<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1998
REGISTRATION NO. 333-61457
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
PRE-EFFECTIVE
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
GLOBAL CROSSING LTD. GLOBAL CROSSING
HOLDINGS LTD.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
BERMUDA 4813 BERMUDA
(PRIMARY STANDARD (STATE OR OTHER
INDUSTRIAL CLASSIFICATION JURISDICTION OF
CODE NUMBER) INCORPORATION OR
(STATE OR OTHER ORGANIZATION)
JURISDICTION OF
INCORPORATION OR ORGANIZATION)
98-0189783
(I.R.S. EMPLOYER 98-0186828
IDENTIFICATION NO.) (I.R.S. EMPLOYER
IDENTIFICATION NO.)
---------------
WESSEX HOUSE
45 REID STREET
HAMILTON HM12, BERMUDA
(441) 296-8600
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NEW YORK 10019
(212) 479-8200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
---------------
WITH COPIES TO:
<TABLE>
<S> <C> <C>
D. RHETT BRANDON, ESQ. JAMES C. GORTON, ESQ.
SIMPSON THACHER & BARTLETT GLOBAL CROSSING LTD.
425 LEXINGTON AVENUE 150 EL CAMINO DRIVE, SUITE
NEW YORK, NEW YORK 10017 204
(212) 455-2000 BEVERLY HILLS, CALIFORNIA
90212
(310) 385-5200
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
---------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1993, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
TABLE OF ADDITIONAL REGISTRANT GUARANTORS
<TABLE>
<CAPTION>
EXACT NAME OF GUARANTOR ADDRESS AND TELEPHONE NUMBER
AS STATE OR OTHER JURISDICTION OF I.R.S. EMPLOYER IDENTIFICATION OF GUARANTOR'S PRINCIPAL
SPECIFIED IN ITS CHARTER INCORPORATION OR ORGANIZATION NO. EXECUTIVE OFFICES
- ------------------------ ------------------------------ ------------------------------ ----------------------------
<S> <C> <C> <C>
Global Telesystems Bermuda Not Required Wessex House
Holdings Ltd. 45 Reid Street
Hamilton HM12 Bermuda
(441) 296-8600
Global Crossing Bermuda Not Required Wessex House
International, Ltd. 45 Reid Street
Hamilton HM12 Bermuda
(441) 296-8600
Global Crossing Holdings United Kingdom Not Required Wessex House
U.K. Ltd. 45 Reid Street
Hamilton HM12 Bermuda
(441) 296-8600
Global Crossing United Kingdom Not Required Wessex House
Marketing 45 Reid Street
U.K. Ltd.
Hamilton HM12 Bermuda
(441) 296-8600
Global Crossing Delaware 95-4670902 150 El Camino Drive,
Development Co. Suite 204
Beverly Hills, CA 90212
(310) 385-5200
Global Crossing Delaware 95-4670978 150 El Camino Drive
Marketing Suite 204
USA Inc. Beverly Hills, CA 90212
(310) 385-5200
Global Crossing Ltd., Cayman Islands 98-0167638 c/o W.S. Walker & Company
LDC PO Box 265
Caledonian House
Mary Street
Georgetown, Grand Cayman
Cayman Islands
(345) 949-0100
</TABLE>
2
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 29, 1998
PROSPECTUS
OFFER TO EXCHANGE 9 5/8% SENIOR NOTES DUE 2008, WHICH HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, FOR 9 5/8% SENIOR NOTES DUE 2008
GLOBAL CROSSING HOLDINGS LTD.
THIS EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1998, AS SUCH DATE MAY BE EXTENDED TO A DATE NO
LATER THAN , 1998 (THE "EXPIRATION DATE").
----------
Global Crossing Holdings Ltd., a Bermuda company (the "Issuer"), hereby
offers (the "Exchange Offer"), upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying letter of transmittal (the
"Letter of Transmittal"), to issue an aggregate of up to $800 million in
principal amount of its 9 5/8% Senior Notes due 2008 (the "Exchange Notes"),
which have been registered under the United States Securities Act of 1933, as
amended (the "Securities Act"), in exchange for an identical principal amount
of its outstanding 9 5/8% Senior Notes due 2008 (the "Restricted Notes"; the
Restricted Notes and the Exchange Notes are collectively referred to herein as
the "Notes"). The terms of the Exchange Notes are identical in all material
respects to those of the Restricted Notes, except for certain transfer
restrictions and registration rights relating to the Restricted Notes and
except for certain interest provisions related to such registration rights. See
"Description of Notes."
The Issuer will accept for exchange any and all Restricted Notes that are
validly tendered prior to 5:00 p.m., New York City time, on the Expiration
Date. Tenders of the Restricted Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration Date. The Exchange Offer is
not conditioned upon any minimum principal amount of the Restricted Notes being
tendered for exchange. However, the Exchange Offer is subject to the terms and
provisions of the Registration Rights Agreement dated as of May 18, 1998 (the
"Registration Agreement") among Salomon Brothers Inc, Merrill Lynch Pierce,
Fenner & Smith Incorporated, CIBC Oppenheimer Corp., Morgan Stanley & Co.
Incorporated and Deutsche Morgan Grenfell Inc. (collectively, the "Initial
Purchasers"), the Issuer and the Guarantors named therein relating to the
Restricted Notes. The Restricted Notes may be tendered only in multiples of
$1,000. See "The Exchange Offer."
The Exchange Notes will be jointly and severally, fully and unconditionally
guaranteed by the parent of the Issuer, Global Crossing Ltd., a Bermuda company
("New GCL" and, together with the Issuer and the Issuer's subsidiaries "Global
Crossing" or the "Company"), Global Crossing Ltd., LDC, a Cayman Islands
Company limited by shares ("Old GCL"), and certain subsidiaries of the Issuer
as specified herein (together with Old GCL and New GCL, the "Guarantors"). The
Issuer has deposited in the Escrow Account (as defined herein) an amount of
cash or U.S. government securities that, together with the proceeds of the
investment thereof, will be sufficient to pay when due the first two interest
payments on the Notes.
The Restricted Notes were issued in an offering (the "Offering") pursuant to
which the Issuer issued an aggregate of $800 million in principal amount of the
Restricted Notes. The Restricted Notes were sold by the Issuer to the Initial
Purchasers on May 13, 1998 pursuant to a Purchase Agreement dated May 13, 1998
(the "Purchase Agreement") between the Issuer, the Guarantors named therein and
the Initial Purchasers. The Initial Purchasers subsequently resold the
Restricted Notes in reliance on Rule 144A under the Securities Act ("Rule
144A") and certain other exemptions under the Securities Act.
The Exchange Notes will bear interest from May 18, 1998 (the "Closing Date")
at a rate of 9 5/8% per annum, payable semi-annually on May 15 and November 15
of each year commencing on November 15, 1998. The Exchange Notes will be
redeemable, at the option of the Issuer, in whole or in part, at any time on or
after May 15, 2003, at the redemption prices set forth herein, plus accrued and
unpaid interest, if any, to the date of redemption. Additionally, the Exchange
Notes will be redeemable, in whole but not in part, at the option of the
Issuer, at a price of 100% of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of redemption, in the event of a Change in
Tax Law (as defined herein) requiring the payment of Additional Amounts (as
defined herein) by the Issuer. In the event of one or more Equity Offerings (as
defined herein) on or before May 15, 2001, the Issuer may, at its option, use
all or a portion of the net proceeds therefrom to redeem up to a maximum of 25%
of the original principal amount of the Notes at a redemption price of 109.625%
of the principal amount thereof plus accrued unpaid interest, if any, to date
the date of redemption. In addition at any time prior to May 15, 2003, the
Exchange Notes may also be redeemed at the option of the Issuer, in whole but
not in part, upon the occurrence of a Change in Control (as defined herein), at
a redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium (as defined herein) as of, and accrued and unpaid interest,
if any, to, the date of redemption. In the event of a Change of Control, each
holder of Notes will have the right to require the Issuer to purchase all or
any part of such holder's Notes at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase. See "Description of Notes--Change of Control."
The Exchange Notes will be senior unsecured obligations of the Issuer ranking
pari passu in right of payment with all other existing and future senior
unsecured obligations of the Issuer and will rank senior to all existing and
future subordinated indebtedness of the Issuer, if any. The Issuer is a holding
company that conducts substantially all of its operations through subsidiaries.
Thus, the Exchange Notes will be effectively subordinated to all indebtedness
and other liabilities (including trade payables and lease obligations) of the
Issuer's subsidiaries that are not Guarantors. As of June 30, 1998, after
giving effect to the Offering and the application of the net proceeds
therefrom, the Issuer's subsidiaries that are not Guarantors would have had
outstanding total indebtedness and other liabilities (including trade payables
and lease obligations) of approximately $518 million, to which the Notes would
have been subordinated. See "Description of Notes--Terms of Notes" and "--
Guarantees."
There is no existing trading market for the Exchange Notes, and there can be
no assurance regarding the future development of a market for the Exchange
Notes, or the ability of holders of the Exchange Notes to sell their Exchange
Notes or the price at which such holders may be able to sell their Exchange
Notes. See "Risk Factors--Lack of Public Market for the Notes." The Issuer does
not intend to apply for listing or quotation of the Exchange Notes on any
securities exchange or stock market.
----------
SEE "RISK FACTORS" COMMENCING ON PAGE 16 HEREIN FOR CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY HOLDERS OF THE RESTRICTED NOTES.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
The date of this Prospectus is , 1998.
<PAGE>
SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES
The Issuer and certain of the Guarantors are organized pursuant to the laws
of Bermuda, and Old GCL is organized pursuant to the laws of the Cayman
Islands. In addition, certain of the directors and officers of the Company
reside outside the United States and a substantial portion of the assets of
the Company are located outside the United States. As a result, it may be
difficult for investors to effect service of process within the United States
upon such persons or to realize against them in courts of the United States
upon judgments of courts of the United States predicated upon civil
liabilities under the United States federal securities laws. The Company has
been advised by its legal counsel in Bermuda, Appleby, Spurling & Kempe, that
there is doubt as to the enforcement in Bermuda, in original actions or in
actions for enforcement of judgments of United States courts, of liabilities
predicated upon U.S. federal securities laws, although Bermuda courts will
enforce foreign judgments for liquidated amounts in civil matters subject to
certain conditions and exceptions. Similarly, Old GCL has been advised by its
legal counsel in the Cayman Islands, W.S. Walker & Company, that generally
speaking, the Cayman Islands courts will enforce United States judgments in
personam for a debt of a definite sum of money which is not as a matter of
Cayman Islands law a tax, fine or penalty and where the defendant is as a
matter of Cayman Islands law properly brought before a U.S. court, subject to
certain limited defenses. For these purposes an express contractual agreement
to submit to the jurisdiction of a U.S. court will suffice to bring a party
properly before a U.S. court.
The Issuer and each Guarantor organized in a jurisdiction other than the
United States have expressly submitted to the jurisdiction of the U.S. federal
and New York state courts sitting in the Borough of Manhattan, The City of New
York for the purpose of any suit, action or proceeding arising out of the
Offering, and such parties have each appointed CT Corporation System to accept
service of process in any such action.
----------------
In this Prospectus, references to "dollars" and "$" are to United States
dollars, and the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains forward-looking statements that include, among
others, statements concerning the Company's plans to effect the design,
construction, and operations of, and sales of capacity on, its planned
telecommunications systems, expectations as to funding its future capital
requirements and other statements of expectations, beliefs, future plans and
strategies, anticipated developments and other matters that are not historical
facts. Management cautions the reader that these forward-looking statements
are subject to risks and uncertainties that could cause actual events or
results to differ materially from those expressed or implied by the
statements. The most important factors that could prevent the Company from
achieving its goals include, but are not limited to, failure by the Company
to: (i) complete its systems within currently estimated time frames and
budgets, (ii) sell capacity on its systems, (iii) make a successful transition
from a system development to an operating company and (iv) effectively compete
in the context of a rapidly evolving market characterized by intense price
competition and unpredictable levels of demand for telecommunication capacity.
See "Risk Factors."
i
<PAGE>
SUMMARY
The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information and financial information
appearing elsewhere in this Prospectus. For a discussion of certain factors to
be considered in connection with an investment in the Shares, see "Risk
Factors." Unless the context otherwise requires, the term "Company" means New
GCL and all of its direct and indirect subsidiaries. A glossary of relevant
terms used in the telecommunications business is included at the end of this
Prospectus.
THE COMPANY
Global Crossing is the world's first independent provider of global Internet
and long distance telecommunications facilities and services utilizing a
network of undersea digital fiber optic cable systems and associated
terrestrial backhaul capacity. As such, the Company believes it is the first to
offer "one-stop shopping" for its customers to multiple destinations worldwide.
The Company operates as a "carriers' carrier", providing tiered pricing and
segmented products to licensed providers of international Internet and
telecommunications services. Capacity on the Company's network is offered to
all customers on an open, equal access basis. The first four cable systems
under development by the Company, together with associated terrestrial backhaul
capacity, will form a state-of-the-art interconnected worldwide high capacity
undersea fiber optic network (the "Global Crossing Network"): Atlantic Crossing
("AC-1"), a system connecting the United States and Europe; Pacific Crossing
("PC-1"), a system connecting the United States and Asia; Mid-Atlantic Crossing
("MAC"), a system connecting the eastern United States and the Caribbean; and
Pan American Crossing ("PAC"), a system connecting the western United States,
Central America and the Caribbean. The undersea component of the Global
Crossing Network initially totals 51,300 km. The Company is in the process of
developing several new cable systems and evaluating other business development
opportunities which will complement the Global Crossing Network.
Global Crossing's business is designed to meet the varying needs of the
global carrier market. The Company offers customers the ability to purchase
capacity on demand, thereby (i) eliminating their need to commit the
substantial capital which would otherwise be required to build undersea cable
capacity and (ii) decreasing the risks associated with forecasting their future
capacity requirements. Compared with traditional undersea cable systems, the
Company offers more comprehensive, flexible and low-cost purchasing
alternatives designed to meet current market requirements of international
carriers, including direct international city-to-city connectivity, the ability
to purchase capacity annually and discounts based upon aggregate volume
purchased on the Global Crossing Network.
The Global Crossing Network is being engineered and constructed to allow
multiple upgrades to its initial circuit capacity at a fraction of the original
network cost. The Company is focusing on expanding the products and services it
offers to customers in order to increase revenues and profits. The Company
anticipates that its future revenues, beyond the sale of the initial capacity
of its first four cable systems, will derive from several sources, including
system upgrades, additional undersea cable projects, the development or
purchase of additional terrestrial fiber capacity and the introduction of new
services.
In addition to the undersea segments of the Global Crossing Network, the
Company has made and expects to continue to make acquisitions of terrestrial
fiber capacity which complement its core undersea cable business and which
address customer demands for global city-to-city connectivity. Global Crossing
intends to pursue such connectivity in approximately 50 of the largest
metropolitan communications markets worldwide. Once completed, the undersea
segments of the Global Crossing Network, in combination with the Company's
investments in terrestrial fiber capacity, will form an integrated worldwide
network with multiple access points offering low-cost wholesale capacity.
1
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY CERTAIN FACTORS RELATING TO
AN INVESTMENT IN THE NOTES. These risk factors include (i) the Company's
limited operating history, (ii) its leverage and substantial future capital
requirements, (iii) risks relating to the completion of the Company's planned
cable systems and the achievement of its sales and marketing objectives and
(iv) the highly competitive nature of the international telecommunications
industry. See "Risk Factors."
THE GLOBAL CROSSING NETWORK
As part of Global Crossing's mission to create an integrated global, high
capacity undersea fiber optic cable network, the initial Global Crossing
Network is being engineered and constructed to connect the two most heavily
trafficked international corridors in the world via AC-1 (United States to
Europe) and PC-1 (United States to Asia). Global Crossing plans to interconnect
these systems with two north-south systems (MAC and PAC), directly connecting
Bermuda, the Caribbean, Central America and, through unaffiliated cable
systems, South America. Of the four undersea fiber optic cable systems
currently being constructed by Global Crossing, AC-1, MAC and PAC are wholly-
owned projects, while PC-1 is being constructed through a joint venture with
one or more partners, including Marubeni Corp. of Japan ("Marubeni"). Global
Crossing will initially have approximately a 58% interest in PC-1 and, in
conjunction with Marubeni, will manage its development, sales and operation.
ATLANTIC CROSSING
The Company commenced operations in March 1997, when it contracted for the
construction of AC-1, a 14,000 km digital fiber optic cable system that will
link the United States, the United Kingdom, The Netherlands and Germany. AC-1
commenced service on its United States-United Kingdom segment on May 26, 1998
and the full system, encompassing a self-healing ring, is scheduled for
completion by February 1999.
AC-1 is equipped with state-of-the-art DWDM and the full ring will initially
offer 40 Gbps of service capacity, significantly increasing the existing fiber
optic cable capacity on this transatlantic route. Capacity on AC-1 is
upgradeable to a minimum of 80 Gbps using DWDM technology. The aggregate costs
of AC-1, which are estimated to be approximately $750 million (excluding
potential future upgrades), have been fully financed prior to the Offerings.
The Company has successfully marketed capacity on AC-1 to licensed
telecommunications providers, including PTTs, Internet service providers and
established and emerging telecommunications companies. As of June 30, 1998, the
Company had entered into capacity purchase agreements and other binding
commitments (collectively, "CPAs") with customers providing for payments to the
Company of $556 million. The Company's AC-1 customers now total more than 22
international telecommunications carriers, including Deutsche Telekom, GTE,
Qwest, Teleglobe, Swisscom, PTT Telecom BV, Telia AB and a number of emerging
telecommunications companies. The timing of payments by purchasers under CPAs
generally depends on when service commences on the segment or segments of AC-1
on which capacity is acquired. All of the foregoing payment amounts assume the
completion of the related segment prior to specified dates falling after the
scheduled ready-for-service ("RFS") date for that segment.
Based upon its current expectations regarding sales of capacity on AC-1, the
Company believes that it will develop and eventually construct Atlantic
Crossing-2 ("AC-2"), an additional four fiber pair cable connecting the United
States to Europe. When combined with AC-1, AC-2 would double the capacity that
Global Crossing would be able to offer customers on the transatlantic route.
PACIFIC CROSSING
PC-1, the Company's first undersea fiber optic cable in the Pacific region,
is being developed as a 21,000 km four fiber pair self-healing ring that, upon
completion, will connect California, Washington and two landing
2
<PAGE>
sites in Japan, providing connectivity to other points in Asia through
interconnection with third party cable systems. PC-1 is designed to operate
initially at 80 Gbps of service capacity and to be upgradeable to a minimum of
160 Gbps, using DWDM technology.
In April 1998, the Company executed a contract with TSSL for the construction
of PC-1 (the "PC-1 Contract"), which provides for a system completion date of
Summer 2000 at an aggregate cost of approximately $1.2 billion (excluding
potential future upgrades). Equity investments in PC-1 by Global Crossing and
its partners are currently estimated at $400 million (of which $231 million
will be provided by the Company), with the remaining $800 million financed
through incurrence of non-recourse indebtedness at the PC-1 level. The credit
agreement for the financing of such indebtedness was executed on July 30, 1998.
On July 6, 1998, the Company executed a memorandum of understanding with DDI
Corporation, the second largest telephone company in Japan, to purchase
capacity on PC-1 which, if successfully converted to a CPA, would represent its
first sale to an Asian customer of capacity on this system.
MID-ATLANTIC CROSSING
MAC is being developed as a 9,300 km two fiber pair self-healing ring that,
upon completion, will connect New York, Bermuda, the Caribbean and Florida.
Global Crossing intends that MAC will be connected to AC-1 via its cable
station in Brookhaven, New York, providing connectivity between Europe, the
eastern United States, Bermuda, and the Caribbean and, through interconnection
with third party cable systems, South America. MAC is being designed to operate
initially at 20 Gbps of service capacity and to be upgradeable to a minimum of
40 Gbps using DWDM technology.
In June 1998, the Company executed a contract with Alcatel Submarine Networks
("Alcatel") for the construction of MAC, which provides for a system completion
date of December 1999 at an aggregate cost of approximately $350 million
(excluding potential future upgrades and amounts capitalized with respect to
the PCG Warrants (as defined herein)), of which approximately $110 million will
consist of equity contributions by the Company and $240 million is to be
financed through non-recourse indebtedness at the MAC level. The contractual
commitment for the financing of such indebtedness was obtained on June 26,
1998.
PAN AMERICAN CROSSING
PAC is being developed as a 7,000 km two fiber pair cable that, upon
completion, will connect California, Mexico, Panama and the Caribbean. PAC is
being designed to interconnect with PC-1 and with MAC. It is anticipated that
PAC will transverse Panama via an existing terrestrial right-of-way. PAC is
being designed to operate initially at 20 Gbps of service capacity and to be
upgradeable to a minimum of 40 Gbps using DWDM technology.
In July 1998, the Company executed a contract with TSSL for the construction
of this system, which provides for a completion date of February 2000 at a cost
of approximately $475 million (excluding potential future upgrades and amounts
capitalized with respect to the PCG Warrants). Approximately $165 million will
be financed through equity contributions from the Company and $310 million is
to be financed through non-recourse indebtedness at the PAC level. The
contractual commitment for the financing of such indebtedness was obtained on
July 22, 1998.
TERRESTRIAL BACKHAUL SERVICES
In addition to the undersea segments of the Global Crossing Network, the
Company has made and expects to continue to make acquisitions of terrestrial
fiber capacity which complement its core undersea cable business and which
address customer demands for global city-to-city connectivity. The Company has
already entered into contractual arrangements to provide terrestrial backhaul
service between its landing stations in the United States
3
<PAGE>
and the United Kingdom and New York City and London, respectively, as well as
other arrangements to provide backhaul service in Germany and The Netherlands.
In addition, the Company recently entered into an agreement with Qwest
Communications International Inc. ("Qwest") whereby Global Crossing will
receive access to over 25 U.S. metropolitan communications markets on Qwest's
terrestrial network. Through Global Access Limited ("Global Access"), a
Japanese telecommunications carrier owned by Marubeni, the Company will offer
backhaul services to PC-1 customers from the Company's Japanese landing
stations directly to Tokyo at prices substantially lower than existing
alternatives. The Company is also currently negotiating with Marubeni to
acquire a minority investment in Global Access, which is constructing a
domestic terrestrial fiber optic cable network connecting the PC-1 cable
station with Tokyo, Nagoya and Osaka.
ADDITIONAL NETWORK EXPANSION OPPORTUNITIES
The Company is in the process of developing several new cable systems and
evaluating other business development opportunities which will complement the
Global Crossing Network. There can be no assurance that the Company will
ultimately elect to proceed with such opportunities or, if it elects to do so,
that such opportunities will help the Company achieve and sustain operating
profitability.
ORGANIZATION OF THE COMPANY
<TABLE>
<CAPTION>
Global Crossing Ltd.
Global Crossing Holdings Ltd.
<S> <C> <C> <C> <C>
Global Telesystems Pacific Crossing Mid-Atlantic Crossing Pan American Crossing Global Crossing
Holdings Ltd. Holdings Ltd. Holdings Ltd. Holdings Ltd. International, Ltd.*
AC-1 PC-1 MAC PAC Global Crossing
(Wholly-Owned) (Joint Venture*) (Wholly-Owned) (Wholly-Owned) Holdings, U.K., Ltd.*
Global Crossing Global Crossing
Marketing U.K. Ltd.* Development Co.*
Global Crossing
Marketing USA Inc.*
</TABLE>
* Denotes current status as Guarantor of Notes.
** Approximately 58% interest. All other subsidiaries of the Issuer are wholly-
owned.
The Company's executive offices are located at Wessex House, 45 Reid Street,
Hamilton, Bermuda and its telephone number is (441) 296-8600. The Company's
home page on the Internet is http://www.globalcrossing.bm.
4
<PAGE>
FINANCING PLAN
Of the $750 million in total estimated costs for AC-1 (excluding potential
future upgrades), approximately $660 million has been incurred as of June 30,
1998. All future costs with respect to AC-1 are fully financed with the
remaining availability under the existing $482 million credit facility (the
"AC-1 Credit Facility") of Atlantic Crossing Ltd. ("ACL").
Global Crossing estimates that the total cost of developing and deploying its
other fiber optic cable systems currently under active development is
approximately $2,025 million (excluding potential future upgrades and the
amounts capitalized with respect to the PCG Warrants), which is comprised of
$1,200 million for PC-1, $350 million for MAC and $475 million for PAC. Equity
investments in PC-1 by Global Crossing and its partners will be $400 million
(of which $231 million will be provided by the Company), with the remaining
$800 million of estimated costs to be financed initially through the incurrence
of non-recourse indebtedness at the PC-1 level. With respect to MAC and PAC,
based upon executed debt financing commitments, the Company currently
anticipates making investments of approximately $110 million and $165 million,
respectively, with the remaining $240 million and $310 million, respectively,
of estimated costs expected to be financed through the incurrence of non-
recourse indebtedness at the system level. With respect to AC-2 and other
network expansion opportunities currently under evaluation by the Company, it
is anticipated that additional financing will be required. Global Crossing has
historically been able to secure non-recourse indebtedness for its systems for
at least 65% of system costs and intends to finance its future expansion
opportunities in a similar fashion. The actual amounts of the Company's future
capital requirements will depend on certain factors including the cost of
developing its cable systems, the speed of developing its systems and the
pricing of the Company's services. There can be no assurance that financing for
such systems will be available to the Company or, if available, that such
financing can be obtained on a timely basis and on acceptable terms. See "Risk
Factors--Substantial Future Capital Requirements" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
On May 18, 1998, the Issuer, the direct wholly-owned subsidiary of New GCL,
consummated the Offering pursuant to which the Issuer issued an aggregate of
$800 million in principal amount of Restricted Notes. The Issuer utilized
approximately $295 million of the net proceeds of the Offering to refinance
certain obligations incurred as part of the initial financing of AC-1. The
balance will be utilized to make equity investments in certain of the Company's
systems and for general corporate purposes.
On August 13, 1998, 24,150,000 shares of Common Stock of the Company (the
"Shares") were offered in concurrent offerings made in the United States,
Canada and internationally (the "Stock Offerings"). Of the 24,150,000 Shares,
22,210,000 Shares were sold by New GCL and 1,940,000 Shares were sold by
certain selling shareholders (the "Selling Shareholders"). See "Principal
Shareholders." The net proceeds to the Company were approximately $393.3
million. The Company intends to use the net proceeds of the Stock Offerings as
follows: (i) approximately $220 million to make investments in the Global
Crossing Network, (ii) up to $50 million to make minority investments in
telecommunications companies and Internet service provides, (iii) up to $25
million to fund the Company's proposed investment in Global Access Limited and
(iv) the balance for general corporate purposes. The Company will receive no
proceeds from the sale of Shares by the Selling Shareholders.
OLD GCL EXCHANGE
Prior to the Stock Offerings, equity ownership in the Company was held
through Old GCL, with Old GCL holding all of the shares of Common Stock of New
GCL. Immediately prior to the Stock Offerings, each shareholder of Old GCL
(other than Canadian Imperial Bank of Commerce ("CIBC")) agreed with Old GCL to
exchange their interests in Old GCL for shares of Common Stock of New GCL held
by Old GCL at a rate of 1.5 shares of Common Stock of New GCL per share of
common stock of Old GCL (the "Old GCL Exchange"). CIBC did not participate in
the Old GCL Exchange and continues to maintain its beneficial ownership
position in New GCL through Old GCL. Subsequent to the Old GCL Exchange and the
Stock Offerings, each previous shareholder of Old GCL holds an equal
proportionate interest in New GCL, with Old GCL now wholly-owned by CIBC. Old
GCL continues to be a Guarantor of the Notes. See "Description of Capital
Stock--Old GCL Exchange" and "Information Regarding Old GCL".
5
<PAGE>
THE EXCHANGE OFFER
Securities Offered.................. Up to $800 million aggregate principal
amount of 9 5/8% Senior Notes due 2008,
which have been registered under the
Securities Act. The terms of the
Exchange Notes are identical in all
material respects to those of the
Restricted Notes, except for certain
transfer restrictions and registration
rights relating to the Restricted Notes
and except for certain interest
provisions related to such registration
rights. The Exchange Notes will be
issued pursuant to, and entitled to the
benefits of, the Indenture governing
the Restricted Notes. See "Description
of Notes."
The Exchange Offer.................. The Exchange Notes are being offered in
exchange for a like principal amount of
Restricted Notes. Restricted Notes may
be exchanged only in integral multiples
of $1,000. The issuance of the Exchange
Notes is intended to satisfy
obligations of the Issuer and the
Guarantors contained in the
Registration Agreement. For procedures
for tendering, see "The Exchange
Offer."
Expiration Date; Withdrawal Rights.. The Exchange Offer will expire at 5:00
p.m., New York City time, on ,
1998, or such later date and time to
which it is extended, provided it may
not be extended beyond , 1998.
The tender of Restricted Notes pursuant
to the Exchange Offer may be withdrawn
at any time prior to the Expiration
Date. Any Restricted Note not accepted
for exchange for any reason will be
returned without expense to the
tendering holder thereof as promptly as
practicable after the expiration or
termination of the Exchange Offer.
Certain Conditions to the Exchange The Issuer's obligation to accept for
Offer............................... Exchange, or to issue Exchange Notes in
exchange for, any Restricted Notes is
subject to certain customary conditions
relating to compliance with any
applicable law, or any applicable
interpretation by any staff of the
Commission, or any order of any
governmental agency or court of law,
which may be waived by the Issuer in
its reasonable discretion. The Issuer
currently expects that each of the
conditions will be satisfied and that
no waivers will be necessary. See "The
Exchange Offer--Certain Conditions to
the Exchange Offer."
Procedures for Tendering Restricted Each holder of Restricted Notes wishing
Notes............................... to accept the Exchange Offer must
complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in
accordance with the instructions
contained herein and therein, and mail
or otherwise deliver such Letter of
Transmittal, or such facsimile,
together with such
6
<PAGE>
Restricted Notes and any other required
documentation, to the Exchange Agent
(as defined herein) at the address set
forth herein. See "The Exchange Offer--
Procedures for Tendering Restricted
Notes."
Certain Tax Consequences............ The exchange of Restricted Notes for
Exchange Notes pursuant to the Exchange
Offer will not constitute a taxable
event to United States Holders (as
defined herein).
Exchange Agent...................... United States Trust Company of New York
is serving as exchange agent (the
"Exchange Agent") in connection with
the Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE RESTRICTED NOTES
Holders of Restricted Notes who do not exchange their Restricted Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Restricted Notes as set forth in the
legends thereon as a consequence of the issuance of the Restricted Notes
pursuant to exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. Accordingly, such Restricted Notes may only be offered, sold, pledged or
otherwise transferred (i) to the Company, (ii) pursuant to a registration
statement that has been declared effective under the Securities Act, (iii) for
so long as the Notes are eligible for resale pursuant to Rule 144A, to a person
it reasonably believes is a qualified institutional buyer ("QIB") within the
meaning of Rule 144A that purchases for its own account or for the account of a
QIB to whom notice is given that the transfer is being made in reliance on Rule
144A, (iv) pursuant to offers and sales that occur outside the United States
within the meaning of Regulation S under the Securities Act, (v) to an
"accredited investor" within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act that is an institutional investor (an "Institutional
Accredited Investor") purchasing for its own account or for the account of such
an Institutional Accredited Investor, in each case in a minimum principal
amount of the Notes of $250,000 or (vi) pursuant to any other available
exemption from the registration requirements of the Securities Act, subject in
each of the foregoing cases to any requirement of law that the disposition of
its property or the property of such investor account or accounts be at all
times within its or their control. The Issuer does not anticipate that it will
register the Restricted Notes under the Securities Act. See "The Exchange
Offer" and "Plan of Distribution." See "Risk Factors--Consequences of Failure
to Exchange Restricted Notes" and "The Exchange Offer--Consequences of Failure
to Exchange." Based upon no-action letters issued by the staff of the
Commission to third parties, the Issuer believes that the Exchange Notes issued
pursuant to the Exchange Offer in exchange for Restricted Notes would in
general be freely transferable after the Exchange Offer without further
registration under the Securities Act if the holder of the Exchange Notes
represents (i) that it is not an "affiliate," as defined in Rule 405 under the
Securities Act, of the Issuer, (ii) that it is acquiring the Exchange Notes in
the ordinary course of its business and (iii) that it has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes; provided that, in the
case of broker-dealers, a prospectus meeting the requirements of the Securities
Act is delivered as required. However, the Commission has not considered the
Exchange Offer in the context of a no-action letter and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as in such other circumstances. Holders of
Restricted Notes wishing to accept the Exchange Offer must represent to the
Issuer that such conditions have been met. Each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer, where it
acquired the Restricted Notes exchanged for such Exchange Notes for its own
account as a result of market-making or other trading activities, must
acknowledge that it will deliver a prospectus in connection with the resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Restricted Notes where
7
<PAGE>
such Restricted Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. A broker-dealer that
delivers such a prospectus to purchasers in connection with such resales will
be subject to certain of the civil liability provisions under the Securities
Act, and will be bound by the provisions of the Registration Agreement
(including certain indemnification and contribution rights and obligations).
THE EXCHANGE NOTES
The terms of the Exchange Notes are identical in all material respects to
those of the Restricted Notes, except for certain transfer restrictions and
registration rights relating to the Restricted Notes and except for certain
interest provisions related to such registration rights. The Exchange Notes
will be issued pursuant to, and entitled to the benefits of, the Indenture
governing the Restricted Notes.
$800 million aggregate principal amount of 9 5/8%
Securities Offered.......... Senior Notes due 2008.
Issuer...................... Global Crossing Holdings Ltd.
Guarantors .................
New GCL, Old GCL and certain Restricted
Subsidiaries (as defined herein) of the Issuer as
specified herein have fully and unconditionally
and jointly and severally guaranteed the payment
and performance obligations of the Issuer under
the Notes. As of the date of the Indenture, ACL
and its subsidiaries will not be Guarantors;
however, ACL and its subsidiaries will become
Guarantors when such action is permitted by the
terms of the AC-1 Credit Facility or the AC-1
Credit Facility has been retired. See
"Description of Notes--Guarantees" and "--Certain
Covenants--Future AC Subsidiary Guarantees."
Maturity.................... May 15, 2008.
Interest.................... Interest on the Exchange Notes will accrue at the
rate of 9 5/8% per annum, payable semi-annually
in arrears on May 15 and November 15 of each
year, commencing on November 15, 1998.
Escrow Account.............. The Issuer has deposited in the Escrow Account an
amount of cash or U.S. government securities
that, together with the proceeds of the
investment thereof, will be sufficient to pay
when due the first two interest payments on the
Notes. See "Description of Notes--Principal,
Maturity and Interest."
Ranking .................... The Exchange Notes will be senior unsecured
obligations of the Issuer ranking pari passu in
right of payment with all other existing and
future senior unsecured obligations of the
Issuer, and senior to all existing and future
subordinated indebtedness of the Issuer, if any.
See "Description of Notes--Terms of Notes."
Optional Redemption ........ The Exchange Notes will be redeemable at the
option of the Issuer, in whole or in part, at any
time on or after May 15, 2003, at the redemption
prices set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption. In
the event of one or more Equity Offerings on or
before May 15, 2001, the Issuer may, at its
option, use all or a portion of the net proceeds
therefrom to redeem up to a maximum of 25% of the
original principal amount of Notes issued in the
Offering at a redemption price of 109.625% of the
principal amount thereof, plus accrued and unpaid
interest, if any, to the date of the redemption.
See "Description of Notes--Optional Redemption."
8
<PAGE>
Optional Tax Redemption .... The Exchange Notes will be redeemable, in whole
but not in part, at the option of the Issuer, at
a purchase price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest,
if any, to the date of redemption, in the event
of a Change in Tax Law requiring the payment of
Additional Amounts by the Issuer. See
"Description of Notes--Optional Tax Redemption."
Change of Control ..........
In the event of a Change of Control, each holder
of Notes will have the right to require the
Issuer to purchase all or any part of such
holder's Notes at a purchase price equal to 101%
of the principal amount thereof, plus accrued and
unpaid interest, if any, to the date of purchase.
There can be no assurance that the Issuer will
have the financial resources necessary to
purchase the Notes in such circumstances. See
"Description of Notes--Repurchase at the Option
of Holders--Change of Control."
In addition, at any time prior to May 15, 2003,
the Notes may be redeemed at the option of the
Company, in whole but not in part, in the event
of a Change of Control, at a redemption price
equal to 100% of the principal amount thereof
plus the Applicable Premium as of, and accrued
and unpaid interest, if any, to, the date of
redemption. See "Description of Notes--Optional
Redemption."
Certain Covenants .......... The Indenture under which the Restricted Notes
were issued and the Exchange Notes will be issued
contains certain covenants which, among other
things, restricts the ability of the Issuer and
its Restricted Subsidiaries to incur additional
indebtedness, pay dividends or make other
restricted payments, create liens, enter into
transactions with affiliates or related persons,
sell assets, consolidate, merge or sell all or
substantially all of their assets or issue
capital stock. These covenants are subject to
important exceptions and qualifications. See
"Description of Notes--Repurchase at the Option
of Holders" and "--Certain Covenants."
Exchange Offer;
Registration Rights ........ Holders of Exchange Notes are not entitled to any
registration rights with respect to the Exchange
Notes. Pursuant to the Registration Rights
Agreement, the Issuer agreed to file, at its
cost, the Registration Statement of which this
Prospectus is a part with respect to the Exchange
Offer (the "Exchange Offer Registration
Statement").
Use of Proceeds............. There will be no cash proceeds to the Issuer from
the Exchange Offer. See "Use of Proceeds."
9
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The summary data presented below under the captions "Statement of Operations
Data" and "Balance Sheet Data" as of December 31, 1997 and for the period from
March 19, 1997 (date of inception) through December 31, 1997 are derived from
the Consolidated Financial Statements of the Company included herein, which
financial statements are prepared in accordance with United States Generally
Accepted Accounting Principles ("U.S. GAAP") and have been audited by Arthur
Andersen & Co., independent public accountants, as indicated in their report
thereon included elsewhere in this Prospectus. The financial data as of and for
the three and six months ended June 30, 1998 are derived from the Company's
unaudited interim financial statements. The unaudited interim financial
statements include all adjustments, consisting of normal recurring adjustments,
that management considers necessary for fair presentation of the financial
position as of June 30, 1998 and results of operations for the interim periods
presented. Results of operations for the interim periods are not necessarily
indicative of the results of operations for a full year. The operating data
presented below are derived from the Company's records. The financial data
presented herein and elsewhere in this Prospectus is not necessarily indicative
of the financial position or results of operations of the Company in the
future. The information set forth below should be read in conjunction with the
discussion under "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Business" and the Consolidated Financial
Statements and the notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 19, 1997
THREE MONTHS (DATE OF INCEPTION)
ENDED SIX MONTHS ENDED TO DECEMBER 31,
JUNE 30, 1998 JUNE 30, 1998 1997
-------------- ---------------- -------------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales and Operating
Revenues................. $ 101,255,867 $ 101,255,867 $ --
-------------- -------------- ------------
Expenses:
Cost of Capacity Sold.... 41,200,229 41,200,229 --
Operating,
Administrative and
Other (1)............... 183,705,088 187,748,840 3,101,708
-------------- -------------- ------------
224,905,317 228,949,069 3,101,708
-------------- -------------- ------------
Operating Loss............ (123,649,450) (127,693,202) (3,101,708)
Other Income (Expense)
Interest Income.......... 4,327,602 4,673,436 2,941,352
Interest Expense......... (7,403,037) (7,426,271) --
Provision for Income Taxes
(2)...................... (9,000,000) (9,000,000) --
Extraordinary Loss on
Retirement of GTH Senior
Notes (3)................ (19,709,471) (19,709,471) --
-------------- -------------- ------------
Net Loss.................. (155,434,356) (159,155,508) (160,356)
GTH Preference Share Non-
Cash Dividends (4)....... (3,898,203) (8,306,433) (12,689,923)
Redemption of GTH
Preference Shares (5).... (34,140,067) (34,140,067) --
-------------- -------------- ------------
Net Loss Applicable to
Common Shareholders...... $ (193,472,626) $ (201,602,008) $(12,850,279)
============== ============== ============
Basic and Diluted Net Loss
per Common Share before $ (1.06) $ (1.11) $ (0.08)
Extraordinary Item....... ============== ============== ============
Net Loss per Common Share $ (0.12) $ (0.12) $ --
on Extraordinary Item.... ============== ============== ============
Basic and Diluted Net Loss $ (1.18) $ (1.23) $ (0.08)
per Common Share......... ============== ============== ============
Shares used in Computing
Basic and Diluted Net 163,639,852 163,508,514 162,886,967
Loss per Common Share.... ============== ============== ============
<CAPTION>
AS OF
AS OF JUNE 30, 1998 DECEMBER 31, 1997
-------------------------------- -------------------
AS
HISTORICAL ADJUSTED(6) HISTORICAL
-------------- ---------------- -------------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and Restricted Cash
(7)...................... $ 541,610,392 $ 934,880,992 $ 26,727,880
Accounts Receivable, Net
of Allowance for Doubtful
Accounts................. 41,854,617 41,854,617 --
Construction in Progress
and Capacity Available
for Sale (8)............. 779,646,579 804,861,302 518,518,509
Investment in Pacific
Crossing Ltd. (9)........ 126,456,345 163,132,306 --
Deferred Finance and
Organizational Costs, Net
of Accumulated
Amortization............. 44,338,405 44,338,405 25,934,021
Other Assets.............. 30,326,686 30,326,686 1,015,958
-------------- -------------- ------------
Total Assets.............. $1,564,233,024 $2,019,394,308 $572,196,368
============== ============== ============
Long Term Debt and Other
Obligations.............. $1,185,431,817 $1,185,431,817 $315,334,000
GTH Preference Shares..... -- -- 90,643,919
Shareholders' Equity:
Common Stock............ 1,636,745 2,050,429 1,628,870
Treasury Stock.......... -- (209,414,620) --
Other Shareholders'
Equity................. 395,458,370 1,059,620,590 72,652,162
Accumulated Deficit..... (159,315,864) (159,315,864) (160,356)
-------------- -------------- ------------
Total Shareholders'
Equity................... 237,779,251 692,940,535 74,120,676
-------------- -------------- ------------
Total Capitalization...... $1,423,211,068 $1,878,372,352 $480,098,595
============== ============== ============
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
AS OF
JUNE 30, 1998
--------------
<S> <C>
OPERATING DATA:
Executed CPAs............................................... $556 million
<CAPTION>
ESTIMATED(10)
--------------
<S> <C>
Route Kilometers............................................ 51,300
Fiber Kilometers............................................ 345,200
Estimated System Costs (excluding potential future upgrades
and amounts capitalized with respect to the PCG Warrants)
AC-1 ..................................................... $750 million
Other Systems Under Development........................... $2,025 million
Landing Stations............................................ 14
</TABLE>
- -------
(1) Includes a charge for the Advisory Services Agreement Termination on June
30, 1998. See "Certain Transactions." The Company acquired the rights of
those entitled to fees payable under the Advisory Services Agreements in
consideration for the issuance of Common Stock in the Company having an
aggregate value of $135 million and the cancellation of approximately $2.7
million owed to the Company under a related advance agreement. As a result
of this transaction, the Company has recorded a non-recurring charge in
the approximate amount of $137.7 million. Also, during each of the three
and six months ended June 30, 1998, the Company recognized $21.1 million,
due in part to certain options which vested immediately upon grant, from a
total of $67.1 million of stock-related expense relating to stock options
issued during such period. The remaining $46.0 million will be recognized
as follows: $4.8 million in each of the third and fourth quarters of 1998,
$19.2 million in 1999, $13.5 million in 2000 and $3.7 million in 2001.
(2) Reflects income taxes on profits earned during the three months ended June
30, 1998 attributable to both United States and other foreign
jurisdictions. A significant portion of the Company's operating losses
have been incurred in non-taxable jurisdictions and therefore these
operating losses cannot be applied to offset future taxable earnings of
the Company.
(3) On May 18, 1998, a portion of the proceeds from the issuance of the Notes
was used to repurchase the 12% Senior Notes Due 2004 ("GTH Senior Notes")
of Global Telesystems Holdings Ltd., an indirect subsidiary of the Company
("GTH"). The Company recognized an extraordinary loss of $19.7 million on
this repurchase, comprising a repurchase premium of approximately $9.8
million and a write-off of approximately $9.9 million of unamortized
deferred financing costs.
(4) The holders of the 14% senior increasing rate redeemable exchangeable
preference shares of GTH (the "GTH Preference Shares") were entitled to
receive cumulative, compounding dividends at an initial annual rate of
14%. Preference share dividends include cumulative 14% dividends and
amortization of the discount and issuance costs. Effective June 17, 1998,
the Company used proceeds from the Notes to redeem all outstanding GTH
Preference Shares. All dividends prior to the redemption had been paid
through the issuance of additional preference shares and charged against
additional paid-in capital.
(5) As a result of the redemption of the GTH Preference Shares, the Company
incurred a one time $34.1 million charge against Additional Paid-in
Capital. The charge was comprised of: (i) a $15.9 million charge for the
redemption premium and (ii) a write-off of $18.2 million of unamortized
discount and unamortized deferred financing costs.
(6) See the pro forma financial information and the notes thereto on pages 12-
15 for a full description of the adjustments.
(7) The majority of Cash and Restricted Cash is comprised of proceeds from the
issuance of the Notes and funds which have been reserved for the purpose
of funding future interest payable on the Notes.
(8) Construction in Progress and Capacity Available for Sale includes direct
and indirect expenditures for construction of AC-1 and other systems and
is stated at cost. Includes costs incurred under (i) the construction
contracts; (ii) advisory, consulting and legal fees; (iii) interest
(including amortization of debt issuance costs incurred during the
construction phase); and (iv) other costs necessary for developing AC-1
and other systems. This amount also includes backhaul capacity available
for sale. Additionally, the Company granted the PCG Warrants to Pacific
Capital Group, Inc. ("PCG"), a shareholder, for the PC-1, MAC and PAC
systems and related rights. The $213.3 million estimated value of the
Common Stock to be issued under the PCG Warrants has been allocated to
Construction in Progress in the amount of $86.8 million and as Investment
in Pacific Crossing Ltd. in the amount of $126.5 million. Such estimated
values will be adjusted to reflect the Price per Share to Public in the
Stock Offerings in the Company's consolidated financial statements for the
three months ending September 30, 1998. Such adjustment is not expected to
be material.
(9) Includes $126.5 million as of June 30, 1998, as described above,
representing the estimated value of the PCG Warrants applicable to Pacific
Crossing Ltd.
(10) Assumes full completion of AC-1, PC-1, MAC and PAC based upon current
Company estimates, including anticipated financing costs. See "Risk
Factors--Risks Related to Completing the Company's Cable Systems" and
"Risk of Error in Forward-Looking Statements."
11
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The impact of the Stock Offerings, the PCG Warrant Conversion, the Advisory
Services Agreement Termination, and the TDC Exchange have all been reflected in
the pro forma balance sheet as of June 30, 1998. The exchange by substantially
all of the shareholders of Global Crossing Ltd., LDC, a Cayman Island limited
duration company ("Old GCL"), of equity interests in Old GCL for Common Stock
of New GCL at a rate of 1.5 shares of Common Stock of New GCL per share of
common stock of Old GCL (the "Old GCL Exchange") has been reflected in the
historical balance sheet as of June 30, 1998. See "Description of Capital
Stock--Old GCL Exchange. The pro forma statement of operations data give effect
to recurring items only. Accordingly, the one time charge resulting from the
redemption of the GTH Preference Shares, the one time extraordinary loss
resulting from the repurchase of the GTH Senior Notes and any impact from the
Advisory Services Agreement (including the Termination) have not been reflected
in the pro forma statement of operations data. These transactions are described
in the footnotes to the pro forma data. The "As Adjusted For the Six Months
Ended June 30, 1998" column gives effect to the pro forma adjustments for the
period from January 1, 1998 to June 30, 1998 as if all of the foregoing
transactions had occurred on March 19, 1997. The "As Adjusted For the Period
March 19, 1997 (Date of Inception) to December 31, 1997" column gives effect to
the pro forma adjustments for the period from March 19, 1997 (Date of
Inception) to December 31, 1997 as if such transactions had occurred on March
19, 1997. The "As Adjusted For the Period March 19, 1997 (Date of Inception) to
June 30, 1998" column gives effect to the pro forma adjustments for the period
from March 19, 1997 (Date of Inception) to June 30, 1998 as if such
transactions had occurred on March 19, 1997.
PRO FORMA BALANCE SHEET DATA:
<TABLE>
<CAPTION>
ADJUSTED
AS OF
ADVISORY JUNE 30, 1998
PCG SERVICES PRIOR TO
HISTORICAL AS OF WARRANT AGREEMENT TDC STOCK STOCK ADJUSTED AS OF
JUNE 30, 1998 CONVERSION(1) TERMINATION(2) EXCHANGE(3) OFFERINGS OFFERINGS(5) JUNE 30, 1998
---------------- ------------- -------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and restricted
cash.............. $ 541,610,392 $ -- $ -- $ -- $ 541,610,392 $393,270,600 $ 934,880,992
Other current
assets............ 64,281,303 -- -- -- 64,281,303 -- 64,281,303
Long term accounts
receivable........ 7,900,000 -- -- -- 7,900,000 -- 7,900,000
Backhaul capacity
available for
sale.............. 54,738,560 -- -- -- 54,738,560 -- 54,738,560
Undersea capacity
available for
sale.............. 206,271,310 -- -- -- 206,271,310 -- 206,271,310
Construction in
progress.......... 518,636,709 25,214,723 -- -- 543,851,432 -- 543,851,432
Investment in
Pacific Crossing
Ltd............... 126,456,345 36,675,961 -- -- 163,132,306 -- 163,132,306
Deferred finance
and organizational
costs, net of
accumulated
amortization...... 44,338,405 -- -- -- 44,338,405 -- 44,338,405
-------------- ----------- ------- ------------ -------------- ------------ --------------
Total Assets....... $1,564,233,024 $61,890,684 $ -- $ -- $1,626,123,708 $393,270,600 $2,019,394,308
============== =========== ======= ============ ============== ============ ==============
Deferred revenue... $ 42,747,611 $ -- $ -- $ -- $ 42,747,611 $ -- $ 42,747,611
Other current
liabilities....... 98,274,345 -- -- -- 98,274,345 -- 98,274,345
Long term debt..... 367,048,000 -- -- -- 367,048,000 -- 367,048,000
Senior notes....... 796,277,203 -- -- -- 796,277,203 -- 796,277,203
Long term deferred
revenue........... 6,916,667 -- -- -- 6,916,667 -- 6,916,667
Obligations under
inland service
agreements and
capital leases.... 15,189,947 -- -- -- 15,189,947 -- 15,189,947
-------------- ----------- ------- ------------ -------------- ------------ --------------
Total Liabilities.. 1,326,453,773 -- -- -- 1,326,453,773 -- 1,326,453,773
-------------- ----------- ------- ------------ -------------- ------------ --------------
Commitments(6).....
Shareholders'
Equity:...........
Common Stock(7). 1,636,745 122,032 71,052 (1,500) 1,828,329 222,100 2,050,429
Treasury Stock.. -- -- -- (209,414,620) (209,414,620) (209,414,620)
Other
shareholders'
equity......... 395,458,370 61,768,652 (71,052) 209,416,120 666,572,090 393,048,500 1,059,620,590
Accumulated
Deficit........ (159,315,864) -- -- -- (159,315,864) -- (159,315,864)
-------------- ----------- ------- ------------ -------------- ------------ --------------
Total Shareholders'
Equity............ 237,779,251 61,890,684 -- -- 299,669,935 393,270,600 692,940,535
-------------- ----------- ------- ------------ -------------- ------------ --------------
Total Liabilities
and Shareholders'
Equity............ $1,564,233,024 $61,890,684 $ -- $ -- $1,626,123,708 $393,270,600 $2,019,394,308
============== =========== ======= ============ ============== ============ ==============
</TABLE>
12
<PAGE>
PRO FORMA STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
HISTORICAL AS ADJUSTED HISTORICAL AS ADJUSTED
FOR THE FOR THE FOR THE PERIOD FOR THE PERIOD HISTORICAL AS ADJUSTED
SIX MONTHS SIX MONTHS MARCH 19, 1997 MARCH 19, 1997 FOR THE PERIOD FOR THE PERIOD
ENDED ENDED (DATE OF INCEPTION) (DATE OF INCEPTION) MARCH 19, 1997 MARCH 19, 1997
JUNE 30, JUNE 30, TO DECEMBER 31, TO DECEMBER 31, (DATE OF INCEPTION) (DATE OF INCEPTION)
1998 1998(8) 1997 1997(8) TO JUNE 30, 1998 TO JUNE 30, 1998(8)
------------- ------------ ------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Sales and Operat-
ing Revenues.... $ 101,255,867 $101,255,867 $ -- $ -- $ 101,255,867 $101,255,867
Expenses(2)(11).. 228,949,069 89,279,729 3,101,708 3,101,708 232,050,777 92,381,437
------------- ------------ ------------ ------------ ------------- ------------
Operating Loss... (127,693,202) 11,976,138 (3,101,708) (3,101,708) (130,794,910) 8,874,430
Other Income (Ex-
pense):
Interest In-
come(9)........ 4,673,436 4,673,436 2,941,352 2,941,352 7,614,788 7,614,788
Interest Ex-
pense(10)...... (7,426,271) (22,692,831) -- (42,030,654) (7,426,271) (64,723,485)
Provision for In-
come Taxes...... (9,000,000) (9,000,000) -- -- (9,000,000) (9,000,000)
------------- ------------ ------------ ------------ ------------- ------------
Net Loss before
Non-Recurring
Charges......... (139,446,037) (15,043,257) (160,356) (42,191,010) (139,606,393) (57,234,267)
Preference Share
Dividends....... (8,306,433) -- (12,689,923) -- (20,996,356) --
------------- ------------ ------------ ------------ ------------- ------------
Net Loss Applica-
ble to Common
Shareholders be-
fore Non-Recur-
ring Charges.... $(147,752,470) $(15,043,257) $(12,850,279) $(42,191,010) $(160,602,749) $(57,234,267)
============= ============ ============ ============ ============= ============
Basic and Diluted
Net Loss per
Common Share
before Non-
Recurring
Charges......... $ (0.90) $ (0.08) $ (0.08) $ (0.21) $ (0.98) $ (0.29)
============= ============ ============ ============ ============= ============
Shares Used in
Computing Basic
and Diluted net
loss per common
share........... 163,508,514 199,228,082 162,886,967 198,763,717 163,088,306 198,947,943
============= ============ ============ ============ ============= ============
</TABLE>
(1) Adjustment for the PCG Warrant Conversion which occurred immediately
preceding the Stock Offerings. Effective January 21, 1998, Old GCL entered
into a warrant agreement with PCG in connection with Old GCL's acquisition
from PCG of the PC-1, MAC and PAC systems (then under development) and
related rights. The warrants issued under the warrant agreement (the "PCG
Warrants") provided PCG with the right to purchase a total of 18,453,185
Class B shares of Old GCL conditioned on an initial public offering of
shares of Old GCL (or any successor of Old GCL) and the achievement of
certain financial performance levels from cable systems other than AC-1.
In June 1998, the Board of Directors of Old GCL amended the terms of the
PCG Warrants so that the PCG Warrants will become exercisable upon the
successful completion of an initial public offering and eliminated their
financial performance conditions. The Board of Directors of Old GCL
determined that, upon completion of the Stock Offerings, the conditions to
the exercise of the PCG Warrants were met. In connection with the Stock
Offerings, Old GCL amended the terms of these warrants to convert them
into Class B shares and new warrants (the "New PCG Warrants") based upon
the price per share of Common Stock in the Stock Offerings (the "PCG
Warrant Conversion"). The Company has agreed to assume the obligations of
Old GCL under the New PCG Warrants. See "Certain Transactions--
Transactions with Pacific Capital Group ("PCG") and its Affiliates--PCG
Warrants."
The total value of the PCG Warrant Conversion is approximately $275.3
million based upon the $19.00 Price per Share to Public in the Stock
Offerings, which is comprised of approximately $231.9 million relating to
the conversion of the PCG Warrants into 12,203,170 Class B shares of Old GCL
and approximately $43.4 million relating to the value of the New PCG
Warrants. Since the PCG Warrants were assumed to be converted to Class B
shares of Old GCL on June 30, 1998, the value of the PCG Warrants as of
June 30, 1998, $213.3 million, was recorded in the Company's consolidated
financial statements at that date. The adjustment for the PCG Warrant
conversion, based upon the $19.00 Price per Share to Public in the Stock
Offerings, results in an increase of $18.6 million over the $213.3 million
already recorded in the Company's consolidated financial statements. The New
PCG Warrants granted to purchase the remaining Class B shares of Old GCL are
also reflected in this adjustment at the estimated value of $6.95 per
warrant for a total value of $43.4 million, which has been allocated to each
of the projects for which the rights were obtained. The portion of the
adjustments of $18.6 million and the $43.4 million related to MAC and PAC
($10.7 million and $14.5 million, respectively) has been capitalized as
construction in progress and the portion of the cost related to PC-1 ($36.8
million) has been capitalized and included as part of the Company's
investment in Pacific Crossing Ltd. since Pacific Crossing Ltd. is not
consolidated. Also included in this adjustment is a $122,032
reclassification from additional paid-in capital to common stock to reflect
the actual issuance of shares of Common Stock at a $.01 par value under the
PCG Warrant Conversion. The $18.6 million increase will be recorded in the
Company's consolidated financial statements for the three months ending
September 30, 1998.
(2) Adjustment for the issuance of Common Stock under the Advisory Services
Agreement Termination, pursuant to which the Advisory Services Agreements
have been terminated. The Advisory Service Agreements had terms of 25
years subject to earlier termination by either party in the event of a
material breach and by PCG Telecom in certain other events. The Advisory
Services Agreements did not contain provisions regarding cancellation fees
or liquidated damages in the event of early termination or breach. The
Advisory Services Agreement Termination was recorded as an increase in
additional paid-in capital and a charge against the statement of
operations in the
13
<PAGE>
amount of $137.7 million. Of this amount, $135 million was determined by
applying the 2% advisory fee to projected revenues for the Company's
systems. The present value of the aggregate advisory fees was then
calculated as $155.5 million, using a discount rate of 12% in respect of
AC-1 and 15% in respect of systems other than AC-1. This amount was
subsequently reduced to $135 million. Both the discount rates and the
ultimate valuation were determined as a result of a negotiation process
including a disinterested director of the Company and the various persons
entitled to fees under the Advisory Services Agreements. The Company has
obtained a fairness opinion from an independent financial advisor in
connection with this transaction. The remaining $2.7 million of the $137.7
million charge reflected the cancellation of $2.7 million advanced by the
Company in respect of amounts expected to be earned under the Advisory
Services Agreements. See "Certain Transactions--Transactions with Pacific
Capital Group ("PCG") and its Affiliates--Advisory Services Agreements."
The adjustment recorded in the pro forma balance sheet data reflects a
$71,053 reclassification from additional paid-in capital to common stock to
record the actual issuance of shares of Common Stock under the Advisory
Services Agreement Termination at a $.01 par value per share.
(3) Adjustment for the repurchase of the Company's shares held by
Telecommunications Development Corporation ("TDC") pursuant to the TDC
Exchange. Prior to the Stock Offerings, the Company acquired 11,016,879
shares of Common Stock in exchange for 10,866,879 newly-issued shares of
Common Stock, a net acquisition by the Company of 150,000 shares of
Common Stock. The Company will record the treasury stock acquired in the
TDC Exchange at its fair value of $209.4 million in its consolidated
financial statements for the three months ending September 30, 1998.
(4) Not Used.
(5) Adjustment to reflect the estimated net proceeds of the Stock Offerings
($393.3 million) after deducting underwriting and offering expenses, with
a Price to Public per Share of $19.00.
(6) In June and July, 1998, the Company entered into contracts for the
construction of MAC and PAC, respectively, and at the same time obtained
commitment letters to finance, in part, the construction costs. No effect
has been given to the commitment letters in the pro forma balance sheet.
(7)Pro forma common stock of the Company is as follows:
<TABLE>
<CAPTION>
PRO FORMA
AS OF JUNE 30, 1998
-------------------
<S> <C>
205,042,900 shares issued and outstanding, $.01 par
value per share.................................... $2,050,429
</TABLE>
(8) The "As Adjusted" columns give effect to the May 18, 1998 issuance of the
Notes assuming that the Notes had been issued at the beginning of the
period. The net proceeds from this transaction were used to repurchase
the GTH Senior Notes and to redeem the GTH Preference Shares. The "As
adjusted" columns do not give effect to non-recurring items such as the
$19.9 million extraordinary loss resulting from the repurchase of the GTH
Senior Notes, the $34.1 million one time charge in connection with the
redemption of the GTH Preference Shares or the $139.7 million charge
related to the Advisory Services Agreement Termination.
(9) The Company has assumed that Notes proceeds not used to redeem the GTH
Preference Shares or repurchase GTH Senior Notes were placed in non-
interest bearing accounts and therefore no interest income has been
reflected in the "As adjusted" columns.
(10) The effect on interest expense resulting from the issuance of the Notes
and the concurrent redemption of the GTH Preference Shares and repurchase
of the GTH Senior Notes has been included in the "As adjusted" columns.
The Company capitalized as construction in progress only the amount of
interest that would be permitted under SFAS 34 had the Notes been
outstanding for the entire period covered on the actual average
qualifying expenditures for such period. The remaining interest cost
attributable to the Notes has been included in the "As adjusted" columns
as interest expense.
14
<PAGE>
The following table presents the calculations used to determine pro forma
interest expense for the periods presented:
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
THREE FOR THE SIX MARCH 19, 1997 FOR THE PERIOD
MONTHS ENDED MONTHS ENDED (DATE OF INCEPTION) MARCH 19, 1997
JUNE 30, JUNE 30, TO DECEMBER (DATE OF INCEPTION)
1998 1998 31, 1997 TO JUNE 30, 1998
------------ ------------ ------------------- -------------------
<S> <C> <C> <C> <C>
TOTAL PRO FORMA INTEREST
COST INCURRED
Principal outstanding on
Notes.................. $800,000,000 $800,000,000 $800,000,000 $800,000,000
Interest rate........... 9.625% 9.625% 9.625% 9.625%
------------ ------------ ------------ ------------
Total interest cost
incurred............... $ 19,250,000 $ 38,500,000 $ 61,386,111 $ 99,886,111
============ ============ ============ ============
TOTAL PRO FORMA INTEREST
CAPITALIZED
Actual average
qualifying expenditures
for the period(A)...... $569,800,000 $569,000,000 $278,300,000 $391,640,293
Effective Capitalization
rate................... 9.53% 9.53% 9.59% 9.56%
------------ ------------ ------------ ------------
Total interest
capitalizable.......... $ 13,575,485 $ 27,112,850 $ 20,832,224 $ 47,945,074
Less: interest
capitalized on existing (9,437,645) (11,305,681) (1,476,767) (12,782,448)
long term debt......... ------------ ------------ ------------ ------------
Total interest $ 4,137,840 15,807,169 19,355,457 35,162,626
capitalized on Notes... ============ ============ ============ ============
TOTAL PRO FORMA INTEREST
EXPENSE................ $ 15,112,160 $ 22,692,831 $ 42,030,654 $ 64,723,485
============ ============ ============ ============
</TABLE>
- --------
(A) Average qualifying expenditures are taken from actual amounts recorded in
the Company's consolidated financial statements.
(11) During each of the three and six months ended June 30, 1998, the Company
recognized $21.1 million from a total of $67.1 million stock-related
expense relating to stock options issued during such period. The remaining
$46.0 million of stock-related expense will be recognized as follows: $4.8
million in each of the third and fourth quarters of 1998, $19.2 million in
1999, $13.5 million in 2000 and $3.7 million in 2001.
15
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully by prospective investors
in evaluating the Company and its business prospects before participating in
the Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE RESTRICTED NOTES
The Exchange Notes will be issued in exchange for Restricted Notes only
after timely receipt by the Exchange Agent of such Restricted Notes, a
properly completed and duly executed Letter of Transmittal and all other
required documents. Therefore, holders of Restricted Notes desiring to tender
such Restricted Notes in exchange for Exchange Notes should allow sufficient
time to ensure timely delivery. Neither the Exchange Agent nor the Issuer is
under any duty to give notification of defects or irregularities with respect
to tenders of Restricted Notes for exchange. Holders of Restricted Notes who
do not exchange their Restricted Notes for Exchange Notes pursuant to the
Exchange Offer will continue to be subject to the restrictions on transfer of
such Restricted Notes as set forth in the legends thereon as a consequence of
the issuance of the Restricted Notes pursuant to exemption from, or in
transactions not subject to, the registration requirements of the Securities
Act and applicable state securities laws. In general, the Restricted Notes may
not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable securities laws of states and other
jurisdictions. In addition, any holder of Restricted Notes who tenders in the
Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes will be required to comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each broker-dealer that receives Exchange Notes for its own
account in exchange for Restricted Notes, where such Restricted Notes were
acquired by such broker-dealer as a result of market-making activities or any
other trading activities, may be deemed to be an "underwriter" within the
meaning of the Securities Act and must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution," "Description of Notes--Exchange Offer; Registration Rights" and
"The Exchange Offer--Consequences of Failure to Exchange."
LACK OF PUBLIC MARKET FOR THE NOTES
The Exchange Notes are being offered to the holders of the Restricted Notes.
The Restricted Notes were resold by the Initial Purchasers to (i) qualified
institutional buyers pursuant to Rule 144A under the Securities Act and (ii)
qualified buyers outside the United States in reliance upon Regulation S under
the Securities Act. The Restricted Notes are eligible for trading in the
Private Offerings, Resales and Trading through Automated Linkages Market, the
National Association of Securities Dealers' screen based, automated market for
trading of securities eligible for resale under Rule 144A. The Exchange Notes
are new securities for which there currently is no market and the Exchange
Offer is not conditioned upon any minimum or maximum aggregate principal
amount of Restricted Notes being tendered for exchange. Although the Initial
Purchasers are making a market in the Restricted Notes and have advised the
Issuer that they currently intend to make a market in the Exchange Notes, they
are not obligated to do so and may discontinue such market making at any time
without notice. The Issuer does not currently intend to apply for listing of
the Restricted Notes or the Exchange Notes on a national securities exchange
or automated quotation system. Accordingly, no assurance can be given that an
active market will develop for any of the Notes or as to the liquidity of the
trading market for any of the Notes. If a trading market does not develop or
is not maintained, holders of the Notes may experience difficulty in reselling
such Notes or may be unable to sell them at all. If a market for the Notes
develops, any such market may be discontinued at any time. To the extent that
a market for the Notes does develop, the market value of the Notes will depend
upon many factors, including prevailing interest rates, market conditions,
yields on alternative investments, general economic conditions, the Company's
financial condition and results of operations and other conditions.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of
securities similar to the Notes. There can be no assurance that, if a market
for the Notes were to develop, such a market would not be subject to similar
disruptions.
16
<PAGE>
LIMITED OPERATING HISTORY
The Company was organized in March 1997 and was in the development stage
through May 26, 1998, when the United States--United Kingdom segment of AC-1
achieved RFS and began to generate revenues. The Company's financial
information relates principally to a period in which the Company was engaged
in construction and development of AC-1 and, until June 1998, had minimal
revenues and operating costs because the costs of construction had been
capitalized. Despite recognizing approximately $101 million in revenues, the
Company has incurred a net loss applicable to common shareholders of
approximately $201.6 million for the period from March 19, 1997 (date of
inception) through June 30, 1998, due primarily to the Advisory Services
Agreement Termination, awards under the Company's Stock Incentive Plan, the
extraordinary loss on the retirement of the GTH Senior Notes and the
redemption of GTH Preference Shares. Global Crossing to date has financed its
net losses, debt service, capital expenditures and other cash needs through
the proceeds of sales of common and preferred equity and the issuance of debt,
including non-recourse indebtedness of ACL. In addition, the Company will
require substantial additional capital in order to carry out its business
plan. See "--Substantial Future Capital Requirements."
The Company's success will substantially depend on sales of capacity upon
its systems. While the Company has been primarily marketing and selling
capacity on AC-1 during its construction period and this activity has resulted
in executed CPAs as of June 30, 1998 to purchase capacity totaling $556
million, including related sales of terrestrial capacity, there can be no
assurance that the Company will continue to be successful in selling capacity
on AC-1 or its other systems under development. There also can be no assurance
that the Company will be able to realize its business plan or that such
realization will help the Company achieve or sustain operating profitability
or sufficient cash flow to service its indebtedness. See "--Sales of Capacity;
Realization of Other Revenues," "--Termination of CPAs," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
LEVERAGE
As of June 30, 1998, on a consolidated pro forma basis after giving effect
to the Stock Offerings and the application of the net proceeds therefrom, the
Company would have had $1,326.5 million of total liabilities, including
approximately $1,228.2 million of senior indebtedness, of which $367 million
would have been secured. In addition, the Company has entered into a $850
million non-recourse credit facility with respect to PC-1 (under which $200
million of indebtedness has been incurred as of August 10, 1998), as well as
contractual commitments with respect to MAC and PAC in the amount of $240
million and $310 million, respectively. The Indenture limits, but does not
prohibit, the incurrence of additional indebtedness by the Company. See "--
Ranking of Notes; Holding Company Structure; Dividend Payment Restrictions"
and "Description of Notes--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock."
The Company's significant debt burden could have important consequences to
the Company, including, but not limited to, the following: (i) the cash
received from operations may be insufficient to meet the principal and
interest payments on the Company's debt as the same become due; (ii) a
significant portion of the Company's cash flow from operations must be used to
service its debt instead of being used in the Company's business; and (iii)
the Company's flexibility to obtain additional financing in the future may be
impaired by the amount of debt outstanding and the restrictions imposed by the
covenants contained in the debt instruments of the Company. See "Description
of Certain Indebtedness."
The ability of the Company to meet its financial obligations will be subject
to financial, business and other factors, many of which are beyond its
control, such as prevailing economic conditions. In addition, the ability of
New GCL's operating subsidiaries to pay dividends or to make other payments to
New GCL will be restricted by the terms of various credit arrangements
expected to be entered into by such operating subsidiaries, as well as legal
restrictions. The instruments governing existing and future indebtedness
contain, or may contain, covenants that limit the operating and financial
flexibility of the Company. Failure to generate sufficient cash flow may
impair the Company's ability to obtain additional equity or debt financing or
to meet its debt service requirements. In such circumstances, the Company may
be required to renegotiate the terms of the instruments
17
<PAGE>
relating to its long term debt or to refinance all or a portion thereof. There
can be no assurance that the Company would be able to renegotiate successfully
such terms or refinance its indebtedness when required or that satisfactory
terms of any such refinancing would be available. If the Company were unable
to refinance its indebtedness or obtain new financing under these
circumstances, it would have to consider other options such as the sale of
certain assets to meet its debt service obligations, the sale of equity,
negotiations with its lenders to restructure applicable indebtedness or other
options available to it under applicable law.
SUBSTANTIAL FUTURE CAPITAL REQUIREMENTS
Global Crossing will require substantial capital investment to pursue the
implementation of its business plan. Because the Company anticipates that each
of its systems will require separate financing in addition to the equity
investment made by the Company in such system, it intends to raise additional
non-recourse debt or equity capital at the system level to meet these
financing requirements. The Company currently estimates that its capital
resources, together with the additional capital that it intends to raise at
the system level, will be sufficient to fund its currently planned systems.
Failure to generate sufficient funds in the future, whether from operations or
by raising additional debt or equity capital, would have a material adverse
effect on the Company's business prospects. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
RANKING OF NOTES; HOLDING COMPANY STRUCTURE; DIVIDEND PAYMENT RESTRICTIONS
The Notes are senior obligations of the Issuer and the Guarantors and rank
pari passu in right of payment to all existing and future unsecured senior
indebtedness of the Issuer and the Guarantors. The Notes are not secured by
any asset of the Company (with the exception of the first two interest
payments thereon which will be held in the Escrow Account). Accordingly, the
Notes are effectively subordinated to any secured obligations of the Issuer
and the Guarantors to the extent of the value of the assets securing such
obligation. If the Issuer becomes insolvent or is liquidated, or if payment
under any secured obligation is accelerated, the lenders under such secured
obligation will be entitled to exercise the remedies available to a secured
lender under applicable law and pursuant to the terms of the agreement
securing such obligation. Any claims of such lenders with respect to such
assets will be prior to any claim of the holders of the Notes with respect to
such assets. Accordingly, it is possible that there would be no assets
remaining from which claims of the holders of the Notes could be satisfied or
if any such assets remain, such assets might be insufficient to satisfy such
claims fully. In addition, the Issuer's Unrestricted Subsidiaries (which
include those subsidiaries (including intermediate holding companies) that
develop PC-1, MAC, PAC and future cable systems) have not guaranteed the
Issuer's obligations with respect to the Notes. Furthermore, as of the date of
the Indenture, ACL and its subsidiaries are not Guarantors; however, ACL and
its subsidiaries will become Guarantors when such action is permitted by the
terms of the AC-1 Credit Facility or the AC-1 Credit Facility has been
retired. See "Description of Notes--Certain Covenants--Future AC Subsidiary
Guarantees."
In addition, the Issuer is a holding company that conducts substantially all
of its operations through its subsidiaries; therefore, the Notes are
effectively subordinated to all indebtedness and other liabilities (including
trade payables and lease obligations) of the Issuer's subsidiaries that are
not Guarantors. As of June 30, 1998, after giving effect to the Offering and
the application of the net proceeds therefrom, the Issuer's subsidiaries that
are not Guarantors would have had total indebtedness and liabilities
(including trade payables and lease obligations) outstanding of approximately
$518 million, to which the Notes would have been effectively subordinated. See
"Description of Notes--Terms of Notes."
The Company intends to utilize revenues from AC-1 to meet its debt service
obligations on the Notes. Such revenues, however, are subject to significant
existing restrictions at the ACL level pursuant to the AC-1 Credit Facility
which will substantially limit or prohibit the payment of dividends or
distributions to the Issuer until the
AC-1 Credit Facility is retired. See "Description of Certain Indebtedness--AC-
1 Credit Facility." To the extent that the AC-1 Credit Facility limits or
prohibits the payment of dividends from ACL to the Issuer, there will be a
material adverse effect on the ability of the Company to satisfy its debt
service obligations on the Notes.
18
<PAGE>
RISKS RELATED TO COMPLETING THE COMPANY'S CABLE SYSTEMS
The Company's ability to achieve its strategic objectives will depend in
large part upon the successful, timely and cost-effective completion of the
Company's planned cable systems as well as on achieving substantial capacity
sales on these systems once they become operational. The construction of the
Company's systems will be affected by a variety of factors, uncertainties and
contingencies, many of which are beyond the Company's control. There can be no
assurance that each of these systems will be completed at the cost and in the
time frame currently estimated by Global Crossing, or even at all. Although
the Company will be awarding contracts for construction of its systems to
certain suppliers who in most cases are expected to be bound by a fixed-price
construction cost schedule, and to provide guarantees in respect of completion
dates and system design specifications, there can be no assurance that the
actual construction costs or the time required to complete these systems will
not exceed current Company estimates. Such circumstances could have a material
adverse effect on the Company. See "Business--Suppliers."
The successful completion of the Company's cable systems will depend, among
other things, upon the Company's ability to manage their construction
effectively and to obtain all permits and licenses required for construction.
Successful completion will also depend on the timely performance by third-
party contractors of their obligations. There can be no assurance that
construction will be completed as scheduled or that the required permits and
licenses will be obtained. There are a limited number of suppliers with whom
the Company can negotiate these arrangements. There can be no assurance that
the Company will be able to enter into these contracts. Any of the foregoing
may significantly delay or prevent completion of one or more of the Company's
systems, which could have a material adverse effect on the Company.
SALES OF CAPACITY; REALIZATION OF OTHER REVENUES
The ability of the Company to achieve its business objectives will also
depend in large part upon its sales and marketing capabilities. Through its
wholly-owned subsidiary, Global Crossing International, Ltd. ("GCI"), the
Company has assembled a dedicated sales and marketing force and will be
dependent upon the ability of such employees to effectively market and sell
capacity. There can be no assurance that the Company will be able to
effectively sell capacity on its cable systems. Failure of the Company to
effectively sell capacity on its cable systems would have a material adverse
effect on the Company.
The Company's ability to increase revenues and profits will depend in part
on its ability to expand the products and services it offers to customers. The
Company currently believes that potential sources of these revenues include
potential upgrades of the capacity available on its planned systems, the
development of additional subsea cable projects and the provision of
terrestrial backhaul services to customers acquiring capacity on its undersea
cable systems. See "Business." In the event the Company is unable to effect
these upgrades, develop additional cable projects or obtain required
terrestrial backhaul capacity, the Company's ability to increase its revenues
and profits will be adversely affected.
TERMINATION OF CPAS
A purchaser's payment obligation under a CPA for AC-1 terminates with
capacity on any segment other than the United States-United Kingdom segment
(and, in certain cases, with respect to capacity on the United States-United
Kingdom segment), if the RFS date for the full AC-1 system has not occurred by
June 30, 1999. Performance under certain CPAs for AC-1 is also contingent upon
the obtaining and continuance of such approvals, consents, governmental
authorizations, licenses and permits as may be required or reasonably deemed
necessary by each party thereto for performance by such party thereunder and
as may be satisfactory to it. It is expected that CPAs for the Company's other
systems will contain similar provisions. Termination of a substantial number
of CPAs for any of the foregoing reasons would have a material adverse effect
on the Company. See "Business--Sales and Marketing" and "--Summary of
Principal Terms of Standard Contractual Documentation."
19
<PAGE>
COMPETITION
The international telecommunications industry is highly competitive. The
Company faces competition from existing and planned systems along each of its
planned routes and from satellite providers, including existing geosynchronous
satellites and low-earth orbit systems now under construction. On certain
routes, terrestrial cable systems may also compete with the Global Crossing
Network. The Company competes primarily on the basis of price, availability,
transmission quality and reliability, customer service and the location of its
systems. Traditionally, carriers have made substantial long term investments
in ownership of cable capacity, making lower price and superior service less
determinative in convincing such carriers to acquire additional capacity on
the Company's systems than is the case in industries without such long term
relationships. Accordingly, there can be no assurance that the Company will be
able to compete successfully against systems to which prospective customers
have made long term commitments.
The routes underlying Global Crossing's systems are currently served by
several undersea cables as well as satellites. Primary future sources of
competition for the Company may result from, among others, (i) TAT-14, a
transatlantic cable system which is being developed by its consortium members,
(ii) Gemini, a transatlantic cable system being operated and marketed by
WorldCom and Cable & Wireless, (iii) China-US, a transpacific system being
developed as a "private cable system" by fourteen large carriers, including
SBC, MCI, AT&T and Sprint, most of whom have traditionally sponsored
consortium cables and (iv) the Japan-US Cable Network, a transpacific system
being developed by a consortium of major telecommunications carriers including
Worldcom, AT&T, KDD, NTT, Cable & Wireless and GTE. Other regional and global
systems are being considered by developers, including Project Oxygen, a global
system being evaluated by CTR Group, Ltd. The Company believes that the other
planned transatlantic systems would compete directly with AC-1 and the
commitments of the developers of these systems could substantially reduce
these customers' demand for capacity on AC-1. Although the Company believes
that the other planned transpacific systems will not satisfy the demand for
capacity between the United States and Japan and that there is currently
enough demand projected to accommodate all such systems, the other planned
transpacific systems will receive commitments for capacity that PC-1 could
have received in their absence. In addition, the Company may face competition
from existing and planned regional undersea cable systems and satellites on
its MAC and PAC routes, where entrants are vying for purchases from a small
but rapidly growing customer base. See "--Rapid Growth in a Changing Industry;
Pricing Uncertainties" and "Business--Competition."
RELATIONSHIP WITH PRINCIPAL SHAREHOLDERS; CONFLICTS OF INTEREST
As of August 13, 1998, Pacific Capital Group, Inc. ("PCG") had a 23.58%
beneficial ownership interest in New GCL (after giving effect to the Old GCL
Exchange and the Stock Offerings). PCG and its affiliates have entered into
certain transactions with the Company in connection with the development by
PCG and its affiliates of several of Global Crossing's systems, including AC-
1, PC-1, PAC and MAC, and the decision by the Board of Directors of GCL to
assume the ongoing development of systems (other than AC-1) from an affiliate
of PCG. PCG and its subsidiaries are controlled by Mr. Gary Winnick, the
Co-Chairman of the Board of Directors of GCL, and several other officers and
directors of New GCL are affiliated with PCG. In addition, through an
affiliate, Canadian Imperial Bank of Commerce ("CIBC") had a 22.46% beneficial
ownership interest in New GCL (after giving effect to the Old GCL Exchange and
the Stock Offerings). An affiliate of CIBC was an Underwriter in the Stock
Offerings, and CIBC and its affiliates have also entered into certain
financing transactions with the Company in connection with the development and
construction of the Company's systems. Several members of the Board of
Directors of New GCL are affiliated with CIBC. See "Management," "Principal
Shareholders" and "Certain Transactions."
Upon completion of the Stock Offerings, PCG and CIBC collectively
beneficially owned 46.04% of the outstanding Common Stock. Accordingly, PCG
and CIBC may be able to determine the vote on matters submitted to a vote of
the Company's stockholders, including the election of directors.
Certain officers and directors of the Company also serve as officers and
directors of other companies and certain officers and directors of the Company
are active investors in the telecommunications industry. See
"Management." Service as a director or officer of the Company and as a
director or officer of another company
20
<PAGE>
could create or appear to create conflicts of interest when the director or
officer is faced with decisions that could have different implications for the
Company and such other company. A conflict of interest could also exist with
respect to allocation of time and attention of persons who are officers of
both the Company and another company. The pursuit of these other business
interests could distract these officers and directors from pursuing
opportunities on behalf of the Company. Such conflicts of interest could have
a material adverse affect on the Company.
BENEFICIAL OWNERSHIP BY MANAGEMENT AND AFFILIATES
The Company's executive officers and directors have substantial equity
interests in the Company and have also received amounts from the Company due
to advisory services fees paid to PCG and its affiliates. This advisory fee
arrangement was terminated prior to the Stock Offerings, with such individuals
receiving Common Stock as a result of such termination, thereby increasing
their significant equity interests in the Company following the Stock
Offerings. Set forth below for each executive officer and director of the
Company is the amount and value of (i) all shares of Common Stock sold by such
individual in the Stock Offerings, (ii) all shares of Common Stock to be
beneficially owned by such individual immediately following the Stock
Offerings (determined pursuant to Rule 13d-3 of the Securities Exchange Act of
1934, as amended, except with respect to options, all of which are shown in
the column entitled "Stock Options Held"), (iii) all options to acquire Common
Stock held by such individual, (iv) all warrants held by such individual to
purchase additional Common Stock and (v) all fees paid to such individual
indirectly through the advisory fees paid to PCG. See "Principal Shareholders"
and "Certain Transactions." The values set forth in the following table are
based upon a price of $19 per share of Common Stock (the Price to Public per
Share of the Stock Offerings).
<TABLE>
<CAPTION>
COMMON COMMON STOCK STOCK ADVISORY
STOCK OWNED AFTER WARRANTS OPTIONS SERVICES
INVESTOR SOLD VALUE STOCK OFFERINGS(1) VALUE HELD(2) VALUE(2) HELD(3) VALUE FEES(4)
- -------- --------- ----------- ------------------ ------------ --------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gary Winnick.... 1,096,463 $20,832,797 46,739,575 $888,051,925 4,282,896 $33,728,493 900,000 $15,600,000 $ 3,191,630
Lodwrick M.
Cook........... -- $ -- 1,731,226 $ 32,893,294 475,001 $ 3,301,257 450,000 $ 7,800,000 $ --
Jack M. Scanlon. -- $ -- -- $ -- -- $ -- 1,800,000 $31,200,000 $ --
Dan J. Cohrs.... -- $ -- -- $ -- -- $ -- 675,000 $ 8,325,000 $ --
David L. Lee.... 306,704 $ 5,827,376 10,102,010 $191,938,190 1,244,229 $ 9,692,335 450,000 $ 7,800,000 $ 481,130
Abbott L. Brown. 230,129 $ 4,372,451 5,690,670 $108,122,730 908,834 $ 6,895,470 450,000 $ 7,800,000 $ 320,754
Barry Porter.... 306,704 $ 5,827,376 9,189,874 $174,607,606 1,217,634 $ 9,423,725 450,000 $ 7,800,000 $ 481,130
James C. Gorton. -- $ -- -- $ -- -- $ -- 750,000 $ 9,250,000 $ --
Jack Finlayson.. -- $ -- -- $ -- -- $ -- 735,000 $ 7,215,000 $ --
K. Eugene
Shutler........ -- $ -- 148,986 $ 2,830,734 -- $ -- 300,000 $ 5,200,000 $ --
Hillel
Weinberger..... -- $ -- 21,330,900 $405,287,100 -- $ -- 60,000 $ 1,040,000 $ --
Jay R. Bloom.... -- $ -- 48,513,400 $921,754,600 -- $ -- 300,000 $ 5,200,000 $ --
Dean C. Kehler.. -- $ -- 48,513,400 $921,754,600 -- $ -- 300,000 $ 5,200,000 $ --
Jay R. Levine... -- $ -- 48,513,400 $921,754,600 -- $ -- 300,000 $ 5,200,000 $ --
William D.
Phoenix........ -- $ -- 48,513,400 $921,754,600 -- $ -- 300,000 $ 5,200,000 $ --
Bruce Raben..... -- $ -- 48,513,400 $921,754,600 -- $ -- 300,000 $ 5,200,000 $ --
Michael R.
Steed.......... -- $ -- 16,590,130 $315,212,470 348,967 $ 3,524,567 60,000 $ 1,040,000 $ 194,696
<CAPTION>
TOTAL
INVESTOR VALUE(5)
- -------- ------------
<S> <C>
Gary Winnick.... $961,404,845
Lodwrick M.
Cook........... $ 43,994,551
Jack M. Scanlon. $ 31,200,000
Dan J. Cohrs.... $ 8,325,000
David L. Lee.... $215,739,031
Abbott L. Brown. $127,511,405
Barry Porter.... $198,139,837
James C. Gorton. $ 9,250,000
Jack Finlayson.. $ 7,215,000
K. Eugene
Shutler........ $ 8,030,734
Hillel
Weinberger..... $406,327,100
Jay R. Bloom.... $926,954,600
Dean C. Kehler.. $926,954,600
Jay R. Levine... $926,954,600
William D.
Phoenix........ $926,954,600
Bruce Raben..... $926,954,600
Michael R.
Steed.......... $319,971,733
</TABLE>
- --------
(1) The amount shown for Mr. Weinberger includes 20,037,585 shares of Common
Stock owned by Continental Casualty Company, an affiliate of Loews/CNA
Holdings Corp. Mr. Weinberger is an officer of Loews/CNA Holdings Corp.
The amounts shown for Messrs. Bloom, Kehler, Levine, Phoenix and Rabin
include 48,513,400 shares of Common Stock owned beneficially by CIBC, an
affiliate of their employer, CIBC Oppenheimer Corp. ("CIBC Oppenheimer").
The amount shown for Mr. Steed includes 16,590,130 shares of Common Stock
owned by MRCo, Inc., a wholly-owned subsidiary of Union Labor Life
Insurance Company ("ULLICO") and certain fees paid to ULLICO. Mr. Steed is
an officer of both such companies.
(2) Includes New PCG Warrants and GCL Warrants. The value of warrants held is
presented based upon a value of $6.95 per New PCG Warrant and $10.10 per
GCL Warrant, the value assigned to such warrants by the Company based upon
independent appraisals.
(3) Of the 7,380,000 aggregate shares of Common Stock issuable upon the
exercise of options reflected in the table, options in respect of
2,260,000 shares are exercisable within 60 days of August 13, 1998 and
options in respect of 5,120,000 shares are exercisable, subject to various
conditions, following vesting on various dates through July 2001. The
amounts shown for Messrs. Bloom, Kehler, Levine, Phoenix and Raben include
options in respect of 300,000 shares of Common Stock owned beneficially by
CIBC.
(4) The agreements providing for the payment of advisory services fees to PCG
and its affiliates also provided that varying portions of such fees were
payable to ULLICO, CIBC and Messrs. Winnick, Cook, Brown, Lee and Porter.
The Company and the other parties to these agreements terminated these
agreements in connection with the Stock Offerings in consideration for the
issuance, through an affiliate of PCG, to the persons entitled to receive
such fees of shares of Common Stock having an aggregate value of $135
million and the cancellation of $2.7 million owed to the Company under a
related advance agreement. Pursuant to this termination, shares of
21
<PAGE>
Common Stock were issued to and are beneficially owned by the following
persons in the amounts and having the values (based upon a Price to Public
per Share of $19.00) indicated. The net proceeds from the sale of the Shares
to be sold in the Stock Offerings by Messrs. Winnick, Cook, Lee, Brown and
Porter are to be used by such individuals to fund anticipated income tax
liabilities resulting from the termination of these advisory fee agreements.
<TABLE>
<CAPTION>
RECIPIENT COMMON STOCK VALUE
--------- ------------ ------------
<S> <C> <C>
Gary Winnick (including PCG and PCG Telecom). 3,257,577 $ 61,893,963
CIBC......................................... 670,000 12,730,000
ULLICO....................................... 366,579 6,965,001
Lodwrick M. Cook............................. 304,974 5,794,506
Abbott L. Brown.............................. 683,711 12,990,510
David L. Lee................................. 911,211 17,313,010
Barry Porter................................. 911,211 17,313,010
--------- ------------
Total...................................... 7,105,263 $135,000,000
========= ============
</TABLE>
(5) The amounts shown give effect to the Old GCL Exchange, Advisory Services
Agreement Termination and TDC Exchange. Amounts under "Warrants Held"
include New PCG Warrants and GCL Warrants. See "Principal Shareholders,"
"Certain Transactions" and "Description of Capital Stock--Old GCL
Exchange."
TRANSITION FROM PROJECT MANAGEMENT TO OPERATING COMPANY
The Company must undergo substantial changes in its operations to transition
from being a development stage company primarily involved in the planning and
development of a major telecommunications infrastructure system to one which
operates, markets, supports and services multiple systems. These changes are
expected to be a significant challenge to the Company's managerial,
administrative and operational resources. The Company is in the process of
expanding the management and operational capabilities necessary for this
transition. The Company's ability to manage this transition successfully will
depend on, among other things: (i) expansion, training and management of its
employee base, including attracting, retaining and motivating highly skilled
personnel; (ii) taking over or outsourcing the Company's customer interface
and operations, administration and maintenance systems; (iii) procuring
terrestrial capacity to provide connectivity to inland cities; and (iv)
control of the Company's expenses. There can be no assurance that the Company
will succeed in developing all or any of these capabilities, and any failure
to do so could have a material adverse effect on the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Management."
RAPID GROWTH IN A CHANGING INDUSTRY; PRICING UNCERTAINTIES
Part of the Company's strategy is to rapidly construct several cable systems
in a short time frame in order to take advantage of the supply and demand
imbalance that currently exists and is projected in the global marketplace.
Each of the Company's currently announced systems is expected to be
operational between 1998 and 2000. As a result of the Company's implementation
of the aggressive timing of its strategy, the Company is experiencing rapid
expansion that management expects will continue for the foreseeable future.
This growth has increased the operating complexity of the Company. At the same
time, the international telecommunications industry is changing rapidly due
to, among other things, regulatory liberalization, privatization of
established carriers, the expansion of telecommunications infrastructure, the
globalization of the world's economies and the changing technology for
wireless and satellite communication. Much of the Company's planned growth is
predicated upon the growth in demand for international telecommunications
capacity which will consume the increased supply of telecommunications
capacity from new cables and other technology so that price declines will not
be greater than the price declines anticipated by the Company in its business
plan. There can be no assurance that such anticipated demand growth will
occur.
The undersea fiber optic cable transmission industry has experienced
significant per circuit price declines resulting from technological advances
in fiber optic technology. Recent technological advances have created even
greater per circuit pricing pressure in the industry. A lower than projected
increase in demand or a higher than
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<PAGE>
projected decline in per circuit price could have a material adverse effect on
the Company. There can be no assurance, even if the Company's projections with
respect to such factors are realized, that the Company will be able to
implement its strategy or that its strategy will be successful in the rapidly
evolving telecommunications market.
RAPID TECHNOLOGICAL CHANGE
Recent technological advances, such as the use of DWDM, have greatly
expanded the availability of capacity of new fiber optic cable at constant
construction costs, resulting in a corresponding decrease in the cost per
circuit of capacity. In addition, the introduction of new products or the
emergence of new technologies may enable competitors to install competing
systems at a lower per-circuit cost on routes currently targeted by the
Company or to expand capacity on existing competitive systems, potentially
rendering the Company's systems not cost competitive. While the Company
believes that being the first to market and construct cable systems with
significant capacity on certain routes may prevent competitors from
overbuilding in those situations, Global Crossing cannot predict the behavior
of potential competitors who might otherwise build a system even if it would
be uneconomical for an additional system to be constructed. The Company
believes that for the foreseeable future, technology changes will neither
materially affect the continued use of fiber optic cable nor materially hinder
the Company's ability to deploy the state-of-the-art technology; however, the
effect of such technological changes on the Company's operations cannot be
predicted and could have a material adverse effect on the Company.
OPERATIONS RISKS
Each of Global Crossing's systems will be subject to the risks inherent in a
large-scale, complex undersea fiber optic telecommunications system employing
advanced technology. The operations, administration, maintenance and repair of
these systems requires the coordination and integration of sophisticated and
highly specialized hardware and software technologies and equipment located
throughout the world. There can be no assurance that, even if built to
specifications, the Company's systems will function as expected in a cost-
effective manner. The failure of the hardware or software to function as
required could render a cable system unable to perform at design
specifications.
AC-1 has, and each of the Company's other systems are expected to have, a
design life of not less than 25 years; however, there can be no assurance of
the actual useful life of any of these systems. A number of factors will
affect the useful life of each of the Company's systems, including, among
other things, quality of construction, unexpected deterioration and
technological or economic obsolescence. Failure of any of the Company's
systems to operate for its full design life could have a material adverse
effect on the Company.
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends on the efforts of certain of its
officers and key technical, sales and other employees, some of whom have only
recently joined the Company, as well as its ability to attract, retain and
motivate highly skilled officers and employees. There can be no assurance that
the Company will successfully integrate new management personnel and employees
into its existing operations, or that the Company will be able to attract,
retain and motivate highly skilled management personnel and employees.
Furthermore, the Company does not presently maintain any key person life
insurance policies on any of its management personnel. See "Management--
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
The Company will derive substantial revenues from international operations.
The Company intends to have substantial physical assets in several
jurisdictions along the routes of its planned systems. International
operations are subject to political, economic and other uncertainties,
including, among other things, risk of war, revolution, border disputes,
expropriation, renegotiation or modification of existing contracts, labor
disputes and other uncertainties arising out of foreign government sovereignty
over the Company's international operations. There can be no assurance that
these factors will not have a material adverse effect on the Company.
23
<PAGE>
FOREIGN EXCHANGE; EXCHANGE CONTROLS
The Company will invoice all sales of capacity in U.S. dollars, and each
customer will incur maintenance and other obligations denominated in U.S.
dollars; however, many actual and prospective customers of the Company derive
their revenues in currencies other than U.S. dollars. The obligations of
customers whose revenues are preponderantly in foreign currencies will be
subject to unpredictable and indeterminate increases in the event that such
currencies devalue relative to U.S. dollars. Furthermore, such customers may
be or may become subject to exchange control regulations which might restrict
or prohibit the conversion of their revenue currencies into dollars. There can
be no assurance that the occurrence of any such factors will not have a
material adverse effect on the Company.
EFFECT OF GOVERNMENT REGULATION
The Company, in the ordinary course of development, construction and
operation of its fiber optic cable systems, will be required to obtain and
maintain various permits, licenses and other authorizations in both the United
States and in foreign jurisdictions where its cables land. In particular,
undersea cable landing or similar licenses will be required in many of the
jurisdictions where Global Crossing's systems will land. Such licenses are
typically issued for a term of years, subject to renewal. Moreover, the
licenses may subject the Company's business and operations to varying forms of
regulation, which could change over the course of time. Failure to obtain or
renew such a license, or a material change in the nature of the regulation to
which the Company's operations are subject, could have a material adverse
effect on the Company's business. In addition, the Company's international
operations may be affected from time to time by political developments and
national and local laws and regulations and may be subject to risks such as
the imposition of governmental controls, license requirements and changes in
tariffs. Specifically, in connection with the construction of each cable
system, the Company must obtain certain permits and licenses with respect to
construction, operations and maintenance. Although Global Crossing intends
that the construction contracts for each of the Company's cable systems will
impose the burden of acquiring and maintaining construction licenses and
permits on the contractor for each of such systems, there can be no assurance
that such contractor will successfully obtain such permits and licenses.
Failure to obtain or maintain any permits or licenses so required could have a
material adverse effect on the Company. See "Business--Regulation."
DEPENDENCE ON THIRD PARTIES
The Company is and will continue to be dependent upon third parties to (i)
provide access to certain origination and termination points of its systems in
various jurisdictions, (ii) construct and operate landing stations in certain
of such jurisdictions, (iii) construct and maintain the Company's systems
pursuant to contractual arrangements with the Company, (iv) provide backhaul
service to the Company's customers through contractual arrangements with such
parties and (v) act as joint venture participants with respect to PC-1 and,
potentially, certain of the Company's future systems. There can be no
assurance that such parties will perform their contractual obligations or that
there will not be political or economic events in relation to such parties
which may have a material adverse effect on the Company.
RISK OF ERROR IN FORWARD-LOOKING STATEMENTS
Until May 26, 1998, the Company was a development stage company.
Accordingly, all statements in this Prospectus that are not clearly historical
in nature are forward-looking. Examples of such forward-looking statements
include the statements concerning the Company's operations, prospects, size of
world telecommunications traffic, size of addressable market, technological
and customer support capabilities, pricing, potential customers and liquidity
and working capital needs, estimated demand forecasts, and information
concerning characteristics of competing systems. These forward-looking
statements are inherently predictive and speculative and no assurance can be
given that any of such statements will prove to be correct. Actual results and
developments may be materially different from those expressed or implied by
such statements. Prospective investors should carefully review the other risk
factors set forth in this section of this Prospectus for a discussion of
certain factors which could result in any of such forward-looking statements
proving to be inaccurate.
24
<PAGE>
TAX MATTERS
The Company believes that a significant portion of its income will not be
subject to tax by any of (i) Bermuda, which currently does not have a
corporate income tax, or (ii) certain other countries in which the Company
conducts activities or in which customers of the Company are located,
including the United States. However, this belief is based upon the
anticipated nature and conduct of the business of the Company, which may
change, and upon the Company's understanding of its position under the tax
laws of the various countries in which the Company has assets or conducts
activities, which position is subject to review and possible challenge by
taxing authorities and to possible changes in law (which may have retroactive
effect). The extent to which certain jurisdictions may require the Company to
pay tax or to make payments in lieu of tax cannot be determined in advance. In
addition, the operations and payments due to the Company may be affected by
changes in taxation, including retroactive tax claims or assessment of
withholding on amounts payable to the Company or other taxes assessed at the
source, in excess of the taxation anticipated by the Company based on business
contacts and practices of the Company and the current tax regimes. There can
be no assurance that any of the foregoing factors would not have a material
adverse effect on the Company. See "Tax Considerations."
COVENANT RESTRICTIONS
The Indenture imposes certain operating and financial restrictions on the
Issuer and its Restricted Subsidiaries; however, the Issuer's Unrestricted
Subsidiaries (which will include those subsidiaries that develop PC-1, MAC,
PAC and future cable systems) will not be subject to such restrictions. Such
restrictions will affect, and in many respects significantly limit or
prohibit, among other things, the ability of the Issuer and its Restricted
Subsidiaries to incur additional indebtedness, repay indebtedness (including
the Notes) prior to stated maturities, sell assets, make investments, engage
in transactions with shareholders and affiliates, issue capital stock, create
liens or engage in mergers or acquisitions. These restrictions could also
limit the ability of the Issuer and its Restricted Subsidiaries to effect
future financings, make needed capital expenditures, withstand a future
downturn in the Company's business or the economy in general, or otherwise
conduct necessary corporate activities. The Issuer's and its Restricted
Subsidiaries' ability to comply with the covenants and restrictions contained
in the Indenture may be affected by events beyond their control, including
prevailing economic and financial concerns. A failure by the Issuer or any of
its Restricted Subsidiaries to comply with these restrictions could lead to a
default under the terms of the Notes notwithstanding the ability of the Issuer
and its Restricted Subsidiaries to meet their debt service obligations. In the
event of a default, holders of the Notes could elect to declare all such
indebtedness to be due and payable together with accrued and unpaid interest.
In such event, a significant portion of the other indebtedness of the Issuer
or any of its subsidiaries may become immediately due and payable and there
can be no assurance that the Issuer and its Restricted Subsidiaries would be
able to make such payments or borrow sufficient funds from alternative sources
to make any such payment. See "Description of Notes--Certain Covenants."
PURCHASE OF NOTES UPON A CHANGE OF CONTROL
The Indenture requires the Issuer to make an offer to purchase the Notes
upon the occurrence of a Change of Control at a purchase price equal to 101%
of the principal amount thereof, plus accrued interest to the date of
purchase. Prior to commencing such an offer to purchase, the Company would be
required to (i) repay in full all indebtedness of the Company that would
prohibit the purchase of the Notes or (ii) obtain any requisite consent to
permit the purchase. If the Company is unable to repay all of such
indebtedness or is unable to obtain the necessary consents, the Issuer will be
unable to offer to purchase the Notes and such failure will constitute an
event of default under the Indenture. There can be no assurance that the
Company will have sufficient funds available at the time of any Change of
Control to make any debt payment (including purchases of Notes) as described
above. See "Description of Notes--Repurchase at the Option of Holders--Change
of Control."
FRAUDULENT CONVEYANCE MATTERS
Under applicable provisions of federal bankruptcy law or comparable
provisions of state fraudulent transfer law, if, among other things, the
Issuer or any Guarantor, at the time it incurred the indebtedness evidenced by
25
<PAGE>
the Notes or by its Guarantee, (i) (a) was or is insolvent or rendered
insolvent by reason of such occurrence or (b) was or is engaged in a business
or transaction for which the assets remaining with the Issuer or such
Guarantor constituted unreasonably small capital or (c) intended or intends to
incur, or believed or believes that it would incur, debts beyond its ability
to pay such debts as they mature, and (ii) the Issuer, or such Guarantor
received or receives less than reasonably equivalent value or fair
consideration for the incurrence of such indebtedness, then the Notes and the
Guarantees, and any pledge or other security interest securing such
indebtedness, could be voided, or claims in respect of the Notes or the
Guarantees could be subordinated to all other debts of the Issuer or such
Guarantor, as the case may be. In addition, the payment of interest and
principal by the Issuer pursuant to the Notes or the payment of amounts by a
Guarantor pursuant to a Guarantee could be voided and required to be returned
to the person making such payment, or to a fund for the benefit of the
creditors of the Issuer or such Guarantor, as the case may be.
The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any proceeding with respect to the
foregoing. Generally, however, the Issuer or a Guarantor would be considered
insolvent if (i) the sum of its debts, including contingent liabilities, were
greater than the saleable value of all of its assets at a fair valuation or if
the present fair saleable value of its assets were less than the amount that
would be required to pay its probable liability on its existing debts,
including contingent liabilities, as they become absolute and mature or (ii)
it could not pay its debts as they become due.
On the basis of historical financial information, recent operating history
and other factors, the Issuer and each Guarantor believes that, after giving
effect to the indebtedness incurred in connection with the Offering, it will
not be insolvent, will not have unreasonably small capital for the business in
which it is engaged and will not incur debts beyond its ability to pay such
debts as they mature. There can be no assurance, however, as to what standard
a court would apply in making such determinations or that a court would agree
with the Issuer's or the Guarantors' conclusions in this regard.
USE OF PROCEEDS
The Issuer will not receive any proceeds from the Exchange Offer.
26
<PAGE>
CAPITALIZATION
The following table sets forth as of June 30, 1998 (i) the historical
consolidated capitalization of the Company (as restated to reflect the Old GCL
Exchange) and (ii) the capitalization as adjusted to reflect the Stock
Offerings and the application of the net proceeds therefrom, the TDC Exchange,
the Advisory Services Agreement Termination, and the PCG Warrant Conversion.
This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and the notes thereto appearing elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
------------------------------
ACTUAL AS ADJUSTED(1)
-------------- --------------
(UNAUDITED)
<S> <C> <C>
Long Term Debt:
AC-1 Credit Facility(2)................... $ 367,048,000 $ 367,048,000
Long Term Deferred Revenue................ 6,916,667 6,916,667
Obligations under Inland Services
Agreements(3)............................ 7,628,050 7,628,050
Obligations under Capital Leases(4)....... 7,561,897 7,561,897
9 5/8% Senior Notes due 2008(5)........... 796,277,203 796,277,203
-------------- --------------
Total Long Term Debt.................... 1,185,431,817 1,185,431,817
-------------- --------------
Shareholders' Equity:
Common Stock.............................. 1,636,745 2,050,429
Treasury Stock............................ -- (209,414,620)
Additional Paid-in Capital................ 395,458,370 1,059,620,590
Accumulated Deficit....................... (159,315,864) (159,315,864)
-------------- --------------
Total Shareholders' Equity.............. 237,779,251 692,940,535
-------------- --------------
Total Capitalization.................... $1,423,211,068 $1,878,372,352
============== ==============
</TABLE>
- --------
(1) As adjusted to reflect the Stock Offerings, the TDC Exchange, the Advisory
Services Agreement Termination and the PCG Warrant Conversion. For
detailed information on these adjustments, see the footnotes to the pro
forma financial information presented on pages 12-15.
(2) The AC-1 Credit Facility provides non-recourse financing at the ACL level
for the construction and development of AC-1. A total of $482.0 million is
available to be borrowed under this facility, of which $367.0 million was
outstanding as of June 30, 1998. See "Description of Certain
Indebtedness--AC-1 Credit Facility."
(3) Net of the $43.5 million current portion of such obligations.
(4) Net of the $6.2 million current portion of such obligations.
(5) The Notes provide funds for refinancing corporate indebtedness and
investments in the Company's PC-1, MAC and PAC systems.
27
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected data presented below under the captions "Statement of
Operations Data" and "Balance Sheet Data" as of December 31, 1997 and for the
period from March 19, 1997 (date of inception) through December 31, 1997 are
derived from the Consolidated Financial Statements of the Company included
herein, which financial statements are prepared in accordance with U.S. GAAP
and have been audited by Arthur Andersen & Co., independent public
accountants, as indicated in their report thereon included elsewhere in this
Prospectus. The financial data as of and for the three and six months ended
June 30, 1998 are derived from the Company's unaudited interim financial
statements. The unaudited interim financial statements include all
adjustments, consisting of normal recurring adjustments, that management
considers necessary for fair presentation of the financial position as of June
30, 1998 and results of operations for the interim periods presented. Results
of operations for the interim periods are not necessarily indicative of the
results of operations for a full year. The operating data presented below are
derived from the Company's records. The financial data presented herein and
elsewhere in this Prospectus is not necessarily indicative of the financial
position or results of operations of the Company in the future. The
information set forth below should be read in conjunction with the discussion
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations," "Business" and the Consolidated Financial Statements and the
notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 19, 1997
SIX MONTHS (DATE OF INCEPTION)
THREE MONTHS ENDED ENDED TO DECEMBER 31,
JUNE 30, 1998 JUNE 30, 1998 1997
------------------ ------------- -------------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Sales and Operating
Revenues............... $ 101,255,867 $ 101,255,867 $ --
------------- ------------- ------------
Expenses:
Cost of Capacity Sold. 41,200,229 41,200,229 --
Operating,
Administrative and 183,705,088 187,748,840 3,101,708
Other (1)............ ------------- ------------- ------------
224,905,317 228,949,069 3,101,708
------------- ------------- ------------
Operating Loss.......... (123,649,450) (127,693,202) (3,101,708)
Other Income (Expense):
Interest Income....... 4,327,602 4,673,436 2,941,352
Interest Expense...... (7,403,037) (7,426,271) --
Provision for Income
Taxes (2).............. (9,000,000) (9,000,000) --
Extraordinary Loss on (19,709,471) (19,709,471) --
Retirement of Debt (3). ------------- ------------- ------------
Net Loss................ (155,434,356) (159,155,508) (160,356)
Preference Share Non-
Cash Dividends (4)..... (3,898,203) (8,306,433) (12,689,923)
Redemption of Preference (34,140,067) (34,140,067) --
Shares (5)............. ------------- ------------- ------------
Net Loss Applicable to $(193,472,626) $(201,602,008) $(12,850,279)
Common Shareholders.... ============= ============= ============
Basic and Diluted Net
Loss per Common Share
before Extraordinary $ (1.06) $ (1.11) $ (0.08)
Item................... ============= ============= ============
Net loss per Common
Share on Extraordinary $ (0.12) $ (0.12) $ --
Item................... ============= ============= ============
Basic and Diluted Net
Loss per Common Share $ (1.18) $ (1.23) $ (0.08)
(6).................... ============= ============= ============
Shares used in Computing
Basic and Diluted Net 163,639,852 163,508,514 162,886,967
Loss per Common Share.. ============= ============= ============
OTHER FINANCIAL DATA:
Ratio of Earnings to
Fixed Charges (13)..... -- -- --
Pro Forma Ratio of Earn-
ings to Fixed Charges
(14)................... -- -- --
Excess of Fixed Charges
over Earnings (13)..... $ 140,121,181 $ 154,334,601 $ 9,937,123
============= ============= ============
Pro Forma Excess of
Fixed Charges over $ 139,787,058 $ 157,045,575 $ 20,992,580
Earnings (14).......... ============= ============= ============
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF
JUNE 30, 1998 DECEMBER 31, 1997
-------------- -----------------
<S> <C> <C>
BALANCE SHEET DATA:
Current Assets Including Cash and Restricted
Cash (7).................................... $ 605,891,695 $ 27,743,838
Long Term Accounts Receivable................ 7,900,000 --
Construction in Progress and Capacity
Available for Sale (8)...................... 779,646,579 518,518,509
Investment in Pacific Crossing Ltd. (9)...... 126,456,345 --
Deferred Finance and Organization Costs, Net 44,338,405 25,934,021
of Accumulated Amortization................. -------------- ------------
$1,564,233,024 $572,196,368
============== ============
Current Liabilities.......................... $ 141,021,956 $ 92,097,773
Long Term Debt............................... 367,048,000 162,325,000
Senior Notes................................. 796,277,203 150,000,000
Long Term Deferred Revenue................... 6,916,667 --
Obligations Under Inland Service Agreements
and Capital Leases (10)..................... 15,189,947 3,009,000
GTH Preference Shares (11)................... -- 90,643,919
Shareholders' Equity.........................
Common Stock............................... 1,636,745 1,628,870
Other Shareholders' Equity................. 395,458,370 72,652,162
Accumulated Deficit........................ (159,315,864) (160,356)
-------------- ------------
Total Shareholders' Equity................... 237,779,251 74,120,676
-------------- ------------
Total Liabilities and Shareholders' Equity... $1,564,233,024 $572,196,368
============== ============
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
AS OF
JUNE
30, 1998
------------
<S> <C>
OPERATING DATA:
Executed CPAs...................................................... $556 million
</TABLE>
<TABLE>
<CAPTION>
ESTIMATED(12)
--------------
<S> <C>
Route Kilometers............................................... 51,300
Fiber Kilometers............................................... 345,200
Estimated System Costs (excluding potential future upgrades and
amounts capitalized with respect to the PCG Warrants)
AC-1 ......................................................... $ 750 million
Other Systems Under Development............................... $2,025 million
Landing Stations............................................... 14
</TABLE>
- --------
(1) Includes a charge for the Advisory Services Agreement Termination on June
30, 1998. See "Certain Transactions." The Company acquired the rights of
those entitled to fees payable under the Advisory Services Agreements in
consideration for the issuance of Common Stock in the Company having an
aggregate value of $135 million and the cancellation of approximately
$2.7 million owed to the Company under a related advance agreement. As a
result of this transaction, the Company has recorded a non-recurring
charge in the approximate amount of $137.7 million. Also, during each of
the three and six months ended June 30, 1998, the Company recognized
$21.1 million from a total of $67.1 million of stock-related expense
relating to stock options issued during such period. The remaining $46.0
million will be recognized as follows: $4.8 million in each of the third
and fourth quarters of 1998, $19.2 million in 1999, $13.5 million in 2000
and $3.7 million in 2001.
(2) Reflects income taxes on profits earned during the three months ended
June 30, 1998 attributable to both United States and foreign
jurisdictions. A significant portion of the Company's operating losses
have been incurred in non-taxable jurisdictions and therefore these
operating losses cannot be applied to future taxable earnings of the
Company.
(3) On May 18, 1998, a portion of the proceeds from the issuance of the Notes
was used to repurchase the GTH Senior Notes. The Company recognized an
extraordinary loss of $19.7 million on repurchase comprising a premium of
approximately $9.8 million and a write-off of approximately $9.9 million
of unamortized deferred financing costs.
(4) The holders of GTH Preference Shares were entitled to receive cumulative,
compounding dividends at an initial annual rate of 14%. Preference share
dividends include cumulative 14% dividends and amortization of the
discount and issuance costs. Effective June 17, 1998, the Company used
proceeds from the Notes to redeem all outstanding GTH Preference Shares.
All dividends prior to the redemption had been paid through the issuance
of additional preference shares and charged against additional paid-
in capital.
(5) As a result of the redemption of the GTH Preference Shares, the Company
incurred a one-time $34.1 million charge recorded against Additional
Paid-in Capital. The charge was comprised of: (i) a $15.9 million charge
for the redemption premium and (ii) a write-off of $18.2 of unamortized
discount and unamortized deferred financing costs.
(6) Basic net loss per share is computed using the weighted average number of
shares of common stock outstanding. Diluted net loss per share is
computed using the weighted average number of shares of common stock
outstanding and common stock equivalents including shares issuable under
options and warrants that are dilutive using the treasury stock method.
(7) The majority of Cash and Restricted Cash is comprised of proceeds from
the issuance of the Notes and funds which have been reserved for the
purpose of funding future interest payable on the Notes.
(8) Construction in Progress and Capacity Available for Sale includes direct
and indirect expenditures for construction of AC-1 and other Systems and
is stated at cost. Includes costs incurred under (i) the AC-1 Contract;
(ii) advisory, consulting and legal fees; (iii) interest (including
amortization of debt issuance costs incurred during the construction
phase); and (iv) other costs necessary for developing AC-1. This amount
also includes backhaul capacity available for sale. Additionally, the
Company granted the PCG Warrants to PCG, a shareholder, for the PC-1, MAC
and PAC systems and related rights. The $213.3 million estimated value of
the Common Stock to be issued under the PCG Warrants has been recorded as
Construction in Progress in the amount of $86.8 million and Investment in
Pacific Crossing Ltd. in the amount of $126.5 million. Such estimated
values will be adjusted to reflect the Price per Share to Public in the
Stock Offerings in the Company's financial statements for the three
months ending September 30, 1998. Such adjustment is not expected to be
material.
29
<PAGE>
(9) Includes $126.5 million as of June 30, 1998, as described above,
representing the estimated value of the PCG Warrants applicable to
Pacific Crossing Ltd.
(10) Certain contracts to acquire backhaul capacity and certain capital leases
require payments over a 25-year period. The amount shown reflects the
present value of such payments, net of the $49.7 million ($30.2 million
as of December 31, 1997) current portion of such payments, which is
included under "Current Liabilities."
(11) The December 31, 1997 amount is comprised of (i) $100 million of GTH
Preference Shares originally issued, plus (ii) $9.8 million of GTH
Preference Shares issued as dividends thereon, less (iii) $19.2 million
reflecting the unamortized discount and issue costs associated therewith.
The Company has redeemed all of the outstanding GTH Preference Shares
effective as of June 17, 1998.
(12) Assumes full completion of AC-1, PC-1, MAC and PAC based upon current
Company estimates, including anticipated financing costs. See "Risk
Factors--Risks Relating to Completing the Company's Cable Systems" and
"Risk of Error in Forward-Looking Statements."
(13) For the purposes of this computation, earnings are defined as income
(loss) before income taxes plus fixed charges. Fixed charges consist of
interest expense (including amortization of deferred debt issuance costs)
and the portion of rental expense that is representative of the interest
factor (deemed to be one-third of minimum operating lease rentals).
(14) For the purposes of this pro-forma computation, earnings are defined as
income (loss) before income taxes plus fixed charges. Fixed charges
consist of interest expense (including amortization of deferred debt
issuance costs) and the portion of rental expense that is representative
of the interest factor (deemed to be one-third of minimum operating lease
rentals). This computation gives effect to the May 18, 1998 issuance of
the Notes assuming that the Notes had been issued at the beginning of
each of the periods presented.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements that include, among
others, statements concerning the Company's plans to effect the design,
construction, and operations of, and sales of capacity on, its planned
telecommunications systems, expectations as to funding its future capital
requirements and other statements of expectations, beliefs, future plans and
strategies, anticipated developments and other matters that are not historical
facts. Management cautions the reader that these forward-looking statements
are subject to risks and uncertainties that could cause actual events or
results to differ materially from those expressed or implied by the
statements. The most important factors that could prevent the Company from
achieving its goals include, but are not limited to, failure by the Company
to: (i) complete its systems within currently estimated time frames and
budgets, (ii) sell capacity on its systems, (iii) make a successful transition
from a system development and construction company to an operating company and
(iv) effectively compete in the context of a rapidly evolving market
characterized by intense price competition and unpredictable levels of demand
for telecommunication capacity. The Company does not intend to publish updates
or revisions of any forward-looking statements included in this Prospectus to
reflect events or circumstances after the date hereof or to reflect subsequent
market analysis. See "Risk Factors--Risk of Error in Forward-Looking
Statements."
The following discussion and analysis should be read in conjunction with the
Company's audited Consolidated Financial Statements and the notes thereto
contained in this Prospectus.
OVERVIEW
The Company was formed as the world's first independent developer, owner and
operator of undersea digital fiber optic cable systems to capitalize on the
accelerating growth of international Internet and telecommunications traffic.
The Company commenced operations in March 1997, when it entered into a fixed
price contract with Tyco Submarine Systems Ltd. ("TSSL"), formerly AT&T
Submarine Systems, Inc., for the design, development, construction and
installation of AC-1, and obtained commitments for AC-1's initial financing.
AC-1, the first of Global Crossing's planned fiber optic cable systems, is
designed to be a four fiber pair system connecting (i) the United States to
the United Kingdom, (ii) the United Kingdom to The Netherlands and Germany,
(iii) The Netherlands to Germany and (iv) Germany to the United States. The
first segment of AC-1, the United States to United Kingdom route, was
completed and commenced operations on May 26, 1998. The Company currently
anticipates that the full AC-1 system will be completed and commence
operations by February 1999. See "Risk Factors--Risks Related to Completing
the Company's Cable Systems."
Until May 26, 1998, the Company was a development stage company and since
its inception, has been involved in the planning, financing, marketing,
organization, development, design and construction of the AC-1 system. In
addition, the Company has been engaged in the planning, developing and
financing of the three other planned systems currently under active
development by the Company (PC-1, MAC and PAC). The Company has also achieved
a number of significant milestones, including (i) the recruitment of
experienced professionals in undersea cable and telecommunications operations,
(ii) the signing of construction contracts on AC-1, PC-1, MAC and PAC, (iii)
the execution of the AC-1 and PC-1 credit facilities and the execution of
financing commitments with respect to MAC and PAC, (iv) the construction and
activation of the United States to United Kingdom segment of AC-1 and (v) the
execution of over $500 million of CPAs. Effective May 26, 1998, the United
States--United Kingdom segment of AC-1 achieved RFS and the Company began
recognizing revenue from the sale of capacity. Accordingly, the Company is no
longer a development stage company.
On March 18, 1998, Old GCL formed a wholly-owned subsidiary, New GCL, a
Bermuda company, and contributed its investment in GTH to New GCL. On April
30, 1998, New GCL formed a wholly-owned subsidiary, GCH, a Bermuda company.
New GCL contributed its investment in GTH to GCH upon its formation. Prior to
the Stock Offerings, substantially all of the shareholders of Old GCL
exchanged their equity interests in Old GCL for Common Stock of New GCL.
31
<PAGE>
The Company, together with other partners, formed a joint venture company,
Pacific Crossing Ltd. ("PCL"), which on April 21, 1998 entered into a contract
with TSSL to construct the PC-1 cable system. The estimated cost of the PC-1
system is approximately $1.2 billion (excluding potential future upgrades) and
will be financed through a $400 million equity contribution by the joint
venture partners and through borrowings under the credit facility discussed
below. PC-1 is an undersea fiber optic cable system connecting California,
Washington and two landing sites in Japan. The Company has approximately a 58%
economic interest in PCL, represented by a 50% direct voting interest in PCL
and, through an equity ownership interest in one of the other joint venture
partners, a further 8% economic (but not voting) interest. The Company's
funding commitment in respect of the $400 million of equity in PCL totals $231
million, which is proportional to its economic interest. PCL has obtained an
$850 million senior secured, non-recourse credit facility from certain lenders
to finance the remaining construction costs of the PC-1 system. Prior to
obtaining such financing, PCL borrowed approximately $104 million under a
promissory note from the underwriters of the $850 million credit facility to
make the initial payments on the PC-1 construction contract. The $850 million
credit facility has been used to repay the $104 million promissory note. The
Company accounts for its investment in PCL on an equity basis.
Effective June 2, 1998, the Company, through its wholly-owned subsidiary
Mid-Atlantic Crossing Ltd. ("MACL"), entered into a contract with Alcatel
Submarine Networks for the construction of MAC, an undersea fiber optic cable
system connecting New York, the Caribbean and Florida. The estimated costs of
the MAC system of approximately $350 million (excluding potential future
upgrades and amounts capitalized with respect to the PCG Warrants) will be
financed through a $110 million equity contribution and through borrowings
under a non-recourse credit facility. On June 26, 1998, MACL entered into a
commitment letter to obtain $240 million of non-recourse indebtedness.
Effective July 21, 1998, the Company, through its wholly owned subsidiary
Pan American Crossing Ltd. ("PACL"), entered into a contract with TSSL to
construct PAC, an undersea fiber optic cable system connecting California with
two landing sites in Mexico, Panama and the Caribbean. The estimated costs of
the PAC system of approximately $475 million (excluding potential future
upgrades and amounts capitalized with respect to the PCG Warrants) will be
financed through a $165 million equity contribution and through borrowings
under a non-recourse credit facility. On July 21, 1998, PACL entered into a
commitment letter to obtain $310 million of non-recourse indebtedness.
Sales of capacity by the Company on its cable systems are effected through
Capacity Purchase Agreements ("CPAs") pursuant to which the Company's
customers obtain an indefeasible right of use ("IRU") for a certain number of
circuits. Each IRU entitles the customer to the use of the related capacity
for a period ending 25 years after the RFS date for the related system. Global
Crossing also sells backhaul capacity on terrestrial cables through Inland
Capacity Purchase Agreements ("ICPAs"), linking certain of the Company's
landing stations with major cities in order to provide city-to-city
connectivity to its customers. This backhaul capacity, which is purchased by
the Company through Inland Services Agreements ("ISAs") from the owners of
terrestrial cable systems, is resold by the Company to its customers through
ICPAs. The CPAs and ICPAs generally provide for a cash deposit upon execution,
followed by full payment upon activation of the related capacity pursuant to
the terms of the CPA.
The Company's basic pricing structure currently provides for volume-based
discounts to its customers as well as discounts for early purchases on a
particular system. Customers are generally provided options in their CPAs to
purchase additional capacity in the future at prices which reflect the
aggregate purchases made by such customers. Consequently, the prices under
such options in the future are often lower than the current price paid by such
customers for their initial capacity.
REVENUES
Revenues from CPAs and ICPAs are recognized in the period during which (i)
the purchaser obtains the right to use the capacity, which can only be
suspended following a failure of the purchaser to pay the full purchase price
or fulfill its contractual obligations, (ii) the purchaser becomes obligated
to pay OA&M costs and (iii) the segment of the system related to the capacity
purchased is ready for service.
32
<PAGE>
CPAs for capacity that do not meet the Company's revenue recognition policy
are not recorded in the Company's consolidated financial statements.
Since the RFS date for the United States--United Kingdom segment of AC-1,
which occurred on May 26, 1998, the Company's revenues have been comprised
principally of revenues from sales of cable capacity on AC-1 and the sale of
associated backhaul capacity.
Pursuant to the CPAs, the Company bills its customers for operations, direct
administration and maintenance costs incurred, plus 10%, subject to certain
annual maximum amounts.
COST OF CAPACITY SOLD; CONSTRUCTION IN PROGRESS; CAPACITY AVAILABLE FOR SALE
Construction costs incurred with respect to each segment of a system are
reflected as "Construction in Progress" in the Company's consolidated balance
sheet until a segment becomes operational, at which time such costs are
reflected as Capacity Available For Sale. Capacity Available For Sale is
recorded at the lower of cost or fair value less cost to sell and is charged
to Cost of Capacity Sold in the period the related revenues are recognized.
Fair value of capacity is derived from a third party consultant's market study
of expected sales of capacity.
The Company capitalizes the cost of acquiring backhaul capacity and records
in Backhaul Capacity Available for Sale amounts equal to the present value of
future payments associated with the acquisition of such backhaul capacity
(excluding from such payments amounts attributable to operations and
maintenance costs).
Construction in Progress includes direct expenditures for construction of
systems, including advisory, consulting and legal fees, interest during
construction and amortized debt issuance costs incurred during the
construction phase.
Amounts charged to Cost of Capacity Sold are calculated based on the ratio
of capacity revenues recognized in a period to total expected capacity
revenues over the life of the system, multiplied by the total cost to
construct the system. Management's forecast of revenues expected over the life
of the system will be supported by an independent consultant's forecast.
Changes in management's estimate of the expected revenues to be derived from
sales of a cable system's capacity will result in adjustments to the
calculations of Cost of Capacity Sold. These adjustments will be recorded on a
prospective basis over future periods commencing with the period when
management revises its estimate. The cost to acquire backhaul capacity is
charged to Cost of Capacity Sold in the period during which the related
revenues are recognized.
OPERATING EXPENSES
In addition to Cost of Capacity Sold, the Company's operating expenses
principally comprise sales and marketing, operations and maintenance, general
and administrative and network development costs. Costs relating to the
Company's evaluation of possible additional systems are expensed as incurred.
RESULTS OF OPERATIONS FOR THE PERIOD FROM MARCH 19, 1997 (DATE OF INCEPTION)
TO DECEMBER 31, 1997
Interest Income. Pursuant to the purchase agreement relating to the sale of
its outstanding $150 million GTH Senior Notes, the Company was required to
maintain certain amounts in restricted cash and cash equivalents accounts to
fund future semi-annual interest payments on such notes. Interest income
earned on this balance, together with interest income earned on cash raised
from financing and cash on CPA deposits, totalled approximately $2.9 million
for the period from March 19, 1997 to December 31, 1997. The Company utilized
a portion of the net proceeds from the Offering to repurchase the GTH Senior
Notes. See "--Liquidity and Capital Resources."
Expenses. During the period ended December 31, 1997, the Company incurred
expenses of $3.1 million. Of this amount, approximately $1.4 million was
attributable to sales and marketing expenses, relating principally to AC-1,
$0.1 related to network development and approximately $1.6 million was
attributable to general and administrative expenses.
33
<PAGE>
GTH Preference Share Dividends. The GTH Preference Shares accrued
compounding dividends at an annual rate of 14%. During the period ended
December 31, 1997, the Company recorded preference share dividends of
approximately $12.7 million. This amount is comprised of $11.1 million in
paid-in-kind ("PIK") dividends, $1.0 million in amortization of the discount
on issuance and $0.6 million in amortization of issuance costs. The $11.1
million in PIK dividends includes $1.3 million accrued but unpaid as of
December 31, 1997.
In connection with the issuance of the GTH Preference Shares, the exclusive
placement agent thereof, CIBC Wood Gundy Securities Corp., received a total of
19,852,950 shares of Class A common stock of Global Crossing Ltd., LDC ("Old
GCL") for no additional consideration. The Company has recorded the
$13,235,000 estimated fair value of such shares as a discount in the carrying
value of the GTH Preference Shares, which discount is being amortized over the
term of such shares. See "Certain Transactions--Transactions Regarding Class A
Shares of Old GCL."
The Company utilized a portion of the net proceeds from the Offering to
redeem the GTH Preference Shares effective June 17, 1998. See "--Liquidity and
Capital Resources."
Net Loss and Net Loss Applicable to Common Shareholders. During the period
ended December 31, 1997, the Company had a net loss applicable to common
shareholders of $12.9 million, resulting primarily from the $12.7 million of
dividends on the GTH Preference Shares described above.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND JUNE 30,
1997
Revenues
Through June 30, 1998, the Company had executed CPAs totalling approximately
$556 million. Of that amount, the Company recognized revenues of subsea and
backhaul capacity on AC-1 of $100.9 million for the three months ended June
30, 1998, in addition to revenues from operation and maintenance services of
$0.4 million. The remaining $455 million has not yet been reflected in the
financial statements primarily because either the segment has not reached RFS
or the purchaser has not obtained the right to use the capacity. As of June
30, 1998, the Company had entered into CPAs with 22 international
telecommunications carriers and had sold approximately 19% of the minimum
projected sales capacity of 512 circuits on the AC-1 system. There were no
revenues in the three months ended June 30, 1997, as the Company was in its
development stage. As of June 30, 1998, the Company recorded an allowance for
doubtful accounts in the amount of $1.0 million.
Expenses
Cost of Capacity Sold. For the three months ended June 30, 1998, the Company
recognized $41.2 million in costs of capacity sold, resulting in a gross
profit on capacity sales of 59%. The Company calculates cost of capacity sold
for AC-1 as previously described based on the ratio of the period's actual
revenue to total expected revenues given a minimum projected sales capacity of
512 circuits. This calculation of cost of sales matches costs with the
relative sales value of each sale. Cost of capacity sold also includes the
cost of backhaul capacity sold during the three months ended June 30, 1998 of
approximately $9 million. There were no sales or related costs recognized in
the three months ended June 30, 1997.
Operation and Maintenance. The Company incurred OA&M costs on the United
States-United Kingdom segment of AC-1 in the amount of $2.4 million during the
three months ended June 30, 1998. The Company has entered into an agreement
with TSSL relating to operations, administration and maintenance of AC-1 and
related backhaul capacity ("the AC-1 OA&M Agreement"). Following the AC-1 full
system RFS date, the Company anticipates that its costs under the AC-1 OA&M
Agreement will be largely recovered through charges to its customers under the
terms of CPAs.
Termination of Advisory Services Agreement with PCG Telecom. In connection
with the development and construction of AC-1, ACL entered into an advisory
services agreement with an affiliate of the Company
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providing for the payment by the Company of an advisory fee of 2.0% of the
gross revenues of ACL. The Company's Board of Directors also approved similar
advisory fees and authorized the Company to enter into similar agreements in
respect of other cable systems developed by the Company. The Company has
agreed to acquire the rights of the persons entitled to the fees payable under
these agreements in consideration for the issuance by the Company of Common
Stock having an aggregate value of $135 million and the cancellation of
approximately $2.7 million owed to the Company under a related advance
agreement. As a result of this transaction, the Company incurred a charge of
$137.7 million, reflected in the statement of operations for the three month
period ended June 30, 1998. In addition, the Company recognized approximately
$2 million of advisory fees incurred prior to termination of the contract. See
"Certain Transactions." Upon the consummation of this transaction, all
obligations of the Company and ACL in respect of the advisory services
agreements will be terminated.
Sales and Marketing. During the three months ended June 30, 1998, the
Company recognized sales and marketing expenses of $6.5 million, including
commissions of $4.1 million incurred on the capacity sales recognized during
this period. During the three months ended June 30, 1997, the Company incurred
sales and marketing costs of approximately $40,000.
Network Development. The Company incurred network development costs during
the three months ended June 30, 1998 in the amount of $4.3 million relating to
the development of possible new systems. No such costs were incurred during
the three months ended June 30, 1997.
General and Administrative. General and administrative expenses totaled $6.5
million during the three months ended June 30, 1998, comprised principally of
salaries, employee benefits and recruiting fees reflecting the Company's
staffing for multiple systems; travel; insurance costs and rent expenses.
During the three months ended June 30, 1997, the Company incurred general and
administrative costs of approximately $50,000.
Stock-Related Expense. On April 3, 1998 and June 12, 1998, the Board of
Directors of Old GCL approved the issuance of options relating to 5,557,500
shares of common stock of Old GCL and 3,352,950 shares of common stock of Old
GCL, respectively, under the Company's Stock Incentive Plan. The options
granted on April 3, 1998 have exercise prices of $1.67 per share and the
options granted on June 12, 1998 have exercise prices of $6.67 per share and
generally have three-year vesting periods and ten-year expiration periods.
During the three months ended June 30, 1998, the Company recorded $67.1
million of unearned compensation, which is being recognized as an expense over
the vesting period of the options. Of this amount, the Company recognized
approximately $21.1 million of compensation expense during the three months
ended June 30, 1998 for the options issued in April and June, certain of which
vested immediately upon issuance, since the exercise price was less than the
estimated fair market value of the stock on the date of grant. Additionally,
$1.6 million in stock-related expense was recorded in respect of shares issued
during the period.
Interest Expense and Interest Income
During the three months ended June 30, 1998, the Company incurred $21.3
million in interest costs, including the amortization of debt discount and
expense. Of this amount, the Company capitalized interest to construction in
progress of $13.9 million and expensed $7.4 million. The Company's accounting
policy, in accordance with SFAS 34, provides for capitalization of interest to
construction in progress until such time as a segment reaches its Ready-for-
Service ("RFS") date. Accordingly, all interest costs were capitalized in the
three months ended June 30, 1997.
Interest income of $4.3 million and $1.3 million in the three months ended
June 30, 1998 and 1997, respectively, represents earnings on restricted cash,
cash raised from financing, and on CPA and ICPA deposits.
Provision for Income Taxes
The income tax provision of $9 million for the three months ended June 30,
1998 provides for taxes on profits earned from subsea and backhaul capacity
sales and OA&M revenues in certain jurisdictions where the Company is deemed
to have a taxable presence. The Company has incurred operating losses which
relate to non-taxable jurisdictions and therefore operating losses incurred to
date cannot be applied against future taxable earnings. Accordingly, no tax
provision or deferred tax benefit was recorded in 1997.
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Extraordinary Item; Preference Share Dividends
On May 18, 1998, the Issuer issued $800 million of the Notes for the purpose
of repurchasing the GTH Senior Notes, redeeming the GTH Preference Shares,
repaying in full amounts drawn under a $200 million senior bridge facility
(the "Global Crossing Bridge Facility") and financing new projects. The
Company recognized an extraordinary loss of $19.7 million upon the repurchase
of the GTH Senior Notes on May 18, 1998, comprised of a repurchase premium of
approximately $9.8 million payable to repurchase the GTH Senior Notes and a
write-off of approximately $9.9 million of unamortized deferred financing
costs. The redemption of the GTH Preference Shares occurred on June 17, 1998
and resulted in a $34.1 million charge against additional paid-in capital,
comprised of approximately a $15.9 million redemption premium and $18.2
million of unamortized discount and deferred financing costs on the GTH
Preference Shares on the date of the redemption. The redemption premium and
write-off of unamortized discount and issuance costs on the GTH Preference
Shares are treated as a deduction to arrive at net loss applicable to common
shareholders in the consolidated statement of operations.
The GTH Preference Shares accrued compounding dividends at an annual rate of
14%. During the three months ended June 30, 1998, the Company recorded
preference share dividends of approximately $3.9 million. This amount is
comprised of $3.5 million in paid-in-kind dividends, $0.3 million in
amortization of the discount on issuance and $0.1 million in amortization of
issuance costs. Preference share dividends for the three months ended June 30,
1997 were approximately $4.0 million comprised of $3.5 million in paid-in-kind
dividends, $0.3 million in amortization of the discount on issuance and $0.2
million in amortization of issuance costs. On June 17, 1998, the Company
redeemed the GTH Preference Shares as stated above.
Net Loss and Net Loss Applicable to Common Shareholders
The Company incurred a net loss of $155.4 million for the three months ended
June 30, 1998, compared to net income of $1.2 million in the three months
ended June 30, 1997. The loss for the three months ended June 30, 1998
reflects an extraordinary loss on retirement of GTH Senior Notes of $19.7
million and a non-recurring charge of $137.7 million relating to the
termination of its Advisory Services Agreement. The Company's net income
before these items would have been $2.0 million.
Net Loss Applicable to Common Shareholders during the three months ended
June 30, 1998 of $193.5 million reflects preference share dividends of $3.9
million and the redemption of GTH Preference Shares of $34.1 million. During
the three months ended June 30, 1997 the Company incurred a Net Loss
Applicable to Common Shareholders of $2.8 million after preference share
dividends of $4.0 million.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND THE PERIOD
FROM MARCH 19, 1997 (DATE OF INCEPTION) TO JUNE 30, 1997
Revenues
Through June 30, 1998, the Company had signed CPAs totalling approximately
$556 million. Of that amount, the Company recognized revenues of subsea and
backhaul capacity on AC-1 of $100.9 million for the six months ended June 30,
1998, in addition to revenues from operation and maintenance services of $0.4
million. The remaining $455 million has not yet been reflected in the
financial statements primarily because either the segment has not reached RFS
or the purchaser has not obtained the right to use the capacity. As of June
30, 1998, the Company had entered into CPAs with 22 international
telecommunications carriers and had sold approximately 19% of the minimum
projected sales capacity of 512 circuits on the AC-1 system. There were no
revenues in the period from March 19, 1997 (date of inception) to June 30,
1997, as the Company was in its development stage. As of June 30, 1998, the
Company recorded an allowance for doubtful accounts in the amount of $1.0
million.
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Expenses
Cost of Capacity Sold. For the six months ended June 30, 1998, the Company
recognized $41.2 million in costs of capacity sold, resulting in a gross
profit on capacity sales of 59%. The Company calculates cost of capacity sold
for AC-1 as previously described based on the ratio of the period's actual
revenue to total expected revenues given a minimum projected sales capacity of
512 circuits. This calculation of cost of sales matches costs with the
relative sales value of each sale. Cost of capacity sold also includes the
cost of backhaul capacity sold during the six months ended June 30, 1998 of
approximately $9 million. There were no sales or related costs recognized for
the period from March 19, 1997 (date of inception) to June 30, 1997.
Operation and Maintenance. The Company incurred OA&M costs on the United
States-United Kingdom segment of AC-1 in the amount of $2.4 million during the
six months ended June 30, 1998. The Company has entered into the AC-1 OA&M
Agreement with TSSL relating to operations, administration and maintenance of
AC-1 and related backhaul capacity. Following the AC-1 full system RFS date,
the Company anticipates that its costs under the AC-1 OA&M Agreement will be
largely recovered through charges to its customers under the terms of CPAs.
Termination of Advisory Services Agreement with PCG Telecom. In connection
with the development and construction of AC-1, ACL entered into an advisory
services agreement with an affiliate of the Company providing for the payment
by the Company of an advisory fee of 2.0% of the gross revenues of ACL. The
Company's Board of Directors also approved similar advisory fees and
authorized the Company to enter into similar agreements in respect of other
cable systems developed by the Company. The Company has agreed to acquire the
rights of the persons entitled to the fees payable under these agreements in
consideration for the issuance by the Company of Common Stock having an
aggregate value of $135 million and the cancellation of approximately $2.7
million owed to the Company under a related advance agreement. This charge of
$137.7 million is reflected in the statement of operations for the six month
period ended June 30, 1998. In addition, the Company recognized approximately
$2 million of advisory fees incurred prior to termination of the contract. See
"Certain Transactions." Upon the consummation of this transaction, all
obligations of the Company and ACL in respect of the advisory services
agreements will be terminated.
Sales and Marketing. During the six months ended June 30, 1998, the Company
recognized sales and marketing expenses of $7.3 million, including commissions
of $4.1 million incurred on the capacity sales recognized during this period.
During the period from March 19, 1997 (date of inception) to June 30, 1997,
the Company incurred sales and marketing costs of approximately $40,000.
Network Development. The Company incurred network development costs during
the six months ended June 30, 1998 in the amount of $4.3 million relating to
the development of possible new systems. No such costs were incurred during
the period from March 19, 1997 (date of inception) to June 30, 1997.
General and Administrative. General and administrative expenses totaled $9.1
million during the six months ended June 30, 1998, comprised principally of
salaries, employee benefits and recruiting fees reflecting the Company's
staffing for multiple systems; travel; insurance costs and rent expenses.
During the period from March 19, 1997 (date of inception) to June 30, 1997,
the Company incurred general and administrative costs of approximately
$50,000.
Stock-Related Expense. On January 21, 1998, April 3, 1998 and June 12, 1998,
the Board of Directors of Old GCL approved the issuance of options relating to
4,231,500, 5,557,500 and 3,352,950 shares of common stock of Old GCL,
respectively, under the Company's Stock Incentive Plan. The options granted on
January 21, 1998 and April 3, 1998 have exercise prices of $1.67 per share and
the options granted on June 12, 1998 have exercise prices of $6.67 per share
and generally have three-year vesting periods and ten-year expiration periods.
During the six months ended June 30, 1998, the Company recorded $67.1 million
of unearned compensation which is being recognized as an expense over the
vesting period of the options. Of this amount the Company recognized
approximately $21.1 million of compensation expense during the six months
ended June 30, 1998 for the options issued in April and June, certain of which
vested upon issuance, since the exercise price was less
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than the estimated fair market value of the stock on the date of grant. During
the six months ended June 30, 1998, the Company also recorded stock-related
expense of $2.3 million relating to shares issued during this period. The
Company's Stock Incentive Plan commenced on January 21, 1998 and therefore no
issuances were made during the period from March 19, 1997 (date of inception)
to June 30, 1997.
Interest Expense and Interest Income
During the six months ended June 30, 1998, the Company incurred $31.8
million in interest costs, including the amortization of debt discount and
expense. Of this amount, the Company capitalized interest to construction in
progress of $24.4 million and expensed $7.4 million. The Company's accounting
policy, in accordance with SFAS 34, provides for capitalization of interest to
construction in progress until such time as a segment reaches its Ready-for-
Service ("RFS") date. Accordingly, all interest costs were capitalized in the
period from March 19, 1997 (date of inception) to June 30, 1997.
Interest income of $4.7 million and $1.3 million in the six months ended
June 30, 1998 and during the period from March 19, 1997 (date of inception) to
June 30, 1997, respectively, represents earnings on restricted cash, cash
raised from financing, and on CPA and ICPA deposits.
Provision for Income Taxes
The income tax provision of $9 million for the six months ended June 30,
1998 provides for taxes on profits earned from subsea and backhaul capacity
sales and OA&M revenues in certain jurisdictions where the Company is deemed
to have a taxable presence. The Company has incurred operating losses which
relate to non-taxable jurisdictions and therefore operating losses incurred to
date cannot be applied against future taxable earnings. Accordingly, no tax
provision or deferred tax benefit was recorded in 1997.
Extraordinary Item; Preference Share Dividends
On May 18, 1998, the Issuer issued $800 million of the Notes for the purpose
of repurchasing the GTH Senior Notes, redeeming the GTH Preference Shares,
repaying amounts drawn under the Global Crossing Bridge Facility and financing
new projects. The Company recognized an extraordinary loss of $19.7 million
upon the repurchase of the GTH Senior Notes on May 18, 1998, comprised of a
premium of approximately $9.8 million payable to repurchase the GTH Senior
Notes and a write-off of approximately $9.9 million of unamortized deferred
financing costs. The redemption of the GTH Preference Shares occurred on June
17, 1998 and resulted in a $34.1 million charge against additional paid-in
capital, comprised of approximately a $15.9 million redemption premium and
$18.2 million of unamortized discount and issuance cost on the GTH Preference
Shares on the date of the redemption. The redemption premium and write-off of
unamortized discount and issuance costs on the GTH Preference Shares are
treated as a deduction to arrive at net loss applicable to common shareholders
in the consolidated statement of operations.
The GTH Preference Shares accrued compounding dividends at an annual rate of
14%. During the six months ended June 30, 1998, the Company recorded
preference share dividends of approximately $8.3 million. This amount is
comprised of $7.3 million in paid-in-kind dividends, $0.6 million in
amortization of the discount on issuance and $0.4 million in amortization of
issuance costs. Preference share dividends for the period from March 19, 1997
(date of inception) to June 30, 1997 were $4.2 million comprised of $3.7
million paid-in-kind dividends, $0.3 million in amortization of the discount
on issuance and $0.2 million in amortization of issuance costs. On June 17,
1998, the Company redeemed the GTH Preference Shares as stated above.
Net Loss and Net Loss Applicable to Common Shareholders
The Company incurred a net loss of $159.2 million for the six months ended
June 30, 1998, compared to net income of $1.2 million in the period from March
19, 1997 (date of inception) to June 30, 1997. The loss for the six months
ended June 30, 1998 reflects an extraordinary loss on retirement of GTH Senior
Notes of $19.7 million and a non-recurring charge of $137.7 million relating
to the termination of its Advisory Services Agreement. The Company's net loss
before these items would have been $1.8 million.
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Net Loss Applicable to Common Shareholders during the six months ended June
30, 1998 of $201.6 million also reflects preference share dividends of $8.3
million and the redemption of GTH Preference Shares of $34.1 million. During
the period from March 19, 1997 (date of inception) to June 30, 1997, the
Company incurred a Net Loss Applicable to Common Shareholders of $3.0 million
after preference share dividends of $4.2 million.
BALANCE SHEET AS OF JUNE 30, 1998
The Company's investment in Construction in Progress, Capacity Available for
Sale, Backhaul Capacity Available for Sale and Investment in PCL totaled
approximately $906 million as at June 30, 1998.
In June 1998, the Board of Directors amended the terms of the PCG Warrants
so that the PCG Warrants became exercisable upon the successful completion of
the Stock Offerings. The Board of Directors also amended the terms of the PCG
Warrants to give each holder the option to convert each share under warrant
into a fraction of a Class B share of Old GCL based upon the ratio of the
current per share valuation at the time of conversion less the per share
exercise price of the warrant divided by the current per share valuation at
the time of conversion, together with a new warrant ("New PCG Warrants") to
purchase the remaining fraction of such Class B share at an exercise price
equal to the current per share valuation. Prior to the Stock Offerings the
holders of the PCG Warrants exercised their warrants to acquire Class B shares
of Old GCL by way of the cashless conversion and the New PCG Warrants were
issued with an exercise price based on the per share valuation at the
conversion date.
The Company has accounted for the PCG Warrants based upon the value of the
cashless conversion as of June 30, 1998 using the current estimated per share
valuation at the expected conversion date multiplied by the number of Class B
shares of Old GCL estimated to be converted in exchange for the PCG Warrants.
The Company has recorded an increase in its Investment in PCL in the amount of
approximately $126.5 million and an increase in Construction in Progress for
PAC and MAC in the amounts of approximately $49.9 million and $36.9 million,
respectively, with a corresponding increase of approximately $213.3 million in
Additional Paid-in-Capital. The $213.3 million was allocated on a pro rata
basis to the three projects according to the estimated cost of each system.
The Company's accounting for the PCG Warrants is pursuant to Emerging Issues
Task Force 96-18, "Accounting for Equity Instruments with Variable Terms that
are Issued for Consideration other than Employee Services under FASB Statement
No. 123" ("EITF 96-18"). Under EITF 96-18, the fair value of equity
instruments issued for consideration other than employee services should be
measured using the stock price or other measurement assumptions as of the date
at which a firm commitment for performance has been reached. The Company has
recorded the estimated value of the PCG Warrants as of June 30, 1998, since
the Stock Offerings were probable at that date. The $213.3 million value
attributed to the PCG Warrants as of June 30, 1998 will be adjusted to the
actual value on the date of the Stock Offerings based upon the Price per Share
to Public in the Stock Offerings. Such adjustment is not expected to be
material.
The Company will give accounting recognition for the New PCG Warrants on the
date these warrants are issued, which is expected to be the date of the Stock
Offerings. The Company estimates the value of each New PCG Warrant at $6.67
based on an independent valuation assuming a Price to Public Per Share of the
Stock Offerings of $18.00 per share. Assuming all of the PCG Warrants are
converted as of June 30, 1998, the New PCG Warrants would have a total value
of $44 million. Upon the issuance of the New PCG Warrants, the Company will
record the actual value of the New PCG Warrants at the date of the Stock
Offerings (based upon the Price per Share to Public in the Stock Offerings)
and the total value will be allocated to the investment in PCL and total
contract costs with a corresponding increase in Additional Paid-in-Capital.
During the six months ended June 30, 1998, the Company paid fees of $7.0
million to PCG, a shareholder of the Company, relating to system evaluation
costs incurred by PCG. This amount was treated as a dividend and charged
against additional paid-in-capital.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital expenditure requirements involve the
construction of undersea cable systems, the related landing stations, and
certain investments in backhaul capacity to connect the landing stations
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to major metropolitan areas. As of June 30, 1998 and December 31, 1997,
respectively, the Company had incurred approximately $724 million and $519
million, respectively, of capital expenditures in respect of AC-1, principally
for system construction costs and purchases of backhaul capacity and was
committed to a further $64 million and $195 million, respectively, of capital
expenditures under the AC-1 Contract in connection with the completion of AC-
1. Backhaul capacity purchases are recorded at the present value of future
payments (excluding from such payments amounts attributable to operations and
maintenance) required to be made by the Company for such capacity.
The total cost of AC-1 is estimated at approximately $750 million, excluding
purchases of backhaul capacity and potential future upgrades but including
financing costs capitalized during the period AC-1 is under construction. All
future costs with respect to AC-1 will be fully financed with the remaining
availability under the AC-1 Credit Facility. AC-1 was initially financed
through (i) the $482 million AC-1 Credit Facility; (ii) $150 million of GTH
Senior Notes; (iii) $100 million of GTH Preference Shares; and (iv) $75
million of GCL common equity. See "Description of Certain Indebtedness." As of
December 31, 1997 and June 30, 1998, the Company had borrowed $162 million and
$367 million, respectively, under the AC-1 Credit Facility. The Company's
principal source of liquidity through those dates was the AC-1 Credit
Facility.
On May 18, 1998, the Issuer consummated the $800 million Offering of the
Restricted Notes. The Company has utilized (or will utilize) the net proceeds
of the Offering (i) to purchase all of the $150 million outstanding GTH Senior
Notes, (ii) to redeem all of the $100 million outstanding GTH Preference
Shares, (iii) to repay in full the $67.2 million outstanding under the Global
Crossing Bridge Facility, (iv) to make $315 million of equity investments in
certain of the Company's systems and (v) for general corporate purposes,
including $74 million to fund a one-year interest reserve on the Notes.
Cash provided by operating activities was approximately $37.4 million for
the six months ended June 30, 1998 and $5.1 million for the period from March
19, 1997 (date of inception) to December 31, 1997 and principally represents
cash received on deposits on signed CPAs plus interest income received, less
sales and marketing and general and administrative expenses paid.
Cash provided by financing activities was approximately $456.3 million for
the six months ended June 30, 1998 and primarily represents borrowings under
the AC-1 Credit Facility and the Global Crossing Bridge Facility net of the
increase in proceeds on borrowings held in restricted cash and cash
equivalents. Cash provided by financing activities of $425.1 million for the
period from March 19, 1997 (date of inception) to December 31, 1997
principally relates to net proceeds from the issuance of common stock,
preference shares and senior notes, and borrowings under the AC-1 Credit
Facility less finance and organization costs paid, less an increase in
proceeds on borrowings held in restricted cash and cash equivalents.
Cash used in investing activities was approximately $191.1 million and
$429.0 million for the six months ended June 30, 1998 and the period from
March 19, 1997 (date of inception) to December 31, 1997, respectively,
represents cash paid for Construction in Progress.
The Company is currently actively developing three additional systems, PC-1,
MAC and PAC. The Company currently estimates that the costs of constructing
these systems will total approximately $2,025 million, including financing
costs but excluding potential future upgrades and amounts capitalized with
respect to the PCG Warrants. The Company expects to use approximately $315
million of the net proceeds from the Stock Offering to fund initial
investments in PC-1, MAC and PAC. In order to finance certain initial costs
relating to the development of these systems, the Company has obtained
additional financing. During the first quarter of 1998, the Company entered
into the $200 million Global Crossing Bridge Facility with a syndicate of
banks led by CIBC. The Company utilized a portion of the net proceeds from the
Offering to repay such borrowings and terminate the remaining commitments
under the Global Crossing Bridge Facility. The Company expects that the
additional capital required to finance these cable systems will be raised
through a combination of commercial bank borrowings, non-recourse project
financings, and public and private offerings of debt and equity securities.
Effective July 30, 1998, the Company entered into a credit agreement for the
$850 million non-recourse project debt financing of PC-1 (including $50
million for the initial upgrade of the PC-1 system). Effective June 26,
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1998, the Company entered into a commitment letter for the $240 million non-
recourse project debt financing of MAC. Effective July 21, 1998, the Company
entered into a commitment letter for $310 million non-recourse project debt
financing of PAC. There can be no assurance that the Company will be
successful in raising additional capital at all or on terms acceptable to the
Company. See "Risk Factors--Substantial Future Capital Requirements" and "Risk
Factors--Risks Related to Completing the Company's Cable Systems."
Because the Company's cost of developing and constructing its systems, as
well as operating its business, will depend on a variety of factors (including
the Company's ability to successfully negotiate construction supply contracts
at favorable prices, the ability of the Company to generate sufficient sales
to customers, changes in the competitive environment of the markets served by
the Company, the estimated levels of participation by the Company's joint
venture partners, and changes in technology), actual costs and revenues will
vary from expected amounts, possibly materially, and such variations will
likely impact the Company's future capital requirements. The development of
additional systems which may be pursued by the Company will lead to additional
future capital requirements.
As of April 21, 1998, a supply contract (the "PC-1 Contract") was entered
into with TSSL to construct PC-1. The PC-1 Contract contains construction
payments totaling approximately $1.0 billion to be made by Global Crossing and
its joint venture partners. On June 2, 1998, the Company entered into a supply
contract (the "MAC Contract") with Alcatel to construct MAC. On July 21, 1998,
the Company entered into a supply contract (the "PAC Contract") with TSSL to
construct PAC. See "Risk Factors--Substantial Future Capital Requirements" and
"Risk Factors--Risk of Error in Forward-Looking Statements."
The Company has extended financing to a small number of customers in
connection with certain CPAs. The financing terms provide for installment
payments over a period of up to four years. To date, less than ten percent of
the Company's sales have been made on this basis. The Company believes that
its extension of financing to its customers will not have a material effect on
the Company's liquidity.
The Company has entered into a commission sharing agreement with TSSL
providing for the payment to TSSL of commissions in respect of marketing of
capacity on the AC-1 and PC-1 systems. Payments by the Company to TSSL of
these commissions is fully contingent upon the receipt by the Company of cash
payment under the related CPAs and, accordingly, payment by the Company of
these commissions has no material effect on its liquidity.
FOREIGN CURRENCY EXPOSURE
All of the Company's sales and substantially all of its expenditures are
denominated in U.S. dollars. Monetary assets and liabilities denominated in
foreign currencies at year end are translated into U.S. dollars at the rate of
exchange at that date. Resulting gains or losses on exchange are recorded in
the statement of operations.
INFLATION
Management does not believe that its business is impacted by inflation to a
significantly different extent than the general economy.
YEAR 2000 COMPLIANCE
The Company believes that its computer information systems will enable it to
process transactions relating to Year 2000 and beyond and that its computer
systems relating to AC-1 will be Year 2000 compliant. The Company has received
assurances from TSSL and Lucent Technologies regarding Year 2000 compliance
status of these suppliers with respect to AC-1, but does not currently have
such information regarding its customers. In the event that any of the
Company's significant suppliers or customers do not successfully and timely
achieve Year 2000 compliance, the Company's business or operations could be
adversely affected.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Restricted Notes were issued and sold by the Issuer to the Initial
Purchasers on May 18, 1998 pursuant to the Purchase Agreement. The Initial
Purchasers subsequently resold the Restricted Notes in reliance on Rule 144A
and other exemptions from registration under the Securities Act. The Issuer,
the Guarantors and the Initial Purchasers also entered into the Registration
Agreement pursuant to which the Issuer agreed, with respect to the Restricted
Notes, to (i) cause to be filed, on or prior to 90 days after the Closing
Date, the Exchange Offer Registration Statement with the Commission under the
Securities Act concerning the Exchange Offer, and (ii) (a) use its reasonable
best efforts to cause such Exchange Offer Registration Statement to be
declared effective by the Commission on or prior to 150 days after the Closing
Date and (b) cause the Exchange Offer to remain open for the minimum period
required by applicable federal and state securities laws; provided, however,
that in no event shall such period be less than 20 Business Days. The Exchange
Offer is intended to satisfy the Issuer's and Guarantors' exchange offer
obligations under the Registration Agreement.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Restricted Notes, where such Restricted Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING RESTRICTED NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Issuer will accept for exchange Restricted Notes which
are properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
New York City time, on , 1998; provided, however, that if the Issuer, in
its sole discretion, has extended the period of time for which the Exchange
Offer is open, the term "Expiration Date" means the latest time and date to
which the Exchange Offer is extended, provided it may not be extended beyond
, 1998.
As of the date of this Prospectus, an aggregate principal amount of $800
million in Restricted Notes is outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about , 1998 to all
holders of Restricted Notes known to the Issuer. The Issuer's obligation to
accept Restricted Notes for exchange pursuant to the Exchange Offer is subject
to certain conditions as set forth in this section under "--Certain Conditions
to the Exchange Offer."
Restricted Notes tendered in the Exchange Offer must be in denominations of
principal amount of $1,000 and any integral multiple thereof.
The Issuer expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Restricted Notes, by giving oral
or written notice of such extension to the holders thereof as described below.
During any such extension, all Restricted Notes previously tendered will
remain subject to the Exchange Offer and may be accepted for exchange by the
Issuer. The Issuer also expressly reserves the right to maintain an offer to
exchange Restricted Notes not tendered on or prior to the Expiration Date
pursuant to the Exchange Offer and accept for exchange any or all Restricted
Notes properly tendered on or prior to the Expiration Date in accordance with
the terms of the Exchange Offer and the Registration Agreement. Any Restricted
Notes not accepted for exchange for any reason will be returned without
expense to the tendering holder thereof as soon as practicable after the
expiration or termination of the Exchange Offer.
The Issuer expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Restricted Notes not theretofore
accepted for exchange, upon the occurrence of any of the events specified
under "--Certain Conditions to the Exchange Offer." The Issuer will give oral
or written notice of
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any extension, amendment, non-acceptance or termination to the holders of the
Restricted Notes as promptly as practicable, such notice in the case of any
extension to be issued by means of a press release or other public
announcement no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING RESTRICTED NOTES
The tender to the Issuer of Restricted Notes by a holder thereof as set
forth below and the acceptance thereof by the Issuer will constitute a binding
agreement between the tendering holder and the Issuer upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to
tender Restricted Notes for exchange pursuant to the Exchange Offer must
transmit a properly completed and duly executed Letter of Transmittal,
including all other documents required by such Letter of Transmittal, to the
Exchange Agent, at the address set forth below under "--Exchange Agent" on or
prior to the Expiration Date. In addition, either (i) certificates for such
Restricted Notes must be received by the Exchange Agent along with the Letter
of Transmittal, or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Restricted Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date.
THE METHOD OF DELIVERY OF RESTRICTED NOTES, LETTERS OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR RESTRICTED
NOTES SHOULD BE SENT TO THE ISSUER. FOR INSTRUCTIONS ON TENDERING RESTRICTED
NOTES HELD THROUGH POSITIONS AT CEDEL OR EUROCLEAR, SEE "--RESTRICTED NOTES
HELD THROUGH CEDEL OR EUROCLEAR."
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Restricted Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the
Restricted Notes who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal
or (ii) for the account of an Eligible Institution (as defined below). In the
event that signatures on a Letter of Transmittal or a notice of withdrawal, as
the case may be, are required to be guaranteed, such guarantees must be by a
firm which is a member of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc. or by a
commercial bank or trust company having an office or correspondent in the
United States (collectively, "Eligible Institutions"). If Restricted Notes are
registered in the name of a person other than a signer of the Letter of
Transmittal, the Restricted Notes surrendered for exchange must be endorsed
by, or be accompanied by a written instrument or instruments of transfer or
exchange, in satisfactory form as determined by the Issuer in its sole
discretion, duly executed by the registered holder, with the signature thereon
guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Restricted Notes tendered for exchange will be
determined by the Issuer in its sole discretion, which determination shall be
final and binding. The Issuer reserves the absolute right to reject any and
all tenders of any particular Restricted Notes not properly tendered or to not
accept any particular Restricted Notes which acceptance might, in the judgment
of the Issuer or its counsel, be unlawful. The Issuer also reserves the
absolute right to waive any defects or irregularities or conditions of the
Exchange Offer as to any particular Restricted Notes either before or after
the Expiration Date (including the right to waive the ineligibility of any
holder who seeks to tender Restricted Notes in the Exchange Offer). The
interpretation of the terms and conditions of the Exchange Offer as to any
particular Restricted Notes either before or after the Expiration Date
(including the Letter of Transmittal and the instructions thereto) by the
Issuer shall be final and binding on all parties. Unless waived, any defects
or irregularities in connection with tenders of Restricted Notes for exchange
must be cured within such reasonable
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period of time as the Issuer shall determine. Neither the Issuer, the
Guarantors, the Exchange Agent nor any other person shall be under any duty to
give notification of any defect or irregularity with respect to any tender of
Restricted Notes, for exchange, nor shall any of them incur any liability for
failure to give such notification.
If the Letter of Transmittal, any Restricted Notes, bond powers or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and,
unless waived by the Issuer, proper evidence satisfactory to the Issuer of
their authority to so act must be submitted.
By tendering, each holder will represent to the Issuer, among other things,
(i) that it is not an "affiliate," as defined in Rule 405 under the Securities
Act, of the Issuer, or if it is an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable, (ii) that it is acquiring the Exchange Notes in the
ordinary course of its business and (iii) at the time of the consummation of
the Exchange Offer it has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes. If the holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Restricted Notes that were
acquired as a result of market-making activities or other trading activities,
the holder may be deemed to be an "underwriter" within the meaning of the
Securities Act and is required to acknowledge in the Letter of Transmittal
that it will deliver a prospectus in connection with any resale of such
Exchange Notes; however, by so acknowledging and by delivering a prospectus,
the holder will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Restricted Notes and whose Restricted Notes
are not immediately available or who cannot deliver their Restricted Notes or
any other documents required by the Letter of Transmittal to the Exchange
Agent prior to 5:00 p.m., New York City time, on the Expiration Date (or
complete the procedure for book-entry transfer on a timely basis), may tender
their Restricted Notes according to the guaranteed delivery procedures set
forth in the Letter of Transmittal. Pursuant to such procedures: (i) such
tender must be made by or through an Eligible Institution and a Notice of
Guaranteed Delivery (as defined in the Letter of Transmittal) must be signed
by such holder, (ii) on or prior to the Expiration Date, the Exchange Agent
must have received from the holder and the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail or hand delivery) setting forth the name and address of the
holder, the certificate number or numbers of the tendered Restricted Notes,
and the principal amount of tendered Restricted Notes, stating that the tender
is being made thereby and guaranteeing that, within three business days after
the Expiration Date, the tendered Restricted Notes or a Book-Entry
Confirmation, as the case may be, a duly executed Letter of Transmittal or
facsimile thereof and any other required documents will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) such properly
completed and executed Letter of Transmittal and all documents required by the
Letter of Transmittal and the tendered Restricted Notes in proper form for
transfer or a Book-Entry Confirmation, as the case may be, are received by the
Exchange Agent within five business days after the Expiration Date.
ACCEPTANCE OF RESTRICTED NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Issuer will accept, promptly after the Expiration Date, all Restricted
Notes properly tendered and will issue the Exchange Notes promptly after
acceptance of the Restricted Notes. See "--Certain Conditions to the Exchange
Offer." For purposes of the Exchange Offer, the Issuer shall be deemed to have
accepted properly tendered Restricted Notes for exchange when, as and if the
Issuer has given oral or written notice thereof to the Exchange Agent, with
written confirmation of any oral notice to be given promptly thereafter.
For each Restricted Note accepted for exchange, the holder of such
Restricted Note will receive an Exchange Note having a principal amount equal
to that of the surrendered Restricted Note. Restricted Notes accepted for
exchange will cease to accrue interest from the date of consummation of the
Exchange Offer.
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Holders of Restricted Notes whose Restricted Notes are accepted for exchange
will not receive any payment in respect of accrued interest on such Restricted
Notes otherwise payable on any interest payment date the record date for which
occurs on or after consummation of the Exchange Offer.
In all cases, issuance of Exchange Notes for Restricted Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Restricted Notes
or a timely Book-Entry Confirmation of such Restricted Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility, a properly completed and
duly executed Letter of Transmittal and all other required documents. If any
tendered Restricted Notes are not accepted for any reason set forth in the
terms and conditions of the Exchange Offer or if Restricted Notes are
submitted for a greater principal amount than the holder desired to exchange,
such unaccepted or non-exchanged Restricted Notes will be returned without
expense to the tendering holder thereof (or, in the case of Restricted Notes
tendered by book-entry transfer into the Exchange Agent's account at the Book-
Entry Transfer Facility pursuant to the book-entry procedures described below,
such non-exchanged Restricted Notes will be credited to an account maintained
with such Book-Entry Transfer Facility) as soon as practicable after the
expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Restricted Notes at the Book-Entry Transfer Facility for purposes of
the Exchange Offer within two business days after the date of this Prospectus,
and any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Restricted Notes by causing
the Book-Entry Transfer Facility to transfer such Restricted Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance
with such Book-Entry Transfer Facility's procedures for transfer. However,
although delivery of Restricted Notes may be effected through book-entry
transfer at the Book-Entry Transfer Facility, the Letter of Transmittal or
facsimile thereof, with any required signature guarantees and any other
required documents, must, in any case, be transmitted to and received by the
Exchange Agent at one of the addresses set forth below under "--Exchange
Agent" on or prior to the Expiration Date.
RESTRICTED NOTES HELD THROUGH CEDEL OR EUROCLEAR
In case of Restricted Notes held through Cedel or Euroclear, holders of such
Restricted Notes wishing to tender such Restricted Notes for exchange pursuant
to the Exchange Offer must send instructions to Cedel or Euroclear, as the
case may be, to block the Restricted Notes in such holder's account at Cedel
or Euroclear. In addition, such holder of Restricted Notes must transmit a
properly completed and duly executed Letter of Transmittal, including all
other documents required by such Letter of Transmittal to the Exchange Agent.
WITHDRAWAL RIGHTS
Tenders of Restricted Notes may be withdrawn at any time prior to the
Expiration Date. For a withdrawal to be effective, a written notice of
withdrawal must be received by the Exchange Agent at one of the addresses set
forth below under "--Exchange Agent." Any such notice of withdrawal must
specify the name of the person having tendered the Restricted Notes to be
withdrawn, identify the Restricted Notes to be withdrawn (including the
principal amount of such Restricted Notes), and (where certificates for
Restricted Notes have been transmitted) specify the name in which such
Restricted Notes are registered, if different from that of the withdrawing
holder. If certificates for Restricted Notes have been delivered or otherwise
identified to the Exchange Agent, then, prior to the release of such
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Restricted Notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Restricted Notes and otherwise
comply with the procedures of such facility. All questions as to the validity,
form and eligibility (including time of receipt) of such notices will be
determined by the Issuer, whose determination shall be final and binding on
all parties. Any Restricted Notes so withdrawn will be deemed not to
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<PAGE>
have been validly tendered for exchange for purposes of the Exchange Offer.
Any Restricted Notes which have been tendered for exchange but which are not
exchanged for any reason will be returned to the holder thereof without cost
to such holder (or, in the case of Restricted Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described above, such
Restricted Notes will be credited to an account maintained with such Book-
Entry Transfer Facility) as soon as practicable after withdrawal, rejection of
tender or expiration or termination of the Exchange Offer. Properly withdrawn
Restricted Notes may be retendered by following one of the procedures
described under "--Procedures for Tendering Restricted Notes" above at any
time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Issuer shall
not be required to accept for exchange, or to issue Exchange Notes in exchange
for, any Restricted Notes and may terminate, extend or amend the Exchange
Offer, if at any time before the Expiration Date, the Issuer determines that
the Exchange Offer violates applicable law, any applicable interpretation of
the staff of the Commission or any order of any governmental agency or court
of competent jurisdiction.
The Issuer expressly reserves the right, upon the occurrence of any of the
conditions of the Exchange Offer specified above, to amend or terminate the
Exchange Offer, and not to accept for exchange any Restricted Notes not
theretofore accepted for exchange. The Issuer will give oral or written notice
of any extension, amendment, non-acceptance or termination to the holders of
the Restricted Notes as promptly as practicable, such notice in the case of
any extension to be issued no later than 9:00 a.m., New York time, on the next
business day after the previously scheduled Expiration Date.
The foregoing conditions are for the sole benefit of the Issuer and may be
asserted by the Issuer regardless of the circumstances giving rise to any such
condition or may be waived by the Issuer in whole or in part at any time and
from time to time in its sole discretion. The failure by the Issuer at any
time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.
In addition, the Issuer will not accept for exchange any Restricted Notes
tendered, and no Exchange Notes will be issued in exchange for any such
Restricted Notes, if at such time any stop order shall be threatened or in
effect with respect to the Registration Statement of which this Prospectus
constitutes a part or the qualification of the Indenture under the Trust
Indenture Act of 1939 (the "Trust Indenture Act").
EXCHANGE AGENT
United States Trust Company of New York has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at the address set forth below. Questions and
requests for assistance, requests for additional copies of this Prospectus or
of the Letter of Transmittal and requests for Notices of Guaranteed Delivery
should be directed to the Exchange Agent addressed as follows:
By Hand Delivery
Mail or Overnight Courier:
United States Trust
Company of New York
114 West 47th Street - 25th Floor
New York, New York 10036
Attention: Cynthia Chaney
BY FACSIMILE:
(212) 852-1626
CONFIRM BY TELEPHONE:
(212) 852-1661
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DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Issuer will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
The estimated cash expenses to be incurred in connection with the Exchange
Offer and paid by the Issuer are estimated in the aggregate to be
approximately $ .
TRANSFER TAXES
Holders who tender their Restricted Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that if holders
instruct the Issuer to deliver to, register or issue Exchange Notes in the
name of, or request that Restricted Notes not tendered or not accepted in the
Exchange Offer be delivered to, registered or issued in the name of, any
person other than the registered holder, or if tendered Restricted Notes are
registered in the name of any person other than the person signing the Letter
of Transmittal, or if a transfer tax is imposed for any reason other than the
transfer of Restricted Notes to the Issuer or its order pursuant to the
Exchange Offer, the amount of any such transfer taxes (whether imposed on the
registered holder or any other person) will be payable by the tendering
holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Restricted Notes who do not exchange their Restricted Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Restricted Notes as set forth in the
legends thereon as a consequence of the issuance of the Restricted Notes
pursuant to exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state
securities laws. Accordingly, such Restricted Notes may only be offered, sold,
pledged or otherwise transferred (i) to the Company, (ii) pursuant to a
registration statement that has been declared effective under the Securities
Act, (iii) for so long as the Notes are eligible for resale pursuant to Rule
144A, to a person it reasonably believes is a QIB that purchases for its own
account or for the account of a QIB to whom notice is given that the transfer
is being made in reliance on Rule 144A, (iv) pursuant to offers and sales that
occur outside the United States within the meaning of Regulation S under the
Securities Act, (v) to an Institutional Accredited Investor purchasing for its
own account or for the account of such Institutional Accredited Investor, in
each case in a minimum principal amount of the Notes of $250,000 or (vi)
pursuant to any other available exemption from the registration requirements
of the Securities Act, subject in each of the foregoing cases to any
requirement of law that the disposition of its property or the property of
such investor account or accounts be at all times within its or their control.
The Issuer does not anticipate that it will register the Restricted Notes
under the Securities Act. See "Plan of Distribution" and "Risk Factors--
Consequences of Failure to Exchange Restricted Notes." Based upon no-action
letters issued by the staff of the Commission to third parties, the Issuer
believes that the Exchange Notes issued pursuant to the Exchange Offer in
exchange for Restricted Notes would in general be freely transferable after
the Exchange Offer without further registration under the Securities Act if
the holder of the Exchange Notes represents (i) that it is not an "affiliate,"
as defined in Rule 405 under the Securities Act, of the Issuer, (ii) that it
is acquiring the Exchange Notes in the ordinary course of its business and
(iii) that it has no arrangement or understanding with any person to
participate in the distribution (within the meaning of the Securities Act) of
the Exchange Notes; provided that, in the case of broker-dealers, a prospectus
meeting the requirements of the Securities Act is delivered as required.
However, the Commission has not considered the Exchange Offer in the context
of a no-action letter and there can be no assurance that the staff of the
Commission would make a similar determination with respect to the Exchange
Offer as in such other circumstances. Holders of Restricted Notes wishing to
accept the Exchange Offer must represent to the Issuer that such conditions
have been met. Each broker-dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer,
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where it acquired the Restricted Notes exchanged for such Exchange Notes for
its own account as a result of market-making or other trading activities, must
acknowledge that it will deliver a prospectus in connection with the resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Notes received
in exchange for Restricted Notes where such Restricted Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Issuer has agreed that, for a period of one year after
consummation of the Exchange Offer, it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. A broker-dealer
that delivers such a prospectus to purchasers in connection with such resales
will be subject to certain of the civil liability provisions under the
Securities Act, and will be bound by the provisions of the Registration
Agreement (including certain indemnification and contribution rights and
obligations).
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BUSINESS
Global Crossing is the world's first independent provider of global Internet
and long distance telecommunications facilities and services utilizing a
network of undersea digital fiber optic cable systems and associated
terrestrial backhaul capacity. As such, the Company believes it is the first
to offer "one-stop shopping" for its customers to multiple destinations
worldwide. The Company operates as a "carriers' carrier", providing tiered
pricing and segmented products to licensed providers of international
telecommunications services. Capacity on the Global Crossing Network is
offered to all customers on an open, equal access basis. The first four cable
systems under development by the Company, together with associated terrestrial
backhaul capacity, will form a state-of-the-art interconnected worldwide high
capacity undersea fiber optic network: AC-1, a system connecting the United
States and Europe; PC-1, a system connecting the United States and Asia; MAC,
a system connecting the eastern United States, Bermuda and the Caribbean; and
PAC, a system connecting the western United States, Mexico, Panama and the
Caribbean. The undersea component of this initial network totals 51,300 km.
The Company is in the process of developing several new cable systems and
evaluating other business development opportunities which will complement the
Global Crossing Network.
Global Crossing's business is designed to meet the varying needs of the
global carrier market. The Company offers customers the ability to purchase
capacity on demand, thereby (i) eliminating their need to commit the
substantial capital which would otherwise be required to build undersea cable
capacity and (ii) decreasing the risks associated with forecasting their
future capacity requirements. Compared with traditional undersea cable
systems, the Company offers more comprehensive, flexible and low-cost
purchasing alternatives designed to meet current market requirements of
international carriers and licensed Internet service providers, including
direct international city-to-city connectivity, the ability to purchase
capacity annually and discounts based upon aggregate volume purchased on the
Global Crossing Network.
The Global Crossing Network is being engineered and constructed to allow
multiple upgrades to its initial circuit capacity at a fraction of the initial
system cost, and the Company is exploring opportunities to expand its subsea
and terrestrial systems, as well as the range of the products it offers. The
Company anticipates that its future revenues, beyond those obtained from the
sale of the initial capacity of its first four cable systems, will derive from
several sources. First, each of the currently-planned systems under
development by the Company is upgradeable to capacities significantly beyond
the initial capacity at a fraction of the original system cost. These upgrades
can be used to meet growth in market demand for telecommunications capacity
and to achieve additional revenues. In addition, the Company is currently
evaluating a number of additional undersea cable projects, as well as
proposals to develop or purchase additional terrestrial fiber capacity in
North America, Europe, and Asia. These potential projects will be pursued to
the extent that they further the Company's strategy of developing an
integrated global network that serves approximately 50 of the largest
metropolitan communications markets worldwide. As the Company's global network
is developed, additional wholesale revenues may be generated from the sale of
additional products and services. See "Risk Factors--Sales Capacity;
Realization of Other Revenues."
Global Crossing was formed to capitalize on the accelerating growth of
international voice and data telecommunications traffic. The significant
increase in Internet usage and other bandwidth-intensive applications and the
growing use of corporate networks have substantially increased the demand for
international fiber optic cable capacity. The proliferation of
telecommunications service providers due, in large part, to industry
deregulation has further contributed to increased demand for such
international cable capacity. Additionally, the Company believes that other
technological developments, such as improvements in "last mile" access
technology, including xDSL and cable modems, and the increasing video content
of Internet applications, will result in further capacity demand growth.
The Company commenced operations in March 1997, when it contracted for the
construction of AC-1, a 14,000 km digital fiber optic cable system that will
link the United States, the United Kingdom, The Netherlands and Germany and
will initially offer 40 Gbps of service capacity, which is upgradeable to a
minimum of 80 Gbps, increasing the existing undersea fiber optic cable
capacity along the heavily trafficked transatlantic route
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by approximately 65% prior to upgrades. AC-1 commenced service on its United
States-United Kingdom segment on May 26, 1998 and the full system,
encompassing a four fiber pair self-healing ring, is scheduled for completion
by February 1999. In April 1998, Global Crossing contracted for the
construction of PC-1, a 21,000 km digital cable system that will link the
United States and Japan and will initially offer 80 Gbps of service capacity,
upgradeable to a minimum of 160 Gbps. PC-1, a four fiber pair self healing
ring, is scheduled to commence initial service in March 2000. In June 1998,
Global Crossing contracted for the construction of MAC, a 9,300 km digital
cable system that will connect New York, Bermuda, the Caribbean and Florida
and will initially offer 20 Gbps of service capacity, upgradeable to a minimum
of 40 Gbps. In addition, in July 1998, Global Crossing contracted for the
construction of PAC, a 7,000 km two fiber pair digital cable that will connect
California, Mexico, Panama and the Caribbean and will initially offer 20 Gbps
of service capacity, upgradable to a minimum of 40 Gbps.
In addition to the undersea segments of the Global Crossing Network, the
Company has made and expects to continue to make acquisitions of terrestrial
fiber capacity which complement its core undersea cable business and which
address customer demands for global city-to-city connectivity. Global Crossing
intends to pursue such connectivity in approximately 50 of the largest
metropolitan communications markets worldwide. Once completed, the undersea
segments of the Global Crossing Network, in combination with the Company's
investments in terrestrial fiber capacity, will form an integrated worldwide
network with multiple access points offering low-cost wholesale capacity.
MARKET OPPORTUNITY
The Global Crossing Network is being developed to capitalize on certain
trends in the international telecommunications industry:
Rapid Growth of International Internet and Telecommunications Traffic. While
international voice traffic from 1996-2000 is expected to grow at a rate of
13% annually, international data traffic growth is expected to significantly
outpace voice traffic growth. One of the key factors contributing to the
growth in data traffic is the increasing use of broadband applications
dominated by Internet, which has grown at a compound annual rate of 86% for
the past five years as measured by the number of Internet hosts. Reflecting
this growth, the number of ISPs is growing explosively on a global basis. ISPs
outside the United States, particularly in Europe, Asia and Latin America, are
expected to require significant subsea optical circuit capacity to provide
efficient service to their customers to popular Internet web sites in the
United States. In addition, improvements in "last mile" technology, such as
xDSL and cable modems, are contributing to the significant increase in the
number of subscribers using such bandwidth-intensive applications. For
example, the number of cable modem subscribers in the United States alone is
projected to increase by approximately 600% in 1998. Several additional key
factors are expected to drive the rapid growth in worldwide telecommunications
traffic, including the (i) worldwide growth in the use of bandwidth-intensive
applications, such as video conferencing and corporate intranets, (ii)
increased globalization of commerce and (iii) a general decline in
international tariffs.
Impact of Global Deregulation. The continued deregulation of the global
telecommunications industry has resulted in a significant increase in the
number of competitors, including traditional carriers, wireless operators,
ISPs and new local exchange service providers, due in large part to: (i) the
breadth and volume of privatization activity globally and (ii) the ability of
new entrants to effectively compete against the formerly protected incumbent
providers. This change in the global competitive landscape is generating
significant demand for broadband communications capacity as carriers seek to
secure sufficient capacity for their expansion plans. As of July 1998, the ITU
estimated that there were 1,000 international carriers, representing a 181%
increase since the end of 1996. In addition, further telecom privatization is
expected during 1998 and 1999, which in turn is expected to generate increased
global competition.
Shortage of Available Capacity. The Company believes that additional network
undersea capacity and faster response times will be required to satisfy
current and anticipated growth in telecommunications traffic. While there has
been a significant increase in the demand for global telecommunications
capacity, there has not
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been a corresponding growth in the number of new transport facilities,
especially in the undersea cable industry. The Company believes that
construction of competing undersea cable systems will be limited in the near
future due to barriers to entry, including (i) the extensive lead time
required to engineer and construct cable systems, (ii) the limited number of
major undersea cable supply and construction companies, (iii) the limited
number of qualified personnel with extensive experience in the undersea cable
industry and (iv) the significant capital required to develop undersea cable
systems.
Increasing Challenges for Consortia Systems. Historically, the planning and
ownership of undersea cable systems was conducted through large consortia
typically led by the monopoly telecommunications providers. Global Crossing
believes that the consortium approach to constructing, owning and operating
undersea cable systems is becoming far less effective as (i) carriers
increasingly view significant long term capital investments in capacity to be
a suboptimal utilization of resources, (ii) deregulation of international
telecommunications markets leads to direct competition among consortia members
for customers, (iii) competition from new entrants makes carriers' market
share and capacity requirements increasingly difficult to predict and (iv) the
rapid pace of technological change creates difficulties in the ability of
carriers to accurately forecast the growth of telecommunications traffic.
Acceptance of Privately Sponsored Cable Systems. The Company believes that
telecommunications service providers have become increasingly receptive to the
advantages of independent, privately-owned cable systems. In connection with
the marketing of capacity on the Global Crossing Network, carriers have
responded positively to the Company's ability to offer (i) capacity as and
when needed without the incurrence of significant initial capital investments,
(ii) a wide range of purchasing options appealing to both established carriers
and new market entrants, (iii) state-of-the-art system quality combined with
cost-effective high quality operations, administration and maintenance support
and (iv) the absence of direct competition with its customers.
BUSINESS STRATEGY
Global Crossing's mission is to create the world's first independent global
fiber optic network designed to offer its customers the highest quality city-
to-city communications connectivity among approximately 50 of the largest
metropolitan markets worldwide. The principal elements of the Company's
business strategy include:
Create a Worldwide Network. Upon completion, the currently announced
undersea segments of the Global Crossing Network will directly connect Asia,
North America, Europe, Central America and the Caribbean through the major
transoceanic routes utilizing state-of-the-art technology. To increase the
attractiveness of the Global Crossing Network, the Company is making selective
wholesale acquisitions of terrestrial fiber capacity, thereby providing its
customers with international city-to-city connectivity through Global
Crossing's cable systems at prices significantly lower than if such customers
had attempted to gain connectivity by separately purchasing required
terrestrial backhaul capacity. The Company also intends to actively pursue
additional opportunities for the expansion of the Global Crossing Network,
including complementary businesses and facilities.
The Company has entered into contractual arrangements to provide terrestrial
backhaul service between its landing stations in the United States and the
United Kingdom and New York City and London, respectively, as well as other
arrangements to provide backhaul service in Germany and The Netherlands. In
addition, the Company recently entered into an agreement with Qwest whereby
Global Crossing will receive access to over 25 U.S. metropolitan
communications markets on Qwest's terrestrial network. Through Global Access,
a Japanese telecommunications carrier owned by Marubeni, the Company will
offer backhaul services to PC-1 customers from the Company's Japanese landing
stations directly to Tokyo at prices substantially lower than existing
alternatives. The Company is also currently negotiating with Marubeni to
obtain a minority investment in Global Access, which is constructing a
domestic terrestrial fiber optic cable network connecting the PC-1 cable
station with Tokyo, Nagoya and Osaka. See "Use of Proceeds."
Maintain Position as a Leading Wholesale Service Provider. Global Crossing
is the world's first independent provider of global Internet and long distance
telecommunications facilities and services utilizing a
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network of undersea digital fiber optic cable systems and associated
terrestrial backhaul capacity. The Company's products are segmented to meet
the varying needs of the global carrier market, with shore-to-shore capacity
offered to major carriers that have their own terrestrial backhaul capacity
and city-to-city capacity provided to other customers that require such
service. Global Crossing also offers carriers, through wholesale channels, a
combination of volume-based purchasing flexibility, typically according to a
tiered scale with various incentive levels, and volume discounts for purchases
of capacity on one cable system based upon purchases previously made on the
Company's other systems. See "--Sales and Marketing."
Utilize State-of-the-Art Technology. The Global Crossing Network is being
engineered and constructed using the latest in fiber optic technology, self-
healing ring structures, erbium doped fiber amplifier repeaters, DWDM and
redundancies of capacity to ensure instantaneous restoration. The Company
believes that incorporating such technology in the Global Crossing Network
will (i) provide a cost advantage over existing alternatives, (ii) make it
more reliable than competing systems, (iii) allow the Company to offer
substantially more capacity than existing cable systems and (iv) enable the
capacity of each of the Company's cable systems to be upgraded at the landing
stations rapidly and at a fraction of the initial system cost without physical
modification of the submerged portion of the system.
Maintain Position as Low-Cost Provider. The Company plans to maintain its
position as a low-cost provider of facilities and services to its carrier
customers relative to its competitors. Global Crossing believes that this low-
cost position results from a combination of (i) low sales and marketing and
general and administrative costs, reflecting a commitment to wholesale
customers, (ii) ownership of undersea fiber optic facilities utilizing state-
of-the-art technology, resulting in lower operating and maintenance costs that
will be passed on to its customers, and (iii) leveraging the Company's strong
position in the undersea fiber optic facilities market to obtain low-cost
terrestrial connectivity between cable landing stations and major
telecommunications sites.
Provide "One-Stop" Sales and Service. Through both its marketing and sales
force, as well as its ongoing operations, administrative and maintenance
support, Global Crossing plans to offer one-stop sales and service to
customers worldwide. The Company currently employs 18 marketing professionals
located in the Company's headquarters in Bermuda and in major cities
throughout the world in order to facilitate the sales of its
telecommunications capacity and increase market awareness and name
recognition. See "--Sales and Marketing." The efforts of the sales force have
resulted in significant contractual arrangements to date with international
telecommunications carriers. In addition, Global Crossing is developing a
centralized operations, administration and maintenance support system to serve
the entire Global Crossing Network, including a customer care center, network
operations center and technical support center. Through such integrated
customer support, in combination with its sales force, the Company intends to
enable customers to have a single point of contact regarding capacity sales
and service on the Global Crossing Network.
Leverage Extensive Management Experience. Global Crossing has assembled and
will continue to build a strong management team comprised of executives with
extensive operating experience in the telecommunications industry and the
undersea cable sector. Prior to joining the Company, Jack Scanlon, the
Company's Chief Executive Officer, was President and General Manager of the
Cellular Networks and Space Sector of Motorola, Inc., responsible for
approximately $6 billion in annual revenues and 16,000 employees. Mr. Scanlon
has over 30 years of experience in the telecommunications industry, including
24 years with AT&T and Bell Laboratories. In addition, William Carter, the
Company's senior executive in charge of system development, was formerly the
President and Chief Executive Officer of SSI, overseeing the research and
development, engineering, implementation and integration of AT&T's
international cable and satellite facilities. Mr. Carter had been at AT&T for
30 years prior to joining the Company. During Mr. Carter's tenure, SSI had the
leading worldwide market share in the undersea cable industry. Dan J. Cohrs,
the Company's Chief Financial Officer, was formerly Vice President and Chief
Planning and Development Officer at GTE, where he was responsible for
corporate development activities, including mergers and acquisitions and
strategic transactions, as well as strategic planning and competitive
analysis. In addition, the Company's system development team includes several
individuals with extensive experience with major undersea cable and
telecommunications industry participants. See "Management."
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THE GLOBAL CROSSING NETWORK
As part of Global Crossing's mission to create an integrated global, high
capacity undersea fiber optic cable network, the Global Crossing Network is
being engineered and constructed to connect the two most heavily trafficked
international corridors in the world via AC-1 (United States to Europe) and
PC-1 (United States to Asia). Global Crossing plans to interconnect these
systems with two north-south systems (MAC and PAC), directly connecting
Bermuda, the Caribbean, Central America and, through unaffiliated cable
systems, South America. Of the four undersea fiber optic cable systems
currently being constructed by Global Crossing, AC-1, MAC and PAC are wholly-
owned projects by the Company, while PC-1 is being constructed through a joint
venture with one or more partners, principally Marubeni. Global Crossing will
initially have approximately a 58% interest in PC-1 and, in conjunction with
Marubeni, will manage its development, sales and operation.
The following table contains information regarding the estimated system
cost, initial RFS date and ownership structure of the Company's four currently
planned systems:
<TABLE>
<CAPTION>
ESTIMATED
SYSTEM COST(1) EXPECTED INITIAL OWNERSHIP
SYSTEM (MILLIONS) RFS DATE(2) STRUCTURE
------ -------------- ------------------------- -------------
<S> <C> <C> <C>
AC-1 $ 750 May 1998 (US-UK) Wholly-Owned
(complete)
February 1999 (Full Ring)
PC-1 1,200 March 2000 Joint Venture
July 2000 (Full Ring)
MAC 350 December 1999 Wholly-Owned
PAC 475 February 2000 Wholly-Owned
------
$2,775
======
</TABLE>
- --------
(1) Includes anticipated financing costs. Excludes the costs of potential
future upgrades and any amount capitalized with respect to the PCG
Warrants. The amount indicated under "Estimated System Cost" is based upon
executed supply and financing documents. Certain factors, such as
increases in interest rates and delays in construction, could result in
higher actual costs or later RFS dates than currently estimated. See "Risk
Factors--Risks Related to Completing the Company's Cable Systems" and
"Risk Factors--Risk of Error in Forward-Looking Statements."
(2) Based upon executed supply and financing documents. Certain factors, such
as reliance upon third party suppliers, could result in timing delays. See
"Risk Factors--Dependence on Third Parties."
ATLANTIC CROSSING
AC-1, the Company's first undersea fiber optic cable in the Atlantic region,
is a 14,000 km four fiber pair self-healing ring that, upon completion, will
connect the United States and Europe with landing stations in the United
States, the United Kingdom, The Netherlands and Germany. AC-1 is equipped with
state-of-the-art DWDM and the full ring will initially offer 40 Gbps of
service capacity, increasing the existing undersea fiber optic cable capacity
along the heavily trafficked transatlantic route by approximately 65% prior to
upgrades. Capacity on AC-1 is upgradeable to a minimum of 80 Gbps using DWDM
technology. AC-1 commenced service on its United States-United Kingdom segment
on May 26, 1998 and the full system, encompassing a self-healing ring, is
scheduled for completion by February 1999.
The aggregate costs of AC-1, which are estimated to be approximately $750
million (excluding potential future upgrades), have been fully financed prior
to the Offerings. In addition to the AC-1 Contract with TSSL for construction
of the system, Global Crossing has entered into other contracts with TSSL
pursuant to which TSSL will provide operations, administration and maintenance
services for the system.
The Company has successfully marketed capacity on AC-1 to licensed
telecommunications providers, including PTTs, Internet service providers and
established and emerging telecommunications companies. Sales
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of capacity on AC-1 and related backhaul commenced in October 1997 and, as of
June 30, 1998, the Company had entered into CPAs with customers providing for
payments to the Company of $556 million and $108 million of payments
(including deposits) had been received in respect thereof. These CPAs
represent approximately 19% of the minimum projected sales capacity of 512
circuits on the AC-1 system. The balance of these payments is scheduled to be
collected over the next four years. The Company's AC-1 customers now total
more than 22 international telecommunications carriers, including Deutsche
Telekom, GTE, Qwest, Teleglobe, Swisscom, PTT Telecom BV, Telia AB and a
number of emerging telecommunications companies. The Company generally grants
customers who have entered into CPAs options to acquire further capacity on
AC-1. The amount of such capacity depends upon a number of factors, including
upgrades to AC-1, future prices for AC-1 capacity and the amount of unsold
capacity on AC-1 at certain dates after the AC-1 system RFS date. In addition,
the Company has received as of June 30, 1998 non-binding indications of
interest from customers pursuant to memoranda of understanding ("MOUs") that
would, if converted into CPAs, provide for payments to the Company of
approximately $90 million. The timing of payments by purchasers under CPAs
generally depends on when service commences on the segment or segments of AC-1
on which capacity is acquired. All of the foregoing payment amounts assume the
completion of the related segment prior to specified dates falling after the
scheduled RFS date for that segment. There can be no assurance that any MOUs
will be converted into CPAs or that the final form of any CPA will contain the
same capacity purchase or payment provisions as the related MOU.
Based upon its current expectations regarding sales of capacity on AC-1, the
Company believes that it will develop and eventually construct AC-2, an
additional four fiber pair cable connecting the United States to Europe. When
combined with AC-1, AC-2 would double the capacity that Global Crossing would
be able to offer customers on the transatlantic route. There can be no
assurance that the Company will ultimately elect to proceed with AC-2 or that
such system will help the Company achieve and sustain operating profitability.
PACIFIC CROSSING
PC-1, the Company's first undersea fiber optic cable in the Pacific region,
is being developed as a 21,000 km four fiber pair self-healing ring that, upon
completion, will connect California, Washington and two landing sites in
Japan, providing connectivity to other points in Asia through interconnection
with other third party cable systems. PC-1 is designed to operate initially at
80 Gbps of service capacity and to be upgradeable to a minimum of 160 Gbps,
using DWDM technology.
In April 1998, the Company executed the PC-1 Contract with TSSL for the
construction of PC-1, which provides for a system completion date of Summer
2000 at an aggregate cost of approximately $1.2 billion. Equity investments in
PC-1 by Global Crossing and its partners are currently estimated at $400
million (of which $231 million will be provided by the Company), with the
remaining $800 million financed through incurrence of non-recourse
indebtedness at the PC-1 level. The credit agreement for the financing of such
indebtedness was executed on July 30, 1998.
On July 6, 1998, the Company executed a memorandum of understanding with DDI
Corporation, the second largest telephone company in Japan, to purchase
capacity on PC-1 which, if successfully converted to a CPA, would represent
its first sale of capacity to an Asian customer on this system.
MID-ATLANTIC CROSSING
MAC is being developed as a 9,300 km two fiber pair self-healing ring that,
upon completion, will connect New York, Bermuda the Caribbean and Florida.
Global Crossing intends that MAC will be connected to AC-1 via its cable
station in Brookhaven, New York, providing connectivity between Europe, the
eastern United States, Bermuda and the Caribbean and, through interconnection
with other non-Global Crossing submarine cable systems, South America. MAC is
being designed to operate initially at 20 Gbps of service capacity and to be
upgradeable to a minimum of 40 Gbps using DWDM technology.
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In June 1998, the Company executed a contract with Alcatel Submarine
Networks ("Alcatel") for the construction of MAC, which provides for a system
completion date of December 1999 at an aggregate cost of approximately $350
million (excluding potential future upgrades and amounts capitalized with
respect to the PCG Warrants), of which approximately $110 million will be
financed by equity contributions by the Company and $240 million is to be
financed through non-recourse indebtedness at the MAC level. The contractual
commitment for the financing of such indebtedness was obtained on June 26,
1998.
PAN AMERICAN CROSSING
PAC is being developed as a 7,000 km two fiber pair cable that, upon
completion, will connect California, Mexico, Panama and the Carribean,. PAC is
being designed to interconnect with PC-1 through the Company's landing station
in San Luis Obispo, California and with MAC through the Company's landing
station in St. Croix. It is anticipated that PAC will transverse Panama via an
existing terrestrial right-of-way. PAC is being designed to operate initially
at 20 Gbps of service capacity and to be upgradeable to a minimum of 40 Gbps
using DWDM technology.
In July 1998, the Company executed a contract with TSSL for the construction
of this system which provides for a system completion date of February 2000
and will cost approximately $475 million (excluding potential future upgrades
and amounts capitalized with respect to the PCG Warrants), with $165 million
financed through equity contributions from the Company and $310 million to be
financed through non-recourse indebtedness at the PAC level. The contractual
commitment for the financing of such indebtedness was obtained on July 22,
1998.
TERRESTRIAL BACKHAUL SERVICES
In addition to the undersea segments of the Global Crossing Network, the
Company has made and expects to continue to make acquisitions of terrestrial
fiber capacity which complement its core undersea cable business and which
address customer demands for global city-to-city connectivity. Global Crossing
intends to acquire such connectivity to approximately 50 of the largest
metropolitan telecommunications markets worldwide. The Company has entered
into contractual arrangements to provide terrestrial backhaul service between
its landing stations in the United States and the United Kingdom and New York
City and London, respectively, as well as other arrangements to provide
backhaul service in Germany and The Netherlands. In addition, the Company
recently entered into an agreement with Qwest whereby Global Crossing will
receive access to over 25 U.S. metropolitan communications markets on Qwest's
terrestrial network. Through Global Access, a Japanese telecommunications
carrier owned by Marubeni, the Company will offer backhaul services to PC-1
customers from the Company's Japanese landing stations directly to Tokyo at
prices substantially lower than existing alternatives. The Company is also
currently negotiating with Marubeni to obtain a minority investment in Global
Access, which is constructing a domestic terrestrial fiber optic cable network
connecting the PC-1 cable station with Tokyo, Nagoya and Osaka. See "Use of
Proceeds."
ADDITIONAL NETWORK EXPANSION OPPORTUNITIES
The Company is in the process of developing several new cable systems and
evaluating other business development opportunities which will complement the
Global Crossing Network. There can be no assurance that the Company will
ultimately elect to proceed with such opportunities or, if it elects to do so,
that such opportunities will help the Company achieve and sustain operating
profitability.
Further Undersea Opportunities. The undersea routes served by the Global
Crossing Network and other cable systems are projected to have substantial
growth greatly exceeding all capacity currently in use and under development
(including planned upgrades). To address such demand, the Company plans to
evaluate and, as appropriate, build additional systems on such routes. It is
anticipated that such systems, where possible, would be restored on the
existing systems and would achieve further cost efficiencies through the use
of existing landing stations.
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Terrestrial Backhaul Opportunities. The Company is reviewing opportunities
to obtain terrestrial backhaul connectivity from the major cities in Europe
and Japan to landing sites for both AC-1 and PC-1 landing stations
respectively.
Other Development Opportunities. The Company is actively pursuing
development opportunities whereby Global Crossing would provide "fee for
service" expertise in the planning, design, implementation and operation of
global undersea cable systems and associated terrestrial backhaul.
OTHER ACTIVITIES
Neptune Acquisition. The Company entered into a letter agreement on May 26,
1998 with Neptune Communications, L.L.C. ("Neptune") to acquire substantially
all of the business of its wholly-owned subsidiary, Neptune Communications
Corp. ("NCC"), for an acquisition price of $20,000,000 payable in Common
Stock. Neptune is controlled by the Carlyle Group, an international investment
firm ("Carlyle"), and was formed to pursue opportunities in the undersea cable
business. Pursuant to such agreement, the Company will acquire all tangible
and intangible assets of NCC (except for assets relating to its North Pacific
Cable business), which consist principally of certain telecommunications
licenses. In addition, Carlyle managing director William Conway, the former
Chief Financial Officer of MCI, has agreed to serve on the Company's Board of
Directors. The Company and Neptune intend to enter long-form agreements with
respect to the transactions contemplated by the letter agreement.
Possible Investments. The Board of Directors of the Company has approved in
principle the making of minority investments in telecommunications and
Internet service providers that do not compete with the Company in its core
business and that will also be current or prospective purchasers of capacity
on the Global Crossing Network. Such investments may consist of purchases of
equity securities for either cash or contributions of capacity on the Global
Crossing Network. Such investments may be managed either by the Company
directly or, if the Board of Directors deems advisable, by one or more third-
party investment advisers so as to minimize potential conflicts of interest
and the amount of time allocated by the Company's senior management to such
investments.
SYSTEM PERFORMANCE
AC-1, PC-1 and MAC are each designed utilizing self-healing ring technology
to optimize system performance. Two types of protection switching, span
switching and ring switching, are provided. Span switching protects a system
against failures between adjacent landing sites which only affect service line
traffic and not the protection fibers. Ring switching protects a system
against complete failures between adjacent landing sites. Because such
technology will protect any single system failure in less than 500
milliseconds, no outages will result as a consequence of a single system
failure. Accordingly, the estimated system availability on any point-to-point
link on such systems is 99.995%.
As undersea cable systems become more powerful (i.e., carry more traffic
along their transmission paths), it is important to provide a "self-
restoration solution" because other systems do not have the capacity to
provide restoration for these new high performance undersea cable systems.
Single span systems must enter into reciprocal arrangements with either other
undersea fiber-optic operators or satellite carriers to pick up and deliver
this traffic if a system failure should occur. Providing self-restoration
through this ring design with the switching techniques described above is now
viewed as offering a qualitative advantage over single span systems with
external restoration.
With respect to PAC, which does not employ self-healing ring technology, the
Company is exploring options to enter into restoration arrangements with
terrestrial fiber optic cable operators to protect against system traffic
interruptions. The Company may also enter into similar arrangements to protect
against catastrophic system malfunction on its other cable systems.
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SALES AND MARKETING
The Company markets capacity on its systems to licensed telecommunications
providers, including PTTs, Internet service providers and established and
emerging telecommunications companies. The Company believes its current
customers represent a broad array of telecommunications companies.
The initial sales strategy of the Company emphasizes the sale of capacity on
an IRU basis, whereby the customer purchases a unit of capacity for the
remaining design life of a particular cable system. On AC-1, the Company is
selling capacity at an increment of 155 megabits (Mbps), known as an STM-1,
for the 25-year life of AC-1. For the other Global Crossing cable systems, the
Company also expects to sell capacity to customers at the STM-1 level, as well
as at the smaller increment of 45 Mbps, where warranted based upon the actual
demand levels along certain routes. The Company has instituted a tiered
pricing schedule for all of its systems which provides for volume discounts,
thereby allowing customers to reduce their average circuit cost as more
circuits are purchased. In addition, the Company offers pricing discounts on
purchases of capacity prior to a system's commercial operation date, in order
to induce customers to make early purchase commitments.
To further increase the attractiveness of the Company's network, Global
Crossing intends to make selective wholesale acquisitions of backhaul
capacity, thereby enabling customers to achieve city-to-city connectivity
through the Global Crossing Network at prices significantly lower than if such
customers had attempted to gain such connectivity by separately purchasing
such backhaul capacity. For AC-1 customers, the Company entered into
contractual arrangements providing backhaul capacity between its landing
stations in the United States and the United Kingdom and New York City and
London, respectively. In addition, Deutsche Telecom and KPN provide backhaul
services directly to the Company's AC-1 customers in Germany and The
Netherlands, respectively. In addition, the Company has recently entered into
an agreement with Qwest whereby Global Crossing will receive access to over 25
U.S. cities on Qwest's terrestrial network.
Global Crossing is exploring the development of other products designed to
take advantage of its ownership of several cable systems in different parts of
the world. For example, the Company has offered its customers volume discounts
for purchases of capacity on one system based upon purchases previously made
on the Company's other systems and the ability to transfer a portion of unused
capacity purchases from one Global Crossing system to another depending on
customers' individual traffic needs.
The Company's marketing entity, Global Crossing International, was
established to facilitate the sales of communications capacity on the Global
Crossing Network, as well as to increase market awareness and name recognition
of Global Crossing. Global Crossing has been able to recruit and train a full-
service sales and marketing team, including Mr. Jack Finlayson, President of
Global Crossing International, a former senior executive of Motorola who
recently joined the Company, and Mr. Patrick Joggerst, Vice President,
Worldwide Sales and Marketing, who had been at TSSL and AT&T for a total of 17
years prior to joining the Company, most recently as Managing Director of
TSSL's Americas Region. Mr. Joggerst directly oversees the Americas Region and
is responsible for overseeing the duties of the two regional vice presidents,
each being in charge of one of the two other regions of the Company's
marketing organization, Europe/Middle East/Africa and Asia. Each regional
vice-president oversees the performance of regional marketing directors who
have direct account responsibility in certain geographic areas of the region.
In total, the Company employed 18 marketing professionals as of June 30, 1998.
While the Company intends to expand the current size of its marketing
organization, management believes that a moderately-sized sales force is
sufficient to adequately address all customers seeking to acquire undersea
cable capacity on a wholesale basis.
During the pre-operational period for AC-1, in which the Company sought to
generate significant pre-sales of capacity, the Company presented project
information meetings (otherwise known as data gathering meetings) in order to
better educate potential customers about AC-1 and Global Crossing's other
planned cable systems. To date, the Company has hosted three such meetings,
with the most recent event attracting 200 attendees representing over 75
companies. Attendees of such meetings have been affiliated with both existing
and prospective customers and have represented a variety of sectors of the
telecommunications industry. Ongoing, the Company intends to organize at least
one major international conference per year in order to provide updated
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information on the Global Crossing Network. The Company also intends to host
regional project information meetings focusing on a particular cable system,
with such meetings scheduled to precede the anticipated commercial operation
date for such system.
The Company intends to reinforce customer awareness through a variety of
marketing campaigns, including its Global Crossing international conferences
and regional marketing events, participation in key industry and user group
conferences, speaking engagements, press conferences and promotional
campaigns. In addition, Global Crossing expects its marketing team to
periodically visit current and prospective customers to obtain a greater
understanding of the individual needs of such customers.
SUMMARY OF PRINCIPAL TERMS OF STANDARD CONTRACTUAL DOCUMENTATION
Capacity Purchase Agreements (CPAs)
In general, a CPA provides for the sale of capacity by the Company on an IRU
basis, whereby the purchaser owns a unit of capacity for the remaining design
life of a particular system. The term of a CPA is 25 years from the RFS date
for the system on which capacity is being acquired, which is the entire useful
life of the system. Upon execution of a CPA prior to a segment RFS date, the
Company generally receives 10% of the purchase price immediately, with the
balance of the purchase price due to the Company upon the applicable RFS date
for that segment. A limited number of CPAs provide for payment of the purchase
price in installments over two to three year periods. Each purchaser under a
CPA is required to pay its allocated share of the cost of operating,
maintaining and repairing the system. A purchaser's payment obligation under a
CPA shall generally terminate with respect to any purchased capacity on AC-1
other than the United States-United Kingdom segment (and, in some cases, with
respect to purchased capacity on the United States-United Kingdom segment), if
the RFS date for the AC-1 system has not occurred by June 30, 1999.
Performance under CPAs is also contingent upon the obtaining and continuance
of such approvals, consents, governmental authorizations, licenses and permits
as may be required or reasonably deemed necessary by each party thereto for
performance by such party thereunder and as may be satisfactory to it. The
obligations of purchasers under certain CPAs are additionally contingent upon
the execution of related ICPAs. See "Risk Factors--Sales of Capacity;
Realization of Other Revenues" and "--Termination of CPAs."
Additionally, each purchaser acquiring capacity on AC-1 prior to the system
RFS date is granted the right to receive additional capacity ("residual
capacity") at no additional cost upon the date which is 12 1/2 years after the
RFS date for the system. Furthermore, neither party is liable to the other for
consequential, incidental, indirect or special damages sustained by reason of
(i) any failure in or breakdown on the system or the facilities associated
with the system, (ii) the failure of any inland carrier to perform the terms
and conditions of any agreement to which it and the purchaser are parties or
(iii) for any interruption of service, whatever the cause and however long it
shall last. Each CPA is subject to an arbitration clause. Some CPAs are
supported by a parent guarantee from the purchaser.
Inland Services Agreements (ISAs)
The Company has entered into agreements with certain terrestrial fiber cable
systems to purchase inland capacity on such systems for resale to its
purchasers. In general, the term of each ISA is 25 years from the RFS date of
the particular system or until the system is retired, whichever occurs first.
In certain cases, the Company has the option to extend the term of each ISA
for an additional five years. Neither party to an ISA is responsible for any
loss, damage, delay or failure of performance resulting from an event of Force
Majeure (as defined therein). If an event of Force Majeure continues for a
period of 30 days, the Company may terminate the ISA. Each ISA is subject to
an arbitration clause.
Inland Capacity Purchase Agreements (ICPAs)
The Company has entered into ICPAs with some of its customers. Under an
ICPA, the Company provides the customer with a portion of the backhaul
capacity it purchased from owners of terrestrial cable systems under ISAs. The
term of each ICPA is 25 years from the RFS date for the particular system.
Upon execution of an
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ICPA, the Company generally receives 10% of the purchase price immediately,
with the balance due no later than the RFS date for the particular segment. A
purchaser's payment obligation under an ICPA generally shall terminate with
respect to any purchased capacity on AC-1 other than the United States-United
Kingdom segment (and, in some cases, with respect to purchased capacity on the
United States-United Kingdom segment), if the RFS Date for the AC-1 system has
not occurred by June 30, 1999. Unlike a CPA, the purchaser under an ICPA is
generally not required to make any additional payments for costs associated
with operating, maintaining and repairing the backhaul capacity in which the
IRU is granted. Neither party is liable to the other for consequential,
incidental, indirect or special damages sustained (i) by reason of any failure
of any inland carrier to perform the terms and conditions of any ISA to which
it is a party or (ii) for any interruption of service, whatever the cause and
however long it shall last. Each ICPA is subject to an arbitration clause. An
ICPA may be supported by a corresponding parent guarantee from the purchaser.
OPERATIONS, ADMINISTRATION AND MAINTENANCE SUPPORT
Pursuant to the AC-1 OA&M Agreement, TSSL will provide operations,
administration and maintenance support on behalf of AC-1 for a term of eight
years following the commencement of commercial operations. As of June 30,
1998, the Company was committed under the AC-1 OA&M Agreement to make payments
totalling approximately $261 million. Such agreement is extendible at the
option of the Company for two additional periods of 8.5 years each. For AC-1,
TSSL's network operations center is designed to ensure the overall ongoing
monitoring of the system's operation, maintenance and control systems. The
network management equipment located at the Brookhaven, New York landing
station provides fault management, security management, configuration
management and performance management, while undersea network management
equipment located at all landing stations provides system level monitoring of
the undersea terminating equipment. The full integration of these control
elements allows the AC-1 cable system to be "self-diagnostic," with such
control elements facilitating localization and repair in the event of the
occurrence of a system fault.
In addition, Global Crossing is separately developing a worldwide
operations, administration and maintenance support system to serve each of its
cable systems (exclusive of AC-1 for the initial term of the TSSL OA&M
Agreement). Such support will be handled through three co-located work centers
currently anticipated to be located in Bermuda: a customer care center
("CCC"), network operations center ("NOC") and technical support center
("TSC").
Customer Care Center. The CCC will provide capacity purchasers with a single
point of contact for service provisioning, interconnect coordination support
and billing inquiries.
Network Operations Center. The NOC will handle operations, administrative
and maintenance activities for each of the Company's cable systems, including
capacity provisioning, network performance, repair and restoration activities.
Capacity provisioning relates to the appropriate allocation of capacity on the
Company's cable systems among capacity purchasers. Management of network
performance entails detection and response to system degradation and other
performance parameters, as well as preventative activities.
Technical Support Center. The TSC will be a 24-hour center managed by
highly-trained experts to handle technical inquiries from purchasers regarding
system performance and interconnection arrangements.
COMPETITION
The international telecommunications industry is highly competitive. The
Company faces competition from existing and planned cable systems along each
of its planned routes and from satellite providers, including existing
geosynchronous satellites and low-earth orbit systems now under construction.
The Company competes primarily on the basis of price, availability,
transmission quality and reliability, customer service and the location of its
systems. Traditionally, carriers have made long term investments in ownership
of cable capacity, making lower price and superior service less determinative
in convincing such carriers to acquire additional capacity on the Company's
systems than is the case in industries without such long-term relationships.
See "Risk Factors--Competition."
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Existing and Planned Cable Systems
The routes addressed by Global Crossing's planned systems are currently
served by several undersea cables as well as satellites. Currently, there are
several fiber optic transatlantic cable systems, each of which will compete
directly with AC-1. Primary future sources of transatlantic competition for
the Company may result from, among others, (i) TAT-14, a transatlantic cable
system which is being developed by its consortium members, including British
Telecom, AT&T, France Telecom and Deutsche Telekom, and (ii) Gemini, a
transatlantic cable system being operated and marketed by WorldCom and Cable &
Wireless. The Company believes that such other cable systems will compete
directly with AC-1 and the commitments of the developers and other carriers on
these systems could substantially reduce demand for capacity on AC-1.
Similarly, there are several cable systems currently operating between the
United States and Asia, the route to be served by PC-1. Competition in the
transpacific market may result from, among others, (i) China-US, a
transpacific system being developed as a "private cable system" by fourteen
large carriers, including SBC, MCI, AT&T and Sprint, most of whom have
traditionally sponsored consortium cables and (ii) a transpacific system being
developed by a consortium of major telecommunications carriers, including
Worldcom, AT&T, KDD, NTT, Cable & Wireless and GTE. Although the Company
believes that such other cable systems will not satisfy the demand for
capacity between the United States and Japan and that there is currently
enough demand projected to accommodate all such systems, such other cable
systems will receive commitments for capacity that PC-1 could have received in
their absence.
Other regional and global systems are being considered by developers,
including Project Oxygen, a global system being evaluated by CTR Group, Ltd.
In addition, the Company may face competition from existing and planned
regional systems and satellites on its MAC and PAC routes, where entrants are
vying for purchases from a small but rapidly growing customer base.
Satellite Transmission
When comparing cable transmission against satellite transmission, the
Company believes that cable has a distinct advantage with respect to latency
(i.e., transmission delay) and voice quality. Cable transmission has a lower
cost per circuit, higher capacity and longer expected equipment life than
satellite transmission. Satellite transmission is generally considered to have
a comparative advantage versus cable transmission for mobile communications
only in the area of point-to-multipoint broadcast and "thin route"
transmission, as opposed to the more common point-to-point, high volume
transmission for which cable usage is considered to be preferable.
In early 1997, the FCC granted Ka-band licenses and orbital locations to 13
companies. The firms developing future satellite technology envision a network
of satellites that will provide broadband data transmission with data rates of
2 Mbps, 20 Mbps, and even 155 Mbps. Potential participants in the field
include Astrolink, Skybridge, Teledesic Corporation, CyberStar and SpaceWay,
who are seeking to provide high bandwidth transmission sublet networks. Due to
(i) the significant initial costs related to these systems, (ii) the risks
relating to satellite launch systems and (iii) the significantly lower
transmission capacity versus current fiber optic systems, the Company believes
that the new satellite systems will not be able to offer competitive cost per
unit of transmission capacity in the dense metropolitan markets the Company is
targeting. Further, the Company believes it will have at least five years lead
time to help it solidify a sustainable competitive market position before true
broadband satellite service commences.
SUPPLIERS
There are currently three major supply companies in the undersea cable
industry: TSSL, Alcatel and KDD SCS. Cable & Wireless and Pirelli also have a
presence in the industry and there are a number of smaller suppliers who have
focused primarily on regional routes or non-repeatered systems. TSSL is
completing construction of AC-1, is responsible for the design and
installation of PAC and, together with KDD SCS (as a subcontractor), is
responsible for design and installation of PC-1. Alcatel is responsible for
design and construction of MAC. See "Risk Factors--Dependence on Third
Parties."
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PROPERTIES
The Company leases executive and administrative offices at its worldwide
headquarters at Wessex House, 45 Reid Street, Hamilton HM12 Bermuda. The
Company owns a cable station in Brookhaven, New York and a cable station in
White Sands, United Kingdom. The Company leases cable station space in Sylt,
Germany and cable station space in Beverwijk, The Netherlands. Such leases run
for the anticipated 25-year term of AC-1. The Company also leases office space
in Los Angeles, Morristown, New Jersey, Dallas, London and San Francisco.
REGULATION
The Company, in the ordinary course of development, construction and
operation of its fiber optic cable systems, will be required to obtain and
maintain various permits, licenses and other authorizations in both the United
States and in foreign jurisdictions where its cables land, and will be subject
to applicable telecommunications regulations in such jurisdictions. In
particular, submarine cable landing or similar licenses will be required in
many of the jurisdictions where Global Crossing's planned systems will land.
With respect to AC-1, an undersea cable landing license (the "AC-1 Landing
License") and a subsequent modification have been obtained from the United
States Federal Communications Commission ("FCC"), which license permits AC-1
to land in the United States at the Brookhaven, New York landing site and to
operate between the United States, the United Kingdom, The Netherlands and
Germany. The AC-1 Landing License authorizes the Company to provide capacity
on a private carriage basis, and AC-1 is not presently regulated by the FCC as
a common carrier. Global Crossing has obtained landing licenses similar to the
AC-1 Landing License in each of the other jurisdictions where the AC-1 cable
system will land and where such licenses are required. With respect to each of
the Company's cable systems other than AC-1, the Company anticipates both
filing applications for cable landing licenses with the FCC (and, where
necessary, foreign regulatory agencies) and seeking private carriage status
for these systems as well. These licenses are typically issued for a term of
years (in the case of the FCC-issued cable landing license, 25 years), and are
subject to renewal. United States law (and the law of several foreign
jurisdictions, as well) limits foreign ownership, direct or indirect, of
entities holding cable landing licenses, although the FCC has progressively
relaxed to the rules to examine only those foreign holders that are affiliated
with a foreign telecommunications carrier that has market power in the
destination country. More recently, in order to implement a multilateral World
Trade Organization agreement, the FCC adopted regulations that presumptively
permit unlimited foreign ownership by nationals of countries that are party to
that agreement. See "Risk Factors--Government Regulation."
Construction of each of the Company's cable systems also requires the
acquisition and maintenance of various permits and licenses in the ordinary
course of business. Pursuant to its construction contracts for AC-1 and PC-1,
TSSL is contractually obligated to obtain and maintain all such licenses and
permits. Although Global Crossing intends that the construction contracts for
each of the Company's other planned cable systems will impose the burden of
acquiring and maintaining construction licenses and permits on the contractor
for each of such systems, there can be no assurance that such contractor will
successfully obtain such permits and licenses. See "Risk Factors--Risks
Related to Completing the Company's Cable Systems."
EMPLOYEES
As of June 30, 1998, the Company had 82 employees. The Company considers its
relations with its employees to be good.
LEGAL PROCEEDINGS
The Company is not presently subject to any legal claims or proceedings.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions of the
directors and executive officers of New GCL.
Prior to the Stock Offerings, New GCL amended and restated its Bye-Laws (the
"Bye-Laws") to provide for a Board of Directors consisting of 16 members
divided into three classes with terms of three years each. Mr. Brown,
Mr. Porter, Mr. Phoenix, Mr. Levine and Mr. Conway were elected as Class A
Directors, with a term expiring in 1999; Mr. Cook, Mr. Lee, Mr. Raben, Mr.
Kent and Mr. Scanlon were elected as Class B Directors, with a term expiring
in 2000; and Mr. Winnick, Mr. Bloom, Mr. Kehler, Mr. Weinberger, Mr. Steed and
Mr. Ogasawara were elected as Class C Directors, with a term expiring in 2001.
The form of Amended and Restated Bye-Laws is an exhibit to the Registration
Statement of which this Prospectus is a part.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gary Winnick....... 50 Co-Chairman of the Board and Director
Lodwrick Cook...... 70 Co-Chairman of the Board and Director
Jack M. Scanlon.... 56 Chief Executive Officer and Director
David L. Lee....... 49 President, Chief Operating Officer and Director
Barry Porter....... 41 Senior Vice President and Director
Abbott L. Brown.... 54 Senior Vice President and Director
Dan J. Cohrs....... 45 Senior Vice President and Chief Financial Officer
James C. Gorton.... 36 Senior Vice President, General Counsel and Secretary
K. Eugene Shutler.. 60 Senior Vice President
Hillel Weinberger.. 44 Director
Jay R. Bloom....... 42 Director
Dean C. Kehler..... 41 Director
Jay R. Levine...... 41 Director
William D. Phoenix. 41 Director
Bruce Raben........ 44 Director
Michael R. Steed... 48 Director
William E. Conway.. 48 Director
Toshiaki Ogasawara. 67 Director
Geoffrey J.W. Kent. 56 Director
</TABLE>
GARY WINNICK--Mr. Winnick, founder of Global Crossing, has been Co-Chairman
of the Board of New GCL since January 1998 and, prior thereto, was Chairman of
the Board since the inception of the Company in March 1997. Mr. Winnick is the
founder and has been the Chairman and Chief Executive Officer of Pacific
Capital Group since its inception, having been in the principal equity
investment and merchant banking business since 1985. Mr. Winnick holds a BA in
Economics and Business Management from C.W. Post College.
LODWRICK M. COOK--Mr. Cook has been Co-Chairman of the Board of New GCL
since January 1998 and Vice Chairman, Managing Director of PCG since 1997.
Prior to joining PCG, Mr. Cook spent 39 years at Atlantic Richfield Co.,
serving as President and Chief Executive Officer from 1985 to 1995 and as
Chairman of the Board of Directors from 1986 to 1995, when he became Chairman
Emeritus. Mr. Cook is also a member of the Board of Directors of Castle and
Cooke, Litex and Ocean Energy, Inc. Mr. Cook received BS degrees in
mathematics and petroleum engineering from Louisiana State University and
holds an MBA degree from Southern Methodist University.
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JACK M. SCANLON--Mr. Scanlon has been Chief Executive Officer and a director
of New GCL since April 1998. Prior to joining the Company, Mr. Scanlon was
President and General Manager of the Cellular Networks and Space Sector of
Motorola Inc. and had been affiliated with Motorola Inc. since 1990. Mr.
Scanlon was Chief Operating Officer of Cambridge Technology Group from 1988 to
1990 and, prior thereto, spent 24 years with AT&T Corp. and Bell Laboratories,
rising to Group Vice President at AT&T Corp. Mr. Scanlon received his BS
degree from the University of Toronto and a MS degree in electrical
engineering from Cornell University.
DAVID L. LEE--Mr. Lee has been President and Chief Operating Officer and a
director of New GCL since the inception of the Company in March 1997. He has
also been a managing director of PCG since 1989. Prior to joining PCG, Mr. Lee
was Group Vice President of Finance and Acquisitions at TRW Information
Systems Group. Mr. Lee is a graduate of McGill University and holds a PhD in
Physics and Economics from the California Institute of Technology.
BARRY PORTER--Mr. Porter is Senior Vice President, Corporate Development and
a director of New GCL. Mr. Porter has been a director of the Company since
1997 and has also been a managing director of PCG since 1993. From 1986 to
1993, Mr. Porter was affiliated with Bear, Stearns & Co. Inc., rising to a
Senior Managing Director in the investment banking department. Mr. Porter
received his JD and MBA degrees from the University of California (Berkeley)
and his BS degree from The Wharton School.
ABBOTT L. BROWN--Mr. Brown is Senior Vice President, Corporate Affairs and a
director of New GCL. Mr. Brown has been a director of the Company since 1997
and has also been a managing director and Chief Financial Officer of PCG since
1994. From 1990 through 1994, Mr. Brown was Executive Vice President, Chief
Financial Officer and a member of the board of directors of Sony Pictures
Entertainment Inc., a wholly-owned subsidiary of Sony Corporation. Prior
thereto, Mr. Brown was a partner in the international accounting firm of Price
Waterhouse LLP. Mr. Brown holds a BS degree from Lehigh University and is a
Certified Public Accountant.
DAN J. COHRS--Mr. Cohrs has been Senior Vice President and Chief Financial
Officer of New GCL since May 18, 1998. From 1993 to 1998, Mr. Cohrs was
affiliated with GTE Corporation, rising to the position of Vice President and
Chief Planning and Development Officer in 1997. From 1990 to 1993, he was at
Northwest Airlines and prior to leaving Northwest Airlines served as Vice
President of International Finance (Tokyo, Japan); from 1986 to 1990, he was
at the Marriott Corporation and served in such capacities as Vice President of
Financial Planning and Acquisitions and Vice President of Project Finance; and
from 1983 to 1986, he was a Strategy and Financial Consultant at Marakon
Associates. Mr. Cohrs received his BS degree from Michigan State University in
Engineering and his PhD degree from Cornell University in Economics, Finance
and Public Policy.
JAMES C. GORTON--Mr. Gorton became Senior Vice President and General Counsel
of New GCL effective July 15, 1998 and Secretary of New GCL effective August
9, 1998. From 1994 to 1998, Mr. Gorton was a member of the New York law firm
Simpson Thacher & Bartlett and had been associated with the firm since 1986.
Mr. Gorton holds a BA degree from Columbia College and a JD degree from New
York University School of Law.
K. EUGENE SHUTLER--Mr. Shutler is a Senior Vice President of New GCL and is
also President of ACL. From 1996 to 1997, Mr. Shutler served as Chairman of
the Board and Chief Executive Officer of Styles On Video, Inc. Prior thereto,
Mr. Shutler was Executive Vice President, General Counsel and a Director of
MGM Grand, Inc. from 1991 to 1995; a member of the Los Angeles law firm of
Troy and Gould from 1983 to 1991; and Vice President/General Counsel of
Republic Corporation, Continental Aircraft Services (Continental Airlines) and
Caesars World, Inc. Mr. Shutler holds a BA degree from the University of
Pennsylvania and an LLB degree from Yale Law School.
HILLEL WEINBERGER--Mr. Weinberger, a director of New GCL since June 1997,
has been a Senior Vice President of Loews/CNA Holdings Corp. since 1988. Prior
thereto, Mr. Weinberger was a Senior Vice President of Presidential Life from
1982 to 1988. Mr. Weinberger serves as director to News Communications Inc.
JAY R. BLOOM--Mr. Bloom, a director of New GCL since the Company's inception
in March 1997, is a managing director of CIBC Oppenheimer Corp. ("CIBC
Oppenheimer"), co-head of its High Yield Group and
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co-head of CIBC World Markets High Yield Merchant Banking Funds. Mr. Bloom
also serves on the board of directors of Heating Oil Partners, L.P.,
Consolidated Advisers Limited, L.L.C. and Morris Material Handling, Inc. Prior
to joining CIBC Oppenheimer in August 1995, Mr. Bloom was a founder and
managing director of The Argosy Group L.P. From 1984 to 1990, Mr. Bloom was a
managing director in the Mergers and Acquisitions Group of Drexel Burnham
Lambert Incorporated. Mr. Bloom was an investment banker associated with
Lehman Brothers Kuhn Loeb Incorporated from 1982 to 1984 and, from 1981 to
1982, practiced law at Paul Weiss Rifkind Wharton & Garrison in New York. Mr.
Bloom received his BS and MBA degrees from Cornell University and his JD
degree from Columbia University School of Law.
DEAN C. KEHLER--Mr. Kehler, a director of New GCL since the Company's
inception, is a managing director of CIBC Oppenheimer and co-head of its High
Yield Group. In addition, he is a member of CIBC's Investment Committee and
co-head of CIBC World Markets High Yield Merchant Banking Funds. Prior to
joining CIBC Oppenheimer in 1995, Mr. Kehler was a founder and managing
director of The Argosy Group. From 1985 to 1990, Mr. Kehler was a managing
director in the Mergers and Acquisitions Group, Co-Head of Merchant Banking
and a member of the Corporate Finance Executive Committee of Drexel Burnham
Lambert Incorporated. Mr. Kehler serves on the board of directors of Booth
Creek Group, Inc., Telebanc Financial Corporation and Heating Oil Partners,
L.P. From 1979 to 1985, Mr. Kehler was an investment banker at Lehman
Brothers. Mr. Kehler received his BS degree from The Wharton School.
JAY R. LEVINE--Mr. Levine, a director of New GCL since the Company's
inception, is a managing director of CIBC Oppenheimer, and manages the CIBC
World Markets High Yield Merchant Banking Funds. Prior to joining CIBC
Oppenheimer in May, 1997, Mr. Levine was President of PPMJ Inc., a private
consulting firm, from September 1996 to April 1997 that advised its clients on
private equity investments. From August 1990 to June 1996, Mr. Levine was a
senior executive in the Morningside and Springfield Group, Inc., a private
investment company. Mr. Levine serves as a director of Aircraft Service
International Group, Consolidated Advisers Limited, L.L.C., Heating Oil
Partners, L.P. and Talton Holdings, Inc. Mr. Levine received a BS degree from
Syracuse University, a JD degree from Tulane University and an LLM in Taxation
from New York University.
WILLIAM P. PHOENIX--Mr. Phoenix, a director of New GCL since its inception,
is a managing director of CIBC Oppenheimer and co-head of Credit Capital
Markets. Prior to joining CIBC Oppenheimer in 1995, Mr. Phoenix had been the
Managing Director of the Canadian Imperial Bank of Commerce since 1982. Mr.
Phoenix serves as a director of the Electrolux Corporation. Mr. Phoenix
received his BA degree from the University of Western Ontario and his MBA
degree from the University of Toronto.
BRUCE RABEN--Mr. Raben, a director of New GCL since its inception, is a
managing director of CIBC Oppenheimer. Prior to joining CIBC Oppenheimer in
January 1996, Mr. Raben was a founder, managing director and co-head of the
Corporate Finance Department of Jefferies & Co., Inc. since 1990. Mr. Raben
serves as a director of Optical Security, Inc., Talton Holdings, Inc., Terex
Corporation and Equity Marketing, Inc. Mr. Raben received his MBA degree from
Columbia Business School and his AB degree from Vassar College.
MICHAEL R. STEED--Mr. Steed, a director of New GCL since its inception, is
Senior Vice President of Investments for the Union Labor Life Insurance
Company, ULLICO Inc. ("ULLICO") and its Family of Companies and President of
Trust Fund Advisors, ULLICO's investment management subsidiary. Mr. Steed
joined ULLICO in November 1992 after serving seven years as President and
Founder of A.F.I.C. Group, Ltd., a financial and investment consulting firm.
From 1983 to 1985, Mr. Steed was the Executive Director of the Democratic
National Committee. Mr. Steed serves as a director of The Lewis & Clark Snake
River Beverage Company. He received his JD degree from Loyola University
School of Law in Los Angeles and his BA degree from Loyola Marymount
University in Los Angeles.
WILLIAM E. CONWAY--Mr. Conway became a director of New GCL in August 1998.
Mr. Conway has been a managing director of The Carlyle Group since 1987. Mr.
Conway was Senior Vice President and Chief Financial Officer of MCI
Communications Corporation from 1984 until he jointly founded The Carlyle
Group in
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August 1987. Mr. Conway serves as director to GTS Duratek, Inc., Nextel
Communications, Inc. and Hownet International Corporation. Mr. Conway received
his BA degree from Dartmouth College and his MBA in Finance from Chicago
Graduate School of Business.
TOSHIAKI OGASAWARA--Mr. Ogasawara, a director of New GCL since August 1998,
has been Chairman and Publisher of The Japan Times, Limited since 1985 and
President and Representative Director of Nifco Inc. since 1967. Mr. Ogasawara
serves as Chairman and Representative Director for FM Inter-Wave, Inc. and
Simmons Co. Ltd.
GEOFFREY J.W. KENT--Mr. Kent, a director of New GCL since August 1998, is
Chairman and Chief Executive Officer of the Abercrombie & Kent Group of
companies and has been associated with the company since 1967.
ADDITIONAL MANAGEMENT
Global Crossing's management team utilizes additional executives with
extensive experience in the telecommunications industry and the undersea cable
sector, including the following individuals:
WILLIAM B. CARTER, JR. is President of Global Crossing Development Co. and
the Company's Senior executive in charge of development. Prior to joining the
Company, Mr. Carter spent 30 years with AT&T, where he headed up the
International Facilities Planning (both cable and satellite) and served as
President and Chief Executive Officer for SSI and as Director of International
Network Operations for AT&T. During Mr. Carter's tenure, SSI had the leading
worldwide market share in the undersea cable industry, with an average market
share of 35-50%. Mr. Carter is a member of the World Telecommunications
Advisory Council to the International Telecommunications Union (ITU) and
Senior Advisory Council to the U.S. government on communications and economic
development. Mr. Carter received a BEE degree from Georgia Institute of
Technology and has completed the advanced program for senior managers at MIT's
Sloan School.
JACK FINLAYSON--Mr. Finlayson has been President of Global Crossing
International, Ltd. since June 1998. Prior to joining the Company, Mr.
Finlayson was corporate vice president and general manager of Motorola Inc.'s
Asia Pacific Cellular Infrastructure group, where he was responsible for
managing the wireless infrastructure business, and had been affiliated with
Motorola Inc. since 1994. Prior to joining Motorola Inc., Mr. Finlayson was
employed by AT&T, where he was sales vice president of Business Network Sales
for the southeastern United States. Mr. Finlayson has more than 17 years
experience in the telecommunications field. Mr. Finlayson received his BS
degree in marketing from LaSalle University and holds an MBA degree in
information management from St. Joseph's University.
S. WALLACE DAWSON, JR., Senior Vice President of Operations of Global
Crossing Development Co., worked at SSI for 29 years, where he had overall
delivery responsibility for the implementation of all submarine cable
projects. Prior thereto, he held various positions at AT&T, where his work
centered on specialized equipment design for military and commercial undersea
cable systems and development of various network services. Mr. Dawson holds a
BEE degree from the University of Virginia, and an MSEE degree from Duke
University. He also completed the Advanced Management Program at INSEAD,
Fountainbleu, France.
HAROLD D. GROSSNICKLE, Managing Director of Global Crossing Development Co.,
is responsible for directing the operations, administration and maintenance of
the Global Crossing Network. Mr. Grossnickle has 28 years of experience in the
telecommunications industry, including over 24 years at AT&T and AT&T
Paradyne, where he served as a vice president of network management systems
and services. Mr. Grossnickle received his BS from Iowa State University and
his MBA from the University of Missouri.
PATRICK JOGGERST is Vice President of Global Sales & Marketing of Global
Crossing International Ltd. and the Company's Senior executive in charge of
sales. Prior to joining the Company, Mr. Joggerst served as Managing Director
for the Americas Region at TSSL. His 17-year tenure at AT&T included positions
with
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several departments, including international services operations,
organizational development/human resources, and communications products and
service sales. Mr. Joggerst graduated from Georgetown University's School of
Foreign Service.
IAN MCLEAN--Mr. McLean is Vice President of New GCL and also serves as Chief
Financial Officer of ACL. Prior to joining the Company in September, 1997, Mr.
McLean was Chief Financial Officer and Systems Information Officer at Price
Waterhouse, Bermuda from 1994 to 1997; Chief Financial Officer for Horizons
Limited from 1992 to 1994; Deputy Manager, Corporate Trust at Bank of Bermuda
Limited from 1988 to 1992 and Vice President of Finance for the Baillargeon
Group from 1985 to 1988. Mr. McLean is a Canadian Chartered Accountant and
holds a Bba degree from Bishop's University and a graduate diploma in
accountancy from McGill University.
WILLIAM T. RICHARDS is Vice President of Operations of ACL. Mr. Richards was
employed at British Telecommunications for seven years, most recently as
Manager of Subsea Projects & Consultancies, and served as Independent Engineer
on the FLAG system. Prior to his position at British Telecommunications, he
served as Business Development Manager at Dowty Magnetics. Mr. Richards
received his BFc (Hons.) degree from City University of London.
LISA DADOURIS, Director of Business Development of Global Crossing
Development Co., spent 12 years at AT&T and Lucent Technologies, where she
held a number of positions in business development, marketing and finance,
including Chief Financial Officer for Local Service in the northeast United
States and Director of Manufacturing Planning for Lucent. Ms. Dadouris
graduated from Wake Forest University with a BS in business, and received her
MBA in accounting from Fuqua School of Business at Duke University.
MOOL SINGHI is Director of Network Planning of Global Crossing Development
Co. Prior to joining the Company, Mr. Singhi served as the Director of Market
Planning at TSSL. Mr. Singhi spent 27 years at AT&T, where he held various key
positions in manufacturing, finance, engineering, operations and international
network planning. Mr. Singhi received a bachelor's degree in mechanical
engineering and a master's degree in operations research and industrial
engineering from the University of Buffalo.
CHARLES D. HOGAN, Director of Operations of Asia Systems of Global Crossing
Development Co., spent 42 years at AT&T, serving as Regional Managing
Developer of AT&T's General Departments. Immediately prior to joining the
Company, Mr Hogan was based in Hong Kong where he was responsible for the
planning of international digital lightwave undersea cables for AT&T in the
Asia/Pacific region, including the planned China-United States cable system.
JOHN MERCOGLIANO, Vice President of Sales and Marketing of Global Crossing
International Ltd., has over 19 years of experience in the telecommunications
industry. Prior to joining the Company, Mr. Mercogliano was employed as Vice
President-Europe of Bell Atlantic Network Systems (Bermuda) Ltd., where he was
responsible for developing strategies and directing sales and marketing
opportunities in the FLAG European region. Mr. Mercogliano received his B.A.
degree from New York University and his MBA from Pace University.
COMPENSATION
Total compensation paid or accrued to the executive officers of New GCL and
its consolidated subsidiaries as a group during the fiscal year ended December
31, 1997 was $155,409. Directors of New GCL and its consolidated subsidiaries
do not receive compensation, except as officers or employees of New GCL or its
consolidated subsidiaries.
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OPTION GRANTS AND OPTION VALUES
The table below sets forth information as of August 13, 1998 concerning
options granted since January 1, 1998 to principal officers of the Company.
Options representing a total of 9,967,500 shares of Common Stock have been
issued to officers or directors of the Company at exercise prices ranging from
$1.67 per share to $19.00 per share.
<TABLE>
<CAPTION>
GRANT
DATE
INDIVIDUAL GRANTS VALUE(1)
---------------------------------------------- ----------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANT
OPTIONS GRANTED TO EXERCISE OR DATE
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME (#) FISCAL YEAR ($/SHARE) DATE VALUE($)
---- ---------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Gary Winnick............ 900,000 7.45% 1.67 03/31/07 15,600,000
Co-Chairman of the
Board
Jack Scanlon............ 1,800,000 14.89% 1.67 04/01/08 31,200,000
Chief Executive Officer
Bill Carter............. 1,500,000 12.41% 1.67 10/27/07 26,000,000
President, Global
Crossing Development
Co.
James Gorton............ 750,000 6.21% 6.67 06/12/08 9,250,000
Senior Vice President
and General Counsel
Jack Finlayson.......... 585,000 4.84% 6.67 06/12/08 7,215,000
President, Global
Crossing International,
Ltd. 150,000 1.24% 19.00 06/12/08 --
</TABLE>
- --------
(1) Based upon difference between exercise price and $19.00, the Price to
Public per Share of the Stock Offerings.
The table below sets forth information as of August 13, 1998 concerning
exercises of stock options by the individuals named above for the current year
and the value of such individuals' unexercised options based upon the midpoint
of the expected pricing range of the Stock Offerings.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS(#) OPTIONS($)
SHARES VALUE ----------------- --------------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($) UNEXERCISABLE UNEXERCISABLE(1)
---- ----------- -------- ----------------- --------------------
<S> <C> <C> <C> <C>
Gary Winnick............ -- -- 300,000/600,000 5,200,000/10,400,000
Co-Chairman of the
Board
Jack Scanlon............ -- -- 450,000/1,350,000 7,800,000/23,400,000
Chief Executive Officer
Bill Carter............. -- -- 0/1,500,000 0/26,000,000
President, Global
Crossing Development
Co.
James Gorton............ -- -- 187,500/562,500 2,312,500/6,937,500
Senior Vice President
and General Counsel
Jack Finlayson.......... -- -- 292,500/442,500 3,607,500/3,607,500
President, Global
Crossing International,
Ltd.
</TABLE>
- --------
(1) Based upon difference between exercise price and $19.00, the Price to
Public per Share of the Stock Offerings.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The 1998 Global Crossing Ltd. Stock Incentive Plan (the "Stock Incentive
Plan") provides that, upon a "change in control," certain of the awards
granted under the Stock Incentive Plan will vest immediately. A "change in
control" is defined under the Stock Incentive Plan as the occurrence of any of
the following: (i) any Person (other than a Person holding securities
representing 10% or more of the combined voting power of New GCL's outstanding
securities as of July 15, 1998, New GCL, any trustee or other fiduciary
holding securities under an employee benefit plan of New GCL, or any company
owned, directly or indirectly, by the shareholders
67
<PAGE>
of New GCL in substantially the same proportions as their ownership of stock
of New GCL) becomes the beneficial owner (as defined under Rule 13d-3 under
the Exchange Act) of securities of New GCL (a) in excess of the interest held
by the existing shareholders of New GCL as of July 15, 1998 and (b)
representing 30% or more of the combined voting power of New GCL's then
outstanding securities; (ii) during any period of 24 months, individuals who
at the beginning of such period constitute the board of directors and any new
director (other than those directors who meet certain exceptions specified in
the Stock Incentive Plan) whose election was approved in advance by a vote of
at least two-thirds of the directors then still in office, cease for any
reason to constitute at least a majority of the board of directors; (iii) the
shareholders of New GCL approve any transaction under which New GCL is merged
or consolidated with any other company, other than a merger or consolidation
which would result in shareholders of New GCL immediately prior thereto
continuing to own more than 65% of the combined voting power of the voting
securities of New GCL or such surviving entity; or (iv) the shareholders of
New GCL approve a plan of complete liquidation of the company or an agreement
for the sale or disposition by New GCL of all or substantially all of New
GCL's assets, other than the liquidation of New GCL into a wholly-owned
subsidiary.
New GCL has entered into an employment agreement, dated as of April 1, 1998,
with Mr. Jack Scanlon, providing for Mr. Scanlon's employment as New GCL's
Chief Executive Officer for a term of two years and continuing thereafter for
successive two-year terms unless either New GCL or Mr. Scanlon provides at
least three months' notice in advance of the expiration of the current term.
In connection with such agreement, Mr. Scanlon was issued an option to
purchase a total of 1,800,000 shares of Common Stock at an exercise price of
$1.67 per share. Such options vest in 25% increments upon the first day of
employment and at the end of each of the first three years of Mr. Scanlon's
employment with New GCL. Upon a "change of control", as defined in the Stock
Incentive Plan, or any other "non-fault" termination as defined in Mr.
Scanlon's employment agreement, vesting of all of such options shall
immediately occur and Mr. Scanlon shall be entitled to terminate the agreement
and receive a lump sum payment equal to the sum of two times Mr. Scanlon's
then annual base salary and bonus. Mr. Finlayson has the option to sell
150,000 shares of Common Stock to the Company at $13.33 per share after two
years of employment.
NEW GCL COMMITTEES
Audit Committee. The purpose of the Audit Committee is to: (i) make
recommendations concerning the engagement of independent public accountants;
(ii) review with New GCL management and the independent public accountants the
plans for, and scope of, the audit procedures to be utilized and results of
audits; (iii) approve the professional services provided by the independent
public accountants; (iv) review the adequacy and effectiveness of New GCL's
internal accounting controls; (v) review New GCL's insurance program; and (vi)
perform any other duties and functions required by any organization under
which New GCL's securities may be listed. Messrs. Weinberger, Conway and Kent
are the current members of the Audit Committee.
Compensation Committee. The purpose of the Compensation Committee is to
establish and submit to the Board of Directors of New GCL recommendations with
respect to (i) compensation of officers and other key employees of New GCL and
(ii) awards to be made under the Stock Incentive Plan. Messrs. Cook, Steed and
Levine are the current members of the Compensation Committee.
68
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table and the accompanying footnotes set forth, as of August
13, 1998, certain information regarding the beneficial ownership of the common
stock of New GCL ("Common Stock") by (i) each person or entity who is known to
New GCL to own beneficially five percent or more of New GCL's voting Common
Stock, (ii) each of New GCL's directors and executive officers and (iii) all
directors and executive officers of New GCL as a group. To the knowledge of
New GCL, each such stockholder has sole voting and investment power with
respect to the shares shown, unless otherwise noted. For a summary of the
principal terms of the Common Stock, see "Description of Capital Stock."
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK
-------------------------------------------------------------------------------
NUMBER PERCENTAGE NUMBER OF NUMBER OF PERCENTAGE
OF SHARES PRIOR TO PRIOR TO SHARES SHARES AFTER AFTER
BENEFICIAL OWNER STOCK OFFERINGS(1) STOCK OFFERINGS SOLD STOCK OFFERINGS STOCK OFFERINGS(2)
---------------- ------------------ --------------- --------- --------------- ------------------
<S> <C> <C> <C> <C> <C>
Pacific Capital Group,
Inc.(3) ............... 52,118,934 26.85% 1,096,463 51,022,471 23.58%
150 El Camino Drive,
Suite 204
Beverly Hills,
California 90212
Canadian Imperial Bank
of Commerce(4)......... 48,588,400 25.03% -- 48,588,400 22.46%
161 Bay Street, 8th
Floor--BCE Place
P.P. Box 500
M5J258
Toronto, Canada
Continental Casualty
Company(5)............. 20,037,585 10.32% -- 20,037,585 9.26%
CNA Plaza, Floor 23
South
Chicago, Illinois 60685
MRCo, Inc. (6).......... 16,939,097 8.73% -- 16,939,097 7.83%
111 Massachusetts
Avenue NW
Washington, DC 20001
Gary Winnick(7)......... 52,418,934 27.00% 1,096,463 51,322,471 23.72%
Lodwrick M. Cook(8)..... 2,356,227 1.21% -- 2,356,227 1.09%
Jack M. Scanlon(9)...... 450,000 * -- 450,000 *
Dan J. Cohrs(10)........ 225,000 * -- 225,000 *
David L. Lee(11)........ 11,802,943 6.08% 306,704 11,496,239 5.31%
Abbott L. Brown(12)(13). 6,979,633 3.60% 230,129 6,749,504 3.12%
Barry Porter(14)........ 10,864,212 5.60% 306,704 10,557,508 4.88%
James C. Gorton(15)..... 187,500 * -- 187,500 *
Jack Finlayson(16)...... 292,500 * -- 292,500 *
K. Eugene
Shutler(13)(17)........ 248,986 * -- 248,986 *
Hillel Weinberger(18)... 21,345,900 11.00% -- 21,345,900 9.87%
Jay R. Bloom(19)........ 48,588,400 25.03% -- 48,588,400 22.46%
Dean C. Kehler(19)...... 48,588,400 25.03% -- 48,588,400 22.46%
Jay R. Levine(19)(20)... 48,588,400 25.03% -- 48,588,400 22.46%
William P.
Phoenix(19)(20)........ 48,588,400 25.03% -- 48,588,400 22.46%
Bruce Raben(19)(20)..... 48,588,400 25.03% -- 48,588,400 22.46%
Michael R. Steed(21).... 16,954,097 8.73% -- 16,954,097 7.84%
William E. Conway(22)... 15,000 * -- 15,000 *
Toshiaki Ogasawara(22).. 15,000 * -- 15,000 *
Geoffrey J.W. Kent(22).. 15,000 * -- 15,000 *
All Directors and
Executive Officers as a
Group.................. 172,759,314 88.99% 1,940,000 170,819,314 78.96%
</TABLE>
- -------
* Percentage of shares beneficially owned does not exceed one percent.
(1) As of August 13, 1998, after giving effect to the Old GCL Exchange, the
PCG Warrant Conversion, the Advisory Services Agreement Termination, the
TDC Exchange and the transactions associated therewith, 182,832,900
shares of Common Stock would have been issued and outstanding. An
additional 2,500,500 shares of Common Stock would have been issuable upon
the exercise of options within 60 days of August 13, 1998; an additional
2,554,183 shares of Common Stock would have been issuable upon the
exercise of the GCL Warrants (effective upon the Stock Offerings); and an
additional 6,250,006 shares of Common Stock would have been issuable upon
the exercise of the New PCG Warrants (effective upon the Stock
Offerings). Both the GCL Warrants and the New PCG Warrants will have a per
share exercise price equal to the Price to Public per Share of the Stock
Offerings. Amounts appearing in the foregoing table include
69
<PAGE>
(i) all shares of Common Stock outstanding as of August 13, 1998, (ii) all
shares of Common Stock issuable upon the exercise of options within 60
days of August 13, 1998 and (iii) all shares of Common Stock issuable upon
the exercise of the GCL Warrants and New PCG Warrants.
(2) After giving effect to the Stock Offerings, 205,042,900 shares of Common
Stock were issued and outstanding.
(3) Includes 38,742,872 shares of Common Stock and 1,257,894 shares of Common
Stock issuable upon the exercise of GCL Warrants which in May 1998 were
transferred to GKW Unified Holdings, LLC, a company formed for the
benefit of Gary Winnick and members of his family that is managed by PCG.
Includes 3,025,002 shares of Common Stock issuable upon the exercise of
New PCG Warrants.
(4) Includes 75,000 shares of Common Stock issuable upon the exercise of
options within 60 days of August 13, 1998 granted to the members of the
Board of Directors affiliated with CIBC.
(5) Includes 8,397,750 shares of Common Stock owned by Continental Casualty
Corporation and 933,150 shares of Common Stock held by Continental
Casualty Corp. Designated High Yield, for which Continental Casualty
Corporation holds sole voting and investment power. Includes 10,706,685
shares of Common Stock to be acquired by Continental Casualty Corp.
Designated High Yield prior to the Stock Offerings.
(6) Includes 348,967 shares of Common Stock issuable upon the exercise of GCL
Warrants.
(7) Includes all shares of Common Stock owned by GKW Unified Holdings, LLC,
of which PCG is manager, and all shares of Common Stock owned by PCG, of
which Mr. Winnick is Chairman and Chief Executive Officer. Includes
300,000 shares of Common Stock issuable upon the exercise of options
within 60 days of August 13, 1998.
(8) Includes 475,001 shares of Common Stock issuable upon the exercise of New
PCG Warrants. Includes 150,000 shares of Common Stock issuable upon the
exercise of options within 60 days of August 13, 1998.
(9) Includes 450,000 shares of Common Stock issuable upon the exercise of
options within 60 days of August 13, 1998.
(10) Includes 225,000 shares of Common Stock issuable upon exercise of options
within 60 days of August 13, 1998.
(11) Includes 4,950,411 shares of Common Stock and 256,578 shares of Common
Stock issuable upon the exercise of GCL Warrants owned by San Pasqual
Corp., of which Mr. Lee and his family are the sole shareholders.
Includes 2,716,617 shares of Common Stock and 75,150 shares of Common
Stock issuable upon the exercise of GCL Warrants owned by the David and
Ellen Lee Family Trust of which Mr. Lee and his wife are the sole
shareholders. Includes 150,000 shares of Common Stock issuable upon the
exercise of options within 60 days of August 13, 1998. Includes 912,501
shares of Common Stock issuable upon the exercise of New PCG Warrants.
(12) Includes all 3,772,709 shares of Common Stock and 183,833 shares of
Common Stock issuable upon the exercise of GCL Warrants owned by
Ridgestone Corp., of which Mr. Brown's family and a related trust are the
sole shareholders. Includes 150,000 shares of Common Stock issuable upon
the exercise of options within 60 days of August 13, 1998. Includes
725,001 shares of Common Stock issuable upon the exercise of New PCG
Warrants.
(13) After giving effect to the liquidation of PCG Telecom LDC, which is
managed by Ridgestone Corp. and of which Mr. Brown and Mr. Shutler are
shareholders, and the distribution therefrom of 37,209 shares to Mr.
Brown and 148,986 shares to Mr. Shutler.
(14) Includes all 5,941,984 shares of Common Stock and 282,816 shares of
Common Stock issuable upon the exercise of GCL Warrants owned by
Galenight Corp., of which Mr. Porter is the sole shareholder. Includes
150,000 shares of Common Stock issuable upon the exercise of options
within 60 days of August 13, 1998. Includes 22,317 shares of Common Stock
issuable upon the exercise of GCL Warrants and 912,501 shares of Common
Stock issuable upon the exercise of New PCG Warrants.
70
<PAGE>
(15) Includes 187,500 shares of Common Stock issuable upon exercise of options
within 60 days of August 13, 1998.
(16) Includes 292,500 shares of Common Stock issuable upon exercise of options
within 60 days of August 13, 1998.
(17) Includes 100,000 shares of Common Stock issuable upon the exercise of
options within 60 days of August 13, 1998.
(18) Includes all shares of Common Stock owned by Continental Casualty
Company, an affiliate of Loews/CNA Holdings Corp. Mr. Weinberger is an
officer of Loews/CNA Holdings Corp. Includes 1,293,315 shares of Common
Stock, consisting of 1,050,000 shares to be held by Global Crossing Trust
1998, of which Mr. Weinberger is a trustee and 243,315 shares to be held
by a partnership of which Mr. Weinberger is a managing partner. Includes
15,000 shares of Common Stock issuable upon the exercise of options
within 60 days of August 13, 1998.
(19) Includes all shares of Common Stock beneficially owned by CIBC. Messrs.
Bloom, Kehler, Levine, Phoenix and Raben are all affiliated with CIBC
Oppenheimer, an affiliate of CIBC.
(20) Beneficial ownership of all shares of Common Stock indicated is
disclaimed.
(21) Includes all shares of Common Stock owned by MRCo, Inc. Mr. Steed is the
Senior Vice President of ULLICO and the President of MRCo, Inc., which is
a wholly-owned subsidiary of ULLICO. Includes 15,000 shares of Common
Stock issuable upon the exercise of options within 60 days of August 13,
1998. Includes 348,967 shares of Common Stock issuable upon the exercise
of GCL Warrants.
(22) Includes 15,000 shares of Common Stock issuable upon the exercise of
options within 60 days of August 13, 1998.
71
<PAGE>
CERTAIN TRANSACTIONS
GENERAL
The Company has entered into certain transactions described below with
entities affiliated with the Company, its officers and directors.
TRANSACTIONS WITH PACIFIC CAPITAL GROUP (PCG) AND ITS AFFILIATES
PCG and its affiliates, including PCG Telecom Services LLC ("PCG Telecom")
and Ocean Systems International LLC ("OSI"), have entered into certain
transactions with the Company described below in connection with the
development by PCG and its affiliates of several of Global Crossing's systems,
including AC-1, PC-1, PAC and MAC, and the decision by the Board of Directors
of New GCL to assume the ongoing development of systems (other than AC-1) from
OSI. Revenue from the Company comprises the sole source of revenues for PCG
Telecom. PCG and its affiliates are controlled by Mr. Gary Winnick, the Co-
Chairman of the Board of Directors of New GCL, and certain other officers and
directors of New GCL are affiliated with PCG, including Messrs. Cook, Lee,
Porter and Brown. See "Management" and "Principal Shareholders."
Advisory Services Agreements. ACL has entered into an Advisory Services
Agreement, dated as of March 25, 1997 (as amended, the "AC-1 Advisory
Agreement"), with PCG Telecom with respect to AC-1, under which PCG Telecom is
entitled to an advisory fee of 2.0% of the gross revenues of ACL. The Board of
Directors of GCL has agreed that each other direct subsidiary of GCL shall
from time to time enter into, or cause each of its subsidiaries to enter into,
similar Advisory Services Agreements (together with the AC-1 Advisory
Agreement, the "Advisory Services Agreements") with PCG Telecom, providing for
an advisory services fee of 2% of such subsidiary's gross revenues (not double
counting any portion of intercompany revenues on which the advisory services
fee has already been calculated). The aggregate amount of all advisory fees
payable under the Advisory Services Agreements shall be reduced by the amount,
if any, by which principals of PCG receive cash compensation (as opposed to
reimbursement of expenses) from the Company other than cash compensation paid
to such principals in their capacities as officers or directors of the Company
as approved by the Board of Directors. In addition, until the earlier of (i)
the date New GCL has a public equity market value in excess of $1.5 billion
and (ii) March 25, 2002 (such earlier date, the "Deferred Fee Payment Date"),
the aggregate cumulative amount of the fees paid under the Advisory Services
Agreements in respect of the calendar years prior to and including each
calendar year set forth below shall not exceed the amounts set forth below,
with any excess being deferred and paid (together with interest thereon at a
rate per annum equal to LIBOR) on the Deferred Fee Payment Date: 1998--$10
million; 1999--$20 million; 2000--$30 million; and 2001--$40 million.
Amounts payable under the AC-1 Advisory Agreement are to be divided annually
in the following manner: 90% of the initial $5 million in advisory services
fees is retained by PCG Telecom, 5% of the initial $5 million in advisory
service fees is payable to ULLICO, Inc. ("ULLICO"), which is the ultimate
parent of MRCo, Inc., and 5% of the initial $5 million in advisory service
fees is payable to PCG. With respect to amounts over the initial $5 million
annually in advisory services fees, 15.5% is payable to ULLICO, 15.5% is
payable to PCG, 35% is payable to CIBC and the remaining 34% is retained by
PCG Telecom. Amounts retained by PCG Telecom, after deducting associated
expenses incurred by PCG relating to salaries, bonuses, overhead and an annual
discretionary expense reduction, are divided amongst Messrs. Winnick, Brown,
Lee, and Porter in the following percentages: 40%, 15%, 22.5%, and 22.5%,
respectively.
All amounts payable annually under each of the other Advisory Services
Agreements will be retained by PCG Telecom and, after deducting associated
expenses incurred by PCG relating to salaries, bonuses, overhead and an annual
discretionary expense reduction, divided amongst Messrs. Winnick, Cook, Brown,
Lee, and Porter in the percentages: 50%, 8%, 12%, 15%, and 15% respectively.
The Company has acquired the rights to advisory fees payable under the
Advisory Services Agreements in consideration for the issuance, through PCG
Telecom, to the persons entitled to receive such fees of shares of
72
<PAGE>
Common Stock having an aggregate value of $135 million and the cancellation of
approximately $2.7 million owed to the Company under a related advance
agreement (the "Advisory Services Agreement Termination"). Upon the
consummation of this transaction, all of the obligations of the Company and
ACL in respect of the Advisory Services Agreements were terminated. The
Company obtained a fairness opinion from an independent financial advisor in
connection with this transaction. As a result of this transaction, the Company
incurred a charge of approximately $137.7 million which has been reflected in
its statement of operations for the period ended June 30, 1998. Of this
amount, $135 million was determined by applying the 2% advisory fee to
projected revenues for the Company's systems. The present value of the
aggregate advisory fees was then calculated at $155.5 million, using a
discount rate of 12% in respect of AC-1 and 15% in respect of systems other
than AC-1. This amount was subsequently reduced to $135 million. Both the
discount rates and the ultimate valuation were determined as a result of a
negotiation process including a disinterested director of the Company and the
various persons entitled to fees under the Advisory Services Agreements. The
shares of Common Stock issued in connection with the Advisory Services
Agreement Termination were issued to and are beneficially owned by the
following persons in the following amounts:
<TABLE>
<CAPTION>
RECIPIENT COMMON STOCK(1) VALUE
--------- --------------- ------------
<S> <C> <C>
Gary Winnick (including PCG and PCG
Telecom).................................. 3,257,577 $ 61,893,963
CIBC....................................... 670,000 12,730,000
ULLICO..................................... 366,579 6,965,001
Lodwrick M. Cook........................... 304,974 5,794,506
Abbott L. Brown............................ 683,711 12,990,510
David L. Lee............................... 911,211 17,313,010
Barry Porter............................... 911,211 17,313,010
--------- ------------
Total.................................... 7,105,263 $135,000,000
========= ============
</TABLE>
- --------
(1) Based upon the Price to Public per Share of the Stock Offerings.
The net proceeds from the sale of the Shares sold by the Selling
Shareholders in the Stock Offerings are to be used by such Selling
Shareholders to fund anticipated income tax liabilities resulting from this
transaction. See "Principal Shareholders."
PCG Warrants. Old GCL and PCG entered into a warrant agreement, dated as of
January 21, 1998 (the "PCG Warrant Agreement"), pursuant to which Old GCL
issued PCG three separate warrants (collectively, the "PCG Warrants")
providing PCG with the right to purchase (i) 9,226,592 of Old GCL's Class B
Shares for an aggregate purchase price of $50,000,000; (ii) an additional
4,613,297 of Old GCL's Class B Shares for an aggregate purchase price of
$31,250,000; and (iii) an additional 4,613,297 of Old GCL's Class B Shares for
an aggregate purchase price of $37,500,000. Such PCG Warrants would entitle
PCG to acquire an additional 10% of the capital stock of Old GCL (as of the
date of issuance of the PCG Warrants), with the exercise price of each PCG
Warrant based upon a different market valuation of the Company. In connection
with issuance of the PCG Warrants, the PC-1, MAC and PAC systems (then under
development) were acquired by the Company, as was the development team that
had been assembled by Pacific Capital Group (led by William Carter, former
President of AT&T Submarine Systems International ("SSI") and Wally Dawson,
former Senior Vice President of SSI). The exercise of each of the PCG Warrants
is conditioned upon (i) an initial public offering of shares of Old GCL (or
any successor thereto), underwritten by an investment banking firm of national
reputation (as determined by a majority of the Board of Directors of Old GCL)
from which Old GCL shall have received at least $50,000,000 in net proceeds,
(ii) the investment by Old GCL in the aggregate of at least $500,000,000 of
Net Attributable Capital (as defined below) in cable systems other than AC-1
and (iii) the generation in the aggregate by cable systems other than AC-1 of
at least $100,000,000 in Net Attributable Revenues (as defined below). For
purposes of the PCG Warrant Agreement, with respect to any cable system, (i)
"Net Attributable Capital" means the aggregate debt and equity capitalization
of such system multiplied by the percentage ownership of Old GCL (directly or
indirectly) in such system, and (ii) "Net Attributable Revenues" means the net
revenues of such system multiplied by the percentage ownership interest of Old
GCL (directly or indirectly)
73
<PAGE>
in such system. Rights under each of the PCG Warrants has been divided amongst
Messrs. Winnick, Cook, Brown, Lee and Porter in the following percentages:
50%, 8%, 12%, 15% and 15%, respectively.
The Board of Directors of Old GCL determined that upon the successful
completion of the Stock Offerings the conditions precedent to exercising the
PCG Warrants were met and therefore the PCG Warrants were deemed exercisable.
The Board of Directors of Old GCL also amended the terms of the PCG Warrants
to give each holder the option to convert each share under warrant into a
fraction of a Class B Share based upon the ratio of the current per share
valuation at the time of conversion less the per share exercise price of the
warrant divided by the current per share valuation at the time of conversion
multiplied by the number of warrants to be converted, together with a new
warrant ("New PCG Warrants") to purchase the remaining fraction of such Class
B Share at an exercise price equal to the Price to Public per Share payable in
the Stock Offerings. The New PCG Warrants will terminate on August 13, 2003,
five years from the date of issuance. Prior to the Stock Offerings, PCG
converted the PCG Warrants in such manner into Class B Shares and New PCG
Warrants, utilizing the anticipated price of the Stock Offerings as the
current per share valuation for such purposes, with the Company assuming the
obligations of Old GCL under the New PCG Warrants (the "PCG Warrant
Conversion"). Upon the PCG Warrant Conversion, Messrs. Winnick, Cook, Brown,
Lee and Porter transferred 100,000, 25,000, 25,000, 25,000 and 25,000 New PCG
Warrants, respectively, to Nelson S. Zand, an employee of PCG.
Following such transactions, shares of Common Stock and New PCG Warrants
issued in connection with the conversion of the PCG Warrants were issued to
the following persons in the following amounts:
<TABLE>
<CAPTION>
COMMON NEW PCG
NAME STOCK WARRANTS VALUE(1)
---- ---------- --------- ------------
<S> <C> <C> <C>
Gary Winnick.......................... 6,101,589 3,025,002 $136,953,955
David L. Lee.......................... 1,830,475 912,501 41,120,907
Barry Porter.......................... 1,830,475 912,501 41,120,907
Abbott L. Brown....................... 1,464,379 725,001 32,861,958
Lodwrick M. Cook...................... 976,252 475,001 21,850,045
Nelson S. Zand........................ 0 200,000 1,390,000
---------- --------- ------------
Total............................... 12,203,170 6,250,006 $275,297,772
========== ========= ============
</TABLE>
- --------
(1) Based upon a price per share of Common Stock of $19.00 (the Price to
Public per Share of the Stock Offerings) and the Company's estimated
value, based upon independent appraisals, of $6.95 per warrant. See "Pro
Forma Financial Information."
Advance Agreements. GCL has entered into an Advance Agreement, dated as of
March 24, 1998 (the "AC-1 Advance Agreement"), with PCG Telecom, pursuant to
which GCL has agreed to make advances to PCG Telecom within three days of a
written request from PCG in respect of fees which will become owing to PCG
Telecom under the AC-1 Advisory Agreement in an amount not to exceed 1% of the
amounts payable under long-form capacity purchase agreements executed by ACL.
As security for the obligation of PCG Telecom to repay such advances, PCG
Telecom has granted a security interest to GCL in its rights to receive
payments under the AC-1 Advisory Agreement. The AC-1 Advance Agreement will be
terminated and the obligation of PCG Telecom to repay approximately $2.7
million to the Company thereunder cancelled in connection with the termination
of the Advisory Service Agreements discussed above.
Of the $4,669,340 advanced to PCG Telecom under the AC-1 Advance Agreement,
the following amounts were paid to directors, executive officers and
shareholders of the Company:
<TABLE>
<CAPTION>
NAME AMOUNT
---- ----------
<S> <C>
Gary Winnick............................. $3,191,630(1)
David L. Lee............................. 481,130
Barry Porter............................. 481,130
Abbott L. Brown.......................... 320,754
MRCo, Inc................................ 194,696
----------
Total.................................. $4,669,340
==========
</TABLE>
- --------
(1) Includes amounts received by PCG, including reimbursement of PCG expenses
of $1,987,914.
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<PAGE>
Assignment of Rights. As part of the consideration for the assumption by the
Company of the rights of OSI to the ongoing development of cable systems, in
the first quarter of 1998 the Company paid PCG $7.0 million for costs incurred
by PCG to such date in connection with such development.
Arrangement Fees. Additionally, during 1997, $7,250,000 in fees were paid to
PCG and certain of its key executives, who are shareholders of New GCL, and
another shareholder of New GCL for services provided in respect of arranging
the AC-1 Credit Facility, the GTH Senior Notes and GTH Preference Shares. Of
such fees, the following amounts were paid to directors, executive officers
and shareholders of the Company:
<TABLE>
<CAPTION>
NAME AMOUNT
---- ----------
<S> <C>
Gary Winnick................................ $3,000,000
David L. Lee................................ 1,250,000
Abbott L. Brown............................. 1,000,000
Barry Porter................................ 1,000,000
MRCo, Inc. ................................. 1,000,000
----------
Total..................................... $7,250,000
==========
</TABLE>
TRANSACTIONS WITH CIBC AND ITS AFFILIATES
CIBC and its affiliates have entered into certain financing transactions
with the Company in connection with the development and construction of the
Company's systems: (i) CIBC, Inc. was the arranger and initial lender under
the $200 million Global Crossing Bridge Facility, which was repaid and
terminated on May 18, 1998; (ii) CIBC, Inc. is one of the lead agents under
the $482 million AC-1 Credit Facility, (iii) CIBC Wood Gundy Securities Corp.,
an affiliate of CIBC, acted as exclusive placement agent for the issuance by
GTH of its $100 million outstanding GTH Preference Shares and the issuance by
GTH of its $150 million outstanding GTH Senior Notes; (iv) CIBC Oppenheimer
was an Initial Purchaser in connection with the issuance by the Issuer of its
$800 million Notes; (v) CIBC, Inc. and other banks entered into a credit
agreement with the Company, effective July 30, 1998, for the $850 million non-
recourse project debt financing of PC-1; (vi) CIBC, Inc. and other lenders
issued a $104 million loan to Pacific Crossing Ltd. to make the initial
payments with respect to the PC-1 construction contract, which was repaid and
terminated on July 30, 1998, (vii) CIBC Oppenheimer was an Underwriter in the
Stock Offerings; and (viii) CIBC, Inc. will be a lead agent under the proposed
$240 million MAC bank credit facility. See "Description of Certain
Indebtedness." During 1997, the Company paid CIBC approximately $25 million in
fees in connection with these transactions. CIBC is a substantial shareholder
in GCL and certain members of the Board of Directors of the GCL are affiliated
with CIBC, including Messrs. Bloom, Kehler, Phoenix, Raben and Levine. See
"Management" and "Principal Shareholders."
TRANSACTIONS WITH WORLDPORT
On April 7, 1998, the Company entered into a CPA with Worldport
Communications, Inc. ("Worldport"), whereby Worldport acquired a total of five
STM-1s of capacity on AC-1 in a transaction that occurred in the ordinary
course of business of the Company and on terms and conditions no less
favorable to the Company than those contained in its other CPAs. Worldport
also executed an MOU to purchase capacity on PC-1, PAC and MAC. Certain
officers and directors of the Company, including Mr. Winnick, Mr. Cook, Mr.
Scanlon, Mr. Lee, Mr. Porter, Mr. Brown, Mr. Raben, Mr. Bloom, Mr. Kehler and
Mr. Steed, have direct or indirect equity ownership positions in Worldport
aggregating approximately 10% of the current common stock of Worldport. In
addition, Continental Casualty Corporation, with which Mr. Weinberger is
affiliated, holds warrants to purchase common stock in Worldport aggregating
less than 1% of the current common stock of Worldport and has also engaged in
certain debt financing transactions with Worldport. Campuslink Communications
Systems Inc., a private company which provides telecommunications services to
colleges and universities and which is indirectly majority-owned by Mr.
Winnick and Union Labor Life Insurance Company, an affiliate of MRCo, Inc.,
has reached an agreement in principle to be acquired by Worldport. In
addition, in connection with the Company's recent decision to explore the
making of minority investments in telecommunications and internet service
providers that are current or prospective customers on the Global Crossing
Network, the Company is considering an investment in Worldport. If the Company
chooses to make such investment, it is currently anticipated that such
investment would amount to approximately $10 million of cash and two STM-1
circuits on AC-1.
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<PAGE>
TRANSACTIONS WITH TELECOMMUNICATIONS DEVELOPMENT CORPORATION
Prior to the Stock Offerings and after giving effect to the Old GCL
Exchange, Telecommunications Development Corporation, a Cayman Islands
corporation ("TDC"), owned 11,016,879 shares of Common Stock, as well as
291,477 GCL Warrants. See "Description of Capital Stock--Old GCL Exchange."
TDC was formed in 1996 for the purpose of making investments in start-up
telecommunications companies and one of the companies in which TDC invested
was Old GCL. Mr. Lee was the Chairman and Mr. Winnick was a director of TDC.
Messrs. Lee, Winnick, Brown and Porter beneficially owned a majority of the
outstanding common stock of TDC and approximately 29% of the outstanding
preferred stock of TDC. The balance of such stock was owned by persons not
affiliated with the Company (the "Unaffiliated Shareholders"). TDC informed
the Company that, in connection with the Stock Offerings, it was undergoing a
reorganization to facilitate the ability of Unaffiliated Shareholders to sell
Common Stock in the open market following the Offerings. In connection with
this reorganization, TDC proposed a transaction (the "TDC Exchange") pursuant
to which the Company acquired the 11,016,879 shares of Common Stock owned by
TDC in exchange for 10,866,879 newly-issued shares of Common Stock (based on a
Price to Public per Share in the Stock Offerings of $19.00). The TDC Exchange
was intended to enable TDC to achieve the reorganization without the
incurrence of gain for tax purposes. Following the TDC Exchange, TDC
distributed all of the shares of Common Stock and GCL Warrants owned by it to
the holders of its preferred and common stock and then liquidated (the "TDC
Liquidation"). The TDC Exchange was approved by a committee of disinterested
members of the Company's Board of Directors. The benefit to the Company from
the TDC Exchange is that it effectively acquired 150,000 shares of Common
Stock for no cost. Following the TDC Exchange and TDC Liquidation, shares of
Common Stock and GCL Warrants originally held by TDC were issued to the
following persons in the following amounts:
<TABLE>
<CAPTION>
COMMON GCL
NAME STOCK WARRANTS VALUE (1)
---- ---------- -------- ------------
<S> <C> <C> <C>
Gary Winnick............................. 2,398,540 65,714 $ 46,235,971
David L. Lee............................. 2,716,617 75,150 52,374,738
Barry Porter............................. 812,908 22,317 15,670,654
Abbott L. Brown.......................... 270,970 7,439 5,223,564
Non-affiliates........................... 4,667,844 120,857 89,909,692
---------- ------- ------------
Total.................................. 10,866,879 291,477 $209,414,619
========== ======= ============
</TABLE>
- --------
(1) Based upon a price per share of Common Stock of $19.00 (the Price to
Public per Share of the Stock Offerings) and the Company's estimated
value, based upon an independent appraisal, of $10.10 per warrant.
TRANSACTIONS REGARDING CLASS A SHARES OF OLD GCL
The Class A common stock of Old GCL was issued in connection with the sale
by Old GCL of the GTH Preference Shares and was offered for nominal or no
consideration as an inducement to purchase the GTH Preference Shares. The
holders of Old GCL's Class B and Class C common stock agreed to the dilutive
effects of issuing the Class A stock on the understanding that Class A stock
not ultimately needed in connection with the sale of the GTH Preference Shares
would be transferred to the holders of the Class B and Class C common stock on
a pro rata basis. Of the 31,102,950 shares of Class A Common Stock issued by
Old GCL, 11,250,000 shares were sold to purchasers of the GTH Preference
Shares at a price of $.67 per Class A share. The remaining 19,852,950 shares
were issued to an affiliate of CIBC Wood Gundy Securities Corporation ("CIBC
Securities"), the placement agent for the offering of the GTH Preference
Shares. This affiliate of CIBC Securities transferred 14,696,150 Class A
shares to purchasers from it of the GTH Preference Shares for no additional
consideration and retained the remaining 5,161,800 Class A shares and CIBC
Securities retained a substantial ownership interest in the GTH Preference
Shares. The holders of the Old GCL Class B and Class C shares took the
position that, consistent with their understanding regarding the disposition
of Class A shares not needed in connection with sales by CIBC Securities of
the GTH Preference Shares, the Class A shares retained by its affiliate should
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<PAGE>
be transferred to the holders of Old GCL's Class B and Class C shares.
Accordingly, such affiliate of CIBC Securities retained 2,580,900 of the Class
A shares based upon its ownership of Class C shares and transferred the
remaining 2,580,899 Class A shares as follows:
<TABLE>
<CAPTION>
CLASS A
NAME SHARES VALUE (1)
---- --------- -----------
<S> <C> <C>
Gary Winnick(2)................. 1,122,213 $21,322,047
MRCo, Inc. ..................... 611,769 11,623,611
Telecommunications Development
Corporation.................... 382,356 7,264,764
PCG Telecom LDC................. 170,148 3,232,812
Barry Porter(3)................. 130,000 2,470,000
David L. Lee(4)................. 95,589 1,816,191
Abbott L. Brown(5).............. 68,824 1,307,656
--------- -----------
Total......................... 2,580,899 $49,037,081
========= ===========
</TABLE>
- --------
(1) Based upon the number of shares of Common Stock to be received pursuant to
the Old GCL Exchange multiplied by $19.00 (the Price to Public per Share
of the Stock Offerings).
(2) Shares indicated for Gary Winnick were acquired by GKW Unified Holdings,
LLC, which is managed by PCG.
(3) Shares indicated for Barry Porter were acquired by Galenight Corp., of
which Mr. Porter is sole shareholder.
(4) Shares indicated for David L. Lee were acquired by San Pasqual Corp., of
which Mr. Lee and his family are the sole shareholders.
(5) Shares indicated for Abbott L. Brown were acquired by Ridgestone Corp., of
which Mr. Brown's family and a related trust are the sole shareholders.
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<PAGE>
DESCRIPTION OF NOTES
GENERAL
The terms of the Exchange Notes are identical in all material respects to
those of the Restricted Notes, except for certain transfer restrictions and
registration rights relating to the Restricted Notes and except for certain
interest provisions related to such registration rights. The Exchange Notes
will be issued pursuant to the Indenture, dated as of May 18, 1998 (the
"Indenture"), between the Company and United States Trust Company of New York,
as trustee (the "Trustee") governing the Restricted Notes. The terms of the
Exchange Notes will include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). The Exchange Notes will be subject to all such
terms, and Holders of Notes are referred to the Indenture and the Trust
Indenture Act for a statement thereof. The following summary of the material
provisions of the Indenture does not purport to be complete and is qualified
in its entirety by reference to the Indenture, including the definitions
therein of certain terms used below. Copies of the form of Indenture, Escrow
Agreement and Registration Agreement are available as set forth below under
"--Additional Information." The definitions of certain terms used in the
following summary are set forth below under "--Certain Definitions." For
purposes of this summary, the term "Company" refers only to Global Crossing
Holdings Ltd. and not to any of its Subsidiaries, Old GCL or New GCL.
As of the date of this Prospectus, all of the Guarantors (except for Old GCL
and New GCL) and all of the AC Subsidiaries are Restricted Subsidiaries. Also
as of the date of this Prospectus, all of the PC-1 Subsidiaries, MAC
Subsidiaries and PAC Subsidiaries are Unrestricted Subsidiaries. Under certain
circumstances, the Company will be able to designate existing or future
Subsidiaries (excluding the AC Subsidiaries) as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants contained in the Indenture and will not be Guarantors.
TERMS OF NOTES
The Exchange Notes will be general unsecured obligations of the Company and
will rank pari passu in right of payment with all existing and future
unsecured senior Indebtedness of the Company. The Exchange Notes will rank
senior in right of payment to all subordinated Indebtedness of the Company
that may be issued in the future, if any.
The Company conducts substantially all of its operations through its
Subsidiaries and, therefore, the Company is dependent on the cash flow of its
Subsidiaries to meet its obligations, including its obligations with respect
to the Notes. The Notes will be effectively subordinated to all Indebtedness
and other liabilities and commitments (including trade payables and lease
obligations) of the Company's Subsidiaries that are not Guarantors. Any right
of the Company to receive assets of any of its Subsidiaries that are not
Guarantors upon the latter's liquidation or reorganization (and the consequent
right of the Holders of the Notes to participate in those assets) will be
effectively subordinated to the claims of that Subsidiary's creditors, except
to the extent that the Company is itself recognized as a creditor of such
Subsidiary, in which case the claims of the Company would still be subordinate
to any security in the assets of such Subsidiary and any indebtedness of such
Subsidiary that is senior to that held by the Company. As of June 30, 1998, on
a pro forma basis after giving effect to the Offering and the application of
the net proceeds therefrom, the Company's Subsidiaries that are not Guarantors
would have had approximately $518 million of Indebtedness and other
liabilities (including trade payables and lease obligations) outstanding, to
which the Notes would have been effectively subordinated. See "Risk Factors--
Ranking of Notes; Holding Company Structure; Dividend Payment Restrictions."
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $800.0 million
and will mature on May 15, 2008. Interest on the Notes will accrue at the rate
of 9 5/8% per annum and will be payable semi-annually in arrears on May 15 and
November 15, commencing on November 15, 1998, to Holders of record on the
immediately preceding May 1 and November 1. Interest on the Notes will accrue
from the most recent date to which interest
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<PAGE>
has been paid or, if no interest has been paid, from the date of original
issuance. Interest will be computed on the basis of a 360-day year comprised
of twelve 30-day months. Principal, premium, if any, and interest on the Notes
will be payable at the office or agency of the Company maintained for such
purpose within the City and State of New York or, at the option of the
Company, payment of interest on the Notes may be made by check mailed to the
Holders of the Notes at their respective addresses set forth in the register
of Holders of Notes; provided that all payments of principal, premium, if any,
and interest on Notes the Holders of which have given wire transfer
instructions to the Company will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Until otherwise designated by the Company, the Company's office or agency in
New York will be the office of the Trustee maintained for such purpose. The
Notes will be issued in denominations of $1,000 and integral multiples
thereof. The Trustee initially will be Paying Agent and Registrar under the
Indenture, and the Company may act as Paying Agent or Registrar under the
Indenture.
The Company's obligation to pay interest on the Notes on November 15, 1998
and May 15, 1999 will be secured by funds held by United States Trust Company
of New York, as escrow agent (the "Escrow Agent") under an agreement between
the Company and the Escrow Agent (the "Escrow and Disbursement Agreement").
The Company has deposited with the Escrow Agent in the escrow account (the
"Escrow Account") an amount of cash or U.S. Government Securities, that,
together with the proceeds from the investment thereof, will be sufficient to
pay when due the first two interest payments on the Notes. Following the
second interest payment on the Notes, any amounts remaining in the Escrow
Account will be released to the Company and will thereafter remain subject to
the applicable provisions of the Indenture.
GUARANTEES
The Company's payment obligations with respect to the Notes will be jointly
and severally, fully and unconditionally guaranteed (the "Guarantees") by the
Guarantors. Each of the Guarantors will receive a fee from the Company as
consideration for its Guarantee, and the obligations of each Guarantor under
its Guarantee will be limited so as not to constitute a fraudulent conveyance
under applicable law. See "Risk Factors--Fraudulent Conveyance Matters."
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person) another Person
(whether or not affiliated with such Guarantor) unless: (i) subject to the
provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) assumes all of the
obligations of such Guarantor (pursuant to a supplemental indenture in form
and substance reasonably satisfactory to the Trustee) under the Notes, the
Indenture, the Escrow and Disbursement Agreement and the Registration
Agreement; and (ii) immediately after giving effect to such transaction, no
Default or Event of Default exists. The provisions of this covenant will not
be applicable to a sale, assignment, transfer, conveyance or other disposition
of assets between or among such Guarantor and any other Guarantor or the
Company.
The Indenture provides that, in the event of a sale or other disposition of
all of the assets of any Guarantor (except for Old GCL or New GCL), by way of
merger, consolidation or otherwise, or a sale or other disposition of all of
the capital stock of any Guarantor (except for Old GCL or New GCL), then such
Guarantor (in the event of a sale or other disposition, by way of such a
merger, consolidation or otherwise, of all of the capital stock of such
Guarantor) or the Person acquiring the property (in the event of a sale or
other disposition of all of the assets of such Guarantor) will be released and
relieved of any obligations under its Guarantee; provided that the Net
Proceeds of such sale or other disposition are applied in accordance with the
applicable provisions of the Indenture. See "--Repurchase at the Option of
Holders--Asset Sales."
OPTIONAL REDEMPTION
Except as set forth below and under "--Optional Tax Redemption," the Notes
are not redeemable at the Company's option prior to May 15, 2003. Thereafter,
the Notes are subject to redemption at any time at the
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<PAGE>
option of the Company, in whole or in part, upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below, plus accrued and unpaid interest thereon to
the applicable redemption date, if redeemed during the twelve-month period
beginning on May 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003................................... 104.813%
2004................................... 103.208%
2005................................... 101.604%
2006 and thereafter.................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to May 15, 2001, the
Company may, on any one or more occasions, redeem up to 25% of the aggregate
principal amount of Notes originally issued pursuant to the Indenture at a
redemption price of 109.625% of the principal amount thereof, plus accrued and
unpaid interest thereon to the redemption date, with the net cash proceeds
received from one or more Equity Offerings made by the Company, Old GCL or New
GCL (to the extent such net cash proceeds received by Old GCL or New GCL were
contributed to the Company as common equity capital); provided that at least
75% of the aggregate principal amount of Notes originally issued pursuant to
the Indenture remain outstanding immediately after the occurrence of any such
redemption. The Company may make any such redemption upon not less than 30 nor
more than 60 days' notice (but in no event more than 90 days after the closing
of the related Equity Offering). Any such notice may be given prior to the
completion of the related Equity Offering and any such redemption may, at the
Company's discretion, be subject to the satisfaction of one or more conditions
precedent, including, but not limited to, the completion of the related Equity
Offering.
In addition, at any time prior to May 15, 2003, the Notes may also be
redeemed at the option of the Company, in whole but not in part, upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60
days' prior notice (but in no event may any such redemption occur more than 90
days after the occurrence of such Change of Control) mailed by first-class
mail to each Holder's registered address, at a redemption price equal to 100%
of the principal amount thereof plus the Applicable Premium as of, and accrued
and unpaid interest, if any, to, the date of redemption (the "Redemption
Date").
"Applicable Premium" means, with respect to any Note on any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Note or (ii) the
excess of (A) the present value at such Redemption Date of (1) the redemption
price of such Note at May 15, 2003 (such redemption price being set forth in
the table above) plus (2) all required interest payments due on such Note
through May 15, 2003 (excluding accrued but unpaid interest), computed using a
discount rate equal to the Treasury Rate plus 50 basis points over (B) the
principal amount of such Note, if greater.
"Treasury Rate" means, as of any Redemption Date, the yield to maturity as
of such Redemption Date of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data))
most nearly equal to the period from the Redemption Date to May 15, 2003;
provided, however, that if the period from the Redemption Date to May 15, 2003
is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall
be used.
OPTIONAL TAX REDEMPTION
The Notes are subject to redemption at the option of the Company or a
successor corporation at any time, in whole but not in part, upon not less
than 30 nor more than 60 days' notice, at a redemption price equal to the
principal amount thereof, plus accrued and unpaid interest thereon to the
redemption date if, as a result of any change in or amendment to the laws or
any regulations or ruling promulgated thereunder of (x) Bermuda or
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<PAGE>
any political subdivision or governmental authority thereof or therein having
the power to tax, (y) any jurisdiction, other than the United States, from or
through which payment on the Notes is made by the Company or a successor
corporation, or its paying agent in its capacity as such or any political
subdivision or governmental authority thereof or therein having the power to
tax or (z) any other jurisdiction, other than the United States, in which the
Company or a successor corporation is organized, or any political subdivision
or governmental authority thereof or therein having the power to tax, or any
change in the official application or interpretation of such laws, regulations
or rulings, or any change in the official application or interpretation of, or
any execution of or amendment to, any treaty or treaties affecting taxation to
which such jurisdiction (or such political subdivision or taxing authority) is
a party (a "Change in Tax Law"), which becomes effective on or after the date
of this Prospectus, the Company or a successor corporation is or would be
required on the next succeeding interest payment date to pay Additional
Amounts with respect to the Notes (as described under "--Payment of Additional
Amounts"), and the payment of such Additional Amounts cannot be avoided by the
use of any reasonable measures available to the Company or a successor
corporation.
In addition, the Notes are subject to redemption at the option of the
Company at any time, in whole but not in part, upon not less than 30 nor more
than 60 days' notice, at a redemption price equal to the principal amount
thereof, plus accrued and unpaid interest thereon to the redemption date, if
the Person formed by a consolidation or amalgamation of the Company or into
which the Company is merged or to which the Company conveys, transfers or
leases its properties and assets substantially as an entirety is required, as
a consequence of such consolidation, amalgamation, merger, conveyance,
transfer or lease and as a consequence of a Change in Tax Law occurring after
the date of such consolidation, amalgamation, merger, conveyance, transfer or
lease, to pay Additional Amounts in respect of any tax, assessment or
governmental charge imposed on any Holder of Notes.
PAYMENT OF ADDITIONAL AMOUNTS
If any deduction or withholding for any present or future taxes, assessments
or other governmental charges of (x) Bermuda or any political subdivision or
governmental authority thereof or therein having power to tax, (y) any
jurisdiction, other than the United States, from or through which payment on
the Notes is made by the Company or a successor corporation, or its paying
agent in its capacity as such or any political subdivision or governmental
authority thereof or therein having the power to tax or (z) any other
jurisdiction, other than the United States, in which the Company or a
successor corporation is organized, or any political subdivision or
governmental authority thereof or therein having the power to tax shall at any
time be required by such jurisdiction (or any such political subdivision or
taxing authority) in respect of any amounts to be paid by the Company or a
successor corporation under the Notes, the Company or a successor corporation
will pay to each Holder of Notes as additional interest, such additional
amounts ("Additional Amounts") as may be necessary in order that the net
amounts paid to such holder of such Notes who, with respect to any such tax,
assessment or other governmental charge, is not resident in, or a citizen of,
such jurisdiction, after such deduction or withholding, shall be not less than
the amount specified in such Notes to which such Holder is entitled; provided,
however, that the Company or a successor corporation shall not be required to
make any payment of Additional Amounts for or on account of:
(i) Any tax, assessment or other governmental charge that would not have
been imposed but for (a) the existence of any present or former connection
between such Holder (or between a fiduciary, settlor, beneficiary, member
or shareholder of, or possessor of a power over, such Holder, if such
Holder is an estate, trust, partnership, limited liability company or
corporation) and the taxing jurisdiction or any political subdivision or
territory or possession thereof or area subject to its jurisdiction,
including, without limitation, such Holder (or such fiduciary, settlor,
beneficiary, member, shareholder or possessor) being or having been a
citizen or resident thereof or being or having been present or engaged in a
trade or business therein or having or having had a permanent establishment
therein, (b) the presentation of a Note (where presentation is required)
for payment on a date more than 30 days after (x) the date on which such
payment became due and payable or (y) the date on which payment thereof is
duly provided for, whichever occurs later, or (c)
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<PAGE>
the presentation of a Note for payment in Bermuda or any political
subdivision thereof or therein, unless such Note could not have been
presented for payment elsewhere;
(ii) Any estate, inheritance, gift, sales, transfer, personal property or
similar tax, assessment or other governmental charge;
(iii) Any tax, assessment or other governmental charge that is payable
otherwise than by withholding from payment of principal of, premium, if
any, or any interest on the Notes;
(iv) Any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure by the Holder or the beneficial owner of
the Note to comply with a request of the Company addressed to the Holder
(a) to provide information, documents or other evidence concerning the
nationality, residence or identity of the Holder or such beneficial owner
or (b) to make and deliver any declaration or other similar claim (other
than a claim for refund of a tax, assessment or other governmental charge
withheld by the Company) or satisfy any information or reporting
requirements, which, in the case of (a) or (b), is required or imposed by a
statute, treaty, regulation or administrative practice of the taxing
jurisdiction as a precondition to exemption from all or part of such tax,
assessment or other governmental charge; or
(v) Any combination of items (i), (ii), (iii) and (iv) above;
nor shall Additional Amounts be paid with respect to any payment of the
principal of, or any premium or interest on, any Note to any Holder who is a
fiduciary or partnership or limited liability company or other than the sole
beneficial owner of such payment to the extent such payment would be required
by the laws of (x) Bermuda or any political subdivision or governmental
authority thereof or therein having the power to tax, (y) any jurisdiction,
other than the United States, from or through which payment on the Notes is
made by the Company or a successor corporation, or its paying agent in its
capacity as such or any political subdivision or governmental authority
thereof or therein having the power to tax or (z) any other jurisdiction,
other than the United States, in which the Company or a successor corporation
is organized, or any political subdivision or governmental authority thereof
or therein having the power to tax to be included in the income for tax
purposes of a beneficiary or settlor with respect to such fiduciary or a
member of such partnership, limited liability company or beneficial owner who
would not have been entitled to such Additional Amounts had it been the Holder
of such Note.
The Company shall provide the Trustee with the official acknowledgment of
the relevant taxing authority (or, if such acknowledgment is not available, a
certified copy thereof) evidencing the payment of the withholding taxes, if
any, by the Company. Copies of such documentation shall be made available to
the Holders of the Notes or the Paying Agent, as applicable, upon request
therefor.
All references in this Prospectus to principal of, premium, if any, and
interest on the Notes shall include any Additional Amounts payable by the
Company in respect of such principal, such premium, if any, and such interest.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are then listed, or, if the Notes are not so then listed, on a pro
rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate; provided that no Notes of $1,000 or less shall be redeemed in
part. Notices of redemption shall be mailed by first class mail at least 30
but not more than 60 days prior to the redemption date to each Holder of Notes
to be redeemed at its registered address. Notices of redemption may not be
conditional. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note. Notes called for redemption will
become due on the date fixed for redemption. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for
redemption.
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MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders," the
Company will not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to purchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at a purchase price in cash
(the "Change of Control Payment") equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon to the date of
purchase (subject to the right of Holders of record on the relevant record
date to receive interest due on the relevant interest payment date); provided,
however, that the Company shall not be obligated to repurchase Notes pursuant
to this covenant in the event that it has exercised its rights to redeem all
of the Notes as described above under "--Optional Redemption." Within 30 days
following any Change of Control, the Company will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of
Control and offering to purchase Notes on the date specified in such notice,
which date shall be no earlier than 30 and no later than 60 days from the date
such notice is mailed (the "Change of Control Payment Date"), in accordance
with the procedures required by the Indenture and described in such notice.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations to the extent such
laws and regulations are applicable in connection with the purchase of Notes
as a result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with any of the provisions of this
covenant, the Company will comply with the applicable securities laws and
regulations and will be deemed not to have breached its obligations under this
covenant by virtue thereof.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail or deliver to each Holder of
Notes so tendered the Change of Control Payment for such Notes, and the
Trustee will promptly authenticate and mail or deliver (or cause to be
transferred by book entry) to each Holder a new Note equal in principal amount
to any unpurchased portion of Notes surrendered, if any; provided that each
such new Note will be in a principal amount of $1,000 or an integral multiple
thereof. The Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company purchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction. The Company's ability to purchase
Notes upon a Change of Control may be limited by the Company's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any such required purchases. See "Risk
Factors--Purchase of Notes Upon a Change of Control."
The Company will not be required to make a Change of Control Offer upon the
occurrence of a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in the Indenture applicable to a Change of Control
Offer made by the Company, and purchases all Notes validly tendered and not
withdrawn under such Change of Control Offer.
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Asset Sales
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, consummate any Asset Sale, unless (i) the Company
(or such Restricted Subsidiary, as the case may be) receives consideration at
the time of such Asset Sale at least equal to the fair market value (as
determined in good faith by the Board of Directors (including as to the value
of all noncash consideration) and set forth in an Officer's Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor is
in the form of cash and/or Cash Equivalents, and (iii) the Net Proceeds
received by the Company (or such Restricted Subsidiary, as the case may be)
from such Asset Sale are applied within 360 days following the receipt of such
Net Proceeds (a) first, to the extent the Company (or such Restricted
Subsidiary, as the case may be) elects, to the redemption or repurchase of
outstanding Indebtedness incurred pursuant to clauses (d) and (e) of the
second paragraph set forth below under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock" and (b) second, to the extent of
the balance of such Net Proceeds after application as described in (a) above
and to the extent the Company (or such Restricted Subsidiary, as the case may
be) elects, to reinvest, or enter into a legally binding agreement to
reinvest, such Net Proceeds (or any portion thereof) in assets that are used
or useful in a Permitted Business. The balance of such Net Proceeds, after the
application of such Net Proceeds as described in the immediately preceding
clauses (a) and (b), shall constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds equals or exceeds $15.0 million
(taking into account income earned on such Excess Proceeds), the Company will
be required to make an offer to all Holders of Notes and pari passu
Indebtedness (an "Asset Sale Offer") to purchase the maximum principal amount
of Notes and pari passu Indebtedness that may be purchased out of the Excess
Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest thereon to the date
of purchase, in accordance with the procedures set forth in the Indenture and
the agreements governing such pari passu Indebtedness. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by the
Indenture. If the aggregate principal amount of Notes and pari passu
Indebtedness tendered into such Asset Sale Offer surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes and pari passu Indebtedness to be purchased on a pro rata basis. Upon
completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero for purposes of the first sentence of this paragraph.
The amount of (x) any liabilities (as shown on the Company's (or such
Restricted Subsidiary's, as the case may be) most recent balance sheet) of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to an
agreement that releases the Company or any Restricted Subsidiary from all
liability in respect thereof, (y) Indebtedness of any Restricted Subsidiary
that is no longer a Restricted Subsidiary as a result of such Asset Sale, to
the extent that the Company and each other Restricted Subsidiary are released
from any guarantee of payment of the principal amount of such Indebtedness in
connection with such Asset Sale and (z) any securities, notes or other
obligations received by the Company (or such Restricted Subsidiary, as the
case may be) from such transferee that are contemporaneously (subject to
ordinary settlement periods) converted by the Company (or such Restricted
Subsidiary, as the case may be) into cash and/or Cash Equivalents (to the
extent of the cash and/or Cash Equivalents received), will be deemed to be
cash and/or Cash Equivalents for purposes of this provision.
CERTAIN COVENANTS
Restricted Payments
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly: (i) declare or pay any dividend or make any other
payment or distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company or any of
its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests (other than
dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or to the Company or a Restricted
Subsidiary of the Company); (ii) purchase, redeem or otherwise acquire or
retire for value (including, without limitation, in connection with any merger
or consolidation involving the Company) any Equity Interests
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of the Company or any direct or indirect parent of the Company (other than any
such Equity Interests owned by the Company or any Wholly Owned Restricted
Subsidiary of the Company); (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes, except a payment of interest
or principal at Stated Maturity; or (iv) make any Restricted Investment (all
such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless:
(a) at the time of and after giving effect to such Restricted Payment, no
Default or Event of Default shall have occurred and be continuing or would
occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to either
clause (i) or (ii) of the first paragraph of the covenant described below
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (vi), (vii), (viii), (ix) (but only
to the extent that such Restricted Payments are reflected as an expense on
the income statement of Old GCL or New GCL, as applicable) and (x) of the
next succeeding paragraph), is less than the sum, without duplication, of
(i) 50% of the Consolidated Net Income of the Company for the period (taken
as one accounting period) beginning on the last day of the fiscal quarter
immediately preceding the date of the Indenture and ending on the last day
of the fiscal quarter immediately preceding the date of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit,
less 100% of such deficit), plus (ii) 100% of the aggregate net cash
proceeds and the fair market value (as determined in good faith by the
Board of Directors) of property or assets received by the Company since the
date of the Indenture as a contribution to its common equity capital or
from the issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or from the issue or sale of Disqualified Stock or debt
securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company), plus the
amount of cash or the fair market value (as determined above) of property
or assets received by the Company or any Restricted Subsidiary upon such
conversion or exchange, plus (iii) the aggregate amount equal to the net
reduction in Investments in Unrestricted Subsidiaries resulting from (x)
dividends, distributions, interest payments, return of capital, repayments
of Investments or other transfers of assets to the Company or any
Restricted Subsidiary from any Unrestricted Subsidiary, (y) proceeds
realized by the Company or any Restricted Subsidiary upon the sale of such
Investment to a Person other than Old GCL, New GCL, the Company or any
Subsidiary of the Company, or (z) the redesignation of any Unrestricted
Subsidiary as a Restricted Subsidiary, not to exceed in the case of any of
the immediately preceding clauses (x), (y) or (z) the aggregate amount of
Restricted Investments made by the Company or any Restricted Subsidiary in
such Unrestricted Subsidiary after the date of the Indenture, plus (iv) to
the extent that any Restricted Investment that was made after the date of
the Indenture is sold for cash or otherwise liquidated or repaid for cash,
the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment; provided, however, that
amounts determined pursuant to subclauses (x) and (y) of clause (iii) or
clause (iv) shall exclude amounts arising from the reallocation of an
Investment made in accordance with the provisions described below in clause
(vi) of the immediate following paragraph.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the foregoing provisions;
(ii) the redemption, repurchase, retirement, defeasance or other acquisition
of any subordinated Indebtedness or Equity Interests of the Company in
exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Subsidiary of the Company) of, other Equity Interests of
the Company (other than any Disqualified Stock); provided that the amount of
any such net cash proceeds that are
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utilized for any such redemption, repurchase, retirement, defeasance or other
acquisition shall be excluded from clause (c)(ii) of the preceding paragraph;
(iii) the defeasance, redemption, retirement, repurchase or other acquisition
of subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Restricted Subsidiary of the Company to the holders of its Equity Interests on
a pro rata basis; (v) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any of its
Restricted Subsidiaries held by any member of the Company's or such Restricted
Subsidiary's management; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$5.0 million in any twelve-month period (with unused amounts being carried
over to succeeding twelve-month periods, subject to a maximum of $10.0 million
in any twelve-month period); (vi) Investments in Project Subsidiaries made
with a portion of the net proceeds of the Offering in an aggregate amount not
to exceed $315 million made within one year of the date of the Indenture, or a
reallocation of any such Investments to the extent of any reduction of such
Investment during such one-year period resulting from an investment by any
third party (including, without limitation, pursuant to a Joint Venture) in
the formation of such Project Subsidiary, provided that such reallocation is
made within one year from the date of such third party Investment; (vii)
Investments in Project Subsidiaries made with the net cash proceeds received
from an Equity Offering made by the Company, Old GCL or New GCL (but only to
the extent such net cash proceeds received by Old GCL or New GCL were
contributed to the Company as common equity capital); provided that the amount
of any such net cash proceeds that are utilized for any such Investment shall
be excluded from clause (c)(ii) of the preceding paragraph; (viii) Investments
in GTH of amounts necessary to effect the redemption of the outstanding GTH
Preference Shares in accordance with the terms thereof; (ix) the payment of
any dividend or the making of any distribution to Old GCL or New GCL by the
Company or any Restricted Subsidiary to pay or permit GCL or New GCL to pay
any GCL Expenses or any Related Taxes; (x) any payments made pursuant to an
incurrence of Indebtedness pursuant to clause (1) of the covenant described
below under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock"; and (xi) other Restricted Payments in an aggregate amount
not to exceed $5.0 million prior to an Initial Public Offering or $10.0
million subsequent to an Initial Public Offering.
The Board of Directors may not designate any Subsidiary of the Company
(other than a newly created Subsidiary in which no Investment has previously
been made (other than the amount required to capitalize such Subsidiary in
connection with its organization)) as an Unrestricted Subsidiary (a
"Designation") unless: (i) no Default or Event of Default shall have occurred
and be continuing at the time of or after giving effect to such Designation;
(ii) the Company would, immediately after giving effect to such Designation,
have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to either clause (i) or (ii) of the first paragraph of the covenant
described below under the caption "--Incurrence of Indebtedness and Issuance
of Preferred Stock" and (iii) the Company would not be prohibited under the
Indenture from making an Investment at the time of such Designation (assuming
the effectiveness of such Designation for purposes of clauses (a) and (b) of
the first paragraph of this covenant) in an amount equal to the fair market
value of the net Investment of the Company or any other Restricted Subsidiary
in such Subsidiary on such date; provided, however, that in no event will
Atlantic Crossing be transferred to or held by an Unrestricted Subsidiary.
In the event of any such Designation, all outstanding Investments owned by
the Company and its Restricted Subsidiaries in the Subsidiary so designated
will be deemed to be an Investment made as of the time of such Designation and
will reduce the amount available for Restricted Payments under the first
paragraph of this covenant or Permitted Investments, as applicable. All such
outstanding Investments will be deemed to constitute Restricted Payments in an
amount equal to the fair market value of such Investments at the time of such
Designation.
The Indenture further provides that a Designation may be revoked (a
"Revocation") by a resolution of the Board of Directors delivered to the
Trustee, provided that Company will not make any Revocation unless: (i) no
Default or Event of Default shall have occurred and be continuing at the time
of or after giving effect to such Designation; and (ii) all Liens and
Indebtedness of such Unrestricted Subsidiary outstanding immediately following
such Revocation would, if incurred at such time, have been permitted to be
incurred at such time for all purposes under the Indenture.
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The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or (such
Restricted Subsidiary, as the case may be) pursuant to the Restricted Payment.
The fair market value of any asset(s) or securities that are required to be
valued by this covenant shall be determined in good faith by the Board of
Directors (such determination to be based upon an opinion or appraisal issued
by an accounting, appraisal or investment banking firm of national standing if
such fair market value exceeds $15.0 million).
Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and the Company will not issue any Disqualified Stock and will not
permit any of its Restricted Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company may incur Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock and its Restricted
Subsidiaries that are Guarantors may incur Indebtedness or issue Disqualified
Stock if either:
(i) the Consolidated Leverage Ratio at the end of the Company's most
recently ended fiscal quarter for which a consolidated balance sheet of the
Company is available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued
would have been less than 5.5 to 1 (prior to May 15, 2001), or 5.0 to 1.0
(subsequent to May 15, 2001), determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued,
as the case may be, at the beginning of the four fiscal quarters ended on
the date of such consolidated balance sheet; or
(ii) the Consolidated Capital Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have
been less than 2.5 to 1.0, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom) as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued,
as the case may be, at the beginning of such four-quarter period.
Notwithstanding the foregoing, the provisions of the paragraph set forth
above will not apply to the incurrence of any of the following items of
Indebtedness (collectively, "Permitted Indebtedness"):
(a) The incurrence by the Company of Indebtedness represented by the
Notes and the Exchange Notes;
(b) The incurrence by the Company or any of its Restricted Subsidiaries
of Existing Indebtedness;
(c) The incurrence of Indebtedness by the Company to any Wholly Owned
Restricted Subsidiary or Indebtedness of any Restricted Subsidiary to the
Company or any Wholly Owned Restricted Subsidiary (but only for so long as
such Indebtedness is held by the Company or such Wholly Owned Restricted
Subsidiary);
(d) The incurrence by the AC Subsidiaries of Indebtedness under the AC-1
Credit Facility in an aggregate principal amount not to exceed $500.0
million at any time outstanding, less the aggregate amount of all
repayments, mandatory or optional (including any repayments made pursuant
to clause (m) of this paragraph, but excluding any repayments of revolving
credit borrowings thereunder, provided that the maximum amount of revolving
credit Indebtedness permitted to be incurred under this clause shall not
exceed $10.0 million at any time outstanding), made by the Company or any
of its Restricted Subsidiaries thereunder since the date of the Indenture;
(e) The incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness pursuant to the construction of extensions or upgrades of
Atlantic Crossing, including AC-2, not to exceed $150.0 million at any time
outstanding, less the aggregate amount of all repayments, mandatory or
optional (including any repayments made pursuant to clause (m) of this
paragraph, but excluding any repayments of
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revolving credit borrowings thereunder, provided that the maximum amount of
revolving credit Indebtedness permitted to be incurred under this clause
shall not exceed $10.0 million at any time outstanding), made by the
Company or any of its Restricted Subsidiaries thereunder; provided that
such Indebtedness is incurred for the purpose of financing all or any part
of the cost of construction of such planned extensions or upgrades of
Atlantic Crossing;
(f) The incurrence by the Company or any of its Restricted Subsidiaries
of Capital Lease Obligations (other than leases of backhaul services),
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $25.0 million at any time outstanding;
(g) The incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness pursuant to acquisitions of backhaul capacity made in the
ordinary course of business;
(h) The incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest or foreign currency exchange rate risk with respect to any
floating rate Indebtedness that is permitted by the terms of the Indenture
to be outstanding;
(i) The incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness of a Restricted Subsidiary incurred and outstanding on the
date on which such Restricted Subsidiary was acquired by the Company;
provided, however, that at the time such Restricted Subsidiary is acquired
by the Company (giving effect to such acquisition), the Company would have
been able to incur $1.00 of additional Indebtedness pursuant to the
immediately preceding paragraph;
(j) The incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred under the first paragraph hereof or clauses (a), (b), (d), (e),
(f), (i), (k), (l) or (n) of this paragraph;
(k) The incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness not otherwise permitted to be incurred pursuant
to this paragraph in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (k), not to exceed $25.0 million;
(l) The incurrence by the Company or any of its Restricted Subsidiaries
that are Guarantors of Indebtedness to finance the construction of AC-2,
provided that such Indebtedness is expressly subordinated to the Notes and
the Stated Maturity and Weighted Average Life to Maturity of such
Indebtedness is not less than the Stated Maturity and Weighted Average Life
to Maturity of the Notes and, provided further, that such Indebtedness is
incurred for the purpose of financing all or any part of the cost of
construction of AC-2;
(m) The incurrence of Indebtedness by a Receivables Entity in a Qualified
Receivables Transaction, provided that the proceeds thereof are applied to
the repayment of Indebtedness permitted to be incurred by clause (d) or (e)
of this paragraph;
(n) The incurrence by any Project Subsidiary that is a Restricted
Subsidiary of the Company (excluding the AC Subsidiaries) of Purchase Money
Indebtedness, provided that the amount of such Purchase Money Indebtedness
does not exceed 80% of the cost of construction, installation, acquisition,
lease, development or improvement of assets used in the business of such
Restricted Subsidiary;
(o) Letters of Credit in an aggregate principal amount not to exceed
$70.0 million at any time outstanding, provided that such Letters of Credit
are cash collateralized by a portion of the net proceeds received from the
sale of the Notes; and
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(p) The guarantee by the Company or any of its Restricted Subsidiaries
that are Guarantors of Indebtedness of the Company or any Restricted
Subsidiary of the Company that was permitted to be incurred by another
provision of this covenant.
The Company will not, and will not permit any of its Restricted Subsidiaries
to, incur any Indebtedness (including Permitted Indebtedness) that is
contractually subordinated in right of payment to any other Indebtedness of
the Company or such Restricted Subsidiary unless such Indebtedness is also
contractually subordinated in right of payment to the Notes on substantially
identical terms; provided, however, that no Indebtedness of the Company shall
be deemed to be contractually subordinated in right of payment to any other
Indebtedness of the Company solely by virtue of being unsecured.
Liens
The Company will not, and will not permit any of its Restricted Subsidiaries
to, create, incur, assume or otherwise cause or suffer to exist or become
effective any Lien of any kind (other than Permitted Liens) upon any of their
property or assets, now owned or hereafter acquired, unless all payments due
under the Indenture and the Notes are secured on an equal and ratable basis
with the obligations so secured until such time as such obligations are no
longer secured by a Lien.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions
to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock
or (2) with respect to any other interest or participation in, or measured by,
its profits, or (b) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets
to the Company or any of its Restricted Subsidiaries. However, the foregoing
restrictions will not apply to encumbrances or restrictions existing under or
by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the AC-1 Credit Facility as in effect as of the date of the
Indenture, (c) Indebtedness incurred in accordance with clause (e) of the
second paragraph of the covenant set forth above under the caption "--
Incurrence of Indebtedness and Issuance of Preferred Stock," provided that any
such encumbrances or restrictions contained in the agreements governing such
Indebtedness do not encumber or restrict the ability of any Restricted
Subsidiary of the Company to make any payments (as described in clauses (i)
through (iii) above) in an amount sufficient for the Company to make the
timely payment of interest on the Notes, (d) Indebtedness incurred in
accordance with clauses (m) or (n) of the second paragraph of the covenant set
forth above under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock," provided that such encumbrances or restrictions are
customary with respect to such types of Indebtedness (as determined in good
faith by the Chief Financial Officer of the Company), (e) the Indenture, the
Notes and the Exchange Notes, (f) applicable law, (g) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of
its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so acquired,
provided, that in the case of Indebtedness, such Indebtedness was permitted by
the terms of the Indenture to be incurred, (h) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (i) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (j) any
agreement for the sale or other disposition of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale or
other disposition, (k) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those contained
in the agreements governing the Indebtedness being refinanced, (l) Liens
securing Indebtedness otherwise permitted to
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be incurred pursuant to the provisions of the covenant described above under
the caption "--Liens" that limit the right of the Company or any of its
Restricted Subsidiaries to dispose of the assets subject to such Lien, (m)
provisions with respect to the disposition or distribution of assets or
property in joint venture agreements and other similar agreements entered into
in the ordinary course of business and (n) restrictions on cash or other
deposits or net worth imposed by customers under contracts entered into in the
ordinary course of business.
Certain restrictions under the AC-1 Credit Facility will substantially limit
the payment of dividends or distributions to the Company until the AC-1 Credit
Facility is retired. See "Risk Factors--Ranking of Notes; Holding Company
Structure; Dividend Payment Restrictions" and "Description of Certain
Indebtedness--AC-1 Credit Facility."
Sale and Leaseback Transactions
The Company will not, and will not permit any of its Restricted Subsidiaries
to, enter into any sale and leaseback transaction; provided that the Company
or any of its Restricted Subsidiaries may enter into a sale and leaseback
transaction if (i) the Company (or such Restricted Subsidiary, as the case may
be) could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
either of the Consolidated Leverage Ratio or Consolidated Capital Ratio tests
set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock" and (b)
incurred a Lien to secure such Indebtedness pursuant to the covenant described
above under the caption "--Liens," (ii) the gross cash proceeds of such sale
and leaseback transaction are at least equal to the fair market value (as
determined in good faith by the Board of Directors and set forth in an
Officers' Certificate delivered to the Trustee) of the property that is the
subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is treated as an Asset Sale, and
the Company applies the proceeds of such transaction in compliance with, the
covenant described above under the caption "--Repurchase at the Option of
Holders--Asset Sales."
Merger, Consolidation, or Sale of Assets
The Company may not, directly or indirectly, consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, convey or otherwise dispose of all or substantially all of
its properties or assets, in one or more related transactions, to another
Person unless: (i) the Company is the surviving corporation or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia,
or Bermuda; (ii) the Person formed by or surviving any such consolidation or
merger (if other than the Company) or the Person to which such sale,
assignment, transfer, conveyance or other disposition shall have been made
assumes all the obligations of the Company under the Registration Agreement,
the Notes, the Exchange Notes and the Indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the Trustee; (iii) immediately
after such transaction no Default or Event of Default exists; and (iv) except
in the case of a merger of the Company with or into a Wholly Owned Restricted
Subsidiary of the Company, the Company or the Person formed by or surviving
any such consolidation or merger (if other than the Company), or to which such
sale, assignment, transfer, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, immediately after such transaction and
after giving pro forma effect thereto and any related financing transactions
as if the same had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to either clause (i) or (ii) of the first paragraph of the covenant
described above under the caption "--Incurrence of Indebtedness and Issuance
of Preferred Stock." The Indenture also provides that the Company may not,
directly or indirectly, lease all or substantially all of its properties or
assets, in one or more related transactions, to any other Person. The
provisions of this covenant will not be applicable to a sale, assignment,
transfer, conveyance or other disposition of assets between or among the
Company and its Wholly Owned Restricted Subsidiaries and any of the
Guarantors.
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Transactions with Affiliates
The Company will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any
of its properties or assets to, or purchase any property or assets from, or
enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are not materially less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $15.0 million, the Company delivers to the Trustee
a resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction is approved by a majority of the disinterested
members of the Board of Directors and an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point of view is
obtained from an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be
deemed to be Affiliate Transactions: (i) (a) the entering into, maintaining or
performance of any employment contract, collective bargaining agreement,
benefit plan, program or arrangement, related trust agreement or any other
similar arrangement for or with any employee, officer or director heretofore
or hereafter entered into in the ordinary course of business, including
vacation, health, insurance, deferred compensation, retirement, savings or
other similar plans, (b) the payment of compensation, performance of
indemnification or contribution obligations, or an issuance, grant or award of
stock, options, or other equity-related interests or other securities, to
employees, officers or directors in the ordinary course of business, (c) any
transaction with an officer or director in the ordinary course of business not
involving more than $100,000 in any one case, or (d) Management Advances and
payments in respect thereof, (ii) transactions between or among the Company
and/or its Restricted Subsidiaries or any Receivables Entity, (iii) payment of
reasonable directors fees, (iv) any sale or other issuance of Equity Interests
(other than Disqualified Stock) of the Company, (v) Affiliate Transactions in
effect or approved by the Board of Directors on the date of the Indenture,
including any amendments thereto (provided that the terms of such amendments
are not materially less favorable to the Company than the terms of such
agreement prior to such amendment), (vi) transactions with respect to capacity
between the Company or any Restricted Subsidiary and any Unrestricted
Subsidiary or other Affiliate and joint sales and marketing pursuant to an
agreement or agreements between the Company or any Restricted Subsidiary and
any Unrestricted Subsidiary or other Affiliate (provided that in the case of
this clause (vi), such agreements are on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that could have
been obtained at the time of such transaction in an arm's-length transaction
with an unrelated third party or, in the case of a transaction with an
Unrestricted Subsidiary, are either (x) entered into in connection with a
transaction involving the selection by a customer of cable system capacity
entered into in the ordinary course of business or (y) involve the provision
by the Company or a Restricted Subsidiary to an Unrestricted Subsidiary of
sales and marketing services, operations, administration and maintenance
services or development services for which the Company or such Restricted
Subsidiary receives a fair rate of return (as determined by the Board of
Directors and set forth in an Officers' Certificate delivered to the Trustee)
above its expenses of providing such services; and (vii) Restricted Payments
that are permitted by the covenant described above under the caption "--
Restricted Payments."
Issuances and Sales of Equity Interests in Wholly Owned Restricted
Subsidiaries
The Company (i) will not, and will not permit any of its Restricted
Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any
Equity Interests in any Wholly Owned Restricted Subsidiary of the Company to
any Person (other than the Company or a Wholly Owned Restricted Subsidiary of
the Company), unless (a) such transfer, conveyance, sale, lease or other
disposition is of all the Equity Interests in such Wholly Owned Restricted
Subsidiary and (b) the cash Net Proceeds from such transfer, conveyance, sale,
lease or other disposition are applied in accordance with the covenant
described above under the caption "--Repurchase at the Option of Holders--
Asset Sales," and (ii) will not permit any Wholly Owned Restricted Subsidiary
of the
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Company to issue any of its Equity Interests (other than, if necessary, shares
of its Capital Stock constituting directors' qualifying shares) to any Person
other than to the Company or a Wholly Owned Restricted Subsidiary of the
Company.
Future AC Subsidiary Guarantees
The Company will cause each of the AC Subsidiaries to become a Guarantor
(other than GTH, which will be a Guarantor as of the date of the Indenture)
and execute a Supplemental Indenture and deliver an Opinion of Counsel, in
accordance with the terms of the Indenture, in each case when such action is
permitted under the terms of the AC-1 Credit Facility or the AC-1 Credit
Facility has been retired.
Additional Restricted Subsidiary Guarantees
If the Company or any of its Restricted Subsidiaries shall acquire or create
another Restricted Subsidiary after the date of the Indenture, then such newly
acquired or created Restricted Subsidiary shall become a Guarantor and execute
a Supplemental Indenture and deliver an Opinion of Counsel, in accordance with
the terms of the Indenture.
Business Activities
The Company will not, and will not permit any of its Restricted Subsidiaries
to, engage in any business other than a Permitted Business.
Payments for Consent
Neither the Company nor any of its Restricted Subsidiaries will, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend such
terms or provisions of the Indenture or the Notes in the time frame set forth
in the solicitation documents relating to such consent, waiver or agreement.
Reports
Whether or not required by the rules and regulations of the Commission, so
long as any Notes are outstanding, the Company and the Guarantors will furnish
to the Trustee and the Holders of the Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company and the Guarantors were
required to file such Forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" that describes the financial
condition and results of operations of the Company and its consolidated
Subsidiaries and, with respect to the annual information only, a report
thereon by the Company's and the Guarantors' certified independent
accountants, and (ii) all current reports that would be required to be filed
with the Commission on Form 8-K if the Company and the Guarantors were
required to file such reports, in each case within the time periods specified
in the Commission's rules and regulations. In addition, following the
consummation of the Exchange Offer, whether or not required by the rules and
regulations of the Commission, the Company and the Guarantors will file a copy
of all such information and reports with the Commission for public
availability within the time periods specified in the Commission's rules and
regulations (unless the Commission will not accept such a filing) and make
such information available to securities analysts and prospective investors
upon request. The Company and the Guarantors will be deemed to have satisfied
such requirements if Old GCL or New GCL files and provides reports, documents
and information of the types otherwise so required by the Commission, in each
case within the applicable time periods, and the Company and the Guarantors
are not required by the Commission to file such reports, documents and
information separately under the applicable rules and regulations of the
Commission
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(after giving effect to any exemptive relief) because of the filings by Old
GCL or New GCL. Furthermore, the Company and the Guarantors will agree that,
for so long as any Notes remain outstanding (and regardless of the immediately
preceding sentence), they will furnish to the Holders of the Notes and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following will constitute an Event
of Default: (i) default for 30 days in the payment when due of interest on the
Notes; (ii) default in the payment when due of the principal of, or premium,
if any, on, the Notes; (iii) failure by the Company or any of its Restricted
Subsidiaries to comply with the provisions described above under the captions
"--Change of Control," "--Asset Sales," "--Restricted Payments" or "--
Incurrence of Indebtedness and Issuance of Preferred Stock"; (iv) failure by
the Company or any of its Restricted Subsidiaries for 60 days after notice to
comply with any of its other agreements in the Indenture or the Notes; (v)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any of its Restricted Subsidiaries (or the
payment of which is guaranteed by the Company or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists, or is created
after the Issue Date, which default results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any
other such Indebtedness or the maturity of which has been so accelerated,
aggregates $15.0 million or more; (vi) failure by the Company or any of its
Restricted Subsidiaries to pay final judgments not subject to appeal
aggregating in excess of $15.0 million (net of applicable insurance coverage
which is acknowledged in writing by the insurer), which judgments are not
paid, discharged or stayed for a period of 60 days; (vii) except as permitted
by the Indenture, any Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect (other than in the case of Old GCL as the result of the liquidation or
dissolution of Old GCL in connection with an initial public offering of
Capital Stock of New GCL) or any Guarantor, or any Person acting on behalf of
any Guarantor, shall deny or disaffirm its obligations under its Guarantee;
(viii) certain events of bankruptcy or insolvency with respect to the Company
or any of its Restricted Subsidiaries; and (ix) failure by GCL or New GCL,
upon an Initial Public Offering, to contribute the net proceeds received
thereby to the Company as common equity capital within 30 days of the receipt
of such net proceeds.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Restricted
Subsidiary that is a Significant Subsidiary or any group of Restricted
Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding Notes will become due and payable without further action or
notice. Holders of the Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal of,
premium, if any, or interest on, the Notes) if it determines that withholding
notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium also
will become immediately due and payable, to the extent permitted by law, upon
the acceleration of the Notes. If an Event of Default occurs prior to May 15,
2003 by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to May 15, 2003, then the premium specified in
the Indenture also will become immediately due and payable, to the extent
permitted by law, upon the acceleration of the Notes.
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The Holders of a majority in aggregate principal amount of the then
outstanding Notes by notice to the Trustee may on behalf of the Holders of all
of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture, except a continuing Default or Event of
Default in the payment of principal of, premium, if any, or interest on, the
Notes.
The Company will be required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company will be required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATORS OR
SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of the Company,
as such, will have any liability for any obligations of the Company with
respect to the Notes or the Indenture, or for any claim based on, or in
respect or by reason of, such obligations or their creation. Each Holder of
Notes by accepting a Note will waive and release any and all such liability.
Such waiver and release are part of the consideration for issuance of the
Notes. Such waiver may not be effective to waive liabilities under federal
securities laws and it is the view of the Commission that such a waiver is
against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture will be discharged and cancelled upon the delivery by the
Company to the Trustee for cancellation of all the Notes or upon irrevocable
deposit with the Trustee, within not more than one year prior to the
redemption of the Notes, or when the Notes are to be called for redemption
within one year under arrangements satisfactory to the Trustee, of funds
sufficient for the payment or redemption of all the Notes. In addition, the
Indenture will provide that the Company may, at its option and at any time,
elect to have all of its obligations discharged with respect to the
outstanding Notes ("Legal Defeasance"), except for: (i) the rights of Holders
of outstanding Notes to receive payments in respect of the principal of,
premium, if any, and interest on such Notes when such payments are due from
the trust referred to below; (ii) the Company's obligations with respect to
the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payment and money for security payments held in trust; (iii) the
rights, powers, trusts, duties and immunities of the Trustee, and the
Company's obligations in connection therewith; and (iv) the Legal Defeasance
provisions of the Indenture. In addition, the Company may, at its option and
at any time, elect to have its obligations released with respect to certain
covenants that are contained in the Indenture ("Covenant Defeasance") and,
thereafter, any omission to comply with such obligations will not constitute a
Default or Event of Default. In the event Covenant Defeasance occurs, certain
events (but not including non-payment, bankruptcy, receivership,
rehabilitation or insolvency events) described under "--Events of Default"
will no longer constitute an Event of Default.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit, or cause to be deposited, with the Trustee,
in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such amounts
as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest on the outstanding Notes on the stated maturity thereof or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Company must deliver to the
Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or since the Issue Date,
there has been a change in the applicable federal income tax law, in either
case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance, and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such
Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance,
the Company must deliver
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to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance, and such Holders will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such deposit)
or insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under, any material agreement
or instrument (other than the Indenture) to which the Company or any of its
Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound; (vi) the Company must deliver to the Trustee
an opinion of counsel in the United States reasonably acceptable to the
Trustee to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights and
remedies generally; (vii) the Company must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders of the Notes over other creditors of the
Company, or with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; (viii) the Company must deliver to the
Trustee an opinion of counsel in Bermuda reasonably acceptable to the Trustee
to the effect that the Holders of the outstanding Notes will not be adversely
affected under Bermuda law; and (ix) the Company must deliver to the Trustee
an Officers' Certificate and an opinion of counsel in the United States
reasonably acceptable to the Trustee, each stating that all conditions
precedent provided for or relating to Legal Defeasance or Covenant Defeasance,
as applicable, have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the procedures
set forth in the Indenture. The Registrar and the Trustee may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents, and the Company may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. The Company will not be
required to transfer or exchange any Note selected for redemption. Also, the
Company will not be required to transfer or exchange any Note for a period of
15 days before (i) a selection of Notes to be redeemed, (ii) an interest
payment date or (iii) the mailing of notice of a Change of Control Offer or
Asset Sale Offer. The registered Holder of a Note will be treated as the owner
of it for all purposes under the Indenture.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the then outstanding Notes (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
Without the consent of each Holder affected, such an amendment or waiver may
not (with respect to any Notes held by a non-consenting Holder): (i) reduce
the principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver; (ii) reduce the principal or change the fixed maturity
of any Note, or alter the redemption provisions of the Notes (other than
redemption provisions relating to the covenants described above under the
caption "--Repurchase at the Option of Holders"); (iii) reduce the rate of, or
change the time for, payment of interest on any Note; (iv) waive a Default or
Event of Default in the payment of principal of, premium, if any, or interest
on the Notes (except a rescission of acceleration of the Notes by the Holders
of at least a majority in aggregate principal amount thereof and a waiver of
the payment default that resulted from such acceleration); (v) make any Note
payable in money other than that stated in the Notes; (vi) make any change
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in the provisions of the Indenture relating to waivers of past Defaults or the
rights of Holders of the Notes to receive payments of principal of, premium,
if any, or interest on the Notes; (vii) waive a redemption payment with
respect to any Note (other than a payment required by one of the covenants
described above under the caption "--Repurchase at the Option of Holders"); or
(viii) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation or sale of all or substantially all of the Company's
assets, to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, or to comply with the
requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage
in other transactions; however, if it acquires any conflicting interest, it
must eliminate such conflict within 90 days, apply to the Commission for
permission to continue, or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. In case an Event of Default shall occur (which shall not
be cured), the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent person in the conduct of their own affairs.
Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
Holder of Notes, unless such Holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by and
construed in accordance with the laws of the State of New York.
The Company and the Guarantors will submit to the jurisdiction of the U.S.
federal and New York state courts located in the Borough of Manhattan, City
and State of New York for purposes of all legal actions and proceedings
instituted in connection with the Notes and the Indenture. The Company has
appointed CT Corporation System as its authorized agent upon which process may
be served in any such action. See "Service of Process and Enforcement of
Liabilities."
CURRENCY INDEMNITY
U.S. dollars are the sole currency of account and payment for all sums
payable by the Company and the Guarantors under or in connection with the
Notes, including damages. Any account received or recovered in a currency
other than dollars (whether as a result of, or the enforcement of, a judgment
or order of a court of any jurisdiction, in the liquidation, dissolution or
other winding-up of the affairs of the Company or the Guarantors or otherwise)
by any Holder of a Note in respect of any sum expressed to be due to it from
the Company or the Guarantors shall only constitute a discharge to the Company
and the Guarantors to the extent of the dollar amount which the recipient is
able to purchase with the amount so received or recovered in that other
currency on the date of that receipt or recovery (or, if it is not practicable
to make that purchase on that date, on the first date on which it is
practicable to do so). If that dollar amount is less than the dollar amount
expressed to be due
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to the recipient under any Note, the Company and the Guarantors shall
indemnify it against any loss sustained by it as a result. In any event, the
Company and the Guarantors shall indemnify the recipient against the cost of
making any such purchase. For the purposes of this paragraph, it will be
sufficient for the Holder of a Note to certify in a satisfactory manner
(indicating the sources of information used) that it would have suffered a
loss had an actual purchase of dollars been made with the amount so received
in that other currency on the date of receipt or recovery (or, if a purchase
of dollars on such date had not been practicable, on the first date on which
it would have been practicable, it being required that the need for a change
of date be certified in the manner mentioned above). These indemnities
constitute a separate and independent obligation from the Company's and the
Guarantors' other obligations, shall give rise to a separate and independent
cause of action, shall apply irrespective of any indulgence granted by any
Holder of a Note and shall constitute in full force and effect despite any
other judgment, order, claim or proof for a liquidated amount in respect of
any sum due under any Note.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture,
Escrow Agreement and Registration Rights Agreement, without charge, by writing
to Global Crossing Holdings, Ltd., 45 Reid Street, Wessex House, Hamilton,
HM12 Bermuda; Attention: K. Eugene Shutler.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"AC-1 Credit Facility" means that certain Credit Agreement, dated as of June
27, 1997 and amended as of December 15, 1997, between ACL and the lenders
named therein.
"AC" or "Atlantic Crossing" means the four fiber pair, self healing ring,
fiber optic submarine cable system known as "Atlantic Crossing" or "AC-1"
which will provide direct telecommunications service between the United States
and Northern Europe with landing stations in the United States, United
Kingdom, The Netherlands and Germany, and all extensions and upgrades thereto.
"ACL" means Atlantic Crossing Ltd., a Bermuda company.
"AC Subsidiaries" means GTH and all of its direct and indirect Subsidiaries.
"AC-2" means the planned fiber optic submarine cable system known as "AC-2"
which will provide direct telecommunications service between the United States
and Europe.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling, controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.
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"Asset Sale" means (i) the sale, lease, transfer, conveyance or other
disposition of any assets or rights (including, without limitation, by way of
a sale and leaseback) other than sales of inventory in the ordinary course of
business and other than any sale, lease, transfer, conveyance or other
disposition of capacity on any cable system owned, controlled or operated by
the Company or any Restricted Subsidiary or of telecommunications capacity or
transmission rights acquired by the Company or any Restricted Subsidiary for
use in a Permitted Business (provided that the sale, lease, transfer,
conveyance or other disposition of all or substantially all of the assets of
the Company and its Restricted Subsidiaries taken as a whole will be governed
by the provisions of the Indenture described above under the caption "--
Repurchase at the Option of Holders--Change of Control" and/or the provisions
described above under the caption "--Certain Covenants--Merger, Consolidation
or Sale of Assets" and not by the provisions of the Asset Sale covenant), and
(ii) the issue or sale by the Company or any of its Restricted Subsidiaries of
Equity Interests of its Subsidiaries, in the case of either clause (i) or
(ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value in excess of $25.0 million or (b) for net
proceeds in excess of $25.0 million. Notwithstanding the foregoing, the
following items shall not be deemed to be Asset Sales: (i) a transfer of
assets by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly
Owned Restricted Subsidiary to the Company or to another Wholly Owned
Restricted Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned
Restricted Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary, (iii) a Restricted Payment that is permitted by the covenant
described above under the caption "--Certain Covenants--Restricted Payments,"
(iv) a transfer of assets by the Company or a Restricted Subsidiary in
connection with a Qualified Receivables Transaction, and (v) a disposition of
obsolete or worn out equipment or equipment that is no longer useful in the
conduct of a Permitted Business and that is disposed of in the ordinary course
of business.
"Attributable Debt" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Board of Directors" means the board of directors or other governing body of
the Company or, if the Company is owned or managed by a single entity, the
board of directors or other governing body of such entity, or, in either case,
any committee thereof duly authorized to act on behalf of such board or
governing body.
"Board Resolution" means a duly authorized resolution of the Board of
Directors.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of six months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case with any
domestic commercial bank having capital and surplus in excess of $500 million
and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Corporation and
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in each case maturing within six months after the date of acquisition and (vi)
money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (i)-(v) of this definition.
"Change of Control" means the occurrence of any of the following: (i) prior
to the first public offering of Voting Stock of the Company, Old GCL or New
GCL, the Permitted Holders cease to be the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in
calculating the beneficial ownership of any particular "person," such "person"
shall be deemed to have beneficial ownership of all securities that such
person has the right to acquire, whether such right is currently exercisable
or is exercisable only upon the occurrence of a subsequent condition),
directly or indirectly, of at least a majority of the Voting Stock (measured
by voting power rather than number of shares) of the Company, Old GCL or New
GCL, (ii) following the first public offering of Voting Stock of the Company,
Old GCL or New GCL, any "person" (as such term is unused in Section 13(d)(3)
of the Exchange Act), other than a Permitted Holder, is or becomes the
beneficial owner, directly or indirectly, of 35% or more of the Voting Stock
(measured by voting power rather than number of shares) of the Company, Old
GCL or New GCL, and the Permitted Holders own, in the aggregate, a lesser
percentage of the total Voting Stock (measured by voting power rather than by
number of shares) of the Company, Old GCL or New GCL than such person and do
not have the right or ability by voting power, contract or otherwise to elect
or designate for election a majority of the board of directors of the Company,
Old GCL or New GCL (for the purposes of this clause, such other person shall
be deemed to "beneficially own" any Voting Stock of a specified corporation
held by a parent corporation if such other person beneficially owns, directly
or indirectly, more than 35% of the Voting Stock (measured by voting power
rather than by number of shares) of such parent corporation and the Permitted
Holders beneficially own, directly or indirectly, in the aggregate a lesser
percentage of Voting Stock (measured by voting power rather than by number of
shares) of such parent corporation and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the board of directors of such parent corporation), (iii) during
any period of two consecutive years, Continuing Directors cease for any reason
to constitute a majority of the Board of Directors of the Company, Old GCL or
New GCL, (iv) the Company, Old GCL or New GCL consolidates or merges with or
into any other Person, other than a consolidation or merger (a) of the Company
into Old GCL or New GCL, Old GCL or New GCL into the Company, or the Company,
Old GCL or New GCL into a Wholly Owned Restricted Subsidiary of the Company or
(b) pursuant to a transaction in which the outstanding Voting Stock of the
Company, Old GCL or New GCL is changed into or exchanged for cash, securities
or other property with the effect that the beneficial owners of the
outstanding Voting Stock of the Company, Old GCL or New GCL, respectively,
immediately prior to such transaction, beneficially own, directly or
indirectly, more than 35% of the Voting Stock (measured by voting power rather
than number of shares) of the surviving corporation immediately following such
transaction or (v) the sale, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of Old GCL or New GCL
or the Company and its Restricted Subsidiaries taken as a whole to any person
other than a Wholly Owned Restricted Subsidiary of the Company or a Permitted
Holder or a person more than 50% of the Voting Stock (measured by voting power
rather than by number of shares) of which is owned, directly or indirectly,
following such transaction or transactions by the Permitted Holders; provided,
however, that sales, transfers, conveyances or other dispositions in the
ordinary course of business of capacity on cable systems owned, controlled or
operated by the Company or any Restricted Subsidiary or of telecommunications
capacity or transmission rights acquired by the Company or any Restricted
Subsidiary for use in its business, including, without limitation. for sale,
lease, transfer, conveyance or other disposition to any customer of the
Company or any Restricted Subsidiary shall not be deemed a disposition of
assets for purposes of this clause (v).
The definition of a Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the assets of Old GCL or New GCL or the Company and its
Restricted Subsidiaries taken as a whole, as such phrase is used in the
Revised Model Business Corporation Act. Although there is a developing body of
case law interpreting the phrase "substantially all," there is no precise
established definition of such phrase under applicable law. Accordingly, the
ability of a Holder of Notes to require the Company to purchase such Notes as
a result of a sale, lease, transfer, conveyance or other disposition of less
than all of the assets of Old GCL or New GCL or the Company and its Restricted
Subsidiaries taken as a whole to another Person or group may be uncertain.
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"Consolidated Capital Ratio" means, with respect to the Company as of any
date, the ratio of (i) the aggregate consolidated principal amount of
Indebtedness of the Company and its Restricted Subsidiaries then outstanding
to (ii) the Consolidated Net Worth of the Company and its Restricted
Subsidiaries as of such date, in each case as shown on the consolidated
balance sheet of the Company in accordance with GAAP.
"Consolidated Cash Flow" means, with respect to the Company for any period,
the Consolidated Net Income of the Company and its Restricted Subsidiaries for
such period plus, to the extent that any of the following items were deducted
or added in computing such Consolidated Net Income, (i) an amount equal to any
extraordinary loss (less any gain) plus any net loss (less any gain) realized
in connection with any Asset Sale, plus (ii) provision for taxes based on
income or profits of the Company and its Restricted Subsidiaries for such
period, plus (iii) consolidated interest expense of the Company and its
Restricted Subsidiaries for such period, whether paid or accrued and whether
or not capitalized (including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest component
of all payments associated with Capital Lease Obligations, imputed interest
with respect to Attributable Debt, commissions, discounts and other fees and
charges incurred in respect of Letter of Credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations), plus
(iv) depreciation, amortization (including amortization of goodwill and other
intangibles and the amount of capacity available for sale (other than for
backhaul capacity) charged to cost of sales), but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior period) of the
Company and its Restricted Subsidiaries for such period, minus (v) non-cash
items increasing such Consolidated Net Income for such period (other than
items that were accrued in the ordinary course of business), in each case, on
a consolidated basis and determined in accordance with GAAP. Notwithstanding
the foregoing, the provision for taxes on the income or profits of, and the
depreciation and amortization and other non-cash expenses of, a Restricted
Subsidiary of the Company shall be added to Consolidated Net Income to compute
Consolidated Cash Flow of the Company only to the extent that a corresponding
amount would be permitted at the date of determination to be dividended to the
Company by such Restricted Subsidiary without prior governmental approval
(that has not been obtained), and without direct or indirect restriction
pursuant to the terms of its charter and all agreements (excluding the AC-1
Credit Facility, to which this provision shall not apply), instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to that Restricted Subsidiary or its shareholders.
"Consolidated Leverage Ratio" means, with respect to the Company, as of any
date, the ratio of (i) the aggregate consolidated principal amount of
Indebtedness of the Company and its Restricted Subsidiaries then outstanding
to (ii) the Consolidated Cash Flow of the Company and its Restricted
Subsidiaries.
"Consolidated Net Income" means, with respect to the Company for any period,
the aggregate of the Net Income of the Company and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Restricted Subsidiary
that is accounted for by the equity method of accounting shall be included
only to the extent of the amount of dividends or distributions paid in cash to
the Company or a Wholly Owned Restricted Subsidiary thereof by such Restricted
Subsidiary, (ii) the Net Income of any Restricted Subsidiary shall be excluded
to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly, by operation of the terms
of its charter or any agreement (excluding the AC-1 Credit Facility, to which
this clause (ii) shall not apply), instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its shareholders, except that the Company's equity in the net
income of any such Restricted Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash that could
have been distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend, (iii) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition shall be excluded,
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(iv) the equity of the Company or any Restricted Subsidiary in the net income
of any Unrestricted Subsidiary shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such
Unrestricted Subsidiary during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (but not in excess of the
amount of the Net Income of such Unrestricted Subsidiary for such period) and
(v) the cumulative effect of a change in accounting principles shall be
excluded.
"Consolidated Net Worth" means, with respect to the Company as of any date,
the sum of (i) the consolidated equity of the common shareholders of the
Company and its consolidated Restricted Subsidiaries as of such date plus (ii)
the respective amounts reported on the Company's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by the Company upon issuance of such preferred stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within 12
months after the acquisition of such business) subsequent to the date of the
Indenture in the book value of any asset owned by the Company or a
consolidated Restricted Subsidiary of the Company, (y) all investments as of
such date in unconsolidated Restricted Subsidiaries and in Persons that are
not Restricted Subsidiaries (except, in each case, Permitted Investments), and
(z) all unamortized debt discount and expense and unamortized deferred charges
as of such date, all of the foregoing determined in accordance with GAAP.
"Consolidated Tangible Assets" means the total amount of assets (less
applicable reserves and other properly deductible items) which under generally
accepted accounting principles would be included on a consolidated balance
sheet of the Company and its Restricted Subsidiaries after deducting therefrom
all goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, which in each case under generally
accepted accounting principles would be included on such consolidated balance
sheet.
"Continuing Directors" means individuals who at the beginning of the period
of determination constituted the Board of Directors of the Company, Old GCL or
New GCL, as the case may be, together with any new directors whose election by
such Board of Directors or whose nomination for election by the shareholders
of the Company, GCL or New GCL, as the case may be, was approved by a vote of
at least a majority of the directors of the Company, GCL or New GCL, as the
case may be, then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously so
approved or is designee of any one of the Permitted Holders or any combination
thereof or was nominated or elected by any such Permitted Holder(s) or any of
their designees.
"Currency Agreement" means, with respect to any Person, any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or beneficiary.
"Default" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the
Holder thereof, in whole or in part, on or prior to the date that is 91 days
after the date on which the Notes mature; provided, however, that any Capital
Stock that would constitute Disqualified Stock solely because the holders
thereof have the right to require the Company to repurchase such Capital Stock
upon the occurrence of a Change of Control or an Asset Sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
the Company may not repurchase or redeem any such Capital Stock pursuant to
such provisions unless such repurchase or redemption complies with the
covenant described above under the caption "--Certain Covenants--Restricted
Payments."
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"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an offering for cash by Old GCL, New GCL or the
Company of its common stock, or options, warrants or rights to acquire such
common stock.
"Existing Indebtedness" means Indebtedness of the Company and its Restricted
Subsidiaries (other than Indebtedness under the Credit Agreement) in existence
on the date of the Indenture, until such amounts are repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"GCL Expenses" means (i) costs (including all professional fees and
expenses) incurred by Old GCL or New GCL to comply with its reporting
obligations under federal or state laws or under the Indenture, including any
reports filed with respect to the Securities Act, the Exchange Act or the
respective rules and regulations promulgated thereunder, (ii) indemnification
obligations of Old GCL or New GCL owing to directors, officers, employees or
other Persons under its charter or by-laws or pursuant to written agreements
with any such Person, (iii) fees and expenses payable by Old GCL or New GCL in
connection with the issuance of the Notes and the Exchange Notes, (iv) other
operational expenses of Old GCL or New GCL incurred in the ordinary course of
business and (v) expenses incurred by Old GCL or New GCL in connection with
any public offering of Capital Stock or Indebtedness (x) where the net
proceeds of such offering are intended to be received by or contributed or
loaned to the Company or a Restricted Subsidiary, or (y) in a prorated amount
of such expenses in proportion to the amount of such net proceeds intended to
be so received, contributed or loaned, or (z) otherwise on an interim basis
prior to completion of such offering so long as Old GCL or New GCL shall cause
the amount of such expenses to be repaid to the Company or the relevant
Restricted Subsidiary out of the proceeds of such offering promptly if
completed.
"GTH" means Global Telesystems Holdings Ltd., a Bermuda company.
"GTH Preference Shares" means the Senior Increasing Rate Redeemable
Exchangeable Preference Shares of GTH.
"Government Securities" means securities that are (a) direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentally thereof) of
the payment of which the full faith and credit of the United States of America
is pledged, (b) obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the United States of America the payment of
which is unconditionally guaranteed as a full faith and credit obligation by
the United States of America or (c) obligations of a Person the payment of
which is unconditionally guaranteed as a full faith and credit obligation by
the United States of America, which, in each case, are not callable or
redeemable at the issuer's option.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Guarantors" means each of (i) Old GCL (until such time, if any, that the
Guarantee of Old GCL may be terminated by Old GCL immediately prior to any
liquidation or dissolution of Old GCL in connection with an initial public
offering of Capital Stock of New GCL), New GCL, GTH, Global Crossing
International, Ltd., Global Crossing Development Co., Global Crossing Holdings
U.K. Ltd., Global Crossing Marketing U.K. Ltd. and Global Crossing Marketing
USA Inc., and (ii) any other Restricted Subsidiary of the Company that
executes a Guarantee in accordance with the provisions of the Indenture, and
their respective successors and assigns.
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"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under any Interest Rate Agreement or Currency Agreement.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced
by bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Indebtedness of others
secured by a Lien on any asset of such Person (whether or not such
Indebtedness is assumed by such Person) and, to the extent not otherwise
included, the guarantee by such Person of any indebtedness of any other
Person. The amount of any Indebtedness outstanding as of any date shall be (i)
the accreted value thereof, in the case of any Indebtedness issued with
original issue discount, and (ii) the principal amount thereof, together with
any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Initial Public Offering" means, as applicable, an initial public offering
of common stock by the Company, GCL or New GCL that results in gross cash
proceeds to the Company, Old GCL or New GCL, as applicable, of at least $200.0
million.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate protection agreement, interest rate future agreement, interest rate
option agreement, interest rate swap agreement, interest rate cap agreement,
interest rate collar agreement, interest rate hedge agreement or other similar
agreement or arrangement to which such Person is a party or beneficiary.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to directors, officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or
would be classified as investments on a balance sheet prepared in accordance
with GAAP. If the Company or any of its Restricted Subsidiaries sells or
otherwise disposes of any Equity Interests of any direct or indirect
Subsidiary such that, after giving effect to any such sale or disposition,
such Person is no longer a Subsidiary of the Company or such Restricted
Subsidiary, the Company shall be deemed to have made an Investment on the date
of any such sale or disposition equal to the fair market value of the Equity
Interests of such Subsidiary not sold or disposed of in an amount determined
as provided in the final paragraph of the covenant described above under the
caption "--Certain Covenants--Restricted Payments."
"Letters of Credit" means one or more irrevocable direct pay letters of
credit issued by a bank or other financial institution to support the payment
of equity obligations of the Company to its Project Subsidiaries.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in, and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"MAC Subsidiaries" means Mid-Atlantic Crossing Holdings Ltd., a Bermuda
company, and all of its direct and indirect Subsidiaries.
"Management Advances" means loans or advances made to directors, officers or
employees of Old GCL or New GCL, the Company or any Restricted Subsidiary (i)
in respect of travel, entertainment or moving-related
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expenses incurred in the ordinary course of business, (ii) in respect of
moving-related expenses incurred in connection with any closing or
consolidation of any facility, or (iii) in the ordinary course of business not
exceeding $2.5 million in the aggregate at any time outstanding.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions made pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any
of its Restricted Subsidiaries and (ii) any extraordinary gain or loss,
together with any related provision for taxes on such extraordinary gain or
loss.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of
any non-cash consideration received in any Asset Sale), net of the direct
costs relating to such Asset Sale (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), and any reserve for adjustment
in respect of the sale price of such asset or assets established in accordance
with GAAP.
"New GCL" means Global Crossing Ltd., a Bermuda company.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any Restricted Subsidiary (a) provides any guarantee or credit support of
any kind (including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute Indebtedness) or (b) is directly or
indirectly liable (as a guarantor or otherwise) and (ii) no default with
respect to which (including any rights that the holders thereof may have to
take enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default under such other
Indebtedness or cause the payment thereof to be accelerated or payable prior
to its Stated Maturity.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means any Co-Chairman of the Board, the President, the Chief
Executive Officer, the Chief Operating Officer, the Chief Financial Officer,
any Senior Vice President, any Vice President, the Treasurer or the Secretary
of the Company.
"Officers Certificate" means a certificate signed by two Officers.
"Old GCL" means Global Crossing Ltd., LDC, a Cayman Islands company limited
by shares.
"PAC Subsidiaries" means Pan American Crossing Holdings Ltd., a Bermuda
company, and all of its direct and indirect Subsidiaries.
"PC-1 Subsidiaries" means Pacific Crossing Holdings Ltd., a Bermuda company,
and all of its direct and indirect Subsidiaries.
"Permitted Business" means any business that is the same as or related,
ancillary or complementary to any of the businesses of the Company or any of
its Restricted Subsidiaries on the date of the Indenture.
"Permitted Holder" means Pacific Capital Group, Inc. and CIBC Oppenheimer
Corp., and their respective Affiliates.
"Permitted Investments" means (a) any Investment in the Company or in a
Wholly Owned Restricted Subsidiary of the Company that is engaged in a
Permitted Business; (b) any Investment in Cash Equivalents; (c)
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any Investment by the Company or any of its Restricted Subsidiaries in a
Person, if as a result of such Investment (i) such Person becomes a Wholly
Owned Restricted Subsidiary of the Company that is engaged in a Permitted
Business or (ii) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Restricted Subsidiary of the
Company that is engaged in a Permitted Business; (d) any Investment made as a
result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with the covenant described above under the
caption "--Repurchase at the Option of Holders--Asset Sales"; (e) any
acquisition of assets solely in exchange for the issuance of Equity Interests
(other than Disqualified Stock) of the Company; (f) other Investments in any
Project Subsidiary having an aggregate fair market value (measured on the date
each such Investment was made and without giving effect to subsequent changes
in value), when taken together with all other Investments made pursuant to
this clause (f) that are at the time outstanding, not to exceed $10.0 million;
and (g) any Investment made in a Receivables Entity in a Qualified Receivables
Transaction.
"Permitted Liens" means (i) Liens to secure Indebtedness permitted by
clauses (d), (e), (m) and (n) of the second paragraph of the covenant
described above under the caption "--Incurrence of Indebtedness and Issuance
of Preferred Stock" covering only the assets acquired with such Indebtedness;
(ii) Liens in favor of the Company; (iii) Liens on property of a Person
existing at the time such Person is merged with or into or consolidated with
the Company or any of its Restricted Subsidiaries; provided that such Liens
were in existence prior to the contemplation of such merger or consolidation
and do not extend to any assets other than those of the Person merged into or
consolidated with the Company or such Restricted Subsidiary; (iv) Liens on
property existing at the time of acquisition thereof by the Company or any of
its Restricted Subsidiaries, provided that such Liens were in existence prior
to the contemplation of such acquisition; (v) Liens to secure the performance
of statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vi)
Liens existing on the date of the Indenture; (vii) Liens for taxes,
assessments or governmental charges or claims that are not yet delinquent or
that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (viii) Liens incurred in the ordinary course of business
of the Company or any of its Restricted Subsidiaries with respect to
obligations that do not exceed $5.0 million at any one time outstanding and
that (a) are not incurred in connection with the borrowing of money or the
obtaining of advances or credit (other than trade credit in the ordinary
course of business) and (b) do not in the aggregate materially detract from
the value of the property or materially impair the use thereof in the
operation of business by the Company or such Restricted Subsidiary; and (ix)
Liens not otherwise permitted by the foregoing clauses (i) through (viii)
securing Indebtedness in an aggregate amount not to exceed 10% of the
Company's Consolidated Tangible Assets.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal
amount (or accreted value, if applicable) of such Permitted Refinancing
Indebtedness does not exceed the principal amount of (or accreted value, if
applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded is subordinated in right of payment to the Notes, such Permitted
Refinancing Indebtedness has a final maturity date later than the final
maturity date of, and is expressly subordinated in right of payment to, the
Notes on terms at least as favorable to the Holders of the Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company, a Restricted Subsidiary that
is a Guarantor or the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
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"Person" means any individual, corporation, partnership, joint venture,
limited liability company, incorporated or unincorporated association, joint-
stock company, trust, unincorporated organization or government or other
agency or political subdivision thereof or other entity of any kind.
"Project Subsidiary" means any of the AC Subsidiaries, PC-1 Subsidiaries,
MAC Subsidiaries or PAC Subsidiaries, and any other Subsidiary of the Company
formed to develop, own and operate undersea fiber optic telecommunications
cable systems.
"Purchase Money Indebtedness" means Indebtedness (including Acquired Debt
and Capital Lease Obligations, mortgage financings and purchase money
obligations) incurred for the purpose of financing all or any part of the cost
of construction, installation, acquisition, lease, development or improvement
of any assets used or useful in a Permitted Business, including any related
notes, guarantees, collateral documents, instruments and agreements executed
in connection therewith, as the same may be amended, supplemented, modified or
restated from time to time.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its
Subsidiaries pursuant to which the Company or any of its Subsidiaries may
sell, convey or otherwise transfer to (a) a Receivables Entity (in the case of
a transfer by the Company or any of its Subsidiaries) and (b) any other Person
(in the case of a transfer by a Receivables Entity), or may grant a security
interest in, any receivables (whether now existing or arising in the future)
of the Company or any of its Subsidiaries, and any assets related thereto
including, without limitation, all collateral securing such receivables, all
contracts and all guarantees or other obligations in respect of such
receivables, and the proceeds of such receivables.
"Receivables Entity" means a Wholly Owned Subsidiary of the Company (or
another Person in which the Company or any Subsidiary of the Company may make
an Investment and to which the Company or any Subsidiary of the Company
transfers receivables and related assets) which engages in no activities other
than in connection with the financing of receivables and which is designated
by the Board of Directors (as provided below) as a Receivables Entity, (a) no
portion of the Indebtedness or any other Obligations (contingent or otherwise)
of which (i) is guaranteed by the Company or any Subsidiary of the Company
(excluding guarantees of Obligations (other than the principal of, and
interest on, Indebtedness) pursuant to Standard Securitization Undertakings),
(ii) is recourse to or obligates the Company or any Subsidiary of the Company
in any way other than pursuant to Standard Securitization Undertakings or
(iii) subjects any property or asset of the Company or any Subsidiary of the
Company, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard Securitization
Undertakings, (b) with which neither the Company nor any Subsidiary of the
Company has any material contract, agreement, arrangement or understanding
other than on terms no less favorable to the Company or such Subsidiary than
those that might be obtained at the time from Persons that are not Affiliates
of the Company, other than fees payable in the ordinary course of business in
connection with servicing receivables, and (c) to which neither the Company
nor any Subsidiary of the Company has any obligation to maintain or preserve
such entity's financial condition or cause such entity to achieve certain
levels of operating results. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy
of the resolution of the Board of Directors giving effect to such designation
and an Officers' Certificate certifying that such designation complied with
the foregoing conditions.
"Related Taxes" means any taxes, charges or assessments, including, but not
limited to, sales, use, transfer, rental, ad valorem, value-added, stamp,
property, consumption, franchise, license, capital, net worth, gross receipts,
excise, occupancy, intangibles or similar taxes, charges or assessments (other
than taxes measured by income and withholding imposed on payments made by Old
GCL or New GCL required to be paid by Old GCL or New GCL by virtue of its
being incorporated or having Capital Stock outstanding (but not by virtue of
owning stock or other equity interests of any corporation or other entity
other than the Company or any of its Subsidiaries), or being a holding company
parent of the Company of receiving dividends from or other distributions in
respect of the Capital Stock of the Company, or having guaranteed any
obligations of the
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Company of any Subsidiary thereof, or having made any payment in respect of
any of the items for which the Company is permitted to make payments to Old
GCL or New GCL pursuant to the covenant described above under "--Certain
Covenants--Restricted Payments,"
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary. As of the date of the
Indenture, all of the Guarantors (except for Old GCL and New GCL) and AC
Subsidiaries were Restricted Subsidiaries; provided, however, that at no time
may the AC Subsidiaries or any successor to any of them or any entities that
provide extensions, upgrades or additions to AC-1 (including AC-2) be
designated as Unrestricted Subsidiaries.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Subsidiary of the
Company which are reasonably customary in securitization of receivables
transactions.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the
date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company (other
than the AC Subsidiaries or any successor to any of them) that is designated
by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any
direct or indirect obligation to maintain or preserve such Person's financial
condition or to cause such Person to achieve any specified levels of operating
results; and (c) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Company or any of its
Restricted Subsidiaries. Any such designation by the Board of Directors shall
be evidenced by filing with the Trustee a certified copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and
was permitted by the covenant described above under the caption "--Certain
Covenants--Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary,
it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of such Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary of the Company as of such date (and, if
such Indebtedness is not permitted to be incurred as of such date under the
covenant described under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock," the Company shall be in default of such
covenant). The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i)
such Indebtedness is permitted under the covenant described under the
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caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock," calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period, and (ii) no
Default or Event of Default would be in existence following such designation.
As of the date of the Indenture, all of the PC-1 Subsidiaries, MAC
Subsidiaries and PAC Subsidiaries are Unrestricted Subsidiaries.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall
at the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
BOOK-ENTRY, DELIVERY AND FORM
All Exchange Notes will be represented by permanent Global Notes in fully
registered form without coupons (the "Global Notes"), which will be deposited
with the Trustee as custodian for DTC and registered in the name of DTC or of
a nominee of DTC.
DTC has advised the Company that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a "banking
organization" within the meaning of the New York Banking Law, (iii) a member
of the Federal Reserve System, (iv) a "clearing corporation" within the
meaning of the Uniform Commercial Code, as amended, and (v) a "clearing
agency" registered pursuant to Section 17A of the Exchange Act. DTC was
created to hold securities for its Participants and facilitates the clearance
and settlement of securities transactions between Participants through
electronic book-entry charges to the accounts of its Participants, thereby
eliminating the need for physical transfer and delivery of certificates. DTC's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain
other organizations. Indirect access to DTC's system is also available to
other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants") that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly.
Investors who are not Participants may beneficially own securities held by or
on behalf of DTC only through Participants or Indirect Participants.
The Company expects that pursuant to procedures established by DTC (i) upon
issuance of a Global Note, DTC will credit, on its internal system, the
principal amount of Exchange Notes of the individual beneficial interests
represented by such Global Note to the respective accounts of persons who have
accounts with such depository and (ii) ownership of beneficial interests in
such Global Notes will be shown on, and the transfer of such ownership will be
effected only through, records maintained by DTC (with respect to interests of
Participants) and the records of Participants and Indirect Participants (with
respect to interests of persons other than Participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of securities in definitive form.
Accordingly, the ability to transfer interests in the Notes represented by a
Global Note to such persons may be limited. In addition, because DTC can act
only on behalf of its Participants, who in turn act on behalf of persons who
hold interests through Participants, the ability of a person having an
interest in
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Notes represented by a Global Note to pledge or transfer such interest to
persons or entities that do not participate in DTC's system, or to otherwise
take actions in respect of such interest, may be affected by the lack of a
physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or such nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a
Global Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Notes, and will not be considered the owners or
holders thereof under the Indenture for any purpose, including with respect to
the giving of any direction, instruction or approval to the Trustee
thereunder. Accordingly, each holder owning a beneficial interest in a Global
Note must rely on the procedures of DTC and, if such holder is not a
Participant or an Indirect Participant, on the procedures of the Participant
through which such holder owns its interest, to exercise any rights of a
holder of Notes under the Indenture or such Global Note. The Company
understands that under existing industry practice, in the event that the
Company requests any action of holders of Notes, or a holder that is an owner
of a beneficial interest in a Global Note desires to take any action that DTC,
as the holder of such Global Note, is entitled to take, DTC would authorize
the Participants to take such action and the Participants would authorize
holders owning through such Participants to take such action or would
otherwise act upon the instruction of such holders. Neither the Company nor
the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of Notes by DTC, or for
maintaining, supervising or reviewing any records of DTC relating to such
Notes.
Payments with respect to the principal of, and premium, if any, liquidated
damages, if any, and interest on, any Notes represented by a Global Note
registered in the name of DTC or its nominee on the applicable record date
will be payable by the Trustee to or at the direction of DTC or its nominee in
its capacity as the registered holder of the Global Note representing such
Notes under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose names the Notes, including the
Global Notes, are registered as the owners thereof for the purpose of
receiving payment thereon and for any and all other purposes whatsoever.
Accordingly, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to owners of
beneficial interests in a Global Note (including principal, premium, if any,
liquidated damages, if any, and interest). Payments by the Participants and
the Indirect Participants to the owners of beneficial interests in a Global
Note will be governed by standing instructions and customary industry practice
and will be the responsibility of the Participants or the Indirect
Participants and DTC.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the one hand, and
Euroclear or Cedel participants, on the other hand, will be effected through
DTC in accordance with DTC's rules on behalf of Euroclear or Cedel, as the
case may be, by its respective depositary; however, such cross-market
transactions will require delivery of instructions to Euroclear or Cedel, as
the case may be, by the counterparty in such system in accordance with the
rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Cedel, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Notes in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Euroclear participants and Cedel
participants may not deliver instructions directly to the depositaries for
Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant
in DTC will be credited, and any such crediting will be reported to the
relevant Euroclear or Cedel participant, during the securities settlement
processing day (which must be a business day for Euroclear and Cedel)
immediately following the settlement date of DTC. Cash received in
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Euroclear or Cedel as a result of sales of interest in a Global Note by or
through a Euroclear or Cedel participant to a Participant in DTC will be
received for value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Notes among participants in
DTC, Euroclear and Cedel, they are under no obligation to perform or to
continue to perform such procedures, and such procedures may be discontinued
at any time. Neither the Company nor the Trustee will have any responsibility
for the performance by DTC, Euroclear or Cedel or their respective
participants or indirect participants of their respective obligations under
the rules and procedures governing their operations.
CERTIFICATED NOTES
If (i) the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depositary or DTC ceases to be registered as a
clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days of such notice or cessation, (ii) the Company, at its
option, notifies the Trustee in writing that it elects to cause the issuance
of Notes in definitive form under the Indenture or (iii) upon the occurrence
of certain other events as provided in the Indenture, then, upon surrender by
DTC of the Global Notes, certificated Notes will be issued to each person that
DTC identifies as the beneficial owner of the Notes represented by the Global
Notes. Upon any such issuance, the Trustee is required to register such
certificated Notes in the name of such person or persons (or the nominee of
any thereof) and cause the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners
of the related Notes and each such person may conclusively rely on, and shall
be protected in relying on, instructions from DTC for all purposes (including
with respect to the registration and delivery, and the respective principal
amounts, of the Notes to be issued).
EXCHANGE OFFER; REGISTRATION RIGHTS
The Company, the Guarantors and the Initial Purchasers entered into the
Registration Agreement pursuant to which the Company agreed, for the benefit
of the holders of the Restricted Notes, that the Company will, at its cost,
(i) cause to be filed, on or prior to 90 days after the Closing Date, the
Exchange Offer Registration Statement with the Commission under the Securities
Act concerning the Exchange Offer, and (ii) (a) use its reasonable best
efforts to cause such Exchange Offer Registration Statement to be declared
effective by the Commission on or prior to 150 days after the Closing Date and
(b) cause the Exchange Offer to remain open for the minimum period required by
applicable federal and state securities laws, provided, however, that in no
event shall such period be less than 20 Business Days. For each Restricted
Note surrendered to the Company and accepted for exchange pursuant to the
Exchange Offer, the holder of such Restricted Note will receive an Exchange
Note having a principal amount equal to that of the surrendered Restricted
Note.
Based upon no-action letters issued by the staff of the Commission to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Restricted Notes would in general be freely
transferable after the Exchange Offer without further registration under the
Securities Act if the holder of the Exchange Notes represents (i) that it is
not an "affiliate," as defined in Rule 405 under the Securities Act, of the
Company, (ii) that it is acquiring the Exchange Notes in the ordinary course
of its business and (iii) that it has no arrangement or understanding with any
person to participate in the distribution (within the meaning of the
Securities Act) of the Exchange Notes; provided that, in the case of broker-
dealers, a prospectus meeting the requirements of the Securities Act be
delivered as required. However, the Commission has not considered the Exchange
Offer in the context of a no-action letter and there can be no assurance that
the staff of the Commission would make a similar determination with respect to
the Exchange Offer as in such other circumstances. Holders of Restricted Notes
wishing to accept the Exchange Offer must represent to the Company
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that such conditions have been met. Each broker-dealer that receives Exchange
Notes for its own account pursuant to the Exchange Offer, where it acquired
the Restricted Notes exchanged for such Exchange Notes for its own account as
a result of market-making or other trading activities, must acknowledge that
it will deliver a prospectus in connection with the resale of such Exchange
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in
exchange for Restricted Notes where such Restricted Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of one year after
consummation of the Exchange Offer, it will make this Prospectus available to
any broker-dealer for use in connection with any such resale. A broker-dealer
that delivers such a prospectus to purchasers in connection with such resales
will be subject to certain of the civil liability provisions under the
Securities Act, and will be bound by the provisions of the Registration
Agreement (including certain indemnification and contribution rights and
obligations).
A holder of Restricted Notes (other than certain specified holders) who
wishes to exchange such Restricted Notes for Exchange Notes in the Exchange
Offer will be required to represent that any Exchange Notes to be received by
it will be acquired in the ordinary course of its business, and that at the
time of the commencement of the Exchange Offer it has no arrangement or
understanding with any person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Notes and that it is not an
"affiliate" of the Company, as defined in Rule 405 under the Securities Act,
or if it is an affiliate, that it will comply with the registration and
prospectus delivery requirements of the Securities Act to the extent
applicable.
If (i) the Exchange Offer is not permitted by applicable law or Commission
policy or (ii) if any Holder of Restricted Securities shall notify the Company
within 20 business days following the consummation of the Exchange Offer that
(A) such holder was prohibited by law or Commission policy from participating
in the Exchange Offer or (B) such holder may not resell the Exchange Notes
acquired by it in the Exchange Offer to the public without delivering a
prospectus and the Prospectus contained in the Exchange Offer Registration
Statement is not appropriate or available for such resales by such holders or
(C) such holder is a broker-dealer and holds Notes acquired directly from the
Company or any of its affiliates, then the Company and the Guarantor will, at
their cost, (a) use their reasonable best efforts to cause to be filed a shelf
registration statement (the "Shelf Registration Statement") covering resales
of the Restricted Notes or the Exchange Notes, as the case may be, (b) use
their reasonable best efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act and (c) use their reasonable best
efforts to keep the Shelf Registration Statement effective until two years
after its effective date or such shorter period ending when all resales of
Restricted Notes or Exchange Notes covered by such Shelf Registration
Statement have been made. A holder selling such Restricted Notes or Exchange
Notes pursuant to the Shelf Registration Statement generally would be required
to be named as a selling security holder in the related prospectus and to
deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales
and will be bound by the provisions of the Registration Agreement which are
applicable to such holder (including certain indemnification obligations).
If (a) the Company and the Guarantors fail to file any of the Registration
Statements required by the Registration Agreement on or before the date
specified for such filing, (b) any of such Registration Statements is not
declared effective by the Commission on or prior to the date specified for
such effectiveness, or (c) the Company and the Guarantors fail to consummate
the Registered Exchange Offer within 180 business days of the Closing Date
with respect to the Exchange Offer Registration Statement, or (d) any
Registration Statement required by the Registration Agreement is declared
effective but thereafter ceases to be effective or usable in connection with
its intended purpose (each such event referred to in clause (a) through (d)
above a "Registration Default"), then the Company and the Guarantors will pay
to each holder of the Restricted Notes affected thereby Special Interest which
will accrue and be payable semi-annually on the Notes and the Exchange Notes
(in addition to the stated interest on the Notes and the Exchange Notes) from
and including the date such Registration Default occurs to, but excluding the
date on which the applicable Registration Statement is filed or
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is declared effective, the Registered Exchange Offer is consummated, or the
applicable Registration Statement is again declare effective or made usable.
During the time that Special Interest is accruing continuously, the rate of
such Special Interest shall be 0.50% per annum during the first 90-day period
and shall increase by 0.25% per annum for each subsequent 90-day period, but
in no event shall such rate exceed 1.0% per annum in the aggregate regardless
of the number of Registration Defaults. If, after the cure of all Registration
Defaults then in effect, there is a subsequent Registration Default, the rate
of Special Interest for such subsequent Registration Default shall initially
be 0.50% regardless of the Special Interest rate in effect with respect to any
prior Registration Default a the time of the cure of such Registration
Default.
The summary herein of certain provisions of the Registration Agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the Registration Agreement, a copy of
which is filed as an exhibit to the Exchange Offer Registration Statement of
which this Prospectus constitutes a part.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The following summary description of the capital stock of the Company does
not purport to be complete and is subject to the provisions of the constituent
documents of New GCL and each of its subsidiaries.
OLD GCL EXCHANGE
Prior to the Stock Offerings, all shares of common stock of New GCL were
held by Old GCL. In order to provide for certain class voting protections and
differential rights upon liquidation, prior to such date Old GCL had issued
and outstanding five classes of common stock: Class A shares, Class B shares,
Class C shares, Class D shares and Class E shares. Class A shares, Class B
shares and Class C shares had identical voting rights other than with respect
to election of directors, in which case it is specified in Old GCL's Articles
of Association how many directors each class is entitled to elect. Except with
respect to any shareholder vote that would modify the rights of such class,
holders of Class D shares and Class E shares had no voting rights. With
respect to distributions, Class D shares were subordinated to the rights of
each of the other classes of stock until such other classes received
cumulative payments yielding a specific internal rate of return. In January
1998, Old GCL authorized Class E shares, which were non-voting but otherwise
identical in all respects to Class B shares, to be issued to individuals
receiving awards under Old GCL's Stock Incentive Plan that was established at
such time.
Prior to the Stock Offerings, New GCL declared a stock dividend to Old GCL
so that Old GCL held 1.5 shares of common stock of New GCL for each share of
common stock of Old GCL outstanding. Pursuant to the terms of the Articles of
Association of Old GCL, prior to the Stock Offerings each holder of Class D
shares converted such shares into a fraction of a Class E share based upon a
valuation at the time of such conversion, together with a warrant to purchase
the remaining fraction of such Class E share at an exercise price based upon
such market valuation. In addition, each holder of Class E shares of Old GCL
had such Class E shares converted into Class B shares of Old GCL. Accordingly,
each holder of Class D and Class E shares ultimately received Class B shares,
with the warrants to purchase Class E shares received by former Class D
shareholders then cancelled in exchange for warrants ("GCL Warrants") to
purchase shares of Common Stock of New GCL at an exercise price equal to the
Price to Public Per Share payable in the Stock Offerings.
Immediately subsequent to such transactions and prior to the Stock
Offerings, each shareholder of Old GCL (other than CIBC) agreed with Old GCL
to exchange their interests in Old GCL for shares of Common Stock of New GCL
held by Old GCL at a rate of 1.5 shares of Common Stock of New GCL per share
of common stock of Old GCL. CIBC did not participate in the Old GCL Exchange
and continues to maintain its beneficial ownership position in New GCL through
Old GCL. Subsequent to the Old GCL Exchange and the Stock Offerings, each
previous shareholder of Old GCL holds an equal proportionate interest in New
GCL, with Old GCL now wholly-owned by CIBC.
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The following table sets forth the beneficial share ownership of Old GCL by
directors, executive officers and principal shareholders of the Company prior
to the Old GCL Exchange and the Stock Offerings, and the number of shares of
Common Stock to be transferred in connection with the Old GCL Exchange:
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
-------------------- --------------------- --------------------- -------------------------------
NEW
NEW GCL NEW GCL NEW GCL NEW GCL GCL
OLD GCL SHARES OLD GCL SHARES OLD GCL SHARES OLD GCL SHARES WARRANTS
NAME SHARES RECEIVED SHARES RECEIVED SHARES RECEIVED SHARES(2) RECEIVED RECEIVED
- ---------------- --------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Canadian
Imperial Bank of
Commerce(3)..... 1,720,600 2,580,900 0 0 30,175,000 45,262,500 0 0 0
Pacific Capital
Group, Inc. .... 804,338 1,206,507 15,040,966 22,561,449 0 0 10,296,100 14,983,516 1,261,545
Continental
Casualty
Company......... 8,208,390 12,312,585 1,575,000 2,362,500 3,575,000 5,362,500 0 0 0
MRCo, Inc. ..... 407,846 611,769 7,626,700 11,440,050 0 0 3,013,800 4,171,733 348,965
Gary Winnick.... 804,338 1,206,507 15,040,966 22,561,449 0 0 10,296,100 14,983,516 1,261,545
Lodwrick M.
Cook............ 0 0 300,000 450,000 0 0 0 0 0
Jack M. Scanlon. 0 0 0 0 0 0 0 0 0
Dan L. Cohrs.... 0 0 0 0 0 0 0 0 0
David L. Lee.... 127,340 191,009 2,381,275 3,571,912 0 0 2,215,900 3,895,379 335,902
Abbott L. Brown. 53,490 80,234 1,000,253 1,500,379 0 0 1,523,400 2,191,340 184,245
Barry Porter.... 105,711 158,567 1,976,816 2,965,223 0 0 2,442,500 3,628,839 306,372
James C. Gorton. 0 0 0 0 0 0 0 0 0
Jack Finlayson.. 0 0 0 0 0 0 0 0 0
K. Eugene
Shutler......... 5,042 7,563 94,282 141,423 0 0 0 0 0
Hillel
Weinberger...... 9,070,600 13,605,900 1,575,000 2,362,500 3,575,000 5,362,500 0 0 0
Jay R. Bloom(3). 1,720,600 2,580,900 0 0 30,175,000 45,262,500 0 0 0
Dean C.
Kehler(3)....... 1,720,600 2,580,900 0 0 30,175,000 45,262,500 0 0 0
Jay R.
Levine(3)....... 1,720,600 2,580,900 0 0 30,175,000 45,262,500 0 0 0
William P.
Phoenix(3)...... 1,720,600 2,580,900 0 0 30,175,000 45,262,500 0 0 0
Bruce Raben(3).. 1,720,600 2,580,900 0 0 30,175,000 45,262,500 0 0 0
Michael R.
Steed........... 407,846 611,769 7,626,700 11,440,050 0 0 3,013,800 4,171,733 348,965
William E.
Conway.......... 0 0 0 0 0 0 0 0 0
Toshiaki
Ogasawara....... 0 0 0 0 0 0 0 0 0
Geoffrey J. W.
Kent............ 0 0 0 0 0 0 0 0 0
<CAPTION>
CLASS E(1)
----------------
NEW GCL
OLD GCL SHARES
NAME SHARES RECEIVED
- ----------------- ------- --------
<S> <C> <C>
Canadian
Imperial Bank of
Commerce(3)..... 50,000 75,000
Pacific Capital
Group, Inc. .... 0 0
Continental
Casualty
Company......... 0 0
MRCo, Inc. ..... 0 0
Gary Winnick.... 200,000 300,000
Lodwrick M.
Cook............ 100,000 150,000
Jack M. Scanlon. 300,000 450,000
Dan L. Cohrs.... 150,000 225,000
David L. Lee.... 100,000 150,000
Abbott L. Brown. 100,000 150,000
Barry Porter.... 100,000 150,000
James C. Gorton. 125,000 187,500
Jack Finlayson.. 195,000 292,500
K. Eugene
Shutler......... 66,667 100,000
Hillel
Weinberger...... 10,000 15,000
Jay R. Bloom(3). 50,000 75,000
Dean C.
Kehler(3)....... 50,000 75,000
Jay R.
Levine(3)....... 50,000 75,000
William P.
Phoenix(3)...... 50,000 75,000
Bruce Raben(3).. 50,000 75,000
Michael R.
Steed........... 10,000 15,000
William E.
Conway.......... 10,000 15,000
Toshiaki
Ogasawara....... 10,000 15,000
Geoffrey J. W.
Kent............ 10,000 15,000
</TABLE>
- -------
(1) Includes shares of Common Stock issuable upon the exercise of stock
options which are exercisable within 60 days of August 13, 1998.
(2) In connection with the liquidation of TDC, Messrs. Winnick, Lee, Porter
and Brown also received 735,985, 833,587, 249,438 and 83,147 shares of
Common Stock, respectively, plus warrants to acquire a further 65,714,
75,150, 22,317 and 7,439 shares of Common Stock, respectively, directly
attributable to Class D shares held by TDC. Such amounts are reflected in
the post-liquidation columns under "Class D" above; however, amounts
initially held by TDC are not shown in the "Old GCL Shares" column under
"Class D" above. See "Certain Transactions--Transactions with
Telecommunications Development Company."
(3) Amounts appearing under "New GCL Shares Received", other than Class E
shares, are held through Old GCL, which became wholly-owned by CIBC after
the Old GCL Exchange.
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NEW GCL
General. Pursuant to its Memorandum of Association, the authorized share
capital of New GCL is $6,000,000, divided into 600,000,000 shares of par value
$.01 each. Prior to the Old GCL Exchange, all of the outstanding shares of
Common Stock of New GCL were held by Old GCL. Currently, 205,042,900 shares of
Common Stock are issued and outstanding.
Voting and Transfer Restrictions. Following the adoption of the Amended and
Restated Bye-Laws of New GCL immediately prior to the Stock Offerings, each
share of Common Stock has one vote, except that if, and so long as, the
Controlled Shares (as defined below) of any person constitute more than 9.5%
(or, in the case of CIBC and certain of its affiliates, collectively, 35%) of
the voting power of the outstanding shares, including the Common Stock, of the
Company (an "Over-the-Threshold Common Stockholder"), the voting rights with
respect to the Controlled Shares owned by such person will be limited, in the
aggregate, to a voting power of 9.5%, pursuant to a formula set forth in the
Bye-Laws. The votes that could be cast by Over-the-Threshold Common
Stockholders but for the restrictions on voting rights described above will be
allocated to the other holders of Common Stock, pro rata based upon the number
of shares of Common Stock held by all other holders of Common Stock, subject
only to the further limitation that no stockholder allocated any such voting
rights may exceed the applicable limitation set forth above as a result of
such allocation. "Controlled Shares" includes, among other things, all shares
of Common Stock that a person is deemed (i) to own directly, indirectly or
constructively pursuant to Section 958 of the Code or (ii) to beneficially own
directly or indirectly as a result of the possession of sole or shared voting
power within the meaning of Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder.
The Bye-Laws also provide that any transfer of shares of Common Stock (or
any interest therein) that results in a person (other than PCG, GKW Unified
Holdings, LLC, CIBC, Continental Casualty Company or MRCo, Inc. or their
affiliates or certain lenders to any of them) beneficially owning (within the
meaning of Section 13(d) of the Exchange Act), directly or indirectly,
Controlled Shares in excess of the Maximum Percentage (as defined below) of
the outstanding shares of Common Stock without the approval of a majority of
the members of the Board of Directors and stockholders holding at least 75% of
the votes that may be cast by all holders of Common Stock (after giving effect
to the voting limitations outlined above) shall not be registered in the share
register of the Company and shall be void and of no effect. "Maximum
Percentage" means (x) in the case of a natural person, 5%, and (y) in the case
of any person (other than a natural person) or any group (as used in Section
13(d) of the Exchange Act), 9.5%.
Amendments to or waivers of the voting reallocation and transfer restriction
provisions of the Bye-Laws will require the approval of the Board of Directors
and stockholders holding 75% of the votes that may be cast by all holders of
Common Stock. In the event of any such amendment or waiver, under certain
circumstances the Company shall indemnify and hold harmless any stockholder
who, as a result thereof, becomes subject to treatment as a "United States
Shareholder" for purposes of Section 951 et seq. of the Code from and against
all losses, costs, damages, liabilities and expenses directly or indirectly
arising out of such treatment.
These voting reallocation and transfer restrictions could make it difficult
for any person or group of persons acting in concert (other than certain
existing owners) to acquire control of the Company.
Distributions. Holders of Common Stock will be treated equally with respect
to all distributions to shareholders of New GCL.
NEW GCL STOCKHOLDERS AGREEMENT AND REGISTRATION RIGHTS AGREEMENT
New GCL, PCG, GKW Unified Holdings, LLC ("GKW"), CIBC, Continental Casualty
Company, MRCo, Inc. and certain other shareholders of the Company (including
certain of New GCL's officers and directors and
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their affiliates) (collectively, the "Existing Holders") have entered into a
Stockholders Agreement and a Registration Rights Agreement, each of which has
been filed as an exhibit to the Registration Statement of which this
Prospectus constitutes a part.
Under the Stockholders Agreement, the Company has been granted a right of
first refusal on certain private transfers by the Existing Holders during the
first two years after the consummation of the Stock Offerings. In addition,
subject to the exceptions set forth in the Stockholders Agreement, certain of
the Existing Holders have rights ("tag-along rights") permitting such
shareholder to participate, on the same terms and conditions, in certain
transfers of shares by other Existing Holders as follows: (i) PCG, GKW and
CIBC (and their affiliates and permitted transferees) shall have the right to
participate in any transaction initiated by any of them to transfer 5% or more
of the outstanding securities of the Company and (ii) PCG, GKW, CIBC,
Continental Casualty Company and MRCo, Inc (and their affiliates and permitted
transferees) shall have the right to participate in any transaction initiated
by any of them to transfer any securities of the Company which transaction
would result in a change of control of the Company. In addition, so long as
Gary Winnick, PCG and GKW and certain of their transferees ("PCG Holders")
collectively beneficially own (within the meaning of Section 13(d) of the
Exchange Act) at least 15% of the outstanding shares of Common Stock, any PCG
Holder shall be entitled to seek appraisal of the fair value of the Common
Stock beneficially owned by such person (and the payment thereof in cash) in
connection with any merger or consolidation of the Company or the sale, lease
or transfer of all or substantially all of the assets of the Company, if such
PCG Holder, in his capacity as a shareholder of the Company, shall not have
voted in favor of or given consent with respect to such transaction and
beneficially owns the Common Stock as to which appraisal is sought immediately
prior to consummation of the transaction.
Pursuant to the Registration Rights Agreement, the Existing Holders have
certain demand and piggyback registration rights and receive indemnification
and, in certain circumstances, expense reimbursement from the Company in
connection with such registration.
CAPITAL STOCK OF SUBSIDIARIES
New GCL owns, directly or indirectly, 100% of the capital stock of each of
its subsidiaries, except for the PC-1 joint venture entity, in which it will
have approximately a 58% economic interest. See "Business--Pacific Crossing."
TRANSFER AGENT AND REGISTRAR FOR COMMON STOCK
The transfer agent and registrar for the Common Stock is First Chicago Trust
Company of New York.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
AC-1 CREDIT FACILITY
ACL is the borrower under the $482.0 million senior secured AC-1 Credit
Facility, comprised of a $472.0 million term loan facility and a $10.0 million
working capital facility, with certain commercial lending institutions and
CIBC and Deutsche Bank AG, New York Branch, an affiliate of Deutsche Bank
Securities Inc., as lead agents for the lenders. The AC-1 Credit Facility is
secured by pledges of the stock of ACL and its subsidiaries (and other
entities holding landing licenses or AC-1 assets) and security interests in
the assets and revenues of ACL and its subsidiaries and is being used to
provide financing for a portion of AC-1. A portion of the AC-1 Credit Facility
is available only to pay interest on the loans prior to the AC-1 RFS date, and
a portion is available to issue letters of credit to the contractor of AC-1.
The loans under the AC-1 Credit Facility will amortize in eight semi-annual
installments, commencing on the first initial principal payment date (which
shall be May 31 or November 30) to occur more than two months after the
commercial operation date (anticipated to occur in February 1999), with 15% of
the principal amount to be amortized in the first year, 25% in the second
year, 30% in the third year and 30% in the fourth year. Borrowings bear
interest at an adjustable rate based on the adjusted base rate or LIBOR plus
an applicable margin. The facility also requires mandatory prepayments to be
made from, among other things, 50% of excess cash flow, 50% of net cash
proceeds of any equity offering of ACL and 100% of net cash proceeds of any
permitted debt offerings of ACL or its immediate parent, permitted asset sales
or insurance proceeds. As of June 30, 1998, a total of $367 million in
indebtedness (to which the Notes would be effectively subordinated) was
outstanding under the AC-1 Credit Facility.
The AC-1 Credit Facility contains covenants that, among other things,
restrict ACL's use of the term loan proceeds to the financing of AC-1 and the
payment of fees and expenses directly thereto and the use of the working
capital facility proceeds to AC-1 costs and for working capital purposes and
limit ACL's ability to make certain dividends, distributions or investments
and mergers. The facility generally only permits dividends or distributions
with respect to a portion of ACL's excess cash flow, but severely restricts
the payment of other dividends or distributions to New GCL. The AC-1 Credit
Facility contains certain financial covenants relating to minimum sales of
capacity on AC-1 and ratio of EBITDA to interest expense, the failure to
comply with which would cause all excess cash flow to be applied to the
lenders under the AC-1 Credit Facility for such period. The AC-1 Credit
Facility contains certain events of default including, among other things,
failure to pay amounts when due, failure to comply with covenants and
insolvency. An event of default shall also occur upon the occurrence of
certain failures in connection with AC-1. Upon the occurrence of an event of
default, the AC-1 Credit Facility permits the lenders to declare all
outstanding borrowings to be immediately due and payable and to proceed
against the collateral. In addition, the AC-1 Credit Facility prescribes the
order by which proceeds from the sale of AC-1 capacity shall be applied, both
prior to and after the commencement of commercial operations, and requires ACL
to maintain certain reserve accounts. As a result of the foregoing, the
ability of ACL to use and distribute revenue is severely restricted so long as
the AC-1 Credit Facility remains in existence.
INFORMATION REGARDING OLD GCL
Subsequent to the Stock Offerings and the Old GCL Exchange, all of the
shares of capital stock of Old GCL are held by CIBC Wood Gundy (SFC) Inc., an
indirect wholly-owned subsidiary of CIBC. Old GCL serves solely as a holding
company for CIBC's investment in the Company, owning all of the shares of
Common Stock of New GCL beneficially owned by CIBC. Old GCL is not presently
subject to any legal claims or proceedings. Old GCL continues to be a
Guarantor of the Notes.
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TAX CONSIDERATIONS
TAXATION OF THE COMPANY
The Company believes that a significant portion of its income will not be
subject to tax in Bermuda, which currently has no corporate income tax, or
other countries in which the Issuer or its affiliates conduct activities or in
which customers of the Company are located, including the United States.
However, this belief is based upon the anticipated nature and conduct of the
business of the Company, which may change, and upon the Company's
understanding of its position under the tax laws of the various countries in
which the Company has assets or conducts activities, which position is subject
to review and possible challenge by taxing authorities and to possible changes
in law (which may have retroactive effect). The extent to which certain taxing
jurisdictions may require the Company to pay tax or to make payments in lieu
of tax cannot be determined in advance. In addition, the operations of and
payments due to the Company may be affected by changes in taxation, including
retroactive tax claims or assessments of withholding on amounts payable to the
Company or other taxes assessed at the source, in excess of the taxation
anticipated by the Company based on business contacts and practices of the
Company and the current tax regimes. There can be no assurance that these
factors will not have a material adverse effect on the Company.
United States Federal Income Tax Considerations
The Issuer and its non-United States subsidiaries will be subject to United
States federal income tax at regular corporate rates (and to United States
branch profits tax) on their income that is effectively connected with the
conduct of a trade or business within the United States, and will be required
to file federal income tax returns reflecting that income. The Company intends
to conduct its operations so as to reduce the amount of its effectively
connected income. However, no assurance can be given that the Internal Revenue
Service (the "IRS") will agree with the positions taken by the Company in this
regard. Moreover, the United States subsidiaries of the Issuer will be subject
to United States federal income tax on their worldwide income regardless of
its source (subject to reduction by allowable foreign tax credits), and
distributions by such United States subsidiaries to the Issuer or its foreign
subsidiaries generally will be subject to United States withholding.
Bermuda Tax Considerations
Under current Bermuda law, the Company is not subject to tax on income or
capital gains. Furthermore, New GCL, the Issuer and the Issuer's Bermuda
subsidiaries have obtained from the Minister of Finance of Bermuda under the
Exempted Undertakings Tax Protection Act 1966 (as amended), an undertaking
that, in the event that Bermuda enacts any legislation imposing tax computed
on profits, income, any capital asset, gain or appreciation, or any tax in the
nature of estate duty or inheritance tax, then the imposition of such tax will
not be applicable to such entities or to any of their operations, or the
shares or capital of such entities, or to the Notes, until March 28, 2016.
This undertaking does not, however, prevent the imposition of property taxes
on any company owning real property or leasehold interests in Bermuda.
TAXATION OF NOTEHOLDERS
Bermuda Tax Considerations
Under current Bermuda law, no income, withholding or other taxes or stamp or
other duties are imposed upon the issue, transfer or sale of the Notes or on
any payments thereunder. See "Taxation of the Company--Bermuda Tax
Considerations" for a description of the undertaking on taxes obtained by the
Company from the Minister of Finance of Bermuda.
United States Federal Income Tax Considerations
The following is a summary of certain United States federal income tax
considerations that apply to the acquisition, ownership and disposition of
Notes by United States Holders (as defined below) as of the date hereof.
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Although the following summary does not purport to describe all of the tax
considerations that may be relevant to a prospective purchaser of Notes, such
summary describes the material United States federal income tax consequences
to a United States Holder. No assurance can be given that the conclusions set
out below would be
sustained by a court if challenged by the IRS. This summary deals only with
Notes that are held as capital assets by United States Holders that purchase
Notes at their "issue price" pursuant to their original issue, and does not
address tax considerations applicable to United States Holders that may be
subject to special tax rules, such as dealers or traders in securities,
financial institutions, insurance companies, tax-exempt entities, United
States Holders that hold Notes as a part of a straddle, conversion
transaction, constructive sale or other arrangement involving more than one
position, United States Holders that own (or are deemed for United States tax
purposes to own) 10% or more of the total combined voting power of all classes
of voting stock of the Company, United States Holders that have a principal
place of business or "tax home" outside the United States or United States
Holders whose functional currency is not the United States dollar. The
discussion below assumes that the Notes will not be issued with more than a de
minimus amount of "original issue discount" and that Special Interest will not
become payable on the Notes.
The discussion below is based upon the provisions of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and regulations,
rulings and judicial decisions thereunder as of the date hereof; any such
authority may be repealed, revoked or modified, perhaps with retroactive
effect, so as to result in federal income tax consequences different from
those discussed below.
THE DISCUSSION SET OUT BELOW IS INTENDED ONLY AS A SUMMARY OF CERTAIN UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES, INCLUDING THE APPLICATION TO
THEIR PARTICULAR SITUATION OF THE TAX CONSIDERATIONS DISCUSSED BELOW, AS WELL
AS THE APPLICATION OF STATE, LOCAL OR FOREIGN TAX LAWS. THE STATEMENTS OF
UNITED STATES FEDERAL INCOME TAX LAW SET OUT BELOW ARE BASED ON THE LAWS IN
FORCE AND INTERPRETATIONS THEREOF AS OF THE DATE OF THIS OFFERING MEMORANDUM,
AND ARE SUBJECT TO ANY CHANGES OCCURRING AFTER THAT DATE.
As used herein, a "United States Holder" of a Note means a holder that is
(i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in or under the laws of the United States or
any political subdivision thereof, (iii) an estate the income of which is
subject to United States federal income taxation regardless of its source or
(iv) a trust which is subject to the supervision of a court within the United
States and the control of a United States person as described in section
7701(a)(30) of the Code.
Payment of Interest. Interest on a Note will be taxable to a United States
Holder as ordinary income at the time that such interest accrues or is
received, in accordance with the United States Holder's regular method of
accounting for federal income tax purposes.
Certain Payments under Registration Agreement. The occurrence of certain
enumerated events described under "Exchange Offer; Registration Rights" will
cause Special Interest to be payable to the holders of Notes in the manner
described therein. However, the Company intends to take the position that the
mere possibility that such Special Interest may become payable on the Notes
will not affect the amount of interest income includible by a United States
Holder of a Note and will not cause the Notes to be issued with original issue
discount or to be treated as contingent payment debt instruments. For these
purposes, the Company's determination that the Notes are not issued with
original issue discount is binding on all United States Holders unless a
United States Holder explicitly discloses in the proper manner to the Service
that its determination is different. If Special Interest in fact becomes
payable on the Notes, then the Special Interest should be includible in income
by United States Holders as ordinary income.
Sale, Exchange or Retirement of the Notes. A United States Holder's tax
basis in a Note generally will be its cost. A United States Holder generally
will recognize gain or loss on the sale, exchange or retirement of a
119
<PAGE>
Note in an amount equal to the difference between the amount realized on the
sale, exchange or retirement (excluding amounts received in respect of accrued
interest) and the adjusted tax basis of the Note. Gain or loss recognized on
the sale, exchange or retirement of a Note (excluding amounts received in
respect of accrued
interest, which will be taxable as ordinary income) generally will be treated
as capital gain or loss. Generally, capital gains of individuals derived in
respect of capital assets held for more than one year are eligible for reduced
rates of taxation. The deductibility of capital losses is subject to
limitations.
The exchange of the Notes for the Exchange Notes in the Exchange Offer, see
"Exchange Offer; Registration Rights," will not constitute a taxable event to
United States Holders. Consequently, (i) no gain or loss will be realized by a
United States Holder upon receipt of an Exchange Note; (ii) the holding period
of the Exchange Note will include the holding period of the Note exchanged
therefor; and (iii) the adjusted tax basis of the Exchange Note will be the
same as the adjusted tax basis of the Note exchanged therefor immediately
before the exchange.
Information Reporting and Backup Withholding. In general, information
reporting requirements will apply to certain payments of principal and
interest on a Note, and to the payment of the proceeds of the sale of a Note,
to United States Holders other than certain exempt recipients (such as
corporations). Backup withholding at a 31% rate will apply to such payments if
the United States Holder fails to provide its taxpayer identification number
or certification of foreign or other exempt status or fails to report in full
dividend and interest income.
Any amounts withheld under the backup withholding rules will be allowed as a
credit against the United States Holder's U.S. federal income tax liability
and may entitle such Holder to a refund, provided that the required
information is furnished to the IRS.
120
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Notes received in exchange for
Restricted Notes where such Restricted Notes were acquired as a result of
market-making activities or other trading activities.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer and/or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of Exchange Notes and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
The Issuer has agreed to pay all expenses incident to the Exchange Offer
(including the expenses of one counsel for the holders of the Restricted
Notes) other than commissions or concessions of any brokers or dealers and
will indemnify the holders of the Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the legality of the Exchange Notes
have been passed upon for the Issuer by Simpson Thacher & Bartlett, New York,
New York. Simpson Thacher & Bartlett will rely, as to matters of Bermuda law,
on the opinion of Appleby, Spurling & Kempe, Hamilton, Bermuda, as to matters
of English law, on the opinion of Wiggin and Co, Gloucestershire, England, and
as to matters of Cayman Islands law, on the opinion of W.S. Walker & Company,
Georgetown, Grand Cayman, Cayman Islands. Certain partners of Simpson Thacher
& Bartlett purchased certain shares of common stock of New GCL in the Stock
Offerings in an aggregate amount equal to less than 1% of the total shares
offered in the Stock Offerings.
EXPERTS
The financial statements and schedules included in this prospectus and
elsewhere in the registration statement to the extent and for the periods
indicated in their reports have been audited by Arthur Andersen & Co.,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
AVAILABLE INFORMATION
The Issuer and the Guarantors have filed with the commission a Registration
Statement on Form S-4 (together with all amendments, exhibits schedules and
supplements thereto, the "Registration Statement") under the Securities Act
with respect to the Exchange Notes being offered hereby. This Prospectus,
which forms a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement. For further information
with respect to the Issuer and the Exchange Notes, reference is made to the
Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily complete, and,
where such contract or other document is an exhibit to the Registration
Statement,
121
<PAGE>
each such statement is qualified by the provisions in such exhibit, to which
reference is hereby made. New GCL is subject to the informational requirements
of the Securities and Exchange Act of 1934, as amended (the "Exchange Act")
and, in accordance therewith, is required to file reports and other
information with the Commission. The Issuer and the Guarantors (other than New
GCL) are not currently subject to the informational requirements of the
Exchange Act. As a result of the offering of the Exchange Notes, the Issuer
and the Guarantors will become subject to the informational requirements of
the Exchange Act, and, in accordance therewith, will file reports and other
information with the Commission unless and until an exemption from such
requirement is obtained. The Registration Statement, such reports and other
information can be inspected and copied at the Public Reference Section of the
Commission located at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington D.C. 20549 and at regional public reference facilities maintained
by the Commission located at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material, including copies of all or any
portion of the Registration Statement, can be obtained from the Public
Reference Section of the Commission at prescribed rates. Such material may
also be accessed electronically by means of the Commission's home page on the
Internet (http:/www.sec.gov).
So long as the Issuer and the Guarantors are subject to the periodic
reporting requirements of the Exchange Act, they are required to furnish the
information required to be filed with the Commission to the Trustee and the
holders of the Notes. The Issuer and the Guarantors have agreed that, even if
they are not required under the Exchange Act to furnish such information to
the Commission, they will nonetheless continue to furnish information that
would be required to be furnished by the Issuer and the Guarantors by Section
13 of the Exchange Act, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and, with respect to the annual
information only, a report thereon by the Issuer's certified independent
accountants to the Trustee and the holders of the Notes as if they were
subject to such periodic reporting requirements. The Issuer and the Guarantors
will be deemed to have satisfied such requirements if New GCL files and
provides reports, documents and information of the types otherwise so required
by the Commission, in each case within the applicable time periods, and the
Issuer and the Guarantors are not required by the Commission to file such
reports, documents and information separately under the applicable rules and
regulations of the Commission (after giving effect to any exemptive relief)
because of the filings by New GCL.
122
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Public Accountants............................. F-2
Consolidated Balance Sheets as of June 30, 1998 (unaudited) and
December 31, 1997................................................... F-3
Consolidated Statements of Operations for the three months ended June
30, 1998 (unaudited) and June 30, 1997 (unaudited), for the six
months ended June 30, 1998 (unaudited), for the period from March
19, 1997 (Date of Inception) to June 30, 1997 (unaudited) and for
the period from March 19, 1997 (Date of Inception) to December 31,
1997.............................................................. F-4
Consolidated Statements of Shareholders' Equity for the six months
ended June 30, 1998 (unaudited) and for the period from March 19,
1997 (Date of Inception) to December 31, 1997..................... F-5
Consolidated Statements of Cash Flows for the six months ended June
30, 1998 (unaudited), for the period from March 19, 1997 (Date of
Inception) to June 30, 1997 (unaudited) and for the period from
March 19, 1997 (Date of Inception) to December 31, 1997........... F-6, F-7
Notes to Consolidated Financial Statements........................... F-8
</TABLE>
NOTE:
The consolidated financial statements of Global Crossing Ltd. ("GCL") and
subsidiaries (formerly Global Crossing Ltd., LDC ("Old GCL") and subsidiaries)
have been restated to reflect the Old GCL Exchange as explained in Note 1 in
the Notes to Consolidated Financial Statements.
Immediately following the Old GCL Exchange, Old GCL became wholly-owned by
Canadian Imperial Bank of Commerce and its affiliates ("CIBC"). Old GCL's
equity investment in GCL is its only asset. Old GCL remains a guarantor of the
New Senior Notes. Financial information for Old GCL is contained in Note 10 in
the Notes to Consolidated Financial Statements on pages F-26 through F-30.
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Global Crossing Ltd.:
We have audited the accompanying consolidated balance sheet of Global
Crossing Ltd. (a Bermuda company in its development stage) and subsidiaries
(formerly Global Crossing Ltd., LDC and subsidiaries) as of December 31, 1997,
and the related consolidated statements of operations, shareholders' equity
and cash flows for the period from March 19, 1997 (date of inception) to
December 31, 1997. 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 audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Global Crossing Ltd. and
subsidiaries as of December 31, 1997, and the results of their operations and
their cash flows for the period from March 19, 1997 (date of inception) to
December 31, 1997, in conformity with accounting principles generally accepted
in the United States.
Arthur Andersen & Co.
Hamilton, Bermuda
April 21, 1998
F-2
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
-------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents................ $ 304,125,205 $ 1,452,684
Accounts receivable, net of allowance for
doubtful accounts of $1,012,117......... 33,954,617 --
Interest receivable...................... 1,979,573 123,000
Other assets and prepaid costs........... 28,347,113 892,958
Restricted cash and cash equivalents..... 237,485,187 25,275,196
-------------- ------------
605,891,695 27,743,838
Long term accounts receivable.............. 7,900,000 --
Backhaul capacity available for sale....... 54,738,560 21,200,000
Undersea capacity available for sale....... 206,271,310 --
Construction in progress................... 518,636,709 497,318,509
Investment in Pacific Crossing Ltd. ....... 126,456,345 --
Deferred finance and organization costs,
net of accumulated amortization of
$3,994,076 ($2,246,857 as of December 31,
1997)..................................... 44,338,405 25,934,021
-------------- ------------
$1,564,233,024 $572,196,368
============== ============
LIABILITIES:
Current liabilities:
Accrued construction costs............... $ 21,688,211 $ 52,003,875
Accounts payable and accrued liabilities. 8,520,395 1,658,399
Accrued interest and preference share
dividends............................... 9,361,111 2,921,854
Deferred revenue......................... 42,747,611 5,325,000
Income taxes payable..................... 9,000,000 --
Current portion of obligations under
inland services agreements.............. 43,489,498 17,891,000
Current portion of obligations under
capital leases.......................... 6,215,130 12,297,645
-------------- ------------
141,021,956 92,097,773
Long term debt............................. 367,048,000 162,325,000
Senior notes............................... 796,277,203 150,000,000
Long term deferred revenue................. 6,916,667 --
Obligations under inland services
agreements................................ 7,628,050 3,009,000
Obligations under capital leases........... 7,561,897 --
-------------- ------------
Total liabilities........................ 1,326,453,773 407,431,773
-------------- ------------
COMMITMENTS
MANDATORILY REDEEMABLE PREFERENCE SHARES
(109,830 shares as of December 31, 1997,
$1,000 preference liquidation preference
per share (net of unamortized discount and
issuance costs of $12,223,993 and
$6,962,407, respectively))................. -- 90,643,919
-------------- ------------
SHAREHOLDERS' EQUITY:
Common stock, 600,000,000 shares
authorized, par value $.01, 163,674,467
and 162,886,967 issued and outstanding as
of June 30, 1998 and December 31, 1997,
respectively ............................. 1,636,745 1,628,870
Other shareholders' equity................. 395,458,370 72,652,162
Accumulated deficit........................ (159,315,864) (160,356)
-------------- ------------
237,779,251 74,120,676
-------------- ------------
$1,564,233,024 $572,196,368
============== ============
</TABLE>
- --------
*Amount less than $1.
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
CONSOLIDATED STATEMENTS OF OPERATIONS
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
THREE MONTHS THREE MONTHS SIX MONTHS FROM MARCH 19, 1997 FROM MARCH 19, 1997
ENDED ENDED ENDED (DATE OF INCEPTION) (DATE OF INCEPTION)
JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1998 TO JUNE 30, 1997 TO DECEMBER 31, 1997
------------- ------------- ------------- ------------------- --------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
SALES AND OPERATING
REVENUES............... $ 101,255,867 $ -- $ 101,255,867 $ -- $ --
------------- ----------- ------------- ----------- ------------
EXPENSES:
Cost of capacity sold.. 41,200,229 -- 41,200,229 -- --
Operations and
maintenance........... 2,470,000 -- 2,470,000 -- --
Sales and marketing.... 6,528,780 40,235 7,312,995 40,235 1,366,724
Network development.... 4,314,183 -- 4,314,183 -- 78,000
General and
administrative........ 6,507,671 50,204 9,099,341 50,204 1,617,770
Termination of
advisory services
agreement............. 139,669,340 -- 139,669,340 -- --
Stock related expense.. 22,760,170 -- 23,397,670 -- --
Provision for doubtful
accounts.............. 1,012,117 -- 1,012,117 -- --
Depreciation and
amortization.......... 442,827 51,623 473,194 51,623 39,214
------------- ----------- ------------- ----------- ------------
224,905,317 142,062 228,949,069 142,062 3,101,708
------------- ----------- ------------- ----------- ------------
OPERATING LOSS.......... (123,649,450) (142,062) (127,693,202) (142,062) (3,101,708)
OTHER INTEREST INCOME
(EXPENSE):
Interest income........ 4,327,602 1,347,512 4,673,436 1,347,512 2,941,352
Interest expense....... (7,403,037) -- (7,426,271) -- --
------------- ----------- ------------- ----------- ------------
INCOME (LOSS) BEFORE
INCOME TAXES AND
EXTRAORDINARY ITEM..... (126,724,885) 1,205,450 (130,446,037) 1,205,450 (160,356)
Provision for income
taxes................. (9,000,000) -- (9,000,000) -- --
------------- ----------- ------------- ----------- ------------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM..... (135,724,885) 1,205,450 (139,446,037) 1,205,450 (160,356)
Extraordinary loss on
retirement of senior
notes................. (19,709,471) -- (19,709,471) -- --
------------- ----------- ------------- ----------- ------------
NET INCOME (LOSS)....... (155,434,356) 1,205,450 (159,155,508) 1,205,450 (160,356)
Preference share
dividends............. (3,898,203) (4,041,664) (8,306,433) (4,236,108) (12,689,923)
Redemption of
preference shares..... (34,140,067) -- (34,140,067) -- --
------------- ----------- ------------- ----------- ------------
NET LOSS APPLICABLE TO
COMMON SHAREHOLDERS.... $(193,472,626) $(2,836,214) $(201,602,008) $(3,030,658) $(12,850,279)
============= =========== ============= =========== ============
LOSS PER COMMON SHARE
Net loss before
extraordinary item:
Basic and diluted.... $ (1.06) $ (0.01) $ (1.11) $ (0.02) $ (0.08)
============= =========== ============= =========== ============
Extraordinary item..... $ (0.12) $ -- $ (0.12) $ -- $ --
============= =========== ============= =========== ============
Net loss applicable to
common shareholders:
Basic and diluted.... $ (1.18) $ (0.01) $ (1.23) $ (0.02) $ (0.08)
============= =========== ============= =========== ============
Shares used in computing
basic and diluted net
loss per share......... 163,639,852 162,886,967 163,508,514 162,886,967 162,886,967
============= =========== ============= =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING, LTD., LDC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED) AND FOR THE PERIOD FROM
MARCH 19, 1997 (DATE OF INCEPTION) TO DECEMBER 31, 1997
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
OLD GCL(3)
----------
<CAPTION>
COMPANY (GCL)(3)
----------------
COMMON STOCK COMMON STOCK
--------------------- ----------------------
ADDITIONAL
PAID-IN
SHARES AMOUNT(1) CAPITAL SHARES AMOUNT
----------- --------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Issuance of
Class A common
stock for cash
on
March 25, 1997. 11,250,000 $ 7 $ 7,499,993 -- $ --
Class A common
stock
distributed
for nil
consideration
to the initial
purchaser of
preference
shares on
March 25, 1997. 19,852,950 13 13,234,987 --
Issuance of
Class B common
stock for cash
on
March 25, 1997. 50,625,000 34 31,249,966 -- --
Issuance of
Class C common
stock for cash
on
March 25, 1997. 50,625,000 34 33,749,966 -- --
Issuance of
Class D common
stock for cash
to certain
Class B
shareholders on
March 25, 1997. 33,088,200 22 2,499,978 -- --
Costs incurred
related to the
issuance of
common stock... -- -- (1,264,045) -- --
Preference share
dividends...... -- -- (12,689,923) -- --
Old GCL
Exchange....... -- -- -- 162,886,967 1,628,870
Net loss for the
period......... -- -- -- -- --
----------- ---- ------------ ----------- ----------
Balance,
December 31,
1997........... 165,441,150 110 74,280,922 162,886,967 1,628,870
----------- ---- ------------ ----------- ----------
Issuance of
Class B common
stock for cash
on
January 21,
1998........... 450,000 -- * 750,000 -- --
Issuance of
Class E common
stock for cash
on
January 21,
1998........... 187,500 -- * 312,500 -- --
Issuance of
Class E common
stock for cash
on
April 22, 1998. 150,000 -- * 1,725,179 -- --
Cash
reimbursement
to certain
shareholders... -- -- (7,047,044) -- --
Unearned
compensation... -- -- 67,130,700 -- --
Compensation
expense........ -- -- -- -- --
PCG Warrants to
be converted to
common stock... -- -- 213,384,957 -- --
Common stock to
be issued in
exchange for
termination of
advisory
services
agreement...... -- -- 135,000,000 -- --
Preference share
dividends...... -- -- (8,306,433) -- --
Redemption of
preference
shares......... -- -- (34,140,067) -- --
Old GCL
Exchange....... -- -- -- 787,500 7,875
Net loss for the
six months
ended June 30,
1998........... -- -- -- -- --
----------- ---- ------------ ----------- ----------
Balance, June
30, 1998....... 166,228,650 $110 $443,090,714 163,674,467 $1,636,745
=========== ==== ============ =========== ==========
OTHER SHAREHOLDERS' EQUITY
---------------------------------------------------------
ADDITIONAL TOTAL
PAID-IN UNEARNED ACCUMULATED SHAREHOLDERS'
CAPITAL COMPENSATION DEFICIT EQUITY
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Issuance of
Class A common
stock for cash
on
March 25, 1997. $ -- $ -- $ -- $ --
Class A common
stock
distributed
for nil
consideration
to the initial
purchaser of
preference
shares on
March 25, 1997. -- -- -- --
Issuance of
Class B common
stock for cash
on
March 25, 1997. -- -- -- --
Issuance of
Class C common
stock for cash
on
March 25, 1997. -- -- -- --
Issuance of
Class D common
stock for cash
to certain
Class B
shareholders on
March 25, 1997. -- -- -- --
Costs incurred
related to the
issuance of
common stock... (1,264,045) -- -- (1,264,045)
Preference share
dividends...... (12,689,923) -- -- (12,689,923)
Old GCL
Exchange....... 86,606,130 -- -- 88,235,000
Net loss for the
period......... -- -- (160,356) (160,356)
------------- ------------- -------------- --------------
Balance,
December 31,
1997........... 72,652,162 -- (160,356) 74,120,676
------------- ------------- -------------- --------------
Issuance of
Class B common
stock for cash
on
January 21,
1998........... -- -- -- --
Issuance of
Class E common
stock for cash
on
January 21,
1998........... -- -- -- --
Issuance of
Class E common
stock for cash
on
April 22, 1998. -- -- -- --
Cash
reimbursement
to certain
shareholders... (7,047,044) -- -- (7,047,044)
Unearned
compensation... 67,130,700 (67,130,700) -- --
Compensation
expense........ -- 21,134,991 -- 21,134,991
PCG Warrants to
be converted to
common stock... 213,384,957 -- -- 213,384,957
Common stock to
be issued in
exchange for
termination of
advisory
services
agreement...... 135,000,000 -- -- 135,000,000
Preference share
dividends...... (8,306,433) -- -- (8,306,433)
Redemption of
preference
shares......... (34,140,067) -- -- (34,140,067)
Old GCL
Exchange....... 2,779,804 -- -- 2,787,679
Net loss for the
six months
ended June 30,
1998........... -- -- (159,155,508) (159,155,508)
------------- ------------- -------------- --------------
Balance, June
30, 1998....... $441,454,079 $(45,995,709) $(159,315,864) $ 237,779,251
============= ============= ============== ==============
</TABLE>
- -------
*Amount less than $1.
(1)Amount per share less than $1.
(2)Value was determined based on the $1 per share paid for the 11,250,000 Class
A shares (Note 7).
(3) The amounts presented for Old GCL reflect the historical equity
transactions as previously reported. The amounts presented for GCL have
been restated to reflect the Old GCL Exchange as if it had occurred March
19, 1997 (Date of Inception).
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
SIX MONTHS MARCH 19, 1997 MARCH 19, 1997
ENDED (DATE OF INCEPTION) (DATE OF INCEPTION)
JUNE 30, TO JUNE 30, TO DECEMBER 31,
1998 1997 1997
------------- ------------------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss applicable to
common shareholders... $(201,602,008) $ (3,030,658) $ (12,850,279)
Adjustments to
reconcile net loss to
net cash provided by
operating activities:
Depreciation and
amortization.......... 473,194 51,623 39,214
Provision for doubtful
accounts.............. 1,012,117 -- --
Termination of advisory
services agreement ... 135,000,000 -- --
Stock related expenses. 23,397,670 -- --
Preference share
dividends............. 8,306,433 4,236,108 12,689,923
Redemption of
preference shares..... 34,140,067 -- --
Extraordinary loss on
retirement of debt.... 19,709,471 -- --
Increase in accounts
receivable............ (42,866,734) -- --
Increase in interest
receivable............ (1,856,573) (246,449) (123,000)
Increase in backhaul
capacity available for
sale.................. (33,538,560) -- (21,200,000)
Increase in other
assets and prepaid
costs................. (27,454,155) (216,355) (909,015)
Undersea Capacity
available for sale
transferred from
construction in
progress.............. 238,554,078 -- --
Increase in undersea
capacity available for
sale.................. (206,271,310) -- --
Increase in deferred
revenue............... 44,339,278 -- 5,325,000
Increase in income tax
payable............... 9,000,000 -- --
Increase in accounts
payable and accrued
liabilities........... 6,861,996 1,991,377 1,248,133
Increase in obligations
under inland service
agreements............ 30,217,548 -- 20,900,000
------------- ------------- -------------
Net cash provided by
operating activities. 37,422,512 2,785,646 5,119,976
------------- ------------- -------------
CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES:
Finance and
organization costs
incurred.............. (31,773,003) (25,320,533) (28,180,878)
Preference share
issuance costs........ -- (7,487,343) (7,529,651)
Costs related to
issuance of common
stock................. -- (1,264,045) (1,264,045)
Cash reimbursement to
certain shareholders.. (7,047,044) -- --
Proceeds from issuance
of common stock and
additional paid-in
capital............... 525,000 75,000,000 75,000,000
Proceeds from issuance
of preference shares.. -- 100,000,000 100,000,000
Redemption of
preference shares..... (134,371,773) -- --
Proceeds from long term
debt.................. 204,723,000 9,250,000 162,325,000
Proceeds from issuance
of senior notes....... 796,232,000 75,000,000 150,000,000
Retirement of senior
notes................. (159,750,000) -- --
Increase in restricted
cash and cash
equivalents........... (212,209,991) (77,354,396) (25,275,196)
------------- ------------- -------------
Net cash provided by
financing activities. 456,328,189 147,823,683 425,075,230
------------- ------------- -------------
CASH FLOWS USED IN
INVESTING ACTIVITIES:
Cash paid for
construction in
progress and capacity
available for sale.... (191,072,180) (147,597,810) (428,742,522)
Investment in Pacific
Crossing Ltd.......... (6,000) -- --
------------- ------------- -------------
Net cash used in
investing activities. (191,078,180) (147,597,810) (428,742,522)
------------- ------------- -------------
NET INCREASE IN CASH.... 302,672,521 3,011,519 1,452,684
CASH, beginning of
period................. 1,452,684 -- --
------------- ------------- -------------
CASH, end of period..... $ 304,125,205 $ 3,011,519 $ 1,452,684
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
SIX MONTHS MARCH 19, 1997 MARCH 19, 1997
ENDED (DATE OF INCEPTION) (DATE OF INCEPTION)
JUNE 30, TO JUNE 30, TO DECEMBER 31,
1998 1997 1997
------------- ------------------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
SUPPLEMENTAL INFORMATION
ON NON-CASH INVESTING
ACTIVITIES:
Costs incurred for
construction in
progress and capacity
available for sale.... $ 259,872,278 $186,994,677 $497,318,509
Decrease (increase) in
accrued construction
costs................. 30,315,664 (39,396,867) (52,003,875)
Increase in accrued
interest on senior
notes................. (7,720,611) -- (1,640,500)
Increase in accrued
liabilities........... -- -- (410,267)
Amortization of
deferred finance
costs................. (2,981,157) -- (2,223,700)
Increase in obligations
under capital leases.. (1,479,382) -- (12,297,645)
Conversion of PCG
Warrants.............. (86,934,612) -- --
------------- ------------ ------------
Cash paid for
construction in
progress and capacity
available for sale.... $ 191,072,180 $147,597,810 $428,742,522
============= ============ ============
SUPPLEMENTAL INFORMATION
ON NON-CASH FINANCING
ACTIVITIES:
Class A common stock
distributed to holders
of preference shares
reflected as a
discount.............. $ -- $ -- $ 13,235,000
============= ============ ============
SUPPLEMENTAL INFORMATION
ON NON-CASH INVESTING
ACTIVITIES:
Investment in Pacific
Crossing Ltd. ........ $ 126,456,345 $ -- $ --
Conversion of PCG
Warrants.............. (126,450,345) -- --
------------- ------------ ------------
$ 6,000 $ -- $ --
============= ============ ============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Interest paid and
capitalized........... $ 18,060,320 $ -- $ 8,136,267
============= ============ ============
Interest paid (net of
capitalized interest). $ 23,234 $ -- $ --
============= ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
1. BACKGROUND
On March 19, 1997, Global Crossing Ltd., LDC ("Old GCL"), formerly GT Parent
Holdings LDC, was incorporated as an exempted limited duration company in the
Cayman Islands. On March 18, 1998, Global Crossing Ltd. ("GCL" and, together
with its subsidiaries, the "Company") a Bermuda company, was formed as a
wholly-owned subsidiary of Old GCL. At that time, Old GCL contributed its
investment in Global Telesystems Holdings Ltd. ("GTH") to GCL. GCL is an
independent developer, owner and operator of undersea digital fiber optic
cable systems. Atlantic Crossing Ltd. ("ACL"), formerly Global Telesystems
Ltd., a Bermuda company which is an indirect wholly-owned subsidiary of GCL,
was incorporated to construct and operate an undersea fiber optic cable ring
with landing stations in the United States, the United Kingdom, Germany and
the Netherlands. ACL has incorporated wholly-owned subsidiaries in each of
these countries in order to own the portion of the cable system located in
each country and the related territorial waters.
On April 30, 1998, GCL formed a wholly-owned subsidiary Global Crossings
Holdings Ltd. ("GCH"), a Bermuda company, and contributed its investment in
GTH to GCH upon its formation.
Prior to GCL's Initial Public Offering, which took place on August 13, 1998,
GCL declared a stock dividend to Old GCL resulting in Old GCL holding 1.5
shares of common stock of GCL for each share of common stock of Old GCL
outstanding. Pursuant to the terms of the Article of Association of Old GCL
and prior to the Initial Public Offering, each holder of Class D shares
converted such shares into a fraction of a Class E share based upon a
valuation at the time of such conversion, together with a warrant to purchase
the remaining fraction of such Class E share at an exercise price based upon
such market valuation. In addition, each holder of Class E shares of Old GCL
had such Class E shares converted into Class B shares of Old GCL. Accordingly,
each holder of Class D and Class E shares ultimately received Class B shares,
with the warrants to purchase Class E shares received by former Class D
shareholders then cancelled in exchange for warrants ("New GCL Warrants") to
purchase shares of Common Stock of GCL at an exercise price equal to the price
to Public Per Share payable in the Initial Public Offering.
Immediately subsequent to the above transaction and prior to the Initial
Public Offering, each shareholder of Old GCL (other than CIBC) agreed with GCL
to exchange their interests in Old GCL for shares of Common Stock of GCL held
by Old GCL at a rate of 1.5 shares of Common Stock of GCL per share of common
stock of Old GCL ("Old GCL Exchange"). CIBC did not participate in the above
mentioned transaction and will continue to maintain its beneficial ownership
position in GCL through Old GCL. Subsequent to this exchange, each previous
shareholder of Old GCL holds an equal proportionate interest in GCL, with Old
GCL becoming wholly-owned by CIBC.
Because Old GCL, GCL and GCH are entities under common control, the
transfers by Old GCL to GCL and GCL to GCH and the Old GCL Exchange were
accounted for similar to a pooling of interests. The financial statements
presented have been restated to reflect these transactions as if they had
occurred as of March 19, 1997 (Date of Inception).
GCL entered into a joint venture, Pacific Crossing Ltd., ("PCL") for
purposes of constructing and operating PC-1, an undersea fiber optic cable
ring system connecting California, Washington and two landing sites in Japan
(see Note 3).
F-8
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
Mid-Atlantic Crossing Ltd., a wholly-owned subsidiary of GCL, entered into a
contract with Alcatel Submarine Networks on June 2, 1998 for the construction
of MAC, an undersea fiber optic cable ring connecting New York, the Caribbean
and Florida at a total cost of $350 million. Mid-Atlantic Crossing Ltd. is in
the process of incorporating companies in each country in which the cable will
land in order to own the portion of the cable system located in each country
and the related territorial waters. To finance, in part, the construction of
MAC, the Company signed a commitment letter to obtain $240 million of senior
secured non-recourse indebtedness.
Effective July 21, 1998, the Company through its wholly-owned subsidiary Pan
American Crossing Ltd., entered into a contract with Tyco Submarine Systems
Ltd. ("TSSL"), formerly AT&T Submarine Systems, Inc. for the construction of
PAC, an undersea fiber optic cable system connecting California, Mexico and
Panama at a total cost of $475 million. To finance, in part, the construction
of PAC, Pan American Crossing Ltd. signed a commitment letter to obtain $310
million of non-recourse indebtedness on July 21, 1998.
To finance construction of ACL's undersea fiber optic cable ring, GCL issued
$75 million of common stock and GTH, an indirect wholly-owned subsidiary of
GCL, and the parent of ACL, issued $100 million of preference shares and sold
$150 million of senior notes, as described in Note 6. These proceeds, together
with a $482 million Credit Facility, as described in Note 5, are being used to
pay for construction costs, financing fees and other related costs. Together
GCL and its subsidiaries are defined as the Company.
ACL has entered into a fixed price contract (the "Contract") with TSSL for
the development, design, construction and installation of a four fiber pair,
fiber optic cable system connecting (i) the United States to the United
Kingdom, (ii) the United Kingdom to the Netherlands and Germany, (iii) the
Netherlands to Germany and (iv) Germany to the United States (collectively,
"AC-1" or the "System"). AT&T Corp. has provided ACL with a guarantee in
respect of TSSL's obligations under the Contract. Assuming that construction
of AC-1 progresses according to the Contract schedule, the System will be
accepted by ACL and made available for commercial service on February 22, 1999
(the "System RFS date"). Certain segments of the System are expected to be
completed in advance of the System RFS date. The United States to the United
Kingdom segment was ready for service on May 26, 1998 and the Germany to the
United States segment is expected to be ready for service on November 30,
1998. Once ACL formally accepts each segment of the System, the segment
becomes ready for service and the ownership of the segment assets transfers to
ACL and its subsidiaries. The only exception to this transfer of ownership is
in respect of certain of the segment assets located in United States territory
to which TSSL retains title until such time as GT Landing Corp., a United
States wholly-owned subsidiary of ACL, exercises its $10,000 bargain purchase
option to purchase title. Pursuant to the Contract, TSSL granted GT Landing
Corp. an indefeasible right of use ("IRU"), for the estimated life of the
System of 25 years from the System RFS date. GT Landing Corp. has accounted
for the IRU as a capital lease, since the IRU transfers the risks and rewards
of ownership to GT Landing Corp. The United States assets governed by this IRU
includes all landing stations assets (with the exception of the building and
land, to which GT Landing Corp. has title), fiber optic cable located in the
United States and the landing license.
Customers of the Company enter into Capacity Purchase Agreements ("CPA") to
obtain an IRU in units of transatlantic and European capacity ("AC-1
Capacity"). The purchase price for AC-1 Capacity is non-refundable once the
segment of the System specified in the CPA is ready for service and the IRU
entitles the customer to all rights and obligations of ownership of the AC-1
capacity for a period ending 25 years after the
F-9
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
System RFS date. The Company's CPAs provide that the AC-1 System will have
self-healing ring capability, whether or not a CPA relates only to a segment of
the System. Self-healing capability enables capacity on the segment of the
System to be instantaneously restored either on the System's other segments or
within the same segment in the event of interruption so that the same point-to-
point connectivity is maintained.
Customers who purchase AC-1 capacity prior to the System RFS date will be
granted 80% of the capacity that remains unsold, if any, 12 1/2 years after the
System RFS date. However, based on sales projections provided by a third party
consultant, it is highly unlikely that there will be a material amount of
unsold capacity on AC-1 at the end of 12 1/2 years after the System RFS date.
The Company has no constraints on the pricing or structure of sales of residual
capacity and the Company would expect that if such capacity had any remaining
value, it would enter into one or more transactions to dispose of such capacity
prior to such date to realize such remaining value. As a result, the right to
residual capacity is not a substantive right.
ACL subsidiaries have entered into contracts, called Inland Services
Agreements, to obtain IRUs of capacity on terrestrial telecommunications
systems ("Backhaul Capacity") for terms of 25 years from the System RFS date.
Under the IRU, the Company is required to pay an up-front non-recurring charge
plus, in certain cases, monthly recurring charges over a 25 year period and in
exchange obtains all rights and obligations of ownership. The Company has
accounted for the IRUs as capital leases since these IRUs represent leases as
defined under Statement of Financial Accounting Standards No. 13, "Accounting
for Leases" ("SFAS 13"). The Company sells this Backhaul Capacity under
separate CPAs ("Backhaul CPA") to certain customers that have purchased
capacity on AC-1 for the purpose of extending capacity from AC-1 landing
stations to major telecommunication centers in the United States and the United
Kingdom. The purchase price for Backhaul Capacity is non-refundable and grants
the customer an IRU which entitles the customer to all rights and obligations
of ownership of the Backhaul Capacity for a period ending 25 years after the
System RFS date.
ACL has entered into an Operations, Administration and Maintenance ("OA&M")
agreement with TSSL whereby TSSL is obligated to provide operating,
administration and maintenance functions to AC-1. The administration functions
include but are not limited to the provision of billing information and annual
expense budgets. The operations and maintenance functions include but are not
limited to the management and maintenance of a Network Operating Center,
assumption of ship costs and any related ship repair costs, obtaining and
renewing all operating permits, providing repair equipment, providing cable
protection and ordering and restocking spares. The OA&M Agreement is for an
initial term of eight years with two renewal periods of eight and one half
years each. Quarterly payments under the OA&M Agreement to TSSL will commence
as ACL accepts ownership to the various segments.
Pursuant to the terms of CPAs, ACL is obliged to use commercially reasonable
efforts to cause the System to be maintained in efficient working order and in
accordance with industry standards. In exchange for the operating,
administration and maintenance services provided by ACL through the OA&M
agreement with TSSL, customers are obligated for the term of the IRU to pay for
their allocable share of the costs for operating and maintaining the System. In
accordance with the CPA, customers appoint members to a System Advisory
Committee which is charged with the responsibility of directing the operations
and maintenance of the System. Customers pay for 110% of ACL's cost to operate
and maintain the system based on their pro-rata share of total capacity subject
to annual maximum amounts per circuit purchased of $250,000 per transatlantic
circuit and
F-10
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
$50,000 per European circuit. Their pro-rata share is effectively calculated
by taking the weighted average of purchased capacity over total capacity
multiplied by 110% of actual costs incurred. These OA&M costs are billed to
customers quarterly in advance based on the prior year's actual costs, are
non-refundable, and should a customer fail to make an OA&M payment, ACL may
suspend all rights to capacity granted under the IRU.
ACL originally entered into a Sales Agency Agreement with TSSL whereby TSSL
was responsible for the marketing and sale of capacity of the System and
received commissions on sales proceeds received at rates that varied as
certain cumulative revenue levels were reached. Effective March 5, 1998, the
Company entered into a commissions sharing agreement with TSSL whereby GCL
assumed primary responsibility for the marketing and sale of capacity of the
System and will share a percentage of commissions payable to TSSL under the
Sales Agency Agreement as consideration for assuming primary responsibility
for the sales effort and marketing of the Company's projects. The Sales Agency
Agreement with TSSL will terminate on March 25, 2002 with an option to extend
it until March 25, 2005.
On January 21, 1998, Old GCL effected a 100-for-1 stock split of each of the
Class A, B, C and D common stock and undesignated stock and amended the par
value of each share of common stock from $.0001 per share to $.000001 per
share. All share information presented in the consolidated financial
statements, including these Notes, gives effect to the stock split.
2. SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. The significant
accounting policies are summarized as follows:
a) Principles of Consolidation
The consolidated financial statements include the accounts of GCL and its
wholly owned subsidiaries. All significant intercompany transactions have been
eliminated. Investment in PCL, in which GCL does not exercise control, has
been accounted for using the equity method.
b) Development Stage Company
The Company was in its development stage until May 26, 1998 when the United
States to United Kingdom segment of the AC-1 system was placed into service
and the Company began generating significant revenues. All aspects of the AC-1
System are scheduled to be ready for commercial service by February 22, 1999.
Currently, construction of the Company's other undersea fiber optic cable
systems are underway.
F-11
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
Successful future operations are subject to several risks, including the
ability of the Company to ensure the successful, timely and cost-effective
completion of AC-1 and other cable systems as well as to successfully market
and generate significant revenue from the sale of capacity of the system. GCL
may encounter problems, delays and expenses, many of which may be beyond its
control. There can be no assurance that the cable systems will be completed
within the time frame and that capacity sales will meet expectations, or that
substantial delays would not adversely affect GCL's achievement of profitable
operations.
c) Cash and Cash Equivalents
The Company considers short-term highly liquid investments with an original
maturity of three months or less at the date of purchase to be cash
equivalents. Cash and cash equivalents include cash in banks and short-term
money market deposits with a maturity of one month.
d) Sales, Cost of Sales and Deferred Revenue
The Company enters into CPAs to sell capacity on the transatlantic and
European segments. In addition, in conjunction with most sales of AC-1
capacity, the Company enters into Backhaul CPAs to sell Backhaul Capacity. Both
AC-1 and Backhaul CPAs grant the customer an IRU of capacity for the life of
the cable which is 25 years from the ready for service date.
Sales of capacity under CPAs are accounted for as sales type leases as they
represent leases of property and meet the criteria for sales-type lease
accounting under SFAS 13.
Revenues from the sale of AC-1 capacity and backhaul capacity are recognized
in the period that the rights and obligations of ownership transfer to the
purchaser, which occurs when (1) the purchaser obtains the right to use the
capacity, which can only be suspended following a failure of the purchaser to
pay the full purchase price or fulfill its contractual obligations, (2) the
purchaser is obligated to pay OA&M costs and (3) the segment of the System
related to the capacity purchased is available for service. Customers who have
entered into CPAs for AC-1 capacity to date have paid deposits toward the
purchase price and such amounts have been included as deferred revenue in the
accompanying consolidated balance sheet. Certain CPAs require a refund of these
deposits should the System RFS date occur after June 30, 1999. The Company's
CPAs provide that the AC-1 system will have self-healing ring capability,
whether or not a customer purchases capacity on a single segment of the system.
Substantially all of the Company's customers to date for its AC-1 System have
assumed the risk of full ring completion. In a limited number of CPAs,
customers who have purchased capacity on the United States to United Kingdom
segment prior to the date the full AC-1 ring is operational have contractually
required full self-healing ring capability as a legal condition subsequent
which, if not satisfied, would enable them to terminate the CPA and require the
Company to refund capacity payments. Payments received relating to these CPAs
will be included in deferred revenue on the consolidated balance sheet until
such time as the full self-healing ring is operative.
Costs incurred on each segment of the System, currently reflected as
construction in progress in the accompanying consolidated balance sheet, will
be recorded as capacity available for sale at the date each segment of the
System becomes operational. AC-1 Capacity and Backhaul Capacity available for
sale will be recorded at
F-12
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
the lower of cost or fair value less costs to sell and will be charged to costs
of sales in the period the related revenues are recognized. Fair value of AC-1
capacity will be derived from a third party consultant's market study of
expected sales of capacity.
The amount charged to cost of sales in any period relating to System capacity
will be calculated based on the ratio of System capacity revenues recognized in
the period to total expected System capacity revenues over the life of the
System multiplied by the total costs incurred to construct the System. This
calculation of the cost of sales amount matches costs with the value of each
sale relative to total expected revenues. Until the entire System is completed,
for purposes of calculating cost of sales, the total System costs incurred will
include an estimate of remaining costs to be incurred to complete the entire
System. Backhaul Capacity sold to customers is acquired from third party
capacity providers generally when needed to fulfill the Company's commitments
under Backhaul CPA agreements. The cost of acquiring Backhaul Capacity will be
charged to cost of sales in the period that the related revenue is recognized.
The calculation of cost of underseas sales will be based on a total system
cost and revenue forecast that includes both the initial system cost and the
cost of system upgrades that management has the intent and ability to complete,
provided the need for such upgrades is supported by a consultant's independent
revenue forecast.
The AC-1 System was designed to enable the Company to upgrade the System in
future years so as to increase the initial design capacity of 256 circuits
available for sale. The business plan for the investment in AC-1 indicated a
minimum capacity sales level of 512 circuits and management currently has both
the intent and ability to upgrade the system to that level. This is
demonstrated by the fact that (i) the Board of Directors has authorized the
purchase of the upgrade, (ii) the Company has the financial ability to purchase
the upgrade and (iii) there are no regulatory or technology issues preventing
the completion of the upgrade. In the period the Company purchases any further
upgrades, the total expected System capacity revenues and cost of the System
used in the cost of sales calculation will change to take into account the
further increase in System cost and in System capacity. The total expected
System capacity revenues used by the Company in its cost of sales calculation
will always be limited by total sales forecasted by a third party consultant
which will be updated on an annual basis. Based on the current third party
consultant's sales forecast, the Company expects to sell all 512 circuits
available for sale, which includes the initial upgrade.
In addition to capacity upgrades, management's estimate of future expected
AC-1 capacity revenues may change due to a number of factors including possible
variances in actual sales prices and volume from management's estimates.
Management will continually evaluate these factors in conjunction with the
updated third party consultant's sales forecast and, as necessary, revise its
estimate of the total expected revenues of AC-1 capacity to be derived over the
life of the System. Changes in management's estimate of the total expected
revenues to be derived from sales of AC-1 capacity will result in adjustments
to the calculations of cost of sales. These adjustments will be recorded on a
prospective basis over future periods commencing with the period management
revises its estimate.
Under their respective CPAs, certain customers have been provided options to
purchase additional capacity at specified prices for specified future periods
as well as the option to purchase additional capacity should the Company
upgrade the System capacity in the future. In many cases, prices under the
options to purchase capacity
F-13
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
during these specified periods are lower than the current price for capacity
charged to the customer. Management's estimate of future revenues for purposes
of calculating cost of sales takes into consideration prices under these
options.
Undersea and backhaul OA&M revenues are recognized in the period the services
are provided. On an annual basis the actual undersea OA&M costs incurred by the
Company will be accumulated and an adjustment will be made to true up actual
undersea OA&M revenues so that they equal 110% of actual costs incurred,
provided specified contractual limits have not been reached. This adjustment
will be recorded in the period in which the adjustment is made.
e) Commissions and Advisory Services Fees
The Company's policy is to record the commission and advisory fee expense and
related payable upon the recognition of revenue so as to appropriately match
these costs with the related revenue. Under the Advisory Services Agreement
("ASA"), the Company pays PCG Telecom Services LLC ("PCG Telecom") and its
affiliates 2% of revenues for advisory services performed and under the Sales
Agency Agreement pays TSSL a commission based on a percentage of capacity
revenues. See Note 12 for discussion of the termination of the ASA.
f) Backhaul Capacity Available For Sale
The cost of acquiring Backhaul Capacity under Inland Service Agreements has
been capitalized to backhaul capacity available for sale. Under these
agreements the Company is required to pay an up-front non-recurring charge
plus, in certain cases, recurring charges over the period the capacity is
provided. The Company has capitalized the present value of total future
payments (excluding OA&M costs) in backhaul capacity available for sale and has
recorded an equal amount as an obligation under Inland Services Agreements in
the accompanying consolidated balance sheets (see Note 5). The related OA&M
costs will be expensed in the period the services are provided.
g) Construction in Progress
Construction in progress includes direct expenditures for construction of the
System and is stated at cost. Capitalized costs include costs incurred under
the Contract; advisory, consulting and legal fees; interest; and amortized
finance costs incurred during the construction phase. Once it is probable that
a cable system will be constructed, costs directly identifiable with the cable
system under development are capitalized. Costs relating to the evaluation of
new projects incurred prior to the date development of the cable system becomes
probable are expensed as incurred.
Additionally, the Company has included in construction in progress the
minimum lease payments related to the IRU held by GT Landing Corp. on System
assets in the United States and minimum lease payments related to leases of
buildings and conduits in Germany and Netherlands described further in Note 5.
Interest costs incurred which includes the amortization of deferred finance
fees and the issuance discount, ("interest cost") are capitalized to
construction in progress in accordance with Statement of Financial
F-14
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
Accounting Standards No. 34, "Capitalization of Interest Costs" ("SFAS 34").
Total interest cost incurred and interest capitalized to construction in
progress during the periods were:
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 19, 1997
(DATE OF
THREE MONTHS ENDED SIX MONTHS ENDED INCEPTION) TO
JUNE 30, 1998 JUNE 30, 1998 DECEMBER 31, 1997
------------------ ---------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Interest cost incurred... $21,312,645 $31,828,147 $9,776,767
=========== =========== ==========
Interest cost capitalized
to construction in
progress................ $13,909,608 $24,401,876 $9,776,767
=========== =========== ==========
</TABLE>
No interest costs were incurred as of June 30, 1997.
h) Deferred Finance and Organization Costs
Costs incurred to obtain financing for the System through the issuance of
senior notes and long term debt have been reflected as an asset in the
accompanying consolidated balance sheets. Costs incurred to obtain financing
for the System through the issuance of common stock and preference shares,
respectively, have been reflected as a reduction in the carrying value of the
issued common and preference shares. The financing costs relating to the debt
are amortized over the term of the related debt agreements. Offering costs of
$7,529,651 related to the issuance of preference shares were being amortized on
a straight line basis through the mandatory redemption date of April 1, 2007.
The issuance discount, as explained in Note 7, was also being amortized through
the mandatory redemption date. On June 17, 1998 the preference shares were
redeemed at which time the remaining balance of unamortized discount and
offering costs was charged against additional paid-in capital. During the
construction period of the System, the amortized portion of deferred financing
costs relating to the senior notes and the long term debt are included in
construction in progress as a component of interest capitalized or recorded as
interest expense in accordance with SFAS 34. The amortized portion of the
deferred financing costs relating to the preference shares is included as a
component of preference share dividends. Deferred organization costs, which
include legal and professional fees incurred to bring GCL, GTH and ACL into
legal existence, are amortized to expense over a period of five years.
i) Translation of Foreign Currencies
Transactions in foreign currencies are translated into United States dollars
at the rate of exchange prevailing at the date of each transaction. Monetary
assets and liabilities denominated in foreign currencies at year end are
translated into United States dollars at the rate of exchange at that date.
Resulting gains or losses on exchange are recorded as other income or loss in
the statement of operations.
j) Stock Option Plan
The Company accounts for stock option grants in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), and, accordingly, recognizes compensation expense for stock option
grants to the extent that the estimated fair value of the stock exceeds the
exercise price of the option at the measurement date. The compensation expense
is charged against operations ratably over the
F-15
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
vesting period of the options. Disclosures will be made in the consolidated
financial statements of future periods in accordance with Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), (see Note 9).
k) Interest Rate Derivatives
The Company uses derivative financial instruments for the purpose of reducing
its exposure to adverse fluctuations in interest rates. The Company does not
utilize derivative financial instruments for trading or other speculative
purposes. The counterparty to these instruments is CIBC. The Company is exposed
to credit loss in the event of nonperformance by this counterparty.
As discussed in Note 5, effective December 31, 1997, the Company entered into
an interest rate swap agreement to hedge its exposure to interest rates on its
long term debt. The net cash amounts paid or received on the agreement are
accrued and recognized as an adjustment to interest expense on the related
debt.
For interest rate derivatives to qualify for hedge accounting, the debt
instrument being hedged must expose the Company to interest rate risk and, at
the inception of the derivative instrument and throughout the period the
derivative is held, there must be a high correlation of changes in the market
value of the derivative and interest expense of the hedged item. Gains and
losses on interest rate derivatives and other derivative instruments which do
not meet this criteria would be recorded in the statement of operations.
If an interest rate derivative instrument were to terminate or be replaced by
another instrument and no longer qualify as a hedge instrument, then it would
be marked to market and carried on the balance sheet at fair value.
l) Interim Financial Information
The unaudited financial statements as of June 30, 1998, and for the three
months and six months ended June 30, 1998, for the three months ended June 30,
1997 and for the period from March 19, 1997 (date of inception) to June 30,
1997 include, in the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for the fair presentation of
such financial statements.
m) Net loss per Share
Basic net loss per share is computed using the weighted average number of
shares of common stock outstanding. Diluted net loss per share is computed
using the weighted average number of shares of common stock outstanding and
common stock equivalents including shares issuable under options and warrants
that are dilutive using the treasury stock method.
F-16
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
The following is a reconciliation of the numerator and the denominator of the
basic and diluted net loss per share:
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
THREE MONTHS THREE MONTHS SIX MONTHS MARCH 19, 1997 MARCH 19, 1997
ENDED ENDED ENDED (DATE OF INCEPTION) (DATE OF INCEPTION)
JUNE 30, 1998 JUNE 30, 1997 JUNE 30, 1998 TO JUNE 30, 1997 TO DECEMBER 31, 1997
-------------- ------------- -------------- ------------------- --------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic and Diluted
Net income (loss)
before extraordinary
item.................. $ (135,724,885) $ 1,205,450 $ (139,446,037) $ 1,205,450 $ (160,356)
Preference share
dividends............. (3,898,203) (4,041,664) (8,306,433) (4,236,108) (12,689,923)
Redemption of
preference shares..... (34,140,067) -- (34,140,067) -- --
-------------- ------------ -------------- ------------ ------------
Net loss applicable to
common shareholders
before extraordinary
item.................. $(173,763,155) $ (2,836,214) $(181,892,537) $ (3,030,658) $(12,850,279)
============== ============ ============== ============ ============
Weighted average shares
outstanding........... 163,639,852 162,886,967 163,508,514 162,886,967 162,886,967
============== ============ ============== ============ ============
Basic and diluted net
loss per common share
before extraordinary
item................... $ (1.06) $ (0.01) $ (1.11) $ (0.02) $ (0.08)
============== ============ ============== ============ ============
</TABLE>
n) Income taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). The Company recognizes current and deferred income tax assets and
liabilities based upon all events that have been recognized in the consolidated
financial statements. Deferred tax assets and liabilities are determined based
on differences between the financial reporting and tax bases of assets and
liabilities. A deferred tax liability or asset is recorded using the enacted
tax rates expected to apply to taxable income in the period in which the
deferred tax liability or asset is expected to be settled or realized. Future
tax benefits attributable to these differences, if any, are recognized to the
extent that realization of such benefits is more likely than not.
o) Pending and New Accounting Standards
The Financial Accounting Standards Board has recently issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130") and Statement of Financial Accounting Standards No. 131, "Disclosures
About Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 130
and SFAS 131 are effective for periods beginning after December 15, 1997. There
was no impact to the financial statements due to the adoption of SFAS 130 in
the first six months of 1998. Management does not expect the impact of the
adoption of SFAS 131 on the Company's financial position or results of
operations to be material.
The Financial Accounting Standards Board has also recently issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," ("SFAS 133") which is effective for
periods beginning after June 15, 1999. Management does not expect the impact of
the adoption of SFAS 133 on the Company's financial position or results of
operations to be material.
The American Institute of Certified Public Accountants recently issued
Statement of Position 98-5, "Reporting on the Cost of Start-Up Activities"
("SOP 98-5"). SOP 98-5 is effective for periods beginning after
F-17
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
December 15, 1998. Management does not expect the impact of the adoption of SOP
98-5 on the Company's financial position or results of operations to be
material.
p) Reclassifications
Certain reclassifications have been made to the December 31, 1997
consolidated financial statements to conform with the presentation as of June
30, 1998.
3. INVESTMENT IN PACIFIC CROSSING LTD.
On April 9, 1998, a wholly-owned subsidiary of GCL entered into a joint
venture to construct a cable system project, PC-1. PC-1 is owned and operated
by PCL. The Company has an economic interest in PCL represented by a 50% direct
voting interest and, through one of the joint venture partners, owns a further
8% economic non-voting interest. PCL entered into a contract on April 21, 1998
with TSSL to construct PC-1 for a total price of approximately $1.2 billion,
which will be financed through a $400 million equity contribution by the joint
venture partners and an $850 million credit facility. On July 30, 1998, an $850
million aggregate senior secured non-recourse loan facility ("the PCL Credit
Facility") was executed, for the construction and financing costs of PC-1. The
PCL Credit Facility is comprised of an $840 million multiple drawdown term loan
facility and a $10 million working capital facility. On July 30, 1998, an
initial drawdown was made on the term loan facility to repay the $104 million
promissory note used for initial construction costs on PC-1 as well as fees
incurred to secure the credit facility. The Company also placed $231 million
into a restricted cash collateral account on July 30, 1998 to satisfy its
equity funding commitment for its 58% joint venture economic interest in PCL.
This amount will be accounted for as an equity investment in the joint venture.
The investment in Pacific Crossing Ltd. is comprised of the following items:
<TABLE>
<S> <C>
Equity investment in PCL.................................... $ 6,000
PC-1 development costs...................................... 126,450,345
------------
Investment in Pacific Crossing Ltd. ........................ $126,456,345
============
</TABLE>
The PC-1 development costs represent the estimated value of the PCG Warrants
as of June 30, 1998 which were granted to PCG in exchange for the PC-1 system
and related rights. In connection with the formation of PCL, the Company agreed
to make available to PCL the consideration received by the Company in
connection with the grant of the PCG Warrants, in addition to the $231 million
cash investment made by the Company. See Note 12.
4. RESTRICTED CASH AND CASH EQUIVALENTS
Restricted cash and cash equivalents comprises approximately $78 million as
of June 30, 1998 ($nil as of December 31, 1997) for the collateralization of
the promissory note used to make the initial payments on the PC-1 construction,
$74 million as of June 30, 1998 ($20 million as of December 31, 1997) reserved
for purposes of funding future interest payable on senior notes, approximately
$72 million as of June 30, 1998 ($5 million as of December 31, 1997) in funds
received pursuant to CPAs that may be used only in accordance with the terms
F-18
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
of the long term debt agreement and approximately $14 million as of June 30,
1998 ($nil as of December 31, 1997) restricted for purchases of Backhaul
Capacity.
5. LONG TERM DEBT AND OBLIGATIONS UNDER INLAND SERVICES AGREEMENTS AND CAPITAL
LEASES
On June 27, 1997, ACL entered into a $410 million aggregate senior secured
non-recourse loan facility (the "Credit Facility") with a group of banks led by
CIBC and Deutsche Bank AG, for the construction and financing costs of AC-1. On
December 15, 1997, the Credit Facility was amended to increase it to $482
million comprised of a $472 million multiple draw down term loan facility (the
"Term Facility") and a $10 million working capital facility (the "Working
Capital Facility") for the purpose of extending the System to include, among
other things, a Netherlands landing site. The Credit Facility is secured by
pledges of the stock of ACL and its subsidiaries and security interests in its
assets and revenues. As of June 30, 1998, ACL had borrowed $367,048,000
($162,325,000 as of December 31, 1997) under the Credit Facility.
The Credit Facility provides that ACL may select loan arrangements as either
a Eurodollar loan or an Alternative Base Rate ("ABR") Loan. The Eurodollar
interest rate is LIBOR plus 2.5% and the ABR interest rate is the greatest of
(a) the Prime Rate (b) the Base CD Rate plus 1% and (c) the Federal Funds
Effective Rate plus 0.5%, plus 1.5%. ACL pays a commitment fee of 0.5% per
annum on the unused portion of the Credit Facility. The Credit Facility
contains various covenants that, among other things, (i) limit further
indebtedness by ACL and its subsidiaries, (ii) limit the ability of ACL to pay
dividends, (iii) require ACL to meet certain minimum capacity sales levels and
(iv) require ACL to meet a minimum interest coverage ratio for the years 1999
through to maturity of the Credit Facility. The Credit Facility will be repaid
in eight semi-annual installments, commencing on the first May 31 or November
30 occurring two months after the System RFS date, with $72.3 million of the
principal amount due in the initial year and $120.5 million, $144.6 million,
and $144.6 million due in the second, third and fourth years, respectively. If
at any semi-annual installment date the outstanding loan balance is lower than
the installment amounts noted in the previous sentence, then the outstanding
loan balance amount will be repaid. In addition, on each semi-annual
installment date, ACL will apply an amount equal to 50% of Excess Cash Flow to
the mandatory prepayment of the remaining outstanding balance under the Credit
Facility. Excess Cash Flow is defined under the terms of the Credit Facility as
all cash received from revenues during the period reduced by the payment of
OA&M expenses, ASA fees, commissions under the Sales Agency Agreement, and
transfers to certain reserve accounts. The Credit Facility also requires
mandatory prepayments to be made from 50% of net cash proceeds of any equity
offering of ACL and 100% of net cash proceeds from permitted debt offerings by
ACL or GTH. Optional prepayments may be made at any time without premium or
penalty. All revenues received prior to the System RFS date are used to fund
certain reserve accounts, as defined by the Credit Facility, and thereafter
applied against the borrowings under the Credit Facility and the Old Senior
Notes as determined by the Credit Facility agreement.
On September 30, 1997, pursuant to the Contract with TSSL and the Credit
Facility agreement, ACL put in place a $50 million letter of credit in favor of
TSSL which will expire at such time as ACL has paid all costs under the
contract. ACL pays a commitment fee of 2.5% per annum on the full amount of the
letter of credit.
F-19
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
As of June 30, 1998, all borrowings under the Credit Facility were Eurodollar
Loans and were drawn down under the Term Facility. As of December 31, 1997,
$500,000 was borrowed under the Working Capital Facility and $161,825,000 was
borrowed under the Term Facility. Effective December 31, 1997, ACL entered into
an interest rate swap transaction based on one month LIBOR to minimize its
exposure to increases in interest rates on its borrowings. The swap transaction
was amended on February 2, 1998 and currently fixes ACL's floating interest
rate at 5.7825% on a notional amount of borrowings ranging between $200 million
and $310 million until January 31, 1999.
As described in Note 1, the Company has capitalized the minimum lease
payments of the IRU held by GT Landing Corp. on System assets held in the
United States. The Company has been granted a bargain purchase option to
purchase for $10,000 all rights and title to these assets at any time during
the term of this contract which is 25 years from the System RFS. As of June 30,
1998, the present value of the payments under the IRU recorded as an obligation
under capital leases is $5,660,619 ($12,297,645 as of December 31, 1997).
The Company has capitalized building and conduit leases in the Netherlands
and Germany. The leases are for a period of 25 years which represents more than
75 percent of the economic life of the asset being purchased. The Company has
the option to extend the Netherlands lease for an additional 5 year term. As of
June 30, 1998, the present value of the obligation has been recorded as an
obligation under capital leases in the accompanying consolidated balance sheet
in the amount of $8,116,408 ($ nil as of December 31, 1997.)
Contracts to purchase Backhaul Capacity have a duration of 25 years from
System RFS which represents more than 75 percent of the economic life of the
asset being purchased. Certain of these contracts require payments over the 25
year period. As of June 30, 1998, the present value of the payments under these
contracts (excluding amounts attributable to operations and maintenance) has
been recorded as obligations under Inland Services Agreements in the
accompanying consolidated balance sheets in the amount of $51,117,547
($20,900,000 as of December 31, 1997).
At June 30, 1998 future minimum payments, in the aggregate for the six months
ending December 31, 1998 and for the four succeeding years, under these Inland
Services Agreements and capital leases are as follows:
<TABLE>
<S> <C>
For the six months ending December 31, 1998.................... $ 39,138,000
1999........................................................... 23,069,000
2000........................................................... 7,057,000
2001........................................................... 4,692,000
2002........................................................... 4,847,000
Thereafter until 2024.......................................... 152,083,000
------------
Total minimum lease payments................................... 230,886,000
Less: Amount representing maintenance payments................. 138,515,331
------------
92,370,669
Less: Amount representing interest............................. 27,476,095
------------
Present value of net minimum lease payments.................... $ 64,894,574
============
</TABLE>
F-20
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
6. SENIOR NOTES
New Senior Notes
The 9 5/8% senior notes due May 15, 2008 with a face value of $800 million
("New Senior Notes") are general unsecured obligations of GCH and will rank
senior to any future subordinated indebtedness of GCH and pari passu in right
of payment with any future unsecured senior indebtedness of GCH. GCH has set
aside $74 million to fund the first two interest payments. Interest is payable
semi-annually in arrears on each May 15 and November 15 commencing on November
15, 1998. The New Senior Notes are redeemable at the option of GCH on May 15,
2003 at 104.813%, May 15, 2004 at 103.208%, on May 15, 2005 at 101.604% and on
May 15, 2006 and on May 15 thereafter at par. The New Senior Notes are
redeemable at the option of the Holder only upon the occurrence of a change in
control in GCL. The New Senior Notes agreement imposes certain limitations on
the ability of GCH and its subsidiaries to, among other things, (i) incur
additional indebtedness including senior indebtedness and (ii) pay certain
dividends and make certain other restricted payments and investments.
Old Senior Notes
The 12% senior notes due March 31, 2004 with a face value of $150 million
("Old Senior Notes") are general unsecured obligations of GTH and will rank
senior to any future subordinated indebtedness of GTH and pari passu in right
of payment with any future unsecured senior indebtedness of GTH. The Old
Senior Notes bear an initial interest rate of 12% per annum. Interest is
payable semi-annually in arrears on each June 1 and December 1. If the Old
Senior Notes are not repaid by April 1, 2000, the interest rate will increase
by 0.5% on April 1, 2000 and by an additional 0.5% on each subsequent April 1,
until repaid. If the interest rate exceeds 15% per annum (the interest rate
payable increases by 2% upon any event of default) GTH may, at its option,
cause such interest in excess of 15% to be paid in additional senior notes.
As described in Note 5, revenues received prior to the System RFS date are
used to fund certain reserve accounts which are then applied against
borrowings under the Credit Facility and the Old Senior Notes as determined by
the Credit Facility agreement. Additionally, GTH will on each June 1 and
December 1, commencing on the first such date to occur more than 90 days after
the System RFS date, apply an amount equal to 50% of ACL's Excess Cash Flow
(as defined in Note 5), to redeem the Old Senior Notes at face value, plus
accrued interest to the date of repurchase. The Old Senior Notes are
redeemable at the option of GTH, at redemption prices starting at 106% of the
face value beginning April 1, 2000, declining to 103% in 2001, and 100% in
2002 and 2003, plus accrued interest (see Note 15).
On May 18, 1998, a portion of the proceeds from the issuance of the New
Senior Notes was used to repurchase the Old Senior Notes. The Company
recognized an extraordinary loss of $19.7 million on repurchase comprising a
premium of approximately $9.8 million and a write-off of approximately $9.9
million of unamortized deferred financing costs.
7. MANDATORILY REDEEMABLE PREFERENCE SHARES
The authorized preference shares consist of 500,000 shares at a liquidation
preference of $1,000 per share. Effective March 25, 1997, 100,000 shares were
issued for $100 million in cash and as of June 30, 1998, nil shares (109,830
shares as of December 31, 1997) were issued and outstanding.
F-21
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
The holders of preference shares are entitled to receive cumulative,
compounding dividends at an initial annual rate of 14% of the $1,000
liquidation preference per share. If the preference shares are not redeemed on
or prior to April 1, 2001, the annual dividend rate will increase by 0.5% per
annum (the dividend rate payable increases by 2% upon any event of default)
thereafter, subject to a maximum annual dividend rate of 20%. At the option of
GTH, accrued dividends may be paid in cash or paid by issuing additional
preference shares (i.e. pay-in-kind) until April 1, 2002, at which time they
must be paid in cash. However, if the dividend rate exceeds 15% per annum, GTH
may cause dividends in excess of 15% to be paid in additional preference
shares. Dividends paid in additional preference shares are payable on a
quarterly basis and cash dividends are payable on a semi-annual basis. All
dividends declared to date have been paid in additional preference shares. The
preference shares rank senior to all common stock with respect to dividend
rights, rights of redemption or rights on liquidation and senior to any future
preferred stock. The preference shares are non-voting unless GTH fails to pay
a dividend, fails to make a mandatory redemption or upon a change in control,
fails to make an offer to purchase the preference shares at 101%, at which
time the holders of a majority of the preference shares will be entitled to
elect one to two directors. In the event that any preference shares are still
outstanding on April 1, 2001, the holders thereof will receive warrants to
purchase shares of Class A common stock of Old GCL at an exercise price of
$.01 per share, up to a maximum of 46,440 shares of Old GCL common stock.
The preference shares have a mandatory redemption on April 1, 2007 at their
liquidation preference. In addition, the preference shares will be redeemed
out of ACL's Excess Cash Flows (as described in Note 5) after repayment of the
Credit Facility and Senior Notes at redemption prices starting at 114% for
both 1997 and 1998, declining to 112% in 1999 and 2000, 107% in 2001 and 100%
thereafter. The preference shares can be redeemed, in whole or in part, at the
option of GTH at redemption prices starting at 114% of the liquidation
preference through 2001, declining to 111% in 2002, 108% in 2003, 105% in
2004, 102% in 2005 and 100% thereafter. The outstanding preference shares are
exchangeable, in whole, at the option of GTH for Senior Subordinated Exchange
Notes ("Exchange Notes") issued by ACL at a rate of $1,000 principal amount of
Exchange Notes for each $1,000 of liquidation preference of preference shares.
These Exchange Notes will bear an interest rate equal to the dividend rate of
the preference shares and will have repayment terms similar to the preference
shares described above.
In connection with the issuance of the preference shares, the holders of
preference shares purchased an aggregate of 11,250,000 shares of Old GCL's
Class A common stock for total proceeds of $7.5 million. Additionally, in
connection with the issuance of the preference shares, the initial purchaser
of the preference shares received 19,852,950 shares of Old GCL's Class A
common stock for no additional consideration representing 15% of the aggregate
number of Old GCL's Class A, B and C shares outstanding, after giving effect
to the issuance. The initial purchaser had the right to distribute these Class
A shares to purchasers of the preference shares. The Company has reflected
the $13,235,000 estimated fair value of the Old GCL's Class A common stock as
a discount in the carrying value of the preference shares.
The fair value of the 19,852,950 shares of Old GCL's Class A common stock
distributed to preference shareholders was based on the $.67 per share paid by
the holders of preference shares for the 11,250,000 Old GCL's Class A shares
purchased for cash.
On June 17, 1998, proceeds from the issuance of the New Senior Notes were
used to redeem the preference shares. The redemption of the preference shares
resulted in a charge against additional paid-in capital comprised
F-22
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
of approximately a $15.9 million redemption premium and $18.2 million of
unamortized discount and issuance cost on the preference shares on the date of
the redemption. The redemption premium and write-off of unamortized discount
and issuance costs on the preference shares were treated as a deduction to
arrive at the net loss applicable to common shareholders in the consolidated
statement of operations. Furthermore, upon the redemption of the preference
shares, the warrants attached to the preference shares expired.
Preference share dividends included the following:
<TABLE>
<CAPTION>
FOR THE
FOR THE PERIOD
PERIOD FROM
FROM MARCH 19,
MARCH 19, 1997 (DATE
SIX 1997 (DATE OF
MONTHS OF INCEPTION)
THREE MONTHS THREE MONTHS ENDED INCEPTION) TO
ENDED JUNE ENDED JUNE JUNE 30, TO JUNE 30, DECEMBER 31,
30, 1998 30, 1997 1998 1997 1997
------------ ------------ ----------- ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Preference share
dividends.............. $3,448,123 $3,500,001 $7,337,031 $3,694,445 $11,111,672
Amortization of discount
on preference shares... 286,759 349,257 617,634 349,257 1,011,007
Amortization of
preference share
issuance costs......... 163,321 192,406 351,768 192,406 567,244
---------- ---------- ---------- ---------- -----------
$3,898,203 $4,041,664 $8,306,433 $4,236,108 $12,689,923
========== ========== ========== ========== ===========
</TABLE>
8. OLD GCL COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
Information with respect to Old GCL common stock and additional paid-in
capital prior to the Old GCL Exchange is as follows:
<TABLE>
<S> <C> <C>
Common Stock:
Authorized:
1,000,000,000 Class A common stock of $.00000067 par
value
1,000,000,000 Class B common stock of $.00000067 par
value
1,000,000,000 Class C common stock of $.00000067 par
value
3,000,000,000 Class D common stock of $.00000067 par
value
1,000,000,000 Class E common stock of $.00000067 par
value
43,000,000,000 undesignated common stock of $.00000067
par value
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
Issued and Outstanding as of June 30, 1998:
31,102,950 Class A shares (31,102,950 as of December 31,
1997).................................................. $20 $20
51,075,000 Class B shares (50,625,000 as of December 31,
1997).................................................. 34 34
50,625,000 Class C shares (50,625,000 as of December 31,
1997).................................................. 34 34
33,088,200 Class D shares (33,088,200 as of December 31,
1997).................................................. 22 22
337,500 Class E shares (nil as of December 31, 1997).... -- * --
</TABLE>
- --------
* Amount less than $1.
F-23
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
As discussed in Note 1, on January 21, 1998, Old GCL effected a 100 for 1
stock split of each of the Class A, B, C and D common stock and undesignated
stock and amended the par value of each share of common stock from $.0001 per
share to $.000001 per share. Shares of common stock of Old GCL outstanding
have been restated to reflect the equivalent number of shares of GCL that were
issued in the Old GCL Exchange as discussed in "Description of Capital Stock".
Class A shares, Class B shares and Class C shares all have voting rights. On
March 25, 1997, Old GCL issued 11,250,000 Class A shares, 50,625,000 Class B
shares, 50,625,000 Class C shares for $.67 per share, resulting in aggregate
proceeds of $75 million. As discussed in Note 7, in addition to the 11,250,000
Class A shares issued to the preference shareholders for cash, in connection
with the issuance of the preference shares, a total of 19,852,950 Class A
shares were distributed to the initial preference shareholder representing 15%
of the aggregate number of Class A, B and C shares outstanding. In addition,
warrants to acquire a maximum of 46,440 shares of common stock of Old GCL were
issued into escrow for the benefit of the holders of preference shares. All or
a portion of the warrants may be exercised at a price of $.01 per share if the
preference shares are outstanding on April 1, 2001. Effective January 21,
1998, Old GCL authorized 1,000,000,000 of new Class E non-voting shares.
Certain of the Class B shareholders were issued a total of 33,088,200 Class
D shares. Of the $33,750,000 of proceeds received from the issuance of Class B
shares, $2,500,000 was allocated to the Class D shares representing the
estimated fair value of the Class D shares based on an independent valuation.
Class D shares are non-voting shares which carry special preference rights on
the cash distributions made by Old GCL. Class D shareholders will receive 10%
of cash distributions to common shareholders once the internal rate of return
to Class C shareholders exceeds 10%, and then increasing to 20% of cash
distributions to common shareholders once the internal rate of return to Class
C shareholders exceeds 30%. Effective January 21, 1998, Class D share rights
were amended such that Class D shareholders now have the option to convert
each Class D share into one Class E share upon payment to Old GCL of $1.47 per
share or are entitled to a fraction of a Class E share based upon a valuation
at the time of such conversion, together with a warrant to purchase the
remaining fraction of such Class E share at an exercise price based upon such
market valuation. By granting to holders of the Class D shares an option to
convert such shares into Class E shares, the Company obtained effective
assurance that it could effect a change to a corporate structure in the event
of a major equity event, such as a merger or other business combination or in
the event of an IPO by GCL, see Note 10, of its common stock, since the
holders of the Class D shares would need to exercise their options in order to
participate directly in benefits of a merger or acquisition of the Company or
in order to obtain the benefits of any trading market for the common stock of
the Company; no trading market was expected to develop for the Class D shares.
The grant of the options to Class D shareholders represents an equity
transaction since the Company granted these shareholders amended share rights
in the form of options with new warrants. As an equity transaction, the fair
value of the option would be recorded as an increase in additional paid-in
capital and a corresponding charge against retained earnings, but since the
Company has an accumulated deficit, the charge would be made against
additional paid in capital which would have no impact on the consolidated
financial statements. The Company will account for the new warrants as an
equity transaction on the date the warrants are issued, which is expected to
be the IPO date. The accounting would increase additional paid in capital and
a charge to retained earnings to the extent the Company has retained earnings
on that date, or against additional paid in capital if the Company does not
have retained earnings.
F-24
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
During the six months ended June 30, 1998, the Company issued, at a price of
$.67 per share, 450,000 Class B shares and 337,500 Class E shares. Since the
estimated fair value of shares exceeded the issue price, the Company increased
stock related expense and shareholders' equity by $1,625,179 and $2,162,679 in
the three and six months ended June 30, 1998, respectively.
9. STOCK OPTION PLAN
On January 21, 1998, the Company adopted the 1998 Stock Incentive Plan ("the
Plan") which provides for the granting of non-qualified stock options to key
officers and employees of the Company at the discretion of the compensation
committee or Board of Directors. As of June 30, 1998, the maximum number of
shares of common stock which may be issued under the Plan was 16,607,865
shares of Class E common stock. Generally, options vest equally over a period
of three years and expire ten years from the date of grant.
The following table summarizes the transactions of the Company's stock
option plans for the six months ended June 30, 1998:
<TABLE>
<CAPTION>
WEIGHTED NUMBER
NUMBER OF AVERAGE EXERCISABLE
OPTIONS EXERCISE AS AT
OUTSTANDING PRICE JUNE 30, 1998
----------- -------- -------------
<S> <C> <C> <C>
Options outstanding as of December 31,
1997.................................. -- -- --
Options granted on January 21, 1998.... 4,231,500 $1.67 --
Options granted April 3, 1998.......... 5,557,500 1.67 1,305,000
Options granted June 12, 1998.......... 3,352,950 6.67 831,251
Options forfeited...................... (1,563,000) 1.67 --
---------- ----- ---------
Options outstanding as of June 30,
1998.................................. 11,578,950 $3.01 2,136,251
========== ===== =========
</TABLE>
The weighted average remaining life of the options outstanding as of June
30, 1998 is 9.5 years. During the three month and six month periods ended June
30, 1998, no options had expired or were exercised. Of the options granted on
April 3, 1998 and June 12, 1998, there were 90,000 options and 370,500
options, respectively, which had an exercise price equal to the IPO price.
Since the IPO price was unknown as of June 30, 1998, these options were not
considered in the weighted average exercise price computations.
During the three months ended June 30, 1998, the Company recorded $67.1
million of unearned compensation ($5.3 million of which relates to the put
rights described below) which is being recognized as an expense over the
vesting period of the options. Of this amount, the Company recognized $21.1
million of compensation expense ($0.3 million of which relates to the employee
rights described below) during the three months and six months ended June 30,
1998, for the options issued in April and June, certain of which vested
immediately, since the exercise price was less than the estimated fair value
of the stock on the dates of grant. The remaining $46.0 million will be
recognized in the amounts of $4.8 million in each of the third and fourth
quarters of 1998, $19.2 million in 1999, $13.5 million in 2000 and $3.7
million in 2001. No compensation expense was recognized in respect of the
January 21, 1998 option grant since the estimated fair value of the stock, on
that date did not exceed the exercise price. Certain employees have the right,
after three years of employment, to require the Company to purchase up to
600,000 shares of common stock held by them for $13.33 per share, if the
Company has not completed an IPO of its stock by that time and one employee
has the option to sell 150,000 shares of stock to the Company at $13.33 per
share for a period of two years from the grant date.
F-25
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
On August 9, 1998, the Company granted options to purchase 507,750 shares
under the Plan at a exercise price equal to the IPO price. Such options
generally have a three year vesting period and expire ten years from the date
of grant.
As permitted by SFAS 123, the Company has chosen to account for employee
stock options under APB 25 and is recognizing compensation expense over the
vesting period to the extent that the estimated fair value of the stock on the
date the options were granted exceeded the exercise price on the dates of
grant. Had compensation cost for the Company's stock-based compensation plans
been determined consistent with the SFAS 123 fair value approach, the impact
on the Company's loss applicable to common shareholders and loss per share
would be as follows:
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1998
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net loss applicable to common shareholders:
As reported.................................... $(193,472,626) $(201,602,008)
Pro forma...................................... $(195,220,089) $(203,496,876)
Basic and diluted net loss per share:
As reported.................................... $ (1.18) $ (1.23)
Pro forma...................................... $ (1.18) $ (1.23)
</TABLE>
The fair value of options for purposes of the SFAS 123 disclosure is
estimated on the date of grant using the minimum value method with the
following average assumptions: no dividend yield, risk-free interest rates of
5.45% and an average expected life of 4 years. The estimated fair value of the
options granted on January 21, April 3, and June 12, 1998 were $0.49, $11.40
and $15.90 respectively.
10. SUMMARIZED FINANCIAL INFORMATION OF GCH, GUARANTORS AND NON-GUARANTORS
Because Old GCL, GCL and GCH are entities under common control, the
transfers by Old GCL to GCL and GCL to GCH and the Old GCL Exchange were
accounted for similar to a pooling of interests. Accordingly, the summarized
financial information of GCH presented below reflects the accounts of GTH and
its subsidiaries retroactive to inception of GTH (March 24, 1997). Old GCL,
GCL and GTH each provide a guarantee of the New Senior Notes described in Note
6. Additionally, Global Crossing International, Inc. ("GCI"), a wholly-owned
subsidiary of GCH that provides marketing and development services to GCL,
along with its wholly-owned subsidiaries, also provide guarantees of the New
Senior Notes. All guarantees are full, unconditional, joint and several. To
the extent companies providing a guarantee have excess cash, dividends or
loans of this cash can be made to GCH without restriction. One of the Non-
Guarantors is restricted under its long term debt agreement from making any
dividends or loans to GCH effectively for the duration of such long term debt
agreement. Separate financial statements of each subsidiary guarantor have not
been provided because they would not be meaningful to investors.
F-26
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
SUMMARIZED FINANCIAL INFORMATION OF GCH, GUARANTORS AND NON-GUARANTORS:
($ AMOUNTS IN '000S)
(UNAUDITED)
<TABLE>
<CAPTION>
OLD ELIMINATION
GCL(1) GCL GCH GUARANTORS NON-GUARANTORS ENTRIES CONSOLIDATED
AS OF JUNE 30, 1998 --------- --------- ---------- ---------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash................... $ -- $ 87 $ 289,120 $ 13,648 $ 1,270 $ -- $ 304,125
Restricted cash........ -- -- 73,348 -- 164,137 -- 237,485
Other current assets... -- 487 14,011 2,343 68,685 (13,344) 72,182
Senior notes........... -- -- 150,000 -- -- (150,000) --
Backhaul capacity
available for sale.... -- -- -- -- 54,739 -- 54,739
Capacity available for
sale.................. -- -- 358 4,585 201,328 -- 206,271
Construction in
progress.............. -- -- -- 7,047 511,734 (144) 518,637
Investment in
subsidiaries.......... 237,779 237,024 485,043 366,526 374,405 (1,700,777) --
Investment in Pacific
Crossing Ltd.......... -- -- -- -- 126,456 -- 126,456
Deferred finance costs,
net................... -- 361 30,904 9,816 13,074 (9,816) 44,339
--------- --------- ---------- -------- ---------- ----------- ----------
Total assets........... $ 237,779 $ 237,959 1,042,784 $403,965 $1,515,828 $(1,874,081) $1,564,234
========= ========= ========== ======== ========== =========== ==========
Current liabilities.... $ -- $ 180 $ 9,483 $ 6,828 $ 137,876 $ (13,344) $ 141,023
Long term debt......... -- -- -- -- 367,048 -- 367,048
Senior notes........... -- -- 796,277 150,000 -- (150,000) 796,277
Long term deferred
revenue............... -- -- -- -- 6,917 -- 6,917
Obligations under
inland service
agreements............ -- -- -- -- 7,628 -- 7,628
Obligations under
capital leases........ -- -- -- -- 7,562 -- 7,562
Common stock........... * 1,637 12 24 36 (72) 1,637
Other shareholders'
equity................ 397,095 395,458 236,489 221,607 949,717 (1,804,908) 395,458
Accumulated deficit.... (159,316) (159,316) 523 25,506 39,044 94,243 (159,316)
--------- --------- ---------- -------- ---------- ----------- ----------
Total liabilities and
shareholders' equity.. $ 237,779 $ 237,959 $1,042,784 $403,965 $1,515,828 $(1,874,081) $1,564,234
========= ========= ========== ======== ========== =========== ==========
- ---------------------------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED
JUNE 30, 1998
Sales and operating
revenue............... $ -- $ -- $ -- $ -- $ 101,256 $ -- $ 101,256
--------- --------- ---------- -------- ---------- ----------- ----------
Cost of capacity sold.. -- -- 56 718 40,426 -- 41,200
Termination of advisory
services agreement.... -- 135,000 2,700 -- -- -- 137,700
Stock related expense.. -- 23,397 -- -- -- -- 23,397
Selling, general and
administrative
expenses.............. -- 1,400 590 11,357 13,305 -- 26,652
--------- --------- ---------- -------- ---------- ----------- ----------
-- 159,797 3,346 12,075 53,731 -- 228,949
--------- --------- ---------- -------- ---------- ----------- ----------
Operating loss......... -- (159,797) (3,346) (12,075) 47,525 -- (127,693)
Other income (expense),
net................... -- -- (2,643) (1,103) 993 -- (2,753)
Provision for income
taxes................. -- -- -- -- (9,000) -- (9,000)
Extraordinary loss..... -- -- (19,710) -- -- -- (19,710)
--------- --------- ---------- -------- ---------- ----------- ----------
Net loss............... -- (159,797) (25,699) (13,178) 39,518 -- (159,156)
Equity in loss of
subsidiaries.......... (201,602) (41,805) (16,106) 38,802 -- 220,711 --
Preference share
dividends............. -- -- -- (8,306) -- -- (8,306)
Premium on redemption
of preference shares.. -- -- -- (34,140) -- -- (34,140)
--------- --------- ---------- -------- ---------- ----------- ----------
Net loss applicable to
common shareholders... $(201,602) $(201,602) $ (41,805) $(16,822) $ 39,518 $ 220,711 $ (201,602)
========= ========= ========== ======== ========== =========== ==========
</TABLE>
- -------------------------------------------------------------------------------
* Amount less than $1,000.
(1) The amounts presented for Old GCL reflect its 100% ownership interest in
GCL prior to the Old GCL Exchange, immediately following the Old GCL
Exchange CIBC, either directly or beneficially, owns 100% of the capital
stock of Old GCL. Since the consummation of the Old GCL Exchange, there
have been no operations of Old GCL. Old GCL's only asset is its 22.46%
ownership interest (including shares beneficially owned by CIBC) in GCL.
Old GCL does not have any other assets liabilities. Old GCL has guaranteed
certain contractual performance obligations entered into by the Company's
operating subsidiaries from time to time in the ordinary course of
business, which contractual obligations are not significant. In connection
with the Old GCL Exchange, the Company is in the process of formally
assuming such guarantee obligations from Old GCL. Old GCL also remains as
a guarantor of the New Senior Notes. After giving effect to the Old GCL
Exchange, on a pro forma basis as of June 30, 1998 Old GCL's only asset
would be approximately a $53,405,000 investment in GCL, which is 22.46% of
GCL's equity. Old GCL's equity would also be approximately $53,405,000. On
a pro forma basis for the six months ended June 30, 1998, Old GCL's equity
loss from its investment in GCL, as well as its net loss, would be
approximately $(45,280,000). On a pro forma basis, Old GCL would have no
cash flow.
F-27
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
SUMMARIZED FINANCIAL INFORMATION OF GCH, GUARANTORS AND NON-GUARANTORS
(CONTINUED):
($ AMOUNTS IN '000S)
(UNAUDITED)
<TABLE>
<CAPTION>
OLD NON- ELIMINATION GCL
FOR THE SIX MONTHS ENDED GCL(1) GCL GCH GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
JUNE 30, 1998 ------ ------- -------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash flows provided by
(used in) operating
activities............. $-- $ -- $ (7,583) $(11,147) $ 56,152 $ -- $ 37,422
---- ------- -------- -------- -------- -------- --------
Cash flows from
financing activities:
Finance and
organization costs
incurred.............. -- (361) (31,376) -- (36) -- (31,773)
Investment in and
advances from (to)
affiliates............ -- 7,495 (241,136) (24,059) 10,473 247,227 --
Proceeds from issuance
of common stock and
additional paid-in
capital............... -- (7,047) -- 169,368 78,384 (247,227) 525
Cash reimbursement to
certain shareholders.. -- -- -- -- -- -- (7,047)
Redemption of
preference shares..... -- -- -- (134,372) -- -- (134,372)
Proceeds from long term
debt.................. -- -- -- -- 204,723 -- 204,723
Proceeds from issuance
of senior notes....... -- -- 796,232 -- -- -- 796,232
Repurchases of senior
notes................. -- -- (159,750) -- -- -- (159,750)
Increase (decrease) in
restricted cash and
cash equivalents...... -- -- (73,348) 19,851 (158,713) -- (212,210)
---- ------- -------- -------- -------- -------- --------
Net cash provided by
financing activities.. -- 87 290,622 30,788 134,831 -- 456,328
---- ------- -------- -------- -------- -------- --------
Cash flows from
investing activities:
Cash paid for
construction in
progress and capacity
available for sale.... -- -- 6,081 (7,205) (189,948) -- (191,072)
Investment in Pacific
Crossing Ltd. ........ -- -- -- -- (6) (6)
---- ------- -------- -------- -------- -------- --------
Net cash provided by
(used in) investing
activities............ -- -- 6,081 (7,205) (189,954) -- (191,078)
---- ------- -------- -------- -------- -------- --------
Net increase in cash.... -- 87 289,120 12,436 1,029 -- 302,672
Cash, beginning of
period................. -- -- -- 1,299 154 -- 1,453
---- ------- -------- -------- -------- -------- --------
Cash, end of period..... $-- $ 87 $289,120 $ 13,735 $ 1,183 $ -- $304,125
==== ======= ======== ======== ======== ======== ========
</TABLE>
F-28
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
SUMMARIZED FINANCIAL INFORMATION OF GCH, GUARANTORS AND NON-GUARANTORS
(CONTINUED):
($ AMOUNTS IN '000S)
<TABLE>
<CAPTION>
OLD
GCL(1) GCL GCH GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
-------- -------- -------- ---------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997
Cash.................... $ -- $ -- $ -- $ 1,299 $ 154 $ -- $ 1,453
Restricted cash......... -- -- -- 19,851 5,424 -- 25,275
Other current assets.... 33 12 12 145 1,019 (205) 1,016
Backhaul capacity
available for sale..... -- -- -- -- 21,200 -- 21,200
Construction in
progress............... -- -- -- 9,014 488,305 -- 497,319
Investment in
subsidiaries........... 73,952 73,952 73,940 276,897 -- (498,741) --
Deferred finance costs,
net.................... 208 -- -- 10,619 15,107 -- 25,934
-------- -------- -------- -------- -------- --------- --------
Total assets............ $ 74,193 $ 73,964 $ 73,952 $317,825 $531,209 $(498,946) $572,197
======== ======== ======== ======== ======== ========= ========
Current liabilities..... $ 72 $ -- $ -- $ 3,253 $ 88,978 $ (205) $ 92,098
Long term debt.......... -- -- -- -- 162,325 -- 162,325
Senior notes............ -- -- -- 150,000 -- -- 150,000
Obligations under inland
service agreements..... -- -- -- -- 3,009 -- 3,009
Mandatorily redeemable
preference shares...... -- -- -- 90,644 -- -- 90,644
Common stock............ -- -- 12 12 12 (36) --
Other shareholders'
equity................. 74,281 74,082 74,058 74,034 277,359 (499,533) 74,281
Accumulated deficit..... (160) (118) (118) (118) (474) 828 (160)
-------- -------- -------- -------- -------- --------- --------
Total liabilities and
shareholders' equity... $ 74,193 $ 73,964 $ 73,952 $317,825 $531,209 $(498,946) $572,197
======== ======== ======== ======== ======== ========= ========
- -----------------------------------------------------------------------------------------------------------
FOR THE PERIOD FROM
MARCH 19, 1997 TO
DECEMBER 31, 1997
Interest income......... $ -- $ -- $ -- $ 556 $ 2,385 $ -- $ 2,941
Selling, general and
administrative
expenses............... 42 -- -- 200 2,859 -- 3,101
-------- -------- -------- -------- -------- --------- --------
Net income (loss)....... (42) -- -- 356 (474) -- (160)
Equity in loss of
subsidiaries........... (12,808) (12,808) (12,808) (474) -- 38,898 --
Preference share
dividends.............. -- -- -- (12,690) -- -- (12,690)
-------- -------- -------- -------- -------- --------- --------
Net loss applicable to
common shareholders.... $(12,850) $(12,808) $(12,808) $(12,808) $ (474) $ 38,898 $(12,850)
======== ======== ======== ======== ======== ========= ========
</TABLE>
* Amount less than $1,000.
F-29
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
SUMMARIZED FINANCIAL INFORMATION OF GCH, GUARANTORS AND NON-GUARANTORS
(CONTINUED):
($ AMOUNTS IN '000S)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MARCH 19, 1997 TO NON- ELIMINATION GCL
DECEMBER 31, 1997 OLD GCL(1) GCL GCH GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
------------------- ---------- ------- ------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash flows provided by $ -- $ -- $ -- $ 528 $ 4,592 $ -- $ 5,120
operating activities... ------- ------- ------- -------- -------- -------- --------
Cash flows from
financing activities:
Finance and
organization costs
incurred.............. -- -- -- (16,456) (11,725) -- (28,181)
Investment in and
advances to
affiliates............ (75,000) (75,000) (75,000) (272,468) -- 497,468 --
Preference share
issuance costs........ -- -- -- (7,530) -- -- (7,530)
Costs related to
issuance of common
stock................. -- -- -- (1,264) -- -- (1,264)
Proceeds from issuance
of common stock and
additional paid-in
capital............... 75,000 75,000 75,000 75,000 272,468 (497,468) 75,000
Proceeds from issuance
of preference shares.. -- -- -- 100,000 -- -- 100,000
Proceeds from long term
debt.................. -- -- -- -- 162,325 -- 162,325
Proceeds from issuance
of senior notes....... -- -- -- 150,000 -- -- 150,000
Increase in restricted
cash and cash
equivalents........... -- -- -- (19,851) (5,424) -- (25,275)
------- ------- ------- -------- -------- -------- --------
Net cash provided by -- -- -- 7,431 417,644 -- 425,075
financing activities. ------- ------- ------- -------- -------- -------- --------
Cash flows from
investing activities:
Cash paid for
construction in
progress and capacity -- -- -- (6,660) (422,082) -- (428,742)
available for sale.... ------- ------- ------- -------- -------- -------- --------
Net cash used in -- -- -- (6,660) (422,082) -- (428,742)
investing activities. ------- ------- ------- -------- -------- -------- --------
Net increase in cash.... -- -- -- 1,299 154 -- $ 1,453
Cash, beginning of -- -- -- -- -- -- --
period................. ------- ------- ------- -------- -------- -------- --------
Cash, end of period..... $ -- $ -- $ -- $ 1,299 $ 154 $ -- $ 1,453
------- ------- ------- -------- -------- -------- --------
</TABLE>
11. FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments:
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
---------------------------- ----------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash, restricted cash
and cash equivalents... $ 541,610,392 $ 541,610,392 $ 26,727,880 $ 26,727,880
Current portion of
obligations under
Inland Services
Agreements and capital
leases................. (49,704,628) (49,704,628) (30,188,645) (30,188,645)
Long term debt,
obligations under
Inland Services
Agreements
and capital leases..... (382,237,947) (382,237,947) (165,334,000) (165,334,000)
Preference shares....... -- -- (90,643,919) (90,643,919)
Senior notes............ (796,277,203) (796,277,203) (150,000,000) (150,000,000)
Interest rate swap
transaction............ -- (115,344) -- (115,115)
</TABLE>
Cash, restricted cash and cash
equivalents................... The carrying amount of restricted cash and
cash equivalents is a reasonable estimate of
fair value as the balances include amounts
held in banks and money market deposits with
a short-term maturity.
F-30
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
Long term debt, obligations
under Inland Services
Agreements and capital The Credit Facility is a special financing
leases........................ for the construction of the System, and the
interest rates provided under the existing
Credit Facility are the best estimate of cur-
rent market rates available to ACL for fi-
nancing with similar terms. Obligations under
Inland Services Agreements and capital leases
are recorded at their present value using a
weighted average interest rate of the Credit
Facility, preference shares, and Senior
Notes.
Preference shares.............. Since the preference shares are a special fi-
nancing for the construction of the System,
the dividend rates provided under the exist-
ing preference share agreement are the best
estimate of current market rates available
for financing with similar terms and redemp-
tion provisions.
Senior notes................... Since the Senior Notes are a special financ-
ing for the construction of the Systems, the
interest rates provided under the existing
Senior Notes arrangement are the best esti-
mate of current market rates available for
financing with similar terms.
Interest rate swap The interest rate swap transaction is "zero
transaction................... cost" meaning that the cost of acquiring the
transaction is embedded in the fixed interest
rate paid. As the transaction is accounted
for as a hedge against interest rate fluctua-
tions on the long term debt there is no car-
rying value. The fair value is a mid-market
valuation provided by CIBC.
12. RELATED PARTY TRANSACTIONS
Advisory Services Agreement
ACL has entered into the ASA with PCG Telecom, an affiliate of Pacific
Capital Group, Inc. ("PCG") which is a shareholder of GCL. Under the ASA, PCG
Telecom provides ACL with advice in respect of the development and maintenance
of the System, development and implementation of marketing and pricing
strategies and the preparation of business plans and budgets. As compensation
for its advisory services, PCG Telecom receives a 2% fee on the gross revenues
of the Company, subject to certain restrictions, with the first such payment
occurring at the System RFS date. Advances on fees payable under the ASA are
being paid to PCG Telecom at a rate of 1% on signed CPAs and Backhaul CPAs
until the System RFS date and are secured by amounts payable under the ASA.
Fees paid under the ASA to PCG Telecom are shared amongst ULLICO, Inc., PCG,
CIBC, and Messrs. Winnick, Cook, Brown, Lee and Porter, all of whom are
shareholders of GCL. The Advisory Service Agreements ("ASA") which were
terminated effective on June 30, 1998 had terms of 25 years subject to
termination, however, the ASA did not contain provisions regarding cancellation
fees or liquidated damages in the event of termination or breach. The Advisory
Services Agreement Termination was recorded in the consolidated financial
statements as an increase in additional paid-in capital and a charge against
the statement of operations in the amount of $137.7 million. The $137.7 million
is comprised of a $135 million settlement of the fees that would have been
payable and the cancellation of approximately $2.7 million owed to the Company
under a related advance agreement. The $135 million amount was calculated by
applying the 2% advisory services fee to projected future revenues and
discounting the amount relating to AC-1 revenues by 12% and the amount relating
to all other system's revenues by 15%. The result of this calculation was
$155.5 million, which amount was subsequently reduced to $135 million. Both the
discount rates and the ultimate valuation were determined as a result of a
negotiation process including a disinterested director of the Company and the
various
F-31
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
persons entitled to fees under the ASA. The Company has obtained a fairness
opinion from an independent financial advisor in connection with this
transaction.
PCG Warrants
Prior to January 21, 1998, PCG and its affiliates had commenced development
of systems other than AC-1, namely PC-1, MAC and PAC. Through January 21,
1998, such development included assembling a management team, negotiating with
potential suppliers, partners, financing sources, obtaining preliminary market
and feasibility studies and developing technical requirements. On January 21,
1998, the Board determined that it was in the Company's best interests to
pursue these new systems, obtain the results of the work and the employees
then within the scope of activity of PCG and broaden the goals, objectives and
business plan of the Company. In consideration of PCG transferring the results
of its activities and becoming limited in its future activities in fiber optic
telecommunications other than through the Company, the Board approved and the
shareholders subsequently approved the transaction whereby PCG received
approximately $7 million representing PCG's costs related thereto and Old GCL
entered into a warrant agreement ("PCG Warrants") under which PCG was issued
three separate warrants permitting PCG to purchase (i) 9,226,592 of Old GCL's
Class B shares for an aggregate price of $50,000,000; (ii) an additional
4,613,297 of Old GCL's Class B shares for an aggregate price of $31,250,000;
and (iii) an additional 4,613,297 of Old GCL's Class B shares for an aggregate
price of $37,500,000. The PCG Warrants were granted in exchange for the rights
to commence the development of the new projects that previously had been under
development by an affiliate of PCG.
These warrants are intended to entitle PCG to acquire, in addition to their
existing ownership, 10% of the capital stock of the Company, as of the date
these warrants were issued. Exercise of these warrants is contingent upon (i)
an IPO of shares of Old GCL (or any successor thereto), underwritten by an
investment banking firm of national reputation (as determined by a majority of
the Board of Directors of Old GCL) from which Old GCL shall have received at
least $50,000,000 in net proceeds, (ii) the investment by Old GCL in the
aggregate of at least $500,000,000 of Net Attributable Capital (as defined
below) in cable systems other than AC-1 and (iii) the generation in the
aggregate by cable systems other than AC-1 of at least $100,000,000 in Net
Attributable Revenues (as defined below). For purposes of the PCG Warrant
Agreement, with respect to any cable system, "Net Attributable Capital" means
the aggregate debt and equity capitalization of such system multiplied by the
percentage ownership of Old GCL (directly or indirectly) in such system, and
"Net Attributable Revenues" means the net revenues of such system multiplied
by the percentage ownership interest of Old GCL (directly or indirectly) in
such system. No accounting was made for the PCG Warrants at the time of
issuance on the basis that it was indeterminable when the conditions described
above would be met.
In June, 1998, the Board of Directors amended the terms of the PCG Warrants
so that the PCG Warrants will become exercisable upon the successful
completion of the IPO and eliminated conditions (ii) and (iii) above. Further
to this amendment, the Board of Directors also amended the terms of the PCG
Warrants to give each holder the option to convert each share under warrant
into a fraction of a Class B share based upon the ratio of the current per
share valuation at the time of conversion less the per share exercise price of
the warrant divided by the current per share valuation at the time of
conversion multiplied by the 18,453,185 shares available under the PCG
Warrants, together with a new warrant ("New PCG Warrants") to purchase the
remaining fraction of
F-32
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
such Class B share at an exercise price equal to the current per share
valuation. Prior to the IPO, it is expected that the holders of the PCG
Warrants will exercise their warrants to acquire Class B shares by way of the
cashless conversion and the New PCG Warrants will be issued with an exercise
price based on the per share valuation at the conversion date.
The Company has accounted for the PCG Warrants by assuming the cashless
conversion took place as of June 30, 1998 using the current estimated per share
valuation at the expected conversion date, multiplied by the number of Class B
shares estimated to be converted in exchange for the PCG Warrants. The
resulting value under this calculation is approximately $213.3 million which
has been allocated to the new systems acquired in exchange for the PCG
Warrants. In connection with the formation of PCL, the Company agreed to make
available to PCL the consideration received by the Company in connection with
the grant of the PCG Warrants, in addition to the $231 million cash investment
made by the Company. See Note 3. Therefore, the Company recorded an increase in
its investment in PCL in the amount of approximately $126.5 million and an
increase in construction in progress for PAC and MAC in the amounts of
approximately $49.9 million and $36.9 million, respectively, with a
corresponding increase of $213.3 million in additional paid in capital. The
$213.3 million was allocated on a pro rata basis to the three projects
according to the estimated cost of each system. The Company's accounting for
the PCG Warrants is pursuant to Emerging Issues Task Force 96-18, "Accounting
for Equity Instruments with Variable Terms that are Issued for Consideration
other than Employee Services under FASB Statement No. 123" ("EITF 96-18").
Under EITF 96-18, the fair value of equity instruments issued for consideration
other than employee services should be measured using the stock price or other
measurement assumptions as of the date at which a firm commitment for
performance level has been reached. The Company has recorded the estimated
value of the PCG Warrants as of June 30, 1998, since the IPO was probable at
that date. The $213.3 million value attributed to the PCG Warrants as of June
30, 1998 will be adjusted to the actual value on the actual date of the IPO
based upon the Price per Share to Public in the Offerings. Such adjustment is
not expected to be material.
The Company will give accounting recognition for the New PCG Warrants on the
date these warrants are issued, which is the date of the IPO. The Company has
estimated the value of each of the New PCG Warrants at $6.67 based on an
independent valuation assuming an IPO price of $18 per share. Assuming a
cashless conversion, as of June 30, 1998 the New PCG Warrants would have a
total value of approximately $44 million. Upon the issuance of the New PCG
Warrants the Company will record the actual value of the New PCG Warrants in a
manner similar to that described above whereby the total value will be
allocated to the investment in PCL, MAC and PAC based on their relative total
contract costs.
Other transactions
$7,250,000 in fees were paid to PCG and certain of its key executives, who
are shareholders of GCL, and another shareholder for services provided in
respect of obtaining the Credit Facility, Senior Notes and preference share
financing. Of the fees paid, $5,523,775 was allocated to the Credit Facility
and Senior Notes and recorded as deferred finance costs, $986,725 was allocated
to the preference shares and recorded as a reduction in the carrying value of
the preference shares and $739,500 was recorded as common stock issuance costs
and is included in the approximately $1.3 million which is reflected as a
reduction in additional paid-in capital.
F-33
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
GCL has paid CIBC approximately $25 million in fees related to the financing
obtained under the Old Senior Notes, Credit Facility, and the issuance of
preference shares. Of the fees incurred, approximately $6.2 million related to
underwriting and commitment fees pertaining to the issuance of the preference
shares and were recorded as a reduction in the carrying value of the
preference shares, approximately $9.2 million related to underwriting,
commitment and advisory fees in connection with the issuance of the Senior
Notes and approximately $9.6 million related to fees associated with obtaining
the Credit Facility which were recorded as deferred finance costs. CIBC is a
member of the syndicate funding the Credit Facility under which the Company
has borrowings of $367,048,000 ($162,325,000 as of December 31, 1997), as of
June 30, 1998 and has been paid interest and other related fees in the amount
of approximately $19 million as of June 30, 1998 ($4.2 million as of December
31, 1997). CIBC is also one of the initial purchasers of the New Senior Notes
and received a $5,817,425 commitment and structuring fee as well as portion of
the $24,750,000 underwriting fee paid to the initial purchasers.
On April 7, 1998, the Company signed a CPA with Worldport Communications,
Inc. ("Worldport"), to acquire capacity on AC-1. This transaction occurred in
the ordinary course of business of the Company and on terms and conditions no
less favorable to the Company than in its other CPAs. Certain officers and
directors of the Company, have direct or indirect equity ownership positions
in Worldport, aggregating approximately 10% of the current common stock of
Worldport.
The Board of Directors authorized, that immediately prior to the IPO, the
Company will purchase all common shares owned by Telecommunications
Development Corporation ("TDC") in the Company in exchange for 150,000 fewer
shares of newly issued common shares based upon the per share value at the
repurchase date. The transaction benefited the Company since 150,000 fewer
shares were outstanding after the repurchase without any cost to the Company.
The transaction will be accounted for as the acquisition of treasury stock and
will be recorded at the fair value of the consideration given.
13. TAXES
The Company accounts for income taxes in accordance with SFAS 109. The
components of income tax expense are as follows:
<TABLE>
<CAPTION>
THREE
MONTHS ENDED SIX MONTHS ENDED
JUNE 30, 1998 JUNE 30, 1998
------------- ----------------
(UNAUDITED)
<S> <C> <C>
Current
U.S. .......................................... $8,000,000 $8,000,000
Other foreign.................................. 1,000,000 1,000,000
---------- ----------
Total income tax expense....................... $9,000,000 $9,000,000
---------- ----------
</TABLE>
Bermuda does not impose a statutory income tax and consequently the
provision for income taxes recorded relates to income earned in taxable
jurisdictions. There are no significant temporary differences between
accounting and taxable income.
F-34
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
(FORMERLY GLOBAL CROSSING LTD., LDC)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1998,
FOR THE THREE MONTHS ENDED JUNE 30, 1997, AND FOR THE PERIOD FROM MARCH 19,
1997
(DATE OF INCEPTION) TO JUNE 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
Since the Company has not recognized any income in periods prior to April 1,
1998, no tax provision has been reflected in those periods. Operating losses
incurred in those periods relate almost entirely to non-taxable jurisdictions
and therefore these operating losses cannot be applied to future taxable
earnings of the Company. Therefore the Company has not recorded any deferred
tax asset as a result of such losses in accordance with SFAS 109.
14. COMMITMENTS
As of June 30, 1998, ACL was committed under its contract with TSSL for
future construction costs totaling approximately $64 million ($195 million as
of December 31, 1997) and is committed under the OA&M contract with TSSL to
quarterly payments, over the next eight years, totaling approximately $261
million ($263 million as of December 31, 1997).
ACL is committed to paying TSSL commissions ranging from 4% to 7% on revenues
received until 2002, subject to certain reductions. As of June 30, 1998, Mid
Atlantic Crossing Ltd. was committed under its contract with Alcatel Submarine
Networks for future construction costs totaling approximately $180 million and
as of July 21, 1998 Pan American Crossing Ltd. was committed under its contract
with TSSL for future construction costs totaling approximately $335 million.
GCL and its subsidiaries have commitments under various operating leases
primarily relating to its office facility in Bermuda. Rent expense for
operating leases $26,556 and $361,354 for the three and six months ended June
30, 1998. Estimated future minimum lease payments on all operating leases are
approximately as follows:
<TABLE>
<S> <C>
For the six months ended December 31, 1998................... $ 438,000
1999......................................................... 953,000
2000......................................................... 963,000
2001......................................................... 971,000
2002......................................................... 652,000
Thereafter................................................... 1,910,000
</TABLE>
F-35
<PAGE>
GLOSSARY OF CERTAIN DEFINED TERMS
Unless the context otherwise requires, any reference in this Prospectus to
any agreement shall mean such agreement and all schedules, exhibits and
attachments thereto, as amended, supplemented or otherwise modified as of the
date of this Prospectus. All terms defined herein used or the singular shall
have the same meanings when used in the plural and vice versa.
<TABLE>
<C> <S>
Amplifier: A device used to boost the strength of an
electronic or optical signal, which is
weakened (attenuated) as it passes through
the transport network. Amplifiers add gain
to the signal by an amount equal to the
loss in the previous section of the
network since last amplification.
Backhaul Capacity: Capacity on terrestrial fiber optic cables
from undersea cable landing stations to
metropolitan areas.
Band: A range of frequencies between two defined
limits.
Bandwidth: A measure of capacity of information-
carrying capacity on a communications
channel. 1) The difference between the
high and low frequencies of a transmission
band, expressed in cycles per second
(Hertz) or in wavelengths (nanometers). It
is a measure of raw capacity without
compression or coding of the information
signal. A voice transmission requires
about 3 KHz and a TV channel about 6 MHz.
2) Transmission capacity is expressed in
bits per second. For example megabits per
second (Mbps) is a bit rate expressed in
millions of bits per second while gigabits
per second (Gbps) is a bit rate expressed
in billions.
. Narrowband: Less than or equal to 64-
kbps
. Wideband: Digital rates between 64-kbps
and 1.544-Mbps (DS1) or 2.048-Mbps
(E1)--LANs, bulk files transfer, video
conferencing, and multimedia.
. Broadband: Greater than 44.736-Mbps (D3)
or 34.368-Mbps (E3)
Bit: A binary unit of information that can have
either of two values, 0 or 1. Contraction
of binary digit:
. KILOBIT = 1,000 bits
. MEGABIT = 1 million bits
. GIGABIT = 1 billion bits
. TERABIT = 1 trillion bits
Broadband: A transmission channel usually carrying a
tremendous amount of information at
transmission speeds of 45 Mbps (45,000,000
bits per second) or greater. Some
facilities have transmission speeds in the
billion of bits (gigabits per second or
Gbps).
1. A communications channel with bandwidth
sufficiently large to carry voice, data
and video on a single channel.
2. Any voice communications channel having
a bandwidth greater than a voice grade
channel.
. A bandwidth of 45 Mbps can carry 672
voice connections.
. In theory up to 64 telephone grade
communication channels can be carried on
one 6 MHz broadband channel.
</TABLE>
GL-1
<PAGE>
<TABLE>
<C> <S>
Capacity: The information-carrying ability of a
telecommunications system, as defined by
its design (number of fibers, system
length, and opto/electronic equipment)
and its deployed equipment (amount of
opto/electronics in the station) and
measured in bits per second. Capacity is
sold in discrete units, usually system
interface levels such as DS-3's and STM-
1's, that in the aggregate are the
equivalent of total system capacity.
Carrier: 1. A third party provider of communications
services by wire, fiber or radio.
. Common Carrier: A private company
offering facilities or services to the
general public on a non-discriminatory
basis and regulated as to market entry,
practices, and rates by various Federal
and State authorities.
. Private Carrier: Services provided for
internal use and free of most common
carrier regulations to allow
discrimination in service provision or
pricing.
2. A signal that is modulated in order to
transmit information.
Common Carrier: A business authorized by the FCC to provide
communications services by wire or radio
from place to place without influence of
content. Services are provided to the
public on a non-discriminatory basis, and
are regulated by Title II of the
Communications Act of 1934. Regulatory
agencies are the FCC and state public
utility commissions.
. Non-dominant carrier is one which has
insufficient market power to practice
anti-competitive pricing.
. Private carriers are not regulated by
government agencies and may charge
whatever the market will bear.
Compression: Algorithm that minimizes the redundancy in
the signal to be transmitted.
Digital: Describes a method of storing, processing
and transmitting information through the
use of distinct electronic or optic pulses
representing the binary digits 0 and 1. In
communications they will modify a carrier
at a selected frequency. The precise
signal transitions preclude any distortion
such as graininess or snow in the case of
video transmission, or static or other
background distortion in the case of audio
transmission.
Digital Transmission: Method of storing, processing and
transmitting information through the use
of distinct electronic or optical pulses
that represent the binary digits 0 and 1.
Digital transmission and switching
technologies employ a sequence of these
pulses to represent information as opposed
to a continuously variable analog signal.
The precise digital numbers preclude any
distortion such as graininess or snow in
the case of video transmission, or static
or other background distortion in the case
of audio transmission.
</TABLE>
GL-2
<PAGE>
<TABLE>
<C> <S>
Doped Fibers: Various impurities may be added to silica-
based fiber-optic strands as they are
constructed to achieve specifically
desired transmission or physical
properties.
. Erbium-Doped Optical Fiber Amplifier
(EDFA) optical amplifiers use a section
of optical fiber doped with the rare
earth erbium and optically pumped with
a laser diode. It can amplify a range
of wavelengths at the same time
surrounding a base wavelength of 1550
nm.
. Praseodymium-doped fibers produce a
signal gain of 30 dB in 1310 nm fibers.
DS1: A digital transmission hierarchy
supporting 1.544 million bits per second
that may be used for "near full-motion"
or compressed video, data or voice
circuits (24, 48 or 96).
DWDM (Dense Wavelength Division
Multiplexing): A technique which employs more than one
light source and detector operating at
different wavelengths and simultaneously
transmits optical signals through the
same fiber while message integrity of
each signal is preserved.
EDFA (Erbium Doped Fiber A purely optical (as opposed to
Amplifier): electronic) device used to boost an
optical signal. It contains several
meters of glass fiber doped with erbium
ions. When the erbium ions are excited to
a higher energy state, the doped fiber
changes from a passive medium to an
active amplifying medium.
Fiber Kilometers: The number of route kilometers installed
multiplied by the number of fiber strands
along the path.
Gbps (Gigabit per second): A data rate of 1 Gbps corresponds to 1,000
million bits per second.
Internet: A fabric of interconnected computer
networks, originally known as the DARPA
network (Defense Advanced Research
Projects Agency) connecting government
and academic sites. It currently links
about 50 million people world-wide who
use it for everything from scientific
research to simple E-Mail.
Indefeasible Right of Use (IRU): A measure of currency in the undersea
cable business. The owner of an IRU has
the right to use the capacity for the
time and bandwidth to which the IRU
applies.
ISP: Independent service provider.
ITU (International
Telecommunications
Union): The ITU is an intergovernmental agency of
the United Nations within which the
public and private sectors cooperate for
the development of telecommunications.
The ITU adopts international regulations
governing the use of the radio spectrum
and develops standards to facilitate the
interconnection of telecommunications
systems on a worldwide basis. It is
headquartered in Geneva, Switzerland. In
1996, the ITU comprised 185 Member States
and 363 members (scientific and
industrial companies, public and private
operators, broadcasters, regional and
international organizations active in
three sectors: Radio communications,
Standardization and Development).
</TABLE>
GL-3
<PAGE>
<TABLE>
<C> <S>
Mbps (Megabit per second): One Mbps corresponds to a data rate of
1,000,000 bite per second.
Multimedia: The electronic conversation between two or
more people or groups of people in
different places using two or more types
of digitally integrated communication for
voice, sound, text, data, graphics,
video, image or presence at the same
time. Applications include conferencing,
presentations, training, referencing,
games, etc.
Multiplexing: An electronic or optical process that
combines two or more lower bandwidth
transmissions into one higher bandwidth
signal by splitting the total available
bandwidth into narrower bands (frequency
division) or by allotting a common
channel to several transmitting sources
one at a time in sequence (time
division).
Multipoint: Pertaining or referring to a
communications line to which three or
more stations are connected. It implies
that the line physically extends from one
station to another until all are
connected.
Optical Fibers: Thin filaments of glass through which
light beams are transmitted. Enormous
capacity, low-cost, low-power
consumption, small space, lite-weight,
insensitivity to electromagnetic
interference characterize this transport
media.
PTTs (Post, Telephone and
Telegraph
companies): International telecommunications carriers
which are generally under the control of
the government in a country that has not
yet privatized its telecommunications
markets.
Repeater: 1. Equipment that receives a low-power
signal, possibly converting it from
light to electrical form, amplifying it
or retiming and reconstructing it for
transmission. It may need to be
reconverted to light for retransmission.
2. An optoelectrical device used at each
end and occasionally at intermediate
points of exceptionally long fiber-optic
span. Optical input is converted to
electrical form to restore a clean
signal, which drives lasers that fully
restores the optical signal at the
original signal strength.
Route Kilometers: The number of route kilometers installed.
RFS (Ready for Service): The data of provisional acceptance or
commercial service of a cable system.
STM (Synchronous Transfer Mode): New term for traditional TDM switching to
distinguish it from ATM.
STM-1: The largest standard circuit unit of
capacity, which consists of 155,500 Kbps
(equal to 155 Mbps). Thus, each Gbps
contains enough capacity for 6.4 STM-1
circuits. While capacity is sold to the
largest telecommunications companies in
minimum investment units equal to one
STM-1 unit, most telecommunications
companies buy smaller units at a price
higher than the equivalent STM-1 price.
</TABLE>
GL-4
<PAGE>
<TABLE>
<C> <S>
Wavelength: The distance between two crests of a signal
or a carrier and is measured in terms of
meters, millimeters, nanometers, etc. In
lightwave applications, because of the
extremely high frequencies, wavelength is
measured in nanometers.
xDSL: A term referring to a variety of new
Digital Subscriber Line technologies. Some
of these varieties are asymmetric with
different data rates in the downstream and
upstream directions. Others are symmetric.
Downstream speeds range from 384 Kbps (or
"SDSL") to 1.5-8 Mbps (or "ADSL").
</TABLE>
GL-5
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT RELATES IN ANY STATE TO ANY
PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH STATE. THE DELIVERY
OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Service of Process and Enforcement of Liabilities......................... i
Information Regarding Forward-Looking Statements.......................... i
Summary................................................................... 1
Risk Factors.............................................................. 16
Use of Proceeds........................................................... 26
Capitalization............................................................ 27
Selected Consolidated Financial Data...................................... 28
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 31
The Exchange Offer........................................................ 42
Business.................................................................. 49
Management................................................................ 62
Principal Shareholders.................................................... 69
Certain Transactions...................................................... 72
Description of Notes...................................................... 78
Description of Capital Stock.............................................. 113
Description of Certain Indebtedness....................................... 117
Information Regarding Old GCL............................................. 117
Tax Considerations........................................................ 118
Plan of Distribution...................................................... 121
Legal Matters............................................................. 121
Experts................................................................... 121
Available Information..................................................... 121
Index to Consolidated Financial Statements................................ F-1
Glossary of Certain Defined Terms......................................... GL-1
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXCHANGE OFFER
GLOBAL CROSSING HOLDINGS LTD.
9 5/8% SENIOR NOTES DUE 2008
LOGO GLOBAL CROSSING
-------
PROSPECTUS
DATED , 1998
-------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
No provision is made in Bermuda statutory law for indemnification of
officers and directors.
The Bye-laws of the registrant provide for indemnification of the
registrant's officers and directors against all liabilities, loss, damage or
expense incurred or suffered by such party as an officer or director of the
registrant; provided that such indemnification shall not extend to any matter
which would render it void pursuant to the Companies Acts as in effect from
time to time in Bermuda.
The directors and officers of the Company are covered by directors' and
officers' insurance policies maintained by the Company.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
3.1 Certificate of Incorporation of Global Crossing Holdings Ltd.
3.2 Bye-laws of Global Crossing Holdings Ltd.
3.3* Certificate of Incorporation of Global Crossing Ltd.
3.4** Amended and Restated Bye-Laws of Global Crossing Ltd.
3.5* Certificate of Incorporation of Change of Name of Global Crossing
Ltd.
3.6* Memorandum of Increase of Share Capital
3.7 Certificate of Incorporation of Global Telesystems Holdings Ltd.
3.8 By-laws of Global Telesystems Holdings Ltd.
3.9 Certificate of Incorporation of Global Crossing International Ltd.
3.10 By-laws of Global Crossing International Ltd.
3.11 Certificate of Incorporation of Global Crossing Holdings U.K. Ltd.
3.12 Memorandum of Association and Articles of Association of Global
Crossing Holdings U.K. Ltd.
3.13 Certificate of Incorporation of Global Crossing Marketing U.K.
Ltd.
3.14 Memorandum of Association and Articles of Association of Global
Crossing Marketing U.K. Ltd.
3.15 Certificate of Incorporation of Global Crossing Marketing U.S.A.
Inc.
3.16 By-laws of Global Crossing Marketing U.S.A. Inc.
3.17 Certificate of Incorporation of Global Crossing Development Co.
3.18 By-laws of Global Crossing Development Co.
3.19 Amended and Restated Memorandum of Association of Global Crossing
Ltd., LDC
3.20 Amended and Restated Articles of Association of Global Crossing
Ltd., LDC
4.1* Form of Certificate for Common Stock
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
4.2 Indenture, dated as of May 18, 1998, between Global Crossing
Holdings Ltd. and United States Trust Company of New York, as
Trustee
4.3* Registration Agreement, dated as of May 18, 1998, among the
registrant, Global Crossing Holdings Ltd. and the other parties
named therein
4.4* Form of Registration Rights Agreement among the Registrant and
the investors named therein
4.5* Credit Agreement, dated as of June 27, 1997 (the "Credit
Agreement"), among Global Telesystems Ltd., various financial
institutions names therein, Deutsche Bank AG, New York Branch
and Canadian Imperial Bank of Commerce, as Lead Agents, Deutsche
Bank AG, New York Branch, as Administrative Agent, Canadian
Imperial Bank of Commerce, as Syndication Agent, Documentation
Agent and the Issuing Bank and Deutsche Morgan Grenfell Inc. and
CIBC Gundy Securities Corp, as Arrangers
4.6* First Amendment and Consent, dated as of December 15, 1997, to
Credit Agreement, among Global Telesystems Ltd., the lenders
named therein, Deutsche Bank AG, New York Branch and Canadian
Imperial Bank of Commerce, as Lead Agents, Deutsche Bank AG, New
York Branch, as Administrative Agent, Canadian Imperial Bank of
Commerce, as Syndication Agent, Documentation Agent and the
Issuing Bank and Deutsche Morgan Grenfell Inc. and CIBC Gundy
Securities Corp, as Arrangers
4.7* Form of Amended and Restated Stockholders' Agreement among GCT
Pacific Holdings, Ltd., SCS (Bermuda) Ltd., Marubeni Pacific
Cable Limited and Pacific Crossing Ltd.
4.8* Second Amendment and Consent, dated as of June 12, 1998, to the
Credit Agreement, among Atlantic Crossing Ltd. (f/k/a Global
Telesystems Ltd.), the lenders named therein, Deutsche Bank AG,
New York Branch and Canadian Imperial Bank of Commerce, as Lead
Agents, Deutsche Bank AG, New York Branch, as Administrative
Agent, Canadian Imperial Bank of Commerce, as Syndication Agent,
Documentation Agent and the Issuing Bank and Deutsche Morgan
Grenfell Inc. and CIBC Gundy Securities Corp, as Arrangers
5.1 Opinion of Appleby, Spurling & Kempe as to the legality of the
securities being registered
5.2 Opinion of Simpson Thacher & Bartlett as to the legality of the
securities being registered
5.3 Opinion of Wiggin and Co as to the legality of the securities
being registered
5.4 Opinion of W.S. Walker & Company as to the legality of the
securities being registered
9.1* Form of Stockholders Agreement among the Registrant and the
investors named therein
10.1* Form of 1998 Global Crossing Ltd. Stock Incentive Plan
10.2* Project Development and Construction Contract, dated March 18,
1997, among AT&T Submarine Systems, Inc. and Global Telesystems
Ltd.
10.3* Project Development and Construction Contract, dated as of April
21, 1998, among Tyco Submarine Systems, Ltd. and Pacific
Crossing Ltd.
10.4* Project Development and Construction Contract, dated as of June
2, 1998, among Alcatel Submarine Networks and Alcatel Submarine
Networks, Inc. and Mid-Atlantic Crossing Ltd.
10.5* Advisory Services Agreement, dated as of March 25, 1997, among
Global Telesystems Ltd. and PCG Telecom Services LLC
10.6* First Amendment, dated as of June 27, 1997, to the Advisory
Services Agreement, dated as of March 25, 1997, among Global
Telesystems Ltd. and PCG Telecom Services LLC
12.1 Statement regarding Computation of Ratio of Earnings to Fixed
Charges
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------- -------
<C> <S>
21.1* Subsidiaries of the Registrant
23.1 Consent of Appleby Spurling & Kempe (included in the opinion
filed as Exhibit 5.1)
23.2 Consent of Arthur Andersen & Co.
23.3 Consent of Simpson Thacher & Bartlett (included in the opinion
filed as Exhibit 5.2)
23.4 Consent of Wiggin and Co (included in the opinion filed as
Exhibit 5.3)
23.5 Consent of W.S. Walker & Company (included in the opinion filed
as Exhibit 5.4)
24.1** Power of Attorney of Global Crossing Holdings Ltd.
24.2** Power of Attorney of Global Crossing Ltd.
24.3** Power of Attorney of Global Telesystems Holdings Ltd.
24.4** Power of Attorney of Global Crossing International Ltd.
24.5** Power of Attorney of Global Crossing Holdings U.K. Ltd.
24.6** Power of Attorney of Global Crossing Marketing U.K. Ltd.
24.7** Power of Attorney of Global Crossing Marketing U.S.A. Inc.
24.8** Power of Attorney of Global Crossing Development Co.
24.9 Power of Attorney of Global Crossing Ltd., LDC (included on
signature page II-17 of this Pre-Effective Amendment No. 2 to
Registration Statement on Form S-4)
25.1** Form T-1 Statement of Eligibility under Trust Indenture Act of
1939 of United States Trust Company of New York, as Trustee
25.2 Amendment No. 1 to Form T-1 Statement of Eligibility under Trust
Indenture Act of 1939 of United States Trust Company of New
York, as Trustee
27.1 Financial Data Schedule
99.1** Consent of Nominee Director
99.2** Consent of Nominee Director
99.3** Consent of Nominee Director
</TABLE>
--------
* Incorporated by reference to Global Crossing Ltd. Registration
Statement on Form S-1 (File No. 333-53393)
** Previously filed
(b) Financial Statement Schedules
II-3
<PAGE>
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceedings) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
(c) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective Amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of Prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering; and
(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of an included in the registration statement when
it became effective.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 2 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Los Angeles, State of California, on September 29, 1998.
Global Crossing Holdings Ltd.
/s/ John M. Scanlon
By __________________________________
NAME: JOHN M. SCANLON
TITLE: CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to the Registration Statement has been signed on September 29,
1998 by or on behalf of the following persons in the capacities indicated with
the registrant.
<TABLE>
<S> <C>
SIGNATURE TITLE
/*/ Co-Chairman of the Board and Director
-------------------------------------
Gary Winnick
/*/ Co-Chairman of the Board and Director
-------------------------------------
Lodwrick Cook
/s/ John M. Scanlon Chief Executive Officer and Director
-------------------------------------
John M. Scanlon
/*/ President, Chief Operating Officer
------------------------------------- and Director
David Lee
/*/ Senior Vice President and Director
-------------------------------------
Barry Porter
/*/ Senior Vice President and Director
-------------------------------------
Abbott Brown
/*/ Senior Vice President and Chief
------------------------------------- Financial Officer
Dan J. Cohrs
</TABLE>
II-5
<PAGE>
SIGNATURE TITLE
/*/ Director
------------------------------------
Hillel Weinberger
/*/ Director
------------------------------------
Jay Bloom
/*/ Director
------------------------------------
Dean Kehler
/*/ Director
------------------------------------
Jay Levine
/*/ Director
------------------------------------
William Phoenix
/*/ Director
------------------------------------
Bruce Raben
/*/ Director
------------------------------------
Michael Steed
/s/ John M. Scanlon Authorized Representative in the
------------------------------------ United States
John M. Scanlon
*By Power of Attorney
/s John M. Scanlon Attorney-in-Fact
------------------------------------
John M. Scanlon
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 2 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Los Angeles, State of California, on September 29, 1998.
Global Crossing Ltd.
/s/ John M. Scanlon
By __________________________________
NAME: JOHN M. SCANLON
TITLE: CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to the Registration Statement has been signed on September 29,
1998 by or on behalf of the following persons in the capacities indicated with
the registrant.
<TABLE>
<S> <C>
SIGNATURE TITLE
/*/ Co-Chairman of the Board and Director
-------------------------------------
Gary Winnick
/*/ Co-Chairman of the Board and Director
-------------------------------------
Lodwrick Cook
/*/ John M. Scanlon Chief Executive Officer and Director
-------------------------------------
John M. Scanlon
/*/ President, Chief Operating Officer
------------------------------------- and Director
David Lee
/*/ Senior Vice President and Director
-------------------------------------
Barry Porter
/*/ Senior Vice President and Director
-------------------------------------
Abbott Brown
/*/ Senior Vice President and Chief
------------------------------------- Financial Officer
Dan J. Cohrs
/*/ Director
-------------------------------------
Hillel Weinberger
</TABLE>
II-7
<PAGE>
SIGNATURE TITLE
<TABLE>
<S> <C>
/*/ Director
-------------------------------------
Jay Bloom
/*/ Director
-------------------------------------
Dean Kehler
/*/ Director
-------------------------------------
Jay Levine
/*/ Director
-------------------------------------
William Phoenix
/*/ Director
-------------------------------------
Bruce Raben
/*/ Director
-------------------------------------
Michael Steed
/s/ John M. Scanlon Authorized Representative in the
------------------------------------- United States
John M. Scanlon
* By Power of Attorney Attorney-in-Fact
/s/ John M. Scanlon
-------------------------------------
John M. Scanlon
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 2 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Hamilton, Bermuda on September 29, 1998.
Global Telesystems Holdings Ltd.
/s/ K. Eugene Shutler
By __________________________________
NAME: K. EUGENE SHUTLER
TITLE: PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to the Registration Statement has been signed on September 29,
1998 by or on behalf of the following persons in the capacities indicated with
the registrant.
<TABLE>
<S> <C>
SIGNATURE TITLE
/*/ Co-Chairman of the Board and Director
-------------------------------------
Gary Winnick
/*/ Co-Chairman of the Board and Director
-------------------------------------
Lodwrick Cook
/s/ K. Eugene Shutler President and Executive Director
-------------------------------------
K. Eugene Shutler
/*/ Chief Financial Officer and Director
-------------------------------------
Ian McLean
/*/ Controller
-------------------------------------
Robert Klug
/s/ John M. Scanlon Director
-------------------------------------
John M. Scanlon
/*/ Director
-------------------------------------
Barry Porter
/*/ Director
-------------------------------------
Abbott Brown
/*/ Director
-------------------------------------
David Lee
/*/ Director
-------------------------------------
Hillel Weinberger
</TABLE>
II-9
<PAGE>
SIGNATURE TITLE
/*/ Director
-------------------------------------
Jay Bloom
/*/ Director
-------------------------------------
Dean Kehler
/*/ Director
-------------------------------------
Jay Levine
/*/ Director
-------------------------------------
William Phoenix
/*/ Director
-------------------------------------
Bruce Raben
/*/ Director
-------------------------------------
Michael Steed
/s/ John M. Scanlon Authorized Representative in the
------------------------------------- United States
John M. Scanlon
* By Power of Attorney
/s/ K. Eugene Shutler Attorney-in-Fact
-------------------------------------
K. Eugene Shutler
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 2 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Hamilton, Bermuda, on September 29, 1998.
Global Crossing International Ltd.
/s/ K. Eugene Shutler
By __________________________________
NAME: K. EUGENE SHUTLER
TITLE: PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to the Registration Statement has been signed on September 29,
1998 by or on behalf of the following persons in the capacities indicated with
the registrant.
<TABLE>
<S> <C>
SIGNATURE TITLE
/*/ Co-Chairman of the Board and Director
-------------------------------------
Gary Winnick
/*/ Co-Chairman of the Board and Director
-------------------------------------
Lodwrick Cook
/s/ K. Eugene Shutler President and Director
-------------------------------------
K. Eugene Shutler
/*/ Chief Financial Officer
-------------------------------------
Ian McLean
/*/ Controller
-------------------------------------
Robert Klug
/s/ John M. Scanlon Director
-------------------------------------
John M. Scanlon
/*/ Director
-------------------------------------
Barry Porter
/*/ Director
-------------------------------------
Abbott Brown
/*/ Director
-------------------------------------
David Lee
</TABLE>
II-11
<PAGE>
SIGNATURE TITLE
/*/ Director
-------------------------------------
Hillel Weinberger
/*/ Director
-------------------------------------
Jay Bloom
/*/ Director
-------------------------------------
Dean Kehler
/*/ Director
-------------------------------------
Jay Levine
/*/ Director
-------------------------------------
William Phoenix
/*/ Director
-------------------------------------
Bruce Raben
/*/ Director
-------------------------------------
Michael Steed
/s/ John M. Scanlon Authorized Representative in the
------------------------------------- United States
John M. Scanlon
* By Power of Attorney
/s/ K. Eugene Shutler Attorney-in-Fact
-------------------------------------
K. Eugene Shutler
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 2 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Hamilton, Bermuda, on September 29, 1998.
GLOBAL CROSSING HOLDINGS U.K. LTD.
/s/ K. Eugene Shutler
By: _________________________________
NAME: K. EUGENE SHUTLER
TITLE: DIRECTOR
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to the Registration Statement has been signed on September 29,
1998 by or on behalf of the following persons in the capacities indicated with
the registrant.
SIGNATURE TITLE
/s/ K. Eugene Shutler Director
- -------------------------------------
K. Eugene Shutler
/*/ Secretary and Director
- -------------------------------------
Ian McLean
/s/ John M. Scanlon Authorized Representative in the
- ------------------------------------- United States
John M. Scanlon
*By Power of Attorney
/s/ K. Eugene Shutler Attorney-in-Fact
- -------------------------------------
K. Eugene Shutler
II-13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 2 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Hamilton, Bermuda, on September 29, 1998.
Global Crossing Marketing U.K. LTD
/s/ K. Eugene Shutler
By __________________________________
NAME: K. EUGENE SHUTLER
TITLE: DIRECTOR
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to the Registration Statement has been signed on September 29,
1998 by or on behalf of the following persons in the capacities indicated with
the registrant.
<TABLE>
<S> <C>
</TABLE>
SIGNATURE TITLE
/s/ K. Eugene Shutler Director
-------------------------------------
K. Eugene Shutler
/*/ Secretary and Director
-------------------------------------
Ian McLean
/s/ John M. Scanlon Authorized Representative in the
------------------------------------- United States
John M. Scanlon
* By Power of Attorney
/s/ K. Eugene Shutler Attorney-in-Fact
-------------------------------------
K. Eugene Shutler
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 2 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Hamilton, Bermuda, on September 29, 1998.
Global Crossing Marketing U.S.A.
INC.
/s/ K. Eugene Shutler
By __________________________________
NAME: K. EUGENE SHUTLER
TITLE: PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to the Registration Statement has been signed on September 29,
1998 by or on behalf of the following persons in the capacities indicated with
the registrant.
<TABLE>
<S> <C>
</TABLE>
SIGNATURE TITLE
/s/ K. Eugene Shutler President, Secretary and Director
-------------------------------------
K. Eugene Shutler
/*/ Vice President, Treasurer and
------------------------------------- Director
Ian McLean
* By Power of Attorney
/s/ K. Eugene Shutler Attorney-in-Fact
-------------------------------------
K. Eugene Shutler
II-15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 2 to the Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
the City of Morristown, State of New Jersey, on September 29, 1998.
Global Crossing Development Co.
/s/ William Carter
By __________________________________
NAME: WILLIAM CARTER
TITLE: PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 2 to the Registration Statement has been signed on September 29,
1998 by or on behalf of the following persons in the capacities indicated with
the registrant.
<TABLE>
<S> <C>
SIGNATURE TITLE
/s/ William Carter President
-------------------------------------
William Carter
/*/ Chief Financial Officer and Director
-------------------------------------
Abbott Brown
/*/ Director
-------------------------------------
Lodwrick Cook
/*/ Director
-------------------------------------
Gary Winnick
* By Power of Attorney
/s/ William Carter Attorney-in-Fact
-------------------------------------
William Carter
</TABLE>
II-16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boston,
State of Massachusetts, on September 29, 1998.
Global Crossing Ltd., LDC
/s/ Jay R. Levine
By: ____________________________
NAME: JAY R. LEVINE
TITLE: DIRECTOR
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being an
officer or director, or both, of GLOBAL CROSSING LTD., LDC ("Guarantor"), in
his capacity as set forth below, hereby constitutes and appoints JAY R. BLOOM
and JAY R. LEVINE, and each of them, his true and lawful attorney and agent,
to do any and all acts and all things and to execute any and all instruments
which said attorney and agent may deem necessary or desirable to enable
Guarantor to comply with the Securities Act of 1933, as amended (the "Act"),
and any rules, regulations and requirements of the Securities and Exchange
Commission thereunder, in connection with the registration under the Act of
exchange notes of Global Crossing Holdings Ltd. (the "Notes"), including,
without limitation, the power and authority to sign the name of each of the
undersigned in the capacities indicated below to the Registration Statement on
Form S-4 to be filed with the Securities and Exchange Commission with respect
to such Notes, to any and all amendments or supplements to such Registration
Statement, whether such amendments or supplements are filed before or after
the effective date of such Registration Statement, to any related Registration
Statement filed pursuant to Rule 462 under the Act, and to any and all
instruments or documents filed as part of or in connection with such
Registration Statement or any and all amendments thereto, whether such
amendments are filed before or after the effective date of such Registration
Statement; and each of the undersigned hereby ratifies and confirms all that
such attorney and agent shall do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed on September 29, 1998 by or behalf of
the following persons in the capacities indicated with the registrant.
<TABLE>
<S> <C>
SIGNATURE TITLE
/s/ Jay R. Bloom Director
-------------------------------------
Jay R. Bloom
/s/ Jay R. Levine Director
-------------------------------------
Jay R. Levine
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below in the City of Boston, State of
Massachusetts on September 29, 1998 by the undersigned as the duly authorized
representative of the registrant in the United States.
/s/ Jay R. Levine
------------------------------------
</TABLE>
II-17
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT PAGE
------- ------- ----
<C> <S> <C>
3.1 Certificate of Incorporation of Global Crossing Holdings Ltd.
3.2 Bye-laws of Global Crossing Holdings Ltd.
3.3* Certificate of Incorporation of Global Crossing Ltd.
3.4** Amended and Restated Bye-Laws of Global Crossing Ltd.
3.5* Certificate of Incorporation of Change of Name of Global
Crossing Ltd.
3.6* Memorandum of Increase of Share Capital
3.7 Certificate of Incorporation of Global Telesystems Holdings
Ltd.
3.8 By-laws of Global Telesystems Holdings Ltd.
3.9 Certificate of Incorporation of Global Crossing International
Ltd.
3.10 By-laws of Global Crossing International Ltd.
3.11 Certificate of Incorporation of Global Crossing Holdings U.K.
Ltd.
3.12 Memorandum of Association and Articles of Association of Global
Crossing Holdings U.K. Ltd.
3.13 Certificate of Incorporation of Global Crossing Marketing U.K.
Ltd.
3.14 Memorandum of Association and Articles of Association of Global
Crossing Marketing U.K. Ltd.
3.15 Certificate of Incorporation of Global Crossing Marketing
U.S.A. Inc.
3.16 By-laws of Global Crossing Marketing U.S.A. Inc.
3.17 Certificate of Incorporation of Global Crossing Development Co.
3.18 By-laws of Global Crossing Development Co.
3.19 Amended and Restated Memorandum of Association of Global
Crossing Ltd., LDC
3.20 Amended and Restated Articles of Association of Global Crossing
Ltd., LDC
4.1* Form of Certificate for Common Stock
4.2 Indenture, dated as of May 18, 1998, between Global Crossing
Holdings Ltd. and United States Trust Company of New York, as
Trustee
4.3* Registration Agreement, dated as of May 18, 1998, among the
Registrant, Global Crossing Holdings Ltd. and the other parties
named therein
4.4* Form of Registration Rights Agreement among the Registrant and
the investors named therein
4.5* Credit Agreement, dated as of June 27, 1997 (the "Credit
Agreement"), among Global Telesystems Ltd., various financial
institutions names therein, Deutsche Bank AG, New York Branch
and Canadian Imperial Bank of Commerce, as Lead Agents,
Deutsche Bank AG, New York Branch, as Administrative Agent,
Canadian Imperial Bank of Commerce, as Syndication Agent,
Documentation Agent and the Issuing Bank and Deutsche Morgan
Grenfell Inc. and CIBC Gundy Securities Corp, as Arrangers
4.6* First Amendment and Consent, dated as of December 15, 1997, to
Credit Agreement, among Global Telesystems Ltd., the lenders
named therein, Deutsche Bank AG, New York Branch and Canadian
Imperial Bank of Commerce, as Lead Agents, Deutsche Bank AG,
New York Branch, as Administrative Agent, Canadian Imperial
Bank of Commerce, as Syndication Agent, Documentation Agent and
the Issuing Bank and Deutsche Morgan Grenfell Inc. and CIBC
Gundy Securities Corp, as Arrangers
4.7* Form of Amended and Restated Stockholders' Agreement among GCT
Pacific Holdings, Ltd., SCS(Bermuda) Ltd., Marubeni Pacific
Cable Limited and Pacific Crossing Ltd.
4.8* Second Amendment and Consent, dated as of June 12, 1998, to the
Credit Agreement, among Atlantic Crossing Ltd. (f/k/a Global
Telesystems Ltd.), the lenders named therein, Deutsche Bank AG,
New York Branch and Canadian Imperial Bank of Commerce, as Lead
Agents, Deutsche Bank AG, New York Branch, as Administrative
Agent, Canadian Imperial Bank of Commerce, as Syndication
Agent, Documentation Agent and the Issuing Bank and Deutsche
Morgan Grenfell Inc. and CIBC Gundy Securities Corp, as
Arrangers
5.1 Opinion of Appleby, Spurling & Kempe as to the legality of the
securities being registered
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT PAGE
------- ------- ----
<C> <S> <C>
5.2 Opinion of Simpson Thacher & Bartlett as to the legality of the
securities being registered
5.3 Opinion of Wiggin and Co as to the legality of the securities
being registered
5.4 Opinion of W.S. Walker & Company as to legality of the
securities being registered
9.1* Form of Stockholders' Agreement among the Registrant and the
investors named therein
10.1* Form of 1998 Global Crossing Ltd. Stock Incentive Plan
10.2* Project Development and Construction Contract, dated March 18,
1997, among AT&T Submarine Systems, Inc. and Global Telesystems
Ltd.
10.3* Project Development and Construction Contract, dated as of
April 21, 1998, among Tyco Submarine Systems, Ltd. and Pacific
Crossing Ltd.
10.4* Project Development and Construction Contract, dated as of June
2, 1998, among Alcatel Submarine Networks and Alcatel Submarine
Networks, Inc. and Mid-Atlantic Crossing Ltd.
10.5* Advisory Services Agreement, dated as of March 25, 1997, among
Global Telesystems Ltd. and PCG Telecom Services LLC
10.6* First Amendment, dated as of June 27, 1997, to the Advisory
Services Agreement, dated as of March 25, 1997, among Global
Telesystems Ltd. and PCG Telecom Services LLC
12.1 Statement regarding Computation of Ratio of Earnings to Fixed
Charges
21.1* Subsidiaries of the Registrant
23.1 Consent of Appleby Spurling & Kempe (included in the opinion
filed as Exhibit 5.1)
23.2 Consent of Arthur Andersen & Co.
23.3 Consent of Simpson Thacher & Bartlett (included in the opinion
filed as Exhibit 5.2)
23.4 Consent of Wiggin and Co (included in the opinion filed as
Exhibit 5.3)
23.5 Consent of W.S. Walker & Company (included in the opinion filed
as Exhibit 5.4)
24.1** Power of Attorney of Global Crossing Holdings Ltd.
24.2** Power of Attorney of Global Crossing Ltd.
24.3** Power of Attorney of Global Telesystems Holdings Ltd.
24.4** Power of Attorney of Global Crossing International Ltd.
24.5** Power of Attorney of Global Crossing Holdings U.K. Ltd.
24.6** Power of Attorney of Global Crossing Marketing U.K. Ltd.
24.7** Power of Attorney of Global Crossing Marketing U.S.A. Inc.
24.8** Power of Attorney of Global Crossing Development Co.
24.9 Power of Attorney of Global Crossing Ltd., LDC (included on
signature page II-17 of this Pre-Effective Amendment No. 2 to
Registration Statement on Form S-4)
25.1** Form T-1 Statement of Eligibility under Trust Indenture Act of
1939 of United States Trust Company of New York, as Trustee
25.2 Amendment No. 1 to Form T-1 Statement of Eligibility under
Trust Indenture Act of 1939 of United States Trust Company of
New York, as Trustee
27.1 Financial Data Schedule
99.1** Consent of Nominee Director
99.2** Consent of Nominee Director
99.3** Consent of Nominee Director
</TABLE>
- --------
* Incorporated by reference to Global Crossing Ltd. Registration Statement
on Form S-1 (File No. 333-53393)
** Previously filed
2
<PAGE>
EXHIBIT 3.1
FORM NO. 3A REGISTRATION NO. EC24644
[LOGO]
BERMUDA
CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME
I HEREBY CERTIFY that in accordance with section 10 of THE COMPANIES ACT 1981
GLOBAL CROSSING HOLDINGS LTD. by resolution and with the approval of the
Registrar of Companies has changed its name and was registered as GLOBAL
CROSSING LTD. on the 30TH day of APRIL, 1998.
Given under my hand and the Seal of the
[SEAL] REGISTRAR OF COMPANIES this 5TH
day of MAY, 1998.
/s/ illegible
for REGISTRAR OF COMPANIES
<PAGE>
FORM NO. 6 REGISTRATION NO. EC24644
[LOGO]
BERMUDA
CERTIFICATE OF INCORPORATION
I hereby in accordance with section 14 of THE COMPANIES ACT 1981 issue this
Certificate of Incorporation and do certify that on the 18TH day of MARCH, 1998
GLOBAL CROSSING HOLDINGS LTD.
was registered by me in the Register maintained by me under the provisions of
the said section and that the status of the said company is that of an EXEMPTED
company.
Given under my hand and the Seal of the
[SEAL] REGISTRAR OF COMPANIES this 23RD
day of MARCH, 1998.
/s/ illegible
for REGISTRAR OF COMPANIES
<PAGE>
FORM NO. 5 REGISTRATION NO. EC24644
[LOGO]
BERMUDA
CERTIFICATE OF DEPOSIT OF
MEMORANDUM OF ASSOCIATION AND CONSENT
GRANTED BY THE MINISTER
THIS IS TO CERTIFY that a Memorandum of Association
of
GLOBAL CROSSING HOLDINGS LTD.
-----------------------------
and the consent granted by the Minister under section 6(1) of THE COMPANIES ACT
1981 ("the Act") were delivered to the Registrar of Companies on the 18TH day of
MARCH, 1998 in accordance with the provisions of section 14(2) of the Act.
Given under my hand this 23RD
day of MARCH, 1998.
/s/ illegible
for REGISTRAR OF COMPANIES
Minimum Capital of the Company: US$12,000.00
------------
Authorised Capital of the Company: US$12,000.00
------------
<PAGE>
FORM NO. 2
LOGO
BERMUDA
THE COMPANIES ACT 1981
MEMORANDUM OF ASSOCIATION OF
COMPANY LIMITED BY SHARES
(SECTION 7(1) AND (2))
MEMORANDUM OF ASSOCIATION
OF
GLOBAL CROSSING HOLDINGS LTD.
(hereinafter referred to as "the Company")
1. The liability of the members of the Company is limited to the amount
(if any) for the time being unpaid on the shares respectively held by
them.
2. We, the undersigned, namely,
<TABLE>
<CAPTION>
NAME ADDRESS BERMUDIAN NATIONALITY NUMBER OF
STATUS SHARES
(YES/NO) SUBSCRIBED
<S> <C> <C> <C>
Jill Virgil-Smith Yes British 1
Cedar House,
41 Cedar Avenue
Hamilton, HM 12, Bermuda
Ruby L. Rawlins Yes British 1
Cedar House,
41 Cedar Avenue
Hamilton HM 12, Bermuda
Judith Morgan-Swan Yes British 1
Cedar House,
41 Cedar Avenue
Hamilton HM 12, Bermuda
Rachael M. Lathan Yes British 1
Cedar House,
41 Cedar Avenue
Hamilton HM 12, Bermuda
</TABLE>
do hereby respectively agree to take such number of shares of the Company as may
be allotted to us respectively by the provisional direction of the Company, not
exceeding the number of shares for which we have respectively subscribed, and to
satisfy such calls as may be made by the directors, provisional directors or
promoters of the Company in respect of the shares allotted to us respectively.
<PAGE>
2
3. The Company is to be an exempted Company as defined by the Companies Act
1981.
4. The Company has power to hold land situate in Bermuda not exceeding in all,
including the following parcels-
Not Applicable
5. The authorized share capital of the Company is $12,000.00 divided into
shares of one cent each. The minimum subscribed share capital of the
Company is $12,000.00 in United States currency.
6. The objects for which the Company is formed and incorporated are -
See Attached
7. The Company has the powers set out in the Schedule annexed hereto.
<PAGE>
3
(i) To carry on business as a holding company and to acquire and hold
shares, stocks, debenture stock, bonds, mortgages, obligations and
securities of any kind issued or guaranteed by any company,
corporation or undertaking of whatever nature and wherever constituted
or carrying on business, and shares, stock, debentures, debenture
stock, bonds, obligations and other securities issued or guaranteed by
any government, sovereign ruler, commissioners, trust, local authority
or other public body, whether in Bermuda or elsewhere, and to vary,
transpose, dispose of or otherwise deal with from time to time as may
be considered expedient any of the Company's investments for the time
being;
(ii) To acquire any such shares and other securities as are mentioned in
the preceding paragraph by subscription, syndicate participation,
tender, purchase, exchange or otherwise and to subscribe for the same,
either conditionally or otherwise, and to guarantee the subscription
thereof and to exercise and enforce all rights and powers conferred by
or incident to the ownership thereof;
(iii) To co-ordinate the administration, policies, management, supervision,
control, research, planning, trading and any and all other activities
of, and to act as financial advisers and consultants to, any company
or companies now or hereafter incorporated or acquired which may be or
may become a Group Company (which expression, in this and the next
following paragraph, means a company, wherever incorporated, which is
or becomes a holding company or a subsidiary of, or affiliated with,
the Company within the meanings respectively assigned to those terms
in The Companies Act 1981) or, with the prior written approval of the
Minister of Finance, to any company or companies now or hereafter
incorporated or acquired with which the Company may be or may become
associated;
(iv) To provide financing and financial investment, management and advisory
services to any Group Company, which shall include but not be limited
to granting or providing credit and financial accommodation, lending
and making advances with or without interest to any Group Company and
lending to or depositing with any bank funds or other assets to
provide security (by way of mortgage, charge, pledge, lien or
otherwise) for loans or other forms of financing granted to such Group
Company by such bank:
Provided that the Company shall not be deemed to have the power to act
as executor or administrator, or as trustee, except in connection with
the issue of bonds and debentures by the Company or any Group Company
or in connection with a pension scheme for the benefit of employees or
former employees of the Company or a Group Company or their respective
predecessors, or the dependants or connections of such employees or
former employees;
(v) As set forth in paragraphs (b) to (n) and (p) to (u) inclusive of the
Second Schedule to The Companies Act 1981.
<PAGE>
4
Signed by each subscriber in the presence of at least one witness attesting the
signature thereof,
/s/ illegible /s/ illegible
- --------------------------------------- ------------------------------
/s/ illegible /s/ illegible
- --------------------------------------- ------------------------------
/s/ illegible /s/ illegible
- --------------------------------------- ------------------------------
/s/ illegible /s/ illegible
- --------------------------------------- ------------------------------
(Subscribers) (Witnesses)
SUBSCRIBED this 5th day of March, 1998
<PAGE>
5
STAMP DUTY (To be affixed)
Not Applicable
<PAGE>
The Schedule
(referred to in Clause 7 of the Memorandum of Association)
--------------------------------------------------------
(a) To borrow and raise money in any currency or currencies and to secure or
discharge any debt or obligation in any manner and in particular (without
prejudice to the generality of the foregoing) by mortgages of or charges
upon all or any part of the undertaking, property and assets (present and
future) and uncalled capital of the Company or by the creation and issue of
securities.
(b) To enter into any guarantee, contract of indemnity or suretyship and in
particular (without prejudice to the generality of the foregoing) to
guarantee, support or secure, with or without consideration, whether by
personal obligation or by mortgaging or charging all or any part of the
undertaking, property and assets (present and future) and uncalled capital
of the Company or both such methods or in any other manner, the performance
of any obligations or commitments, of, and the repayment or payment of the
principal amounts of and any premiums, interest, dividends and other moneys
payable on or in respect of any securities or liabilities of, any person
including (without prejudice to the generality of the foregoing) any
company which is for the time being a subsidiary or a holding company of
the Company or another subsidiary or a holding company of the Company or
otherwise associated with the Company.
(c) To accept, draw, make, create, issue, execute, discount, endorse, negotiate
bills of exchange, promissory notes, and other instruments and securities,
whether negotiable or otherwise.
(d) To sell, exchange, mortgage, charge, let on rent, share of profit, royalty
or otherwise, grant licenses, easements, options, servitudes and other
rights over, and in any other manner deal with or dispose of, all or any
part of the undertaking, property and assets (present and future) of the
Company for any consideration and in particular (without prejudice to the
generality of the foregoing) for any securities.
(e) To issue and allot securities of the Company for cash or in payment or part
payment for any real or personal property purchased or otherwise acquired
by the Company or any services rendered to the Company or as security for
any obligation or amount (even if less than the nominal amount of such
securities) or for any other purpose.
(f) To grant pensions, annuities, or other allowances, including allowances on
death, to any directors, officers or employees or former directors,
officers or employees of the Company or any company which at any time is or
was a subsidiary or a holding company or another subsidiary of a holding
company of the Company or otherwise associated with the Company or of any
predecessor in business of any of them, and to the relations, connections
or dependants of any such persons, and to other persons whose service or
services have directly or indirectly been of benefit to the Company or whom
the Company considers have any moral claim on the Company or to their
relations, connections or dependants, and to establish or support any
associations, institutions, clubs, schools, building and housing schemes,
funds and trusts, and to make payments toward insurance or another
arrangements likely to benefit any such persons or otherwise advance the
interests of the Company or of its Members, and to subscribe, guarantee or
pay money for any purpose likely, directly or indirectly to
<PAGE>
2
further the interests of the Company or of its Members or for any national,
charitable, benevolent, educational, social, public, general or useful
object.
(g) Subject to the provisions of Section 42 of the Companies Act 1981, to issue
preference shares which at the option of the holders thereof are to be
liable to be redeemed.
(h) To purchase its own shares in accordance with the provisions of Section 42A
of the Companies Act 1981.
<PAGE>
FORM NO. 1A
[LOGO]
BERMUDA
THE COMPANIES ACT 1981
CONSENT
PURSUANT TO SECTION 6(1)
In exercise of the powers conferred upon him by Section 6(1) of the Companies
Act 1981. The Minister of Finance hereby gives his Consent to:
GLOBAL CROSSING HOLDINGS LTD.
to be registered as AN EXEMPTED Company under the Companies Act 1981, subject to
the provisions of the said Act.
Date this 17th day of March 1998.
/s/ illegible
Minister of Finance
<PAGE>
EXHIBIT 3.2
B Y E - L A W S
OF
GLOBAL CROSSING HOLDINGS LTD.
I HEREBY CERTIFY that the within written Bye-Laws are a true copy of the Bye-
Laws of
GLOBAL CROSSING HOLDINGS LTD.
as subscribed by the subscribers to the Memorandum of Association and approved
at the Statutory meeting of the above Company on the 30/th/ April, 1998.
Assistant Secretary
Prepared by
Messrs Appleby Spurling & Kempe
Cedar House
41 Cedar Avenue
Hamilton, Bermuda
<PAGE>
I N D E X
---------
<TABLE>
<CAPTION>
BYE-LAW SUBJECT PAGE
- ------- ------- ----
<C> <S> <C>
1 Interpretation................................. 1,2
2 Registered Office.............................. 3
3,4 Share Rights................................... 3,4
5,6 Modification of Rights......................... 4
7-9 Shares......................................... 5
10-12 Certificates................................... 5,6
13-15 Lien........................................... 6,7
16-21 Calls on Shares................................ 7,8
22-28 Forfeiture of Shares........................... 9,10
29 Register of Shareholders....................... 11
30 Register of Directors and Officers............. 11
31-34 Transfer of Shares............................. 11,12
35-38 Transmission of Shares......................... 13,14
39-41 Increase of Capital............................ 14,15
42,43 Alteration of Capital.......................... 15,16
44,45 Reduction of Capital........................... 16
46 General Meetings and Written Resolutions....... 16,17
47,48 Notice of General Meetings..................... 18
49-55 Proceedings at General Meetings................ 19,20
56-67 Voting......................................... 21-23
68-73 Proxies and Corporate Representatives.......... 24-26
74-76 Appointment and Removal of Directors........... 26,27
77 Resignation and Disqualification of Directors.. 27
78-80 Alternate Directors............................ 27,28
81 Directors' Fees and Additional
Remuneration and Expenses.................... 28,29
82 Directors' Interests........................... 29,30
83-87 Powers and Duties of the Board................. 30-32
88-90 Delegation of the Board's Powers............... 32,33
91-99 Proceedings of the Board....................... 33-36
100 Officers....................................... 36
101 Minutes........................................ 36,37
102,103 Secretary and Resident Representative.......... 37
104 The Seal....................................... 37,38
105-111 Dividends and Other Payments................... 38-40
112 Reserves....................................... 41
113,114 Capitalization of Profits...................... 41,42
115 Record Dates................................... 42
116-118 Accounting Records............................. 42,43
119 Audit.......................................... 43
120-122 Service of Notices and Other Documents......... 43,44
123 Winding Up..................................... 45
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
BYE-LAW SUBJECT PAGE
- ------- ------- ----
<C> <S> <C>
124-128 Indemnity...................................... 45-47
129 Amalgamation................................... 47
130 Continuation................................... 48
131 Alteration of Bye-Laws......................... 48
</TABLE>
ii
<PAGE>
B Y E - L A W S
OF
GLOBAL CROSSING HOLDINGS LTD.
INTERPRETATION
1. (1) In these Bye-Laws unless the context otherwise requires -
"BERMUDA" means the Islands of Bermuda;
"BOARD" means the Board of Directors of the Company or the Directors
present at a meeting of Directors at which there is a quorum;
"THE COMPANIES ACTS" means every Bermuda statute from time to time in
force concerning companies insofar as the same applies to the Company;
"COMPANY" means the company incorporated in Bermuda under the name of
GLOBAL CROSSING HOLDINGS LTD. on the 30/th/ day of April, 1998;
"OFFICER" means a person appointed by the Board pursuant to Bye-Law
100 of these Bye-Laws and shall not include an auditor of the Company;
"PAID UP" means paid up or credited as paid up;
"REGISTER" means the Register of Shareholders of the Company;
"REGISTERED OFFICE" means the registered office for the time being of
the Company;
"RESIDENT REPRESENTATIVE" means the person (or, if permitted in
accordance with the Companies Acts, the company) appointed to perform the
duties of resident representative set out in the Companies Acts and
includes any assistant or deputy Resident Representative appointed by the
Board to perform any of the duties of the Resident Representative;
"RESOLUTION" means a resolution of the Shareholders or, where
required, of a separate class or separate classes of Shareholders, adopted
either in general meeting or by written resolution, in accordance with the
provisions of these Bye-Laws;
"SEAL" means the common seal of the Company and includes any duplicate
thereof;
"SECRETARY" includes a temporary or assistant or deputy Secretary and
any person appointed by the Board to perform any of the duties of the
Secretary;
"SHAREHOLDER" means a shareholder or member of the Company;
<PAGE>
2
"THESE BYE-LAWS" means these Bye-Laws in their present form or as from
time to time amended;
(2) For the purposes of these Bye-Laws a corporation shall be deemed
to be present in person if its representative duly authorised pursuant to
the Companies Acts is present;
(3) Words importing only the singular number include the plural number
and vice versa;
(4) Words importing only the masculine gender include the feminine and
neuter genders respectively;
(5) Words importing persons include companies or associations or
bodies of persons, whether corporate or un-incorporate;
(6) Reference to writing shall include typewriting, printing,
lithography, photography and other modes of representing or reproducing
words in a legible and non-transitory form;
(7) Any words or expressions defined in the Companies Acts in force at
the date when these Bye-Laws or any part thereof are adopted shall bear the
same meaning in these Bye-Laws or such part (as the case may be).
REGISTERED OFFICE
2. The Registered Office shall be at such place in Bermuda as the Board
shall from time to time appoint.
SHARE RIGHTS
3. Subject to any special rights conferred on the holders of any share or
class of shares, any share in the Company may be issued with or have attached
thereto such preferred, deferred, qualified or other special rights or such
restrictions, whether in regard to dividend, voting, return of capital or
otherwise, as the Company may by Resolution determine or, if there has not been
any such determination or so far as the same shall not make specific provision,
as the Board may determine.
4. (1) Subject to the Companies Acts, any preference shares may, with
the sanction of a resolution of the Board, be issued on terms:
(a) that they are to be redeemed on the happening of a specified
event or on a given date; and/or,
(b) that they are liable to be redeemed at the option of the
Company; and/or,
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3
(c) if authorised by the memorandum/Incorporating act of the
Company, that they are liable to be redeemed at the option of the
holder.
The terms and manner of redemption shall be provided for in such
resolution of the Board and shall be attached to but shall not form part of
these Bye-Laws.
The Board may, at its discretion and without the sanction of a Resolution
authorise the purchase by the Company of its own shares
upon such terms as the Board may in its discretion determine PROVIDED ALWAYS
that such purchase is effected in accordance with the provisions of the
Companies Acts.
MODIFICATION OF RIGHTS
5. Subject to the Companies Acts, all or any of the special rights for
the time being attached to any class of shares for the time being issued may
from time to time (whether or not the Company is being wound up) be altered or
abrogated with the consent in writing of the holders of not less than seventy
five percent of the issued shares of that class or with the sanction of a
resolution passed at a separate general meeting of the holders of such shares
voting in person or by proxy. To any such separate general meeting, all the
provisions of these Bye-Laws as to general meetings of the Company shall mutatis
mutandis apply, but so that the necessary quorum shall be two or more persons
holding or representing by proxy any of the shares of the relevant class, that
every holder of shares of the relevant class shall be entitled on a poll to one
vote for every such share held by him and that any holder of shares of the
relevant class present in person or by proxy may demand a poll; provided,
however, that if the Company or a class of Shareholders shall have only one
Shareholder, one Shareholder present in person or by proxy shall constitute the
necessary quorum.
6. The special rights conferred upon the holders of any shares or class
of shares shall not, unless otherwise expressly provided in the rights attaching
to or the terms of issue of such shares, be deemed to be altered by the creation
or issue of further shares ranking pari passu therewith.
SHARES
7. Subject to the provisions of these Bye-Laws, the unissued shares of
the Company (whether forming part of the original capital or any increased
capital) shall be at the disposal of the Board, which may offer, allot, grant
options over or otherwise dispose of them to such persons, at such times and for
such consideration and upon such terms and conditions as the Board may
determine.
8. The Board may in connection with the issue of any shares exercise all
powers of paying commission and brokerage conferred or permitted by law.
9. Except as ordered by a court of competent jurisdiction or as required
by law, no person shall be recognised by the Company as holding any share upon
trust and the Company shall not be bound by or required in any way to recognise
(even when having
<PAGE>
4
notice thereof) any equitable, contingent, future or partial interest in any
share or any interest in any fractional part of a share or (except only as
otherwise provided in these Bye-Laws, or by law) any other right in respect of
any share except an absolute right to the entirety thereof in the registered
holder.
CERTIFICATES
10. The preparation, issue and delivery of certificates shall be governed
by the Companies Acts. In the case of a share held jointly by several persons,
delivery of a certificate to one of several joint holders shall be sufficient
delivery to all.
If a share certificate is defaced, lost or destroyed it may be replaced
without fee but on such terms (if any) as to evidence and indemnity and to
payment
of the costs and out of pocket expenses of the Company in investigating such
evidence and preparing such indemnity as the Board may think fit and, in case of
defacement, on delivery of the old certificate to the Company.
12. All certificates for share or loan capital or other securities of the
Company (other than letters of allotment, scrip certificates and other like
documents) shall, except to the extent that the terms and conditions for the
time being relating thereto otherwise provide, be issued under the Seal. The
Board may by resolution determine, either generally or in any particular case,
that any signatures on any such certificates need not be autographic but may be
affixed to such certificates by some mechanical means or may be printed thereon
or that such certificates need not be signed by any persons.
LIEN
13. The Company shall have a first and paramount lien on every share (not
being a fully paid share) for all moneys, whether presently payable or not,
called or payable, at a date fixed by or in accordance with the terms of issue
of such share in respect of such share, and the Company shall also have a first
and paramount lien on every share (other than a fully paid share) standing
registered in the name of a Shareholder, whether singly or jointly with any
other person, for all the debts and liabilities of such Shareholder or his
estate to the Company, whether the same shall have been incurred before or after
notice to the Company of any interest of any person other than such Shareholder,
and whether the time for the payment or discharge of the same shall have
actually arrived or not, and notwithstanding that the same are joint debts or
liabilities of such Shareholder or his estate and any other person, whether a
Shareholder or not. The Company's lien on a share shall extend to all dividends
payable thereon. The Board may at any time, either generally or in any
particular case, waive any lien that has arisen or declare any share to be
wholly or in part exempt from the provisions of this Bye-Law.
14. The Company may sell, in such manner as the Board may think fit, any
share on which the Company has a lien but no sale shall be made unless some sum
in respect of which the lien exists is presently payable nor until the
expiration of fourteen days after a notice in writing, stating and demanding
payment of the sum presently payable and giving
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5
notice of the intention to sell in default of such payment, has been served on
the holder for the time being of the share.
15. The net proceeds of sale by the Company of any shares on which it has
a lien shall be applied in or towards payment or discharge of the debt or
liability in respect of which the lien exists so far as the same is presently
payable, and any residue shall (subject to a like lien for debts or liabilities
not presently payable as existed upon the share prior to the sale) be paid to
the person who was the holder of the share immediately before such sale. For
giving effect to any such sale the Board may authorise some person to transfer
the share sold to the purchaser thereof. The purchaser shall be registered as
the holder of the share and he shall not be bound to see to the application of
the purchase money, nor shall his title to the share be affected by any
irregularity or invalidity in the proceedings relating to the sale.
CALLS ON SHARES
16. The Board may from time to time make calls upon the Shareholders in
respect of any moneys unpaid on their shares (whether on account of the par
value of the shares or by way of premium) and not by the terms of issue thereof
made payable at a date fixed by or in accordance with such terms of issue, and
each Shareholder shall (subject to the Company serving upon him at least
fourteen days notice specifying the time or times and place of payment) pay to
the Company at the time or times and place so specified the amount called on his
shares. A call may be revoked or postponed as the Board may determine.
17. A call may be made payable by instalments and shall be deemed to have
been made at the time when the resolution of the Board authorising the call was
passed.
18. The joint holders of a share shall be jointly and severally liable to
pay all calls in respect thereof.
19. If a sum called in respect of the share shall not be paid before or on
the day appointed for payment thereof the person from whom the sum is due shall
pay interest on the sum from the day appointed for the payment thereof to the
time of actual payment at such rate as the Board may determine, but the Board
shall be at liberty to waive payment of such interest wholly or in part.
20. Any sum which, by the terms of issue of a share, becomes payable on
allotment or at any date fixed by or in accordance with such terms of issue,
whether on account of the nominal amount of the share or by way of premium,
shall for all the purposes of these Bye-Laws be deemed to be a call duly made,
notified and payable on the date on which, by the terms of issue, the same
becomes payable and, in case of non-payment, all the relevant provisions of
these Bye-Laws as to payment of interest, forfeiture or otherwise shall apply as
if such sum had become payable by virtue of a call duly made and notified.
21. The Board may on the issue of shares differentiate between the
allottees or holders as to the amount of calls to be paid and the times of
payment.
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6
FORFEITURE OF SHARES
22. If a Shareholder fails to pay any call or instalment of a call on the
day appointed for payment thereof, the Board may at any time thereafter during
such time as any part of such call or instalment remains unpaid serve a notice
on him requiring payment of so much of the call or instalment as is unpaid,
together with any interest which may have accrued.
23. The notice shall name a further day (not being less than 14 days from
the date of the notice) on or before which, and the place where, the payment
required by the notice is to be made and shall state that, in the event of non-
payment on or before the day and at the place appointed, the shares in respect
of which such call is made or instalment is payable will be liable to be
forfeited. The Board may accept the surrender of any share liable to be
forfeited hereunder and, in such case, references in these Bye-Laws to
forfeiture shall include surrender.
24. If the requirements of any such notice as aforesaid are not complied
with, any share in respect of which such notice has been given may at any time
thereafter, before payment of all calls or instalments and interest due in
respect thereof has been made, be forfeited by a resolution of the Board to that
effect. Such forfeiture shall include all dividends declared in respect of the
forfeited shares and not actually paid before the forfeiture.
25. When any share has been forfeited, notice of the forfeiture shall be
served upon the person who was before forfeiture the holder of the share; but no
forfeiture shall be in any manner invalidated by any omission or neglect to give
such notice as aforesaid.
26. A forfeited share shall be deemed to be the property of the Company
and may be sold, re-offered or otherwise disposed of either to the person who
was, before forfeiture, the holder thereof or entitled thereto or to any other
person upon such terms and in such manner as the Board shall think fit, and at
any time before a sale, re-allotment or disposition the forfeiture may be
cancelled on such terms as the Board may think fit.
27. A person whose shares have been forfeited shall thereupon cease to be
a Shareholder in respect of the forfeited shares but shall, notwithstanding the
forfeiture, remain liable to pay to the Company all moneys which at the date of
forfeiture were presently payable by him to the Company in respect of the shares
with interest thereon at such rate as the Board may determine from the date of
forfeiture until payment, and the Company may enforce payment without being
under any obligation to make any allowance for the value of the shares
forfeited.
28. An affidavit in writing that the deponent is a Director of the Company
or the Secretary and that a share has been duly forfeited on the date stated in
the affidavit shall be conclusive evidence of the facts therein stated as
against all persons claiming to be entitled to the share. The Company may
receive the consideration (if any) given for the share on the sale, re-allotment
or disposition thereof and the Board may authorise some person to transfer
<PAGE>
7
the share to the person to whom the same is sold, re-allotted or disposed of,
and he shall thereupon be registered as the holder of the share and shall not be
bound to see to the application of the purchase money (if any) nor shall his
title to the share be affected by any irregularity or invalidity in the
proceedings relating to the forfeiture, sale, re-allotment or disposal of the
share.
REGISTER OF SHAREHOLDERS
29. The Secretary shall establish and maintain the Register at the
Registered Office in the manner prescribed by the Companies Acts. Unless the
Board otherwise determines, the Register shall be open to inspection in the
manner prescribed by the Companies Acts between 10.00 a.m. and 12.00 noon on
every working day. Unless the Board so determines, no Shareholder or intending
Shareholder shall be entitled to have entered in the Register any indication of
any trust or any equitable, contingent, future or partial interest in any share
or any interest in any fractional part of a share and if any such entry exists
or is permitted by the Board it shall not be deemed to abrogate any of the
provisions of Bye-Law 9.
REGISTER OF DIRECTORS AND OFFICERS
30. The Secretary shall establish and maintain a register of the Directors
and Officers of the Company as required by the Companies Acts. The register of
Directors and Officers shall be open to inspection in the manner prescribed by
the Companies Acts between 10:00 a.m. and 12:00 noon on every working day.
TRANSFER OF SHARES
31. Subject to the Companies Acts and to such of the restrictions
contained in these Bye-Laws as may be applicable, any Shareholder may transfer
all or any of his shares by an instrument of transfer in the usual common form
or in any other form which the Board may approve.
32. The instrument of transfer of a share shall be signed by or on behalf
of the transferor and where any share is not fully-paid, the transferee and the
transferor shall be deemed to remain the holder of the share until the name of
the transferee is entered in the Register in respect thereof. All instruments of
transfer when registered may be retained by the Company. The Board may, in its
absolute discretion and without assigning any reason therefor, decline to
register any transfer of any share which is not a fully-paid share. The Board
may also decline to register any transfer unless:-
(1) the instrument of transfer is duly stamped and lodged with the
Company, accompanied by the certificate for the shares to which it relates,
and such other evidence as the Board may reasonably require to show the
right of the transferor to make the transfer,
(2) the instrument of transfer is in respect of only one class of
share,
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8
(3) where applicable, the permission of the Bermuda Monetary Authority
with respect thereto has been obtained.
Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under this Bye-
Law and Bye-Laws 31 and 33.
33. If the Board declines to register a transfer it shall, within three
months after the date on which the instrument of transfer was lodged, send to
the transferee notice of such refusal.
34. No fee shall be charged by the Company for registering any transfer,
probate, letters of administration, certificate of death or marriage, power of
attorney, distringas or stop notice, order of court or other instrument relating
to or affecting the title to any share, or otherwise making an entry in the
Register relating to any share.
TRANSMISSION OF SHARES
35. In the case of the death of a Shareholder, the survivor or survivors,
where the deceased was a joint holder, and the estate representative, where he
was sole holder, shall be the only person recognised by the Company as having
any title to his shares; but nothing herein contained shall release the estate
of a deceased holder (whether the sole or joint) from any liability in respect
of any share held by him solely or jointly with other persons. For the purpose
of this Bye-Law, estate representative means the person to whom probate or
letters of administration has or have been granted in Bermuda or, failing any
such person, such other person as the Board may in its absolute discretion
determine to be the person recognised by the Company for the purpose of this
Bye-Law.
36. Any person becoming entitled to a share in consequence of the death of
a Shareholder or otherwise by operation of applicable law may, subject as
hereafter provided and upon such evidence being produced as may from time to
time be required by the Board as to his entitlement, either be registered
himself as the holder of the share or elect to have some person nominated by him
registered as the transferee thereof. If the person so becoming entitled elects
to be registered himself, he shall deliver or send to the Company a notice in
writing signed by him stating that he so elects. If he shall elect to have his
nominee registered, he shall signify his election by signing an instrument of
transfer of such share in favour of his nominee. All the limitations,
restrictions and provisions of these Bye-Laws relating to the right to transfer
and the registration of transfer of shares shall be applicable to any such
notice or instrument of transfer as aforesaid as if the death of the Shareholder
or other event giving rise to the transmission had not occurred and the notice
or instrument of transfer was an instrument of transfer signed by such
Shareholder.
37. A person becoming entitled to a share in consequence of the death of a
Shareholder or otherwise by operation of applicable law shall (upon such
evidence being produced as may from time to time be required by the Board as to
his entitlement) be entitled to receive and may give a discharge for any
dividends or other moneys payable in respect of the share, but he shall not be
entitled in respect of the share to receive notices of or to attend
<PAGE>
9
or vote at general meetings of the Company or, save as aforesaid, to exercise in
respect of the share any of the rights or privileges of a Shareholder until he
shall have become registered as the holder thereof. The Board may at any time
give notice requiring such person to elect either to be registered himself or to
transfer the share and, if the notice is not complied with within sixty days,
the Board may thereafter withhold payment of all dividends and other moneys
payable in respect of the shares until the requirements of the notice have been
complied with.
38. Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under Bye-Laws
35, 36 and 37.
INCREASE OF CAPITAL
39. The Company may from time to time increase its capital by such sum to
be divided into shares of such par value as the Company by Resolution shall
prescribe.
40. The Company may, by the Resolution increasing the capital, direct that
the new shares or any of them shall be offered in the first instance either at
par or at a premium or (subject to the provisions of the Companies Acts) at a
discount to all the holders for the time being of shares of any class or classes
in proportion to the number of such shares held by them respectively or make any
other provision as to the issue of the new shares.
41. The new shares shall be subject to all the provisions of these Bye-
Laws with reference to lien, the payment of calls, forfeiture, transfer,
transmission and otherwise.
ALTERATION OF CAPITAL
42. The Company may from time to time by Resolution:-
(1) divide its shares into several classes and attach thereto
respectively any preferential, deferred, qualified or special rights,
privileges or conditions;
(2) consolidate and divide all or any of its share capital into shares
of larger par value than its existing shares;
(3) sub-divide its shares or any of them into shares of smaller par
value than is fixed by its memorandum, so, however, that in the sub-
division the proportion between the amount paid and the amount, if any,
unpaid on each reduced share shall be the same as it was in the case of the
share from which the reduced share is derived;
(4) make provision for the issue and allotment of shares which do not
carry any voting rights;
(5) cancel shares which, at the date of the passing of the resolution
in that behalf, have not been taken or agreed to be taken by any person,
and diminish the amount of its share capital by the amount of the shares so
cancelled; and
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10
(6) change the currency denomination of its share capital.
Where any difficulty arises in regard to any division, consolidation,
or sub-division under this Bye-Law, the Board may settle the same as it thinks
expedient and, in particular, may arrange for the sale of the shares
representing fractions and the distribution of the net proceeds of sale in due
proportion amongst the Shareholders who would have been entitled to the
fractions, and for this purpose the Board may authorise some person to transfer
the shares representing fractions to the purchaser thereof, who shall not be
bound to see to the application of the purchase money nor shall his title to the
shares be affected by any irregularity or invalidity in the proceedings relating
to the sale.
43. Subject to the Companies Acts and to any confirmation or consent
required by law or these Bye-Laws, the Company may by Resolution from time to
time convert any preference shares into redeemable preference shares.
REDUCTION OF CAPITAL
44. Subject to the Companies Acts, its memorandum and any confirmation or
consent required by law or these Bye-Laws, the Company may from time to time by
Resolution authorise the reduction of its issued share capital or any share
premium or contributed surplus account in any manner.
45. In relation to any such reduction, the Company may by Resolution
determine the terms upon which such reduction is to be effected including in the
case of a reduction of part only of a class of shares, those shares to be
affected.
GENERAL MEETINGS AND WRITTEN RESOLUTIONS
46. (1) The Board shall convene and the Company shall hold general
meetings as Annual General Meetings in accordance with the requirements of the
Companies Acts at such times and places as the Board shall appoint. The Board
may, whenever it thinks fit, and shall, when required by the Companies Acts,
convene general meetings other than Annual General Meetings which shall be
called Special General Meetings.
(2) Except in the case of the removal of auditors and Directors,
anything which may be done by resolution of the Company in general meeting
or by resolution of a meeting of any class of the Shareholders of the
Company may, without a meeting and without any previous notice being
required, be done by resolution in writing, signed by all of the
Shareholders or their proxies, or in the case of a Shareholder that is a
corporation (whether or not a company within the meaning of the Companies
Acts), on behalf of, all the Shareholders of the Company, or any class
thereof, in as many counterparts as may be necessary.
(3) For the purposes of this Bye-Law, the date of the resolution in
writing is the date when the resolution is signed by, or in the case of a
Shareholder that is a corporation (whether or not a company within the
meaning of the Companies Acts), on
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11
behalf of, the last Shareholder to sign and any reference in any enactment
to the date of passing of a Resolution is, in relation to a resolution in
writing made in accordance with this section, a reference to such date.
(4) A resolution in writing made in accordance with this Bye-Law is as
valid as if it had been passed by the Company in general meeting or, if
applicable, by a meeting of the relevant class of Shareholders of the
Company, as the case may be. A resolution in writing made in accordance
with this section shall constitute minutes for the purposes of the
Companies Acts and these Bye-Laws.
NOTICE OF GENERAL MEETINGS
47. An Annual General Meeting shall be called by not less than 5 days
notice in writing and a Special General Meeting shall be called by not less than
5 days notice in writing. The notice shall be exclusive of the day on which
it is served or deemed to be served and of the day for which it is given, and
shall specify the place, day and time of the meeting, and, the nature of the
business to be considered. Notice of every general meeting shall be given in
any manner permitted by Bye-Laws 120 and 121 to all Shareholders other than such
as, under the provisions of these Bye-Laws or the terms of issue of the shares
they hold, are not entitled to receive such notice from the Company and to any
Director or Resident Representative who or which has delivered a written notice
upon the Registered Office requiring that such notice be sent to him or it.
Notwithstanding that a meeting of the Company is called by shorter
notice than that specified in this Bye-Law, it shall be deemed to have been duly
called if it is so agreed:-
(1) in the case of a meeting called as an Annual General Meeting, by
all the Shareholders entitled to attend and vote thereat;
(2) in the case of any other meeting, by a majority in number of the
Shareholders having the right to attend and vote at the meeting, being a
majority together holding not less than 95 percent in nominal value of the
shares giving that right.
48. The accidental omission to give notice of a meeting or (in cases where
instruments of proxy are sent out with the notice) the accidental omission to
send such instrument of proxy to, or the non-receipt of notice of a meeting or
such instrument of proxy by, any person entitled to receive such notice shall
not invalidate the proceedings at that meeting.
PROCEEDINGS AT GENERAL MEETINGS
49. No business shall be transacted at any general meeting unless a quorum
is present when the meeting proceeds to business, but the absence of a quorum
shall not preclude the appointment, choice or election of a chairman which shall
not be treated as part of the business of the meeting. Save as otherwise
provided by these Bye-Laws, at least two
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12
Shareholders present in person or by proxy and entitled to vote shall be a
quorum for all purposes; provided, however, that if the Company or a class of
Shareholders shall have only one Shareholder, one Shareholder present in person
or by proxy shall constitute the necessary quorum.
50. If within five minutes (or such longer time as the chairman of the
meeting may determine to wait) after the time appointed for the meeting, a
quorum is not present, the meeting, if convened on the requisition of
Shareholders, shall be dissolved. In any other case, it shall stand adjourned
to such other day and such other time and place as the chairman of the meeting
may determine and at such adjourned meeting two Shareholders present in person
or by proxy shall be a quorum provided that if the Company or a class of
Shareholders shall have only one Shareholder, one Shareholder present in person
or by proxy shall constitute the necessary quorum. The Company shall give not
less than days notice of any meeting adjourned through want of a quorum
and such notice shall state that the sole Shareholder or, if more than one, two
Shareholders present in person or by proxy (whatever the number of shares held
by them) shall be a quorum.
A meeting of the Shareholders or any class thereof may be held by means of
such telephone, electronic or other communication facilities as permit all
persons participating in the meeting to communicate with each other
simultaneously and instantaneously and participation in such a meeting shall
constitute presence in person at such meeting.
52. Each Director upon giving the notice referred to in Bye-Law 47 above,
and the Resident Representative, if any, shall be entitled to attend and speak
at any general meeting of the Company.
53. The Chairman (if any) of the Board or, in his absence, the President
shall preside as chairman at every general meeting. If there is no such
Chairman or President, or if at any meeting neither the Chairman nor the
President is present within five minutes after the time appointed for holding
the meeting, or if neither of them is willing to act as chairman, the Directors
present shall choose one of their number to act or if one Director only is
present he shall preside as chairman if willing to act. If no Director is
present, or if each of the Directors present declines to take the chair, the
persons present and entitled to vote on a poll shall elect one of their number
to be chairman.
54. The chairman of the meeting may, with the consent of any meeting at
which a quorum is present (and shall if so directed by the meeting), adjourn the
meeting from time to time and from place to place but no business shall be
transacted at any adjourned meeting except business which might lawfully have
been transacted at the meeting from which the adjournment took place. When a
meeting is adjourned for three months or more, notice of the adjourned meeting
shall be given as in the case of an original meeting.
55. Save as expressly provided by these Bye-Laws, it shall not be
necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting.
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13
VOTING
56. Save where a greater majority is required by the Companies Acts or
these Bye-Laws, any question proposed for consideration at any general meeting
shall be decided on by a simple majority of votes cast.
57. At any general meeting, a resolution put to the vote of the meeting
shall be decided on a show of hands unless (before or on the declaration of the
result of the show of hands or on the withdrawal of any other demand for a poll)
a poll is demanded by:-
(1) the chairman of the meeting; or
(2) at least three Shareholders present in person or represented by
proxy; or
(3) any Shareholder or Shareholders present in person or represented
by proxy and holding between them not less than one tenth of the total
voting rights of all the Shareholders having the right to vote at such
meeting; or
(4) a Shareholder or Shareholders present in person or represented by
proxy holding shares conferring the right to vote at such meeting, being
shares on which an aggregate sum has been paid up equal to not less than
one tenth of the total sum paid up on all such shares conferring such
right.
The demand for a poll may be withdrawn by the person or any of the persons
making it at any time prior to the declaration of the result. Unless a poll is
so demanded and the demand is not withdrawn, a declaration by the chairman that
a resolution has, on a show of hands, been carried or carried unanimously or by
a particular majority or not carried by a particular majority or lost shall be
final and conclusive, and an entry to that effect in the minute book of the
Company shall be conclusive evidence of the fact without proof of the number or
proportion of votes recorded for or against such resolution.
58. If a poll is duly demanded, the result of the poll shall be deemed to
be the resolution of the meeting at which the poll is demanded.
59. A poll demanded on the election of a chairman, or on a question of
adjournment, shall be taken forthwith. A poll demanded on any other question
shall be taken in such manner and either forthwith or at such time (being not
later than three months after the date of the demand) and place as the chairman
shall direct. It shall not be necessary (unless the chairman otherwise directs)
for notice to be given of a poll.
60. The demand for a poll shall not prevent the continuance of a meeting
for the transaction of any business other than the question on which the poll
has been demanded and it may be withdrawn at any time before the close of the
meeting or the taking of the poll, whichever is the earlier.
61. On a poll, votes may be cast either personally or by proxy.
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62. A person entitled to more than one vote on a poll need not use all his
votes or cast all the votes he uses in the same way.
63. In the case of an equality of votes at a general meeting, whether on a
show of hands or on a poll, the chairman of such meeting shall not be entitled
to a second or casting vote and the resolution shall fail.
64. In the case of joint holders of a share, the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and for this purpose
seniority shall be determined by the order in which the names stand in the
Register in respect of the joint holding.
65. A Shareholder who is a patient for any purpose of any statute or
applicable law relating to mental health or in respect of whom an order has been
made by any Court having jurisdiction for the protection or management of the
affairs of persons incapable of managing their own affairs may vote, whether on
a show of hands or on a poll, by his receiver, committee, curator bonis or other
person in the nature of a receiver, committee or curator bonis appointed by such
Court and such receiver, committee, curator bonis or other person may vote on a
poll by proxy, and may otherwise act and be treated as such Shareholder for the
purpose of general meetings.
66. No Shareholder shall, unless the Board otherwise determines, be
entitled to vote at any general meeting unless all calls or other sums presently
payable by him in respect of shares in the Company have been paid.
67. If;
(1) any objection shall be raised to the qualification of any voter;
or,
(2) any votes have been counted which ought not to have been counted
or which might have been rejected; or,
(3) any votes are not counted which ought to have been counted, the
objection or error shall not vitiate the decision of the meeting or
adjourned meeting on any resolution unless the same is raised or pointed
out at the meeting or, as the case may be, the adjourned meeting at which
the vote objected to is given or tendered or at which the error occurs.
Any objection or error shall be referred to the chairman of the meeting and
shall only vitiate the decision of the meeting on any resolution if the
chairman decides that the same may have affected the decision of the
meeting. The decision of the chairman on such matters shall be final and
conclusive.
PROXIES AND CORPORATE REPRESENTATIVES
68. The instrument appointing a proxy shall be in writing under the hand
of the appointor or of his attorney authorised by him in writing or, if the
appointor is a corporation,
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15
either under its seal or under the hand of an officer, attorney or other person
authorised to sign the same.
69. Any Shareholder may appoint a standing proxy or (if a corporation)
representative by depositing at the Registered Office a proxy or (if a
corporation) an authorisation and such proxy or authorisation shall be valid for
all general meetings and adjournments thereof or, resolutions in writing, as the
case may be, until notice of revocation is received at the Registered Office.
Where a standing proxy or authorisation exists, its operation shall be deemed to
have been suspended at any general meeting or adjournment thereof at which the
Shareholder is present or in respect to which the Shareholder has specially
appointed a proxy or representative. The Board may from time to time require
such evidence as it shall deem necessary as to the due execution and continuing
validity of any such standing proxy or authorisation and the operation of any
such standing proxy or authorisation shall be deemed to be suspended until such
time as the Board determines that it has received the requested evidence or
other evidence satisfactory to it.
70. Subject to Bye-Law 69, the instrument appointing a proxy together with
such other evidence as to its due execution as the Board may from time to time
require, shall be delivered at the Registered Office (or at such place as may be
specified in the notice convening the meeting or in any notice of any
adjournment or, in either case or the case of a written resolution, in any
document sent therewith) prior to the holding of the relevant meeting or
adjourned meeting at which the person named in the instrument proposes to vote
or, in the case of a poll taken subsequently to the date of a meeting or
adjourned meeting, before the time appointed for the taking of the poll, or, in
the case of a written resolution, prior to the effective date of the written
resolution and in default the instrument of proxy shall not be treated as valid.
71. Instruments of proxy shall be in any common form or in such other form
as the Board may approve and the Board may, if it thinks fit, send out with the
notice of any meeting or any written resolution forms of instruments of proxy
for use at that meeting or in connection with that written resolution. The
instrument of proxy shall be deemed to confer authority to demand or join in
demanding a poll and to vote on any amendment of a written resolution or
amendment of a resolution put to the meeting for which it is given as the proxy
thinks fit. The instrument of proxy shall unless the contrary is stated therein
be valid as well for any adjournment of the meeting as for the meeting to which
it relates.
72. A vote given in accordance with the terms of an instrument of proxy
shall be valid notwithstanding the previous death or unsoundness of mind of the
principal, or revocation of the instrument of proxy or of the authority under
which it was executed, provided that no intimation in writing of such death,
insanity or revocation shall have been received by the Company at the Registered
Office (or such other place as may be specified for the delivery of instruments
of proxy in the notice convening the meeting or other documents sent therewith)
one hour at least before the commencement of the meeting or adjourned meeting,
or the taking of the poll, or the day before the effective date of any written
resolution at which the instrument of proxy is used.
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73. Subject to the Companies Acts, the Board may at its discretion waive
any of the provisions of these Bye-Laws related to proxies or authorisations
and, in particular, may accept such verbal or other assurances as it thinks fit
as to the right of any person to attend and vote on behalf of any Shareholder at
general meetings or to sign written resolutions.
APPOINTMENT AND REMOVAL OF DIRECTORS
74. The number of Directors shall be such number not less than two as the
Company by Resolution may from time to time determine and, subject to the
Companies Acts and these Bye-Laws, the Directors shall serve until re-elected or
their successors are appointed at the next Annual General Meeting. All
Directors, upon election or appointment, must provide written acceptance of
their appointment, in such form as the Board may think fit, by notice in writing
to the Registered Office within thirty days of their appointment.
75. The Company shall at the Annual General Meeting and may by Resolution
determine the minimum and the maximum number of Directors and may by Resolution
determine that one or more vacancies in the Board shall be deemed casual
vacancies for the purposes of these Bye-Laws. Without prejudice to the power of
the Company by Resolution in pursuance of any of the provisions of these Bye-
Laws to appoint any person to be a Director, the Board, so long as a quorum of
Directors remains in office, shall have power at any time and from time to time
to appoint any individual to be a Director so as to fill a casual vacancy.
76. The Company may in a Special General Meeting called for that purpose
remove a Director provided notice of any such meeting shall be served upon the
Director concerned not less than 14 days before the meeting and he shall be
entitled to be heard at that meeting. Any vacancy created by the removal of a
Director at a Special General Meeting may be filled at the Meeting by the
election of another Director in his place or, in the absence of any such
election, by the Board.
RESIGNATION AND DISQUALIFICATION OF DIRECTORS
77. The office of a Director shall be vacated upon the happening of any of
the following events:
(1) if he resigns his office by notice in writing delivered to the
Registered Office or tendered at a meeting of the Board;
(2) if he becomes of unsound mind or a patient for any purpose of any
statute or applicable law relating to mental health and the Board resolves
that his office is vacated;
(3) if he becomes bankrupt under the laws of any country or compounds
with his creditors;
(4) if he is prohibited by law from being a Director;
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17
(5) if he ceases to be a Director by virtue of the Companies Acts or is
removed from office pursuant to these Bye-Laws.
ALTERNATE DIRECTORS
78. A Director may appoint and remove his own Alternate Director. Any
appointment or removal of an Alternate Director by a Director shall be effected
by depositing a notice of appointment or removal with the Secretary at the
Registered Office, signed by such Director, and such appointment or removal
shall become effective on the date of receipt by the Secretary. Any Alternate
Director may be removed by resolution of the Board. Subject as aforesaid, the
office of Alternate Director shall continue until the next annual election of
Directors or, if earlier, the date on which the relevant Director ceases to be a
Director. An Alternate Director may also be a Director in his own right and may
act as alternate to more than one Director.
79. An Alternate Director shall be entitled to receive notices of all
meetings of Directors, to attend, be counted in the quorum and vote at any such
meeting at which any Director to whom he is alternate is not personally present,
and generally to perform all the functions of any Director to whom he is
alternate in his absence.
80. Every person acting as an Alternate Director shall (except as regards
powers to appoint an alternate and remuneration) be subject in all respects to
the provisions of these Bye-Laws relating to Directors and shall alone be
responsible to the Company for his acts and defaults and shall not be deemed to
be the agent of or for any Director for whom he is alternate. An Alternate
Director may be paid expenses and shall be entitled to be indemnified by the
Company to the same extent mutatis mutandis as if he were a Director. Every
person acting as an Alternate Director shall have one vote for each Director for
whom he acts as alternate (in addition to his own vote if he is also a
Director). The signature of an Alternate Director to any resolution in writing
of the Board or a committee of the Board shall, unless the terms of his
appointment provides to the contrary, be as effective as the signature of the
Director or Directors to whom he is alternate.
DIRECTORS' FEES AND ADDITIONAL REMUNERATION AND EXPENSES
81. The amount, if any, of Directors' fees shall from time to time be
determined by the Company by Resolution and in the absence of a determination to
the contrary such fees shall be deemed to accrue from day to day. Each Director
may be paid his reasonable travel, hotel and incidental expenses in attending
and returning from meetings of the Board or committees constituted pursuant to
these Bye-Laws or general meetings and shall be paid all expenses properly and
reasonably incurred by him in the conduct of the Company's business or in the
discharge of his duties as a Director. Any Director who, by request, goes or
resides abroad for any purposes of the Company or who performs services which in
the opinion of the Board go beyond the ordinary duties of a Director may be paid
such extra remuneration (whether by way of salary, commission, participation in
profits or otherwise) as the Board may determine, and such extra remuneration
shall be in addition to any remuneration provided for by or pursuant to any
other Bye-Law.
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DIRECTORS' INTERESTS
82. (1) A Director may hold any other office or place of profit with the
Company (except that of auditor) in conjunction with his office of Director for
such period and upon such terms as the Board may determine, and may be paid such
extra remuneration therefor (whether by way of salary, commission, participation
in profits or otherwise) as the Board may determine, and such extra remuneration
shall be in addition to any remuneration provided for by or pursuant to any
other Bye-Law.
(2) A Director may act by himself or his firm in a professional
capacity for the Company (otherwise than as auditor) and he or his firm
shall be entitled to remuneration for professional services as if he were
not a Director.
(3) Subject to the provisions of the Companies Acts, a Director may
notwithstanding his office be a party to, or otherwise interested in, any
transaction or arrangement with the Company or in which the Company is
otherwise interested; and be a director or other officer of, or employed
by, or a party to any transaction or arrangement with, or otherwise
interested in, any body corporate promoted by the Company or in which the
Company is interested. The Board may also cause the voting power conferred
by the shares in any other company held or owned by the Company to be
exercised in such manner in all respects as it thinks fit, including the
exercise thereof in favour of any resolution appointing the Directors or
any of them to be directors or officers of such other company, or voting or
providing for the payment of remuneration to the directors or officers of
such other company.
(4) So long as, where it is necessary, he declares the nature of his
interest at the first opportunity at a meeting of the Board or by writing
to the Directors as required by the Companies Acts, a Director shall not by
reason of his office be accountable to the Company for any benefit which he
derives from any office or employment to which these Bye-Laws allow him to
be appointed or from any transaction or arrangement in which these Bye-Laws
allow him to be interested, and no such transaction or arrangement shall be
liable to be avoided on the ground of any interest or benefit.
(5) Subject to the Companies Acts and any further disclosure required
thereby, a general notice to the Directors by a Director or Officer
declaring that he is a director or officer or has an interest in a person
and is to be regarded as interested in any transaction or arrangement made
with that person, shall be a sufficient declaration of interest in relation
to any transaction or arrangement so made.
POWERS AND DUTIES OF THE BOARD
83. Subject to the provisions of the Companies Acts and these Bye-Laws and
to any directions given by the Company by Resolution, the Board shall manage the
business of the Company and may pay all expenses incurred in promoting and
incorporating the Company and may exercise all the powers of the Company. No
alteration of these Bye-Laws and no
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19
such direction shall invalidate any prior act of the Board which would have been
valid if that alteration had not been made or that direction had not been given.
The powers given by this Bye-Law shall not be limited by any special power given
to the Board by these Bye-Laws and a meeting of the Board at which a quorum is
present shall be competent to exercise all the powers, authorities and
discretions for the time being vested in or exercisable by the Board.
84. The Board may exercise all the powers of the Company to borrow money
and to mortgage or charge all or any part of the undertaking, property and
assets (present and future) and uncalled capital of the Company and to issue
debentures and other securities, whether outright or as collateral security for
any debt, liability or obligation of the Company or of any other persons.
85. All cheques, promissory notes, drafts, bills of exchange and other
instruments, whether negotiable or transferable or not, and all receipts for
money paid to the Company shall be signed, drawn, accepted, endorsed or
otherwise executed, as the case may be, in such manner as the Board shall from
time to time by resolution determine.
86. The Board on behalf of the Company may provide benefits, whether by
the payment of gratuities or pensions or otherwise, for any person including any
Director or former Director who has held any executive office or employment with
the Company or with any body corporate which is or has been a subsidiary or
affiliate of the Company or a predecessor in the business of the Company or of
any such subsidiary or affiliate, and to any member of his family or any person
who is or was dependent on him, and may contribute to any fund and pay premiums
for the purchase or provision of any such gratuity, pension or other benefit, or
for the insurance of any such person.
87. The Board may from time to time appoint one or more of its body to be
a managing director, joint managing director or an assistant managing director
or to hold any other employment or executive office with the Company for such
period and upon such terms as the Board may determine and may revoke or
terminate any such appointments. Any such revocation or termination as
aforesaid shall be without prejudice to any claim for damages that such Director
may have against the Company or the Company may have against such Director for
any breach of any contract of service between him and the Company which may be
involved in such revocation or termination. Any person so appointed shall
receive such remuneration (if any) (whether by way of salary, commission,
participation in profits or otherwise) as the Board may determine, and either in
addition to or in lieu of his remuneration as a Director.
DELEGATION OF THE BOARD'S POWERS
88. The Board may by power of attorney appoint any company, firm or person
or any fluctuating body of persons, whether nominated directly or indirectly by
the Board, to be the attorney or attorneys of the Company for such purposes and
with such powers, authorities and discretions (not exceeding those vested in or
exercisable by the Board under these Bye-Laws) and for such period and subject
to such conditions as it may think fit, and any such
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20
power of attorney may contain such provisions for the protection and convenience
of persons dealing with any such attorney and of such attorney as the Board may
think fit, and may also authorise any such attorney to sub-delegate all or any
of the powers, authorities and discretions vested in him.
89. The Board may entrust to and confer upon any Director, Officer or,
without prejudice to the provisions of Bye-Law 90, other individual any of the
powers exercisable by it upon such terms and conditions with such restrictions
as it thinks fit, and either collaterally with, or to the exclusion of, its own
powers, and may from time to time revoke or vary all or any of such powers but
no person dealing in good faith and without notice of such revocation or
variation shall be affected thereby.
90. The Board may delegate any of its powers, authorities and discretions
to committees, consisting of such person or persons (whether a member or members
of its body or not) as it thinks fit. Any committee so formed shall, in the
exercise of the powers, authorities and discretions so delegated, and in
conducting its proceedings conform to any regulations which may be imposed upon
it by the Board. If no regulations are imposed by the Board the proceedings of
a committee with two or more members shall be, as far as is practicable,
governed by the Bye-Laws regulating the proceedings of the Board.
PROCEEDINGS OF THE BOARD
91. The Board may meet for the despatch of business, adjourn and otherwise
regulate its meetings as it thinks fit. Questions arising at any meeting shall
be determined by a majority of votes. In the case of an equality of votes the
motion shall be deemed to have been lost. A Director may, and the Secretary on
the requisition of a Director shall, at any time summon a meeting of the Board.
92. Notice of a meeting of the Board shall be deemed to be duly given to a
Director if it is given to him personally or by word of mouth or sent to him by
post, cable, telex, telecopier or other mode of representing or reproducing
words in a legible and non-transitory form at his last known address or any
other address given by him to the Company for this purpose. A Director may
retrospectively waive the requirement for notice of any meeting by consenting in
writing to the business conducted at the meeting.
93. (1) The quorum necessary for the transaction of the business of the
Board may be fixed by the Board and, unless so fixed at any other number, shall
be two individuals. Any Director who ceases to be a Director at a meeting of
the Board may continue to be present and to act as a Director and be counted in
the quorum until the termination of the meeting if no other Director objects and
if otherwise a quorum of Directors would not be present.
(2) A Director who to his knowledge is in any way, whether directly or
indirectly, interested in a contract or proposed contract, transaction or
arrangement with the Company and has complied with the provisions of the
Companies Acts and these Bye-Laws with regard to disclosure of his interest
shall be entitled to vote in
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21
respect of any contract, transaction or arrangement in which he is so
interested and if he shall do so his vote shall be counted, and he shall be
taken into account in ascertaining whether a quorum is present.
(3) The Resident Representative shall, upon delivering written notice
of an address for the purposes of receipt of notice, to the Registered
Office, be entitled to receive notice of, attend and be heard at, and to
receive minutes of all meetings of the Board.
94. So long as a quorum of Directors remains in office, the continuing
Directors may act notwithstanding any vacancy in the Board but, if no such
quorum remains, the continuing Directors or a sole continuing Director may act
only for the purpose of calling a general meeting.
95. The Chairman (or President) or, in his absence, the Deputy Chairman
(or Vice-President), shall preside as chairman at every meeting of the Board.
If at any meeting the Chairman or Deputy Chairman (or the President or Vice-
President) is not present within five minutes after the time appointed for
holding the meeting, or is not willing to act as chairman, the Directors present
may choose one of their number to be chairman of the meeting.
96. The meetings and proceedings of any committee consisting of two or
more members shall be governed by the provisions contained in these Bye-Laws for
regulating the meetings and proceedings of the Board so far as the same are
applicable and are not superseded by any regulations imposed by the Board.
97. A resolution in writing signed by all the Directors for the time being
entitled to receive notice of a meeting of the Board or by all the members of a
committee for the time being shall be as valid and effectual as a resolution
passed at a meeting of the Board or, as the case may be, of such committee duly
called and constituted. Such resolution may be contained in one document or in
several documents in the like form each signed by one or more of the Directors
or members of the committee concerned.
98. A meeting of the Board or a committee appointed by the Board may be
held by means of such telephone, electronic or other communication facilities as
permit all persons participating in the meeting to communicate with each other
simultaneously and instantaneously and participation in such a meeting shall
constitute presence in person at such meeting.
99. All acts done by the Board or by any committee or by any person acting
as a Director or member of a committee or any person duly authorised by the
Board or any committee, shall, notwithstanding that it is afterwards discovered
that there was some defect in the appointment of any member of the Board or such
committee or person acting as aforesaid or that they or any of them were
disqualified or had vacated their office, be as valid as if every such person
had been duly appointed and was qualified and had continued to be a Director,
member of such committee or person so authorised.
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OFFICERS
100. The Officers of the Company shall include a President and a Vice-
President or a Chairman and a Deputy Chairman who shall be Directors and shall
be elected by the Board as soon as possible after the statutory meeting and each
Annual General Meeting. In addition, the Board may appoint any person whether
or not he is a Director to hold such office as the Board may from time to time
determine. Any person elected or appointed pursuant to this Bye-Law shall hold
office for such period and upon such terms as the Board may determine and the
Board may revoke or terminate any such election or appointment. Any such
revocation or termination shall be without prejudice to any claim for damages
that such Officer may have against the Company or the Company may have against
such Officer for any breach of any contract of service between him and the
Company which may be involved in such revocation or termination. Save as
provided in the Companies Acts or these Bye-Laws, the powers and duties of the
Officers of the Company shall be such (if any) as are determined from time to
time by the Board.
MINUTES
101. The Board shall cause minutes to be made and books kept for the
purpose of recording -
(1) all appointments of Officers made by the Board;
(2) the names of the Directors and other persons (if any) present at
each meeting of the Board and of any committee;
(3) of all proceedings at meetings of the Company, of the holders of
any class of shares in the Company, of the Board and of committees
appointed by the Board or the Shareholders;
(4) of all proceedings of its managers (if any).
Shareholders shall only be entitled to see the Register of Directors and
Officers, the Register, the financial information provided for in Bye-Law 118
and the minutes of meetings of the Shareholders of the Company.
SECRETARY AND RESIDENT REPRESENTATIVE
102. The Secretary (including one or more deputy or assistant secretaries)
and, if required, the Resident Representative, shall be appointed by the Board
at such remuneration (if any) and upon such terms as it may think fit and any
Secretary and Resident Representative so appointed may be removed by the Board.
The duties of the Secretary and the duties of the Resident Representative shall
be those prescribed by the Companies Acts together with such other duties as
shall from time to time be prescribed by the Board.
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23
103. A provision of the Companies Acts or these Bye-Laws requiring or
authorising a thing to be done by or to a Director and the Secretary shall not
be satisfied by its being done by or to the same person acting both as Director
and as, or in the place of, the Secretary.
THE SEAL
104. (1) The Seal shall consist of a circular metal device with the name
of the Company around the outer margin thereof and the country and year of
incorporation across the centre thereof. Should the Seal not have been received
at the Registered Office in such form at the date of adoption of this Bye-Law
then, pending such receipt, any document requiring to be sealed with the Seal
shall be sealed by affixing a red wafer seal to the document with the name of
the Company, and the country and year of incorporation type written across the
centre thereof.
(2) The Board shall provide for the custody of every Seal. A Seal
shall only be used by authority of the Board or of a committee constituted
by the Board. Subject to these Bye-laws, any instrument to which a Seal is
affixed shall be signed by either two Directors, or by the Secretary and
one Director, or by the Secretary or by any one person whether or not a
Director or Officer, who has been authorised either generally or
specifically to affirm the use of a Seal; provided that the Secretary or a
Director may affix a Seal over his signature alone to authenticate copies
of these Bye-Laws, the minutes of any meeting or any other documents
requiring authentication.
DIVIDENDS AND OTHER PAYMENTS
105. The Board may from time to time declare dividends or distributions out
of contributed surplus to be paid to the Shareholders according to their rights
and interests including such interim dividends as appear to the Board to be
justified by the position of the Company. The Board, in its discretion, may
determine that any dividend shall be paid in cash or shall be satisfied, subject
to Bye-Law 113, in paying up in full shares in the Company to be issued to the
Shareholders credited as fully paid or partly paid or partly in one way and
partly the other. The Board may also pay any fixed cash dividend which is
payable on any shares of the Company half yearly or on such other dates,
whenever the position of the Company, in the opinion of the Board, justifies
such payment.
106. Except insofar as the rights attaching to, or the terms of issue of,
any share otherwise provide:-
(1) all dividends or distributions out of contributed surplus may be
declared and paid according to the amounts paid up on the shares in respect
of which the dividend or distribution is paid, and an amount paid up on a
share in advance of calls may be treated for the purpose of this Bye-Law as
paid-up on the share;
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24
(2) dividends or distributions out of contributed surplus may be
apportioned and paid pro rata according to the amounts paid-up on the
shares during any portion or portions of the period in respect of which the
dividend or distribution is paid.
107. The Board may deduct from any dividend, distribution or other moneys
payable to a Shareholder by the Company on or in respect of any shares all sums
of money (if any) presently payable by him to the Company on account of calls or
otherwise in respect of shares of the Company.
108. No dividend, distribution or other moneys payable by the Company on or
in respect of any share shall bear interest against the Company.
109. Any dividend, distribution or interest, or part thereof payable in
cash, or any other sum payable in cash to the holder of shares may be paid by
cheque or warrant sent through the post addressed to the holder at his address
in the Register or, in the case of joint holders, addressed to the holder whose
name stands first in the Register in respect of the shares at his registered
address as appearing in the Register or addressed to such person at such address
as the holder or joint holders may in writing direct. Every such cheque or
warrant shall, unless the holder or joint holders otherwise direct, be made
payable to the order of the holder or, in the case of joint holders, to the
order of the holder whose name stands first in the Register in respect of such
shares, and shall be sent at his or their risk and payment of the cheque or
warrant by the bank on which it is drawn shall constitute a good discharge to
the Company. Any one of two or more joint holders may give effectual receipts
for any dividends, distributions or other moneys payable or property
distributable in respect of the shares held by such joint holders.
110. Any dividend or distribution out of contributed surplus unclaimed for
a period of six years from the date of declaration of such dividend or
distribution shall be forfeited and shall revert to the Company and the payment
by the Board of any unclaimed dividend, distribution, interest or other sum
payable on or in respect of the share into a separate account shall not
constitute the Company a trustee in respect thereof.
111. The Board may also, in addition to its other powers, direct payment or
satisfaction of any dividend or distribution out of contributed surplus wholly
or in part by the distribution of specific assets, and in particular of paid-up
shares or debentures of any other company, and where any difficulty arises in
regard to such distribution or dividend the Board may settle it as it thinks
expedient, and in particular, may authorise any person to sell and transfer any
fractions or may ignore fractions altogether, and may fix the value for
distribution or dividend purposes of any such specific assets and may determine
that cash payments shall be made to any Shareholders upon the footing of the
values so fixed in order to secure equality of distribution and may vest any
such specific assets in trustees as may seem expedient to the Board provided
that such dividend or distribution may not be satisfied by the distribution of
any partly paid shares or debentures of any company without the sanction of a
Resolution.
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RESERVES
112. The Board may, before recommending or declaring any dividend or
distribution out of contributed surplus, set aside such sums as it thinks proper
as reserves which shall, at the discretion of the Board, be applicable for any
purpose of the Company and pending such application may, also at such
discretion, either be employed in the business of the Company or be invested in
such investments as the Board may from time to time think fit. The Board may
also without placing the same to reserve carry forward any sums which it may
think it prudent not to distribute.
CAPITALIZATION OF PROFITS
113. The Board may, from time to time resolve to capitalise all or any part
of any amount for the time being standing to the credit of any reserve or fund
which is available for distribution or to the credit of any share premium
account and accordingly that such amount be set free for distribution amongst
the Shareholders or any class of Shareholders who would be entitled thereto if
distributed by way of dividend and in the same proportions, on the footing that
the same be not paid in cash but be applied either in or towards paying up
amounts for the time being unpaid on any shares in the Company held by such
Shareholders respectively or in payment up in full of unissued shares,
debentures or other obligations of the Company, to be allotted and distributed
credited as fully paid amongst such Shareholders, or partly in one way and
partly in the other, provided that for the purpose of this Bye-Law, a share
premium account may be applied only in paying up of unissued shares to be issued
to such Shareholders credited as fully paid and provided further that any sum
standing to the credit of a share premium account may only be applied in
crediting as fully paid shares of the same class as that from which the relevant
share premium was derived.
114. Where any difficulty arises in regard to any distribution under the
last preceding Bye-Law, the Board may settle the same as it thinks expedient
and, in particular, may authorise any person to sell and transfer any fractions
or may resolve that the distribution should be as nearly as may be practicable
in the correct proportion but not exactly so or may ignore fractions altogether,
and may determine that cash payments should be made to any Shareholders in order
to adjust the rights of all parties, as may seem expedient to the Board. The
Board may appoint any person to sign on behalf of the persons entitled to
participate in the distribution any contract necessary or desirable for giving
effect thereto and such appointment shall be effective and binding upon the
Shareholders.
RECORD DATES
115. Notwithstanding any other provisions of these Bye-Laws, the Company
may by Resolution or the Board may fix any date as the record date for any
dividend, distribution, allotment or issue and for the purpose of identifying
the persons entitled to receive notices of general meetings. Any such record
date may be on or at any time before or after any date on which such dividend,
distribution, allotment or issue is declared, paid or made or such notice is
despatched.
<PAGE>
26
ACCOUNTING RECORDS
116. The Board shall cause to be kept accounting records sufficient to give
a true and fair view of the state of the Company's affairs and to show and
explain its transactions, in accordance with the Companies Acts.
117. The records of account shall be kept at the Registered Office or at
such other place or places as the Board thinks fit, and shall at all times be
open to inspection by the Directors: PROVIDED that if the records of account are
kept at some place outside Bermuda, there shall be kept at an office of the
Company in Bermuda such records as will enable the Directors to ascertain with
reasonable accuracy the financial position of the Company at the end of each
three month period. No Shareholder (other than an Officer of the Company) shall
have any right to inspect any accounting record or book or document of the
Company except as conferred by law or authorised by the Board or by Resolution.
118. A copy of every balance sheet and statement of income and expenditure,
including every document required by law to be annexed thereto, which is to be
laid before the Company in general meeting, together with a copy of the
auditors' report, shall be sent to each person entitled thereto in accordance
with the requirements of the Companies Acts.
AUDIT
119. Save and to the extent that an audit is waived in the manner permitted
by the Companies Acts, auditors shall be appointed and their duties regulated in
accordance with the Companies Acts, any other applicable law and such
requirements not inconsistent with the Companies Acts as the Board may from time
to time determine.
SERVICE OF NOTICES AND OTHER DOCUMENTS
120. Any notice or other document (including a share certificate) may be
served on or delivered to any Shareholder by the Company either personally or by
sending it through the post (by airmail where applicable) in a pre-paid letter
addressed to such Shareholder at his address as appearing in the Register or by
delivering it to or leaving it at such registered address. In the case of joint
holders of a share, service or delivery of any notice or other document on or to
one of the joint holders shall for all purposes be deemed as sufficient service
on or delivery to all the joint holders. Any notice or other document if sent
by post shall be deemed to have been served or delivered seven days after it was
put in the post, and in proving such service or delivery, it shall be sufficient
to prove that the notice or document was properly addressed, stamped and put in
the post.
121. Any notice of a general meeting of the Company shall be deemed to be
duly given to a Shareholder, or other person entitled to it, if it is sent to
him by cable, telex, telecopier or other mode of representing or reproducing
words in a legible and non-transitory form at his address as appearing in the
Register or any other address given by him to the Company for this purpose. Any
such notice shall be deemed to have been served twenty-four hours after its
despatch.
<PAGE>
27
122. Any notice or other document delivered, sent or given to a
Shareholder in any manner permitted by these Bye-Laws shall, notwithstanding
that such Shareholder is then dead or bankrupt or that any other event has
occurred, and whether or not the Company has notice of the death or bankruptcy
or other event, be deemed to have been duly served or delivered in respect of
any share registered in the name of such Shareholder as sole or joint holder
unless his name shall, at the time of the service or delivery of the notice or
document, have been removed from the Register as the holder of the share, and
such service or delivery shall for all purposes be deemed as sufficient service
or delivery of such notice or document on all persons interested (whether
jointly with or as claiming through or under him) in the share.
WINDING UP
123. If the Company shall be wound up, the liquidator may, with the
sanction of a Resolution of the Company and any other sanction required by the
Companies Acts, divide amongst the Shareholders in specie or kind the whole or
any part of the assets of the Company (whether they shall consist of property of
the same kind or not) and may for such purposes set such values as he deems fair
upon any property to be divided as aforesaid and may determine how such division
shall be carried out as between the Shareholders or different classes of
Shareholders. The liquidator may, with the like sanction, vest the whole or any
part of such assets in trustees upon such trust for the benefit of the
contributories as the liquidator, with the like sanction, shall think fit, but
so that no Shareholder shall be compelled to accept any shares or other assets
upon which there is any liability.
INDEMNITY
124. Subject to the proviso below, every Director, Officer of the Company
and member of a committee constituted under Bye-Law 90 and any Resident
Representative shall be indemnified out of the funds of the Company against all
liabilities, loss, damage or expense (including but not limited to liabilities
under contract, tort and statute or any applicable foreign law or regulation and
all reasonable legal and other costs and expenses properly payable) incurred or
suffered by him as such Director, Officer, committee member or Resident
Representative and the indemnity contained in this Bye-Law shall extend to any
person acting as a Director, Officer, committee member or Resident
Representative in the reasonable belief that he has been so appointed or elected
notwithstanding any defect in such appointment or election PROVIDED ALWAYS that
the indemnity contained in this Bye-Law shall not extend to any matter which
would render it void pursuant to the Companies Acts.
125. Every Director, Officer, member of a committee duly constituted under
Bye-Law 90 or Resident Representative of the Company shall be indemnified out of
the funds of the Company against all liabilities incurred by him as such
Director, Officer, committee member or Resident Representative in defending any
proceedings, whether civil or criminal, in which judgement is given in his
favour, or in which he is acquitted, or in connection with any application under
the Companies Acts in which relief from liability is granted to him by the
court.
<PAGE>
28
126. To the extent that any Director, Officer, member of a committee duly
constituted under Bye-Law 90 or Resident Representative is entitled to claim an
indemnity pursuant to these Bye-Laws in respect of amounts paid or discharged by
him, the relative indemnity shall take effect as an obligation of the Company to
reimburse the person making such payment or effecting such discharge.
127. Each Shareholder and the Company agree to waive any claim or right of
action he or it may at any time have, whether individually or by or in the right
of the Company, against any Director, Officer, or member of a committee duly
constituted under Bye-Law 90 on account of any action taken by such Director,
Officer, or member of a committee or the failure of such Director, Officer, or
member of a committee to take any action in the performance of his duties with
or for the Company PROVIDED HOWEVER that such waiver shall not apply to any
claims or rights of action arising out of the fraud of such Director, Officer,
or member of a committee duly constituted under Bye-Law 90 or to recover any
gain, personal profit or advantage to which such Director, Officer, or member of
a committee duly constituted under Bye-Law 90 is not legally entitled.
128. Subject to the Companies Acts, expenses incurred in defending any
civil or criminal action or proceeding for which indemnification is required
pursuant to Bye-Laws 124 and 125 shall be paid by the Company in advance of the
final disposition of such action or proceeding upon receipt of an undertaking by
or on behalf of the indemnified party to repay such amount if it shall
ultimately be determined that the indemnified party is not entitled to be
indemnified pursuant to Bye-Laws 124 and 125.
Each Shareholder of the Company, by virtue of its acquisition and continued
holding of a share, shall be deemed to have acknowledged and agreed that the
advances of funds may be made by the Company as aforesaid, and when made by the
Company under this Bye-Law 128 are made to meet expenditures incurred for the
purpose of enabling such Director, Officer, or member of a committee duly
constituted under Bye-Law 90 to properly perform his or her duties as an officer
of the Company.
AMALGAMATION
129. Any resolution proposed for consideration at any general meeting to
approve the amalgamation of the Company with any other company, wherever
incorporated, shall require the approval of a simple majority of votes cast at
such meeting and the quorum for such meeting shall be that required in Bye-Law
49 and a poll may be demanded in respect of such resolution in accordance with
the provisions of Bye-Law 57.
<PAGE>
29
CONTINUATION
130. Subject to the Companies Act, the Board may approve the
discontinuation of the Company in Bermuda and the continuation of the Company in
a jurisdiction outside Bermuda. The Board, having resolved to approve the
discontinuation of the Company, may further resolve not to proceed with any
application to discontinue the Company in Bermuda or may vary such application
as it sees fit.
ALTERATION OF BYE-LAWS
131. These Bye-Laws may be amended from time to time in the manner provided
for in the Companies Acts.
<PAGE>
EXHIBIT 3.7
FORM NO. 5 REGISTRATION NO. EC23122
[LOGO]
BERMUDA
CERTIFICATE OF DEPOSIT OF
MEMORANDUM OF ASSOCIATION AND CONSENT
GRANTED BY THE MINISTER
THIS IS TO CERTIFY that a Memorandum of Association
of
GLOBAL TELESYSTEMS HOLDINGS LTD.
--------------------------------
and the consent granted by the Minister under section 6(l) of THE COMPANIES ACT
1981 ("the Act") were delivered to the Registrar of Companies on the 24TH day of
MARCH, 1997 in accordance with section 14(2) of the Act.
Given under my hand this 25TH day of
MARCH, 1997.
/s/ illegible
for ACTING REGISTRAR OF COMPANIES
Minimum Capital of the Company: US$12,000.00
------------
Authorised Capital of the Company: US$12,000.00
------------
<PAGE>
FORM NO. 2
[LOGO]
BERMUDA
THE COMPANIES ACT 1981
MEMORANDUM OF ASSOCIATION OF
COMPANY LIMITED BY SHARES
(Section 7(1) AND (2))
MEMORANDUM OF ASSOCIATION
OF
GLOBAL TELESYSTEMS HOLDINGS LTD.
- --------------------------------------------------------------------------------
(hereinafter referred to as "the Company")
1. The liability of the members of the Company is limited to the amount (if
any) for the time being unpaid on the shares respectively held by them.
2. We, the undersigned, namely,
<TABLE>
<CAPTION>
NAME ADDRESS BERMUDIAN NATIONALITY NUMBER OF
STATUS SHARES
(YES/NO) SUBSCRIBED
<S> <C> <C> <C>
Judith Collis Yes British 1
Cedar House,
41 Cedar Avenue
Hamilton, HM 12, Bermuda
Ruby L. Rawlins Yes British 1
Cedar House,
41 Cedar Avenue
Hamilton HM 12, Bermuda
Judith Morgan-Swan Yes British 1
Cedar House,
41 Cedar Avenue
Hamilton HM 12, Bermuda
Stacy L. Robinson Yes British 1
Cedar House,
41 Cedar Avenue
Hamilton HM 12, Bermuda
</TABLE>
do hereby respectively agree to take such number of shares of the Company as may
be allotted to us respectively by the provisional directors of the Company, not
exceeding the number of shares for which we have respectively subscribed, and to
satisfy such calls as may be made by the directors, provisional directors or
promoters of the Company in respect of the shares allotted to us respectively.
<PAGE>
2
3. The Company is to be an exempted Company as defined by the Companies Act
1981.
4. The Company has power to hold land situate in Bermuda not exceeding in all,
including the following parcels -
Not Applicable
5. The authorised share capital of the Company is $12,000.00 divided into
shares of US one dollar each. The minimum subscribed share capital of the
Company is $12,000.00 in United States currency.
6. The objects for which the Company is formed and incorporated are -
See Attached
7. The Company has the powers set out in the Schedule annexed hereto.
<PAGE>
3
(i) To carry on business as a holding company and to acquire and hold
shares, stocks, debenture stock, bonds, mortgages. obligations and
securities of any kind issued or guaranteed by any company,
corporation or undertaking of whatever nature and wherever
constituted or carrying on business, and shares, stock, debentures,
debenture stock, bonds, obligations and other securities issued or
guaranteed by any government, sovereign ruler, commissioners, trust,
local authority or other public body, whether in Bermuda or
elsewhere, and to vary, transpose, dispose of or otherwise deal with
from time to time as may be considered expedient any of the
Company's investments for the time being;
(ii) To acquire any such shares and other securities as are mentioned in
the preceding paragraph by subscription, syndicate participation,
tender, purchase, exchange or otherwise and to subscribe for the
same, either conditionally or otherwise, and to guarantee the
subscription thereof and to exercise and enforce all rights and
powers conferred by or incident to the ownership thereof;
(iii) To co-ordinate the administration, policies, management,
supervision, control, research, planning, trading and any and all
other activities of, and to act as financial advisers and
consultants to, any company or companies now or hereafter
incorporated or acquired which may be or may become a Group Company
(which expression, in this and the next following paragraph, means a
company, wherever incorporated, which is or becomes a holding
company or a subsidiary of, or affiliated with, the Company within
the meanings respectively assigned to those terms in The Companies
Act 1981) or, with the prior written approval of the Minister of
Finance, to any company or companies now or hereafter incorporated
or acquired with which the Company may be or may become associated;
(iv) To provide financing and financial investment, management and
advisory services to any Group Company, which shall include but not
be limited to granting or providing credit and financial
accommodation, lending and making advances with or without interest
to any Group Company and lending to or depositing with any bank
funds or other assets to provide security (by way of mortgage,
charge, pledge, lien or otherwise) for loans or other forms of
financing granted to such Group Company by such bank:
Provided that the Company shall not be deemed to have the power to
act as executor or administrator, or as trustee, except in
connection with the issue of bonds and debentures by the Company or
any Group Company or in connection with a pension scheme for the
benefit of employees or former employees of the Company or a Group
Company or their respective predecessors, or the dependants or
connections of such employees or former employees;
(v) As set forth in paragraphs (b) to (n) and (p) to (u) inclusive of
the Second Schedule to The Companies Act 1981.
<PAGE>
The Schedule
(referred to in Clause 7 of the Memorandum of Association)
--------------------------------------------------------
(a) To borrow and raise money in any currency or currencies and to secure or
discharge any debt or obligation in any manner and in particular (without
prejudice to the generality of the foregoing) by mortgages of or charges
upon all or any part of the undertaking, property and assets (present and
future) and uncalled capital of the Company or by the creation and issue of
securities.
(b) To enter into any guarantee, contract of indemnity or suretyship and in
particular (without prejudice to the generality of the foregoing) to
guarantee, support or secure, with or without consideration. whether by
personal obligation or by mortgaging or charging all or any part of the
undertaking, property and assets (present and future) and uncalled capital
of the Company or both such methods or any other manner, the performance of
any obligations or commitments, of, and the repayment or payment of the
principal amounts of and any premiums, interest, dividends and other moneys
payable on or in respect of any securities or liabilities of, any person
including (without prejudice to the generality of the foregoing) any
company which is for the time being a subsidiary or a holding company of
the Company or another subsidiary or a holding company of the Company or
otherwise associated with the Company.
(c) To accept, draw, make, create, issue, execute, discount, endorse, negotiate
bills of exchange, promissory notes, and other instruments and securities,
whether negotiable or otherwise.
(d) To sell, exchange, mortgage, charge, let on rent, share of profit, royalty
or otherwise, grant licenses, easements, options, servitudes and other
rights over, and in any other manner deal with or dispose of, all or any
part of the undertaking, property and assets (present and future) of the
Company for any consideration and in particular (without prejudice to the
generality of the foregoing) for any securities.
(e) To issue and allot securities of the Company for cash or in payment or part
payment for any real or personal property purchased or otherwise acquired
by the Company or any services rendered to the Company or as security for
any obligation or amount (even if less than the nominal amount of such
securities) or for any other purpose.
(f) To grant pensions, annuities, or other allowances, including allowances on
death, to any directors, officers or employees or former directors,
officers or employees of the Company or any company which at any time is or
was a subsidiary or a holding company or another subsidiary of a holding
company of the Company or otherwise associated with the Company or of any
predecessor in business of any of them, and to the relations, connections
or dependants of any such persons, and to other persons whose service or
services have directly or indirectly been of benefit to the Company or whom
the Company considers have any moral claim on the Company or to their
relations, connections or dependants, and to establish or support any
associations,
<PAGE>
2
institutions, clubs, schools, building and housing schemes, funds and
trusts, and to make payments toward insurance or another arrangements
likely to benefit any such persons or otherwise advance the interests of
the Company or of its Members, and to subscribe, guarantee or pay money for
any purpose likely, directly or indirectly to further the interests of the
Company or of its Members or for any national, charitable, benevolent,
educational, social, public, general or useful object.
(g) Subject to the provisions of Section 42 of the Companies Act 1981, to issue
preference shares which at the option of the holders thereof are to be
liable to be redeemed.
(h) To purchase its own shares in accordance with the provisions of Section 42A
of the Companies Act 1981.
<PAGE>
THE COMPANIES ACT 1981
FIRST SCHEDULE
(SECTION 11(L))
A company limited by shares may exercise all or any of the following powers
subject to any provision of the law or its memorandum -
1. (Deleted) 404
2. to acquire or undertake the whole or any part of the business, property and
liabilities of any person carrying on any business that the company is
authorized to carry on;
3. to apply for register, purchase, lease, acquire, hold, use, control,
license, sell, assign or dispose of patents, patent rights, copyrights,
trade marks, formulae, licenses, inventions, processes, distinctive marks
and similar rights;
4. to enter into partnership or into any arrangement for sharing of profits,
union of interests, co-operation, joint venture, reciprocal concession or
otherwise with any person carrying on or engaged in or about to carry on or
engage in any business or transaction that the company is authorized to
carry on or engage in or any business or transaction capable of being
conducted so as to benefit the company;
5. to take or otherwise acquire and hold securities in any other body
corporate having objects altogether or in part similar to those of the
company or carrying on any business capable of being conducted so as to
benefit the company;
6. subject to section 96 to lend money to any employee or to any person having
dealings with the company or with whom the company proposes to have
dealings or to any other body corporate any of whose shares are held by the
company;
7. to apply for, secure or acquire by grant, legislative enactment,
assignment, transfer, purchase or otherwise and to exercise, carry out and
enjoy any charter, license, power authority, franchise, concession, right
or privilege, that any government or authority or any body corporate or
other public body may be empowered to grant, and pay for, aid in and
contribute toward carrying it into effect and to assume any liabilities or
obligations incidental thereto;
8. to establish and support or aid in the establishment and support of
associations, institutions, funds or trusts for the benefit of employees or
former employees of the company or its predecessors, or the dependents or
connections of such employees or former employees, and grant pensions and
allowances, and make payments towards insurance or for any object similar
to those set forth in this paragraph, and to subscribe or guarantee money
for charitable, benevolent, educational or religious objects or for any
exhibition or for any public, general or useful objects;
<PAGE>
2
9. to promote any company for the purpose of acquiring or taking over any of
the property and liabilities of the company or for any other purpose that
may benefit the company;
10. to purchase, lease, take in exchange, hire or otherwise acquire any
personal property and any rights or privileges that the company considers
necessary or convenient for the purposes of its business;
11. to construct, maintain, alter, renovate and demolish any buildings or works
necessary or convenient for its objects;
12. to take land in Bermuda by way of lease or letting agreement for a term not
exceeding twenty-one years, being land "bonafide" required for the purposes
of the business of the company and with the consent of the Minister granted
in his discretion to take land in Bermuda by way of lease or letting
agreement for a similar period in order to provide accommodation or
recreational facilities for its officers and employees and when no longer
necessary for any of the above purposes to terminate or transfer the lease
or letting agreement;
13. except to the extent, if any, as may be otherwise expressly provided in its
incorporating Act or memorandum and subject to the provisions of this Act
every company shall have power to invest the moneys of the Company by way
of mortgage of real or personal property of every description in Bermuda or
elsewhere and to sell, exchange, vary, or dispose of such mortgage as the
company shall from time to time determine;
14. to construct, improve, maintain, work, manage, carry out or control any
roads, ways, tramways, branches or sidings, bridges, reservoirs,
watercourses, wharves, factories, warehouses, electric works, shops, stores
and other works and conveniences that may advance the interests of the
company and contribute to, subsidize or otherwise assist or take part in
the construction, improvement, maintenance, working, management, carrying
out or control thereof;
15. to raise and assist in raising money for, and aid by way of bonus, loan,
promise, endorsement, guarantee or otherwise, any person and guarantee the
performance or fulfillment of any contracts or obligations of any person,
and in particular guarantee the payment of the principal of and interest on
the debt obligations of any such person;
16. to borrow or raise or secure the payment of money in such manner as the
company may think fit;
17. to draw, make, accept, endorse, discount, execute and issue bills of
exchange, promissory notes, bills of lading, warrants and other negotiable
or transferable instruments;
<PAGE>
3
18. when properly authorized to do so, to sell, lease, exchange or otherwise
dispose of the undertaking of the company or any part thereof as an
entirety or substantially as an entirety for such consideration as the
company thinks fit;
19. to sell, improve, manage, develop, exchange, lease, dispose of, turn to
account or otherwise deal with the property of the company in the ordinary
course of its business;
20. to adopt such means of making known the products of the company as may seem
expedient, and in particular by advertising, by purchase and exhibition of
works of art or interest, by publication of books and periodicals and by
granting prizes and rewards and making donations;
21. to cause the company to be registered and recognized in any foreign
jurisdiction, and designate persons therein according to the laws of that
foreign jurisdiction or to represent the company and to accept service for
and on behalf of the company of any process or suit;
22. to allot and issue fully-paid shares of the company in payment or part
payment of any property purchased or otherwise acquired by the company or
for any past services performed for the company;
23. to distribute among the members of the company in cash, kind, specie or
otherwise as may be resolved, by way of dividend, bonus or any other manner
considered advisable, any property of the company, but not so as to
decrease the capital of the company unless the distribution is made for the
purpose of enabling the company to be dissolved or the distribution, apart
from this paragraph, would be otherwise lawful;
24. to establish agencies and branches;
25. to take or hold mortgages, hypothecs, liens and charges to secure payment
of the purchase price, or of any unpaid balance of the purchase price, of
any part of the property of the company of whatsoever kind sold by the
company, or for any money due to the company from purchasers and others and
to sell or otherwise dispose of any such mortgage, hypothec, lien or
charge;
26. to pay all costs and expenses of or incidental to the incorporation and
organization of the company;
27. to invest and deal with the moneys of the company not immediately required
for the objects of the company in such manner as may be determined;
28. to do any of the things authorized by this subsection and all things
authorized by its memorandum as principals, agents, contractors, trustees
or otherwise, and either alone or in conjunction with others;
<PAGE>
4
29. to do all such other things as are incidental or conducive to the
attainment of the objects and the exercise of the powers of the company.
Every company may exercise its powers beyond the boundaries of Bermuda to
the extent to which the laws in force where the powers are sought to be
exercised permit.
<PAGE>
THE COMPANIES ACT 1981
SECOND SCHEDULE
(SECTION 11(2))
A company may by reference include in its memorandum any of the following
objects that is to say the business of -
(a) insurance and re-insurance of all kinds;
(b) packaging of goods of all kinds;
(c) buying, selling and dealing in goods of all kinds;
(d) designing and manufacturing of goods of all kinds;
(e) mining and quarrying and exploration for metals, minerals, fossil fuels and
precious stones of all kinds and their preparation for sale or use;
(f) exploring for, the drilling for, the moving, transporting and refining
petroleum and hydro carbon products including oil and oil products;
(g) scientific research including the improvement, discovery and development of
processes, inventions, patents and designs and the construction,
maintenance and operation of laboratories and research centres;
(h) land, sea and air undertakings including the land, ship and air carriage of
passengers, mails and goods of all kinds;
(i) ships and aircraft owners, managers, operators, agents, builders and
repairers;
(j) acquiring, owning, selling, chartering, repairing or dealing in ships and
aircraft;
(k) travel agents, freight contractors and forwarding agents;
(l) dock owners, wharfingers, warehousemen;
(m) ship chandlers and dealing in rope, canvas oil and ship stores of all
kinds;
(n) all forms of engineering;
(o) developing, operating, advising or acting as technical consultants to any
other enterprise or business;
<PAGE>
2
(p) farmers, livestock breeders and keepers, graziers, butchers, tanners and
processors of and dealers in all kinds of live and dead stock, wool, hides,
tallow, grain, vegetables and other produce;
(q) acquiring by purchase or otherwise and holding as an investment inventions,
patents, trade marks, trade names, trade secrets, designs and the like;
(r) buying, selling, hiring, letting and dealing in conveyances of any sort;
(s) employing, providing, hiring out and acting as agent for artists, actors,
entertainers of all sorts, authors, composers, producers, directors,
engineers and experts or specialists of any kind;
(t) to acquire by purchase or otherwise hold, sell, dispose of and deal in real
property situated outside Bermuda and in personal property of all kinds
wheresoever situated; and
(u) to enter into any guarantee, contract of indemnity or suretyship and to
assure, support or secure with or without consideration or benefit the
performance of any obligations of any person or persons and to guarantee
the fidelity of individuals filling or about to fill situations of trust or
confidence.
<PAGE>
3
Signed by each subscriber in the presence of at least one witness attesting the
signature thereof--
/s/ illegible /s/ illegible
- ------------------------------------ -----------------------------------
/s/ illegible /s/ illegible
- ------------------------------------ -----------------------------------
/s/ illegible /s/ illegible
- ------------------------------------ -----------------------------------
/s/ illegible /s/ illegible
- ------------------------------------ -----------------------------------
(Subscribers) (Witnesses)
SUBSCRIBED this 19th day of March, 1997
<PAGE>
4
STAMP DUTY (To be affixed)
<PAGE>
FORM NO. 1A
[LOGO]
BERMUDA
THE COMPANIES ACT 1981
CONSENT
PURSUANT TO SECTION 6(1)
In exercise of the powers conferred upon him by Section 6(1) of the Companies
Act 1981. The Minister of Finance hereby gives his Consent to:-
GLOBAL TELESYSTEMS HOLDINGS LTD.
to be registered as AN EXEMPTED Company under the Companies Act 1981, subject to
the provisions of the said Act.
Date this 24th day of March, 1997.
/s/ illegible
Minister of Finance
<PAGE>
EXHIBIT 3.8
B Y E - L A W S
OF
GLOBAL TELESYSTEMS HOLDINGS LTD.
I HEREBY CERTIFY that the within written Bye-Laws are a true copy of the Bye-
Laws of
GLOBAL TELESYSEMS HOLDINGS LTD.
as subscribed by the subscribers to the Memorandum of Association and approved
at the Statutory meeting of the above Company on the 25/th/ March, 1997.
Secretary
Prepared by
Messrs Appleby Spurling & Kempe
Cedar House
41 Cedar Avenue
Hamilton, Bermuda
<PAGE>
I N D E X
BYE-LAW SUBJECT
- ------- -------
1 Interpretation
2 Registered Office
3-4 Share Rights
5-6 Modification of Rights
7-9 Shares
10-12 Certificates
13-15 Lien
16-21 Calls on Shares
22-28 Forfeiture of Shares
29 Register of Shareholders
30 Register of Directors and Officers
31-34 Transfer of Shares
35-38 Transmission of Shares
39-41 Increase of Capital
42-43 Alteration of Capital
44-45 Reduction of Capital
46 General Meetings and Written Resolutions
47-48 Notice of General Meetings
49-55 Proceedings at General Meetings
56-67 Voting
68-73 Proxies and Corporate Representatives
74-76 Appointment and Removal of Directors
77 Resignation and Disqualification of Directors
78-80 Alternate Directors
81 Directors' Fees and Additional
Remuneration and Expenses
82 Directors' Interests
83-87 Powers and Duties of the Board
88-90 Delegation of the Board's Powers
91-99 Proceedings of the Board
100 Officers
101 Minutes
102-103 Secretary and Resident Representative
104 The Seal
105-111 Dividends and Other Payments
112 Reserves
113-114 Capitalization of Profits
115 Record Dates
116-118 Accounting Records
119 Audit
120-122 Service of Notices and Other Documents
123 Winding Up
<PAGE>
124-126 Indemnity
127 Amalgamation
128 Alteration of Bye-Laws
<PAGE>
B Y E - L A W S
OF
GLOBAL TELESYSTEMS HOLDINGS LTD
INTERPRETATION
- --------------
1. In these Bye-Laws unless the context otherwise requires -
"Bermuda" means the Islands of Bermuda;
"Board" means the Board of Directors of the Company or the Directors
present at a meeting of Directors at which there is a quorum;
"the Companies Acts" means every Bermuda statute from time to time in force
concerning companies insofar as the same applies to the Company;
"Company" means the company incorporated in Bermuda under the name of
Global Telesystems Holdings Ltd on the 25th day of March, 1997;
"paid up" means paid up or credited as paid up;
"Parent" means the company incorporated in the Cayman Islands under the
name of GT Parent Holdings LDC;
"Register" means the Register of Shareholders of the Company;
"Registered Office" means the registered office for the time being of the
Company;
"Resident Representative" means the person (or, if permitted in accordance
with the Companies Acts, the company) appointed to perform the duties of
resident representative set out in the Companies Acts and includes any assistant
or deputy Resident Representative appointed by the Board to perform any of the
duties of the Resident Representative;
"Resolution" means a resolution of the Shareholders or, where required, of
a separate class or separate classes of Shareholders, adopted either in general
meeting or by written resolution, in accordance with the provisions of these
Bye-Laws;
"Seal" means the common seal of the Company and includes any duplicate
thereof;
"Secretary" includes a temporary or assistant or deputy Secretary and any
person appointed by the Board to perform any of the duties of the Secretary;
"Shareholder" means a shareholder or member of the Company;
<PAGE>
2
"Stockholders Agreement" means the agreement dated 24th March, 1997, and
made between Parent and its shareholders relating, inter alia, to the
management and operation of the Parent;
"these Bye-Laws" means these Bye-Laws in their present form or as from time
to time amended;
for the purposes of these Bye-Laws a corporation shall be deemed to be
present in person if its representative duly authorised pursuant to the
Companies Acts is present;
words importing only the singular number include the plural number and vice
versa;
words importing only the masculine gender include the feminine and neuter
genders respectively;
words importing persons include companies or associations or bodies of
persons, whether corporate or un-incorporate;
reference to writing shall include typewriting, printing, lithography,
photography and other modes of representing or reproducing words in a legible
and non-transitory form;
any words or expressions defined in the Companies Acts in force at the date
when these Bye-Laws or any part thereof are adopted shall bear the same meaning
in these Bye-Laws or such part (as the case may be).
REGISTERED OFFICE
- -----------------
2. The Registered Office shall be at such place in Bermuda as the Board
shall from time to time appoint.
SHARE RIGHTS
- ------------
3. Subject to any special rights conferred on the holders of any share or
class of shares, any share in the Company may be issued with or have attached
thereto such preferred, deferred, qualified or other special rights or such
restrictions, whether in regard to dividend, voting, return of capital or
otherwise, as the Company may by Resolution determine or, if there has not been
any such determination or so far as the same shall not make specific provision,
as the Board may determine.
4. Subject to the Companies Acts, any preference shares may, with the
sanction of a Resolution, be issued on terms:
(a) that they are to be redeemed on the happening of a specified event
or on a given date; and/or,
(b) that they are liable to be redeemed at the option of the Company;
and/or,
<PAGE>
3
(c) if authorised by the memorandum/Incorporating Act of the Company,
that they are liable to be redeemed at the option of the holder.
The terms and manner of redemption shall be provided for by way of such
Resolution, or if the shareholders so direct by Resolution, as the Board may
determine, provided that such rights, when so determined, shall be attached to
these Bye-Laws.
MODIFICATION OF RIGHTS
- ----------------------
5. Subject to the Companies Acts, all or any of the special rights for
the time being attached to any class of shares for the time being issued may
from time to time (whether or not the Company is being wound up) be altered or
abrogated with the consent in writing of the holders of not less than seventy
five percent of the issued shares of that class or with the sanction of a
resolution passed at a separate general meeting of the holders of such shares
voting in person or by proxy. To any such separate general meeting, all the
provisions of these Bye-Laws as to general meetings of the Company shall mutatis
mutandis apply, but so that the necessary quorum shall be two or more persons
holding or representing by proxy any of the shares of the relevant class, that
every holder of shares of the relevant class shall be entitled on a poll to one
vote for every such share held by him and that any holder of shares of the
relevant class present in person or by proxy may demand a poll; provided,
however, that if the Company or a class of Shareholders shall have only one
Shareholder, one Shareholder present in person or by proxy shall constitute the
necessary quorum.
6. The special rights conferred upon the holders of any shares or class
of shares shall not, unless otherwise expressly provided in the rights attaching
to or the terms of issue of such shares, be deemed to be altered by the creation
or issue of further shares ranking pari passu therewith.
SHARES
- ------
7. (a) Subject to the provisions of these Bye-Laws and to sub-paragraph
(b) below, the unissued shares of the Company (whether forming part of the
original capital or any increased capital) shall be at the disposal of the
Board, which may offer, allot, grant options over or otherwise dispose of them
to such persons, at such times and for such consideration and upon such terms
and conditions as the Board may determine.
(b) Notwithstanding the foregoing, no shares in the capital of the
Company may be issued to the Parent except in accordance with the terms of
the Stockholders Agreement.
8. The Board may in connection with the issue of any shares exercise all
powers of paying commission and brokerage conferred or permitted by law.
<PAGE>
4
9. Except as ordered by a court of competent jurisdiction or as required
by law, no person shall be recognised by the Company as holding any share upon
trust and the Company shall not be bound by or required in any way to recognise
(even when having notice thereof) any equitable, contingent, future or partial
interest in any share or any interest in any fractional part of a share or
(except only as otherwise provided in these Bye-Laws, or by law) any other right
in respect of any share except an absolute right to the entirety thereof in the
registered holder.
CERTIFICATES
- -------------
10. The preparation, issue and delivery of certificates shall be governed
by the Companies Acts. In the case of a share held jointly by several persons,
delivery of a certificate to one of several joint holders shall be sufficient
delivery to all.
11. If a share certificate is defaced, lost or destroyed it may be
replaced without fee but on such terms (if any) as to evidence and indemnity and
to payment of the costs and out of pocket expenses of the Company in
investigating such evidence and preparing such indemnity as the Board may think
fit and, in case of defacement, on delivery of the old certificate to the
Company.
12. All certificates for share or loan capital or other securities of the
Company (other than letters of allotment, scrip certificates and other like
documents) shall, except to the extent that the terms and conditions for the
time being relating thereto otherwise provide, be issued under the Seal. The
Board may by resolution determine, either generally or in any particular case,
that any signatures on any such certificates need not be autographic but may be
affixed to such certificates by some mechanical means or may be printed thereon
or that such certificates need not be signed by any persons.
LIEN
- ----
13. The Company shall have a first and paramount lien on every share (not
being a fully paid share) for all moneys, whether presently payable or not,
called or payable, at a date fixed by or in accordance with the terms of issue
of such share in respect of such share, and the Company shall also have a first
and paramount lien on every share (other than a fully paid share) standing
registered in the name of a Shareholder, whether singly or jointly with any
other person, for all the debts and liabilities of such Shareholder or his
estate to the Company, whether the same shall have been incurred before or after
notice to the Company of any interest of any person other than such Shareholder,
and whether the time for the payment or discharge of the same shall have
actually arrived or not, and notwithstanding that the same are joint debts or
liabilities of such Shareholder or his estate and any other person, whether a
Shareholder or not. The Company's lien on a share shall extend to all dividends
payable thereon. The Board may at any time, either generally or in any
particular case, waive any lien that has arisen or declare any share to be
wholly or in part exempt from the provisions of this Bye-Law.
<PAGE>
5
14. The Company may sell, in such manner as the Board may think fit, any
share on which the Company has a lien but no sale shall be made unless some sum
in respect of which the lien exists is presently payable nor until the
expiration of fourteen days after a notice in writing, stating and demanding
payment of the sum presently payable and giving notice of the intention to sell
in default of such payment, has been served on the holder for the time being of
the share.
15. The net proceeds of sale by the Company of any shares on which it has
a lien shall be applied in or towards payment or discharge of the debt or
liability in respect of which the lien exists so far as the same is presently
payable, and any residue shall (subject to a like lien for debts or liabilities
not presently payable as existed upon the share prior to the sale) be paid to
the holder of the share immediately before such sale. For giving effect to any
such sale the Board may authorise some person to transfer the share sold to the
purchaser thereof. The purchaser shall be registered as the holder of the share
and he shall not be bound to see to the application of the purchase money, nor
shall his title to the share be affected by any irregularity or invalidity in
the proceedings relating to the sale.
CALLS ON SHARES
- ---------------
16. The Board may from time to time make calls upon the Shareholders in
respect of any moneys unpaid on their shares (whether on account of the par
value of the shares or by way of premium) and not by the terms of issue thereof
made payable at a date fixed by or in accordance with such terms of issue, and
each Shareholder shall (subject to the Company serving upon him at least
fourteen days notice specifying the time or times and place of payment) pay to
the Company at the time or times and place so specified the amount called on his
shares. A call may be revoked or postponed as the Board may determine.
17. A call may be made payable by installments and shall be deemed to have
been made at the time when the resolution of the Board authorizing the call was
passed.
18. The joint holders of a share shall be jointly and severally liable to
pay all calls in respect thereof.
19. If a sum called in respect of the share shall not be paid before or on
the day appointed for payment thereof the person from whom the sum is due shall
pay interest on the sum from the day appointed for the payment thereof to the
time of actual payment at such rate as the Board may determine, but the Board
shall be at liberty to waive payment of such interest wholly or in part.
20. Any sum which, by the terms of issue of a share, becomes payable on
allotment or at any date fixed by or in accordance with such terms of issue,
whether on account of the nominal amount of the share or by way of premium,
shall for all the purposes of these Bye-Laws be deemed to be a call duly made,
notified and payable on the date on which, by the terms of issue, the same
becomes payable and, in case of non-payment, all the relevant provisions of
these Bye-Laws as to payment of interest, forfeiture or otherwise shall apply as
if such sum had become payable by virtue of a call duly made and notified.
<PAGE>
6
21. The Board may on the issue of shares differentiate between the
allottees or holders as to the amount of calls to be paid and the times of
payment.
FORFEITURE OF SHARES
- --------------------
22. If a Shareholder fails to pay any call or installment of a call on the
day appointed for payment thereof, the Board may at any time thereafter during
such time as any part of such call or installment remains unpaid serve a notice
on him requiring payment of so much of the call or installment as is unpaid,
together with any interest which may have accrued.
23. The notice shall name a further day (not being less than 14 days from
the date of the notice) on or before which, and the place where, the payment
required by the notice is to be made and shall state that, in the event of non-
payment on or before the day and at the place appointed, the shares in respect
of which such call is made or installment is payable will be liable to be
forfeited. The Board may accept the surrender of any share liable to be
forfeited hereunder and, in such case, references in these Bye-Laws to
forfeiture shall include surrender.
24. If the requirements of any such notice as aforesaid are not complied
with, any share in respect of which such notice has been given may at any time
thereafter, before payment of all calls or installments and interest due in
respect thereof has been made, be forfeited by a resolution of the Board to that
effect. Such forfeiture shall include all dividends declared in respect of the
forfeited shares and not actually paid before the forfeiture.
25. When any share has been forfeited, notice of the forfeiture shall be
served upon the person who was before forfeiture the holder of the share; but no
forfeiture shall be in any manner invalidated by any omission or neglect to give
such notice as aforesaid.
26. A forfeited share shall be deemed to be the property of the Company
and may be sold, re-offered or otherwise disposed of either to the person who
was, before forfeiture, the holder thereof or entitled thereto or to any other
person upon such terms and in such manner as the Board shall think fit, and at
any time before a sale, re-allotment or disposition the forfeiture may be
cancelled on such terms as the Board may think fit.
27. A person whose shares have been forfeited shall thereupon cease to be
a Shareholder in respect of the forfeited shares but shall, notwithstanding the
forfeiture, remain liable to pay to the Company all moneys which at the date of
forfeiture were presently payable by him to the Company in respect of the shares
with interest thereon at such rate as the Board may determine from the date of
forfeiture until payment, and the Company may enforce payment without being
under any obligation to make any allowance for the value of the shares
forfeited.
<PAGE>
7
28. An affidavit in writing that the deponent is a Director or the
Secretary and that a share has been duly forfeited on the date stated in the
affidavit shall be conclusive evidence of the facts therein stated as against
all persons claiming to be entitled to the share. The Company may receive the
consideration (if any) given for the share on the sale, re-allotment or
disposition thereof and the Board may authorise some person to transfer the
share to the person to whom the same is sold, re-allotted or disposed of, and he
shall thereupon be registered as the holder of the share and shall not be bound
to see to the application of the purchase money (if any) nor shall his title to
the share be affected by any irregularity or invalidity in the proceedings
relating to the forfeiture, sale, re-allotment or disposal of the share.
REGISTER OF SHAREHOLDERS
- ------------------------
29. The Secretary shall establish and maintain the Register of
Shareholders at the Registered Office in the manner prescribed by the Companies
Acts. Unless the Board otherwise determines, the Register of Shareholders shall
be open to inspection in the manner prescribed by the Companies Acts between
10.00 a.m. and 12.00 noon on every working day. Unless the Board so determines,
no Shareholder or intending Shareholder shall be entitled to have entered in the
Register any indication of any trust or any equitable, contingent, future or
partial interest in any share or any interest in any fractional part of a share
and if any such entry exists or is permitted by the Board it shall not be deemed
to abrogate any of the provisions of Bye-Law 9.
REGISTER OF DIRECTORS AND OFFICERS
- ----------------------------------
30. The Secretary shall establish and maintain a register of the Directors
and Officers of the Company as required by the Companies Acts. The register of
Directors and Officers shall be open to inspection in the manner prescribed by
the Companies Acts between 10:00 a.m. and 12:00 noon on every working day.
TRANSFER OF SHARES
- ------------------
31. Subject to the Companies Acts and to such of the restrictions
contained in these Bye-Laws as may be applicable, any Shareholder may transfer
all or any of his shares by an instrument of transfer in the usual common form
or in any other form which the Board may approve.
32. The instrument of transfer of a share shall be signed by or on behalf
of the transferor and where any share is not fully-paid, the transferee and the
transferor shall be deemed to remain the holder of the share until the name of
the transferee is entered in the Register in respect thereof. All instruments
of transfer when registered may be retained by the Company. The Board may, in
its absolute discretion and without assigning any reason therefor, decline to
register any transfer of any share which is not a fully-paid share. The Board
may also decline to register any transfer unless:-
<PAGE>
8
(a) the instrument of transfer is duly stamped and lodged with the
Company, accompanied by the certificate for the shares to which it relates,
and such other evidence as the Board may reasonably require to show the
right of the transferor to make the transfer,
(b) the instrument of transfer is in respect of only one class of
share,
(c) where applicable, the permission of the Bermuda Monetary Authority
with respect thereto has been obtained.
Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under this Bye-
Law and Bye-Laws 31 and 33.
33. If the Board declines to register a transfer it shall, within three
months after the date on which the instrument of transfer was lodged, send to
the transferee notice of such refusal.
34. No fee shall be charged by the Company for registering any transfer,
probate, letters of administration, certificate of death or marriage, power of
attorney, distringas or stop notice, order of court or other instrument relating
to or affecting the title to any share, or otherwise making an entry in the
Register relating to any share.
TRANSMISSION OF SHARES
- ----------------------
35. In the case of the death of a Shareholder, the survivor or survivors,
where the deceased was a joint holder, and the estate representative, where he
was sole holder, shall be the only person recognised by the Company as having
any title to his shares; but nothing herein contained shall release the estate
of a deceased holder (whether the sole or joint) from any liability in respect
of any share held by him solely or jointly with other persons. For the purpose
of this Bye-Law, estate representative means the person to whom probate or
letters of administration has or have been granted in Bermuda or, failing any
such person, such other person as the Board may in its absolute discretion
determine to be the person recognised by the Company for the purpose of this
Bye-Law.
36. Any person becoming entitled to a share in consequence of the death of
a Shareholder or otherwise by operation of applicable law may, subject as
hereafter provided and upon such evidence being produced as may from time to
time be required by the Board as to his entitlement, either be registered
himself as the holder of the share or elect to have some person nominated by him
registered as the transferee thereof. If the person so becoming entitled elects
to be registered himself, he shall deliver or send to the Company a notice in
writing signed by him stating that he so elects. If he shall elect to have his
nominee registered, he shall signify his election by signing an instrument of
transfer of such share in favour of his nominee. All the limitations,
restrictions and provisions of these Bye-Laws relating to the right to transfer
and the registration of transfer of shares shall be applicable to any such
notice or instrument of transfer as aforesaid as if the death of the Shareholder
or
<PAGE>
9
other event giving rise to the transmission had not occurred and the notice or
instrument of transfer was an instrument of transfer signed by such Shareholder.
37. A person becoming entitled to a share in consequence of the death of a
Shareholder or otherwise by operation of applicable law shall (upon such
evidence being produced as may from time to time be required by the Board as to
his entitlement) be entitled to receive and may give a discharge for any
dividends or other moneys payable in respect of the share, but he shall not be
entitled in respect of the share to receive notices of or to attend or vote at
general meetings of the Company or, save as aforesaid, to exercise in respect of
the share any of the rights or privileges of a Shareholder until he shall have
become registered as the holder thereof. The Board may at any time give notice
requiring such person to elect either to be registered himself or to transfer
the share and, if the notice is not complied with within sixty days, the Board
may thereafter withhold payment of all dividends and other moneys payable in
respect of the shares until the requirements of the notice have been complied
with.
38. Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under Bye-Laws
35, 36 and 37.
INCREASE OF CAPITAL
- -------------------
39. The Company may from time to time increase its capital by such sum to
be divided into shares of such par value as the Company by Resolution shall
prescribe.
40. The Company may, by the Resolution increasing the capital, direct that
the new shares or any of them shall be offered in the first instance either at
par or at a premium or (subject to the provisions of the Companies Acts) at a
discount to all the holders for the time being of shares of any class or classes
in proportion to the number of such shares held by them respectively or make any
other provision as to the issue of the new shares.
41. The new shares shall be subject to all the provisions of these Bye-
Laws with reference to lien, the payment of calls, forfeiture, transfer,
transmission and otherwise.
ALTERATION OF CAPITAL
- ---------------------
42. The Company may from time to time by Resolution:-
(a) divide its shares into several classes and attach thereto
respectively any preferential, deferred, qualified or special rights,
privileges or conditions;
(b) consolidate and divide all or any of its share capital into shares
of larger par value than its existing shares;
<PAGE>
10
(c) sub-divide its shares or any of them into shares of smaller par
value than is fixed by its memorandum, so, however, that in the sub-
division the proportion between the amount paid and the amount, if any,
unpaid on each reduced share shall be the same as it was in the case of the
share from which the reduced share is derived;
(d) make provision for the issue and allotment of shares which do not
carry any voting rights;
(e) cancel shares which, at the date of the passing of the resolution
in that behalf, have not been taken or agreed to be taken by any person,
and diminish the amount of its share capital by the amount of the shares so
cancelled; and
(f) change the currency denomination of its share capital. Where any
difficulty arises in regard to any division, consolidation, or sub-division
under this Bye-Law, the Board may settle the same as it thinks expedient
and, in particular, may arrange for the sale of the shares representing
fractions and the distribution of the net proceeds of sale in due
proportion amongst the Shareholders who would have been entitled to the
fractions, and for this purpose the Board may authorise some person to
transfer the shares representing fractions to the purchaser thereof, who
shall not be bound to see to the application of the purchase money nor
shall his title to the shares be affected by any irregularity or invalidity
in the proceedings relating to the sale.
43. Subject to the Companies Acts and to any confirmation or consent
required by law or these Bye-Laws, the Company may by Resolution from time to
time convert any preference shares into redeemable preference shares.
REDUCTION OF CAPITAL
- --------------------
44. Subject to the Companies Acts, its memorandum and any confirmation or
consent required by law or these Bye-Laws, the Company may from time to time by
Resolution authorise the reduction of its issued share capital or any capital
redemption reserve fund or any share premium or contributed surplus account in
any manner.
45. In relation to any such reduction, the Company may by Resolution
determine the terms upon which such reduction is to be effected including in the
case of a reduction of part only of a class of shares, those shares to be
affected.
GENERAL MEETINGS AND WRITTEN RESOLUTIONS
- ----------------------------------------
46. (a) The Board shall convene and the Company shall hold general
meetings as Annual General Meetings in accordance with the requirements of the
Companies Acts at such times and places as the Board shall appoint. The Board
may, whenever it thinks fit, and shall, when required by the Companies Acts,
convene general meetings other than Annual General Meetings which shall be
called Special General Meetings.
<PAGE>
11
(b) Except in the case of the removal of auditors and Directors,
anything which may be done by resolution of the Company in general meeting
or by resolution of a meeting of any class of the Shareholders of the
Company may, without a meeting and without any previous notice being
required, be done by resolution in writing, signed by all of the
Shareholders or their proxies, or in the case of a Shareholder that is a
corporation (whether or not a company within the meaning of the Companies
Acts) on behalf of such Shareholder, being all of the Shareholders of the
Company who at the date of the resolution in writing would be entitled to
attend a meeting and vote on the resolution. Such resolution in writing
may be signed by, or in the case of a Shareholder that is a corporation
(whether or not a company within the meaning of the Companies Acts), on
behalf of, all the Shareholders of the Company, or any class thereof, in as
many counterparts as may be necessary.
(c) For the purposes of this Bye-Law, the date of the resolution in
writing is the date when the resolution is signed by, or in the case of a
Shareholder that is a corporation (whether or not a company within the
meaning of the Companies Acts), on behalf of, the last Shareholder to sign
and any reference in any enactment to the date of passing of a resolution
is, in relation to a resolution in writing made in accordance with this
section, a reference to such date.
(d) A resolution in writing made in accordance with this Bye-Law is as
valid as if it had been passed by the Company in general meeting or, if
applicable, by a meeting of the relevant class of Shareholders of the
Company, as the case may be. A resolution in writing made in accordance
with this section shall constitute minutes for the purposes of the
Companies Acts and these Bye-Laws.
NOTICE OF GENERAL MEETINGS
- --------------------------
47. An Annual General Meeting shall be called by not less than 5 days
notice in writing and a Special General Meeting shall be called by not less than
5 days notice in writing. The notice shall be exclusive of the day on which it
is served or deemed to be served and of the day for which it is given, and shall
specify the place, day and time of the meeting, and, in the case of a Special
General Meeting, the general nature of the business to be considered. Notice of
every general meeting shall be given in any manner permitted by Bye-Laws 120 and
121 to all Shareholders other than such as, under the provisions of these Bye-
Laws or the terms of issue of the shares they hold, are not entitled to receive
such notice from the Company and to any Director or Resident Representative who
or which has delivered a written notice upon the Registered Office requiring
that such notice be sent to him or it.
Notwithstanding that a meeting of the Company is called by shorter notice
than that specified in this Bye-Law, it shall be deemed to have been duly called
if it is so agreed:-
(a) in the case of a meeting called as an Annual General Meeting, by
all the Shareholders entitled to attend and vote thereat;
<PAGE>
12
(b) in the case of any other meeting, by a majority in number of the
Shareholders having the right to attend and vote at the meeting, being a
majority together holding not less than 95 percent in nominal value of the
shares giving that right.
48. The accidental omission to give notice of a meeting or (in cases where
instruments of proxy are sent out with the notice) the accidental omission to
send such instrument of proxy to, or the non-receipt of notice of a meeting or
such instrument of proxy by, any person entitled to receive such notice shall
not invalidate the proceedings at that meeting.
PROCEEDINGS AT GENERAL MEETINGS
- -------------------------------
49. No business shall be transacted at any general meeting unless a quorum
is present when the meeting proceeds to business, but the absence of a quorum
shall not preclude the appointment, choice or election of a chairman which shall
not be treated as part of the business of the meeting. Save as otherwise
provided by these Bye-Laws, at least two Shareholders present in person or by
proxy and entitled to vote shall be a quorum for all purposes; provided,
however, that if the Company shall have only one Shareholder, one Shareholder
present in person or by proxy shall constitute the necessary quorum.
50. If within five minutes (or such longer time as the chairman of the
meeting may determine to wait) after the time appointed for the meeting, a
quorum is not present, the meeting, if convened on the requisition of
Shareholders, shall be dissolved. In any other case, it shall stand adjourned
to such other day and such other time and place as the chairman of the meeting
may determine and at such adjourned meeting two Shareholders present in person
or by proxy (whatever the number of shares held by them) shall be a quorum
provided that if the Company shall have only one Shareholder, one Shareholder
present in person or by proxy shall constitute the necessary quorum. The
Company shall give not less than 5 days notice of any meeting adjourned
through want of a quorum and such notice shall state that the sole Shareholder
or, if more than one, two Shareholders present in person or by proxy (whatever
the number of shares held by them) shall be a quorum.
51. A meeting of the Shareholders or any class thereof may be held by
means of such telephone, electronic or other communication facilities as permit
all persons participating in the meeting to communicate with each other
simultaneously and instantaneously and participation in such a meeting shall
constitute presence in person at such meeting.
52. Each Director upon giving the notice referred to in Bye-Law 47 above,
and the Resident Representative shall be entitled to attend and speak at any
general meeting of the Company.
53. The Chairman (if any) of the Board or, in his absence, the President
shall preside as chairman at every general meeting. If there is no such
Chairman or President, or if at any meeting neither the Chairman nor the
President is present within five minutes after the time appointed for holding
the meeting, or if neither of them is willing to act as chairman, the
<PAGE>
13
Directors present shall choose one of their number to act or if one Director
only is present he shall preside as chairman if willing to act. If no Director
is present, or if each of the Directors present declines to take the chair, the
persons present and entitled to vote on a poll shall elect one of their number
to be chairman.
54. The chairman of the meeting may, with the consent of any meeting at
which a quorum is present (and shall if so directed by the meeting), adjourn the
meeting from time to time and from place to place but no business shall be
transacted at any adjourned meeting except business which might lawfully have
been transacted at the meeting from which the adjournment took place. When a
meeting is adjourned for three months or more, notice of the adjourned meeting
shall be given as in the case of an original meeting.
55. Save as expressly provided by these Bye-Laws, it shall not be
necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting.
VOTING
- ------
56. Save where a greater majority is required by the Companies Acts or
these Bye-Laws, any question proposed for consideration at any general meeting
shall be decided on by a simple majority of votes cast.
57. At any general meeting, a resolution put to the vote of the meeting
shall be decided on a show of hands unless (before or on the declaration of the
result of the show of hands or on the withdrawal of any other demand for a poll)
a poll is demanded by:-
(a) the chairman of the meeting; or
(b) at least three Shareholders present in person or represented by
proxy; or
(c) any Shareholder or Shareholders present in person or represented
by proxy and holding between them not less than one tenth of the total
voting rights of all the Shareholders having the right to vote at such
meeting; or
(d) a Shareholder or Shareholders present in person or represented by
proxy holding shares conferring the right to vote at such meeting, being
shares on which an aggregate sum has been paid up equal to not less than
one tenth of the total sum paid up on all such shares conferring such
right.
Unless a poll is so demanded and the demand is not withdrawn, a declaration
by the chairman that a resolution has, on a show of hands, been carried or
carried unanimously or by a particular majority or not carried by a particular
majority or lost shall be final and conclusive, and an entry to that effect in
the minute book of the Company shall be conclusive evidence of the fact without
proof of the number of votes recorded for or against such resolution.
<PAGE>
14
58. If a poll is duly demanded, the result of the poll shall be deemed to
be the resolution of the meeting at which the poll is demanded.
59. A poll demanded on the election of a chairman, or on a question of
adjournment, shall be taken forthwith. A poll demanded on any other question
shall be taken in such manner and either forthwith or at such time (being not
later than three months after the date of the demand) and place as the chairman
shall direct. It shall not be necessary (unless the chairman otherwise directs)
for notice to be given of a poll.
60. The demand for a poll shall not prevent the continuance of a meeting
for the transaction of any business other than the question on which the poll
has been demanded and it may be withdrawn at any time before the close of the
meeting or the taking of the poll, whichever is the earlier.
61. On a poll, votes may be cast either personally or by proxy.
62. A person entitled to more than one vote on a poll need not use all his
votes or cast all the votes he uses in the same way.
63. In the case of an equality of votes at a general meeting, whether on a
show of hands or on a poll, the chairman of such meeting shall not be entitled
to a second or casting vote.
64. In the case of joint holders of a share, the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and for this purpose
seniority shall be determined by the order in which the names stand in the
Register in respect of the joint holding.
65. A Shareholder who is a patient for any purpose of any statute or
applicable law relating to mental health or in respect of whom an order has been
made by any Court having jurisdiction for the protection or management of the
affairs of persons incapable of managing their own affairs may vote, whether on
a show of hands or on a poll, by his receiver, committee, curator bonis or other
person in the nature of a receiver, committee or curator bonis appointed by such
Court and such receiver, committee, curator bonis or other person may vote on a
poll by proxy, and may otherwise act and be treated as such Shareholder for the
purpose of general meetings.
66. No Shareholder shall, unless the Board otherwise determines, be
entitled to vote at any general meeting unless all calls or other sums presently
payable by him in respect of shares in the Company have been paid.
67. If (i) any objection shall be raised to the qualification of any voter
or (ii) any votes have been counted which ought not to have been counted or
which might have been rejected or (iii) any votes are not counted which ought to
have been counted, the objection or error shall not vitiate the decision of the
meeting or adjourned meeting on any resolution unless the same is raised or
pointed out at the meeting or, as the case may be, the adjourned
<PAGE>
15
meeting at which the vote objected to is given or tendered or at which the error
occurs. Any objection or error shall be referred to the chairman of the meeting
and shall only vitiate the decision of the meeting on any resolution if the
chairman decides that the same may have affected the decision of the meeting.
The decision of the chairman on such matters shall be final and conclusive.
PROXIES AND CORPORATE REPRESENTATIVES
- -------------------------------------
68. The instrument appointing a proxy shall be in writing under the hand
of the appointor or of his attorney authorised by him in writing or, if the
appointor is a corporation, either under its seal or under the hand of an
officer, attorney or other person authorised to sign the same.
69. Any Shareholder may appoint a standing proxy or (if a corporation)
representative by depositing at the Registered Office a proxy or (if a
corporation) an authorisation and such proxy or authorisation shall be valid for
all general meetings and adjournments thereof or, resolutions in writing, as the
case may be, until notice of revocation is received at the Registered Office.
Where a standing proxy or authorisation exists, its operation shall be deemed to
have been suspended at any general meeting or adjournment thereof at which the
Shareholder is present or in respect to which the Shareholder has specially
appointed a proxy or representative. The Board may from time to time require
such evidence as it shall deem necessary as to the due execution and continuing
validity of any such standing proxy or authorisation and the operation of any
such standing proxy or authorisation shall be deemed to be suspended until such
time as the Board determines that it has received the requested evidence or
other evidence satisfactory to it.
70. Subject to Bye-Law 69, the instrument appointing a proxy together with
such other evidence as to its due execution as the Board may from time to time
require, shall be delivered at the Registered Office (or at such place as may be
specified in the notice convening the meeting or in any notice of any
adjournment or, in either case or the case of a written resolution, in any
document sent therewith) prior to the holding of the relevant meeting or
adjourned meeting at which the person named in the instrument proposes to vote
or, in the case of a poll taken subsequently to the date of a meeting or
adjourned meeting, before the time appointed for the taking of the poll, or, in
the case of a written resolution, prior to the effective date of the written
resolution and in default the instrument of proxy shall not be treated as valid.
71. Instruments of proxy shall be in any common form or in such other form
as the Board may approve and the Board may, if it thinks fit, send out with the
notice of any meeting or any written resolution forms of instruments of proxy
for use at that meeting or in connection with that written resolution. The
instrument of proxy shall be deemed to confer authority to demand or join in
demanding a poll and to vote on any amendment of a written resolution or
amendment of a resolution put to the meeting for which it is given as the proxy
thinks fit. The instrument of proxy shall unless the contrary is stated therein
be valid as well for any adjournment of the meeting as for the meeting to which
it relates.
<PAGE>
16
72. A vote given in accordance with the terms of an instrument of proxy
shall be valid notwithstanding the previous death or insanity of the principal,
or revocation of the instrument of proxy or of the authority under which it was
executed, provided that no intimation in writing of such death, insanity or
revocation shall have been received by the Company at the Registered Office (or
such other place as may be specified for the delivery of instruments of proxy in
the notice convening the meeting or other documents sent therewith) one hour at
least before the commencement of the meeting or adjourned meeting, or the taking
of the poll, or the day before the effective date of any written resolution at
which the instrument of proxy is used.
73. Subject to the Companies Acts, the Board may at its discretion waive
any of the provisions of these Bye-Laws related to proxies or authorisations
and, in particular, may accept such verbal or other assurances as it thinks fit
as to the right of any person to attend and vote on behalf of any Shareholder at
general meetings or to sign written resolutions.
APPOINTMENT AND REMOVAL OF DIRECTORS
- ------------------------------------
74. The number of Directors shall be such number not less than two as the
Company by Resolution may from time to time determine and, subject to the
Companies Acts and these Bye-Laws, shall serve until re-elected or their
successors are appointed at the next Annual General Meeting.
75. The Company shall at the Annual General Meeting and may by Resolution
determine the minimum and the maximum number of Directors and may by Resolution
determine that one or more vacancies in the Board shall be deemed casual
vacancies for the purposes of these Bye-Laws. Without prejudice to the power of
the Company by Resolution in pursuance of any of the provisions of these Bye-
Laws to appoint any person to be a Director, the Board, so long as a quorum of
Directors remains in office, shall have power at any time and from time to time
to appoint any individual to be a Director so as to fill a casual vacancy.
76. The Company may in a Special General Meeting called for that purpose
remove a Director provided notice of any such meeting shall be served upon the
Director concerned not less than 14 days before the meeting and he shall be
entitled to be heard at that meeting. Any vacancy created by the removal of a
Director at a Special General Meeting may be filled at the Meeting by the
election of another Director in his place or, in the absence of any such
election, by the Board.
RESIGNATION AND DISQUALIFICATION OF DIRECTORS
- ---------------------------------------------
77. The office of a Director shall be vacated upon the happening of any of
the following events:
(a) if he resigns his office by notice in writing delivered to the
Registered Office or tendered at a meeting of the Board;
<PAGE>
17
(b) if he becomes of unsound mind or a patient for any purpose of any
statute or applicable law relating to mental health and the Board resolves
that his office is vacated;
(c) if he becomes bankrupt or compounds with his creditors;
(d) if he is prohibited by law from being a Director;
(e) if he ceases to be a Director by virtue of the Companies Acts or
is removed from office pursuant to these Bye-Laws.
ALTERNATE DIRECTORS
- -------------------
78. The Company may by Resolution elect any person or persons to act as
Directors in the alternative to any of the Directors or may authorise the Board
to appoint such Alternate Directors and a Director may appoint and remove his
own Alternate Director. Any appointment or removal of an Alternate Director by
a Director shall be effected by depositing a notice of appointment or removal
with the Secretary at the Registered Office, signed by such Director, and such
appointment or removal shall become effective on the date of receipt by the
Secretary. Any Alternate Director may be removed by Resolution of the Company
and, if appointed by the Board, may be removed by the Board. Subject as
aforesaid, the office of Alternate Director shall continue until the next annual
election of Directors or, if earlier, the date on which the relevant Director
ceases to be a Director. An Alternate Director may also be a Director in his
own right and may act as alternate to more than one Director.
79. An Alternate Director shall be entitled to receive notices of all
meetings of Directors, to attend, be counted in the quorum and vote at any such
meeting at which any Director to whom he is alternate is not personally present,
and generally to perform all the functions of any Director to whom he is
alternate in his absence.
80. Every person acting as an Alternate Director shall (except as regards
powers to appoint an alternate and remuneration) be subject in all respects to
the provisions of these Bye-Laws relating to Directors and shall alone be
responsible to the Company for his acts and defaults and shall not be deemed to
be the agent of or for any Director for whom he is alternate. An Alternate
Director may be paid expenses and shall be entitled to be indemnified by the
Company to the same extent mutatis mutandis as if he were a Director. Every
person acting as an Alternate Director shall have one vote for each Director for
whom he acts as alternate (in addition to his own vote if he is also a
Director). The signature of an Alternate Director to any resolution in writing
of the Board or a committee of the Board shall, unless the terms of his
appointment provides to the contrary, be as effective as the signature of the
Director or Directors to whom he is alternate.
<PAGE>
18
DIRECTORS' FEES AND ADDITIONAL REMUNERATION AND EXPENSES
- --------------------------------------------------------
81. The amount, if any, of Directors' fees shall from time to time be
determined by the Company by Resolution and in the absence of a determination to
the contrary such fees shall be deemed to accrue from day to day. Each Director
may be paid his reasonable travel, hotel and incidental expenses in attending
and returning from meetings of the Board or committees constituted pursuant to
these Bye-Laws or general meetings and shall be paid all expenses properly and
reasonably incurred by him in the conduct of the Company's business or in the
discharge of his duties as a Director. Any Director who, by request, goes or
resides abroad for any purposes of the Company or who performs services which in
the opinion of the Board go beyond the ordinary duties of a Director may be paid
such extra remuneration (whether by way of salary, commission, participation in
profits or otherwise) as the Board may determine, and such extra remuneration
shall be in addition to any remuneration provided for by or pursuant to any
other Bye-Law.
DIRECTORS' INTERESTS
- --------------------
82. (a) A Director may hold any other office or place of profit with the
Company (except that of auditor) in conjunction with his office of Director for
such period and upon such terms as the Board may determine, and may be paid such
extra remuneration therefor (whether by way of salary, commission, participation
in profits or otherwise) as the Board may determine, and such extra remuneration
shall be in addition to any remuneration provided for by or pursuant to any
other Bye-Law.
(b) A Director may act by himself or his firm in a professional
capacity for the Company (otherwise than as auditor) and he or his firm
shall be entitled to remuneration for professional services as if he were
not a Director.
(c) Subject to the provisions of the Companies Acts, a Director may
notwithstanding his office be a party to, or otherwise interested in, any
transaction or arrangement with the Company or in which the Company is
otherwise interested; and be a Director or other officer of, or employed
by, or a party to any transaction or arrangement with, or otherwise
interested in, any body corporate promoted by the Company or in which the
Company is interested. The Board may also cause the voting power conferred
by the shares in any other company held or owned by the Company to be
exercised in such manner in all respects as it thinks fit, including the
exercise thereof in favour of any resolution appointing the Directors or
any of them to be directors or officers of such other company, or voting or
providing for the payment of remuneration to the directors or officers of
such other company.
(d) So long as, where it is necessary, he declares the nature of his
interest at the first opportunity at a meeting of the Board or by writing
to the Directors as required by the Companies Acts, a Director shall not by
reason of his office be accountable to the Company for any benefit which he
derives from any office or employment to which these Bye-Laws allow him to
be appointed or from any transaction or arrangement in which these Bye-Laws
allow him to be interested, and
<PAGE>
19
no such transaction or arrangement shall be liable to be avoided on the
ground of any interest or benefit.
(e) Subject to the Companies Acts and any further disclosure required
thereby, a general notice to the Directors by a Director or officer
declaring that he is a director or officer or has an interest in a person
and is to be regarded as interested in any transaction or arrangement made
with that person, shall be a sufficient declaration of interest in relation
to any transaction or arrangement so made.
POWERS AND DUTIES OF THE BOARD
- ------------------------------
83. Subject to the provisions of the Companies Acts and these Bye-Laws and
to any directions given by the Company by Resolution, the Board shall manage the
business of the Company and may pay all expenses incurred in promoting and
incorporating the Company and may exercise all the powers of the Company. No
alteration of these Bye-Laws and no such direction shall invalidate any prior
act of the Board which would have been valid if that alteration had not been
made or that direction had not been given. The powers given by this Bye-Law
shall not be limited by any special power given to the Board by these Bye-Laws
and a meeting of the Board at which a quorum is present shall be competent to
exercise all the powers, authorities and discretions for the time being vested
in or exercisable by the Board.
84. The Board may exercise all the powers of the Company to borrow money
and to mortgage or charge all or any part of the undertaking, property and
assets (present and future) and uncalled capital of the Company and to issue
debentures and other securities, whether outright or as collateral security for
any debt, liability or obligation of the Company or of any other persons.
85. All cheques, promissory notes, drafts, bills of exchange and other
instruments, whether negotiable or transferable or not, and all receipts for
money paid to the Company shall be signed, drawn, accepted, endorsed or
otherwise executed, as the case may be, in such manner as the Board shall from
time to time by resolution determine.
86. The Board on behalf of the Company may provide benefits, whether by
the payment of gratuities or pensions or otherwise, for any person including any
Director or former Director who has held any executive office or employment with
the Company or with any body corporate which is or has been a subsidiary or
affiliate of the Company or a predecessor in the business of the Company or of
any such subsidiary or affiliate, and to any member of his family or any person
who is or was dependent on him, and may contribute to any fund and pay premiums
for the purchase or provision of any such gratuity, pension or other benefit, or
for the insurance of any such person.
87. The Board may from time to time appoint one or more of its body to be
a managing director, joint managing director or an assistant managing director
or to hold any other employment or executive office with the Company for such
period and upon such terms as the Board may determine and may revoke or
terminate any such appointments. Any such
<PAGE>
20
revocation or termination as aforesaid shall be without prejudice to any claim
for damages that such Director may have against the Company or the Company may
have against such Director for any breach of any contract of service between him
and the Company which may be involved in such revocation or termination. Any
person so appointed shall receive such remuneration (if any) (whether by way of
salary, commission, participation in profits or otherwise) as the Board may
determine, and either in addition to or in lieu of his remuneration as a
Director.
DELEGATION OF THE BOARD'S POWERS
- --------------------------------
88. The Board may by power of attorney appoint any company, firm or person
or any fluctuating body of persons, whether nominated directly or indirectly by
the Board, to be the attorney or attorneys of the Company for such purposes and
with such powers, authorities and discretions (not exceeding those vested in or
exercisable by the Board under these Bye-Laws) and for such period and subject
to such conditions as it may think fit, and any such power of attorney may
contain such provisions for the protection and convenience of persons dealing
with any such attorney and of such attorney as the Board may think fit, and may
also authorise any such attorney to sub-delegate all or any of the powers,
authorities and discretions vested in him.
89. The Board may entrust to and confer upon any Director, officer or,
without prejudice to the provisions of Bye-Law 90, other individual any of the
powers exercisable by it upon such terms and conditions with such restrictions
as it thinks fit, and either collaterally with, or to the exclusion of, its own
powers, and may from time to time revoke or vary all or any of such powers but
no person dealing in good faith and without notice of such revocation or
variation shall be affected thereby.
90. The Board may delegate any of its powers, authorities and discretions
to committees, consisting of such person or persons (whether a member or members
of its body or not) as it thinks fit. Any committee so formed shall, in the
exercise of the powers, authorities and discretions so delegated, conform to any
regulations which may be imposed upon it by the Board.
PROCEEDINGS OF THE BOARD
- ------------------------
91. The Board may meet for the despatch of business, adjourn and otherwise
regulate its meetings as it thinks fit. Questions arising at any meeting shall
be determined by a majority of votes. In the case of an equality of votes the
motion shall be deemed to have been lost. A Director may, and the Secretary on
the requisition of a Director shall, at any time summon a meeting of the Board.
92. Notice of a meeting of the Board shall be deemed to be duly given to a
Director if it is given to him personally or by word of mouth or sent to him by
post, cable, telex, telecopier or other mode of representing or reproducing
words in a legible and non-transitory form at his last known address or any
other address given by him to the Company
<PAGE>
21
for this purpose. A Director may waive notice of any meeting either
prospectively or retrospectively.
93. (a) The quorum necessary for the transaction of the business of the
Board may be fixed by the Board and, unless so fixed at any other number, shall
be two individuals. Any Director who ceases to be a Director at a meeting of
the Board may continue to be present and to act as a Director and be counted in
the quorum until the termination of the meeting if no other Director objects and
if otherwise a quorum of Directors would not be present.
(b) A Director who to his knowledge is in any way, whether directly or
indirectly, interested in a contract or proposed contract, transaction or
arrangement with the Company and has complied with the provisions of the
Companies Acts and these Bye-Laws with regard to disclosure of his interest
shall be entitled to vote in respect of any contract, transaction or
arrangement in which he is so interested and if he shall do so his vote
shall be counted, and he shall be taken into account in ascertaining
whether a quorum is present.
(c) The Resident Representative shall, upon delivering written notice
of an address for the purposes of receipt of notice, to the Registered
Office, be entitled to receive notice of, attend and be heard at, and to
receive minutes of all meetings of the Board.
94. So long as a quorum of Directors remains in office, the continuing
Directors may act notwithstanding any vacancy in the Board but, if no such
quorum remains, the continuing Directors or a sole continuing Director may act
only for the purpose of calling a general meeting.
95. The Chairman (if any) of the Board or, in his absence, the President
shall preside as chairman at every meeting of the Board. If there is no such
Chairman or President, or if at any meeting the Chairman or the President is not
present within five minutes after the time appointed for holding the meeting, or
is not willing to act as chairman, the Directors present may choose one of their
number to be chairman of the meeting.
96. The meetings and proceedings of any committee consisting of two or
more members shall be governed by the provisions contained in these Bye-Laws for
regulating the meetings and proceedings of the Board so far as the same are
applicable and are not superseded by any regulations imposed by the Board.
97. A resolution in writing signed by all the Directors for the time being
entitled to receive notice of a meeting of the Board or by all the members of a
committee for the time being shall be as valid and effectual as a resolution
passed at a meeting of the Board or, as the case may be, of such committee duly
called and constituted. Such resolution may be contained in one document or in
several documents in the like form each signed by one or more of the Directors
or members of the committee concerned.
<PAGE>
22
98. A meeting of the Board or a committee appointed by the Board may be
held by means of such telephone, electronic or other communication facilities as
permit all persons participating in the meeting to communicate with each other
simultaneously and instantaneously and participation in such a meeting shall
constitute presence in person at such meeting.
99. All acts done by the Board or by any committee or by any person acting
as a Director or member of a committee or any person duly authorised by the
Board or any committee, shall, notwithstanding that it is afterwards discovered
that there was some defect in the appointment of any member of the Board or such
committee or person acting as aforesaid or that they or any of them were
disqualified or had vacated their office, be as valid as if every such person
had been duly appointed and was qualified and had continued to be a Director,
member of such committee or person so authorised.
OFFICERS
- --------
100. The officers of the Company shall include a President and a Vice-
President or a Chairman and a Deputy Chairman who shall be Directors and shall
be elected by the Board as soon as possible after the statutory meeting and each
Annual General Meeting. In addition, the Board may appoint any person whether
or not he is a Director to hold such office as the Board may from time to time
determine. Any person elected or appointed pursuant to this Bye-Law shall hold
office for such period and upon such terms as the Board may determine and the
Board may revoke or terminate any such election or appointment. Any such
revocation or termination shall be without prejudice to any claim for damages
that such officer may have against the Company or the Company may have against
such officer for any breach of any contract of service between him and the
Company which may be involved in such revocation or termination. Save as
provided in the Companies Acts or these Bye-Laws, the powers and duties of the
officers of the Company shall be such (if any) as are determined from time to
time by the Board.
MINUTES
- -------
101. The Directors shall cause minutes to be made and books kept for the
purpose of recording -
(a) all appointments of officers made by the Directors;
(b) the names of the Directors and other persons (if any) present at
each meeting of Directors and of any committee;
(c) of all proceedings at meetings of the Company, of the holders of
any class of shares in the Company, and of committees;
(d) of all proceedings of its managers (if any).
<PAGE>
23
SECRETARY AND RESIDENT REPRESENTATIVE
- -------------------------------------
102. The Secretary and, if required, the Resident Representative, shall be
appointed by the Board at such remuneration (if any) and upon such terms as it
may think fit and any Secretary and Resident Representative so appointed may be
removed by the Board.
The duties of the Secretary and the duties of the Resident Representative shall
be those prescribed by the Companies Acts together with such other duties as
shall from time to time be prescribed by the Board.
103. A provision of the Companies Acts or these Bye-Laws requiring or
authorising a thing to be done by or to a Director and the Secretary shall not
be satisfied by its being done by or to the same person acting both as Director
and as, or in the place of, the Secretary.
THE SEAL
- --------
104. (a) The Seal shall consist of a circular metal device with the name
of the Company around the outer margin thereof and the country and year of
incorporation across the centre thereof. Should the Seal not have been received
at the Registered Office in such form at the date of adoption of this Bye-Law
then, pending such receipt, any document requiring to be sealed with the Seal
shall be sealed by affixing a red wafer seal to the document with the name of
the Company, and the country and year of incorporation type written across the
centre thereof.
(b) The Board shall provide for the custody of every Seal. A Seal
shall only be used by authority of the Board or of a committee constituted
by the Board. Subject to these Bye-laws, any instrument to which a Seal is
affixed shall be signed by either two Directors, or by the Secretary and
one Director, or by the Secretary or by any one person whether or not a
Director or Officer, who has been authorised either generally or
specifically to attest to the use of a Seal.
DIVIDENDS AND OTHER PAYMENTS
- ----------------------------
105. The Board may from time to time declare cash dividends or
distributions out of contributed surplus to be paid to the Shareholders
according to their rights and interests including such interim dividends as
appear to the Board to be justified by the position of the Company. The Board
may also pay any fixed cash dividend which is payable on any shares of the
Company half yearly or on such other dates, whenever the position of the
Company, in the opinion of the Board, justifies such payment.
106. Except insofar as the rights attaching to, or the terms of issue of, any
share otherwise provide:-
(a) all dividends or distributions out of contributed surplus may be
declared and paid according to the amounts paid up on the shares in respect
of which the dividend or distribution is paid, and an amount paid up on a
share in advance of calls may be treated for the purpose of this Bye-Law as
paid-up on the share;
<PAGE>
24
(b) dividends or distributions out of contributed surplus may be
apportioned and paid pro rata according to the amounts paid-up on the
shares during any portion or portions of the period in respect of which the
dividend or distribution is paid.
107. The Board may deduct from any dividend, distribution or other moneys
payable to a Shareholder by the Company on or in respect of any shares all sums
of money (if any) presently payable by him to the Company on account of calls or
otherwise in respect of shares of the Company.
108. No dividend, distribution or other moneys payable by the Company on or
in respect of any share shall bear interest against the Company.
109. Any dividend, distribution, interest or other sum payable in cash to
the holder of shares may be paid by cheque or warrant sent through the post
addressed to the holder at his address in the Register or, in the case of joint
holders, addressed to the holder whose name stands first in the Register in
respect of the shares at his registered address as appearing in the Register or
addressed to such person at such address as the holder or joint holders may in
writing direct. Every such cheque or warrant shall, unless the holder or joint
holders otherwise direct, be made payable to the order of the holder or, in the
case of joint holders, to the order of the holder whose name stands first in the
Register in respect of such shares, and shall be sent at his or their risk and
payment of the cheque or warrant by the bank on which it is drawn shall
constitute a good discharge to the Company. Any one of two or more joint
holders may give effectual receipts for any dividends, distributions or other
moneys payable or property distributable in respect of the shares held by such
joint holders.
110. Any dividend or distribution out of contributed surplus unclaimed for
a period of six years from the date of declaration of such dividend or
distribution shall be forfeited and shall revert to the Company and the payment
by the Board of any unclaimed dividend, distribution, interest or other sum
payable on or in respect of the share into a separate account shall not
constitute the Company a trustee in respect thereof.
111. The Board may direct payment or satisfaction of any dividend or
distribution out of contributed surplus wholly or in part by the distribution of
specific assets, and in particular of paid-up shares or debentures of any other
company, and where any difficulty arises in regard to such distribution or
dividend the Board may settle it as it thinks expedient, and in particular, may
authorise any person to sell and transfer any fractions or may ignore fractions
altogether, and may fix the value for distribution or dividend purposes of any
such specific assets and may determine that cash payments shall be made to any
Shareholders upon the footing of the values so fixed in order to secure equality
of distribution and may vest any such specific assets in trustees as may seem
expedient to the Board provided that such dividend or distribution may not be
satisfied by the distribution of any partly paid shares or debentures of any
company without the sanction of a Resolution.
<PAGE>
25
RESERVES
- --------
112. The Board may, before recommending or declaring any dividend or
distribution out of contributed surplus, set aside such sums as it thinks proper
as reserves which shall, at the discretion of the Board, be applicable for any
purpose of the Company and pending such application may, also at such
discretion, either be employed in the business of the Company or be invested in
such investments as the Board may from time to time think fit. The Board may
also without placing the same to reserve carry forward any sums which it may
think it prudent not to distribute.
CAPITALIZATION OF PROFITS
- -------------------------
113. The Company may, upon the recommendation of the Board, at any time and
from time to time pass a Resolution to the effect that it is desirable to
capitalize all or any part of any amount for the time being standing to the
credit of any reserve or fund which is available for distribution or to the
credit of any share premium account or any capital redemption reserve fund and
accordingly that such amount be set free for distribution amongst the
Shareholders or any class of Shareholders who would be entitled thereto if
distributed by way of dividend and in the same proportions, on the footing that
the same be not paid in cash but be applied either in or towards paying up
amounts for the time being unpaid on any shares in the Company held by such
Shareholders respectively or in payment up in full of unissued shares,
debentures or other obligations of the Company, to be allotted and distributed
credited as fully paid amongst such Shareholders, or partly in one way and
partly in the other, and the Board shall give effect to such Resolution,
provided that for the purpose of this Bye-Law, a share premium account and a
capital redemption reserve fund may be applied only in paying up of unissued
shares to be issued to such Shareholders credited as fully paid and provided
further that any sum standing to the credit of a share premium account may only
be applied in crediting as fully paid shares of the same class as that from
which the relevant share premium was derived.
114. Where any difficulty arises in regard to any distribution under the
last preceding Bye-Law, the Board may settle the same as it thinks expedient
and, in particular, may authorise any person to sell and transfer any fractions
or may resolve that the distribution should be as nearly as may be practicable
in the correct proportion but not exactly so or may ignore fractions altogether,
and may determine that cash payments should be made to any Shareholders in order
to adjust the rights of all parties, as may seem expedient to the Board. The
Board may appoint any person to sign on behalf of the persons entitled to
participate in the distribution any contract necessary or desirable for giving
effect thereto and such appointment shall be effective and binding upon the
Shareholders.
RECORD DATES
- ------------
115. Notwithstanding any other provisions of these Bye-Laws, the Company
may by Resolution or the Board may fix any date as the record date for any
dividend, distribution, allotment or issue and for the purpose of identifying
the persons entitled to receive notices of general meetings. Any such record
date may be on or at any time before or after any date on
<PAGE>
26
which such dividend, distribution, allotment or issue is declared, paid or made
or such notice is despatched.
ACCOUNTING RECORDS
- ------------------
116. The Board shall cause to be kept accounting records sufficient to give
a true and fair view of the state of the Company's affairs and to show and
explain its transactions, in accordance with the Companies Acts.
117. The records of account shall be kept at the Registered Office or at
such other place or places as the Board thinks fit, and shall at all times be
open to inspection by the Directors: PROVIDED that if the records of account are
kept at some place outside Bermuda, there shall be kept at an office of the
Company in Bermuda such records as will enable the Directors to ascertain with
reasonable accuracy the financial position of the Company at the end of each
three month period. No Shareholder (other than an officer of the Company) shall
have any right to inspect any accounting record or book or document of the
Company except as conferred by law or authorised by the Board or by Resolution.
118. A copy of every balance sheet and statement of income and expenditure,
including every document required by law to be annexed thereto, which is to be
laid before the Company in general meeting, together with a copy of the
auditors' report, shall be sent to each person entitled thereto in accordance
with the requirements of the Companies Acts.
AUDIT
- -----
119. Save and to the extent that an audit is waived in the manner permitted
by the Companies Acts, auditors shall be appointed and their duties regulated in
accordance with the Companies Acts, any other applicable law and such
requirements not inconsistent with the Companies Acts as the Board may from time
to time determine.
SERVICE OF NOTICES AND OTHER DOCUMENTS
- --------------------------------------
120. Any notice or other document (including a share certificate) may be
served on or delivered to any Shareholder by the Company either personally or by
sending it through the post (by airmail where applicable) in a pre-paid letter
addressed to such Shareholder at his address as appearing in the Register or by
delivering it to or leaving it at such registered address. In the case of joint
holders of a share, service or delivery of any notice or other document on or to
one of the joint holders shall for all purposes be deemed as sufficient service
on or delivery to all the joint holders. Any notice or other document if sent
by post shall be deemed to have been served or delivered seven days after it was
put in the post, and in proving such service or delivery, it shall be sufficient
to prove that the notice or document was properly addressed, stamped and put in
the post.
121. Any notice of a general meeting of the Company shall be deemed to be
duly given to a Shareholder, or other person entitled to it, if it is sent to
him by cable, telex, telecopier or other mode of representing or reproducing
words in a legible and non-transitory
<PAGE>
27
form at his address as appearing in the Register or any other address given by
him to the Company for this purpose. Any such notice shall be deemed to have
been served twenty-four hours after its despatch.
122. Any notice or other document delivered, sent or given to a Shareholder
in any manner permitted by these Bye-Laws shall, notwithstanding that such
Shareholder is then dead or bankrupt or that any other event has occurred, and
whether or not the Company has notice of the death or bankruptcy or other event,
be deemed to have been duly served or delivered in respect of any share
registered in the name of such Shareholder as sole or joint holder unless his
name shall, at the time of the service or delivery of the notice or document,
have been removed from the Register as the holder of the share, and such service
or delivery shall for all purposes be deemed as sufficient service or delivery
of such notice or document on all persons interested (whether jointly with or as
claiming through or under him) in the share.
WINDING UP
- ----------
123. If the Company shall be wound up, the liquidator may, with the
sanction of a Resolution of the Company and any other sanction required by the
Companies Acts, divide amongst the Shareholders in specie or kind the whole or
any part of the assets of the Company (whether they shall consist of property of
the same kind or not) and may for such purposes set such values as he deems fair
upon any property to be divided as aforesaid and may determine how such division
shall be carried out as between the Shareholders or different classes of
Shareholders. The liquidator may, with the like sanction, vest the whole or any
part of such assets in trustees upon such trust for the benefit of the
contributories as the liquidator, with the like sanction, shall think fit, but
so that no Shareholder shall be compelled to accept any shares or other assets
upon which there is any liability.
INDEMNITY
- ---------
124. Subject to the proviso below, every Director, officer of the Company
and member of a committee constituted under Bye-Law 90 and any Resident
Representative shall be indemnified out of the funds of the Company against all
liabilities, loss, damage or expense (including but not limited to liabilities
under contract, tort and statute or any applicable foreign law or regulation and
all reasonable legal and other costs and expenses properly payable) incurred or
suffered by him as such Director, officer, committee member or Resident
Representative and the indemnity contained in this Bye-Law shall extend to any
person acting as a Director, officer, committee member or Resident
Representative in the reasonable belief that he has been so appointed or elected
notwithstanding any defect in such appointment or election PROVIDED ALWAYS that
the indemnity contained in this Bye-Law shall not extend to any matter which
would render it void pursuant to the Companies Acts.
125. Every Director, officer, member of a committee duly constituted under
Bye-Law 90 or Resident Representative of the Company shall be indemnified out of
the funds of the Company against all liabilities incurred by him as such
Director, officer, committee member or Resident Representative in defending any
proceedings, whether civil or criminal,
<PAGE>
28
in which judgment is given in his favour, or in which he is acquitted, or in
connection with any application under the Companies Acts in which relief from
liability is granted to him by the court.
126. To the extent that any Director, officer, member of a committee duly
constituted under Bye-Law 90 or Resident Representative is entitled to claim an
indemnity pursuant to these Bye-Laws in respect of amounts paid or discharged by
him, the relative indemnity shall take effect as an obligation of the Company to
reimburse the person making such payment or effecting such discharge.
AMALGAMATION
- ------------
127. Any resolution proposed for consideration at any general meeting to
approve the amalgamation of the Company with any other company, wherever
incorporated, shall require the approval of a simple majority of votes cast at
such meeting and the quorum for such meeting shall be that required in Bye-law
49.
ALTERATION OF BYE-LAWS
- ----------------------
128. These Bye-Laws may be amended from time to time in the manner provided
for in the Companies Acts.
<PAGE>
(Revised June 13, 1997)
Form of Schedule I to the Bye-Laws
of Global Telesystems Holdings Ltd.
SCHEDULE I
Senior Increasing Rate Redeemable
Exchangeable Preference Shares
----------------------------------
The terms of the Company's authorized Senior Increasing Rate
Redeemable Exchangeable Preference Shares shall be as set forth below in this
Schedule I.
(a) Designation. There is hereby created out of the authorized and
-----------
unissued Preferred Shares of the Company a class of Preferred Shares designated
as the "Senior Increasing Rate Redeemable Exchangeable Preference Shares." The
number of shares constituting such class shall be 500,000 and are referred to as
the "Preference Shares." 100,000 Preference Shares shall be initially issued
with the remaining 400,000 shares reserved for issuance in accordance with
paragraph (d) hereof. The liquidation preference of the Preference Shares shall
be $1,000.00 per share.
(b) Currency. The Preference Shares shall be denominated in United
--------
States currency and all payments and distributions thereon or with respect
thereto shall be made in United States currency. All references to "$" or
"dollars" refer to United States currency.
(c) Rank. The Preference Shares shall, with respect to dividends and
----
distributions upon liquidation, winding-up and dissolution of the Company, rank
(i) senior to all classes of Common Stock of the Company and to each other class
of Capital Stock of the Company or series of Preference Shares of the Company
hereafter created the terms of which do not expressly provide that it ranks
senior to or on a parity with the Preference Shares as to dividends and
distributions upon liquidation, winding up and dissolution of the Company
(collectively referred to as "Junior Securities"); (ii) pari passu with each
---- -----
class of Capital Stock of the Company or series of Preferred Stock of the
Company hereafter created, the terms of which expressly provide that such class
or series will rank on a parity with the Preference Shares as to dividends and
distributions upon liquidation, winding-up and dissolution (collectively
referred to as "Parity Securities"); provided that any such Parity Securities
--------
not issued in accordance with the requirements of paragraph (g)(ii)(A) hereof
shall be deemed to be Junior Securities and not Parity Securities; and (iii)
junior to each class of Capital Stock of the Company or series of Preferred
Shares of the Company hereafter created the terms of which expressly provide
that such class or series will rank senior to the Preference Shares as to
dividends and distributions upon
<PAGE>
2
liquidation, winding-up and dissolution of the Company (collectively referred to
as "Senior Securities"); provided that any such Senior Securities that were not
--------
approved by the Holders in accordance with paragraph (g)(ii)(B) hereof shall be
deemed to be Junior Securities and not Senior Securities.
(d) Dividends.
---------
(i) Beginning on the Issue Date, the Holders of the outstanding
Preference Shares shall be entitled to receive, when, as and if declared by
the Board of Directors, out of funds legally available therefor,
distributions in the form of dividends on each Preference Share, at a rate
per annum equal to 14% of the liquidation preference per Preference Share,
--- -----
payable on each Dividend Payment Date. If the Preference Shares are not
redeemed prior to April 1, 2001 the dividend rate shall increase by 0.50%
per annum on April 1, 2001 and by an additional 0.50% per annum on each
--- ----- --- -----
subsequent April 1; provided that in no event shall the dividend rate borne
--------
by the Preference Shares exceed 20% per annum. All dividends shall be
--- -----
cumulative, whether or not earned or declared, on a daily basis from the
date of issuance of the Preference Shares and shall be payable in arrears,
on each Dividend Payment Date, commencing June 1, 1997. Dividends may be
paid, at the Company's option, on any applicable Dividend Payment Date
occurring on or prior to April 1, 2002 either in cash (and, if paid in
cash, payable only for such consecutive Dividend Periods immediately
preceding the applicable Dividend Payment Date for which dividends, whether
cash or in-kind, have not been declared and paid) or by the issuance of
additional Preference Shares (including fractional shares) having an
aggregate liquidation preference equal to the amount of such dividends.
Thereafter, dividends will be payable in cash only; provided that if the
--------
dividend rate exceeds 15% per annum, the Company may, at its option, cause
--- -----
any dividends in excess of 15% per annum to be paid in additional
--- -----
Preference Shares (including fractional Shares). In the event that
dividends are declared and paid through the issuance of additional
Preference Shares on or prior to April 1, 2002 or as provided in the
previous sentence, such dividends shall be deemed paid in full and shall
not accumulate. Each dividend shall be payable to the Holders of record as
they appear on the stock books of the Company on the Dividend Record Date
immediately preceding the related Dividend Payment Date. Dividends shall
cease to accumulate in respect of the Preference Shares on the Exchange
Date or on the date of their earlier redemption unless the Company shall
have failed to issue the appropriate aggregate principal amount of Exchange
Notes in respect of the Preference Shares on such Exchange Date or shall
have failed to pay the relevant redemption price on the date fixed for
redemption.
<PAGE>
3
(ii) All dividends paid with respect to the Preference Shares
pursuant to paragraph (d)(i) shall be paid pro rata to the Holders entitled
--- ----
thereto.
(iii) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of Directors to
declare, or the Company to pay or set apart for payment, any dividends on
Preference Shares at any time.
(iv) Dividends accruing after April 1, 2002 on the Preference Shares
for any past Dividend Period and dividends in connection with any optional
redemption pursuant to paragraph (f)(i) may be declared and paid at any
time, without reference to any regular Dividend Payment Date, to Holders of
record on such date, not more than forty-five (45) days prior to the
payment thereof, as may be fixed by the Board of Directors of the Company.
(v) Dividends payable on the Preference Shares for any period less
than a year shall be computed on the basis of a 360-day year of twelve 30-
day months and the actual number of days elapsed in the period for which
payable.
(e) Liquidation Preference.
----------------------
(i) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, the Holders of
Preference Shares then outstanding shall be entitled to be paid out of the
assets of the Company available for distribution to its stockholders an
amount in cash equal to the liquidation preference for each share
outstanding, plus, without duplication, an amount in cash equal to
accumulated and unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding up (including an amount equal to a prorated dividend
for the period from the last Dividend Payment Date to the date fixed for
liquidation, dissolution or winding up) before any distribution shall be
made or any assets distributed to the holders of any of the Junior
Securities including, without limitation, Common Stock of the Company.
Except as provided in the preceding sentence, Holders of Preference Shares
shall not be entitled to any distribution in the event of any liquidation,
dissolution or winding up of the affairs of the Company. If the assets of
the Company are not sufficient to pay in full the liquidation payments
payable to the Holders of outstanding Preference Shares, then the holders
of all such shares shall share equally and ratably in such distribution of
assets first in proportion to the full liquidation preference to which each
is entitled until such preferences are paid in full, and then in proportion
to their respective amounts of accumulated but unpaid dividends.
<PAGE>
4
(ii) For the purposes of this paragraph (e), neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets
of the Company nor the consolidation or merger of the Company with or into
one or more entities shall be deemed to be a liquidation, dissolution or
winding up of the affairs of the Company.
(f) Redemption.
----------
(i) Optional Redemption. (A) The Company may, at the option of the
-------------------
Board of Directors, redeem at any time on or after April 1, 1997, in whole
or in part, in the manner provided for in paragraph (f)(iii) hereof, any or
all of the Preference Shares, at the redemption prices (expressed as a
percentage of the liquidation preference) set forth below plus, without
duplication, an amount in cash equal to all accumulated and unpaid
dividends per share (including an amount in cash equal to a prorated
dividend for the period from the Dividend Payment Date immediately prior to
the Redemption Date to the Redemption Date) (the "Optional Redemption
Price"). The redemption prices shall be as follows if redeemed during the
12-month period beginning April 1 of each of the years set forth below:
1997............................ 114%
1998............................ 114%
1999............................ 114%
2000............................ 114%
2001............................ 114%
2002............................ 111%
2003............................ 108%
2004............................ 105%
2005............................ 102%
2006............................ 100%
; provided that no redemption pursuant to this paragraph (f)(i)(A) shall be
--------
authorized or made unless prior thereto full accumulated and unpaid
dividends are declared and paid in full, or declared and a sum in cash set
apart sufficient for such payment, on the Preference Shares for all
Dividend Periods terminating on or prior to the Redemption Date.
(B) In the event of a redemption pursuant to paragrap h (f)(i)(A)
hereof of only a portion of the then outstanding Preference Shares, the
Company shall effect such redemption on a pro rata basis according to the
--- ----
number of shares held by each Holder of the Preference Shares, except that
the Company may redeem such shares held by Holders of fewer than 10 shares
(or shares held by Holders who would hold less than 10 shares as a result
of such redemption), as may be determined by the Company.
<PAGE>
5
(ii) Mandatory Redemption. (A) The Company will, on each June 1 and
--------------------
December 1 commencing on the first such date to occur more than 90 days
after the Commercial Operation Date, apply an amount equal to 100% of
Excess Cash Flow to mandatorily redeem the Preference Shares on a pro rata
basis, at the redemption prices (expressed as a percentage of the
liquidation preference) set forth below, plus, without duplication, an
amount in cash equal to all accumulated and unpaid dividends per share
(including an amount in cash equal to a prorated dividend for the period
from the Dividend Payment Date immediately prior to the Redemption Date to
the Redemption Date); provided that any Excess Cash Flow shall be applied
--------
(i) first, to mandatorily redeem the Senior Notes pursuant to the
provisions thereof, (ii) second, if none of the Senior Notes are
outstanding, to pay accumulated but unpaid dividends in cash on the
Preference Shares and (iii) third, to redeem the Preference Shares in
accordance with the terms of this Section (f)(ii)(A). The redemption
prices shall be as follows if redeemed during the 12-month period beginning
April 1 of the years set forth below:
1997................. 114%
1998................. 114%
1999................. 112%
2000................. 112%
2001................. 107%
2002 and thereafter.. 100%
Notwithstanding the foregoing, at such time as at least $50 million in aggregate
liquidation preference of Preference Shares has been redeemed or repurchased,
Excess Cash Flow may be used for a Permitted System Upgrade in lieu of redeeming
any Preference Shares.
(B) On April 1, 2007, the Company shall redeem, to the extent of
funds legally available therefor, in the manner provided for in paragraph
(e)(iii) hereof, all of the Prefe rence Shares then outstanding at a
redemption price equal to 100% of the liquidation preference per share,
plus, without duplication, an amount in cash equal to all accumulated and
unpaid dividends per share (including an amount equal to a prorated
dividend for the period from the Dividend Payment Date immediately prior to
the Redemption Date to the Redemp tion Date) (the "Mandatory Redemption
Price").
(iii) Procedures for Redemption. (A) At least thirty (30) days and
-------------------------
not more than sixty (60) days prior to the date fixed for any redemption of
the Preference Shares, written notice (the "Redemption Notice") shall be
given by first class mail, postage prepaid, to each Holder of record on the
record date fixed for such redemption of the Preference Shares at such
Holder's address as it appears on the stock books of the Company, provided
--------
that no failure to
<PAGE>
6
give such notice nor any deficiency therein shall affect the validity of
the procedure for the redemption of any Preference Shares to be redeemed
except as to the Holder or Holders to whom the Company has failed to give
said notice or to whom such notice was defective. The Redemption Notice
shall state:
(1) whether the redemption is pursuant to paragraph (f)(i) or
(f)(ii) hereof;
(2) the Optional Redemption Price or the Mandatory Redemption
Price, as the case may be;
(3) whether all or less than all the outstanding shares of the
Preference Shares are to be redeemed and the total number of
Preference Shares being redeemed;
(4) the date fixed for redemption;
(5) that the Holder is to surrender to the Company, in the
manner, at the place or places and at the price designated, his
certificate or certificates representing the Preference Shares to be
redeemed; and
(6) that dividends on the Preference Shares to be redeemed shall
cease to accumulate on such Redemption Date unless the Company
defaults in the payment of the Optional Redemption Price or the
Mandatory Redemption Price, as the case may be.
(B) Each Holder of Preference Shares shall surrender the certificate
or certificates representing such Preference Shares to the Company, duly
endorsed (or otherwise in proper form for transfer, as determined by the
Company), in the manner and at the place designated in the Redemption
Notice, and on the Redemption Date the full Optional Redemption Price or
Mandatory Redemption Price, as the case may be, for such shares shall be
payable in cash to the Person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall
be canceled and retired. In the event that less than all of the shares
represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares.
(C) On and after the Redemption Date, unless the Company defaults in
the payment in full of the applicable redemption price, dividends on the
Preference Shares called for redemption shall cease to accumulate on the
Redemption Date, and all rights of the Holders of redeemed shares shall
terminate with respect thereto on the Redemption Date, other than the right
to receive the Optional Redemption Price or the Mandatory Redemption Price,
as the case may be, without interest; provided, however, that if a notice
-------- -------
of redemption
<PAGE>
7
shall have been given as provided in paragraph (iii)(A) above and the funds
necessary for redemption (including an amount in respect of all dividends
that will accrue to the Redemption Date) shall have been irrevocably
deposited in trust for the equal and ratable benefit for the Holders of the
shares to be redeemed, then, at the close of business on the day on which
such funds are segregated and set aside, the Holders of the shares to be
redeemed shall cease to be stockholders of the Company and shall be
entitled only to receive the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be, without interest.
(g) Voting Rights.
-------------
(i) The Holders of Preference Shares, except as otherwise required
under Bermuda law or as set forth in paragraphs (ii), (iii) and (iv) below,
shall not be entitled or permitted to vote on any matter required or
permitted to be voted upon by the stockholders of the Company.
(ii) (A) So long as any shares of the Preference Shares are
outstanding, the Company shall not authorize any additional Preference
Shares or any class of Parity Securities without the affirmative vote or
consent of Holders of at least a majority of the then outstanding
Preference Shares, voting or consenting, as the case may be, as one class,
given in person or by proxy, either in writing or by resolution adopted at
an annual or special meeting; provided, however, that no such vote or
-------- -------
consent shall be necessary in connection with the issuance of additional
Preference Shares pursuant to the provisions of paragraph (d) hereof.
(B) So long as any Preference Shares are outstanding, the Company
shall not authorize any class of Senior Securities without the affirmative
vote or consent of Holders of at least a majority of the outstanding
Preference Shares, voting or consenting, as the case may be, as one class,
given in person or by proxy, either in writing or by resolution adopted at
an annual or special meeting.
(C) So long as any Preference Shares are outstanding, the Company
shall not amend this Certificate of Designation so as to affect materially
and adversely the specified rights, preferences, privileges or voting
rights of holders of Preference Shares without the affirmative vote or
consent of Holders of at least a majority of the issued and outstanding
Preference Shares, voting or consenting, as the case may be, as one class,
given in person or by proxy, either in writing or by resolution adopted at
an annual or special meeting.
(D) While any of the Preference Shares are outstanding, the Company
shall not amend or modify the
<PAGE>
8
Exchange Notes to be issued upon an exchange of Preference Shares in
accordance with paragraph (h) hereof in the form as executed on the Issue
Date without the affirmative vote or consent of Holders of at least a
majority of the Preference Shares then outstanding, voting or consenting,
as the case may be, as one class, and given in person or by proxy, either
in writing or by resolution adopted at an annual or special meeting.
(E) Except as set forth in paragraphs (g)(ii)(A), (g)(ii)(B) and
(g)(ii)(C) above, (x) the creation, authorization or issuance of any shares
of any Junior Securities, Parity Securities or Senior Securities or (y) the
increase or decrease in the amount of authorized Capital Stock of any
class, including Preference Shares, shall not require the consent of
Holders of Preference Shares and shall not be deemed to affect adversely
the rights, preferences, privileges or voting rights of Holders of
Preference Shares.
(iii) Without the affirmative vote or consent of Holders of a
majority of the issued and outstanding Preference Shares, voting or
consenting, as the case may be, as one class, given in person or by proxy,
either in writing or by resolution adopted at an annual or special meeting,
the Company shall not, in a single transaction or series of related
transactions, consolidate or merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its
assets to, another Person or adopt a plan of liquidation unless: (A)
either (1) the Company is the surviving or continuing Person or (2) the
Person (if other than the Company) formed by such consolidation or into
which the Company is merged or the Person that acquires by conveyance,
transfer or lease the properties and assets of the Company substantially as
an entirety or in the case of a plan of liquidation, the Person to which
assets of the Company have been transferred, shall be a corporation,
partnership or trust organized and existing under the laws of the United
States or any State thereof or the District of Columbia or under the laws
of Bermuda; (B) the Preference Shares shall be converted into or exchanged
for and shall become shares of such successor, transferee or resulting
Person, having in respect of such successor, transferee or resulting Person
the same powers, preferences and relative, participating, optional or other
special rights and the qualifications, limitations or restrictions thereon,
that the Preference Shares had immediately prior to such transaction; (C)
immediately after giving effect to such transactions, no Voting Rights
Triggering Event shall have occurred or be continuing; and (D) the Company
has delivered to the Holders of the Preference Shares prior to the
consummation of the proposed transaction an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or
<PAGE>
9
transfer complies with the terms hereof and that all conditions precedent
herein relating to such transaction have been satisfied.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of related
transactions) of all or substantially all of the properties or assets of
one or more Subsidiaries of the Company, the Capital Stock of which
constitutes all or substantially all of the properties and assets of the
Company shall be deemed to be the transfer of all or substantially all of
the properties and assets of the Company.
(iv) (A) If (1) the Company fails to pay dividends on the Preference
Shares in an amount equivalent to at least four quarterly dividends (a
"Dividend Default"); (2) the Company fails to redeem all of the then
outstanding Preference Shares on April 1, 2007 or otherwise fails to
discharge any redemption obligation with respect to the Preference Shares;
(3) the Company fails to make a Change of Control Offer (whether pursuant
to the terms of paragraph (i)(v) or otherwise) following a Change of
Control if such Change of Control Offer is required by paragraph (i) hereof
or fails to purchase Preference Shares from Holders who elect to have such
shares purchased pursuant to the Change of Control Offer; then in the case
of any of clauses (1)-(3) the number of directors constituting the Board of
Directors shall be adjusted by the number, if any, necessary to permit the
Holders of Preference Shares, voting separately and as one class, to elect
the lesser of two directors or that number of directors constituting 25% of
the members of the Board of Directors. Each such event described in
clauses (1), (2) and (3) is a "Voting Rights Triggering Event." Holders of
a majority of the issued and outstanding Preference Shares, voting
separately and as one class, shall have the exclusive right to elect the
lesser of two directors or that number of directors constituting 25% of the
members of the Board of Directors at a meeting therefor called upon
occurrence of such Voting Rights Triggering Event, and at every subsequent
meeting at which the terms of office of the directors so elected by the
Holders of Preference Shares expire (other than as described in (g)(iv)(B)
below). The voting rights provided herein shall be the exclusive remedy at
law or in equity of the holders of Preference Shares for any Voting Rights
Triggering Event.
(B) The right of the Holders of Preference Shares voting together as a
separate class to elect members of the Board of Directors as set forth in
subparagraph (g)(iv)(A) above shall continue until such time as (x) in the
event such right arises due to a Dividend Default, all accumulated
dividends that are in arrears on the Preference Shares are
<PAGE>
10
paid in full in cash; and (y) in all other cases, the failure, breach or
default giving rise to such Voting Rights Triggering Event is remedied,
cured or waived by the holders of at least a majority of the Preference
Shares then outstanding and entitled to vote thereon, at which time (1) the
special right of the Holders of Preference Shares so to vote as a class for
the election of directors and (2) the term of office of the directors
elected by the Holders of Preference Shares shall each terminate and the
directors elected by the holders of Common Stock or Capital Stock (other
than the Preference Shares), if applicable, shall constitute the entire
Board of Directors. At any time after voting power to elect directors
shall have become vested and be continuing in the Holders of Preference
Shares pursuant to paragraph (g)(iv) hereof, or if vacancies shall exist in
the offices of directors elected by the Holders of Preference Shares, a
proper officer of the Company may, and upon the written request of the
Holders of record of at least twenty-five percent (25%) of the Preference
Shares then outstanding addressed to the secretary of the Company shall,
call a special meeting of the Holders of Preference Shares, for the purpose
of electing the directors which such Holders are entitled to elect. If
such meeting shall not be called by a proper officer of the Company within
twenty (20) days after personal service of said written request upon the
secretary of the Company, or within twenty (20) days after mailing the same
within the United States by certified mail, addressed to the secretary of
the Company at its principal executive offices, then the Holders of record
of at least twenty-five percent (25%) of the outstanding Preference Shares
may designate in writing one of their number to call such meeting at the
reasonable expense of the Company, and such meeting may be called by the
Person so designated upon the notice required for the annual meetings of
stockholders of the Company and shall be held at the place for holding the
annual meetings of stockholders. Any Holder of Preference Shares so
designated shall have, and the Company shall provide, access to the lists
of stockholders to be called pursuant to the provisions hereof.
(C) At any meeting held for the purpose of electing directors at which
the Holders of Preference Shares shall have the right, voting together as a
separate class, to elect directors as aforesaid, the presence in person or
by proxy of the Holders of at least a majority of the outstanding
Preference Shares shall be required to constitute a quorum of such
Preference Shares.
(D) Any vacancy occurring in the office of a director elected by the
Holders of Preference Shares may be filled by the remaining directors
elected by the Holders of Preference Shares unless and until such vacancy
shall be filled by the Holders of Preference Shares.
<PAGE>
11
(v) In any case in which the Holders of Preference Shares shall be
entitled to vote pursuant to this paragraph (g) or pursuant to Bermuda law,
each Holder of Preference Shares entitled to vote with respect to such
matter shall be entitled to one vote for each Preference Share held.
(h) Exchange.
--------
(i) Requirements. The outstanding Preference Shares are exchangeable,
------------
in whole but not in part, at the option of the Company, at any time for
Global's Exchange Notes due 2007 (the "Exchange Notes") to be substantially
in the form of Exhibit A hereto; provided, however, that any such exchange
-------- -------
may only be made if on or prior to the date of such exchange (i) the
Company has paid (or is deemed to have paid) all accumulated dividends on
the Preference Shares (including the dividends payable on the date of
exchange) and there shall be no contractual impediment to such exchange;
(ii) no default or event of default under any other material instrument
governing Indebtedness of Global outstanding at the time would be caused
thereby; and (iii) the Company shall have delivered a written opinion to
the effect that all conditions to be satisfied prior to such exchange have
been satisfied. The exchange rate shall be $1.00 principal amount of
Exchange Notes for each $1.00 of liquidation preference of Preference
Shares, including, to the extent necessary, Exchange Notes in principal
amounts less than $1,000, provided that the Company shall have the right,
--------
at its option, to pay cash in an amount equal to the principal amount of
that portion of any Exchange Note that is not an integral multiple of
$1,000 instead of delivering an Exchange Note in a denomination of less
than $1,000. Each holder of Preference Shares by so holding agrees to
accept Exchange Notes and, in lieu of fractional shares, cash, in
satisfaction of the amounts due to him on redemption or repurchase of the
Preference Shares that is deemed to occur upon the exchange and waives any
right to receive cash other than as aforesaid in respect of such redemption
or repurchase.
(ii) Procedure for Exchange. (A) At least thirty (30) days and not
----------------------
more than sixty (60) days prior to the date fixed for exchange, written
notice (the "Exchange Notice") shall be given by first-class mail, postage
prepaid, to each Holder of record on the record date fixed for such
exchange of Preference Shares at such Holder's address as the same appears
on the stock books of the Company; provided that no failure to give such
--------
notice nor any deficiency therein shall affect the validity of the
procedure for the exchange of any Preference Shares to be exchanged except
as to the Holder or Holders to whom the Company has failed to give said
notice or to whom such notice was defective. The Exchange Notice shall
state:
<PAGE>
12
(1) the date fixed for exchange;
(2) that the Holder is to surrender to the Company, in the manner
and at the place or places designated, his certificate or certificates
representing the Preference Shares to be exchanged;
(3) that dividends on the Preference Shares to be exchanged shall
cease to accrue on such Exchange Date whether or not certificates for
Preference Shares are surrendered for exchange on such Exchange Date
unless the Company shall default in the delivery of Exchange Notes;
and
(4) that interest on the Exchange Notes shall accrue from the
Exchange Date whether or not certificates for Preference Shares are
surrendered for exchange on such Exchange Date.
(B) On or before the Exchange Date, each Holder of Preference
Shares shall surrender the certificate or certificates representing
such Preference Shares, in the manner and at the place designated in
the Exchange Notice. The Company shall cause the Exchange Notes to be
executed on the Exchange Date and, upon surrender in accordance with
the Exchange Notice of the certificates for any Preference Shares so
exchanged, duly endorsed (or otherwise in proper form for transfer, as
determined by the Company), such shares shall be exchanged by the
Company into Exchange Notes. The Company shall pay interest on the
Exchange Notes at the rate and on the dates specified therein from the
Exchange Date.
(C) If notice has been mailed as aforesaid and all Exchange Notes
necessary for such exchange shall have been duly executed by the
Company and delivered to the Holders of Preference Shares, then the
rights of the Holders of Preference Shares so exchanged as
stockholders of the Company shall cease (except the right to receive
Exchange Notes, an amount in cash equal to the amount of accrued and
unpaid dividends to the Exchange Date and, if the Company so elects,
cash in lieu of any Exchange Notes not in an integral multiple of
$1,000), and the Person or Persons entitled to receive the Exchange
Notes issuable upon exchange shall be treated for all purposes as the
registered Holder or Holders of such Exchange Notes as of the Exchange
Date.
(iii) No Exchange in Certain Cases. Notwithstanding the
foregoing provisions of this paragraph (h), the Company shall not be
entitled to exchange the Preference Shares for Exchange Notes
<PAGE>
13
(i) if such exchange, or any term or provision of the Exchange Notes,
or the performance of the Company's obligations under the Exchange
Notes, shall materially violate any applicable law or if, at the time
of such exchange, the Company is insolvent or if it would be rendered
insolvent by such exchange or (ii) in the event Global or any of its
Subsidiaries, after the issuance of the Preference Shares, has
transferred, directly or indirectly, to any Subsidiary of the Company,
other than any Subsidiary of Global, assets or property of Global or
its Subsidiaries constituting in any individual transfer at least 10%,
or in the aggregate at least 20%, of the assets of Global and its
Subsidiaries, taken as a whole, unless each such transferee
simultaneously with the exchange of Preference Shares for Exchange
Notes executes and delivers in favor of the holders of the Exchange
Notes a guarantee of all of Global's obligations with respect to the
Exchange Notes, which guarantee shall be subordinated to Senior
Indebtedness (as defined in the Exchange Notes) of such transferee to
the same extent as the Exchange Notes are subordinated to Senior
Indebtedness of Global and which is otherwise in form and substance
reasonably satisfactory to the holders of a majority of the Preference
Shares.
(i) Change of Control.
-----------------
(i) In the event of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company shall
notify the Holders of the Preference Shares in writing of such
occurrence and shall make an offer to purchase (the "Change of Control
Offer") all then outstanding Preference Shares at a purchase price of
101% of the liquidation preference thereof plus, without duplication,
an amount in cash equal to all accumulated and unpaid dividends per
share (including an amount in cash equal to a prorated dividend for
the period from the Dividend Payment Date immediately prior to the
Change of Control Payment Date to the Change of Control Payment Date).
(ii) Within 30 days following the Change of Control Date, the
Company shall send, by first class mail, postage prepaid, a notice to
each Holder of Preference Shares at such Holder's address as it
appears on the stock books of the Company, which notice shall govern
the terms of the Change of Control Offer. The notice to the Holders
shall contain all instructions and materials necessary to enable such
Holders to tender Preference Shares pursuant to the Change of Control
Offer. Such notice shall state:
<PAGE>
14
(A) that a Change of Control has occurred, that the Change of
Control Offer is being made pursuant to this paragraph (i) and that
all Preference Shares validly tendered and not withdrawn will be
accepted for payment;
(B) the purchase price (including the amount of accumulated and
unpaid dividends, if any) and the purchase date (which shall be no
earlier than 30 days nor later than 45 days from the date such notice
is mailed, other than as may be required by law) (the "Change of
Control Payment Date");
(C) that any Preference Shares not tendered will continue to
accrue dividends;
(D) that, unless the Company defaults in making payment therefor,
any Preference Shares accepted for payment pursuant to the Change of
Control Offer shall cease to accrue dividends after the Change of Control
Payment Date;
(E) that Holders electing to have any Preference Shares purchased
pursuant to a Change of Control Offer will be required to surrender the
certificate or certificates representing such shares, properly endorsed for
transfer together with such customary documents as the Company and the
transfer agent may reasonably require, in the manner and at the place
specified in the notice prior to the close of business on the Business Day
prior to the Change of Control Payment Date;
(F) that Holders will be entitled to withdraw their election if
the Company receives, not later than five Business Days prior to the Change
of Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the number of Preference
Shares the Holder delivered for purchase and a statement that such Holder
is withdrawing his election to have such Preference Shares purchased;
(G) that Holders whose Preference Shares are purchased only in
part will be issued a new certificate representing the unpurchased
Preference Shares; and
(H) the circumstances and relevant facts regarding such Change of
Control.
(iii) The Company will comply with any securities laws and
regulations, to the extent such laws and regulations are applicable to the
repurchase of Preference Shares in connection with a Change of Control
Offer.
(iv) On the Change of Control Payment Date the Company shall (A)
accept for payment the Preference Shares
<PAGE>
15
validly tendered pursuant to the Change of Control Offer, (B) pay to the
Holders of shares so accepted the purchase price therefor in cash and (C)
cancel and retire each surrendered certificate. Unless the Company
defaults in the payment for the Preference Shares tendered pursuant to the
Change of Control Offer, dividends will cease to accumulate with respect to
the Preference Shares tendered and all rights of Holders of such tendered
shares will terminate, except for the right to receive payment therefor, on
the Change of Control Payment Date.
(v) If the purchase of the Preference Shares would violate or
constitute a default under the Senior Credit Facilities, the Senior Notes
or any other Indebtedness, then, notwithstanding anything to the contrary
contained above, prior to complying with the foregoing provisions, but in
any event within 30 days following the Change of Control Date, the Company
shall, to the extent needed to permit such purchase of the Preference
Shares, either (A) repay in full all such Indebtedness under the Senior
Credit Facilities, the Senior Notes and such other Indebtedness and, in the
case of the Senior Credit Facilities, the Senior Notes or other
Indebtedness, terminate all commitments outstanding thereunder or (B)
obtain the requisite consents, if any, under the Senior Credit Facilities,
the Senior Notes or the instruments governing such Indebtedness required to
permit the repurchase of Preference Shares required by this paragraph (i).
Until the requirements of the immediately preceding sentence are satisfied,
the Company shall not make, and shall not be obligated to make, any Change
of Control Offer; provided that the Company's failure to comply with the
--------
provisions of this paragraph (i)(v) shall constitute a Voting Rights
Triggering Event.
(j) Conversion or Exchange. The Holders of Preference Shares shall
----------------------
not have any rights hereunder to convert such shares into or exchange such
shares for shares of any other class or classes or of any other series of any
class or classes of Capital Stock of the Company or for Exchange Notes.
(k) Reissuance of Preference Shares. Preference Shares that have been
-------------------------------
issued and reacquired in any manner, including shares purchased or redeemed or
exchanged, shall (upon compliance with any applicable provisions of the laws of
Bermuda) have the status of authorized and unissued Preference Shares
undesignated as to series and may be redesignated and reissued as part of any
series of Preference Shares, provided that any issuance of such Preference
--------
Shares must be in compliance with the terms hereof.
(l) Business Day. If any payment, redemption or exchange shall be
------------
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or
<PAGE>
16
exchange shall be made on the immediately succeeding Business Day.
(m) Definitions. As used in this Certificate of Designation, the
-----------
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Advisory Services Agreement" means the Advisory Services Agreement,
---------------------------
dated as of March 25, 1997, between Global and PCG Telecom Services LLC, a
Delaware limited liability company.
"Affiliate" as applied to any Person, means any other Person directly
---------
or indirectly controlling, controlled by, or under common control with,
that Person. For the purposes of this definition, "control" (including the
correlative meanings, the terms "controlling," "controlled by" and "under
common control with"), as applied to any Person, means (i) the possession,
directly or indirectly, of the power to direct or cause the direction of
the management and policies of that Person, whether through the ownership
of voting securities or by contract or otherwise, or (ii) the ownership of
more than 10% of the voting securities of that Person; provided that
--------
Preference Shares shall not constitute voting securities.
"Board of Directors" means, with respect to any Person, the Board of
------------------
Directors of such Person or any duly authorized committee of that Board.
"Board Resolution" means a copy of a resolution certified pursuant to
----------------
an Officers' Certificate to have been duly adopted by the Board of
Directors of the Company and to be in full force and effect, and delivered
to the Holders.
"Business Day" means any day excluding Saturday, Sunday and any day
------------
which is a legal holiday under the laws of New York, New York or of Canada
or Bermuda or is a day on which banking institutions therein located are
authorized or required by law or other governmental action to close.
"Cable System" means the submarine fiber optic cable system linking
------------
the United States to the United Kingdom, the United Kingdom to Germany
(and/or the Netherlands) and Germany (and/or the Netherlands) to the United
States.
"Capital Stock" means (i) with respect to any Person that is a
-------------
corporation, any and all shares, interests, membership units,
participations or other equivalents (however designated and whether or not
voting) of corporate stock, including, without limitation, each class of
Common Stock or Preferred Shares of such Person and (ii) with
<PAGE>
17
respect to any Person that is not a corporation, any and all partnership or
other equity interests of such Person.
"Change in Law" means any change in or amendment to any Law, or any
-------------
change in official position regarding the application or interpretation of
such Law.
"Change of Control" means the occurrence of one or more of the
-----------------
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially
all of the assets of Parent or the Company to any Person or group of
related Persons for purposes of Section 13(d) of the Exchange Act (a
"Group"), together with any Affiliates thereof; (ii) the approval by the
holders of Capital Stock of Parent or the Company of any plan or proposal
for the liquidation or dissolution of Parent or the Company; (iii) any
Person or Group (other than the Permitted Holders or Parent) shall become
the owner, directly or indirectly, beneficially or of record, of Voting
Stock representing more than 35% of the total voting power of all Voting
Stock of Parent or the Company; (iv) the occurrence of any "Change of
Control" as defined in the Senior Credit Facilities or the Senior Notes; or
(v) the termination of PCG or its Affiliates under the Advisory Services
Agreement.
"Change of Control Date" shall have the meaning ascribed to it in
----------------------
paragraph (i)(i) hereof.
"Change of Control Offer" shall have the meaning ascribed to it in
-----------------------
paragraph (i)(i) hereof.
"Change of Control Payment Date" shall have the meaning ascribed to it
------------------------------
in paragraph (i)(ii) hereof.
"Commercial Operation Date" means the date of commercial service for
-------------------------
the entire Cable System as defined in the Supply Contract.
"Common Stock" of any Person means any and all shares, interests or
------------
other participations in, and other equivalents (however designated and
whether voting or non-voting) of, such Person's common stock, whether
outstanding on the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"Company Taxes" means, with respect to any semi-annual period, the
-------------
amount of any Tax imposed during, or with respect to, such period and to
which the Company becomes subject after the date hereof as a result of any
change in or amendment to any law or any change in official position
regarding the application or interpretation of such law which becomes
effective after the date hereof.
<PAGE>
18
"Company" means Global Telesystems Holdings Ltd., a company organized
-------
under the laws of Bermuda.
"Disqualified Capital Stock" means any Capital Stock of the Company or
--------------------------
a Subsidiary thereof which, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable at the option
of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or is redeemable at the option of the holder thereof, in whole or in part,
on or prior to the maturity date of the Preference Shares, for cash or
securities constituting Indebtedness. Without limitation of the foregoing,
Disqualified Capital Stock shall be deemed to include (i) any Preferred
Shares of a Subsidiary of the Company and (ii) any Preferred Shares of the
Company, with respect to either of which, under the terms of such Preferred
Shares, by agreement or otherwise, such Subsidiary of the Company is
obligated to pay current dividends or distributions in cash during the
period prior to the maturity date of the Preference Shares; provided,
--------
however, that Preferred Shares of the Company or any Subsidiary thereof
-------
that are issued with the benefit of provisions requiring a change of
control offer to be made for such Preferred Shares in the event of a change
of control of the Company or Subsidiary, which provisions have
substantially the same effect as the provisions hereof described under
"Change of Control," shall not be deemed to be Disqualified Capital Stock
solely by virtue of such provisions.
"Dividend Default" shall have the meaning ascribed to it in paragraph
----------------
(g)(ii) hereof.
"Dividend Payment Date" means March 1, June 1, September 1 and
---------------------
December 1 of each year; provided that the payment of cash dividends shall
--------
occur only on each June 1 and December 1.
"Dividend Period" means each semi-annual period ending on a Dividend
---------------
Payment Date.
"Dividend Record Date" means the February 15, May 15, August 15 and
--------------------
November 15 of each year preceding such Dividend Payment Date.
"Excess Cash Flow" means for each semi-annual period commencing after
----------------
the Commercial Operation Date, 100% of Operating Cash Flow minus (i) an
-----
amount of Company operating expenses not to exceed $2.5 million per annum
without the consent of the holders of a majority in aggregate liquidation
preference of the outstanding Preference Shares, minus (ii) an amount equal
-----
to all Permitted Tax Distributions, minus (iii) all Parent expenses not to
-----
exceed $1.5 million without the consent of the holders of a
<PAGE>
19
majority in aggregate liquidation preference of the outstanding Preference
Shares, minus (iv) any Company Taxes and minus (v) an amount equal to the
----- -----
aggregate of all amounts required to be paid to the holders of Senior Notes
during such semi-annual period.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time, and any successor statute.
"Exchange Date" means the date of issuance of any Exchange Notes in
-------------
accordance with paragraph (h) hereof.
"Exchange Notes" shall have the meaning ascribed to it in paragraph
--------------
(h)(i) hereof.
"Exchange Notice" shall have the meaning ascribed to it in paragraph
---------------
(h)(ii) hereof.
"Global" means Global Telesystems Ltd., a company organized under the
------
laws of Bermuda, and which is a wholly-owned Subsidiary of the Company.
"Holder" means a holder of Preference Shares as reflected in the stock
------
books of the Company.
"Indebtedness" means, with respect to any Person, (i) all
------------
indebtedness, obligations and liabilities of such Person for borrowed
money, (ii) that portion of obligations with respect to capital leases that
is properly classified as a liability on a balance sheet of such Person in
conformity with generally accepted accounting principles, (iii) notes
payable and drafts accepted representing extensions of credit, whether or
not representing obligations for borrowed money, of such Person, (iv) any
indebtedness, obligation or liability of such Person owed for all or any
part of the deferred purchase price of property or services, which purchase
price is (a) due more than six months (or a longer period of up to one
year, if such terms are available from suppliers in the ordinary course of
business) from the date of incurrence of the obligation in respect thereof
or (b) evidenced by a note or similar written instrument, (v) all
indebtedness, obligations and liabilities secured by any lien on any
property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person except that "Indebtedness" shall
not include trade payables and accrued liabilities incurred in the ordinary
course of business for the purchase of goods or services which are not
secured by a lien, (vi) guarantees of such Person in respect of
Indebtedness of other Persons and (vii) all Disqualified Capital Stock
issued by such Person with the amount of Indebtedness represented by such
<PAGE>
20
Disqualified Capital Stock being equal to the greater of its voluntary or
involuntary liquidation preference and its maximum fixed repurchase price,
but excluding accrued dividends, if any; provided that Indebtedness shall
--------
not include any obligations of Global under the Supply Contract. For
purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock
as if such Disqualified Capital Stock were purchased on any date on which
Indebtedness shall be required to be determined pursuant to this Agreement,
and if such price is based upon, or measured by, the fair market value of
such Disqualified Capital Stock, such fair market value to be determined
reasonably and in good faith by the Board of Directors of the issuer of
such Disqualified Capital Stock.
"Issue Date" means the date of original issuance of the Preference
----------
Shares.
"Junior Securities" shall have the meaning ascribed to it in paragraph
-----------------
(d) hereof.
"Laws" means all applicable statutes, laws, ordinances, regulations,
----
rules, orders, judgments, writs, injunctions or decrees of any state,
commonwealth, nation, territory, possession, province, county, parish,
town, township, village municipality or Tribunal and "Law" means each of
the foregoing.
"Mandatory Redemption Price" shall have the meaning ascribed to it in
--------------------------
paragraph (f)(ii) hereof.
"Officer" means the Chairman of the Board, the Chief Executive
-------
Officer, the President, any Vice President, the Chief Financial Officer,
the Controller, the Treasurer or the Secretary of the Company, as the case
may be.
"Officers' Certificate" means, as applied to any corporation, a
---------------------
certificate executed on behalf of such corporation by two Officers.
"Operating Cash Flow" means, with respect to Global, for each semi-
-------------------
annual period commencing after the Commercial Operation Date, that portion
of Global's "Excess Cash Flow" (as defined in the Senior Credit Facilities
as in effect on June , 1997, which definition is incorporated by
reference herein and may be amended, supplemented or otherwise modified in
a manner that is not materially adverse to the Holders) available to the
Company pursuant to the terms of the Senior Credit Facilities as in effect
on June , 1997 (which terms are incorporated by reference herein and may
be amended, supplemented or otherwise modified in a manner that
<PAGE>
21
is not materially adverse to the Holders) in respect of such period.
"Opinion of Counsel" means an opinion of counsel that, in such
------------------
counsel's opinion, all conditions precedent to be performed by the Company
prior to the taking of any proposed action have been taken.
"Optional Redemption Price" shall have the meaning ascribed to it in
-------------------------
paragraph (f)(i) hereof.
"Parent" means GT Parent Holdings LDC, a Cayman Islands limited
------
duration company, and the parent company of the Company.
"Parity Securities" shall have the meaning ascribed to it in paragraph
-----------------
(c) hereof.
"PCG" means Pacific Capital Group, Inc., or its Affiliates.
---
"Permitted Holders" means each of PCG, CIBC and PCG Telecom LDC and
-----------------
their respective Affiliates.
"Permitted System Upgrade" means upgrades to the Cable System
------------------------
contemplated by Article 6-A of the Supply Contract in an amount not to
exceed $75 million.
"Permitted Tax Distributions" means the payment of distributions to
---------------------------
Parent at such times and in such amounts that are sufficient to enable
Parent to satisfy timely, or to further distribute such amounts to its
members or their members, partners, or shareholders (collectively, "Upper
Tier Persons") in order that such Upper Tier Persons may satisfy timely,
any Tax liability resulting from a Change in Law that becomes effective
after the date hereof, which distributions shall take into account, and be
increased by, any further Taxes imposed upon Parent or an Upper Tier Entity
as a result of the receipt of such distributions.
"Person" means and includes natural persons, corporations, limited
------
liability companies, limited partnerships, general partnerships, joint
stock companies, joint ventures, associations, companies, trusts, banks,
trust companies, land trusts, business trusts or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
"Preference Shares" shall have the meaning ascribed to it in the
-----------------
introductory paragraph hereof.
"Preferred Shares" of any Person means any Capital Stock of such
----------------
Person that has preferential rights (as
<PAGE>
22
compared to any other Capital Stock of such Person) with respect to
dividends or redemptions or upon liquidation.
"Redemption Date", with respect to any Preference Shares, means the
---------------
date on which such Preference Shares are redeemed by the Company.
"Redemption Notice" shall have the meaning ascribed to it in paragraph
-----------------
(f)(iii) hereof.
"Senior Credit Facilities" means the long form Senior Credit
------------------------
Facilities Commitment Letter and, upon execution thereof, instead means,
the Credit Agreement among Global, the lenders named therein and Canadian
Imperial Bank of Commerce, as agent, together with the documents related
thereto (including, without limitation, any guarantee agreements and
security documents), in each case as such agreements may be amended
(including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
adding Subsidiaries of Global as additional borrowers or guarantors
thereunder) all or any portion of the Indebtedness under such agreement or
any successor or replacement agreement and whether by the same or any other
agent, lender or group of lenders.
"Senior Notes" means the Senior Notes due 2004 of the Company issued
------------
pursuant to the Senior Note Securities Purchase Agreement dated as of March
25, 1997 among the Company and the purchasers named therein as such
agreement may be amended (including any amendment and restatement thereof),
supplemented or otherwise modified from time to time.
"Senior Securities" shall have the meaning ascribed to it in paragraph
-----------------
(c) hereof.
"Subsidiary" means, with respect to any Person, any corporation,
----------
association or other business entity of which more than 50% of the total
voting power of shares of stock or other equity interest entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereto is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"Supply Contract" means the Project Development and Construction
---------------
Contract dated as of March 25, 1997 between AT&T-Submarine Services, Inc.
and Global, as amended from time to time.
<PAGE>
23
"Taxes" means all taxes, assessments, fees, levies, impost, duties,
-----
penalties, deductions, liabilities, withholdings or other charges of any
nature whatsoever, including interest penalties, from time to time or at
any time imposed by any Law or any Tribunal.
"Tribunal" means any government, any arbitration panel, any court or
--------
any governmental department, commission, board, agency, authority or
instrumentality of the United States or any state, province, commonwealth,
nation, territory, possession, county, parish, town, township, village or
municipality, whether now or hereafter constituted and/or existing.
"Voting Rights Triggering Event" shall have the meaning ascribed to it
------------------------------
in paragraph (g)(iv) hereof.
<PAGE>
24
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed by , its , this day of
June, 1997.
GLOBAL TELESYSTEMS HOLDINGS LTD.
By:___________________________
Name:
Title:
<PAGE>
(Revised June 13, 1997)
SENIOR SUBORDINATED EXCHANGE NOTE THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE DISPOSED OF OR
TRANSFERRED UNLESS REGISTERED UNDER SUCH ACT OR UNLESS AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. IN THE CASE OF A TRANSFER OTHER THAN (1) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (2) PURSUANT TO RULE 144A
UNDER THE ACT, FOR SO LONG AS IT IS AVAILABLE, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
ACT THAT PURCHASES FOR ITS ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, THE HOLDER SHALL, AT THE REQUEST OF THE COMPANY, PROVIDE
TO THE ISSUER HEREOF AN OPINION OF COUNSEL THAT THE TRANSFER DOES NOT REQUIRE
REGISTRATION UNDER THE ACT.
GLOBAL TELESYSTEMS LTD. (the "Company")
SENIOR SUBORDINATED EXCHANGE NOTE
DUE APRIL 1, 2007
$____________ [DATE]
GLOBAL TELESYSTEMS LTD., a Bermuda company ("Payor"), for value
received, promises to pay to the order of _________ ("Payee") the principal
amount of __________ DOLLARS ($____________), together with accrued interest
thereon, calculated and payable as set forth below in this Note (together with
any PIK Notes issued pursuant to Section 2.1 below, the "Notes"). The principal
and interest on the Notes is payable in lawful money of the United States of
America in immediately available funds at such place in the United States as
Payee may from time to time designate in writing to Payor.
This Note is made pursuant to that certain Preference Share Securities
Purchase Agreement (the "Purchase Agreement"), dated March 25, 1997, by and
between Global Telesystems Holdings Ltd. ("Holdings") and the Purchasers named
therein, and is one of the "Exchange Notes" referred to therein. All
capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in the Purchase Agreement.
SECTION 1 DEFINITIONS
1.1 Certain Defined Terms
---------------------
The following terms used in this Note shall have the following
meanings:
"Acquired Indebtedness" means Indebtedness of a Person existing at the
time such Person becomes a Subsidiary of the
<PAGE>
2
Company or assumed in connection with the acquisition of assets from such
Person.
"Additional Amounts" has the meaning ascribed to such term in Section
7.10.
"Additional Shares" means the purchase by one or more Persons of
shares of the Class A Common Shares of Parent representing 8.5% of such
outstanding shares of voting Common Stock of Parent on the Closing Date for
gross proceeds to Parent of at least $7.5 million, which proceeds will be
contributed to Holdings on the Closing Date.
"Advisory Services Agreement" means the Advisory Services Agreement,
dated as of March 25, 1997, between Global and PCG Telecom Services LLC, a
Delaware limited liability company.
"Affiliate," as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means (i) the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise, or (ii) the ownership of more than 10% of the voting
securities of that Person; provided that the Senior Preferred Stock shall not
constitute voting securities.
"Affiliate Transaction" has the meaning ascribed to such term in
Section 4.9.
"Agent" has the meaning ascribed to such term in Section 7.8.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
lease, assignment, transfer or other disposition for value (including, without
limitation, pursuant to any amalgamation, merger or consolidation or pursuant to
any sale-and-leaseback transaction) by the Company or by any of its Subsidiaries
to any Person other than the Company or any of its wholly-owned Subsidiaries
(any such transaction, a "disposition") of (i) any Capital Stock of any of the
Company's Subsidiaries, (ii) all or substantially all of the assets of any
division or line of business of the Company or of any of its Subsidiaries, or
(iii) any other assets (whether tangible or intangible) of the Company or of any
of its Subsidiaries; excluding (a) any disposition of inventory in the ordinary
---------
course of business or obsolete equipment in the ordinary course of business
consistent with past practices of the Company or the lease or sub-lease of any
real or personal property in the ordinary course of business, (b) any sale,
lease or transfer of Capacity and (c) any
<PAGE>
3
disposition of stock or assets in any single transaction or related series of
transactions the aggregate value of which is equal to $1,000,000 or less.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Company or any Subsidiary from such Asset Sale (including cash
received as consideration for the assumption of liabilities incurred in
connection with or in anticipation of such Asset Sale), after (a) provision for
all income or other taxes measured by or resulting from such Asset Sale, (b)
payment of all brokerage commissions, underwriting and other fees and expenses
related to such Asset Sale, (c) provision for minority interest holders in any
Subsidiary as a result of such Asset Sale and (d) deduction of appropriate
amounts to be provided by the Company or a Subsidiary as a reserve, in
accordance with GAAP, against any liabilities associated with the assets sold or
disposed of in such Asset Sale and retained by the Company or a Subsidiary after
such Asset Sale, including, without limitation, pension and other post
employment benefit liabilities and liabilities related to environmental matters
or against any indemnification obligations associated with the assets sold or
disposed of in such Asset Sale, and (ii) promissory notes and other noncash
consideration received by the Company or any Subsidiary from such Asset Sale or
other disposition upon the liquidation or conversion of such notes or noncash
consideration into cash.
"AT&T-SSI" means AT&T Submarine Systems, Inc.
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sale that have not been applied in
accordance with clause (III)(a) or (III)(b), and which have not yet been the
basis for an Excess Proceeds Offer in accordance with clause (III)(c), of
Section 2.2C(i).
"Bank Indebtedness" means any and all obligations of every nature of
the Company and its Subsidiaries under or in respect of the Senior Credit
Facilities whether for principal, reimbursements, interest, fees, expenses,
indemnities or otherwise, and whether primary, secondary, direct, indirect,
contingent, fixed or otherwise (including obligations of performance).
"Bankruptcy Law" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute or any
other United States federal, state or local law or the law of any other
jurisdiction relating to bankruptcy, insolvency, winding up, liquidation,
reorganization or relief of debtors, whether in effect on the date hereof or
hereafter.
"Bankruptcy Order" means any court order made in a proceeding pursuant
to or within the meaning of any Bankruptcy Law, containing an adjudication of
bankruptcy or insolvency, or
<PAGE>
4
providing for liquidation, winding up, dissolution or reorganization, or
appointing a custodian of a debtor or of all or any substantial part of a
debtor's property, or providing for the staying, arrangement, adjustment or
composition of indebtedness or other relief of a debtor.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any duly authorized committee of that Board.
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of New York, New York or of Canada or
Bermuda or is a day on which banking institutions therein located are authorized
or required by law or other governmental action to close.
"Cable System" means the submarine fiber optic cable system linking
the United States to the United Kingdom, the United Kingdom to Germany (and/or
the Netherlands) and Germany (and/or the Netherlands) to the United States.
"Capacity" means all capacity of the Cable System which is available
for sale, lease or other disposition, as more specifically defined in the
Capacity Sales Agreements.
"Capacity Sales Agreements" means any agreement between the Company or
any of its Subsidiaries and any other Person providing for the sale, lease or
other disposition of Capacity of the Cable System.
"Capital Lease," as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is required to be accounted for as a capital lease on the
balance sheet of that Person.
"Capitalized Lease Obligation" means obligations under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, membership units, participations or
other equivalents (however designated and whether or not voting) of corporate
stock, including, without limitation, each class of Common Stock and Preferred
Stock of such Person and (ii) with respect to any Person that is not a
corporation, any and all partnership or other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued or
unconditionally guaranteed by the United
<PAGE>
5
States Government or issued by any agency thereof and backed by the full faith
and credit of the United States, in each case maturing within one year from the
date of acquisition thereof; (ii) marketable direct obligations issued by any
state of the United States of America or any political subdivision of any such
state or any public instrumentality thereof maturing within one year from the
date of acquisition thereof and, at the time of acquisition, having the highest
rating obtainable from either Standard & Poor's Rating Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of acquisition,
having the highest rating obtainable from either S&P's or Moody's; and (iv)
certificates of deposit or bankers' acceptances maturing within one year from
the date of acquisition thereof issued by any commercial bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia that (a) is at least "adequately capitalized" (as defined in the
regulations of its primary Federal banking regulator) and (b) has Tier 1 capital
(as defined in such regulations) of not less than $100,000,000; (v) shares of
any money market mutual fund that (a) has at least 95% of its assets invested
continuously in the types of investments referred to in clauses (i) and (ii)
above, (b) has net assets of not less than $500,000,000, and (c) has the highest
rating obtainable from either S&P's or Moody's; and (vi) repurchase agreements
with respect to, and which are fully secured by a perfected security interest
in, obligations of a type described in clause (i) or clause (ii) above and are
with any commercial bank described in clause (iv) above.
"Certificate of Designation" means the Certificate of Designation duly
adopted by the Board of Directors of the Company setting forth the rights,
preferences and priorities of the Preference Shares.
"Change in Law" means any change in or amendment to any Law, or any
change in official position regarding the application or interpretation of such
Law.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of Parent, Holdings or the Company to any Person or group of related
Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), together
with any Affiliates thereof; (ii) the approval by the holders of Capital Stock
of Parent, Holdings or the Company of any plan or proposal for the liquidation
or dissolution of Parent, Holdings or the Company; (iii) any Person or Group
(other than the Permitted Holders or Parent or Holdings) shall become the owner,
directly or indirectly, beneficially or of record, of Voting Stock representing
more than 35% of the total voting power of all Voting Stock of Parent, Holdings
or the Company; (iv) the occurrence of any "Change of Control" as defined in the
Senior
<PAGE>
6
Credit Facilities; or (v) the termination of PCG or its Affiliates under the
Advisory Services Agreement.
"Change of Control Date" has the meaning ascribed to such term in
Section 2.2C(ii).
"Change of Control Offer" has the meaning ascribed to such term in
Section 2.2C(ii).
"CIBC" means CIBC Wood Gundy Securities Corp. or its Affiliates.
"CIBC Capital Equity Investment" means the purchase by CIBC Wood Gundy
Capital (SFC) Inc. or one or more of its Affiliates of shares of Class C Common
Shares of Parent representing 38.25% of the outstanding shares of voting Common
Stock on the Closing Date for gross proceeds to Parent of at least $33.75
million, which proceeds will be contributed to the Company on the Closing Date.
"Closing Date" means the date of the consummation of the purchase of
the Preference Shares.
"Commercial Operation Date" means the date of commercial service for
the entire Cable System as defined in the Supply Contract.
"Common Stock" of any Person means any and all shares, interests or
other participations in, and other equivalents (however designated and whether
voting or non-voting) of, such Person's common stock, whether outstanding on the
Closing Date or issued after the Closing Date, and includes, without limitation,
all series and classes of such common stock.
"Company" has the meaning ascribed to such term in the introduction to
this Note.
"Company Taxes" means with respect to any Taxable period of the
Company, the amount of Tax imposed during, or with respect to, such period as a
result of a Change in Law which change becomes effective after the Closing Date.
"Consolidated Interest Coverage Ratio" means of any Person, with
respect to any determination date, the ratio of (i) EBITDA for such Person's
prior four full Fiscal Quarters for which financial results are available, to
(ii) consolidated Interest Expense of such Person for such period. For purposes
of computing the Consolidated Interest Coverage Ratio, (A) if the Indebtedness
which is the subject of a determination under this provision is Acquired
Indebtedness, or Indebtedness incurred in connection with the simultaneous
acquisition (by way of merger, consolidation or otherwise) of any Person,
business, property or assets (an "Acquisition"), then such ratio shall be
determined by giving effect (on a pro forma basis, as if the transaction had
<PAGE>
7
occurred at the beginning of the four-quarter period) to both the incurrence or
assumption of such Acquired Indebtedness or such other Indebtedness by the
Company and the inclusion in the Company's EBITDA of the EBITDA of the acquired
Person, business, property or assets, (B) if any Indebtedness outstanding or to
be incurred (x) bears a floating rate of interest, the interest expense on such
Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account on a pro forma basis any Interest Rate Agreement applicable to such
Indebtedness if such Interest Rate Agreement has a remaining term as at the date
of determination in excess of 12 months), (y) bears, at the option of the
Company or a Subsidiary, a fixed or floating rate of interest, the interest
expense on such Indebtedness shall be computed by applying, at the option of the
Company or such Subsidiary, either a fixed or floating rate and (z) was incurred
under a revolving credit facility, the interest expense on such Indebtedness
shall be computed based upon the average daily balance of such Indebtedness
during the applicable period, (C) for any Fiscal Quarter prior to the date
hereof included in the calculation of such ratio, such calculation shall be made
on a pro forma basis, giving effect to the Transaction, the issuance of the
Notes, the incurrence of Indebtedness under the Senior Credit Facilities and the
use of the net proceeds therefrom as if the same had occurred at the beginning
of the four-quarter period used to make such calculation and (D) for any Fiscal
Quarter included in the calculation of such ratio prior to the date that any
Asset Sale was consummated, or that any Indebtedness was incurred, or that any
Acquisition was affected, by the Company or any of its Subsidiaries, such
calculation shall be made on a pro forma basis, giving effect to each Asset
Sale, incurrence of Indebtedness or Acquisition, as the case may be, and the use
of any proceeds therefrom, as if the same had occurred at the beginning of the
four-quarter period used to make such calculation.
"Consolidated Interest Expense" means, with respect to any Person for
any period, without duplication, the sum of (i) the total interest expense of
such Person and its Subsidiaries for such period, on a consolidated basis,
determined in accordance with GAAP (including amortization of original issue
discount (other than original issue discount attributable to the issuance of the
Senior Notes), non-cash interest payments and the interest component of
Capitalized Lease Obligations), whether paid or accrued, to the extent such
expense was deducted in computing the Consolidated Net Income of such Person,
and (ii) an amount equal to the product of (A) all redeemable cash dividends
paid during such period on any Disqualified Capital Stock of such Person and its
Subsidiaries times (B) a fraction, the numerator of which is one and the
-----
denominator of which is one minus the then effective consolidated Federal, state
and local tax rate of such Person expressed as a decimal.
<PAGE>
8
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the net income (or loss) of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (a) the net income of any other Person in which such
--------
Person or any of its Subsidiaries has an interest (which interest does not cause
the net income of such other Person to be consolidated with the net income of
such Person and its Subsidiaries in accordance with GAAP) shall be included only
to the extent of the amount of dividends or distributions actually paid to such
Person or such Subsidiary by such other Person during such period; (b) the net
income of any Subsidiary of such Person that is subject to any Payment
Restriction shall be excluded to the extent such Payment Restriction would
prevent the payment of an amount that otherwise could have been paid to such
Person or to a Subsidiary of such Person not subject to any Payment Restriction;
and (c) there shall be excluded (i) the net income (or loss) of any other Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition, (ii) all gains and losses realized on any Asset Sale
(without regard to the $1,000,000 threshold set forth in the definition of Asset
Sale), (iii) all gains and losses realized on the purchase or other acquisition
by such Person or any of its Subsidiaries of any Securities of such Person or
any of its Subsidiaries, (iv) all other net extraordinary gains/losses, and
(v)(A) all non-cash charges (provided, however, that any cash payments actually
-------- -------
made with respect to the liabilities for which such charges were created shall
be deducted from Consolidated Net Income in the period when made) and (B) all
deferred financing costs written off in connection with the early extinguishment
of any Indebtedness, in each case, incurred by such Person or any of its
Subsidiaries in connection with the Transaction.
"Consolidated Tax Expense" means, for any Person, for any period, the
aggregate income tax expense of such Person and its Subsidiaries determined on a
consolidated basis in accordance with GAAP, excluding, however, the income tax
expense of such Person attributable to a disposition of assets the gain from
which is excluded form the calculation of "Consolidated Net Income," but only to
the extent such income tax expense does not exceed the cash portion of the
consideration received by such Person in connection with the disposition of such
assets.
"Contingent Obligation," as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account
<PAGE>
9
of that Person or as to which that Person is otherwise liable for reimbursement
of drawings, or (iii) under Interest Rate Agreements and Currency Agreements.
Contingent Obligations shall include, without limitation, (a) the direct or
indirect guaranty, endorsement (otherwise than for collection or deposit in the
ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of the obligation of another, (b) the obligation to make
take-or-pay or similar payments if required regardless of non-performance by any
other party or parties to an agreement, and (c) any liability of such Person for
the obligation of another through any agreement (contingent or otherwise) (X) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (Y) to maintain the solvency or any balance sheet item, level
of income or financial condition of another if, in the case of any agreement
described under subclause (X) or (Y) of this sentence, the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.
"Contractual Obligation", as applied to any Person, means any
provision of any security issued by that Person or of any indenture, mortgage,
deed of trust, contract, undertaking, agreement or other instrument to which
that Person is a party or by which it or any of its properties is bound or to
which it or any of its properties is subject.
"Controlled Group" means (i) a controlled group of corporations as
defined in Section 1563(a) of the Internal Revenue Code or (ii) a group of
trades or businesses under common control, as defined in Section 414(c) of the
Internal Revenue Code, of which the Company or any of its Subsidiaries is a part
or becomes a part.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement designed to protect the Company or any of its
Subsidiaries against fluctuations in currency values.
"Custodian" means any receiver, interim receiver, receiver and
manager, trustee, assignee, liquidator, sequestrator or similar official charged
with maintaining possession or control over property for one or more creditors,
whether under any Bankruptcy Law or otherwise.
"Designated Senior Indebtedness," as to the Company, means any Senior
Indebtedness (a) under the Senior Credit Facilities, or (b) which at the time of
determination exceeds
<PAGE>
10
$75,000,000 in aggregate principal amount (or accreted value in the case of
Indebtedness issued at a discount) outstanding or available under a committed
facility and (x) which is specifically designated in the instrument evidencing
such Senior Indebtedness as "Designated Senior Indebtedness" by such Person and
(y) as to which the Holders have been given written notice of such designation.
"Disqualified Capital Stock" means any Capital Stock of the Company or
a Subsidiary thereof which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable at the option of the
holder), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
maturity date of the Senior Notes, for cash or securities constituting
Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock
shall be deemed to include (i) any Preferred Stock of a Subsidiary of the
Company and (ii) any Preferred Stock of the Company, with respect to either of
which, under the terms of such Preferred Stock, by agreement or otherwise, such
Subsidiary or the Company is obligated to pay current dividends or distributions
in cash during the period prior to the maturity date of the Senior Notes;
provided, however, that Preferred Stock of the Company or any Subsidiary thereof
- -------- -------
that is issued with the benefit of provisions requiring a change of control
offer to be made for such Preferred Stock in the event of a change of control of
the Company or Subsidiary, which provisions have substantially the same effect
as the provisions of this Note described under "Change of Control," shall not be
deemed to be Disqualified Capital Stock solely by virtue of such provisions.
"Dollars" or the sign "$" means the lawful money of the United States
of America.
"EBITDA" means, for any Person, for any period, an amount equal to (a)
the sum of (i) Consolidated Net Income for such period, plus (ii) Consolidated
Tax Expense for such period, plus (iii) Consolidated Interest Expense (but only
to the extent included in the determination of Consolidated Net Income) for such
period, plus (iv) depreciation for such period on a consolidated basis, plus (v)
amortization of intangibles for such period on a consolidated basis, plus (vi)
any other non-cash items reducing Consolidated Net Income for such period, minus
(b) all non-cash items increasing Consolidated Net Income for such period, all
for such Person and its Subsidiaries determined in accordance with GAAP.
"Environmental Laws" means the common law and all statutes,
ordinances, orders, rules, regulations, plans, policies or decrees and the like
relating to (i) environmental matters, including, without limitation, those
relating to fines, injunctions, penalties, damages, contribution, cost recovery
<PAGE>
11
compensation, losses or injuries resulting from the Release or threatened
Release of Hazardous Materials, (ii) the generation, use, storage,
transportation or disposal of Hazardous Materials, or (iii) occupational safety
and health, industrial hygiene, land use or the protection of human, plant or
animal health or welfare, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act (42 U.S.C. (S) 9601 et
--
seq.), the Hazardous Materials Transportation Act (49 U.S.C. (S) 1801 et seq.),
- --- -- ---
the Resource Conservation and Recovery Act (42 U.S.C. (S) 6901 et seq.), the
-- ---
Federal Water Pollution Control Act (33 U.S.C. (S) 1251 et seq.), the Clean Air
-- ---
Act (42 U.S.C. (S) 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
-- ---
(S) 2601 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act (7
-- ---
U.S.C. (S) 136 et seq.), the Occupational Safety and Health Act (29 U.S.C. (S)
-- ---
651 et seq.) and the Emergency Planning and Community Right-to-Know Act (42
-- ---
U.S.C. (S) 11001 et seq.), each as amended or supplemented, and any analogous
-- ---
future or present statutes and regulations promulgated pursuant thereto, each as
in effect as of the date of determination.
"Environmental Lien" means a Lien in favor of a Tribunal or other
Person (i) for any liability under an Environmental Law or (ii) for damages
arising from or costs incurred by such Tribunal or other Person in response to a
Release or threatened Release of hazardous or toxic waste, substance or
constituent into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"Escrow Agreement" means the Escrow Agreement dated as of March 25,
1997 between Parent and United States Trust Company of New York, as escrow
agent, relating to the Warrants.
"Event of Default" means each of the events set forth in Section 5.
"Excess Cash Flow" means for each semi-annual period commencing after
the Commercial Operation Date, 100% of Operating Cash Flow minus (i) an amount
of Holdings operating expenses not to exceed $2.5 million per annum without the
consent of the holders of a majority in aggregate principal amount of the
outstanding Notes, (ii) an amount equal to all Permitted Tax Distributions,
(iii) all Parent expenses not to exceed $1.5 million without the consent of the
holders of Senior Notes as provided for in the Senior Notes, (iv) any Company
Taxes and (v) an amount equal to the aggregate of all amounts required to be
paid to the holders of Senior Notes during such semi-annual period pursuant to
the Senior Note Purchase Agreement.
"Excess Proceeds Offer" has the meaning ascribed to such term in
Section 2.2C(i).
<PAGE>
12
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"Exchange Date" means the date on which Holdings exercises its right
pursuant to the terms of the Certificate of Designation to exchange all of its
then outstanding Preference Shares for Notes.
"Facilities" means any and all real property (including, without
limitation, all buildings, fixtures or other improvements located thereon) now,
hereafter or heretofore owned, leased, operated or used by any of Parent,
Holdings, the Company or any of their respective Subsidiaries or any of their
respective predecessors in interest.
"Fiscal Quarter" means each quarterly accounting period of each Fiscal
Year of the Company.
"Fiscal Year" means each annual accounting period of the Company,
ending on December 31 of each calendar year.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by The Financial Accounting Standards
Board and which are consistently applied for all periods after the date hereof
so as to properly reflect the financial conditions, and the results of
operations and changes in financial position, of the Company and its
Subsidiaries, except that any accounting principle or practice required to be
changed in order to continue as a generally accepted accounting principle or
practice may be so changed.
"Guaranteed Completion Date" means August 15, 1999.
"Guaranty" means the Guaranty of AT&T Corp. of certain of the
obligations of AT&T-SSI under the Supply Contract.
"Hazardous Materials" means (i) any chemical, material or substance at
any time defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," "infectious waste," "toxic substances" or any
other formulations intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, "TCLP toxicity" or "EP
toxicity" or words of similar import under any applicable Environmental Laws or
publications promulgated pursuant thereto; (ii) any oil, petroleum, petroleum
fraction or petroleum derived substance; (iii) any drilling fluids, produced
waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources; (iv) any flammable
substances or explosives; (v) any radioactive materials; (vi) asbestos in any
form; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which
contains any oil or dielectric fluid containing
<PAGE>
13
levels of polychlorinated biphenyls in excess of fifty parts per million; (ix)
pesticides; and (x) any other chemical, material or substance, exposure to which
is prohibited, limited or regulated by any governmental authority or which may
or could pose a hazard to human health or safety or the environment.
"Holder" shall mean the holder of this Note and "Holders" shall mean
-------
each of the holders of the Notes.
"Holdings" means Global Telesystems Holdings Ltd., a Bermuda company.
"Incur" means, with respect to any Indebtedness or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such Person
(and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings
correlative to the foregoing); provided, however, that any amendment,
-------- -------
modification or waiver of any document pursuant to which Indebtedness was
previously Incurred shall only be deemed to be an Incurrence of Indebtedness if
and to the extent such amendment, modification or waiver (i) increases the
principal thereof or interest rate or premium payable thereon or (ii) changes to
an earlier date the stated maturity thereof or the date of any scheduled or
required principal payment thereon or the time or circumstances under which such
Indebtedness shall be redeemed; provided, further, that any Indebtedness of a
-------- -------
Person existing at the time such Person becomes a Subsidiary of the Company
(whether by merger, consolidation, acquisition or otherwise) shall be deemed to
be Incurred by such Subsidiary at the time it becomes a Subsidiary of the
Company.
"Indebtedness" means, with respect to any Person, (i) all
indebtedness, obligations and liabilities of such Person for borrowed money,
(ii) that portion of obligations with respect to Capital Leases that is properly
classified as a liability on a balance sheet of such Person in conformity with
GAAP, (iii) notes payable and drafts accepted representing extensions of credit,
whether or not representing obligations for borrowed money, of such Person, (iv)
any indebtedness, obligation or liability of such Person owed for all or any
part of the deferred purchase price of property or services (excluding any such
obligations incurred under ERISA), which purchase price is (a) due more than six
months (or a longer period of up to one year, if such terms are available from
suppliers in the ordinary course of business) from the date of incurrence of the
obligation in respect thereof or (b) evidenced by a note or similar written
instrument, (v) all indebtedness, obligations and liabilities secured by any
Lien on any property or asset owned or held by that Person regardless of whether
the indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person
<PAGE>
14
except that "Indebtedness" shall not include trade payables and accrued
liabilities Incurred in the ordinary course of business for the purchase of
goods or services which are not secured by a Lien other than a Permitted
Encumbrance and obligations under Interest Rate Agreements, Currency Agreements
and obligations of Global under the Supply Contract (which constitute Contingent
Obligations, not Indebtedness), (vi) guarantees of such Person in respect of
Indebtedness of other Persons and (vii) all Disqualified Capital Stock issued by
such Person with the amount of Indebtedness represented by such Disqualified
Capital Stock being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price, but excluding
accrued dividends, if any. For purposes hereof, the "maximum fixed repurchase
price" of any Disqualified Capital Stock which does not have a fixed repurchase
price shall be calculated in accordance with the terms of such Disqualified
Capital Stock as if such Disqualified Capital Stock were purchased on any date
on which Indebtedness shall be required to be determined pursuant to this Note,
and if such price is based upon, or measured by, the fair market value of such
Disqualified Capital Stock, such fair market value to be determined reasonably
and in good faith by the board of directors of the issuer of such Disqualified
Capital Stock.
"Independent Financial Advisor" means an accounting, appraisal,
investment banking or consulting firm of nationally recognized standing that is,
in the reasonable and good faith judgment of the Board of Directors of the
Company, qualified to perform the task for which such firm has been engaged and
disinterested and independent with respect to the Company and its Affiliates.
"Initial Blockage Period" has the meaning ascribed to such term in
Section 6.2(b).
"Intercompany Indebtedness" means any Indebtedness of the Company or
any Subsidiary of the Company which, in the case of the Company, is owing to any
wholly-owned Subsidiary of the Company and which, in the case of any such
Subsidiary, is owing to the Company or any wholly-owned Subsidiary of the
Company; provided, however, that if as of any date any Person other than the
-------- -------
Company or a wholly-owned Subsidiary of the Company or any lender under the
Senior Credit Facilities owns or holds such Indebtedness, or holds any Lien in
respect thereof, such Indebtedness shall no longer be Intercompany Indebtedness
permitted to be Incurred pursuant to Section 4.1(v).
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect the Company or any of its
Subsidiaries against fluctuations in interest rates.
<PAGE>
15
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor code or statute.
"Investment" means (i) any direct or indirect purchase or other
acquisition of, or of a beneficial interest in, any securities of any other
Person or (ii) any direct or indirect loan, advance (other than advances to
employees for moving, entertainment and travel expenses, drawing accounts and
similar expenditures in the ordinary course of business), extension of credit or
capital contribution to any other Person, including all indebtedness and
accounts receivable from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of business.
The amount of any Investment shall be the original cost of such Investment plus
the cost of all additions thereto, without any adjustments for increases or
decreases in value, or write-ups, write-downs or write-offs with respect to such
Investment.
"Investor Shares" means shares of the Class A Common Shares of Parent
representing up to 15% of the outstanding shares of voting Common Stock on the
Closing Date issued by Parent to holders of the Senior Preferred Stock.
"Judgment Currency" has the meaning ascribed to such term in Section
7.8.
"Laws" means all applicable statutes, laws, ordinances, regulations,
rules, orders, judgments, writs, injunctions or decrees of any state,
commonwealth, nation, territory, possession, province, county, parish, town,
township, village, municipality or Tribunal, and "Law" means each of the
---
foregoing.
"Lien" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"Margin Stock" has the meaning assigned to that term in Regulation U
and Regulation G of the Board of Governors of the Federal Reserve System as in
effect from time to time.
"Material Adverse Effect" means (i) a material adverse effect on (a)
the Cable System or (b) the business, assets, revenues (after the Commercial
Operation Date), results of operations (after the Commercial Operation Date) or
financial condition of the Company and its Subsidiaries, taken as a whole, or
(c) the ability of the Company and its Subsidiaries to achieve the Commercial
Operation Date by the Guaranteed Completion Date, (ii) a material adverse effect
on the ability of the Company or its Subsidiaries to perform, or the impairment
of the ability of the Holders to enforce, the obligations of the Company under
this
<PAGE>
16
Note or (iii) a material adverse effect on the ability of Global, the Company or
its Subsidiaries to perform their obligations under the System Contracts,
provided that an adverse change in sales or prospective sales of Capacity on the
Cable System whether or not based on changes or perceived changes in external
market conditions (including as a result of increased competition or
introductions or applications of new technology) will not provide a basis that
an event described above has occurred.
"Maturity Date" has the meaning ascribed to such term in Section 2.1D.
"Maximum Cash Interest Rate" means an interest rate of 15% per annum;
provided that any interest payable on the Notes pursuant to Section 2.1E shall
- --------
be included in the determination.
"Multiemployer Plan" means a Pension Plan which is a "multiemployer
plan" as defined in Section 4001(a)(3) of ERISA.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by
the Company, the aggregate net proceeds received by the Company, after payment
of expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the board of directors, at the time of
receipt) and (b) in the case of any exchange, exercise, conversion or surrender
of outstanding securities of any kind for or into shares of Capital Stock of the
Company which is not Disqualified Capital Stock, the net book value of such
outstanding securities on the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the holder to the
Company upon such exchange, exercise, conversion or surrender, less any and all
payments made to the holders, e.g., on account of fractional shares and less all
expenses incurred by the Company in connection therewith).
"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate the
maturity of any Designated Senior Indebtedness.
"Obligations" means the Company's obligation to make timely payments
of principal and interest on the Notes.
"Officer" means the Chairman of the Board, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, the
Controller, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by two Officers; provided,
--------
however, that every Officers' Certificate with respect to the compliance with a
- -------
condition precedent to the issuance of the Notes hereunder shall include
<PAGE>
17
(i) a statement that the officer or officers making or giving such Officers'
Certificate have read such condition and any definitions or other provisions
contained in this Note relating thereto, (ii) a statement that, in the opinion
of the signers, they have made or have caused to be made such examination or
investigation as is necessary to enable them to express an informed opinion as
to whether or not such condition has been complied with, and (iii) a statement
as to whether, in the opinion of the signers, such condition has been complied
with.
"Operating Cash Flow" means, with respect to the Company, for each
semi-annual period commencing after the Commercial Operation Date, that portion
of the Company's "Excess Cash Flow" (as defined in the Senior Credit Facilities)
available to Holdings pursuant to the terms of the Senior Credit Facilities in
respect of such period.
"Operations Agreement" means the Operations, Administration and
Maintenance Agreement dated as of March 25, 1997 between AT&T-SSI and the
Company, as amended from time to time.
"Parent" means GT Parent Holdings LDC, a Cayman Islands limited
duration company and the parent company of Holdings and Company.
"Payment Blockage Period" has the meaning ascribed to such term in
Section 6.2(b).
"Payment Date" has the meaning ascribed to such term in Section
2.2(D).
"Payment Default" means any default, whether or not any requirement
for the giving of notice, the lapse of time or both, or any other condition to
such default becoming an event of default has occurred, in the payment of
principal of (or premium, if any) or interest on or any other amount payable in
connection with Designated Senior Indebtedness.
"Payment Restriction" has the meaning ascribed to such term in Section
4.8.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or any of the Pension Benefit Guaranty Corporation's functions
under ERISA.
"PCG" means Pacific Capital Group, Inc. or its Affiliates.
"PCG Common Equity Investment" means the issuance of shares of the
Class B Common Shares of Parent representing 38.25% of the outstanding shares of
voting Common Stock on the Closing Date for gross proceeds to Parent of at least
$33.75 million,
<PAGE>
18
which proceeds will be contributed to the Company on the Closing Date.
"Pension Plan" means an employee pension benefit plan as defined in
Section 3(2) of ERISA which is subject to the provisions of Title IV of ERISA
and which is maintained for employees of Parent, the Company, any of their
respective Subsidiaries or any member of the Controlled Group.
"Permitted Encumbrances" means (i) Liens granted to secure the Bank
Indebtedness and the obligations of the Company and the Guarantors under this
Note and the Guarantees; (ii) Liens existing on the Closing Date to the extent
and in the manner such Liens are in effect on the Closing Date; (iii) Liens for
Obligations under or otherwise contemplated by the Supply Contract; (iv) Liens
for taxes, assessments or governmental charges or claims the payment of which is
not, at the time, required by Section 4.3; (v) statutory Liens of landlords and
banks and rights of offset, and Liens of carriers, warehousemen, workmen,
repairmen, mechanics and materialmen and other Liens imposed by law incurred in
the ordinary course of business for sums not yet delinquent or being contested
in good faith, if such reserve or other appropriate provision, if any, as shall
be required by GAAP shall have been made therefor; (vi) Liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, trade contracts, utility payments,
performance and return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money); (vii) any attachment or
judgment Lien not constituting an Event of Default; (viii) leases or subleases
granted to others not interfering in any material respect with the ordinary
conduct of the business of the Company and its Subsidiaries, taken as a whole;
(ix) easements, rights-of-way, restrictions, minor defects, encroachments or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the business of
the Company and its Subsidiaries, taken as a whole; (x) any (a) interest or
title of a lessor or sublessor (other than the Company or any of its
Subsidiaries) under any lease, (b) restriction or encumbrance that the interest
or title of such lessor or sublessor may be subject to (including without
limitation ground leases or other prior leases of the demised premises,
mortgages, mechanics' liens, tax liens, and easements), or (c) subordination of
the interest of the lessee or sublessee under such lease to any restrictions or
encumbrance referred to in the preceding clause (b); (x) Liens arising from
filing UCC financing statements for precautionary purposes relating solely to
true leases of personal property permitted by this Note under which the Company
or any of its Subsidiaries is a lessee; (xii) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods;
<PAGE>
19
(xiii) any zoning or similar law or right reserved to or vested in any
governmental office or agency to control or regulate the use of any real
property; (xiv) Liens securing obligations (other than obligations representing
Indebtedness for borrowed money) under operating, reciprocal easement or similar
agreements entered into in the ordinary course of business of the Company and
its Subsidiaries; (xv) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods in the ordinary
course of business; (xv) Liens securing reimbursement obligations with respect
to letters of credit which encumber documents and other property relating to
such letters of credit and the products and proceeds thereof; (xvii) Liens
arising out of consignment or similar arrangements for the sale of goods entered
into by the Company or any Subsidiary in the ordinary course of business in
accordance with past practices; and (xix) Liens to secure Permitted Refinancing
Indebtedness to the extent the Indebtedness Refinanced was secured and such
Liens do not extend to any property other than the property which was subject to
the Lien under the Indebtedness being Refinanced.
"Permitted Holders" means each of PCG, CIBC and PCG Telecom LDC and
their respective Affiliates.
"Permitted Investments" means
(i) Investments by the Company, or by a Subsidiary thereof, in the
Company or a Subsidiary;
(ii) any Investment (including, without limitation, any promissory
note or other debt obligation) issued by a purchaser or lessee or other
user of any portion of the Cable System located within the jurisdiction of
a Landing Country to the Company or Global in connection with a transaction
permitted by the Senior Credit Facilities;
(iii) Investments in cash and Cash Equivalents;
(iv) Investments by the Company, or by a Subsidiary thereof, in a
Person, if as a result of such Investment (a) such Person becomes a
Subsidiary of the Company or (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Subsidiary thereof;
(v) reasonable and customary loans made to employees in connection
with their relocation not to exceed $2 million in the aggregate at any one
time outstanding; and
(vi) an Investment that is made by the Company or a Subsidiary thereof
in the form of any stock, bonds, notes, debentures, partnership or joint
venture interests or other
<PAGE>
20
securities that are issued by a third party to the Company or Subsidiary
solely as partial consideration for the consummation of an Asset Sale that
is otherwise permitted under the covenant described under Section 2.2C.
"Permitted Refinancing Indebtedness" means (A) any Refinancing by the
Company of Indebtedness of the Company or of its Subsidiaries and (B) any
Indebtedness incurred pursuant to a Refinancing by any Subsidiary of the Company
of Indebtedness Incurred by such Subsidiary, that does not (1) result in an
increase in the total of the aggregate principal amount of the Indebtedness of
such Person being Refinanced as of the date of such proposed Refinancing (if
such Indebtedness that is Refinancing the existing Indebtedness is issued at a
price less than 100% of the principal amount thereof, an increase shall not be
deemed to have occurred unless the gross proceeds of such Indebtedness that is
Refinancing the existing Indebtedness is in excess of the total of the aggregate
principal amount of the Indebtedness being Refinanced as of the date of such
proposed Refinancing) or (2) create Indebtedness with a Weighted Average Life to
Maturity that is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced; provided, however, that (x) if such Indebtedness
-------- -------
being Refinanced is Indebtedness of the Company, then such Refinancing
Indebtedness shall be Indebtedness solely of the Company and (y) if such
Indebtedness being Refinanced is subordinate or junior in right of payment to
the Notes or if recourse in respect of the Indebtedness being Refinanced is
limited in any respect, then such Indebtedness proposed to be Incurred to
Refinance the existing Indebtedness shall be subordinate in right of payment to
the Notes and recourse with respect thereto, as the case may be, shall be
limited at least to the same extent and in the same manner as the Indebtedness
being Refinanced.
"Permitted System Upgrade" means upgrades to the Cable System
contemplated by Article 6-A of the Supply Contract in an amount not to exceed
$75 million.
"Permitted Tax Distributions" means the payment of distributions to
Holdings at such times and in such amounts that are sufficient to enable
Holdings and Parent to satisfy timely, or to further distribute such amounts to
its members or their members, partners, or shareholders (collectively, "Upper
Tier Persons") in order that such Upper Tier Persons may satisfy timely, any Tax
liability resulting from a Change in Law that becomes effective after the
Closing Date, which distributions shall take into account, and be increased by,
any further Taxes imposed upon Holdings, Parent or an Upper Tier Entity as a
result of the receipt of such distributions.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land
<PAGE>
21
trusts, business trusts or other organizations, whether or not legal entities,
and governments and agencies and political subdivisions thereof.
"PIK Interest Amount" has the meaning ascribed to such term in Section
2.1B.
"Placement Agent" means CIBC Wood Gundy Securities Corp., as placement
agent for the Transaction.
"Placement Agreement" means the Placement Agreement dated as of March
25, 1997 among Parent, Holdings and the Placement Agent, relating to the
Transaction.
"Plan" means an employee benefit plan as defined in Section 3(3) of
ERISA maintained by the Company or any of its Subsidiaries for employees of the
Company or any of its Subsidiaries.
"Plan Assets" means the assets of (i) an "employee benefit plan" (as
defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, (ii) a
"plan" (as defined in Section 4975(e)(1) of the Code), (iii) any other entity
deemed to hold "plan assets" within the meaning of 29 C.F.R. (S) 2510.3-101 or
otherwise under ERISA or (iv) any governmental plan subject to Federal, state or
local law substantially similar to the provisions of Section 406 of ERISA or
Section 4975 of the Code.
"Potential Event of Default" means a condition or event which, after
notice or lapse of time or both, would constitute an Event of Default if that
condition or event were not cured or removed within any applicable grace or cure
period.
"Preference Share" means the Senior Increasing Rate Redeemable
Exchangeable Preference Shares of Holdings.
"Preferred Stock" of any Person means any Capital Stock of such Person
that has preferential rights (as compared to any other Capital Stock of such
Person) with respect to dividends or redemptions or upon liquidation.
"Projections" means the financial projection of the Company provided
to the Holders by the Company, its representatives, advisors or Affiliates in
connection with the Transaction.
"Purchase Agreement" has the meaning ascribed to such term in the
introductory paragraphs hereof.
"Real Property Assets" means interests in land, buildings,
improvements, and fixtures attached thereto or used in the operation thereof, in
each case owned or leased (as lessee) by the Company or its Subsidiaries.
<PAGE>
22
"Refinance" means, in respect of any security or Indebtedness, to
refinance, extend, renew, refund or defease, or to issue a security or
Indebtedness in exchange or replacement for, such security or Indebtedness in
whole or in part.
"Refinanced" and "Refinancing" shall have correlative meanings.
"Related Business Investment" means (i) any Investment by a Person in
any other Person a majority of whose revenues are derived from a spur to the
Cable System, (ii) any capital expenditure or Investment, in each case,
reasonably related to a spur to the Cable System and (iii) any investment or
capital expenditure in respect of any other submarine cable system.
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, the abandonment or disposal of any
barrels, containers or other closed receptacles containing any Hazardous
Materials), or into or out of any Facility, including the movement of any
Hazardous Material through the air, soil, surface water, groundwater or
property.
"Reinvestment Date" has the meaning ascribed to such term in Section
2.2C(i).
"Reportable Event" has the meaning set forth in Section 4043 of ERISA,
but excluding any event for which the 30-day notice requirement has been waived
by applicable regulations of the PBGC.
"Representative" has the meaning ascribed to such term in Section
6.3(b).
"Required Holders" means Holders holding in the aggregate more than
50% of the outstanding principal amount of Notes.
"Restricted Payment" means any of the following: (i) the declaration
or payment of any dividend or any other distribution or payment on Capital Stock
of the Company or any Subsidiary of the Company or any payment made to the
direct or indirect holders (in their capacities as such) of Capital Stock of the
Company or any Subsidiary of the Company (other than (x) dividends or
distributions payable solely in Capital Stock (other than Disqualified Capital
Stock) or in options, warrants or other rights to purchase Capital Stock (other
than Disqualified Capital Stock), and (y) in the case of Subsidiaries of the
Company, dividends or distributions payable to the Company or to a wholly-owned
Subsidiary of the Company), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Company or any of its
Subsidiaries (other
<PAGE>
23
than Capital Stock owned by the Company or a wholly-owned Subsidiary of the
Company, excluding Disqualified Capital Stock), (iii) the purchase, defeasance,
repurchase, redemption or other acquisition or retirement for value, prior to
any scheduled maturity, scheduled repayment or scheduled sinking fund payment
of, or the making of any principal payment on, any Subordinated Indebtedness
other than Subordinated Indebtedness acquired in anticipation of satisfying a
scheduled sinking fund obligation, principal installment or final maturity (in
each case due within one year of the date of acquisition), (iv) the making of
any Investment or guarantee of any Investment in any Person other than a
Permitted Investment and (v) forgiveness of any Indebtedness of an Affiliate of
the Company to the Company or a Subsidiary. For purposes of determining the
amount expended for Restricted Payments, cash distributed or invested shall be
valued at the face amount thereof and property other than cash shall be valued
at its fair market value determined in good faith by the Board of Directors of
the Company.
"Sales Agency Agreement" means the Sales Agency Agreement dated as of
March 25, 1997 between AT&T-SSI and the Company, as amended.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any successor statute.
"Senior Credit Facilities" means the long form Senior Credit
Facilities Commitment Letter and upon execution the Credit Agreement among the
Company, the lenders named therein and Canadian Imperial Bank of Commerce, as
agent, together with the documents related thereto (including, without
limitation, any guarantee agreements and security documents), in each case as
such agreements may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time, including any
agreement extending the maturity of, refinancing, replacing or otherwise
restructuring (including adding Subsidiaries of the Company as additional
borrowers or guarantors thereunder) all or any portion of the Indebtedness under
such agreement or any successor or replacement agreement and whether by the same
or any other agent, lender or group of lenders.
"Senior Indebtedness" means for any Person the principal of, premium,
if any, and interest on and all other obligations with respect to any
Indebtedness of such Person, whether outstanding on the Closing Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Notes. Without limiting the generality
of the foregoing, "Senior Indebtedness" shall include (x) the principal of,
premium, if any, and interest on all obligations of every nature of the Company
from time to time owed to the lenders under the Senior
<PAGE>
24
Credit Facilities, including, without limitation, all obligations in respect of
letters of credit and principal of and interest on and all fees, indemnities,
and expenses payable under the Senior Credit Facilities and (y) interest
accruing thereon subsequent to the occurrence of any Event of Default specified
in Sections 5.7 and 5.8 relating to the Company, whether or not the claim for
such interest is allowed under any applicable Bankruptcy Law. Notwithstanding
the foregoing, "Senior Indebtedness" of any Person shall not include (a)
Indebtedness evidenced by the Notes, (b) Indebtedness that is expressly
subordinate or junior in right of payment to any Indebtedness of such Person,
(c) Indebtedness which, when incurred and without respect to any election under
Section 1111(b) of Title 11, United States Code, is without recourse to such
Person, (d) Indebtedness which is represented by Disqualified Capital Stock, (e)
obligations for goods, materials or services purchased in the ordinary course of
business or obligations consisting of trade payables, (f) Indebtedness of or
amounts owed by such Person for compensation to employees or for services
rendered such Person, (g) any liability for federal, state, local or other taxes
owed or owing by such Person, (h) Indebtedness of such Person to a Subsidiary of
such Person and (i) that portion of any Indebtedness which is incurred by such
Person in violation of this Note.
"Senior Note Purchase Agreement" means the Senior Note Securities
Purchase Agreement, dated March 25, 1997, among Holdings and the Purchasers
named therein.
"Senior Notes" are the Senior Notes of Holdings as described in the
Senior Note Purchase Agreement.
"Senior Officers" means each of the Chief Executive Officer, Senior
Vice President and Chief Financial Officer of the Company.
"Subordinated Indebtedness" means Indebtedness of the Company which is
expressly subordinated in right of payment to the Notes.
"Subsequent Notes" has the meaning ascribed to such term in Section
2.1C.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of stock or other equity interest entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereto is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof.
"Supply Contract" means the Project Development and Construction
Contract dated as of March 25, 1997 between AT&T-SSI and the Company.
<PAGE>
25
"System Contracts" means, collectively, the Supply Contract,
Operations Agreement, Sales Agency Agreement and the Guaranty.
"Taxes" means all taxes, assessments, fees, levies, imposts, duties,
penalties, deductions, liabilities, withholdings or other charges of any nature
whatsoever, including interest penalties, from time to time or at any time
imposed by any Law or any Tribunal.
"Transaction" shall mean, collectively, (i) the entering into of the
System Contracts for the purpose of establishing the Cable System, (ii) the PCG
Common Equity Investment, (iii) the CIBC Capital Common Equity Investment, (iv)
the purchase of the Preference Shares, (v) the Senior Notes Purchase Commitment,
(vi) the issuance of the Investor Shares pursuant to the Escrow Agreement, if
applicable, and the Additional Shares and the commitment to issue the Warrants
pursuant to the Escrow Agreement, (vii) the execution of a commitment letter to
provide for the Senior Credit Facilities and (viii) the execution of the
Advisory Services Agreement.
"Transaction Documents" means the Preference Shares, the Purchase
Agreement, the Notes, the Senior Note Purchase Agreement, the Senior Notes, the
Senior Credit Facilities, the Advisory Services Agreement, the System Contracts,
the Escrow Agreement and each agreement or instrument entered into in accordance
with the foregoing and each other agreement or instrument entered into in
accordance with the PCG Common Equity Investment, the CIBC Capital Common Equity
Investment, the Investor Shares, the Additional Shares and the Warrants and each
other agreement entered into in connection with the Transaction.
"Tribunal" means any government, any arbitration panel, any court or
any governmental department, commission, board, bureau, agency, authority or
instrumentality of the United States or any state, province, commonwealth,
nation, territory, possession, county, parish, town, township, village or
municipality, whether now or hereafter constituted and/or existing.
"Trigger Event" means the occurrence of any event or the existence of
any circumstances requiring or permitting the redemption of the Notes, or
requiring an offer to purchase the Notes, in each case pursuant to the
provisions of Section 2.2.
"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"Voting Stock" means, with respect to any Person, securities of any
class or classes of Capital Stock in such Person entitling the holders thereof
to vote under ordinary
<PAGE>
26
circumstances in the election of members of the board of directors or other
governing body of such Person.
"Warrants" means Warrants to purchase shares of Class A Common Stock
of Parent representing up to 5% of the fully diluted shares of Common Stock of
Parent issued on the Execution Date and held pursuant to the Escrow Agreement
pending delivery to holders of outstanding Preference Shares on April 1, 2001.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding aggregate principal amount of such Indebtedness into (b) the total
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment.
"wholly owned Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which 100% of the total
voting power of shares of stock or other equity interest entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other wholly-owned
Subsidiaries of that Person or a combination thereof.
1.2 Accounting Terms
----------------
For the purposes of this Note, all accounting terms not otherwise
defined herein shall have the meanings assigned to them in conformity with GAAP.
1.3 Other Definitional Provisions
-----------------------------
Any of the terms defined in Section 1.1 may, unless the context
otherwise requires, be used in the singular or the plural depending on the
reference.
SECTION 2 TERMS OF NOTE
2.1 Interest on the Notes
---------------------
A. Rate of Interest. The Notes shall bear cash interest on the
----------------
unpaid principal amount thereof from the date of issuance (the "Issue Date")
through maturity (whether by prepayment, acceleration or otherwise) initially at
a rate of 14.00% per annum, which rate shall increase by .50% per annum
commencing on April 1, 2001 and by an additional .50% per annum on each
subsequent April 1, provided that in no case will the interest rate exceed
--------
20.00% per annum.
<PAGE>
27
B. Interest Payments. Interest shall be payable with respect to the
-----------------
Notes, semi-annually in arrears on each December 1 and June 1 commencing on the
first June 1 or December 1 after issuance thereof, and upon any prepayment of
the Notes (to the extent accrued on the amount being prepaid) and at maturity of
the Notes; provided, however, that if, on any interest payment date, the
-------- -------
interest rate borne by the Notes exceeds the Maximum Cash Interest Rate, the
Company may pay all or a portion of the interest payable in excess of the
Maximum Cash Interest Rate by issuance of Subsequent Notes in an aggregate
principal amount equal to the amount of such interest in excess of the Maximum
Cash Interest Rate being so paid (the "PIK Interest Amount").
C. PIK Notes. On each interest payment date on which the Company
---------
elects to pay a PIK Interest Amount pursuant to Section 2.1B, the Company shall
execute and deliver to each Holder on such interest payment date a Note dated
such interest payment date substantially in the form of this Note in a principal
amount equal to such Holder's pro rata portion of such PIK Interest Amount (each
a "Subsequent Note" and, together with all other Notes, the "Notes"). A
Subsequent Note shall bear interest from the date of its issuance at the same
rate borne by all Notes.
D. Maturity of Notes. The Notes shall mature and the Company shall
-----------------
pay in full the outstanding principal amount thereof and accrued interest
thereon on April 1, 2007 (the "Maturity Date").
E. Defaulted Interest. Any principal payments on the Notes not paid
------------------
when due and, to the extent permitted by applicable law, any interest payment on
the Notes not paid when due, in each case whether at stated maturity, by notice
of prepayment, by acceleration or otherwise, shall thereafter bear interest
payable upon demand at a rate which is 2.00% per annum in excess of the rate of
interest otherwise then payable on the Notes.
F. Computation of Interest. Interest on the Notes shall be computed
-----------------------
on the basis of a 360-day year of twelve 30-day months. In computing interest
on the Notes, the Exchange Date shall be included and the date of payment shall
be excluded; provided, however, that if a Note is repaid on the same day on
-------- -------
which it is issued, one day's interest shall be paid on that Note.
2.2 Optional and Mandatory Redemption
of Notes; Offers to Purchase Notes
----------------------------------
A. Optional Redemption. The Company may, upon not less than three
-------------------
Business Days' prior written notice confirmed in writing to each Holder, at any
time and from time to time, on a pro rata basis, repurchase the Notes in whole
--- ----
or in part at the redemption prices (expressed as a percentage of principal
amount)
<PAGE>
28
set forth below, plus accrued and unpaid interest to the redemption date, if
redeemed during the 12-month period beginning on April 1 of each year indicated
below:
<TABLE>
<CAPTION>
Year Percentage
---- -----------
<S> <C>
1997................ 114%
1998................ 114
1999................ 114
2000................ 114
2001................ 114
2002................ 111
2003................ 108
2004................ 105
2005................ 102
2006................ 100
</TABLE>
B. Excess Cash Flow Sweep. Subject to the terms and conditions of
----------------------
the Senior Credit Facilities and the Senior Notes the Company will, on each June
1 and December 1 commencing on the first such date to occur more than 90 days
after the Commercial Operation Date, apply an amount equal to 100% of Excess
Cash Flow to mandatorily redeem the Notes on a pro rata basis, at the redemption
--- ----
prices set forth below, plus, without duplication, an amount in cash equal to
all unpaid and accumulated interest (including an amount in cash equal to all
interest accrued since the interest payment date immediately prior to the
redemption date); provided that any Excess Cash Flow shall be applied (i) first,
--------
to mandatorily redeem the Senior Notes pursuant to the provisions thereof and
(ii) second, to redeem the Notes in accordance with the terms of this Section
2.2B. The redemption prices shall be as follows if redeemed during the 12-month
period beginning April 1 of the years set forth below:
<TABLE>
<CAPTION>
Year Percentage
-------- -----------
<S> <C>
1997......................... 114%
1998......................... 114
1999......................... 112
2000......................... 112
2001......................... 107
2002 and thereafter.......... 111
</TABLE>
At such time as at least 50% of the outstanding principal amount of Notes has
been redeemed or repurchased pursuant to the terms of this Note, Excess Cash
Flow may be used for a Permitted System Upgrade in lieu of redeeming any Notes.
<PAGE>
29
C. Offers to Purchase Notes.
------------------------
(i) Prepayments from Asset Sales. The Company will not, and will not
----------------------------
permit any of its Subsidiaries to, consummate an Asset Sale (other than
those permitted under or contemplated by the Senior Credit Facilities)
unless (I) the Company or such Subsidiary, as the case may be, receives
consideration at the time of such sale or other disposition at least equal
to the fair market value thereof (as determined in good faith by the
Company's Board of Directors); (II) not less than 85% of the consideration
received by the Company or its Subsidiaries, as the case may be, is in the
form of cash or Cash Equivalents; and (III) the Asset Sale Proceeds
received by the Company or such Subsidiary are applied (a) first, to the
extent the Company elects, or is required, to prepay, repay or purchase
debt under the Senior Credit Facilities within 180 days following the
receipt of the Asset Sale Proceeds from any Asset Sale; (b) second, to the
extent of the balance of Asset Sale Proceeds after application as described
above, to the extent the Company elects, to a Related Business Investment,
provided that such investment occurs or the Company or a Subsidiary enters
--------
into contractual commitments to make such investment, subject only to
customary conditions (other than the obtaining of financing), on or prior
to the 181st day following receipt of such Asset Sale Proceeds and Asset
Sale Proceeds contractually committed are so applied within 270 days
following the receipt of such Asset Sale Proceeds (the "Reinvestment
Date"); (d) third, to an offer by Holdings to repurchase Senior Notes
pursuant to the asset sale provisions thereof; and (d) fourth, if, on the
Reinvestment Date with respect to any Asset Sale, the Available Asset Sale
Proceeds exceed $5,000,000, the Company shall apply an amount equal to such
Available Asset Sale Proceeds to an offer to repurchase the Notes, at a
purchase price in cash equal to 100% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of repurchase (an "Excess
Proceeds Offer").
(ii) Change of Control. Upon the occurrence of a Change of Control
-----------------
(the date of such occurrence, the "Change of Control Date"), the Holders
shall have the right to require the repurchase of all of the Notes pursuant
to an offer to purchase (the "Change of Control Offer") at a purchase price
equal to 101% of the aggregate principal amount thereof, plus accrued
interest thereon to the date of repurchase.
If the Senior Credit Facilities are in effect, or any amounts are
owing thereunder, at the time of the occurrence of a Change of Control, prior to
the mailing of the notice to Holders described in paragraph 2.2D below, but in
any event within 30 days following any Change of Control, the Company covenants
to (i) repay in full all obligations under the Senior Credit
<PAGE>
30
Facilities or offer to repay in full all obligations under the Senior Credit
Facilities and repay the obligations under the Senior Credit Facilities of each
lender who has accepted such offer or (ii) obtain the requisite consent under
the Senior Credit Facilities to permit the repurchase of the Notes pursuant to
this Section 2.2C. The Company must first comply with the covenant described in
the preceding sentence before it shall be required to purchase Notes in the
event of a Change of Control; provided that the Company's failure to comply with
--------
the covenant described in the preceding sentence constitutes an Event of Default
described under Section 5.3 hereof if not cured within 30 days after the notice
required by such clause.
D. Procedure for Redemption or Purchase. Within 30 days following
------------------------------------
any Trigger Event the Company shall mail a notice to each Holder stating:
(1) that the offer is being made pursuant to this Section 2.2
and stating the relevant subsection thereof and that, in the case of
Section 2.2A, the principal amount of Notes to be redeemed and, in the case
of Section 2.2C, that all Notes validly tendered will be accepted for
payment (in the case of an Excess Proceeds Offer, to the extent of the
Available Asset Sale Proceeds);
(2) the purchase price and the purchase date which shall be no earlier
than 30 days nor later than 60 days from the date such notice is mailed
(the "Payment Date");
(3) that any Note not tendered or accepted for payment will continue
to accrue interest;
(4) that any Note accepted for payment shall cease to accrue interest
after the Payment Date unless the Company shall default in the payment of
the repurchase price of the Notes;
(5) that Holders electing to have Notes purchased pursuant to Section
2.4C will be required to surrender the Note, with the form entitled "Option
of Holder to Elect Purchase" on the reverse of the Note completed, to the
Company on or prior to 5:00 p.m. New York time on the Payment Date;
(6) that Holders will be entitled to withdraw their election in the
case of an offer pursuant to Section 2.2C if the Company receives, not
later than 5:00 p.m. New York time on the Business Day preceding the
Payment Date, a facsimile transmission or letter setting forth the name of
the Holder, the principal amount of the Notes the Holder delivered for
purchase and a statement that such Holder is withdrawing his election to
have such Notes purchased;
<PAGE>
31
(7) that, in the case of an Excess Proceeds Offer, the method of
calculating the Available Asset Sale Proceeds and that if the aggregate
principal amount of Notes surrendered by Holders exceeds the Available
Asset Sale Proceeds, the Company shall select the Notes to be purchased on
a pro rata basis (with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000, or integral
multiples thereof, shall be purchased);
(8) that Holders whose Notes were purchased or redeemed only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered; and
(9) such other information or calculations reasonably necessary to the
consummation of any such offer in accordance with the provisions hereof.
On or before the Payment Date, the Company shall, to the extent lawful
and to the extent required by this Note, accept for payment Notes or portions
thereof tendered and shall mail or deliver to each tendering Holder an amount
equal to the purchase or redemption price of the Notes tendered by such Holder
and accepted by the Company for purchase, and the Company shall promptly issue
new Notes and mail or make available for delivery such new Notes to such Holder
equal in principal amount to any unpurchased portion of the Notes surrendered,
if applicable.
Rule 14e-1. The Company shall comply with the requirements of Rule
----------
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the purchase of Notes pursuant to an offer hereunder. To the extent the
provisions of any securities laws or regulations conflict with the provisions
under this Section, the Company shall comply with the applicable securities laws
and regulations and shall not be deemed to have breached its obligations under
this Section 2.2 by virtue thereof.
E. Manner and Time of Payment. All payments of obligations under
--------------------------
the Notes by the Company shall be made without defense, set-off or counterclaim
and in same-day funds and delivered to each Holder, unless otherwise specified,
not later than 10:00 A.M. New York time on the date due to the account of such
Holder as indicated on the relevant signature page hereto; funds received by a
Holder after that time shall be deemed to have been paid by the Company on the
next succeeding Business Day.
F. Payments on Non-Business Days. Whenever any payment to be made
-----------------------------
under the Notes shall be stated to be due on a day which is not a Business Day,
the payment shall be made on the next succeeding Business Day and such extension
of time shall be
<PAGE>
32
included in the computation of the payment of interest hereunder or under the
Notes.
SECTION 3 AFFIRMATIVE COVENANTS
The Company covenants and agrees that, until the Notes and all other
amounts due under this Note have been indefeasibly paid in full it shall perform
all covenants in this Section 3 required to be performed by it:
3.1 Financial Statements and Other Reports
--------------------------------------
The Company will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of consolidated financial
statements in conformity with GAAP. The Company will deliver to each Holder
following the Exchange Date:
(i) as soon as available and in any event within 45 days after the end
of each of the first three fiscal quarters of each fiscal year and within
90 days after the end of the fourth fiscal quarter of each fiscal year, (1)
the consolidated balance sheets of the Company and its Subsidiaries as at
the end of such fiscal quarter, (2) the related consolidated statements of
operations, stockholders' equity and cash flows for such fiscal quarter and
for the period from the beginning of the then current fiscal year to the
end of such fiscal quarter, setting forth in each case in comparative form
the corresponding figures for the corresponding periods of the previous
fiscal year and the corresponding figures from the consolidated plan and
financial forecast for the current fiscal year delivered pursuant to
Section 3.1(viii), all in reasonable detail and certified by the chief
financial officer of the Company that they fairly present the financial
condition of each the Company and its Subsidiaries, as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated, subject to changes resulting from audit and normal year-
end adjustments, and (3) a narrative report describing the operations of
the Company and its Subsidiaries (in the form of management's discussion
and analysis of such operations which would comply with the disclosure
requirements of the Exchange Act and rules and regulations promulgated
thereunder with respect to management's discussion and analysis set forth
in quarterly reports on Form 10-Q) prepared for such fiscal quarter and for
the period from the beginning of the then current fiscal year to the end of
such fiscal quarter;
(ii) as soon as available and in any event within 90 days after the
end of each fiscal year, (1) the consolidated balance sheets of the Company
and its Subsidiaries as at the end of such fiscal year, (2) the related
consolidated
<PAGE>
33
statements of operations, stockholders' equity and cash flows for such
fiscal year, setting forth in each case in comparative form the
corresponding figures for the previous fiscal year and the corresponding
figures from the consolidated plan and financial forecast for the current
fiscal year delivered pursuant to Section 3.1(viii) for the fiscal year
covered by such financial statements, all in reasonable detail and
certified by the chief financial officer of the Company that they fairly
present the financial condition of the Company and its Subsidiaries as at
the dates and the results of their operations and their cash flows for the
periods indicated, (3) a narrative report describing the operations of the
Company and its Subsidiaries (in the form of management's discussion and
analysis of such operations which would comply with the disclosure
requirements of the Exchange Act and rules and regulations promulgated
thereunder with respect to management's discussion and analysis set forth
in quarterly reports on Form 10-K) prepared for such fiscal year, and (4) a
report thereon of independent certified public accountants of recognized
national standing, which report shall be unqualified as to scope of audit,
shall express no doubts about the ability of the Company and its
Subsidiaries to continue as a going concern, and shall state that such
consolidated financial statements fairly present the consolidated financial
position of the Company and its Subsidiaries as at the dates indicated and
the results of their operations and their cash flows for the periods
indicated in conformity with GAAP applied on a basis consistent with prior
years (except as otherwise disclosed in such financial statements) and that
the examination by such accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards;
(iii) together with each delivery of financial statements pursuant to
Sections (i) and (ii) above, (a) an Officers' Certificate of the Company
stating that the signers have reviewed the terms of the Notes and have
made, or caused to be made under their supervision, a review in reasonable
detail of the transactions and condition of the Company and its
Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence during or
at the end of such accounting period, and that the signers do not have
knowledge of the existence as at the date of the Officers' Certificate, of
any condition or event which constitutes an Event of Default or Potential
Event of Default, or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action the
Company has taken, is taking and proposes to take with respect thereto; and
(b) a compliance certificate demonstrating in reasonable detail compliance
(as determined in accordance with GAAP) during and at the end of such
<PAGE>
34
accounting periods with the restrictions contained in Sections 4.1 through
4.17 inclusive;
(iv) together with each delivery of consolidated financial statements
pursuant to Section (iii) above, a written statement by the independent
certified public accountants giving the report thereon (a) stating whether,
in connection with their audit examination, any condition or event that
constitutes an Event of Default or Potential Event of Default that relates
to accounting matters has come to their attention and, if any such
condition or event has come to their attention, specifying the nature and
period of existence thereof; provided that such accountants shall not be
--------
liable by reason of any failure to obtain knowledge of any such Event of
Default or Potential Event of Default that would not be disclosed in the
course of their audit examination, and (b) stating that based on their
audit examination nothing has come to their attention that causes them to
believe that the information contained in the certificates delivered
therewith is not correct;
(v) promptly upon the sending or filing thereof, copies of all
financial statements, reports, notices and proxy statements sent or made
available generally by the Company to its security holders or by any
Subsidiary of the Company to its security holders other than the Company or
another Subsidiary of the Company;
(vi) promptly after a responsible officer has knowledge thereof, the
Company will give written notice to the Holders of (a) the occurrence of an
Event of Default or Potential Event of Default, (b) any default under any
Contractual Obligation of the Company that could reasonably be expected to
have a Material Adverse Effect, and (c) any other development that has
resulted in, or could reasonably be expected to result in, a Material
Adverse Effect;
(vii) promptly upon any Senior Officer obtaining knowledge of (X) the
institution of, or non-frivolous threat of, any action, suit, proceeding
(whether administrative, judicial or otherwise), governmental investigation
or arbitration against or affecting the Company or any of its Subsidiaries
or any property of the Company or any of its Subsidiaries (collectively,
"Proceedings") not previously disclosed in writing by the Company to
Holders or (Y) any material development in any Proceeding that, in any
case:
(1) could reasonably be expected to have a Material Adverse
Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or
to recover any material damages or obtain material relief as a result
of, the Transaction,
<PAGE>
35
written notice thereof together with such other information as may be
reasonably available to the Company or any of its Subsidiaries to enable
the Holders and their counsel to evaluate such matters;
(viii) within 60 days of the Commercial Operation Date, the Company
will adopt an operating budget and an operating plan for the initial
operating year and within 60 days of each subsequent operating year, an
operating plan for such year;
(ix) in writing, promptly upon an Officer obtaining knowledge that the
Company or any of its Subsidiaries has received notice or otherwise learned
of any claim, demand, action, event, condition, report or investigation
indicating any potential or actual liability arising in connection with (x)
the non-compliance with or violation of the requirements of any
Environmental Law which could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect, (y) the release or
threatened release of any toxic or hazardous waste, substance or
constituent into the environment which could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect, or (z)
the existence of any Environmental Lien on any properties or assets of the
Company or any of its Subsidiaries;
(x) promptly after the availability thereof, copies of all material
amendments to the certificate of incorporation or by-laws of the Company or
any of its Subsidiaries;
(xi) promptly upon any Person becoming a Subsidiary of the Company, a
written notice setting forth with respect to such Person the date on which
such Person became a Subsidiary of the Company; and
(xii) with reasonable promptness, such other information and data
with respect to the Company or any of its Subsidiaries or any of their
respective property, business or assets as from time to time may be
reasonably requested by any Holder of $25 million or more of Notes to
enable such purchaser to confirm compliance by the Company with the
covenants contained herein; provided that no information or data shall be
--------
required to be delivered hereunder or under any other provision of this
Note if it would violate any applicable attorney-client or accountant-
client privilege.
3.2 Corporate Existence, Etc.
------------------------
The Company will at all times preserve and keep in full force and
effect its corporate existence and rights and franchises to its business and
those of each of its Subsidiaries,
<PAGE>
36
except where the failure to so preserve or keep could not, singly or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
3.3 Payment of Taxes and Claims;
Tax Consolidation
----------------------------
A. The Company will, and will cause each of its Subsidiaries to, pay
all material Taxes, assessments and other governmental charges imposed upon it
or any of its material properties or assets or in respect of any of its
franchises, business, income or property before any material penalty accrues
thereon, and all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums which have become due and payable and
which by law have or may become a Lien upon any of its properties or assets
prior to the time when any material penalty or fine shall be incurred with
respect thereto, provided, however, that no such Tax assessment, charge or claim
-------- -------
need be paid if the validity or amount of such charge or claim is being
diligently contested in good faith and if such reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor.
B. The Company will not, nor will it permit any of its Subsidiaries
to, file or consent to the filing of any consolidated income tax return with any
Person (other than the Company or any of its Subsidiaries so long as the filing
of such consolidated income tax return is permitted by applicable law).
3.4 Maintenance of Properties; Insurance
------------------------------------
From and after the Commercial Operation Date, the Company will cause
the Cable System to be operated in an efficient and businesslike manner in
accordance with the Supply Contract and the Operations Agreement. The Company
will maintain or cause to be maintained, with financially sound and reputable
insurers or with self insurance programs, in each case to the extent consistent
with prudent business practices and customary in its industries, insurance with
respect to its properties and business and the properties and businesses of its
Subsidiaries against loss or damage of the kinds (including, in any event,
business interruption insurance) and in the amounts customarily carried or
maintained under similar circumstances by corporations of established reputation
engaged in similar businesses and owning similar properties in the same general
respective areas in which the Company and its Subsidiaries operate; provided,
--------
that in no event shall the Company maintain insurance at levels below those
required by the Senior Credit Facilities.
3.5 Inspection
----------
The Company shall permit one authorized representative designated by
the Holders to visit and inspect any of the properties of the Company or its
Subsidiaries, including, without
<PAGE>
37
limitation, its and their financial and accounting records, and to make copies,
and to discuss its and their affairs, finances and accounts with its and their
officers and independent public accountants (provided that representatives of
the Company or any of its Subsidiaries may, if it so chooses, be present at or
participate in any such discussion), all upon reasonable notice and at such
reasonable times during normal business hours and as often as may be reasonably
requested.
3.6 Limitation on Loans
-------------------
The Company will not, and will not permit any of its Subsidiaries to,
create, incur or otherwise cause of suffer to exist or become effective any
Liens of any kind other than Liens permitted by Section 4.3 upon any property or
asset of the Company or and Subsidiary or any shares of stock or debt of any
Subsidiary which owns property or assets, now owned or hereafter acquired,
unless (i) if such Lien secures Indebtedness which is pari passu with the Notes,
---- -----
then the Notes are secured on an equal and ratable basis with the obligations so
secured until such time as such obligation is no longer secured by a Lien or
(ii) if such Lien secures Indebtedness which is subordinated to the Notes, any
such Lien shall be subordinated to the Lien granted to the Holders of the Notes
to the same extent as such subordinated Indebtedness is subordinated to the
Notes.
3.7 Compliance with Laws, Etc.
-------------------------
The Company shall and shall cause each of its Subsidiaries to comply
with the requirements of all applicable Laws of any Tribunal, noncompliance with
which, singly or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
3.8 Maintenance of Accurate Records, Etc.
------------------------------------
The Company shall keep, and shall cause each of its Subsidiaries to
keep, true books and records and accounts in which full and correct entries will
be made of all its respective business transactions, and will reflect, and cause
each of its Subsidiaries to reflect, in its respective financial statements
adequate accruals and appropriations to reserves.
3.9 ERISA Compliance
----------------
Each of the Company and its Subsidiaries will (i) make prompt payment
of all contributions which it is obligated to make under all Pension Plans and
which are required to meet the minimum funding standard set forth in ERISA with
respect to each of the Pension Plans, except where the failure to make such
payment could not reasonably be expected to have a Material Adverse Effect, and
(ii) notify the Holders promptly upon becoming aware of any fact, including but
not limited to, any Reportable Event arising in connection with any of the
Pension
<PAGE>
38
Plans that is not a Multiemployer Plan, which could be reasonably expected to
constitute grounds for termination thereof by the PBGC or for the appointment by
the appropriate United States District Court of a trustee to administer such
Pension Plan, together with a statement as to the action, if any, proposed to be
taken with respect thereto.
3.10 Payments in U.S. Dollars
------------------------
Other than with respect to PIK Interest Amounts, all payments of any
obligations to be made hereunder by the Company or any other obligor with
respect thereto shall be made solely in U.S. Dollars or such other currency as
is then legal tender for public and private debts in the United States of
America.
3.11 Form, Registration, Transfer and
Exchange of Notes; Lost Notes
--------------------------------
The Notes are issuable as registered Notes without coupons in
denominations of at least $1,000, except as may be necessary to reflect any
principal amount not evenly divisible by $1,000. The Company shall keep at its
principal office a register in which the Company shall provide for the
registration of Notes and of transfers of Notes. Upon surrender for
registration of transfer of any Note at the principal office of the Company, the
Company shall, at its expense, execute and deliver one or more new Notes of the
like tenor and of a like aggregate principal amount, registered in the name of
such transferee or transferees. At the option of the holder of any Note, such
Note may be exchanged for other Notes of like tenor and of any authorized
denominations, of a like aggregate principal amount, upon surrender of the Note
to be exchanged at the principal office of the Company. Whenever any Notes are
so surrendered for exchange, the Company shall, at its expense, execute and
deliver the Notes which the Holder making the exchange is entitled to receive.
Every Note surrendered for registration of transfer or exchange shall be duly
endorsed, or be accompanied by a written instrument of transfer duly executed by
the holder of such Note or such holder's attorney duly authorized in writing.
Any Note or Notes issued in exchange for any Note or upon transfer thereof shall
carry the rights to unpaid interest and interest to accrue which were carried by
the Note so exchanged or transferred, so that neither gain nor loss of interest
shall result from any such transfer or exchange. Upon receipt of written notice
from the holder of any Note of the loss, theft, destruction or mutilation of
such Note and, in the case of any such loss, theft or destruction, upon receipt
of such holder's unsecured indemnity agreement, or in the case of any such
mutilation upon surrender and cancellation of such Note, the Company will make
and deliver a new Note, of like tenor, in lieu of the lost, stolen, destroyed or
mutilated Note.
Prior to due presentment for registration of transfer, the Company may
treat the Person in whose name any Note is
<PAGE>
39
registered as the owner and holder of such Note for the purpose of receiving
payment of principal of and interest on such Note and for all other purposes
whatsoever, whether or not such Note shall be overdue, and the Company shall not
be affected by notice to the contrary.
3.12 Holders' Meeting
----------------
The Company will participate in a meeting with the Holders twice
during each fiscal year to be held at a location and a time selected by the
Holders and reasonably satisfactory to the Company.
SECTION 4 NEGATIVE COVENANTS
The Company covenants and agrees that until the repayment in full of
the Notes and all other obligations due under this Note it will fully and timely
perform all covenants in this Section 4.
4.1 Indebtedness
------------
The Company shall not, and shall not cause or permit any of its
Subsidiaries to, directly or indirectly, Incur, or remain or become directly or
indirectly liable with respect to, any Indebtedness, except for the following
("Permitted Indebtedness"):
(i) the Company may Incur and remain liable with respect to the
obligations under the Notes;
(ii) the Company and its Subsidiaries may Incur and remain liable with
respect to the Bank Indebtedness; provided, however, that the aggregate
-------- -------
principal amount of Indebtedness under the Senior Credit Facilities shall
not exceed the sum of $425,000,000 less the sum of (a) the aggregate amount
of scheduled amortization payments of the principal amount thereof actually
made (other than with respect to the revolving loan commitments under the
Senior Credit Facilities), (b) the aggregate amount of mandatory
prepayments of the principal amount thereof actually made (other than with
respect to the revolving loan commitments under the Senior Credit
Facilities) and (c) each permanent reduction of commitments to extend
credit thereunder not otherwise caused pursuant to clause (a) or (b);
(iii) the Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations permitted by Section 4.6 and, upon
any matured obligations actually arising pursuant thereto, the Indebtedness
corresponding to the Contingent Obligations so extinguished;
(iv) the Company and its Subsidiaries may remain liable with respect
to Indebtedness in respect of Capital Leases or
<PAGE>
40
incurred to finance (a) the purchase price of equipment, fixtures and any
other similar property or the remodeling or other improvement costs of any
facility of the Company or any of its Subsidiaries or (b) the purchase
price of any Real Property Assets; provided that the aggregate amount of
--------
Indebtedness incurred under this Section 4.1(iv) from and after the Closing
Date shall not exceed $25 million at any time outstanding;
(v) the Company and its Subsidiaries may Incur and remain liable with
respect to Intercompany Indebtedness;
(vi) the Company and its Subsidiaries may Incur and remain liable with
respect to Permitted Refinancing Indebtedness;
(vii) Subsidiaries of the Company acquired after the Closing Date may
remain liable with respect to Indebtedness existing immediately prior to
the time any such entity became a Subsidiary of Company in an aggregate
amount for all such Subsidiaries not to exceed $10 million at any time
outstanding; provided that such Indebtedness is not incurred in
--------
contemplation of such acquisition;
(viii) the Company may become and remain liable with respect to other
Indebtedness in an aggregate principal amount not to exceed at any time
outstanding $25 million;
(ix) to the extent permitted under the Senior Credit Facilities,
Indebtedness under, or constituting net exposure under, interest and
currency hedging arrangements entered into to hedge obligations under the
Senior Credit Facilities; and
(x) Indebtedness incurred in connection with Permitted Sale Leasebacks
(as defined in the Senior Credit Facilities) in an amount not to exceed at
any time outstanding $ 5.0 million.
In addition to the foregoing, at any time if no Event of Default or
Potential Event of Default with respect to the Notes shall have occurred and be
continuing at the time of or as a consequence of the incurrence of any such
Indebtedness, the Company may incur Indebtedness if the Consolidated Interest
Coverage Ratio immediately preceding the time at which such additional
Indebtedness is incurred would have been at least 2.0 to 1, determined on a pro
forma basis in accordance with GAAP.
4.2 Senior Subordinated Indebtedness
--------------------------------
The Company shall not, nor shall it cause or permit any of its
Subsidiaries to, directly or indirectly, Incur any Indebtedness that is by its
terms (or by the terms of any agreement governing such Indebtedness)
subordinated in right of
<PAGE>
41
payment to any other Indebtedness of the Company or of such Subsidiary
("Subordinated Indebtedness") unless such Subordinated Indebtedness is also by
its terms (or by the terms of any agreement governing such Subordinated
Indebtedness) made expressly subordinate to the Notes to the same extent and in
the same manner as such Notes are subordinated to Senior Indebtedness of the
Company.
4.3 Liens
-----
The Company shall not, nor shall it cause or permit any of its
Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset (including any
document or instrument in respect of goods or accounts receivable) of the
Company or of any of its Subsidiaries, whether now owned or hereafter acquired,
or assign or otherwise convey any right to receive any income or profits
therefrom, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any Lien with respect to any such
property, asset, income or profits under the Uniform Commercial Code of any
State or under any similar recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens on (a) Real Property Assets or (b) equipment, fixtures and
other similar property of Company and any of its Subsidiaries, in each case
securing Indebtedness described in Sections 4.1(iv) and 4.1(vii); provided
--------
that such Liens shall extend only to the equipment, fixtures, and other
similar property so financed (and improvements or attachments thereto) and
the proceeds thereof;
(iii) Liens securing Indebtedness permitted under Section 3.1(viii),
which Liens are existing prior to the time the entity which incurred such
Indebtedness became a Subsidiary of the Company; provided that such Liens
--------
were not incurred in connection with, or in contemplation of, the
acquisition of such Subsidiary of the Company and such Liens extend or
cover only the property and assets of such entity which were covered by
such Liens and which were owned by such entity, in each case at the time
such entity became a Subsidiary of the Company (and improvements or
attachments thereto); and
(iv) the replacement, extension or renewal of any Lien permitted by
this Section 4.3 upon or in the same property subject to such Lien and as
security for the same obligations or any refinancings thereof to the extent
such refinancings are permitted under Section 4.1; provided that such Lien
--------
does not extend to or cover any property other than the property covered by
such Lien immediately prior to
<PAGE>
42
such replacement, extension or renewal of such Lien (and improvements or
attachments thereto) and the principal of the obligations secured thereby
is not increased.
4.4 Restricted Payments
-------------------
The Company shall not make, and shall not permit any of its
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Event of Default or Potential Event of Default shall have
occurred and be continuing at the time of or immediately after giving
effect to such Restricted Payment;
(b) immediately after giving pro forma effect to such Restricted
--- -----
Payment, the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the last paragraph of Section 4.1; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Closing
Date does not exceed the sum of (1) 25% of the Company's Consolidated Net
Income (or in the event that such Consolidated Net Income shall be a
deficit, minus 100% of such deficit) after the Closing Date, plus (2) 100%
of the aggregate Net Proceeds from the issue or sale, after the Issue Date,
of Capital Stock (other than Disqualified Capital Stock or Capital Stock of
the Company issued to any Subsidiary of the Company) of the Company or any
Indebtedness or other securities of the Company convertible into or
exercisable or exchangeable for Capital Stock (other than Disqualified
Capital Stock) of the Company which has been so converted or exercised or
exchanged, as the case may be.
The provisions of this Section 4.4 shall not prohibit (i) the payment
of any distribution within 60 days after the date of declaration thereof, if at
such date of declaration such payment would comply with the provisions of this
Note, (ii) the retirement of any shares of Capital Stock of the Company or
Subordinated Indebtedness by conversion into, or by or in exchange for, shares
of Capital Stock (other than Disqualified Capital Stock), or out of, the Net
Proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of Capital Stock of the Company (other than
Disqualified Capital Stock), (iii) the redemption, repayment or retirement of
Subordinated Indebtedness in exchange for, by conversion into, or out of the Net
Cash Proceeds of, a substantially concurrent sale or incurrence of Capital Stock
(other than Disqualified Capital Stock) or of Indebtedness (other than any
Indebtedness owed to a Subsidiary) of the Company that is contractually
subordinated in right of payment to the Notes to at least the same extent as the
Indebtedness being redeemed, repair or retired, (iv) the retirement of any
shares of
<PAGE>
43
Disqualified Capital Stock by conversion into, or by exchange for, shares of
Disqualified Capital Stock, or out of the Net Proceeds of the substantially
concurrent issuance or sale (other than to a Subsidiary of the Company) of other
shares of Disqualified Capital Stock, (v) the payment of dividends to Holdings
in such amounts and at such time as is necessary for the payment of interest,
principal or premium on the Senior Notes in accordance with the terms thereof
and the Senior Note Purchase Agreement in effect on the Closing Date, (vi) the
payment of an amount not to exceed 1.5% of the gross revenues of Holdings for
management services provided by PCG under the Advisory Services Agreement, (vii)
the payment of dividends to Holdings, in an amount not to exceed $4.0 million
per year, to be used by Holdings and Parent for overhead and operating expenses
of Holdings and Parent or (viii) Permitted Tax Distributions.
4.5 Investments
-----------
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any Investment other than (i) a Permitted Investment or
(ii) an Investment that is made as a Restricted Payment in compliance with
Section 4.4.
4.6 Contingent Obligations
----------------------
The Company shall not, nor shall it cause or permit any of its
Subsidiaries to, directly or indirectly, create or become or remain liable with
respect to any Contingent Obligation, except:
(i) the Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations in respect of letters of credit under the
Senior Credit Facilities;
(ii) the Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with Asset Sales or other sales of assets; provided that the
--------
maximum assumable liability in respect of all such obligations shall at no
time exceed the gross proceeds actually received by the Company and its
Subsidiaries in connection with such Asset Sales and other sales;
(iii) the Company and its Subsidiaries, as applicable, may remain
liable with respect to existing Contingent Obligations existing on the
Closing Date;
(iv) the Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations under guarantees made under the
Senior Credit Facilities;
<PAGE>
44
(v) the Company and its Subsidiaries may become and remain liable with
respect to guarantees of Indebtedness or Contingent Obligations of a
wholly-owned Subsidiary of the Company and a Subsidiary of the Company may
become and remain liable with respect to guarantees of Indebtedness or
Contingent Obligations of the Company or a wholly-owned Subsidiary of the
Company;
(vi) with respect to the Company and its Subsidiaries, Contingent
Obligations permitted in accordance with the terms of Senior Credit
Facilities; and
(vii) the Company and its Subsidiaries may become and remain liable
with respect to other Contingent Obligations; provided that the maximum
--------
aggregate liability, contingent or otherwise, of the Company and its
Subsidiaries in respect of all such Contingent Obligations shall at no time
exceed $5 million.
4.7 Restriction on Fundamental Changes
----------------------------------
Other than the sale of Capital Stock of a Subsidiary of the Company in
accordance with Section 2.4C(i) and Section 4.15, the Company shall not, nor
shall it cause or permit any of its Subsidiaries to, directly or indirectly,
enter into any transaction, or series of related transactions, of merger,
amalgamation, consolidation or combination, or consolidate, or liquidate, wind-
up or dissolve itself (or suffer any liquidation or dissolution), or convey,
sell, lease, sublease, transfer or otherwise dispose of, in one transaction or
in a series of transactions, all or substantially all of its business, property
or assets, whether now owned or hereafter acquired, except any Subsidiary of the
Company may be merged, amalgamated, consolidated or combined with or into the
Company or any wholly-owned Subsidiary of the Company or be liquidated, wound up
or dissolved, or all or substantially all of its business, property or assets
may be conveyed, sold, leased, transferred or otherwise disposed of, in one
transaction or in a series of transactions, to the Company or to any wholly-
owned Subsidiary of the Company; provided, however, that (A) no Potential Event
-------- -------
of Default or Event of Default shall have occurred and be continuing or would
result therefrom, (B) in the case of such a merger, amalgamation, consolidation
or combination of the Company and a Subsidiary of the Company, the Company shall
be the continuing or surviving corporation, and (C) where one of the predecessor
entities is the Company, the surviving entity (i) if it is the Company (I)
continues to be bound as such under this Note and (II) executes and delivers to
the Holders immediately upon consummation of such transaction a written
confirmation or acknowledgment to such effect, in form and substance
satisfactory to the Holders, together with evidence of appropriate corporate
power, authority and action and a written legal opinion in form and substance
satisfactory to the Holders to the effect that this Note continues to be a
legal, valid and binding obligation of
<PAGE>
45
such entity, enforceable against such entity in accordance with its terms
(subject to customary exceptions in respect of bankruptcy, insolvency and other
equitable remedies) and with respect to such other matters as the Holders may
reasonably request, and (ii) if it is not the Company, executes and delivers to
the Holders immediately upon the consummation of such transaction an amendment
to this Note, in form and substance satisfactory to the Holders, whereby such
surviving entity assumes the due and punctual performance of all obligations and
liabilities of such predecessor, together with evidence of appropriate corporate
power, authority and action and a written legal opinion in form and substance
satisfactory to the Holders to the effect that such Note is the legal, valid and
binding obligation of such surviving entity, enforceable against such surviving
entity in accordance with its terms (subject to customary exceptions in respect
of bankruptcy, insolvency and other equitable remedies) and with respect to such
other matters as the Holders may reasonably request.
4.8 Limitation on Dividend and Other Payment
Restrictions Affecting Subsidiaries
-----------------------------------
The Company shall not, nor shall it cause or permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or permit or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary of the Company to (a) pay dividends or make any other
distributions on its Capital Stock or any other interest or participation in, or
measured by, such Subsidiary's profits; (b) make loans or advances or pay any
Indebtedness or other obligation owed to the Company or to any Subsidiary of the
Company; or (c) transfer any of its property or assets to the Company or to any
Subsidiary of the Company (any such restriction or encumbrance a "Payment
Restriction"), except for such encumbrances or restrictions existing under or by
reason of: (1) any restrictions contained in (i) this Note; (ii) the Senior
Credit Facilities (or any of the documents contemplated therein) as in effect on
the Closing Date; (iii) the Indebtedness pertaining to a Subsidiary of the
Company that is not a Subsidiary of the Company on the Closing Date in existence
at the time such Subsidiary becomes a Subsidiary of the Company; provided,
--------
however, that any such Indebtedness was not incurred as a result of, in
- -------
connection with or in anticipation of the transaction pursuant to which such
entity becomes a Subsidiary of the Company and it does not apply to any Person,
or the properties of assets of any Person, other than the Subsidiary acquired
and such Indebtedness is otherwise permitted to be incurred pursuant to Section
4.1; (iv) secured Indebtedness otherwise permitted to be incurred pursuant to
Sections 4.1 and 4.2 that limits the right of the debtor to dispose of the
assets securing such Indebtedness; (2) customary non-assignment provisions of
any lease governing a leasehold interest of any Subsidiary of the Company; (3)
customary net worth provisions contained in leases and other agreements entered
into by a
<PAGE>
46
Subsidiary in the ordinary course of business; (4) customary restrictions with
respect to a Subsidiary pursuant to an agreement that has been entered into for
the sale or disposition of all or substantially all of the Capital Stock or
assets of such Subsidiary; (5) applicable law; and (6) any instrument that
Refinances any Indebtedness effecting any such encumbrance or restriction
pursuant to clause (1) above; provided, however, that the provisions relating to
-------- -------
any such encumbrance or restriction in any such instrument are not materially
less favorable to the Company or its Subsidiaries or the Holders than those
contained in the agreements referred to in clause (1).
4.9 Transactions with Shareholders
and Affiliates
------------------------------
The Company shall not, nor shall it cause or permit any of its
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction or series of related transactions (including, without limitation,
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate of the Company (an "Affiliate Transaction") or
extend, renew, waive or otherwise modify the terms of any Affiliate Transaction
entered into prior to the Closing Date unless (i) such Affiliate Transaction is
between or among the Company and its wholly-owned Subsidiaries; or (ii) the
terms of such Affiliate Transaction are fair and reasonable to the Company or
such Subsidiary, as the case may be, and the terms of such Affiliate Transaction
are at least as favorable as the terms which could be obtained by the Company or
such Subsidiary, as the case may be, in a comparable transaction made on an
arm's-length basis between unaffiliated parties. In any Affiliate Transaction
involving an amount or having a value in excess of $3 million which is not
permitted under clause (i) above, the Company must obtain a resolution of the
Board of Directors certifying that such Affiliate Transaction complies with
clause (ii) above. In transactions with a value in excess of $5 million which
are not permitted under clause (i) above, the Company must obtain a written
opinion as to the fairness of such a transaction from an Independent Financial
Advisor.
The foregoing restrictions shall not apply to the following "Permitted
Affiliate Transactions": (i) any transaction exclusively between the Company
and any of its wholly-owned Subsidiaries or exclusively between any of the
Company's wholly-owned Subsidiaries, (ii) reasonable and customary fees paid to
members of the Board of Directors of the Company, (iii) reasonable and customary
fees and compensation paid to, and indemnity provided on behalf of, officers,
directors or employees of the Company or any of its Subsidiaries, as determined
by the Board of Directors of the Company or any such Subsidiary or the senior
management thereof in good faith, including, without limitation, issuances of
stock, payment of bonuses and other transactions pursuant to employment or
compensation agreements, stock option agreements, indemnification
<PAGE>
47
agreements and other arrangements approved by the Board of Directors of the
applicable company, in good faith, and director and officer and other insurance
purchased by the Company and benefiting the officers and directors of Parent or
Holdings, (iv) transactions pursuant to or affecting the Advisory Services
Agreement, (v) transactions pursuant to or affecting the Placement Agreement and
(vi) any transactions with PCG or CIBC.
4.10 Subsidiary Stock
----------------
Except for any sale of 100% of the Capital Stock or other equity
securities of any of the Company's Subsidiaries in compliance with the
provisions of Section 4.7, the Company will not and will not permit any of its
Subsidiaries to directly or indirectly sell, assign, pledge or otherwise
encumber or dispose of any shares of Capital Stock or other equity securities of
any of its Subsidiaries, except (i) to qualify directors if required by
applicable law, (ii) in the case of the Company's Subsidiaries, to the Company
or to a wholly-owned Subsidiary of the Company, (iii) Asset Sales made in
compliance with this Note or (iv) Liens in favor of the lenders under the Senior
Credit Facilities.
4.11 Business Activities
-------------------
The Company shall not, nor shall the Company cause or permit any of
its Subsidiaries to, directly or indirectly, engage in or operate any business
other than the Cable System or a Related Business Investment.
4.12 Amendments or Waivers of Certain Documents
------------------------------------------
The Company shall not, nor shall it cause or permit any of its
Subsidiaries to, except to the extent permitted in accordance with the terms of
the Senior Credit Facilities, directly or indirectly, enter into any amendment,
modification, supplement or waiver with respect to any of the Transaction
Documents as in effect on the Closing Date, that would modify any of the
provisions thereof or any of the definitions relating to the provisions thereof
in a manner materially adverse to the Holders and which would have a Material
Adverse Effect on the value of the Notes.
4.13 Amendments to Charter Documents
-------------------------------
The Company shall not, nor shall it cause or permit any of its
Subsidiaries to, amend its certificate of incorporation or bylaws in any respect
which is materially adverse to the interests of the Holders.
4.14 Refinancing of the Notes in Part
--------------------------------
The Company shall not, nor shall the Company cause or permit any of
its Subsidiaries to, Incur any Indebtedness to
<PAGE>
48
Refinance (other than any extension or amendment or other restructuring of the
Indebtedness under the Senior Credit Facilities) the Notes in part unless the
terms, conditions, covenants, events of default and other provisions in respect
of the instruments evidencing the Indebtedness Incurred to Refinance the Notes
in part shall be the same or better terms; and provided that no Refinancing in
--------
part shall result in the amount of the Notes outstanding being less than $50
million.
4.15 Asset Sales
-----------
The Company shall not, nor shall it cause or permit any of its Subsidiaries
to, except to the extent permitted in accordance with the terms of the Senior
Credit Facilities, directly or indirectly, consummate any Asset Sale unless all
of the Asset Sale Proceeds in respect thereof are applied by the Company or a
Subsidiary of the Company in accordance with Section 2.4C(i).
4.16 Transfer of Assets to Subsidiaries
----------------------------------
(a) The Company shall not, nor shall the Company cause or permit any
of its Subsidiaries to, except to the extent permitted in accordance with the
terms and conditions of the Senior Credit Facilities, directly or indirectly,
transfer (or in the ordinary course of business or pursuant to a Permitted
Investment) any assets or property to any Subsidiary of the Company unless such
Subsidiary pays fair market value therefor to the Company or to a wholly-owned
Subsidiary of the Company and except as provided in Sections 4.8 and 4.10.
(b) The Company shall not, nor shall the Company cause or permit any
of its Subsidiaries to, directly or indirectly, transfer to any Subsidiary of
Holdco, other than any Subsidiary of the Company, assets or property of the
Company or its Subsidiaries constituting in any individual transfer at least
10%, or in the aggregate at least 20%, of the assets and property of the Company
and its Subsidiaries, taken as a whole, unless each such transferee executes and
delivers in favor of the Holders a guarantee of all of the Company's obligations
with respect to the Notes, which guarantee shall be subordinated to Senior
Indebtedness of such transferee to the same extent as the Notes are subordinated
to Senior Indebtedness of the Company and which is otherwise in form and
substance reasonably satisfactory to the Required Holders. In the event any
such transfer occurs prior to the initial issuance of the Notes, the transferee
shall execute and deliver such guarantee simultaneous with the issuance of the
Notes.
SECTION 5 EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default")
shall occur and be continuing:
<PAGE>
49
5.1 Failure To Make Payments When Due
---------------------------------
Failure to pay any installment of principal of the Notes when due,
whether at stated maturity, by acceleration, by notice of prepayment or
otherwise; or failure to pay any interest on the Notes or any other amount due
under this Note within five days or more after the date due; or
5.2 Default in Other Agreements
---------------------------
Failure of the Company or any of its Subsidiaries to pay at final
maturity any principal on one or more issues of Indebtedness or Contingent
Obligations of the Company or of any of its Subsidiaries (other than
Indebtedness referred to in Section 5.1) or breach or default by the Company or
any of its Subsidiaries with respect to any other term of any one or more issues
of Indebtedness or Contingent Obligations of the Company or of any of its
Subsidiaries or any agreement or instrument evidencing or securing such
Indebtedness or Contingent Obligations and such default or breach results in the
acceleration of that Indebtedness or Contingent Obligation prior to its stated
maturity and, in either case, the principal amount of such Indebtedness or
Contingent Obligation and all other such Indebtedness or Contingent Obligations
of the Company and its Subsidiaries in respect of which there is a failure to
pay principal or interest or which has been so accelerated equals $5,000,000 or
more; or
5.3 Breach of Certain Covenants
---------------------------
Failure of the Company to perform or comply with any covenant, term or
condition contained in Section 2.2C(ii) or 3.2; or
5.4 Breach of Warranty
------------------
Any representation, warranty or certification made by Global in the
Purchase Agreement or in any statement or certificate at any time given by
Global in writing pursuant hereto or thereto or in connection herewith or
therewith shall be false or incorrect in any material respect on the date as of
which made or deemed made and shall not have been cured within 30 days;
provided, however, if (A) such failure cannot be cured within such 30-day period
- -------- -------
despite the Company's best efforts to do so, (B) such failure is susceptible of
cure, (C) the Company is continuously proceeding with diligence and in good
faith to cure such failure and (D) the existence of such failure has not had and
could not reasonably be expected to have a Material Adverse Effect, then such
30-day cure period shall be extended to such date, not to exceed a total 90-day
cure period; or
<PAGE>
50
5.5 Other Defaults Under Note
-------------------------
The Company shall default in the performance of or compliance with any
covenant, term or condition contained in this Note and such default shall not
have been remedied or waived in accordance with this Note within 30 days after
the date of written notice from the holder or holders of not less than 25% in
aggregate principal amount of the Notes then outstanding of such default;
provided, however, if (A) such failure cannot be cured within such 30-day period
- -------- -------
despite the Company's best efforts to do so, (B) such failure is susceptible of
cure, (C) the Company is continuously proceeding with diligence and in good
faith to cure such failure and (D) the existence of such failure has not had and
could not reasonably be expected to have a Material Adverse Effect, then such
30-day cure period shall be extended to such date, not to exceed a total 90-day
cure period; or
5.6 Defaults Under Other Agreements
-------------------------------
Prior to the Commercial Operation Date, an "event of default" (as
defined therein) shall have occurred under the Supply Contract, and could
reasonably be expected to have a Material Adverse Effect unless AT&T Corp. is
performing under its Guaranty or the Supply Contract has been replaced following
such termination or default; or
5.7 Involuntary Bankruptcy;
Appointment of Custodian, Etc.
------------------------------
A court of competent jurisdiction enters a Bankruptcy Order under any
Bankruptcy Law that:
(A) is for relief against the Company or any Subsidiary in an
involuntary case or proceeding, or
(B) appoints a Custodian of the Company or any Subsidiary for all
or substantially all of its properties, or
(C) orders the liquidation of the Company or any Subsidiary,
and in each case the order or decree remains unstayed and in effect for 60 days;
or
5.8 Voluntary Bankruptcy;
Appointment of Custodian, Etc.
------------------------------
The Company or any Subsidiary pursuant to or within the meaning of any
Bankruptcy Law:
(A) commences a voluntary case or proceeding, or
<PAGE>
51
(B) consents to the entry of a Bankruptcy Order for relief
against it in an involuntary case or proceeding, or
(C) consents to the appointment of a Custodian; or
5.9 Judgments and Attachments
-------------------------
Any money judgment, writ or warrant of attachment, or similar process
involving in any individual case or in the aggregate at any time an amount in
excess of $5,000,000 (to the extent not covered by third-party insurance as to
which the insurance company has acknowledged coverage) shall be entered or filed
against the Company or any of its Subsidiaries or any of their respective
properties or assets and shall remain undischarged, unvacated, unbonded or
unstayed for a period of 60 days or in any event later than five days prior to
the date of any proposed sale thereunder; or
5.10 Dissolution
-----------
Any order, judgment or decree shall be entered against the Company or
any Subsidiary decreeing the dissolution or split-up of the Company or that
Subsidiary and such order shall remain undischarged or unstayed for a period in
excess of 60 days; or
5.11 Foreclosure
-----------
The agent under the Senior Credit Facilities or any other party
entitled to act thereunder commences judicial proceedings to foreclose on the
collateral securing the Bank Indebtedness or exercises any right under
applicable law or any instrument evidencing a security interest or other
encumbrance in respect of such collateral to take ownership or effect the
transfer of such collateral in lieu of foreclosure;
THEN (i) upon the occurrence of any Event of Default described in the
foregoing Sections 5.7 or 5.8, all of the unpaid principal amount of and accrued
interest on the Notes and all other outstanding obligations shall automatically
become immediately due and payable, without presentment, demand, protest or
other requirements of any kind, all of which are hereby expressly waived by the
Company, and (ii) upon written notice of the holder or holders of 25% in
aggregate principal amount of the Notes then outstanding, by written notice to
the Company, declare all of the unpaid principal amount of and accrued interest
on the Notes and all other outstanding obligations to be, and the same shall
forthwith become, due and payable, and the obligations of the Holders hereunder
shall thereupon terminate or if there are any amounts outstanding under the
Senior Credit Facilities, such amounts shall become due and payable upon the
first to occur of an acceleration under the Senior Credit Facilities or five
<PAGE>
52
Business Days after receipt by the Company of notice of the acceleration of the
Notes; provided, however, that if any declaration of acceleration under the
Notes occurs solely because an Event of Default set forth in Section 5.2 has
occurred and is continuing, such declaration of acceleration shall be
automatically annulled if the holders of the Indebtedness or Contingent
Obligations which are the subject of such Event of Default have rescinded their
declaration of acceleration in respect of such Indebtedness or Contingent
Obligations within thirty days of such acceleration of such Indebtedness or
Contingent Obligations and the Holders have received written notice thereof
within such time and if no other Event of Default has occurred during such
thirty-day period which has not been cured or waived in accordance with this
Note. Nevertheless, if at any time after acceleration of the maturity of the
Notes, the Company shall pay all arrears of interest and all payments on account
of the principal thereof which shall have become due otherwise than by
acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Note) and all Events of Default
and Potential Events of Default (other than non-payment of principal of and
accrued interest on the Notes due and payable solely by virtue of acceleration)
shall be remedied or waived, then the holders of a majority in aggregate
principal amount of the Notes then outstanding, by written notice to the Company
may rescind and annul the acceleration and its consequences; but such action
shall not affect any subsequent Event of Default or Potential Event of Default
or impair any right consequent thereon.
SECTION 6 SUBORDINATION
6.1 Notes Subordinated to Senior
Indebtedness of the Company
---------------------------
Payments of principal and interest due on the Notes by the Company
shall be subordinated in accordance with the provisions of this Section 6 to the
prior payment in full, in cash or Cash Equivalents, of all amounts payable in
respect of Senior Indebtedness of the Company, whether now outstanding or
hereafter created (including any interest accruing subsequent to an event
specified in Section 5.7 or 5.8 whether or not such interest is an allowed claim
against the Company), that the subordination is for the benefit of the holders
of Senior Indebtedness of the Company, and that each holder of Senior
Indebtedness of the Company whether now outstanding or hereafter created,
incurred, assumed or guaranteed shall be deemed to have acquired Senior
Indebtedness of the Company in reliance upon the covenants and provisions
contained in this Note.
6.2 Priority and Payment Over
of Proceeds in Certain Events
-----------------------------
(a) Subordination on Dissolution, Liquidation or Reorganization of
--------------------------------------------------------------
the Company. Upon any payment or distribution
- -----------
<PAGE>
53
of assets or securities of the Company of any kind or character, whether in
cash, property or securities, upon any dissolution or winding up or total or
partial liquidation or reorganization of the Company, whether voluntary or
involuntary or in bankruptcy, insolvency, receivership or other proceedings, all
Senior Indebtedness of the Company (including any interest accruing subsequent
to an event specified in Section 5.7 or 5.8 whether or not such interest is an
allowed claim enforceable against the Company) shall first be paid in full in
cash or Cash Equivalents, before the Holders shall be entitled to receive any
payment by the Company of any principal or interest on the Notes and upon any
such dissolution or winding up or liquidation or reorganization, any payment or
distribution of assets or securities of the Company of any kind or character,
whether in cash, property or securities, to which the Holders would be entitled
except for the provisions of this Section 6 shall be made by the Company or by
any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person
making such payment or distribution, directly to the holders of the Senior
Indebtedness of the Company or their representatives to the extent necessary to
pay all of the Senior Indebtedness of the Company to the holders of such Senior
Indebtedness of the Company.
(b) Subordination on Default on Designated Senior Indebtedness. (i)
Unless Section 6.3(a) hereof shall be applicable, after the occurrence of a
Payment Default no payment or distribution of any assets or securities of the
Company or any Subsidiary of any kind or character (including, without
limitation, cash, property and any payment or distribution which may be payable
or deliverable by reason of the payment of any other Indebtedness of the Company
being subordinated to the payment of the Notes by the Company) may be made by or
on behalf of the Company or any Subsidiary, including, without limitation, by
way of set-off or otherwise, for or on account of principal of, premium, if any,
or interest on the Notes, or for or on account of the purchase, redemption or
other acquisition of the Notes, and no holder or owner of any Notes shall take
or receive from the Company or any Subsidiary, directly or indirectly in any
manner, payment in respect of all or any portion of Notes following the delivery
by the representative of the holders of Designated Senior Indebtedness (the
"Representative") to the Holders of written notice of the occurrence of a
Payment Default, and in any such event, such prohibition shall continue until
such Payment Default is cured, waived in writing or ceases to exist. At such
time as the prohibition set forth in the preceding sentence shall no longer be
in effect, subject to the provisions of the following paragraph (ii), the
Company the Notes, including any missed payments.
(ii) Unless Section 6.3(a) hereof shall be applicable, upon the
occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness,
no payment or distribution of any assets of the Company of any kind or character
shall be made by the Company, including, without limitation, by way of set-off
or
<PAGE>
54
otherwise, on account of any principal of, premium, if any, or interest on the
Notes or on account of the purchase, redemption, defeasance or other acquisition
of Notes for a period ("Payment Blockage Period") commencing on the date of
receipt by the Holders of written notice from the Representative of such Non-
Payment Event of Default unless and until (subject to any blockage of payments
that may then be in effect under the preceding paragraph (a)) the earliest to
occur of the following events; (w) more than 179 days shall have elapsed since
the date of receipt of such written notice by the Holders, (x) such Non-Payment
Event of Default shall have been cured or waived in writing or shall have ceased
to exist, (y) such Designated Senior Indebtedness shall have been discharged or
paid in full in cash or Cash Equivalents or (z) such Payment Blockage Period
shall have been terminated by written notice to the Company or the Holders from
the Representative initiating such Payment Blockage Period, or the holders of at
least a majority in principal amount of such issue of Designated Senior
Indebtedness, after which, in the case of clause (w), (x), (y) or (z), the
Company shall resume making any and all required payments in respect of the
Notes, including any missed payments. Notwithstanding any other provisions of
this Note, no Non-Payment Event of Default with respect to Designated Senior
Indebtedness which existed or was continuing on the date of the commencement of
any Payment Blockage Period initiated by the Representative shall be, or be
made, the basis for the commencement of a second Payment Blockage Period
initiated by the Representative unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days. In no event
shall a Payment Blockage Period extend beyond 179 days from the date of the
receipt by the Holders of the notice referred to in this Section 6.3(b)(ii) (the
"Initial Blockage Period"). Any number of additional Payment Blockage Periods
may be commenced during the Initial Blockage Period; provided, however, that no
such additional Payment Blockage period shall extend beyond the Initial Blockage
Period. After the expiration of the Initial Blockage period, no Payment
Blockage Period may be commenced under this Section 6.3(b)(ii) and no Guarantee
Payment Blockage Period may be commenced under Section 8.2(b) hereof until at
least 180 consecutive days have elapsed from the last day of the Initial
Blockage Period.
(c) Rights and Obligations of the Holders. In the event that,
notwithstanding the foregoing provisions prohibiting such payment or
distribution, the Holders shall have received any payment on account of any
Obligation (other than as permitted by Sections (a) and (b) of this Section 6.2)
at a time when such payment is prohibited by this Section 6.2, then and in such
event such payment or distribution shall be received and held in trust for the
holders of the Senior Indebtedness of the Company and shall be paid over or
delivered to the holders of the Senior Indebtedness of the Company remaining
unpaid to the extent necessary to pay in full in cash or Cash Equivalents all
Senior Indebtedness of the Company in accordance with their terms after
<PAGE>
55
giving effect to any concurrent payment or distribution to the holders of such
Senior Indebtedness of the Company.
If payment of the Obligations is accelerated because of an Event of
Default, the Company shall promptly notify the agent or other representatives
for Senior Indebtedness of the Company of the acceleration.
Upon any payment or distribution of assets or securities referred to
in this Section 6, the Holders (notwithstanding any other provision of this
Note) shall be entitled to rely upon any order or decree of a court of competent
jurisdiction in which such dissolution, winding up, liquidation or
reorganization proceedings are pending, and upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making any
such payment or distribution, delivered to the Holders for the purpose of
ascertaining the Persons entitled to participate in such distribution, the
holders of Senior Indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Section 6.
The Company shall give written notice to each of the Holders of any
default or event of default under any Senior Indebtedness of the Company or
under any agreement pursuant to which Senior Indebtedness of the Company may
have been issued, and, in the event of any such event of default, shall provide
to the Holders the names and address of the trustees or other representatives of
holders of such Senior Indebtedness of the Company.
With respect to the holders and owners of Senior Indebtedness of the
Company, by acceptance of this Note, each Holder undertakes to perform only such
obligations on the part of such Holder as are specifically set forth in this
Section 6, and no implied covenants or obligations with respect to the holders
or owners of Senior Indebtedness of the Company shall be read into this Note
against the Holders. The Holders shall not be deemed to owe any fiduciary duty
to the holders or owners of Senior Indebtedness of the Company or to the agent
under the Senior Credit Facilities or any other representative of the holders of
the Senior Indebtedness of the Company.
6.3 Payments May Be Paid Prior to Dissolution
-----------------------------------------
Nothing contained in this Section 6 or elsewhere in this Note shall
prevent or delay the Company, except under the conditions described in Section
6.2, from making payments at any time for the purpose of paying Obligations.
<PAGE>
56
6.4 Rights of Holders of Senior Indebtedness
of the Company Not To Be Impaired
----------------------------------------
No right of any present or future holder of any Senior Indebtedness of
the Company to enforce subordination as provided in this Section 6 shall at any
time in any way be prejudiced or impaired by any act or failure to act by any
such holder, or by any noncompliance by the Company with the terms and
provisions and covenants herein, regardless of any knowledge thereof any such
holder may have or otherwise be charged with. Without in any way limiting the
generality of the foregoing Section, such holders of Senior Indebtedness of the
Company may, at any time and from time to time without impairing or releasing
the subordination provided in this Section 6 or the obligations of the Holders
hereunder to the holders of Senior Indebtedness of the Company, do any one or
more of the following: (i) change the manner, place, terms or time of payment
of, or renew or alter, Senior Indebtedness of the Company or otherwise amend or
supplement in any manner Senior Indebtedness of the Company or any instrument
evidencing the same or any agreement under which any Senior Indebtedness of the
Company is outstanding; (ii) sell, exchange, release, or otherwise deal with any
property pledged, mortgaged, or otherwise securing Senior Indebtedness of the
Company or fail to perfect or delay in the perfection of the security interest
in such property; (iii) release any Person liable in any manner for the
collection of Senior Indebtedness of the Company; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person. Each
Holder by purchasing or accepting a Note waives any and all notice of the
creation, modification, renewal, extension or accrual of any Senior Indebtedness
of the Company and notice of or proof of reliance by any holder or owner of
Senior Indebtedness of the Company upon this Section 6 and the Senior
Indebtedness of the Company shall conclusively be deemed to have been created,
contracted or incurred in reliance upon this Section 6, and all dealings between
the Company and the holders and owners of the Senior Indebtedness of the Company
shall be deemed to have been consummated in reliance upon this Section 6.
The provisions of this Section 6 are intended to be for the benefit
of, and shall be enforceable directly by, the holders of the Senior Indebtedness
of the Company.
6.5 Subrogation
-----------
Upon the payment in full in accordance with the terms of Section 6.2
of all amounts payable under or in respect of the Senior Indebtedness of the
Company, the Holders shall be subrogated to the rights of the holders of such
Senior Indebtedness of the Company to receive payments or distributions of
assets of Company made on such Senior Indebtedness of the Company until the
Obligations shall be paid in full in cash or Cash Equivalents; and for purposes
of such subrogation no payments or distributions to holders of such Senior
Indebtedness
<PAGE>
57
of the Company of any cash, property or securities to which the Holders would be
entitled except for the provisions of this Section 6, and no payment over
pursuant to the provisions of this Section 6 to holders of such Senior
Indebtedness of the Company by the Holders, shall, as between the Company, its
creditors other than holders of such Senior Indebtedness of the Company and the
Holders, be deemed to be a payment by the Company to or on account of such
Senior Indebtedness of the Company, it being understood that the provisions of
this Section 6 are solely for the purpose of defining the relative rights of the
holders of such Senior Indebtedness of the Company, on the one hand, and the
Holders, on the other hand. A release of any claim by any holder of Senior
Indebtedness of the Company shall not limit the Holders' rights of subrogation
under this Section 6.5.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Section 6 shall have been
applied, pursuant to the provisions of this Section 6, to the payment of all
amounts payable under the Senior Indebtedness of the Company, then and in such
case, the Holders shall be entitled to receive from the holders of such Senior
Indebtedness of the Company at the time outstanding the full amount of any such
payments or distributions received by such holders of Senior Indebtedness of the
Company in excess of the amount sufficient to pay all Senior Indebtedness of the
Company payable under or in respect of the Senior Indebtedness of the Company in
full in cash or Cash Equivalents in accordance with the terms of Section 6.2.
6.6 Obligations of the Company Unconditional
----------------------------------------
Nothing contained in this Section 6 or elsewhere in this Note is
intended to or shall impair as between the Company and the Holders the
obligations of the Company, which are absolute and unconditional, to pay to the
Holders Obligations as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of the Holders and creditors of the Company other than the holders of the
Senior Indebtedness of the Company, nor shall anything herein or therein prevent
the Holders from exercising all remedies otherwise permitted by applicable law
upon default under this Note, subject to the rights, if any, under this Section
6 of the holders of such Senior Indebtedness of the Company in respect of cash,
property or securities of the Company received upon the exercise of any such
remedy.
The failure to make a payment on account of Obligations by reason of
any provision of this Section 6 shall not prevent the occurrence of an Event of
Default under Section 5.
<PAGE>
58
SECTION 7 MISCELLANEOUS
7.1 Amendments and Waivers
----------------------
No amendment, modification, termination or waiver of any term or
provision of the Notes or consent to any departure by the Company therefrom
shall in any event be effective without the prior written concurrence of the
Company and the Required Holders; provided, however, that, without the prior
-------- -------
written consent of each Holder affected, an amendment, modification, termination
or waiver of this Note or consent to departure from a term or provision hereof
may not: (i) reduce the principal amount of Notes whose holders must consent to
any such amendment, modification, termination, waiver or consent; (ii) reduce
the rate of or extend the time for payment of principal, premium or interest on
any Note; (iii) reduce the principal amount of any Note; (iv) make any Note
payable in money other than that stated in the Note; (v) make any change in
Section 2.4 or in the definition of Change of Control, in the last paragraph of
Section 5 or this Section 7.1; (vi) reduce the rate or extend the time of
payment of fees or other compensation payable to the Holders hereunder; (vii)
modify the provisions of Section 6 or any of the defined terms related thereto
in any manner adverse to the Holders. Any waiver or consent shall be effective
only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on the Company in any case shall entitle the
Company to any further notice or demand in similar or other circumstances. Any
amendment, modification, termination, waiver or consent effected in accordance
with this Section 7.1 shall be binding upon each holder of the Notes at the time
outstanding, each further holder of the Notes and, if signed by the Company, on
the Company.
7.2 Independence of Covenants
-------------------------
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or be otherwise within the
limitation of, another covenant shall not avoid the occurrence of an Event of
Default or Potential Event of Default if such action is taken or condition
exists.
7.3 Notices
-------
Unless otherwise provided herein, any notice or other communications
herein required or permitted to be given shall be in writing and may be
personally served, telecopied, telexed or sent by mail and shall be deemed to
have been given when delivered in person, upon receipt of telecopy or telex
against receipt of answer back or four Business Days after depositing it in the
mail, registered or certified, with postage prepaid and properly addressed;
provided, however, that notices shall not be effective until received. For the
purposes hereof, the addresses
<PAGE>
59
of the parties hereto (until notice of a change thereof is delivered as provided
in this Section 7.3) shall be set forth under each party's name on the signature
pages hereto.
7.4 Failure or Indulgence Not Waiver;
Remedies Cumulative
--------------------------------
No failure or delay on the part of any Holder of any Note in the
exercise of any power, right or privilege hereunder shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this Note are
cumulative to and not exclusive of any rights or remedies otherwise available.
7.5 Severability
------------
In case any provision in or obligation under this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
7.6 Headings
--------
Sections and Section headings in this Note are included herein for
convenience of reference only and shall not constitute a part of this Note for
any other purpose or be given any substantive effect.
7.7 Applicable Law
--------------
THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW.
7.8 Agent for Service; Submission to
Jurisdiction; Waiver of Immunities;
Judgment Currency
-----------------------------------
By the execution and delivery of this Note, the Company (i)
acknowledges that it has, by separate written instrument, designated and
appointed CT Corporation System, 1633 Broadway, New York, New York 10019 (the
"Agent") (and any successor entity) as its authorized agent upon which process
may be served in any suit or proceeding arising out of or relating to this Note
that may be instituted in any federal or state court in The City of New York,
Borough of Manhattan, State of New York, or brought under federal or state
securities laws and acknowledges that the Agent has accepted such designation,
(ii) submits to the jurisdiction of any such court in any such suit or
proceeding and
<PAGE>
60
(iii) agrees that service of process upon the Agent and written notice of said
service to the Company and each Guarantor in accordance with Section 7.3 of this
Note shall be deemed in every respect effective service of process upon the
Company in any such suit or proceeding. The Company further agrees to take any
and all action, including the execution and filing of any and all such documents
and instruments, as may be necessary to continue such designation and
appointment of the Agent in full force and effect without lapse for so long as
any of the Notes shall be outstanding; provided that the Company may (and, to
the extent the Agent ceases to be able to be served on the basis contemplated
herein, shall), by written notice to the Holders in accordance with Section 7.3
of this Note, designate such additional or alternative agent for service of
process under this Section 7.8 that (i) maintains an office located in The City
of New York, Borough of Manhattan, State of New York and (ii) is a corporate
service company which acts as agent for service of process for other persons in
the ordinary course of its business. Such written notice shall identify the
name of such agent for service of process and the address of the office of such
agent for service of process in The City of New York, Borough of Manhattan,
State of New York.
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, it
hereby irrevocably waives such immunity in respect of its obligations under this
Note. In addition, the Company irrevocably waives and agrees not to assert, by
way of motion, as a defense, or otherwise in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
the above-mentioned courts for any reason whatsoever, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue for such suit
is improper, or that this Note or the subject matter hereof may not be enforced
in such courts.
The Company and the Holder, by acceptance of this Note, agree that a
final judgment in any such suit, action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
The Company agrees to indemnify the Holders, the officers, directors
and agents of the Holders and each person, if any, who controls the Holders
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act against any loss incurred by any of them as a result of any
judgment or order being given or made for any amount due under this Note and
such judgment or order being expressed and paid in a currency (the "Judgment
Currency") other than United States dollars and as a result of any variation as
between (i) the rate of exchange at which the United States dollar amount is
converted into the
<PAGE>
61
Judgment Currency for the purpose of such judgment or order and (ii) the spot
rate of exchange in The City of New York at which any such person on the date of
payment of such judgment or order is able to purchase United States dollars with
the amount of the Judgment Currency actually received by such person. The
foregoing indemnity shall continue in full force and effect notwithstanding any
such judgment or order as aforesaid. The term "spot rate of exchange" shall
include any premiums and costs of exchange payable in connection with the
purchase of, or conversion into, United States dollars.
7.9 Waiver of Stay, Extension or Usury Laws
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Note; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Holders, but will suffer and permit
the execution of every such power as though no such law had been enacted.
7.10 Additional Amounts
------------------
All payments made by the Company under or with respect to the Notes
will be made free and clear of and without withholding or deduction for or on
account of any present or future Taxes, (including penalties, interest and other
liabilities related thereto) imposed or levied by or on behalf of the government
of Bermuda or of any region or territory thereof or by any authority or agency
therein or thereof having power to tax, unless the Company is required to
withhold or deduct such Taxes by law or by the interpretation or administration
thereof. If the Company is required to withhold or deduct any amount for or on
account of Taxes from any payment made under or with respect to the Notes, the
Company will pay such additional amounts ("Additional Amounts") as may be
necessary so that the net amount received by each Holder (including Additional
Amounts) after such withholding or deduction will not be less than the amount
the Holder would have received if such Taxes had not been withheld or deducted;
provided, however, that no Additional Amounts shall be payable for or on account
of:
(1) any Tax which would not have been imposed but for the fact that
such holder of Notes:
(a) was or is a resident, domiciliary or national of, or engaged
in business or maintained a permanent
<PAGE>
62
establishment or was physically present in, Bermuda or any political
subdivision thereof or therein or otherwise had some connection with
Bermuda other than the mere ownership of, or receipt of payment under,
such Note;
(b) presented such Note for payment in Bermuda or any political
subdivision thereof or therein, unless such Note could not have been
presented for payment elsewhere; or
(c) presented such Note for payment more than 30 days after the
date on which the payment in respect of such Note became due and
payable or provided for, whichever is later, except to the extent that
the holder of such Note would have been entitled to such Additional
Amounts if it had presented such Note for payment on any day within
such period of 30 days;
(2) any estate, inheritance, gift, sales, transfer, personal property
or similar tax, assessment or other governmental charge;
(3) any Tax imposed on a holder that is not the beneficial owner of a
Note to the extent that the beneficial owner would not have been entitled to the
payment of Additional Amounts had the beneficial owner directly held the Note;
(4) any Tax that is imposed or withheld by reason of the failure of
such holder or other beneficial owner of such Note to comply with a request by
the Company addressed to such holder (A) to provide information concerning the
nationality, residence, or identity of such holder or such beneficial owner or
(B) to make any declaration or other similar claim or satisfy any information or
reporting requirement, which, in the case of (A) or (B) is required or imposed
by Law of the Taxing jurisdiction as a precondition to a partial or complete
exemption from such Tax; or
(5) any combination of items (1), (2), (3) or (4).
The Company will use its best efforts to obtain and furnish to each
Holder, within 30 calendar days after the date the payment of any Taxes is due
pursuant to applicable law, certified copies of tax receipts evidencing such
payment by the Company.
The Company will, upon written request of any Holder, reimburse each
such Holder for the amount of any Taxes so levied or imposed and paid by such
Holder as a result of payments made under or with respect to the Notes held by
such Holder during the taxable period in respect of which such Taxes were paid;
provided, however, that if the imposition of such Taxes is the subject of a good
- -------- -------
faith protest promptly instituted and
<PAGE>
63
diligently pursued by the Company, such reimbursement shall be deferred until a
final resolution of such protest and the amount of such reimbursement shall be
no greater than the amount of Taxes determined to be due, in respect of such
Notes and taxable period, as a result of such protest.
Each Holder agrees that if any Additional Amounts paid to, or in
respect of any payments made to, a Holder results in a tax credit or deduction
to such Holder, the Holder shall promptly (i) notify the Company and (ii)
furnish the Company with a computation of and pay to the Company an amount equal
to, any tax benefit resulting from such credit or deduction.
<PAGE>
64
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Note.
COMPANY:
GLOBAL TELESYSTEMS LTD.
By: ______________________
Name:
Title:
Notice Address:
Telephone:
Telecopy:
<PAGE>
65
[Holder] hereby acknowledges the provisions of this Note and agrees to be bound
by the provisions hereof.
[HOLDER]
By: ____________________
Name:
Title:
Notice Address:
Telephone:
Telecopy:
<PAGE>
EXHIBIT 3.9
FORM NO. 3A REGISTRATION NO. EC23973
[LOGO]
BERMUDA
CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME
I HEREBY CERTIFY that in accordance with section 10 of THE COMPANIES ACT 1981 GT
INTERCONNECT SERVICES LTD. by resolution and with the approval of the Registrar
of Companies has changed its name and was registered as GLOBAL CROSSING
INTERNATIONAL, LTD. on the 11TH day of FEBRUARY 1998.
[SEAL]
Given under my hand and the Seal of the
REGISTRAR OF COMPANIES this 19TH
day of FEBRUARY, 1998.
/s/ illegible
for REGISTRAR OF COMPANIES
<PAGE>
FORM NO. 5 REGISTRATION NO. EC23973
[LOGO]
BERMUDA
CERTIFICATE OF DEPOSIT OF
MEMORANDUM OF ASSOCIATION AND CONSENT
GRANTED BY THE MINISTER
THIS IS TO CERTIFY that a Memorandum of Association
of
GT INTERCONNECT SERVICES LTD.
-----------------------------
and the consent granted by the Minister under section 6(1) of THE COMPANIES ACT
1981 (the "Act") were delivered to the Registrar of Companies on the 15TH day of
OCTOBER, 1997 in accordance with the provisions of section 14(2) of the Act.
Given under my hand this 20TH day of
OCTOBER, 1997.
/s/ illegible
for REGISTRAR OF COMPANIES
Minimum Capital of the Company: US$12,000.00
------------
Authorised Capital of the Company: US$12,000.00
------------
<PAGE>
FORM NO. 2
[LOGO]
BERMUDA
THE COMPANIES ACT 1981
MEMORANDUM OF ASSOCIATION OF
COMPANY LIMITED BY SHARES
(Section 7(1) AND (2))
MEMORANDUM OF ASSOCIATION
OF
GT INTERCONNECT SERVICES LTD.
1. The liability of the members of the Company is limited to the amount (if
any) for the time being unpaid on the shares respectively held by them.
2. We, the undersigned, namely,
- --------------------------------------------------------------------------------
(hereinafter referred to as "the Company")
NAME ADDRESS BERMUDIAN NATIONALITY NUMBER OF
STATUS SHARES
(YES/NO) SUBSCRIBED
Cameron Adderley Yes British 1
Cedar House,
41 Cedar Avenue
Hamilton, HM 12, Bermuda.
Ruby L. Rawlins Yes British 1
Cedar House,
41 Cedar Avenue
Hamilton HM 12, Bermuda.
Judith Morgan-Swan Yes British 1
Cedar House,
41 Cedar Avenue
Hamilton HM 12, Bermuda.
Maria Pacheco Yes British 1
Cedar House,
41 Cedar Avenue
Hamilton HM 12, Bermuda.
do hereby respectively agree to take such number of shares of the Company as may
be allotted to us respectively by the provisional directors of the Company, not
exceeding the number of shares for which we have respectively subscribed, and to
satisfy such calls as may be made by the directors, provisional directors or
promoters of the Company in respect of the shares allotted to us respectively.
<PAGE>
2
3. The Company is to be an exempted Company as defined by the Companies Act
1981.
4. The Company has power to hold land situate in Bermuda not exceeding in all,
including the following parcels-
Not Applicable
5. The authorised share capital of the Company is $12,000.00 divided into
shares of $0.01 each. The minimum subscribed share capital of the Company
is $12,000.00 in United States currency.
6. The objects for which the Company is formed and incorporated are -
(i) To carry on the business of the construction, owning, operating
and maintaining of fibre-optic cable networks, undersea and
overland, in all parts of the world, to sell, lease and
otherwise deal in capacity in such networks, to provide
telecommunications services and services for the laying,
maintenance and repair of telecommunications cables and to
construct, own operate and maintain all structures, buildings,
cableships and other plant and equipment associated with any of
the foregoing;
(ii) To carry on business as a holding company and to acquire and
hold shares, stocks, debenture stock, bonds, mortgages,
obligations and securities of any kind issued or guaranteed by
any company, corporation or undertaking of whatever nature and
wherever constituted or carrying on business, and shares,
stock, debentures, debenture stock, bonds, obligations and
other securities issued or guaranteed by any government,
sovereign ruler, commissioners, trust, local authority or other
public body, whether in Bermuda or elsewhere, and to vary,
transpose, dispose of or otherwise deal with from time to time
as may be considered expedient any of the Company's investments
for the time being;
(iii) To acquire any such shares and other securities as are
mentioned in the preceding paragraph by subscription, syndicate
participation, tender, purchase, exchange or otherwise and to
subscribe for the same, either conditionally or otherwise, and
to guarantee the subscription thereof and to exercise and
enforce all rights and powers conferred by or incident to the
ownership thereof;
(iv) To co-ordinate the administration, policies, management,
supervision, control, research, planning, trading and any and
all other activities of, and to act as financial advisers and
consultants to, any company or companies now or hereafter
incorporated or acquired which may be or may become a Group
company (which expression, in this paragraph, means a company,
wherever incorporated, which is or becomes a holding company or
a subsidiary of, or affiliated with, the Company within the
meanings respectively assigned to those terms in The Companies
Act 1981) or, with the prior written approval of the Minister
of Finance, to any
<PAGE>
3
company or companies now or hereafter incorporated or acquired
with which the Company may be or may become associated;
(v) As set forth in paragraphs (b) to (n) and (p) to (u) inclusive
of the Second Schedule to The Companies Act 1981.
7. The Company has the powers set out in the Schedule annexed hereto.
<PAGE>
THE COMPANIES ACT 1981
SECOND SCHEDULE
(SECTION 11(2))
A Company may by reference include in its memorandum any of the following
objects that is to say the business of -
(a) insurance and re-insurance of all kinds;
(b) packaging of goods of all kinds;
(c) buying, selling and dealing in goods of all kinds;
(d) designing and manufacturing of goods of all kinds;
(e) mining and quarrying and exploration for metals, minerals, fossils fuels
and precious stones of all kinds and their preparation for sale or use;
(f) exploring for, the drilling for, the moving, transporting and refining
petroleum and hydro carbon products including oil and oil products;
(g) scientific research including the improvement, discovery and development of
processes, inventions, patents and designs and the construction,
maintenance and operation of laboratories and research centres;
(h) land, sea and air undertakings including the land, ship and air carriage of
passengers, mails and goods of all kinds;
(i) ships and aircraft owners, managers, operators, agents, builders and
repairers;
(j) acquiring, owning, selling, chartering, repairing or dealing in ships and
aircraft;
(k) travel agents, freight contractors and forwarding agents;
(l) dock owners, wharfingers, warehousemen;
(m) ship chandlers and dealing in rope, canvas oil and ship stores of all
kinds;
(n) all forms of engineering;
(o) developing, operating, advising or acting as technical consultants to any
other enterprise or business;
<PAGE>
2
(p) farmers, livestock breeders and keepers, graziers, butchers, tanners and
processors of and dealers in all kinds of live and dead stock, wool, hides,
tallow, grain, vegetables and other produce;
(q) acquiring by purchase or otherwise and holding as an investment inventions,
patents, trade marks, trade names, trade secrets, designs and the like;
(r) buying, selling, hiring, letting and dealing in conveyances of any sort;
(s) employing, providing, hiring out and acting as agent for artists, actors,
entertainers of all sorts, authors, composers, producers, directors,
engineers and experts or specialists of any kind;
(t) to acquire by purchase or otherwise hold, sell, dispose of and deal in real
property situated outside Bermuda and in personal property of all kinds
wheresoever situated; and
(u) to enter into any guarantee, contract of indemnity or suretyship and to
assure, support or secure with or without consideration or benefit the
performance of any obligations of any person or persons and to guarantee
the fidelity of individuals filling or about to fill situations of trust or
confidence.
<PAGE>
THE SCHEDULE
(REFERRED TO IN CLAUSE 7 OF THE MEMORANDUM OF ASSOCIATION)
----------------------------------------------------------
(a) To borrow and raise money in any currency or currencies and to secure or
discharge any debt or obligation in any manner and in particular (without
prejudice to the generality of the foregoing) by mortgages of or charges
upon all or any part of the undertaking, property and assets (present and
future) and uncalled capital of the Company or by the creation and issue of
securities.
(b) To enter into any guarantee, contract of indemnity or suretyship and in
particular (without prejudice to the generality of the foregoing) to
guarantee, support or secure, with or without consideration, whether by
personal obligation or by mortgaging or charging all or any part of the
undertaking, property and assets (present and future) and uncalled capital
of the Company or both such methods or in any other manner, the performance
of any obligations or commitments, of, and the repayment or payment of the
principal amounts of and any premiums, interest, dividends and other moneys
payable on or in respect of any securities or liabilities of, any person
including (without prejudice to the generality of the foregoing) any
company which is for the time being a subsidiary or a holding company of
the Company or another subsidiary or a holding company of the Company or
otherwise associated with the Company.
(c) To accept, draw, make, create, issue, execute, discount, endorse, negotiate
bills of exchange, promissory notes, and other instruments and securities,
whether negotiable or otherwise.
(d) To sell, exchange, mortgage, charge, let on rent, share of profit, royalty
or otherwise, grant licenses, easements, options, servitudes and other
rights over, and in any other manner deal with or dispose of, all or any
part of the undertaking, property and assets (present and future) of the
Company for any consideration and in particular (without prejudice to the
generality of the foregoing) for any securities.
(e) To issue and allot securities of the Company for cash or in payment or part
payment for any real or personal property purchased or otherwise acquired
by the Company or any services rendered to the Company or as security for
any obligation or amount (even if less than the nominal amount of such
securities) or for any other purpose.
(f) To grant pensions, annuities, or other allowances, including allowances on
death, to any directors, officers or employees or former directors,
officers or employees of the Company or any company which at any time is or
was a subsidiary or a holding company or another subsidiary of a holding
company of the Company or otherwise associated with the Company or of any
predecessor in business of any of them, and to the relations, connections
or dependants of any such persons, and to other persons whose service or
services have directly or indirectly been of benefit to the Company or whom
the Company considers have any moral claim on the Company or to their
relations,
<PAGE>
2
connections or dependants, and to establish or support any associations,
institutions, clubs, schools, building and housing schemes, funds and
trusts, and to make payments toward insurance or another arrangements
likely to benefit any such persons or otherwise advance the interests of
the Company or of its Members, and to subscribe, guarantee or pay money for
any purpose likely, directly or indirectly to further the interests of the
Company or of its Members or for any national, charitable, benevolent,
educational, social, public, general or useful object.
(g) Subject to the provisions of Section 42 of the Companies Act 1981, to issue
preference shares which at the option of the holders thereof are to be
liable to be redeemed.
(h) To purchase its own shares in accordance with the provisions of Section 42A
of the Companies Act 1981.
<PAGE>
THE COMPANIES ACT 1981
FIRST SCHEDULE
(SECTION 11(1))
A company limited by shares may exercise all or any of the following powers
subject to any provision of the law or its memorandum -
1. (Deleted) 404
2. to acquire or undertake the whole or any part of the business, property and
liabilities of any person carrying on any business that the company is
authorized to carry on;
3. to apply for register, purchase, lease, acquire, hold, use, control,
license, sell, assign or dispose of patents, patent rights, copyrights,
trade marks, formulae, licenses, inventions, processes, distinctive marks
and similar rights;
4. to enter into partnership or into any arrangement for sharing of profits,
union of interests, co-operation, joint venture, reciprocal concession or
otherwise with any person carrying on or engaged in or about to carry on or
engage in any business or transaction that the company is authorized to
carry on or engage in or any business or transaction capable of being
conducted so as to benefit the company;
5. to take or otherwise acquire and hold securities in any other body
corporate having objects altogether or in part similar to those of the
company or carrying on any business capable of being conducted so as to
benefit the company;
6. subject to section 96 to lend money to any employee or to any person having
dealings with the company or with whom the company proposes to have
dealings or to any other body corporate any of whose shares are held by the
company;
7. to apply for, secure or acquire by grant, legislative enactment,
assignment, transfer, purchase or otherwise and to exercise, carry out and
enjoy any charter, license, power authority, franchise, concession, right
or privilege, that any government or authority or any body corporate or
other public body may be empowered to grant, and pay for, aid in and
contribute toward carrying it into effect and to assume any liabilities or
obligations incidental thereto;
8. to establish and support or aid in the establishment and support of
associations, institutions, funds or trusts for the benefit of employees or
former employees of the company or its predecessors, or the dependents or
connections of such employees or former employees, and grant pensions and
allowances, and make payments towards insurance or for any object similar
to those set forth in this paragraph, and to subscribe or guarantee money
for charitable, benevolent, educational or religious objects or for any
exhibition or for any public, general or useful objects;
<PAGE>
2
9. to promote any company for the purpose of acquiring or taking over any of
the property and liabilities of the company or for any other purpose that
may benefit the company;
10. to purchase, lease, take in exchange, hire or otherwise acquire any
personal property and any rights or privileges that the company considers
necessary or convenient for the purposes of its business;
11. to construct, maintain, alter, renovate and demolish any buildings or works
necessary or convenient for its objects;
12. to take land in Bermuda by way of lease or letting agreement for a term not
exceeding twenty-one years, being land "bonafide" required for the purposes
of the business of the company and with the consent of the Minister granted
in his discretion to take land in Bermuda by way of lease or letting
agreement for a similar period in order to provide accommodation or
recreational facilities for its officers and employees and when no longer
necessary for any of the above purposes to terminate or transfer the lease
or letting agreement;
13. except to the extent, if any, as may be otherwise expressly provided in its
incorporating Act or memorandum and subject to the provisions of this Act
every company shall have power to invest the moneys of the Company by way
of mortgage of real or personal property of every description in Bermuda or
elsewhere and to sell, exchange, vary, or dispose of such mortgage as the
company shall from time to time determine;
14. to construct, improve, maintain, work, manage, carry out or control any
roads, ways, tramways, branches or sidings, bridges, reservoirs,
watercourses, wharves, factories, warehouses, electric works, shops, stores
and other works and conveniences that may advance the interests of the
company and contribute to, subsidize or otherwise assist or take part in
the construction, improvement, maintenance, working, management, carrying
out or control thereof;
15. to raise and assist in raising money for, and aid by way of bonus, loan,
promise, endorsement, guarantee or otherwise, any person and guarantee the
performance or fulfillment of any contracts or obligations of any person,
and in particular guarantee the payment of the principal of and interest on
the debt obligations of any such person;
16. to borrower or raise or secure the payment of money in such manner as the
company may think fit;
17. to draw, make, accept, endorse, discount, execute and issue bills of
exchange, promissory notes, bills of lading, warrants and other negotiable
or transferable instruments;
18. when properly authorized to do so, to sell, lease, exchange or otherwise
dispose of the undertaking of the company or any part thereof as an
entirety or substantially as an entirety for such consideration as the
company thinks fit;
<PAGE>
3
19. to sell, improve, manage, develop, exchange, lease, dispose of, turn to
account or otherwise deal with the property of the company in the ordinary
course of its business;
20. to adopt such means of making known the products of the company as may seem
expedient, and in particular by advertising, by purchase and exhibition of
works of art or interest, by publication of books and periodicals and by
granting prizes and rewards and making donations;
21. to cause the company to be registered and recognized in any foreign
jurisdiction, and designate persons therein according to the laws of that
foreign jurisdiction or to represent the company and to accept service for
and on behalf of the company of any process or suit;
22. to allot and issue fully-paid shares of the company in payment or part
payment of any property purchased or otherwise acquired by the company or
for any past services performed for the company;
23. to distribute among the members of the company in cash, kind, specie or
otherwise as may be resolved, by way of dividend, bonus or any other manner
considered advisable, any property of the company, but not so as to
decrease the capital of the company unless the distribution is made for the
purpose of enabling the company to be dissolved or the distribution, apart
from this paragraph, would be otherwise lawful;
24. to establish agencies and branches;
25. to take or hold mortgages, hypothecs, liens and charges to secure payment
of the purchase price, or of any unpaid balance of the purchase price, of
any part of the property of the company of whatsoever kind sold by the
company, or for any money due to the company from purchasers and others and
to sell or otherwise dispose of any such mortgage, hypothec, lien or
charge;
26. to pay all costs and expenses of or incidental to the incorporation and
organization of the company;
27. to invest and deal with the moneys of the company not immediately required
for the objects of the company in such manner as may be determined;
28. to do any of the things authorized by this subsection and all things
authorized by its memorandum as principals, agents, contractors, trustees
or otherwise, and either alone or in conjunction with others;
29. to do all such other things as are incidental or conducive to the
attainment of the objects and the exercise of the powers of the company.
<PAGE>
4
Every company may exercise its power beyond the boundaries of Bermuda to
the extent to which the laws in force where the powers are sought to be
exercised permit.
<PAGE>
STAMP DUTY (To be affixed)
Not Applicable
<PAGE>
Signed by each subscriber in the presence of at least one witness attesting the
signature thereof,
/s/ illegible /s/ illegible
---------------------- ----------------------
/s/ illegible /s/ illegible
---------------------- ----------------------
/s/ illegible /s/ illegible
---------------------- ----------------------
/s/ illegible /s/ illegible
(Subscribers) (Witnesses)
SUBSCRIBED this 9th day of October, 1997
<PAGE>
FORM NO. 1A
[LOGO]
BERMUDA
THE COMPANIES ACT 1981
CONSENT
PURSUANT TO SECTION 6(1)
In exercise of the powers conferred upon him by Section 6(1) of the Companies
Act 1981. The Minister of Finance hereby gives his Consent to:-
GT INTERCONNECT SERVICES LTD.
to be registered as an exempted Company under the Companies Act 1981, subject to
the provisions of the said Act.
DATE THIS 14TH DAY OF OCTOBER, 1997.
/s/ illegible
MINISTER OF FINANCE
<PAGE>
EXHIBIT 3.10
COMPANY CHANGED ITS NAME TO
GLOBAL CROSSING INTERNATIONAL, LTD.
EFFECTIVE 11/TH/ FEBRUARY, 1998
BYE - LAWS
OF
GT INTERCONNECT SERVICES LTD.
I HEREBY CERTIFY that the within-written Bye-Laws are a true copy of the Bye-
Laws of GT INTERCONNECT SERVICES LTD.
as subscribed by the subscribers to the Memorandum of Association and approved
at the Statutory Meeting of the above Company on the 15/th/ day of October,
1997.
Secretary
Prepared by
Messrs. Appleby, Spurling & Kempe
Cedar House
41 Cedar Avenue
Hamilton, Bermuda
<PAGE>
I N D E X
---------
<TABLE>
<CAPTION>
BYE-LAW SUBJECT PAGE
- ------- ------- ----
<C> <S> <C>
1 Interpretation............................................ 1,2
2 Registered Office......................................... 2
3-4 Share Rights.............................................. 3
5-6 Modification of Rights.................................... 3,4
7-9 Shares.................................................... 4
10-12 Certificates.............................................. 5
13-15 Lien...................................................... 5,6
16-21 Calls on Shares........................................... 6,7
22-28 Forfeiture of Shares...................................... 7-9
29 Register of Shareholders.................................. 9
30 Register of Directors and Officers........................ 10
31-34 Transfer of Shares........................................ 10,11
35-38 Transmission of Shares.................................... 11,12
39-41 Increase of Capital....................................... 12,13
42-43 Alteration of Capital..................................... 13,14
44-45 Reduction of Capital...................................... 14
46 General Meetings and Written Resolutions.................. 14-16
47-48 Notice of General Meetings................................ 16,17
49-55 Proceedings at General Meetings........................... 17,18
56-67 Voting.................................................... 19-21
68-73 Proxies and Corporate Representatives..................... 21-23
74-76 Appointment and Removal of Directors...................... 23,24
77 Resignation and Disqualification of Directors............. 24
78-80 Alternate Directors....................................... 24,25
81 Directors' Fees and Additional Remuneration and Expenses.. 26
82 Directors' Interests...................................... 26,27
83-87 Powers and Duties of the Board............................ 28,29
88-90 Delegation of the Board's Powers.......................... 29,30
91-99 Proceedings of the Board.................................. 30-32
100 Officers.................................................. 32,33
101 Minutes................................................... 33
102-103 Secretary and Resident Representative..................... 33,34
104 The Seal.................................................. 34
105-111 Dividends and Other Payments.............................. 34-36
112 Reserves.................................................. 37
113-114 Capitalization of Profits................................. 37,38
115 Record Dates.............................................. 38
116-118 Accounting Records........................................ 38,39
119 Audit..................................................... 39
120-122 Service of Notices and Other Documents.................... 39,40
123 Winding Up................................................ 40,41
124-126 Indemnity................................................. 41,42
127 Amalgamation.............................................. 42
128 Alteration of Bye-Laws.................................... 42
</TABLE>
<PAGE>
BYE - LAWS
OF
GT INTERCONNECT SERVICES LTD.
INTERPRETATION
- --------------
1. In these Bye-Laws unless the context otherwise requires -
"Bermuda" means the Islands of Bermuda;
"Board" means the Board of Directors of the Company or the Directors
present at a meeting of Directors at which there is a quorum;
"the Companies Acts" means every Bermuda statute from time to time in force
concerning companies insofar as the same applies to the Company;
"Company" means the company incorporated in Bermuda under the name of GT
Interconnect Services Ltd. on the 15th day of October, 1997
"paid up" means paid up or credited as paid up;
"Register" means the Register of Shareholders of the Company;
"Registered Office" means the registered office for the time being of the
Company;
"Resident Representative" means the person (or, if permitted in accordance
with the Companies Acts, the company) appointed to perform the duties of
resident representative set out in the Companies Acts and includes any assistant
or deputy Resident Representative appointed by the Board to perform any of the
duties of the Resident Representative;
"Resolution" means a resolution of the Shareholders or, where required, of
a separate class or separate classes of Shareholders, adopted either in general
meeting or by written resolution, in accordance with the provisions of these
Bye-Laws;
"Seal" means the common seal of the Company and includes any duplicate
thereof;
"Secretary" includes a temporary or assistant or deputy Secretary and any
person appointed by the Board to perform any of the duties of the Secretary;
"Shareholder" means a shareholder or member of the Company;
"these Bye-Laws" means these Bye-Laws in their present form or as from time
to time amended;
for the purposes of these Bye-Laws a corporation shall be deemed to be
present in person if its representative duly authorised pursuant to the
Companies Acts is present;
<PAGE>
2
words importing only the singular number include the plural number and vice
versa;
words importing only the masculine gender include the feminine and neuter
genders respectively;
words importing persons include companies or associations or bodies of
persons, whether corporate or un-incorporate;
reference to writing shall include typewriting, printing, lithography,
photography and other modes of representing or reproducing words in a legible
and non-transitory form;
any words or expressions defined in the Companies Acts in force at the date
when these Bye-Laws or any part thereof are adopted shall bear the same meaning
in these Bye-Laws or such part (as the case may be).
REGISTERED OFFICE
- -----------------
The Registered Office shall be at such place in Bermuda as the Board shall
from time to time appoint.
SHARE RIGHTS
- ------------
3. Subject to any special rights conferred on the holders of any share or
class of shares, any share in the Company may be issued with or have attached
thereto such preferred, deferred, qualified or other special rights or such
restrictions, whether in regard to dividend, voting, return of capital or
otherwise, as the Company may by Resolution determine or, if there has not been
any such determination or so far as the same shall not make specific provision,
as the Board may determine.
4. Subject to the Companies Acts, any preference shares may, with the
sanction of a Resolution, be issued on terms:
(a) that they are to be redeemed on the happening of a specified
event or on a given date; and/or,
(b) that they are liable to be redeemed at the option of the Company;
and/or,
(c) if authorised by the memorandum/Incorporating Act of the Company,
that they are liable to be redeemed at the option of the holder.
The terms and manner of redemption shall be provided for by way of
amendment of these Bye-Laws.
MODIFICATION OF RIGHTS
- ----------------------
Subject to the Companies Acts, all or any of the special rights for the
time being
<PAGE>
3
attached to any class of shares for the time being issued may from time to time
(whether or not the Company is being wound up) be altered or abrogated with the
consent in writing of the holders of not less than seventy five percent of the
issued shares of that class or with the sanction of a resolution passed at a
separate general meeting of the holders of such shares voting in person or by
proxy. To any such separate general meeting, all the provisions of these Bye-
Laws as to general meetings of the Company shall mutatis mutandis apply, but so
that the necessary quorum shall be two or more persons holding or representing
by proxy any of the shares of the relevant class, that every holder of shares of
the relevant class shall be entitled on a poll to one vote for every such share
held by him and that any holder of shares of the relevant class present in
person or by proxy may demand a poll; provided, however, that if the Company or
a class of Shareholders shall have only one Shareholder, one Shareholder present
in person or by proxy shall constitute the necessary quorum.
6. The special rights conferred upon the holders of any shares or class
of shares shall not, unless otherwise expressly provided in the rights attaching
to or the terms of issue of such shares, be deemed to be altered by the creation
or issue of further shares ranking pari passu therewith.
SHARES
- ------
7. Subject to the provisions of these Bye-Laws, the unissued shares of
the Company (whether forming part of the original capital or any increased
capital) shall be at the disposal of the Board, which may offer, allot, grant
options over or otherwise dispose of them to such persons, at such times and for
such consideration and upon such terms and conditions as the Board may
determine.
8. The Board may in connection with the issue of any shares exercise all
powers of paying commission and brokerage conferred or permitted by law.
9. Except as ordered by a court of competent jurisdiction or as required
by law, no person shall be recognised by the Company as holding any share upon
trust and the Company shall not be bound by or required in any way to recognise
(even when having notice thereof) any equitable, contingent, future or partial
interest in any share or any interest in any fractional part of a share or
(except only as otherwise provided in these Bye-Laws, or by law) any other right
in respect of any share except an absolute right to the entirety thereof in the
registered holder.
CERTIFICATES
- -------------
10. The preparation, issue and delivery of certificates shall be governed
by the Companies Acts. In the case of a share held jointly by several persons,
delivery of a certificate to one of several joint holders shall be sufficient
delivery to all.
11. If a share certificate is defaced, lost or destroyed it may be
replaced without fee but on such terms (if any) as to evidence and indemnity and
to payment of the costs and out of pocket expenses of the Company in
investigating such evidence and preparing such
<PAGE>
4
indemnity as the Board may think fit and, in case of defacement, on delivery of
the old certificate to the Company.
12. All certificates for share or loan capital or other securities of the
Company (other than letters of allotment, scrip certificates and other like
documents) shall, except to the extent that the terms and conditions for the
time being relating thereto otherwise provide, be issued under the Seal. The
Board may by resolution determine, either generally or in any particular case,
that any signatures on any such certificates need not be autographic but may be
affixed to such certificates by some mechanical means or may be printed thereon
or that such certificates need not be signed by any persons.
LIEN
- ----
13. The Company shall have a first and paramount lien on every share (not
being a fully paid share) for all moneys, whether presently payable or not,
called or payable, at a date fixed by or in accordance with the terms of issue
of such share in respect of such share, and the Company shall also have a first
and paramount lien on every share (other than a fully paid share) standing
registered in the name of a Shareholder, whether singly or jointly with any
other person, for all the debts and liabilities of such Shareholder or his
estate to the Company, whether the same shall have been incurred before or after
notice to the Company of any interest of any person other than such Shareholder,
and whether the time for the payment or discharge of the same shall have
actually arrived or not, and notwithstanding that the same are joint debts or
liabilities of such Shareholder or his estate and any other person, whether a
Shareholder or not. The Company's lien on a share shall extend to all dividends
payable thereon. The Board may at any time, either generally or in any
particular case, waive any lien that has arisen or declare any share to be
wholly or in part exempt from the provisions of this Bye-Law.
14. The Company may sell, in such manner as the Board may think fit, any
share on which the Company has a lien but no sale shall be made unless some sum
in respect of which the lien exists is presently payable nor until the
expiration of fourteen days after a notice in writing, stating and demanding
payment of the sum presently payable and giving notice of the intention to sell
in default of such payment, has been served on the holder for the time being of
the share.
15. The net proceeds of sale by the Company of any shares on which it has
a lien shall be applied in or towards payment or discharge of the debt or
liability in respect of which the lien exists so far as the same is presently
payable, and any residue shall (subject to a like lien for debts or liabilities
not presently payable as existed upon the share prior to the sale) be paid to
the holder of the share immediately before such sale. For giving effect to any
such sale the Board may authorise some person to transfer the share sold to the
purchaser thereof. The purchaser shall be registered as the holder of the share
and he shall not be bound to see to the application of the purchase money, nor
shall his title to the share be affected by any irregularity or invalidity in
the proceedings relating to the sale.
<PAGE>
5
CALLS ON SHARES
- ---------------
16. The Board may from time to time make calls upon the Shareholders in
respect of any moneys unpaid on their shares (whether on account of the par
value of the shares or by way of premium) and not by the terms of issue thereof
made payable at a date fixed by or in accordance with such terms of issue, and
each Shareholder shall (subject to the Company serving upon him at least
fourteen days notice specifying the time or times and place of payment) pay to
the Company at the time or times and place so specified the amount called on his
shares. A call may be revoked or postponed as the Board may determine.
17. A call may be made payable by installments and shall be deemed to have
been made at the time when the resolution of the Board authorizing the call was
passed.
18. The joint holders of a share shall be jointly and severally liable to
pay all calls in respect thereof.
19. If a sum called in respect of the share shall not be paid before or on
the day appointed for payment thereof the person from whom the sum is due shall
pay interest on the sum from the day appointed for the payment thereof to the
time of actual payment at such rate as the Board may determine, but the Board
shall be at liberty to waive payment of such interest wholly or in part.
20. Any sum which, by the terms of issue of a share, becomes payable on
allotment or at any date fixed by or in accordance with such terms of issue,
whether on account of the nominal amount of the share or by way of premium,
shall for all the purposes of these Bye-Laws be deemed to be a call duly made,
notified and payable on the date on which, by the terms of issue, the same
becomes payable and, in case of non-payment, all the relevant provisions of
these Bye-Laws as to payment of interest, forfeiture or otherwise shall apply as
if such sum had become payable by virtue of a call duly made and notified.
21. The Board may on the issue of shares differentiate between the
allottees or holders as to the amount of calls to be paid and the times of
payment.
FORFEITURE OF SHARES
- --------------------
22. If a Shareholder fails to pay any call or installment of a call on the
day appointed for payment thereof, the Board may at any time thereafter during
such time as any part of such call or installment remains unpaid serve a notice
on him requiring payment of so much of the call or installment as is unpaid,
together with any interest which may have accrued.
23. The notice shall name a further day (not being less than 14 days from
the date of the notice) on or before which, and the place where, the payment
required by the notice is to be made and shall state that, in the event of non-
payment on or before the day and at the place appointed, the shares in respect
of which such call is made or installment is payable will be liable to be
forfeited. The Board may accept the surrender of any share liable to be
<PAGE>
6
forfeited hereunder and, in such case, references in these Bye-Laws to
forfeiture shall include surrender.
24. If the requirements of any such notice as aforesaid are not complied
with, any share in respect of which such notice has been given may at any time
thereafter, before payment of all calls or installments and interest due in
respect thereof has been made, be forfeited by a resolution of the Board to that
effect. Such forfeiture shall include all dividends declared in respect of the
forfeited shares and not actually paid before the forfeiture.
25. When any share has been forfeited, notice of the forfeiture shall be
served upon the person who was before forfeiture the holder of the share; but no
forfeiture shall be in any manner invalidated by any omission or neglect to give
such notice as aforesaid.
26. A forfeited share shall be deemed to be the property of the Company
and may be sold, re-offered or otherwise disposed of either to the person who
was, before forfeiture, the holder thereof or entitled thereto or to any other
person upon such terms and in such manner as the Board shall think fit, and at
any time before a sale, re-allotment or disposition the forfeiture may be
cancelled on such terms as the Board may think fit.
27. A person whose shares have been forfeited shall thereupon cease to be
a Shareholder in respect of the forfeited shares but shall, notwithstanding the
forfeiture, remain liable to pay to the Company all moneys which at the date of
forfeiture were presently payable by him to the Company in respect of the shares
with interest thereon at such rate as the Board may determine from the date of
forfeiture until payment, and the Company may enforce payment without being
under any obligation to make any allowance for the value of the shares
forfeited.
28. An affidavit in writing that the deponent is a Director or the
Secretary and that a share has been duly forfeited on the date stated in the
affidavit shall be conclusive evidence of the facts therein stated as against
all persons claiming to be entitled to the share. The Company may receive the
consideration (if any) given for the share on the sale, re-allotment or
disposition thereof and the Board may authorise some person to transfer the
share to the person to whom the same is sold, re-allotted or disposed of, and he
shall thereupon be registered as the holder of the share and shall not be bound
to see to the application of the purchase money (if any) nor shall his title to
the share be affected by any irregularity or invalidity in the proceedings
relating to the forfeiture, sale, re-allotment or disposal of the share.
REGISTER OF SHAREHOLDERS
- ------------------------
29. The Secretary shall establish and maintain the Register of
Shareholders at the Registered Office in the manner prescribed by the Companies
Acts. Unless the Board otherwise determines, the Register of Shareholders shall
be open to inspection in the manner prescribed by the Companies Acts between
10.00 a.m. and 12.00 noon on every working day. Unless the Board so determines,
no Shareholder or intending Shareholder shall be entitled to have entered in the
Register any indication of any trust or any equitable, contingent, future or
<PAGE>
7
partial interest in any share or any interest in any fractional part of a share
and if any such entry exists or is permitted by the Board it shall not be deemed
to abrogate any of the provisions of Bye-Law 9.
REGISTER OF DIRECTORS AND OFFICERS
- ----------------------------------
30. The Secretary shall establish and maintain a register of the Directors
and Officers of the Company as required by the Companies Acts. The register of
Directors and Officers shall be open to inspection in the manner prescribed by
the Companies Acts between 10:00 a.m. and 12:00 noon on every working day.
TRANSFER OF SHARES
- ------------------
31. Subject to the Companies Acts and to such of the restrictions
contained in these Bye-Laws as may be applicable, any Shareholder may transfer
all or any of his shares by an instrument of transfer in the usual common form
or in any other form which the Board may approve.
32. The instrument of transfer of a share shall be signed by or on behalf
of the transferor and where any share is not fully-paid, the transferee and the
transferor shall be deemed to remain the holder of the share until the name of
the transferee is entered in the Register in respect thereof. All instruments
of transfer when registered may be retained by the Company. The Board may, in
its absolute discretion and without assigning any reason therefor, decline to
register any transfer of any share which is not a fully-paid share. The Board
may also decline to register any transfer unless:
(a) the instrument of transfer is duly stamped and lodged with the
Company, accompanied by the certificate for the shares to which it relates,
and such other evidence as the Board may reasonably require to show the
right of the transferor to make the transfer,
(b) the instrument of transfer is in respect of only one class of
share,
(c) where applicable, the permission of the Bermuda Monetary Authority
with respect thereto has been obtained.
Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under this Bye-
Law and Bye-Laws 31 and 33.
33. If the Board declines to register a transfer it shall, within three
months after the date on which the instrument of transfer was lodged, send to
the transferee notice of such refusal.
34. No fee shall be charged by the Company for registering any transfer,
probate, letters of administration, certificate of death or marriage, power of
attorney, distringas or stop
<PAGE>
8
notice, order of court or other instrument relating to or affecting the title to
any share, or otherwise making an entry in the Register relating to any share.
TRANSMISSION OF SHARES
- ----------------------
35. In the case of the death of a Shareholder, the survivor or survivors,
where the deceased was a joint holder, and the estate representative, where he
was sole holder, shall be the only person recognised by the Company as having
any title to his shares; but nothing herein contained shall release the estate
of a deceased holder (whether the sole or joint) from any liability in respect
of any share held by him solely or jointly with other persons. For the purpose
of this Bye-Law, estate representative means the person to whom probate or
letters of administration has or have been granted in Bermuda or, failing any
such person, such other person as the Board may in its absolute discretion
determine to be the person recognised by the Company for the purpose of this
Bye-Law.
36. Any person becoming entitled to a share in consequence of the death of
a Shareholder or otherwise by operation of applicable law may, subject as
hereafter provided and upon such evidence being produced as may from time to
time be required by the Board as to his entitlement, either be registered
himself as the holder of the share or elect to have some person nominated by him
registered as the transferee thereof. If the person so becoming entitled elects
to be registered himself, he shall deliver or send to the Company a notice in
writing signed by him stating that he so elects. If he shall elect to have his
nominee registered, he shall signify his election by signing an instrument of
transfer of such share in favour of his nominee. All the limitations,
restrictions and provisions of these Bye-Laws relating to the right to transfer
and the registration of transfer of shares shall be applicable to any such
notice or instrument of transfer as aforesaid as if the death of the Shareholder
or other event giving rise to the transmission had not occurred and the notice
or instrument of transfer was an instrument of transfer signed by such
Shareholder.
37. A person becoming entitled to a share in consequence of the death of a
Shareholder or otherwise by operation of applicable law shall (upon such
evidence being produced as may from time to time be required by the Board as to
his entitlement) be entitled to receive and may give a discharge for any
dividends or other moneys payable in respect of the share, but he shall not be
entitled in respect of the share to receive notices of or to attend or vote at
general meetings of the Company or, save as aforesaid, to exercise in respect of
the share any of the rights or privileges of a Shareholder until he shall have
become registered as the holder thereof. The Board may at any time give notice
requiring such person to elect either to be registered himself or to transfer
the share and, if the notice is not complied with within sixty days, the Board
may thereafter withhold payment of all dividends and other moneys payable in
respect of the shares until the requirements of the notice have been complied
with.
38. Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under Bye-Laws
35, 36 and 37.
<PAGE>
9
INCREASE OF CAPITAL
- -------------------
39. The Company may from time to time increase its capital by such sum to
be divided into shares of such par value as the Company by Resolution shall
prescribe.
40. The Company may, by the Resolution increasing the capital, direct that
the new shares or any of them shall be offered in the first instance either at
par or at a premium or (subject to the provisions of the Companies Acts) at a
discount to all the holders for the time being of shares of any class or classes
in proportion to the number of such shares held by them respectively or make any
other provision as to the issue of the new shares.
41. The new shares shall be subject to all the provisions of these Bye-
Laws with reference to lien, the payment of calls, forfeiture, transfer,
transmission and otherwise.
ALTERATION OF CAPITAL
- ---------------------
42. The Company may from time to time by Resolution:-
(a) divide its shares into several classes and attach thereto
respectively any preferential, deferred, qualified or special rights,
privileges or conditions;
(b) consolidate and divide all or any of its share capital into shares
of larger par value than its existing shares;
(c) sub-divide its shares or any of them into shares of smaller par
value than is fixed by its memorandum, so, however, that in the sub-
division the proportion between the amount paid and the amount, if any,
unpaid on each reduced share shall be the same as it was in the case of the
share from which the reduced share is derived;
(d) make provision for the issue and allotment of shares which do not
carry any voting rights;
(e) cancel shares which, at the date of the passing of the resolution
in that behalf, have not been taken or agreed to be taken by any person,
and diminish the amount of its share capital by the amount of the shares so
cancelled; and
(f) change the currency denomination of its share capital.
Where any difficulty arises in regard to any division, consolidation, or
sub-division under this Bye-Law, the Board may settle the same as it thinks
expedient and, in particular, may arrange for the sale of the shares
representing fractions and the distribution of the net proceeds of sale in due
proportion amongst the Shareholders who would have been entitled to the
fractions, and for this purpose the Board may authorise some person to transfer
the shares representing fractions to the purchaser thereof, who shall not be
bound to see to the application of the purchase money nor shall his title to the
shares be affected by any irregularity or invalidity in the proceedings relating
to the sale.
<PAGE>
10
43. Subject to the Companies Acts and to any confirmation or consent
required by law or these Bye-Laws, the Company may by Resolution from time to
time convert any preference shares into redeemable preference shares.
REDUCTION OF CAPITAL
- --------------------
44. Subject to the Companies Acts, its memorandum and any confirmation or
consent required by law or these Bye-Laws, the Company may from time to time by
Resolution authorise the reduction of its issued share capital or any capital
redemption reserve fund or any share premium or contributed surplus account in
any manner.
45. In relation to any such reduction, the Company may by Resolution
determine the terms upon which such reduction is to be effected including in the
case of a reduction of part only of a class of shares, those shares to be
affected.
GENERAL MEETINGS AND WRITTEN RESOLUTIONS
- ----------------------------------------
46. (a) The Board shall convene and the Company shall hold general
meetings as Annual General Meetings in accordance with the requirements of the
Companies Acts at such times and places as the Board shall appoint. The Board
may, whenever it thinks fit, and shall, when required by the Companies Acts,
convene general meetings other than Annual General Meetings which shall be
called Special General Meetings.
(b) Except in the case of the removal of auditors and Directors,
anything which may be done by resolution of the Company in general meeting
or by resolution of a meeting of any class of the Shareholders of the
Company may, without a meeting and without any previous notice being
required, be done by resolution in writing, signed by all of the
Shareholders or their proxies, or in the case of a Shareholder that is a
corporation (whether or not a company within the meaning of the Companies
Acts) on behalf of such Shareholder, being all of the Shareholders of the
Company who at the date of the resolution in writing would be entitled to
attend a meeting and vote on the resolution. Such resolution in writing
may be signed by, or in the case of a Shareholder that is a corporation
(whether or not a company within the meaning of the Companies Acts), on
behalf of, all the Shareholders of the Company, or any class thereof, in as
many counterparts as may be necessary.
(c) For the purposes of this Bye-Law, the date of the resolution in
writing is the date when the resolution is signed by, or in the case of a
Shareholder that is a corporation (whether or not a company within the
meaning of the Companies Acts), on behalf of, the last Shareholder to sign
and any reference in any enactment to the date of passing of a resolution
is, in relation to a resolution in writing made in accordance with this
section, a reference to such date.
(d) A resolution in writing made in accordance with this Bye-Law is as
valid as if it had been passed by the Company in general meeting or, if
applicable, by a meeting of the relevant class of Shareholders of the
Company, as the case may be.
<PAGE>
11
A resolution in writing made in accordance with this section shall
constitute minutes for the purposes of the Companies Acts and these Bye-
Laws.
NOTICE OF GENERAL MEETINGS
- --------------------------
47. An Annual General Meeting shall be called by not less than 5 days
notice in writing and a Special General Meeting shall be called by not less than
5 days notice in writing. The notice shall be exclusive of the day on which it
is served or deemed to be served and of the day for which it is given, and shall
specify the place, day and time of the meeting, and, in the case of a Special
General Meeting, the general nature of the business to be considered. Notice of
every general meeting shall be given in any manner permitted by Bye-Laws 120 and
121 to all Shareholders other than such as, under the provisions of these Bye-
Laws or the terms of issue of the shares they hold, are not entitled to receive
such notice from the Company and to any Director or Resident Representative who
or which has delivered a written notice upon the Registered Office requiring
that such notice be sent to him or it.
Notwithstanding that a meeting of the Company is called by shorter notice
than that specified in this Bye-Law, it shall be deemed to have been duly called
if it is so agreed:
(a) in the case of a meeting called as an Annual General Meeting, by
all the Shareholders entitled to attend and vote thereat;
(b) in the case of any other meeting, by a majority in number of the
Shareholders having the right to attend and vote at the meeting, being a
majority together holding not less than 95 percent in nominal value of the
shares giving that right.
48. The accidental omission to give notice of a meeting or (in cases where
instruments of proxy are sent out with the notice) the accidental omission to
send such instrument of proxy to, or the non-receipt of notice of a meeting or
such instrument of proxy by, any person entitled to receive such notice shall
not invalidate the proceedings at that meeting.
PROCEEDINGS AT GENERAL MEETINGS
- -------------------------------
49. No business shall be transacted at any general meeting unless a quorum
is present when the meeting proceeds to business, but the absence of a quorum
shall not preclude the appointment, choice or election of a chairman which shall
not be treated as part of the business of the meeting. Save as otherwise
provided by these Bye-Laws, at least two Shareholders present in person or by
proxy and entitled to vote shall be a quorum for all purposes; provided,
however, that if the Company shall have only one Shareholder, one Shareholder
present in person or by proxy shall constitute the necessary quorum.
50. If within five minutes (or such longer time as the chairman of the
meeting may determine to wait) after the time appointed for the meeting, a
quorum is not present, the meeting, if convened on the requisition of
Shareholders, shall be dissolved. In any other case,
<PAGE>
12
it shall stand adjourned to such other day and such other time and place as the
chairman of the meeting may determine and at such adjourned meeting two
Shareholders present in person or by proxy (whatever the number of shares held
by them) shall be a quorum provided that if the Company shall have only one
Shareholder, one Shareholder present in person or by proxy shall constitute the
necessary quorum. The Company shall give not less than 5 days notice of
any meeting adjourned through want of a quorum and such notice shall state that
the sole Shareholder or, if more than one, two Shareholders present in person or
by proxy (whatever the number of shares held by them) shall be a quorum.
51. A meeting of the Shareholders or any class thereof may be held by
means of such telephone, electronic or other communication facilities as permit
all persons participating in the meeting to communicate with each other
simultaneously and instantaneously and participation in such a meeting shall
constitute presence in person at such meeting.
52. Each Director upon giving the notice referred to in Bye-Law 47 above,
and the Resident Representative shall be entitled to attend and speak at any
general meeting of the Company.
53. The Chairman (if any) of the Board or, in his absence, the President
shall preside as chairman at every general meeting. If there is no such
Chairman or President, or if at any meeting neither the Chairman nor the
President is present within five minutes after the time appointed for holding
the meeting, or if neither of them is willing to act as chairman, the Directors
present shall choose one of their number to act or if one Director only is
present he shall preside as chairman if willing to act. If no Director is
present, or if each of the Directors present declines to take the chair, the
persons present and entitled to vote on a poll shall elect one of their number
to be chairman.
54. The chairman of the meeting may, with the consent of any meeting at
which a quorum is present (and shall if so directed by the meeting), adjourn the
meeting from time to time and from place to place but no business shall be
transacted at any adjourned meeting except business which might lawfully have
been transacted at the meeting from which the adjournment took place. When a
meeting is adjourned for three months or more, notice of the adjourned meeting
shall be given as in the case of an original meeting.
55. Save as expressly provided by these Bye-Laws, it shall not be
necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting.
VOTING
- ------
56. Save where a greater majority is required by the Companies Acts or
these Bye-Laws, any question proposed for consideration at any general meeting
shall be decided on by a simple majority of votes cast.
57. At any general meeting, a resolution put to the vote of the meeting
shall be decided on a show of hands unless (before or on the declaration of the
result of the show of hands or on the withdrawal of any other demand for a poll)
a poll is demanded by:-
<PAGE>
13
(a) the chairman of the meeting; or
(b) at least three Shareholders present in person or represented by
proxy; or
(c) any Shareholder or Shareholders present in person or represented
by proxy and holding between them not less than one tenth of the total
voting rights of all the Shareholders having the right to vote at such
meeting; or
(d) a Shareholder or Shareholders present in person or represented by
proxy holding shares conferring the right to vote at such meeting, being
shares on which an aggregate sum has been paid up equal to not less than
one tenth of the total sum paid up on all such shares conferring such
right.
Unless a poll is so demanded and the demand is not withdrawn, a declaration
by the chairman that a resolution has, on a show of hands, been carried or
carried unanimously or by a particular majority or not carried by a particular
majority or lost shall be final and conclusive, and an entry to that effect in
the minute book of the Company shall be conclusive evidence of the fact without
proof of the number of votes recorded for or against such resolution.
58. If a poll is duly demanded, the result of the poll shall be deemed to
be the resolution of the meeting at which the poll is demanded.
59. A poll demanded on the election of a chairman, or on a question of
adjournment, shall be taken forthwith. A poll demanded on any other question
shall be taken in such manner and either forthwith or at such time (being not
later than three months after the date of the demand) and place as the chairman
shall direct. It shall not be necessary (unless the chairman otherwise directs)
for notice to be given of a poll.
60. The demand for a poll shall not prevent the continuance of a meeting
for the transaction of any business other than the question on which the poll
has been demanded and it may be withdrawn at any time before the close of the
meeting or the taking of the poll, whichever is the earlier.
61. On a poll, votes may be cast either personally or by proxy.
62. A person entitled to more than one vote on a poll need not use all his
votes or cast all the votes he uses in the same way.
63. In the case of an equality of votes at a general meeting, whether on a
show of hands or on a poll, the chairman of such meeting shall not be entitled
to a second or casting vote.
64. In the case of joint holders of a share, the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and for this purpose
seniority shall be determined by the order in which the names stand in the
Register in respect of the joint holding.
<PAGE>
14
65. A Shareholder who is a patient for any purpose of any statute or
applicable law relating to mental health or in respect of whom an order has been
made by any Court having jurisdiction for the protection or management of the
affairs of persons incapable of managing their own affairs may vote, whether on
a show of hands or on a poll, by his receiver, committee, curator bonis or other
person in the nature of a receiver, committee or curator bonis appointed by such
Court and such receiver, committee, curator bonis or other person may vote on a
poll by proxy, and may otherwise act and be treated as such Shareholder for the
purpose of general meetings.
66. No Shareholder shall, unless the Board otherwise determines, be
entitled to vote at any general meeting unless all calls or other sums presently
payable by him in respect of shares in the Company have been paid.
67. If (i) any objection shall be raised to the qualification of any voter
or (ii) any votes have been counted which ought not to have been counted or
which might have been rejected or (iii) any votes are not counted which ought to
have been counted, the objection or error shall not vitiate the decision of the
meeting or adjourned meeting on any resolution unless the same is raised or
pointed out at the meeting or, as the case may be, the adjourned meeting at
which the vote objected to is given or tendered or at which the error occurs.
Any objection or error shall be referred to the chairman of the meeting and
shall only vitiate the decision of the meeting on any resolution if the chairman
decides that the same may have affected the decision of the meeting. The
decision of the chairman on such matters shall be final and conclusive.
PROXIES AND CORPORATE REPRESENTATIVES
- -------------------------------------
68. The instrument appointing a proxy shall be in writing under the hand
of the appointor or of his attorney authorised by him in writing or, if the
appointor is a corporation, either under its seal or under the hand of an
officer, attorney or other person authorised to sign the same.
69. Any Shareholder may appoint a standing proxy or (if a corporation)
representative by depositing at the Registered Office a proxy or (if a
corporation) an authorisation and such proxy or authorisation shall be valid for
all general meetings and adjournments thereof or, resolutions in writing, as the
case may be, until notice of revocation is received at the Registered Office.
Where a standing proxy or authorisation exists, its operation shall be deemed to
have been suspended at any general meeting or adjournment thereof at which the
Shareholder is present or in respect to which the Shareholder has specially
appointed a proxy or representative. The Board may from time to time require
such evidence as it shall deem necessary as to the due execution and continuing
validity of any such standing proxy or authorisation and the operation of any
such standing proxy or authorisation shall be deemed to be suspended until such
time as the Board determines that it has received the requested evidence or
other evidence satisfactory to it.
70. Subject to Bye-Law 69, the instrument appointing a proxy together with
such other evidence as to its due execution as the Board may from time to time
require, shall be delivered at the Registered Office (or at such place as may be
specified in the notice
<PAGE>
15
convening the meeting or in any notice of any adjournment or, in either case or
the case of a written resolution, in any document sent therewith) prior to the
holding of the relevant meeting or adjourned meeting at which the person named
in the instrument proposes to vote or, in the case of a poll taken subsequently
to the date of a meeting or adjourned meeting, before the time appointed for the
taking of the poll, or, in the case of a written resolution, prior to the
effective date of the written resolution and in default the instrument of proxy
shall not be treated as valid.
71. Instruments of proxy shall be in any common form or in such other form
as the Board may approve and the Board may, if it thinks fit, send out with the
notice of any meeting or any written resolution forms of instruments of proxy
for use at that meeting or in connection with that written resolution. The
instrument of proxy shall be deemed to confer authority to demand or join in
demanding a poll and to vote on any amendment of a written resolution or
amendment of a resolution put to the meeting for which it is given as the proxy
thinks fit. The instrument of proxy shall unless the contrary is stated therein
be valid as well for any adjournment of the meeting as for the meeting to which
it relates.
72. A vote given in accordance with the terms of an instrument of proxy
shall be valid notwithstanding the previous death or insanity of the principal,
or revocation of the instrument of proxy or of the authority under which it was
executed, provided that no intimation in writing of such death, insanity or
revocation shall have been received by the Company at the Registered Office (or
such other place as may be specified for the delivery of instruments of proxy in
the notice convening the meeting or other documents sent therewith) one hour at
least before the commencement of the meeting or adjourned meeting, or the taking
of the poll, or the day before the effective date of any written resolution at
which the instrument of proxy is used.
73. Subject to the Companies Acts, the Board may at its discretion waive
any of the provisions of these Bye-Laws related to proxies or authorisations
and, in particular, may accept such verbal or other assurances as it thinks fit
as to the right of any person to attend and vote on behalf of any Shareholder at
general meetings or to sign written resolutions.
APPOINTMENT AND REMOVAL OF DIRECTORS
- ------------------------------------
74. The number of Directors shall be such number not less than two as the
Company by Resolution may from time to time determine and, subject to the
Companies Acts and these Bye-Laws, shall serve until re-elected or their
successors are appointed at the next Annual General Meeting.
75. The Company shall at the Annual General Meeting and may by Resolution
determine the minimum and the maximum number of Directors and may by Resolution
determine that one or more vacancies in the Board shall be deemed casual
vacancies for the purposes of these Bye-Laws. Without prejudice to the power of
the Company by Resolution in pursuance of any of the provisions of these Bye-
Laws to appoint any person to be a Director, the Board, so long as a quorum of
Directors remains in office, shall have power at any time and from time to time
to appoint any individual to be a Director so as to fill a casual vacancy.
<PAGE>
16
76. The Company may in a Special General Meeting called for that purpose
remove a Director provided notice of any such meeting shall be served upon the
Director concerned not less than 14 days before the meeting and he shall be
entitled to be heard at that meeting. Any vacancy created by the removal of a
Director at a Special General Meeting may be filled at the Meeting by the
election of another Director in his place or, in the absence of any such
election, by the Board.
RESIGNATION AND DISQUALIFICATION OF DIRECTORS
- ---------------------------------------------
77. The office of a Director shall be vacated upon the happening of any of
the following events:
(a) if he resigns his office by notice in writing delivered to the
Registered Office or tendered at a meeting of the Board;
(b) if he becomes of unsound mind or a patient for any purpose of any
statute or applicable law relating to mental health and the Board resolves
that his office is vacated;
(c) if he becomes bankrupt or compounds with his creditors;
(d) if he is prohibited by law from being a Director;
(e) if he ceases to be a Director by virtue of the Companies Acts or
is removed from office pursuant to these Bye-Laws.
ALTERNATE DIRECTORS
- -------------------
78. The Company may by Resolution elect any person or persons to act as
Directors in the alternative to any of the Directors or may authorise the Board
to appoint such Alternate Directors and a Director may appoint and remove his
own Alternate Director. Any appointment or removal of an Alternate Director by
a Director shall be effected by depositing a notice of appointment or removal
with the Secretary at the Registered Office, signed by such Director, and such
appointment or removal shall become effective on the date of receipt by the
Secretary. Any Alternate Director may be removed by Resolution of the Company
and, if appointed by the Board, may be removed by the Board. Subject as
aforesaid, the office of Alternate Director shall continue until the next annual
election of Directors or, if earlier, the date on which the relevant Director
ceases to be a Director. An Alternate Director may also be a Director in his
own right and may act as alternate to more than one Director.
79. An Alternate Director shall be entitled to receive notices of all
meetings of Directors, to attend, be counted in the quorum and vote at any such
meeting at which any Director to whom he is alternate is not personally present,
and generally to perform all the functions of any Director to whom he is
alternate in his absence.
80. Every person acting as an Alternate Director shall (except as regards
powers to appoint an alternate and remuneration) be subject in all respects to
the provisions of these
<PAGE>
17
Bye-Laws relating to Directors and shall alone be responsible to the Company for
his acts and defaults and shall not be deemed to be the agent of or for any
Director for whom he is alternate. An Alternate Director may be paid expenses
and shall be entitled to be indemnified by the Company to the same extent
mutatis mutandis as if he were a Director. Every person acting as an Alternate
Director shall have one vote for each Director for whom he acts as alternate (in
addition to his own vote if he is also a Director). The signature of an
Alternate Director to any resolution in writing of the Board or a committee of
the Board shall, unless the terms of his appointment provides to the contrary,
be as effective as the signature of the Director or Directors to whom he is
alternate.
DIRECTORS' FEES AND ADDITIONAL REMUNERATION AND EXPENSES
- --------------------------------------------------------
81. The amount, if any, of Directors' fees shall from time to time be
determined by the Company by Resolution and in the absence of a determination to
the contrary such fees shall be deemed to accrue from day to day. Each Director
may be paid his reasonable travel, hotel and incidental expenses in attending
and returning from meetings of the Board or committees constituted pursuant to
these Bye-Laws or general meetings and shall be paid all expenses properly and
reasonably incurred by him in the conduct of the Company's business or in the
discharge of his duties as a Director. Any Director who, by request, goes or
resides abroad for any purposes of the Company or who performs services which in
the opinion of the Board go beyond the ordinary duties of a Director may be paid
such extra remuneration (whether by way of salary, commission, participation in
profits or otherwise) as the Board may determine, and such extra remuneration
shall be in addition to any remuneration provided for by or pursuant to any
other Bye-Law.
DIRECTORS' INTERESTS
- --------------------
82. (a) A Director may hold any other office or place of profit with the
Company (except that of auditor) in conjunction with his office of Director for
such period and upon such terms as the Board may determine, and may be paid such
extra remuneration therefor (whether by way of salary, commission, participation
in profits or otherwise) as the Board may determine, and such extra remuneration
shall be in addition to any remuneration provided for by or pursuant to any
other Bye-Law.
(b) A Director may act by himself or his firm in a professional
capacity for the Company (otherwise than as auditor) and he or his firm
shall be entitled to remuneration for professional services as if he were
not a Director.
(c) Subject to the provisions of the Companies Acts, a Director may
notwithstanding his office be a party to, or otherwise interested in, any
transaction or arrangement with the Company or in which the Company is
otherwise interested; and be a Director or other officer of, or employed
by, or a party to any transaction or arrangement with, or otherwise
interested in, any body corporate promoted by the Company or in which the
Company is interested. The Board may also cause the voting power conferred
by the shares in any other company held or owned by the Company to be
exercised in such manner in all respects as it thinks fit, including the
exercise thereof in favour of any resolution appointing the Directors or
any of them to
<PAGE>
18
be directors or officers of such other company, or voting or providing for
the payment of remuneration to the directors or officers of such other
company.
(d) So long as, where it is necessary, he declares the nature of his
interest at the first opportunity at a meeting of the Board or by writing
to the Directors as required by the Companies Acts, a Director shall not by
reason of his office be accountable to the Company for any benefit which he
derives from any office or employment to which these Bye-Laws allow him to
be appointed or from any transaction or arrangement in which these Bye-Laws
allow him to be interested, and no such transaction or arrangement shall be
liable to be avoided on the ground of any interest or benefit.
(e) Subject to the Companies Acts and any further disclosure required
thereby, a general notice to the Directors by a Director or officer
declaring that he is a director or officer or has an interest in a person
and is to be regarded as interested in any transaction or arrangement made
with that person, shall be a sufficient declaration of interest in relation
to any transaction or arrangement so made.
POWERS AND DUTIES OF THE BOARD
- ------------------------------
83. Subject to the provisions of the Companies Acts and these Bye-Laws and
to any directions given by the Company by Resolution, the Board shall manage the
business of the Company and may pay all expenses incurred in promoting and
incorporating the Company and may exercise all the powers of the Company. No
alteration of these Bye-Laws and no such direction shall invalidate any prior
act of the Board which would have been valid if that alteration had not been
made or that direction had not been given. The powers given by this Bye-Law
shall not be limited by any special power given to the Board by these Bye-Laws
and a meeting of the Board at which a quorum is present shall be competent to
exercise all the powers, authorities and discretions for the time being vested
in or exercisable by the Board.
84. The Board may exercise all the powers of the Company to borrow money
and to mortgage or charge all or any part of the undertaking, property and
assets (present and future) and uncalled capital of the Company and to issue
debentures and other securities, whether outright or as collateral security for
any debt, liability or obligation of the Company or of any other persons.
85. All cheques, promissory notes, drafts, bills of exchange and other
instruments, whether negotiable or transferable or not, and all receipts for
money paid to the Company shall be signed, drawn, accepted, endorsed or
otherwise executed, as the case may be, in such manner as the Board shall from
time to time by resolution determine.
86. The Board on behalf of the Company may provide benefits, whether by
the payment of gratuities or pensions or otherwise, for any person including any
Director or former Director who has held any executive office or employment with
the Company or with any body corporate which is or has been a subsidiary or
affiliate of the Company or a predecessor in the business of the Company or of
any such subsidiary or affiliate, and to any
<PAGE>
19
member of his family or any person who is or was dependent on him, and may
contribute to any fund and pay premiums for the purchase or provision of any
such gratuity, pension or other benefit, or for the insurance of any such
person.
87. The Board may from time to time appoint one or more of its body to be
a managing director, joint managing director or an assistant managing director
or to hold any other employment or executive office with the Company for such
period and upon such terms as the Board may determine and may revoke or
terminate any such appointments. Any such revocation or termination as
aforesaid shall be without prejudice to any claim for damages that such Director
may have against the Company or the Company may have against such Director for
any breach of any contract of service between him and the Company which may be
involved in such revocation or termination. Any person so appointed shall
receive such remuneration (if any) (whether by way of salary, commission,
participation in profits or otherwise) as the Board may determine, and either in
addition to or in lieu of his remuneration as a Director.
DELEGATION OF THE BOARD'S POWERS
- --------------------------------
88. The Board may by power of attorney appoint any company, firm or person
or any fluctuating body of persons, whether nominated directly or indirectly by
the Board, to be the attorney or attorneys of the Company for such purposes and
with such powers, authorities and discretions (not exceeding those vested in or
exercisable by the Board under these Bye-Laws) and for such period and subject
to such conditions as it may think fit, and any such power of attorney may
contain such provisions for the protection and convenience of persons dealing
with any such attorney and of such attorney as the Board may think fit, and may
also authorise any such attorney to sub-delegate all or any of the powers,
authorities and discretions vested in him.
89. The Board may entrust to and confer upon any Director, officer or,
without prejudice to the provisions of Bye-Law 90, other individual any of the
powers exercisable by it upon such terms and conditions with such restrictions
as it thinks fit, and either collaterally with, or to the exclusion of, its own
powers, and may from time to time revoke or vary all or any of such powers but
no person dealing in good faith and without notice of such revocation or
variation shall be affected thereby.
90. The Board may delegate any of its powers, authorities and discretions
to committees, consisting of such person or persons (whether a member or members
of its body or not) as it thinks fit. Any committee so formed shall, in the
exercise of the powers, authorities and discretions so delegated, conform to any
regulations which may be imposed upon it by the Board.
PROCEEDINGS OF THE BOARD
- ------------------------
91. The Board may meet for the despatch of business, adjourn and otherwise
regulate its meetings as it thinks fit. Questions arising at any meeting shall
be determined by a majority of votes. In the case of an equality of votes the
motion shall be deemed to have
<PAGE>
20
been lost. A Director may, and the Secretary on the requisition of a Director
shall, at any time summon a meeting of the Board.
92. Notice of a meeting of the Board shall be deemed to be duly given to a
Director if it is given to him personally or by word of mouth or sent to him by
post, cable, telex, telecopier or other mode of representing or reproducing
words in a legible and non-transitory form at his last known address or any
other address given by him to the Company for this purpose. A Director may
waive notice of any meeting either prospectively or retrospectively.
93. (a) The quorum necessary for the transaction of the business of the
Board may be fixed by the Board and, unless so fixed at any other number, shall
be two individuals. Any Director who ceases to be a Director at a meeting of
the Board may continue to be present and to act as a Director and be counted in
the quorum until the termination of the meeting if no other Director objects and
if otherwise a quorum of Directors would not be present.
(b) A Director who to his knowledge is in any way, whether directly or
indirectly, interested in a contract or proposed contract, transaction or
arrangement with the Company and has complied with the provisions of the
Companies Acts and these Bye-Laws with regard to disclosure of his interest
shall be entitled to vote in respect of any contract, transaction or
arrangement in which he is so interested and if he shall do so his vote
shall be counted, and he shall be taken into account in ascertaining
whether a quorum is present.
(c) The Resident Representative shall, upon delivering written notice
of an address for the purposes of receipt of notice, to the Registered
Office, be entitled to receive notice of, attend and be heard at, and to
receive minutes of all meetings of the Board.
94. So long as a quorum of Directors remains in office, the continuing
Directors may act notwithstanding any vacancy in the Board but, if no such
quorum remains, the continuing Directors or a sole continuing Director may act
only for the purpose of calling a general meeting.
95. The Chairman (if any) of the Board or, in his absence, the President
shall preside as chairman at every meeting of the Board. If there is no such
Chairman or President, or if at any meeting the Chairman or the President is not
present within five minutes after the time appointed for holding the meeting, or
is not willing to act as chairman, the Directors present may choose one of their
number to be chairman of the meeting.
96. The meetings and proceedings of any committee consisting of two or
more members shall be governed by the provisions contained in these Bye-Laws for
regulating the meetings and proceedings of the Board so far as the same are
applicable and are not superseded by any regulations imposed by the Board.
<PAGE>
21
97. A resolution in writing signed by all the Directors for the time being
entitled to receive notice of a meeting of the Board or by all the members of a
committee for the time being shall be as valid and effectual as a resolution
passed at a meeting of the Board or, as the case may be, of such committee duly
called and constituted. Such resolution may be contained in one document or in
several documents in the like form each signed by one or more of the Directors
or members of the committee concerned.
98. A meeting of the Board or a committee appointed by the Board may be
held by means of such telephone, electronic or other communication facilities as
permit all persons participating in the meeting to communicate with each other
simultaneously and instantaneously and participation in such a meeting shall
constitute presence in person at such meeting.
99. All acts done by the Board or by any committee or by any person acting
as a Director or member of a committee or any person duly authorised by the
Board or any committee, shall, notwithstanding that it is afterwards discovered
that there was some defect in the appointment of any member of the Board or such
committee or person acting as aforesaid or that they or any of them were
disqualified or had vacated their office, be as valid as if every such person
had been duly appointed and was qualified and had continued to be a Director,
member of such committee or person so authorised.
OFFICERS
- --------
100. The officers of the Company shall include a President and a Vice-
President or a Chairman and a Deputy Chairman who shall be Directors and shall
be elected by the Board as soon as possible after the statutory meeting and each
Annual General Meeting. In addition, the Board may appoint any person whether
or not he is a Director to hold such office as the Board may from time to time
determine. Any person elected or appointed pursuant to this Bye-Law shall hold
office for such period and upon such terms as the Board may determine and the
Board may revoke or terminate any such election or appointment. Any such
revocation or termination shall be without prejudice to any claim for damages
that such officer may have against the Company or the Company may have against
such officer for any breach of any contract of service between him and the
Company which may be involved in such revocation or termination. Save as
provided in the Companies Acts or these Bye-Laws, the powers and duties of the
officers of the Company shall be such (if any) as are determined from time to
time by the Board.
MINUTES
- -------
101. The Directors shall cause minutes to be made and books kept for the
purpose of recording.
(a) all appointments of officers made by the Directors;
(b) the names of the Directors and other persons (if any) present at
each meeting of Directors and of any committee;
<PAGE>
22
(c) of all proceedings at meetings of the Company, of the holders of
any class of shares in the Company, and of committees;
(d) of all proceedings of its managers (if any).
SECRETARY AND RESIDENT REPRESENTATIVE
- -------------------------------------
102. The Secretary and, if required, the Resident Representative, shall be
appointed by the Board at such remuneration (if any) and upon such terms as it
may think fit and any Secretary and Resident Representative so appointed may be
removed by the Board.
The duties of the Secretary and the duties of the Resident Representative shall
be those prescribed by the Companies Acts together with such other duties as
shall from time to time be prescribed by the Board.
103. A provision of the Companies Acts or these Bye-Laws requiring or
authorising a thing to be done by or to a Director and the Secretary shall not
be satisfied by its being done by or to the same person acting both as Director
and as, or in the place of, the Secretary.
THE SEAL
- --------
104. (a) The Seal shall consist of a circular metal device with the name
of the Company around the outer margin thereof and the country and year of
incorporation across the centre thereof. Should the Seal not have been received
at the Registered Office in such form at the date of adoption of this Bye-Law
then, pending such receipt, any document requiring to be sealed with the Seal
shall be sealed by affixing a red wafer seal to the document with the name of
the Company, and the country and year of incorporation type written across the
centre thereof.
(b) The Board shall provide for the custody of every Seal. A Seal shall
only be used by authority of the Board or of a committee constituted by the
Board. Subject to these Bye-laws, any instrument to which a Seal is affixed
shall be signed by either two Directors, or by the Secretary and one Director,
or by the Secretary or by any one person whether or not a Director or Officer,
who has been authorised either generally or specifically to attest to the use of
a Seal.
DIVIDENDS AND OTHER PAYMENTS
- ----------------------------
105. The Board may from time to time declare cash dividends or
distributions out of contributed surplus to be paid to the Shareholders
according to their rights and interests including such interim dividends as
appear to the Board to be justified by the position of the Company. The Board
may also pay any fixed cash dividend which is payable on any shares of the
Company half yearly or on such other dates, whenever the position of the
Company, in the opinion of the Board, justifies such payment.
106. Except insofar as the rights attaching to, or the terms of issue of,
any share otherwise provide:
<PAGE>
23
(a) all dividends or distributions out of contributed surplus may be
declared and paid according to the amounts paid up on the shares in respect
of which the dividend or distribution is paid, and an amount paid up on a
share in advance of calls may be treated for the purpose of this Bye-Law as
paid-up on the share;
(b) dividends or distributions out of contributed surplus may be
apportioned and paid pro rata according to the amounts paid-up on the
shares during any portion or portions of the period in respect of which the
dividend or distribution is paid.
107. The Board may deduct from any dividend, distribution or other moneys
payable to a Shareholder by the Company on or in respect of any shares all sums
of money (if any) presently payable by him to the Company on account of calls or
otherwise in respect of shares of the Company.
108. No dividend, distribution or other moneys payable by the Company on or
in respect of any share shall bear interest against the Company.
109. Any dividend, distribution, interest or other sum payable in cash to
the holder of shares may be paid by cheque or warrant sent through the post
addressed to the holder at his address in the Register or, in the case of joint
holders, addressed to the holder whose name stands first in the Register in
respect of the shares at his registered address as appearing in the Register or
addressed to such person at such address as the holder or joint holders may in
writing direct. Every such cheque or warrant shall, unless the holder or joint
holders otherwise direct, be made payable to the order of the holder or, in the
case of joint holders, to the order of the holder whose name stands first in the
Register in respect of such shares, and shall be sent at his or their risk and
payment of the cheque or warrant by the bank on which it is drawn shall
constitute a good discharge to the Company. Any one of two or more joint
holders may give effectual receipts for any dividends, distributions or other
moneys payable or property distributable in respect of the shares held by such
joint holders.
110. Any dividend or distribution out of contributed surplus unclaimed for
a period of six years from the date of declaration of such dividend or
distribution shall be forfeited and shall revert to the Company and the payment
by the Board of any unclaimed dividend, distribution, interest or other sum
payable on or in respect of the share into a separate account shall not
constitute the Company a trustee in respect thereof.
111. The Board may direct payment or satisfaction of any dividend or
distribution out of contributed surplus wholly or in part by the distribution of
specific assets, and in particular of paid-up shares or debentures of any other
company, and where any difficulty arises in regard to such distribution or
dividend the Board may settle it as it thinks expedient, and in particular, may
authorise any person to sell and transfer any fractions or may ignore fractions
altogether, and may fix the value for distribution or dividend purposes of any
such specific assets and may determine that cash payments shall be made to any
Shareholders upon the footing of the values so fixed in order to secure equality
of distribution and may vest any such specific assets in trustees as may seem
expedient to the Board provided that such dividend or distribution may not be
satisfied by the distribution of any partly paid shares or debentures of any
company without the sanction of a Resolution.
<PAGE>
24
RESERVES
- --------
112. The Board may, before recommending or declaring any dividend or
distribution out of contributed surplus, set aside such sums as it thinks proper
as reserves which shall, at the discretion of the Board, be applicable for any
purpose of the Company and pending such application may, also at such
discretion, either be employed in the business of the Company or be invested in
such investments as the Board may from time to time think fit. The Board may
also without placing the same to reserve carry forward any sums which it may
think it prudent not to distribute.
CAPITALIZATION OF PROFITS
- -------------------------
113. The Company may, upon the recommendation of the Board, at any time and
from time to time pass a Resolution to the effect that it is desirable to
capitalize all or any part of any amount for the time being standing to the
credit of any reserve or fund which is available for distribution or to the
credit of any share premium account or any capital redemption reserve fund and
accordingly that such amount be set free for distribution amongst the
Shareholders or any class of Shareholders who would be entitled thereto if
distributed by way of dividend and in the same proportions, on the footing that
the same be not paid in cash but be applied either in or towards paying up
amounts for the time being unpaid on any shares in the Company held by such
Shareholders respectively or in payment up in full of unissued shares,
debentures or other obligations of the Company, to be allotted and distributed
credited as fully paid amongst such Shareholders, or partly in one way and
partly in the other, and the Board shall give effect to such Resolution,
provided that for the purpose of this Bye-Law, a share premium account and a
capital redemption reserve fund may be applied only in paying up of unissued
shares to be issued to such Shareholders credited as fully paid and provided
further that any sum standing to the credit of a share premium account may only
be applied in crediting as fully paid shares of the same class as that from
which the relevant share premium was derived.
114. Where any difficulty arises in regard to any distribution under the
last preceding Bye-Law, the Board may settle the same as it thinks expedient
and, in particular, may authorise any person to sell and transfer any fractions
or may resolve that the distribution should be as nearly as may be practicable
in the correct proportion but not exactly so or may ignore fractions altogether,
and may determine that cash payments should be made to any Shareholders in order
to adjust the rights of all parties, as may seem expedient to the Board. The
Board may appoint any person to sign on behalf of the persons entitled to
participate in the distribution any contract necessary or desirable for giving
effect thereto and such appointment shall be effective and binding upon the
Shareholders.
RECORD DATES
- ------------
115. Notwithstanding any other provisions of these Bye-Laws, the Company
may by Resolution or the Board may fix any date as the record date for any
dividend, distribution, allotment or issue and for the purpose of identifying
the persons entitled to receive notices of general meetings. Any such record
date may be on or at any time before or after any date on
<PAGE>
25
which such dividend, distribution, allotment or issue is declared, paid or made
or such notice is despatched.
ACCOUNTING RECORDS
- ------------------
116. The Board shall cause to be kept accounting records sufficient to give
a true and fair view of the state of the Company's affairs and to show and
explain its transactions, in accordance with the Companies Acts.
117. The records of account shall be kept at the Registered Office or at
such other place or places as the Board thinks fit, and shall at all times be
open to inspection by the Directors: PROVIDED that if the records of account are
kept at some place outside Bermuda, there shall be kept at an office of the
Company in Bermuda such records as will enable the Directors to ascertain with
reasonable accuracy the financial position of the Company at the end of each
three month period. No Shareholder (other than an officer of the Company) shall
have any right to inspect any accounting record or book or document of the
Company except as conferred by law or authorised by the Board or by Resolution.
118. A copy of every balance sheet and statement of income and expenditure,
including every document required by law to be annexed thereto, which is to be
laid before the Company in general meeting, together with a copy of the
auditors' report, shall be sent to each person entitled thereto in accordance
with the requirements of the Companies Acts.
AUDIT
- -----
119. Save and to the extent that an audit is waived in the manner permitted
by the Companies Acts, auditors shall be appointed and their duties regulated in
accordance with the Companies Acts, any other applicable law and such
requirements not inconsistent with the Companies Acts as the Board may from time
to time determine.
SERVICE OF NOTICES AND OTHER DOCUMENTS
- --------------------------------------
120. Any notice or other document (including a share certificate) may be
served on or delivered to any Shareholder by the Company either personally or by
sending it through the post (by airmail where applicable) in a pre-paid letter
addressed to such Shareholder at his address as appearing in the Register or by
delivering it to or leaving it at such registered address. In the case of joint
holders of a share, service or delivery of any notice or other document on or to
one of the joint holders shall for all purposes be deemed as sufficient service
on or delivery to all the joint holders. Any notice or other document if sent
by post shall be deemed to have been served or delivered seven days after it was
put in the post, and in proving such service or delivery, it shall be sufficient
to prove that the notice or document was properly addressed, stamped and put in
the post.
121. Any notice of a general meeting of the Company shall be deemed to be
duly given to a Shareholder, or other person entitled to it, if it is sent to
him by cable, telex, telecopier or other mode of representing or reproducing
words in a legible and non-transitory form at his address as appearing in the
Register or any other address given by him to the
<PAGE>
26
Company for this purpose. Any such notice shall be deemed to have been served
twenty-four hours after its despatch.
122. Any notice or other document delivered, sent or given to a Shareholder
in any manner permitted by these Bye-Laws shall, notwithstanding that such
Shareholder is then dead or bankrupt or that any other event has occurred, and
whether or not the Company has notice of the death or bankruptcy or other event,
be deemed to have been duly served or delivered in respect of any share
registered in the name of such Shareholder as sole or joint holder unless his
name shall, at the time of the service or delivery of the notice or document,
have been removed from the Register as the holder of the share, and such service
or delivery shall for all purposes be deemed as sufficient service or delivery
of such notice or document on all persons interested (whether jointly with or as
claiming through or under him) in the share.
WINDING UP
- ----------
123. If the Company shall be wound up, the liquidator may, with the
sanction of a Resolution of the Company and any other sanction required by the
Companies Acts, divide amongst the Shareholders in specie or kind the whole or
any part of the assets of the Company (whether they shall consist of property of
the same kind or not) and may for such purposes set such values as he deems fair
upon any property to be divided as aforesaid and may determine how such division
shall be carried out as between the Shareholders or different classes of
Shareholders. The liquidator may, with the like sanction, vest the whole or any
part of such assets in trustees upon such trust for the benefit of the
contributories as the liquidator, with the like sanction, shall think fit, but
so that no Shareholder shall be compelled to accept any shares or other assets
upon which there is any liability.
INDEMNITY
- ---------
124. Subject to the proviso below, every Director, officer of the Company
and member of a committee constituted under Bye-Law 90 and any Resident
Representative shall be indemnified out of the funds of the Company against all
liabilities, loss, damage or expense (including but not limited to liabilities
under contract, tort and statute or any applicable foreign law or regulation and
all reasonable legal and other costs and expenses properly payable) incurred or
suffered by him as such Director, officer, committee member or Resident
Representative and the indemnity contained in this Bye-Law shall extend to any
person acting as a Director, officer, committee member or Resident
Representative in the reasonable belief that he has been so appointed or elected
notwithstanding any defect in such appointment or election PROVIDED ALWAYS that
the indemnity contained in this Bye-Law shall not extend to any matter which
would render it void pursuant to the Companies Acts.
125. Every Director, officer, member of a committee duly constituted under
Bye-Law 90 or Resident Representative of the Company shall be indemnified out of
the funds of the Company against all liabilities incurred by him as such
Director, officer, committee member or Resident Representative in defending any
proceedings, whether civil or criminal, in which judgment is given in his
favour, or in which he is acquitted, or in connection with
<PAGE>
27
any application under the Companies Acts in which relief from liability is
granted to him by the court.
126. To the extent that any Director, officer, member of a committee duly
constituted under Bye-Law 90 or Resident Representative is entitled to claim an
indemnity pursuant to these Bye-Laws in respect of amounts paid or discharged by
him, the relative indemnity shall take effect as an obligation of the Company to
reimburse the person making such payment or effecting such discharge.
AMALGAMATION
- ------------
127. Any resolution proposed for consideration at any general meeting to
approve the amalgamation of the Company with any other company, wherever
incorporated, shall require the approval of a simple majority of votes cast at
such meeting and the quorum for such meeting shall be that required in Bye-law
49.
ALTERATION OF BYE-LAWS
- ----------------------
128. These Bye-Laws may be amended from time to time in the manner provided
for in the Companies Acts.
<PAGE>
EXHIBIT 3.11
[LOGO]
CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME
Company No. 3427500
The Registrar of Companies for England and Wales hereby certifies that
GT INTERCONNECT SERVICES U.K. LIMITED
having by special resolution changed its name, is now incorporated under the
name of
GLOBAL CROSSING HOLDINGS UK LIMITED
Given at Companies House, Cardiff, the 13th May 1998
/s/ C. PHILLIPS
C. PHILLIPS
For The Registrar Of Companies
<PAGE>
[LOGO]
CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME
Company No. 3427500
The Registrar of Companies for England and Wales hereby certifies that
CHELTRADING 162 LIMITED
having by special resolution changed its name, is now incorporated under the
name of
GT INTERCONNECT SERVICES U.K. LIMITED
Given at Companies House, Cardiff, the 13th October 1997
/s/ L. PARRY
MRS. L. PARRY
For the Registrar of Companies
<PAGE>
[LOGO]
CERTIFICATE OF INCORPORATION
OF A PRIVATE LIMITED COMPANY
Company No. 3427500
The Registrar of Companies for England and Wales hereby certifies that
CHELTRADING 162 LIMITED
is this day incorporated under the Companies Act 1985 as a private company
and that the company is limited.
Given at Companies House, Cardiff, the 2nd September 1997
/s/ L. PARRY
MRS. L. PARRY
For the Registrar of Companies
<PAGE>
EXHIBIT 3.12
THE COMPANIES ACTS 1985 TO 1989
PRIVATE COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION OF
GLOBAL CROSSING HOLDINGS UK LIMITED
(AS AMENDED BY SPECIAL RESOLUTION
DATED 12TH MAY 1998)
1. The Company's name is "Cheltrading 162 Limited".
2. The Company's registered office is to be situated in England and Wales.
3. (i) The object of the Company is to carry on business as a general
commercial company.
(ii) Without prejudice to the generality of the object and the powers
of the Company derived from Section 3A of the Act the Company has
power to do all or any of the following things:-
(a) To purchase or by any other means acquire and take options over any
property whatever, and any rights or privileges of any kind over or in
respect of any property.
(b) To apply for, register, purchase, or by other means acquire and
protect, prolong and renew, whether in the United Kingdom or elsewhere
any patents, patent rights, brevets d'invention, licences, secret
processes, trade marks, designs, protections and concessions and to
disclaim, alter, modify, use and turn to account and to manufacture
under or grant licences or privileges in respect of the same, and to
expend money in experimenting upon, testing and improving any patents,
inventions or rights which the Company may acquire or propose to
acquire.
(c) To acquire or undertake the whole or any part of the business,
goodwill, and assets of any person, firm, or company carrying on or
proposing to carry on any of the businesses which the Company is
authorised to carry on and as part of the consideration for such
acquisition to undertake all or any of the liabilities of such person,
firm or company, or to acquire an interest in, amalgamate with, or
enter into partnership or into any arrangement for sharing profits, or
for co-operation, or for mutual assistance with any such person, firm,
or company, or for subsidising or otherwise assisting any such person,
firm or company, and to give or accept, by way of consideration for
any of the acts or things aforesaid or property acquired, any shares,
debentures, debenture stock
<PAGE>
2
or securities that may be agreed upon, and to hold and retain, or
sell, mortgage and deal with any shares, debentures, debenture stock
or securities so received.
(d) To improve, manage, construct, repair, develop, exchange, let on lease
or otherwise, mortgage, charge, sell, dispose of, turn to account,
grant licences, options, rights and privileges in respect of, or
otherwise deal with all or any part of the property and rights of the
Company.
(e) To invest and deal with the moneys of the Company not immediately
required in such manner as may from time to time be determined and to
hold or otherwise deal with any investments made.
(f) To lend and advance money or give credit on any terms and with or
without security to any person, firm or company (including without
prejudice to the generality of the foregoing any holding company,
subsidiary or fellow subsidiary of, or any other company associated in
any way with, the Company), to enter into guarantees, contracts of
indemnity and suretyships of all kinds, to receive money on deposit or
loan upon any terms, and to secure or guarantee in any manner and upon
any terms the payment of any sum of money or the performance of any
obligation by any person, firm or company (including without prejudice
to the generality of the foregoing any such holding company,
subsidiary, fellow subsidiary or associated company as aforesaid).
(g) To borrow and raise money in any manner and to secure the repayment of
any money borrowed, raised or owing by mortgage, charge, standard
security, lien or other security upon the whole or any part of the
Company's property or assets (whether present or future), including
its uncalled capital, and also by a similar mortgage, charge, standard
security, lien or security to secure and guarantee the performance by
the Company of any obligation or liability it may undertake or which
may become binding on it.
(h) To draw, make, accept, endorse, discount, negotiate, execute and issue
cheques, bills of exchange, promissory notes, bills of lading,
warrants, debentures, and other negotiable or transferable
instruments.
(i) To apply for, promote, and obtain any Act of Parliament, order, or
licence of the Department of Trade or other authority for enabling the
Company to carry any of its objects into effect, or for effecting any
modification of the Company's constitution, or for any other purpose
which may seem calculated directly or indirectly to promote the
Company's interests, and to oppose any proceedings or applications
which may seem calculated directly or indirectly to prejudice the
Company's interests.
(j) To enter into any arrangements with any government or authority
(supreme, municipal, local, or otherwise) that may seem conducive to
the attainment of the Company's objects or any of them, and to obtain
from any such
<PAGE>
3
government or authority any charters, decrees, rights, privileges or
concessions which the Company may think desirable and to carry out,
exercise, and comply with any such charters, decrees, rights,
privileges, and concessions.
(k) To subscribe for, take, purchase, or otherwise acquire, hold, sell,
deal with and dispose of, place and underwrite shares, stocks,
debentures, debenture stocks, bonds, obligations or securities issued
or guaranteed by any other company constituted or carrying on business
in any part of the world, and debentures, debenture stocks, bonds,
obligations or securities issued or guaranteed by any government or
authority, municipal, local or otherwise, in any part of the world.
(l) To control, manage, finance, subsidise, co-ordinate or otherwise
assist any company or companies in which the Company has a direct or
indirect financial interest, to provide secretarial, administrative,
technical, commercial and other services and facilities of all kinds
for any such company or companies and to make payments by way of
subvention or otherwise and any other arrangements which may seem
desirable with respect to any business or operations of or generally
with respect to any such company or companies.
(m) To promote any other company for the purpose of acquiring the whole or
any part of the business or property or undertaking or any of the
liabilities of the Company, or of undertaking any business or
operations which may appear likely to assist or benefit the Company or
to enhance the value of any property or business of the Company, and
to place or guarantee the placing of, underwrite, subscribe for, or
otherwise acquire all or any part of the shares or securities of any
such company as aforesaid.
(n) To sell or otherwise dispose of the whole or any part of the business
or property of the Company, either together or in portions, for such
consideration as the Company may think fit, and in particular for
shares, debentures, or securities of any company purchasing the same.
(o) To act as agents or brokers and as trustees for any person, firm or
company, and to undertake and perform sub-contracts.
(p) To remunerate any person, firm or company rendering services to the
Company either by cash payment or by the allotment to him or them of
shares or other securities of the Company credited as paid up in full
or in part or otherwise as may be thought expedient.
(q) To distribute among the Members of the Company in kind any property of
the Company of whatever nature.
<PAGE>
4
(r) To pay all or any expenses incurred in connection with the promotion,
formation and incorporation of the Company, or to contract with any
person, firm or company to pay the same, and to pay commissions to
brokers and others for underwriting, placing, selling, or guaranteeing
the subscription of any shares or other securities of the Company.
(s) To support and subscribe to any charitable or public object and to
support and subscribe to any institution, society, or club which may
be for the benefit of the Company or its Directors or employees, or
may be connected with any town or place where the Company carries on
business; to give or award pensions, annuities, gratuities, and
superannuation or other allowances or benefits or charitable aid and
generally to provide advantages, facilities and services for any
persons who are or have been Directors of, or who are or have been
employed by, or who are serving or have served the Company, or any
company which is a subsidiary of the Company or the holding company of
the Company or a fellow subsidiary of the Company or the predecessors
in business of the Company or of any such subsidiary, holding or
fellow subsidiary company and to the wives, widows, children and other
relatives and dependents of such persons; to make payments towards
insurance including insurance for any Director, officer or Auditor
against any liability as is referred to in Section 310(1) of the Act;
and to set up, establish, support and maintain superannuation and
other funds or schemes (whether contributory or non-contributory) for
the benefit of any of such persons and of their wives, widows,
children and other relatives and dependents; and to set up, establish,
support and maintain profit sharing or share purchase schemes for the
benefit of any of the employees of the Company or of any such
subsidiary, holding or fellow subsidiary company and to lend money to
any such employees or to trustees on their behalf to enable any such
purchase schemes to be established or maintained.
(t) Subject to and in accordance with a due compliance with the provisions
of Sections 155 to 158 (inclusive) of the Act ( if and so far as such
provisions shall be applicable), to give, whether directly or
indirectly, any kind of financial assistance (as defined in Section
152(1)(a) of the Act) for any such purpose as is specified in Section
151(1) and/or Section 151(2) of the Act.
(u) To procure the Company to be registered or recognised in any part of
the world.
(v) To do all or any of the things or matters aforesaid in any part of the
world and either as principals, agents, contractors or otherwise, and
by or through agents, brokers, sub-contractors or otherwise and either
alone or in conjunction with others.
<PAGE>
5
(w) To do all such other things as may be deemed incidental or conducive
to the attainment of the Company's object or of any of the powers
given to it by the Act or by this Clause.
AND so that:-
(1) None of the provisions set forth in any sub-clause of this Clause
shall be restrictively construed but the widest interpretation shall
be given to each such provision, and none of such provisions shall,
except where the context expressly so requires, be in any way limited
or restricted by reference to or inference from any other provision
set forth in such sub-clause, or by reference to or inference from the
terms of any other sub-clause of this Clause, or by reference to or
inference from the name of the Company.
(2) The word "Company" in this Clause, except where used in reference to
the Company, shall be deemed to include any partnership or other body
of persons, whether incorporated or unincorporated and whether
domiciled in the United Kingdom or elsewhere.
(3) In this Clause the expression "the Act" means the Companies Act 1985,
but so that any reference in this Clause to any provision of the Act
shall be deemed to include a reference to any statutory modification
or re-enactment of that provision for the time being in force.
4. The liability of the Members is limited.
5. The Company's share capital is (Pounds)1,000 divided into 1000 shares of
(Pounds)1 each.
<PAGE>
6
We, the subscribers to this Memorandum of Association, wish to be formed
into a Company pursuant to this Memorandum; and we agree to take the number of
shares shown opposite our respective names.
NAME AND ADDRESSES OF SUBSCRIBERS NUMBER OF SHARES TAKEN BY EACH
SUBSCRIBER
1. Stoorne Incorporations Limited
4th Floor ONE
The Quadrangle
Imperial Square
Cheltenham
Gloucestershire
GL50 1YX
- --------------------------------------------------------------------
2. Stoorne Services Limited
4th Floor ONE
The Quadrangle
Imperial Square
Cheltenham
Gloucestershire
GL50 1YX
- --------------------------------------------------------------------
Total shares taken TWO
- --------------------------------------------------------------------
Dated the day of
Witness to the above Signatures:- Gerald Ireland
4th Floor
The Quadrangle
Imperial Square
Cheltenham
Gloucestershire
GL50 1YX
Chartered Secretary
<PAGE>
7
THE COMPANIES ACTS 1985 TO 1989
PRIVATE COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION OF
GLOBAL CROSSING HOLDINGS UK LIMITED
(AS AMENDED BY SPECIAL RESOLUTION
DATED 12TH MAY 1998)
PRELIMINARY
1. (a) The Regulations contained in Table A in the Schedule to the
Companies (Tables A to F) Regulations 1985 (SI 1985 No 805) as amended
by the Companies (Tables A to F) (Amendment) Regulations 1985 (SI 1985
No 1052) (such Table being hereinafter called "Table A") shall apply
to the Company save in so far as they are excluded or varied hereby
and such Regulations (save as so excluded or varied) and the Articles
hereinafter contained shall be the regulations of the Company.
(b) In these Articles the expression "the Act" means the Companies Act
1985, but so that any reference in these Articles to any provision of
the Act shall be deemed to include a reference to any statutory
modification or re-enactment of that provision for the time being in
force.
ALLOTMENT OF SHARES
2. (a) Shares which are comprised in the authorised share capital with
which the Company is incorporated shall be under the control of the
Directors who may (subject to Section 80 of the Act and to paragraph
(d) below) allot, grant options over or otherwise dispose of the same,
to such persons, on such terms and in such manner as they think fit.
(b) All shares which are not comprised in the authorised share capital
with which the Company is incorporated and which the Directors propose
to issue shall first be offered to the Members in proportion as nearly
as may be to the number the existing shares held by them respectively
unless the Company in General Meeting shall by Special Resolution
otherwise direct. The offer shall be made by notice specifying the
number of shares offered, and limiting a period (not being less than
fourteen days) within which the offer, if not accepted, will be deemed
to be declined. After the expiration of that period, those shares so
deemed to be declined shall be offered in the proportion aforesaid to
the persons who have, within the said period, accepted all the
<PAGE>
8
shares offered to them; such further offer shall be made in like terms
in the same manner and limited by a like period as the original offer.
Any shares not accepted pursuant to such offer or further offer as
aforesaid or not capable of being offered as aforesaid except by way
of fractions and any shares released from the provisions of this
Article by any such Special Resolution as aforesaid shall be under the
control of the Directors, who may allot, grant options over or
otherwise dispose of the same to such persons, on such terms, and in
such manner as they think fit, provided that, in the case of shares
not accepted as aforesaid, such shares shall not be disposed of on
terms which are more favourable to the subscribers therefor than the
terms on which they were offered to the Members. The foregoing
provisions of this paragraph (b) shall have effect subject to Section
80 of the Act.
(c) In accordance with Section 91(1) of the Act Sections 89(1) and 90(1)
to (6) (inclusive) of the Act shall not apply to the Company.
(d) The Directors are generally and unconditionally authorised for the
purposes of Section 80 of the Act, to exercise any power of the
Company to allot and grant rights to subscribe for or convert
securities into shares of the Company up to the amount of the
authorised share capital with which the Company is incorporated at any
time or times during the period of five years from the date of
incorporation and the Directors may, after that period, allot any
shares or grant any such rights under this authority in pursuance of
an offer or agreement so to do made by the Company within that period.
The authority hereby given may at any time (subject to the said
Section 80) be renewed, revoked or varied by Ordinary Resolution of
the Company in General Meeting.
SHARES
3. The lien conferred by Clause 8 in Table A shall attach also to fully paid-
up shares, and the Company shall also have a first and paramount lien on
all shares, whether fully paid or not, standing registered in the name of
any person indebted or under liability to the Company, whether he shall be
the sole registered holder thereof or shall be one of two or more joint
holders, for all moneys presently payable by him or his estate to the
Company. Clause 8 in Table A shall be modified accordingly.
4. The liability of any Member in default in respect of a call shall be
increased by the addition at the end of the first sentence of Clause 18 in
Table A of the words "and all expenses that may have been incurred by the
Company by reason of such non-payment".
GENERAL MEETINGS AND RESOLUTIONS
5. (a) Every notice convening a General Meeting shall comply with the
provisions of Section 372(3) of the Act as to giving information to
Members in regard to their right to appoint proxies; and notices of
and other communications relating
<PAGE>
9
to any General Meeting which any Member is entitled to receive shall
be sent to the Directors and to the Auditors for the time being of the
Company.
(b) No business shall be transacted at any General Meeting unless a quorum
is present. Subject to paragraph (c) below two persons entitled to
vote upon the business to be transacted, each being a Member or a
proxy for a Member or a duly authorised representative of a
corporation, shall be a quorum.
(c) If and for so long as the Company has only one Member, that Member
present in person or by proxy or if that Member is a corporation by a
duly authorised representative shall be a quorum.
(d) If a quorum is not present within half an hour from the time appointed
for a General Meeting the General Meeting shall stand adjourned to the
same day in the next week at the same time and place or to such other
day and at such other time and place as the Directors may determine;
and if at the adjourned General Meeting a quorum is not present within
half an hour from the time appointed therefor such adjourned General
Meeting shall be dissolved.
(e) Clauses 40 and 41 in Table A shall not apply to the Company.
6. (a) If and for so long as the Company has only one Member and that
Member takes any decision which is required to be taken in General
Meeting or by means of a written resolution, that decision shall be as
valid and effectual as if agreed by the Company in General Meeting
save that this paragraph shall not apply to resolutions passed
pursuant to sections 303 and 391 of the Act.
(b) Any decision taken by a sole Member pursuant to paragraph (a) above
shall be recorded in writing and delivered by that Member to the
Company for entry in the Company's Minute Book.
APPOINTMENT OF DIRECTORS
7. (a) Clause 64 in Table A shall not apply to the Company.
(b) The maximum number and minimum number respectively of the Directors
may be determined from time to time by Ordinary Resolution in General
Meeting of the Company. Subject to and in default of any such
determination there shall be no maximum number of Directors and the
minimum number of Directors shall be one. Whensoever the minimum
number of Directors shall be one, a sole Director shall have authority
to exercise all the powers and discretions by Table A and by these
Articles expressed to be vested in the Directors generally, and Clause
89 in Table A shall be modified accordingly.
(c) The Directors shall not be required to retire by rotation and Clauses
73 to 80 (inclusive) in Table A shall not apply to the Company.
<PAGE>
10
(d) No person shall be appointed a Director at any General Meeting unless
either:-
(i) he is recommended by the Directors; or
(ii) not less than fourteen nor more than thirty-five
clear days before the date appointed for the General Meeting, notice
signed by a Member qualified to vote at the General Meeting has been
given to the Company of the intention to propose that person for
appointment, together with notice signed by that person of his
willingness to be appointed.
(e) Subject to paragraph (d) above, the Company may by Ordinary Resolution
in General Meeting appoint any person who is willing to act to be a
Director, either to fill a vacancy or as an additional Director.
(f) The Directors may appoint a person who is willing to act to be a
Director, either to fill a vacancy or as an additional Director,
provided that the appointment does not cause the number of Directors
to exceed any number determined in accordance with paragraph (b) above
as the maximum number of Directors and for the time being in force.
(g) In any case where as the result of the death of a sole Member of the
Company the Company has no Members and no Directors the personal
representatives of such deceased member shall have the right by notice
in writing to appoint a person to be a Director of the Company and
such appointment shall be as effective as if made by the Company in
General Meeting pursuant to paragraph (e) of this Article.
BORROWING POWERS
8. The Directors may exercise all the powers of the Company to borrow money
without limit as to amount and upon such terms and in such manner as they
think fit, and subject (in the case of any security convertible into
shares) to Section 80 of the Act to grant any mortgage, charge or standard
security over its undertaking, property and uncalled capital, or any part
thereof, and to issue debentures, debenture stock, and other securities
whether outright or as security for any debt, liability or obligation of
the Company or of any third party.
ALTERNATE DIRECTORS
9. (a) An alternate Director shall not be entitled as such to receive
any remuneration from the Company, save that he may be paid by the
Company such part (if any) of the remuneration otherwise payable to
his appointor as such appointor may by notice in writing to the
Company from time to time direct, and the first sentence of Clause 66
in Table A shall be modified accordingly.
<PAGE>
11
(b) A Director, or any such other person as is mentioned in Clause 65 in
Table A, may act as an alternate Director to represent more than one
Director, and an alternate Director shall be entitled at any meeting
of the Directors or of any committee of the Directors to one vote for
every Director whom he represents in addition to his own vote (if any)
as a Director, but he shall count as only one for the purpose of
determining whether a quorum is present.
GRATUITIES AND PENSIONS
10. (a) The Directors may exercise the powers of the Company conferred by
Clause 3(ii)(s) of the Memorandum of Association of the Company and
shall be entitled to retain any benefits received by them or any of
them by reason of the exercise of any such powers.
(b) Clause 87 in Table A shall not apply to the Company.
PROCEEDINGS OF DIRECTORS
11. (a) A Director may vote, at any meeting of the Directors or of any
committee of the Directors, on any resolution, notwithstanding that it
in any way concerns or relates to a matter in which he has, directly
or indirectly, any kind of interest whatsoever, and if he shall vote
on any such resolution as aforesaid his vote shall be counted; and in
relation to any such resolution as aforesaid he shall (whether or not
he shall vote on the same) be taken into account in calculating the
quorum present at the meeting.
(b) Clauses 94 to 97 (inclusive) in Table A shall not apply to the
Company.
THE SEAL
12. (a) If the Company has a seal it shall only be used with the authority of
the Directors or of a committee of Directors. The Directors may
determine who shall sign any instrument to which the seal is affixed
and unless otherwise so determined it shall be signed by a Director
and by the Secretary or second Director. The obligation under Clause
6 of Table A relating to the sealing of share certificates shall apply
only if the Company has a seal. Clause 101 of Table A shall not apply
to the Company.
(b) The Company may exercise the powers conferred by Section 39 of the Act
with regard to having an official seal for use abroad, and such powers
shall be vested in the Directors.
<PAGE>
12
INDEMNITY
13. (a) Every Director or other officer or Auditor of the Company shall be
indemnified out of the assets of the Company against all losses or
liabilities which he may sustain or incur in or about the execution of
the duties of his office or otherwise in relation thereto, including
any liability incurred by him in defending any proceedings, whether
civil or criminal, or in connection with any application under Section
144 or Section 727 of the Act in which relief is granted to him by the
Court, and no Director or other officer shall be liable for any loss,
damage or misfortune which may happen to or be incurred by the Company
in the execution of the duties of his office or in relation thereto.
But this Article shall only have effect in so far as its provisions
are not avoided by Section 310 of the Act.
(b) The Directors shall have power to purchase and maintain for any
Director, officer or Auditor of the Company insurance against any such
liability as is referred to in Section 310(1) of the Act.
(c) Clause 118 in Table A shall not apply to the Company.
<PAGE>
13
TRANSFER OF SHARES
14. The Directors may, in their absolute discretion and without assigning any
reason therefor, decline to register the transfer of a share, whether or
not it is a fully paid share, and the first sentence of Clause 24 in Table
A shall not apply to the Company.
NAMES AND ADDRESSES OF SUBSCRIBERS
1. Stoorne Incorporations Limited
4th Floor
The Quadrangle
Imperial Square
Cheltenham
Gloucestershire GL50 1YX
- ------------------------------------
2. Stoorne Services Limited
4th Floor
The Quadrangle
Imperial Square
Cheltenham
Gloucestershire GL50 1YX
- ------------------------------------
Dated this day of
Witness to the above signatures, Gerald Ireland
4th Floor
The Quadrangle
Imperial Square
Cheltenham
Gloucestershire
GL50 1YX
Chartered Secretary
<PAGE>
EXHIBIT 3.13
[LOGO]
CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME
Company No. 3529109
The Registrar of Companies for England and Wales hereby certifies that
CHELTRADING 188 LIMITED
having by special resolution changed its name, is now incorporated
under the name of
GLOBAL CROSSING MARKETING (UK) LIMITED
Given at Companies House, Cardiff, the 15th May 1998
/s/ R.C. EDWARDS
R. C. EDWARDS
For the Registrar of Companies
<PAGE>
[LOGO]
CERTIFICATE OF INCORPORATION
OF A PRIVATE LIMITED COMPANY
Company No. 3529109
The Registrar of Companies for England and Wales hereby certifies that
CHELTRADING 188 LIMITED
is this day incorporated under the Companies Act 1985 as a private company
and that the company is limited.
Given at Companies House, Cardiff, the 17th March 1998
/s/ L. PARRY
MRS. L. PARRY
For the Registrar of Companies
<PAGE>
EXHIBIT 3.14
THE COMPANIES ACTS 1985 TO 1989
PRIVATE COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION OF
GLOBAL CROSSING MARKETING (UK) LIMITED
As amended by Special Resolution passed on 8th May 1998
1. The Company's name is "Cheltrading 188 Limited".
2. The Company's registered office is to be situated in England and Wales.
3. (i) The object of the Company is to carry on business as a
general commercial company.
(ii) Without prejudice to the generality of the object and the
powers of the Company derived from Section 3A of the Act
the Company has power to do all or any of the following
things:-
(a) To purchase or by any other means acquire and take options
over any property whatever, and any rights or privileges
of any kind over or in respect of any property.
(b) To apply for, register, purchase, or by other means
acquire and protect, prolong and renew, whether in the
United Kingdom or elsewhere any patents, patent rights,
brevets d'invention, licences, secret processes, trade
marks, designs, protections and concessions and to
disclaim, alter, modify, use and turn to account and to
manufacture under or grant licences or privileges in
respect of the same, and to expend money in experimenting
upon, testing and improving any patents, inventions or
rights which the Company may acquire or propose to
acquire.
(c) To acquire or undertake the whole or any part of the
business, goodwill, and assets of any person, firm, or
company carrying on or proposing to carry on any of the
businesses which the Company is authorised to carry on and
as part of the consideration for such acquisition to
undertake all or any of the liabilities of such person,
firm or company, or to acquire an interest in, amalgamate
with, or enter into partnership or into any arrangement
for sharing profits, or for co-operation, or for mutual
assistance with any such person, firm, or company, or for
subsidising or otherwise assisting any such person, firm
or company, and to give or accept, by way of consideration
for any of the acts or
<PAGE>
2
things aforesaid or property acquired, any shares,
debentures, debenture stock or securities that may be
agreed upon, and to hold and retain, or sell, mortgage and
deal with any shares, debentures, debenture stock or
securities so received.
(d) To improve, manage, construct, repair, develop, exchange,
let on lease or otherwise, mortgage, charge, sell, dispose
of, turn to account, grant licences, options, rights and
privileges in respect of, or otherwise deal with all or
any part of the property and rights of the Company.
(e) To invest and deal with the moneys of the Company not
immediately required in such manner as may from time to
time be determined and to hold or otherwise deal with any
investments made.
(f) To lend and advance money or give credit on any terms and
with or without security to any person, firm or company
(including without prejudice to the generality of the
foregoing any holding company, subsidiary or fellow
subsidiary of, or any other company associated in any way
with, the Company), to enter into guarantees, contracts of
indemnity and suretyships of all kinds, to receive money
on deposit or loan upon any terms, and to secure or
guarantee in any manner and upon any terms the payment of
any sum of money or the performance of any obligation by
any person, firm or company (including without prejudice
to the generality of the foregoing any such holding
company, subsidiary, fellow subsidiary or associated
company as aforesaid).
(g) To borrow and raise money in any manner and to secure the
repayment of any money borrowed, raised or owing by
mortgage, charge, standard security, lien or other
security upon the whole or any part of the Company's
property or assets (whether present or future), including
its uncalled capital, and also by a similar mortgage,
charge, standard security, lien or security to secure and
guarantee the performance by the Company of any obligation
or liability it may undertake or which may become binding
on it.
(h) To draw, make, accept, endorse, discount, negotiate,
execute and issue cheques, bills of exchange, promissory
notes, bills of lading, warrants, debentures, and other
negotiable or transferable instruments.
(i) To apply for, promote, and obtain any Act of Parliament,
order, or licence of the Department of Trade or other
authority for enabling the Company to carry any of its
objects into effect, or for effecting any modification of
the Company's constitution, or for any other purpose which
may seem calculated directly or indirectly to promote the
Company's interests, and to oppose any proceedings or
applications
<PAGE>
3
which may seem calculated directly or indirectly to
prejudice the Company's interests.
(j) To enter into any arrangements with any government or
authority (supreme, municipal, local, or otherwise) that
may seem conducive to the attainment of the Company's
objects or any of them, and to obtain from any such
government or authority any charters, decrees, rights,
privileges or concessions which the Company may think
desirable and to carry out, exercise, and comply with any
such charters, decrees, rights, privileges, and
concessions.
(k) To subscribe for, take, purchase, or otherwise acquire,
hold, sell, deal with and dispose of, place and underwrite
shares, stocks, debentures, debenture stocks, bonds,
obligations or securities issued or guaranteed by any
other company constituted or carrying on business in any
part of the world, and debentures, debenture stocks,
bonds, obligations or securities issued or guaranteed by
any government or authority, municipal, local or
otherwise, in any part of the world.
(l) To control, manage, finance, subsidise, co-ordinate or
otherwise assist any company or companies in which the
Company has a direct or indirect financial interest, to
provide secretarial, administrative, technical, commercial
and other services and facilities of all kinds for any
such company or companies and to make payments by way of
subvention or otherwise and any other arrangements which
may seem desirable with respect to any business or
operations of or generally with respect to any such
company or companies.
(m) To promote any other company for the purpose of acquiring
the whole or any part of the business or property or
undertaking or any of the liabilities of the Company, or
of undertaking any business or operations which may appear
likely to assist or benefit the Company or to enhance the
value of any property or business of the Company, and to
place or guarantee the placing of, underwrite, subscribe
for, or otherwise acquire all or any part of the shares or
securities of any such company as aforesaid.
(n) To sell or otherwise dispose of the whole or any part of
the business or property of the Company, either together
or in portions, for such consideration as the Company may
think fit, and in particular for shares, debentures, or
securities of any company purchasing the same.
(o) To act as agents or brokers and as trustees for any
person, firm or company, and to undertake and perform sub-
contracts.
<PAGE>
4
(p) To remunerate any person, firm or company rendering
services to the Company either by cash payment or by the
allotment to him or them of shares or other securities of
the Company credited as paid up in full or in part or
otherwise as may be thought expedient.
(q) To distribute among the Members of the Company in kind any
property of the Company of whatever nature.
(r) To pay all or any expenses incurred in connection with the
promotion, formation and incorporation of the Company, or
to contract with any person, firm or company to pay the
same, and to pay commissions to brokers and others for
underwriting, placing, selling, or guaranteeing the
subscription of any shares or other securities of the
Company.
(s) To support and subscribe to any charitable or public
object and to support and subscribe to any institution,
society, or club which may be for the benefit of the
Company or its Directors or employees, or may be connected
with any town or place where the Company carries on
business; to give or award pensions, annuities,
gratuities, and superannuation or other allowances or
benefits or charitable aid and generally to provide
advantages, facilities and services for any persons who
are or have been Directors of, or who are or have been
employed by, or who are serving or have served the
Company, or any company which is a subsidiary of the
Company or the holding company of the Company or a fellow
subsidiary of the Company or the predecessors in business
of the Company or of any such subsidiary, holding or
fellow subsidiary company and to the wives, widows,
children and other relatives and dependents of such
persons; to make payments towards insurance including
insurance for any Director, officer or Auditor against any
liability as is referred to in Section 310(1) of the Act;
and to set up, establish, support and maintain
superannuation and other funds or schemes (whether
contributory or non-contributory) for the benefit of any
of such persons and of their wives, widows, children and
other relatives and dependents; and to set up, establish,
support and maintain profit sharing or share purchase
schemes for the benefit of any of the employees of the
Company or of any such subsidiary, holding or fellow
subsidiary company and to lend money to any such employees
or to trustees on their behalf to enable any such purchase
schemes to be established or maintained.
(t) Subject to and in accordance with a due compliance with
the provisions of Sections 155 to 158 (inclusive) of the
Act ( if and so far as such provisions shall be
applicable), to give, whether directly or indirectly, any
kind of financial assistance (as defined in Section
152(1)(a) of the Act) for any such purpose as is specified
in Section 151(1) and/or Section 151(2) of the Act.
<PAGE>
5
(u) To procure the Company to be registered or recognised in
any part of the world.
(v) To do all or any of the things or matters aforesaid in any
part of the world and either as principals, agents,
contractors or otherwise, and by or through agents,
brokers, sub-contractors or otherwise and either alone or
in conjunction with others.
(w) To do all such other things as may be deemed incidental or
conducive to the attainment of the Company's object or of
any of the powers given to it by the Act or by this
Clause.
AND so that:-
(1) None of the provisions set forth in any sub-clause of this
Clause shall be restrictively construed but the widest
interpretation shall be given to each such provision, and
none of such provisions shall, except where the context
expressly so requires, be in any way limited or restricted
by reference to or inference from any other provision set
forth in such sub-clause, or by reference to or inference
from the terms of any other sub-clause of this Clause, or
by reference to or inference from the name of the Company.
(2) The word "Company" in this Clause, except where used in
reference to the Company, shall be deemed to include any
partnership or other body of persons, whether incorporated
or unincorporated and whether domiciled in the United
Kingdom or elsewhere.
(3) In this Clause the expression "the Act" means the
Companies Act 1985, but so that any reference in this
Clause to any provision of the Act shall be deemed to
include a reference to any statutory modification or re-
enactment of that provision for the time being in force.
4. The liability of the Members is limited.
5. The Company's share capital is (Pounds)1,000 divided into 1000 shares of
(Pounds)1 each.
<PAGE>
6
We, the subscribers to this Memorandum of Association, wish to be formed
into a Company pursuant to this Memorandum; and we agree to take the number of
shares shown opposite our respective names.
NAME AND ADDRESSES OF SUBSCRIBERS NUMBER OF SHARES TAKEN BY EACH
SUBSCRIBER
1. Stoorne Incorporations Limited
4th Floor ONE
The Quadrangle
Imperial Square
Cheltenham
Gloucestershire
GL50 1YX
2. Stoorne Services Limited
4th Floor ONE
The Quadrangle
Imperial Square
Cheltenham
Gloucestershire
GL50 1YX
- -------------------------------------------------------------------------
Total shares taken TWO
- -------------------------------------------------------------------------
Dated the day of
Witness to the above Signatures:- Gerald Ireland
4th Floor
The Quadrangle
Imperial Square
Cheltenham
Gloucestershire
GL50 1YX
Chartered Secretary
<PAGE>
7
THE COMPANIES ACTS 1985 TO 1989
PRIVATE COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION OF
GLOBAL CROSSING MARKETING (UK) LIMITED
As amended by Special Resolution passed on 8th May 1998
PRELIMINARY
1. (a) The Regulations contained in Table A in the Schedule to the
Companies (Tables A to F) Regulations 1985 (SI 1985 No 805) as amended
by the Companies (Tables A to F) (Amendment) Regulations 1985 (SI 1985
No 1052) (such Table being hereinafter called "Table A") shall apply
to the Company save in so far as they are excluded or varied hereby
and such Regulations (save as so excluded or varied) and the Articles
hereinafter contained shall be the regulations of the Company.
(b) In these Articles the expression "the Act" means the Companies Act
1985, but so that any reference in these Articles to any provision of
the Act shall be deemed to include a reference to any statutory
modification or re-enactment of that provision for the time being in
force.
ALLOTMENT OF SHARES
2. (a) Shares which are comprised in the authorised share capital with
which the Company is incorporated shall be under the control of the
Directors who may (subject to Section 80 of the Act and to paragraph
(d) below) allot, grant options over or otherwise dispose of the same,
to such persons, on such terms and in such manner as they think fit.
(b) All shares which are not comprised in the authorised share capital
with which the Company is incorporated and which the Directors propose
to issue shall first be offered to the Members in proportion as nearly
as may be to the number the existing shares held by them respectively
unless the Company in General Meeting shall by Special Resolution
otherwise direct. The offer shall be made by notice specifying the
number of shares offered, and limiting a period (not being less than
fourteen days) within which the offer, if not accepted, will be deemed
to be declined. After the expiration of that period, those shares so
deemed to be declined shall be offered in the proportion aforesaid to
the persons who have, within the said period, accepted all the shares
offered to them; such further offer shall be made in like terms in the
<PAGE>
8
same manner and limited by a like period as the original offer. Any
shares not accepted pursuant to such offer or further offer as
aforesaid or not capable of being offered as aforesaid except by way
of fractions and any shares released from the provisions of this
Article by any such Special Resolution as aforesaid shall be under the
control of the Directors, who may allot, grant options over or
otherwise dispose of the same to such persons, on such terms, and in
such manner as they think fit, provided that, in the case of shares
not accepted as aforesaid, such shares shall not be disposed of on
terms which are more favourable to the subscribers therefor than the
terms on which they were offered to the Members. The foregoing
provisions of this paragraph (b) shall have effect subject to Section
80 of the Act.
(c) In accordance with Section 91(1) of the Act Sections 89(1) and 90(1)
to (6) (inclusive) of the Act shall not apply to the Company.
(d) The Directors are generally and unconditionally authorised for the
purposes of Section 80 of the Act, to exercise any power of the
Company to allot and grant rights to subscribe for or convert
securities into shares of the Company up to the amount of the
authorised share capital with which the Company is incorporated at any
time or times during the period of five years from the date of
incorporation and the Directors may, after that period, allot any
shares or grant any such rights under this authority in pursuance of
an offer or agreement so to do made by the Company within that period.
The authority hereby given may at any time (subject to the said
Section 80) be renewed, revoked or varied by Ordinary Resolution of
the Company in General Meeting.
SHARES
3. The lien conferred by Clause 8 in Table A shall attach also to fully paid-
up shares, and the Company shall also have a first and paramount lien on
all shares, whether fully paid or not, standing registered in the name of
any person indebted or under liability to the Company, whether he shall be
the sole registered holder thereof or shall be one of two or more joint
holders, for all moneys presently payable by him or his estate to the
Company. Clause 8 in Table A shall be modified accordingly.
4. The liability of any Member in default in respect of a call shall be
increased by the addition at the end of the first sentence of Clause 18 in
Table A of the words "and all expenses that may have been incurred by the
Company by reason of such non-payment".
GENERAL MEETINGS AND RESOLUTIONS
5. (a) Every notice convening a General Meeting shall comply with the
provisions of Section 372(3) of the Act as to giving information to
Members in regard to their right to appoint proxies; and notices of
and other communications relating
<PAGE>
9
to any General Meeting which any Member is entitled to receive shall
be sent to the Directors and to the Auditors for the time being of the
Company.
(b) No business shall be transacted at any General Meeting unless a quorum
is present. Subject to paragraph (c) below two persons entitled to
vote upon the business to be transacted, each being a Member or a
proxy for a Member or a duly authorised representative of a
corporation, shall be a quorum.
(c) If and for so long as the Company has only one Member, that Member
present in person or by proxy or if that Member is a corporation by a
duly authorised representative shall be a quorum.
(d) If a quorum is not present within half an hour from the time appointed
for a General Meeting the General Meeting shall stand adjourned to the
same day in the next week at the same time and place or to such other
day and at such other time and place as the Directors may determine;
and if at the adjourned General Meeting a quorum is not present within
half an hour from the time appointed therefor such adjourned General
Meeting shall be dissolved.
(e) Clauses 40 and 41 in Table A shall not apply to the Company.
6. (a) If and for so long as the Company has only one Member and that
Member takes any decision which is required to be taken in General
Meeting or by means of a written resolution, that decision shall be as
valid and effectual as if agreed by the Company in General Meeting
save that this paragraph shall not apply to resolutions passed
pursuant to sections 303 and 391 of the Act.
(b) Any decision taken by a sole Member pursuant to paragraph (a) above
shall be recorded in writing and delivered by that Member to the
Company for entry in the Company's Minute Book.
APPOINTMENT OF DIRECTORS
7. (a) Clause 64 in Table A shall not apply to the Company.
(b) The maximum number and minimum number respectively of the Directors
may be determined from time to time by Ordinary Resolution in General
Meeting of the Company. Subject to and in default of any such
determination there shall be no maximum number of Directors and the
minimum number of Directors shall be one. Whensoever the minimum
number of Directors shall be one, a sole Director shall have authority
to exercise all the powers and discretions by Table A and by these
Articles expressed to be vested in the Directors generally, and Clause
89 in Table A shall be modified accordingly.
(c) The Directors shall not be required to retire by rotation and Clauses
73 to 80 (inclusive) in Table A shall not apply to the Company.
<PAGE>
10
(d) No person shall be appointed a Director at any General Meeting unless
either:-
(i) he is recommended by the Directors; or
(ii) not less than fourteen nor more than thirty-five clear days
before the date appointed for the General Meeting, notice
signed by a Member qualified to vote at the General Meeting
has been given to the Company of the intention to propose
that person for appointment, together with notice signed by
that person of his willingness to be appointed.
(e) Subject to paragraph (d) above, the Company may by Ordinary Resolution
in General Meeting appoint any person who is willing to act to be a
Director, either to fill a vacancy or as an additional Director.
(f) The Directors may appoint a person who is willing to act to be a
Director, either to fill a vacancy or as an additional Director,
provided that the appointment does not cause the number of Directors
to exceed any number determined in accordance with paragraph (b) above
as the maximum number of Directors and for the time being in force.
(g) In any case where as the result of the death of a sole Member of the
Company the Company has no Members and no Directors the personal
representatives of such deceased member shall have the right by notice
in writing to appoint a person to be a Director of the Company and
such appointment shall be as effective as if made by the Company in
General Meeting pursuant to paragraph (e) of this Article.
BORROWING POWERS
8. The Directors may exercise all the powers of the Company to borrow money
without limit as to amount and upon such terms and in such manner as they
think fit, and subject (in the case of any security convertible into
shares) to Section 80 of the Act to grant any mortgage, charge or standard
security over its undertaking, property and uncalled capital, or any part
thereof, and to issue debentures, debenture stock, and other securities
whether outright or as security for any debt, liability or obligation of
the Company or of any third party.
ALTERNATE DIRECTORS
9. (a) An alternate Director shall not be entitled as such to receive
any remuneration from the Company, save that he may be paid by the
Company such part (if any) of the remuneration otherwise payable to
his appointor as such appointor may by notice in writing to the
Company from time to time direct, and the first sentence of Clause 66
in Table A shall be modified accordingly.
<PAGE>
11
(b) A Director, or any such other person as is mentioned in Clause 65 in
Table A, may act as an alternate Director to represent more than one
Director, and an alternate Director shall be entitled at any meeting
of the Directors or of any committee of the Directors to one vote for
every Director whom he represents in addition to his own vote (if any)
as a Director, but he shall count as only one for the purpose of
determining whether a quorum is present.
GRATUITIES AND PENSIONS
10. (a) The Directors may exercise the powers of the Company conferred by
Clause 3(ii)(s) of the Memorandum of Association of the Company and
shall be entitled to retain any benefits received by them or any of
them by reason of the exercise of any such powers.
(b) Clause 87 in Table A shall not apply to the Company.
PROCEEDINGS OF DIRECTORS
11. (a) A Director may vote, at any meeting of the Directors or of any
committee of the Directors, on any resolution, notwithstanding that it
in any way concerns or relates to a matter in which he has, directly
or indirectly, any kind of interest whatsoever, and if he shall vote
on any such resolution as aforesaid his vote shall be counted; and in
relation to any such resolution as aforesaid he shall (whether or not
he shall vote on the same) be taken into account in calculating the
quorum present at the meeting.
(b) Clauses 94 to 97 (inclusive) in Table A shall not apply to the
Company.
THE SEAL
12. (a) If the Company has a seal it shall only be used with the authority of
the Directors or of a committee of Directors. The Directors may
determine who shall sign any instrument to which the seal is affixed
and unless otherwise so determined it shall be signed by a Director
and by the Secretary or second Director. The obligation under Clause
6 of Table A relating to the sealing of share certificates shall apply
only if the Company has a seal. Clause 101 of Table A shall not apply
to the Company.
(b) The Company may exercise the powers conferred by Section 39 of the Act
with regard to having an official seal for use abroad, and such powers
shall be vested in the Directors.
<PAGE>
12
INDEMNITY
13. (a) Every Director or other officer or Auditor of the Company shall be
indemnified out of the assets of the Company against all losses or
liabilities which he may sustain or incur in or about the execution of
the duties of his office or otherwise in relation thereto, including
any liability incurred by him in defending any proceedings, whether
civil or criminal, or in connection with any application under Section
144 or Section 727 of the Act in which relief is granted to him by the
Court, and no Director or other officer shall be liable for any loss,
damage or misfortune which may happen to or be incurred by the Company
in the execution of the duties of his office or in relation thereto.
But this Article shall only have effect in so far as its provisions
are not avoided by Section 310 of the Act.
(b) The Directors shall have power to purchase and maintain for any
Director, officer or Auditor of the Company insurance against any such
liability as is referred to in Section 310(1) of the Act.
(c) Clause 118 in Table A shall not apply to the Company.
TRANSFER OF SHARES
14. The Directors may, in their absolute discretion and without assigning any
reason therefor, decline to register the transfer of a share, whether or
not it is a fully paid share, and the first sentence of Clause 24 in Table
A shall not apply to the Company.
NAMES AND ADDRESSES OF SUBSCRIBERS
1. Stoorne Incorporations Limited
4th Floor
The Quadrangle
Imperial Square
Cheltenham
Gloucestershire GL50 1YX
2. Stoorne Services Limited
4th Floor
The Quadrangle
Imperial Square
Cheltenham
Gloucestershire GL50 1YX
<PAGE>
13
Dated this day of
Witness to the above signatures, Gerald Ireland
4th Floor
The Quadrangle
Imperial Square
Cheltenham
Gloucestershire
GL50 1YX
Chartered Secretary
<PAGE>
EXHIBIT 3.15
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "GT INTERCONNECT SERVICE U.S. CORP.", FILED IN THIS OFFICE ON
THE TWENTY-FIRST DAY OF OCTOBER, A.D. 1997, AT 2:15 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING.
[SEAL] /s/ Edward J. Freel
-----------------------------------------
Edward J. Freel, Secretary of State
2810748 8100 AUTHENTICATION: 8715392
981355821 DATE:10-11-97
<PAGE>
CERTIFICATE OF INCORPORATION
OF
GT INTERCONNECT SERVICES U.S. CORP.
-----------------------------------
The undesigned, in order to form a corporation for the purpose
hereinafter stated, under and pursuant to the provisions of the Delaware General
Corporation Law, hereby certifies that:
FIRST: The name of the corporation is GT INTERCONNECT SERVICES U.S.
CORP.
SECOND: The registered office and registered agent of the Corporation
is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH: The total number of shares of stock that the Corporation is
authorized to issue is one thousand (1000) shares of Common Stock, par value of
$.01 each.
FIFTH: The name and address of the incorporator is Tara Wortman, 425
Lexington Avenue, New York City, New York 10017-3954.
SIXTH: The Board of Directors of the Corporation, acting by majority
vote, may alter, amend or repeal the By-Laws of the Corporation.
SEVENTH: Except as otherwise provided by the Delaware General
Corporation Law as the same exists or may hereafter be amended, no director of
the Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Any repeal or modification of this Article SEVENTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Incorporation of October 21, 1997.
/s/ Tara Wortman
-------------------------------------
Tara Wortman
Incorporator
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "GT INTERCONNECT SERVICE U.S. CORP.", CHANGING ITS NAME FROM "GT INTERCONNECT
SERVICES U.S. CORP." TO "GLOBAL CROSSING SALES USA INC.", FILED IN THIS OFFICE
ON THE FOURTH DAY OF FEBRUARY, A.D. 1998, AT 12:30 O'CLOCK P.M.
[SEAL] /s/ Edward J. Freel
-----------------------------------------
Edward J. Freel, Secretary of State
2810748 8100 AUTHENTICATION: 8902981
981044744 DATE: 02-04-98
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
BEFORE PAYMENT OF CAPITAL
OF
GT INTERCONNECT SERVICES U.S. CORP.
PURSUANT TO SECTION 241 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
GT INTERCONNECT SERVICES U.S. CORP., a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"), hereby
certifies as follows:
FIRST: Article FIRST of the Certificate of
Incorporation be and it hereby is amended to read as follows:
"FIRST: The name of the Corporation is
GLOBAL CROSSING SALES USA INC."
SECOND: The Corporation has not received any payment for any of its
stock.
THIRD: The aforesaid amendment was duly adopted in accordance with
the provisions of Section 241 of the General Corporation Law of the State of
Delaware.
<PAGE>
2
IN WITNESS WHEREOF, GT INTERCONNECT SERVICES U.S. CORP. has caused
this Certificate to be signed by its Vice President and Treasurer, Ian McLean,
this 29th day of January 1998.
GT INTERCONNECT SERVICES U.S. CORP.
/s/ Ian McLean
-----------------------------------------------
Ian McLean
Vice President and Treasurer
Attest:
/s/ K. Eugene Shutler
- --------------------------------
K. Eugene Shutler
President and Secretary
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "GLOBAL CROSSING SALES USA INC.", CHANGING ITS NAME FROM "GLOBAL CROSSING
SALES USA INC." TO "GLOBAL CROSSING MARKETING USA INC." FILED IN THIS OFFICE ON
THE THIRD DAY OF MARCH, A.D. 1998, AT 11:30 O'CLOCK A.M.
[SEAL] /s/ Edward J. Freel
-----------------------------------------
Edward J. Freel, Secretary of State
2810748 8100 AUTHENTICATION: 8952076
981081312 DATE:03-04-98
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
BEFORE PAYMENT OF CAPITAL
OF
GLOBAL CROSSING SALES USA INC.
PURSUANT TO SECTION 241 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
GLOBAL CROSSING SALES USA INC., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
FIRST: Article FIRST of the Certificate of Incorporation be and it
hereby is amended to read as follows:
"FIRST: The name of the Corporation is
GLOBAL CROSSING MARKETING USA INC."
SECOND: The Board of Directors of the Corporation, through an
unanimous written consent, adopted a resolution proposing and declaring
advisable the foregoing amendment, and said amendment has been adopted by the
sole stockholder of the Corporation in accordance with the provisions of
Sections 242 and 228 of the General Corporation Law of the State of Delaware.
<PAGE>
2
IN WITNESS WHEREOF, GLOBAL CROSSING SALES USA INC. has caused this
Certificate to be signed by its Vice President and Treasurer, Ian McLean, this
2nd day of March 1998.
GLOBAL CROSSING SALES USA INC.
/s/ Ian McLean
-----------------------------------------------
Ian McLean
Vice President and Treasurer
Attest:
/s/ K. Eugene Shutler
- -----------------------------------
K. Eugene Shutler
President and Secretary
<PAGE>
EXHIBIT 3.16
GT INTERCONNECT SERVICES U.S. CORP.
(HEREINAFTER CALLED THE "CORPORATION")
BY-LAWS
ARTICLE I
MEETING OF STOCKHOLDERS
-----------------------
Section 1. Place of Meeting and Notice. Meetings of the stockholders
---------------------------
of the Corporation shall be held at such place either within or without the
State of Delaware as the Board of Directors may determine.
Section 2. Annual and Special Meetings. Annual meetings of
---------------------------
stockholders shall be held, at a date, time and place fixed by the Board of
Directors and stated in the notice of meeting, to elect a Board of Directors and
to transact such other business as may properly come before the meeting.
Special meetings of the stockholders may be called by the President for any
purpose and shall be called by the President or Secretary if directed by the
Board of Directors or requested in writing by the holders of not less than 25%
of the capital stock of the Corporation. Each such stockholder request shall
state the purpose of the proposed meeting.
Section 3. Notice. Except as otherwise provided by law, at least 10
------
and not more than 60 days before each meeting of stockholders, written notice of
the time, date nd place of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be given to each
stockholder.
Section 4. Quorum. At any meeting of stockholders, the holders of
------
record, present in person or by proxy, of a majority of the Corporation's issued
and outstanding capital stock shall constitute a quorum for the transaction of
business, except as otherwise provided by law. In the absence of a quorum, any
officer entitled to preside at or to act as secretary of the meeting shall have
power to adjourn the meeting from time to time until a quorum is present.
Section 5. Voting. Except as otherwise provided by law, all matters
------
submitted to a meeting of stockholders shall be decided by vote of the holders
of record, present in person or by proxy, of a majority of the Corporation's
issued and outstanding capital stock.
<PAGE>
2
ARTICLE II
DIRECTORS
---------
Section 1. Number, Election and Removal of Directors. The number of
-----------------------------------------
Directors that shall constitute the Board of Directors shall not be less than
one or more than fifteen. The first Board of Directors shall consist of two
Directors. Thereafter, within the limits specified above, the number of
Directors shall be determined by the Board of Directors or the stockholders.
The Directors shall be elected by stockholders at their annual meeting.
Vacancies and newly created directorships resulting from any increase in the
number of Directors may be filled by a majority of the Directors then in office,
although less thana quorum, or by the sole remaining Director or by the
stockholders. A Director may be removed with or without cause by the
stockholders.
Section 2. Meetings. Regular meetings of the Board of Directors
--------
shall be held at such times and places as may from time to time be fixed by the
Board of Directors or as may be specified in a notice of meeting.
Section 3. Quorum. One-third of the total number of Directors shall
------
constitute a quorum for the transaction of business. If a quorum is not present
at any meeting of the Board of Directors, the Directors present may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until such a quorum is present. Except as otherwise provided by law,
the Certificate of Incorporation of the Corporation, these By-Laws or any
contract or agreement to which the Corporation is a party, the act of a majority
of the Directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors.
Section 4. Committees. The Board of Directors may, by resolution
----------
adopted by a majority of the whole Board, designate one or more committees,
including, without limitation, an Executive Committee, to have and exercise such
power and authority as the Board of Directors shall specify. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another Director to act at the
absent or disqualified member.
Section 5. Duties and Powers. The business of the Corporation shall
-----------------
be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-laws directed or required to be exercised or done by the stockholders.
Section 6. Actions of the Board. Unless otherwise provided by the
--------------------
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the member of the Board of Directors or
committee, as the case may be,
<PAGE>
3
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or Directors or committee.
ARTICLE III
OFFICERS
--------
The officers of the Corporation shall consist of a Present, a Vice
President, a Secretary, a Treasurer and such other additional officers with such
titles as the Board of Directors shall determine, all of which shall be chosen
by and shall serve at the pleasure of the Board of Directors. Such officers
shall have the usual powers and shall perform all the usual duties incident to
their respective offices. All officers shall be subject to the supervision and
direction of the Board of Directors. The authority, duties or responsibilities
of any officer of the Corporation may be suspended by the President with or
without cause. Any officer elected or appointed by the Board of Directors may
be removed by the Board of Directors with or without cause.
ARTICLE IV
INDEMNIFICATION
---------------
To the fullest extent permitted by the Delaware General Corporation
Law, the corporation shall indemnify any current or former Director or officer
of the Corporation and may, at the discretion of the Board of Directors,
indemnify any current or former employee or agent of the Corporation against all
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any threatened, pending or
completed action, suit or proceeding brought by or in the right of the
Corporation or otherwise, to which he was or is a party by reason of his current
or former position with the Corporation or by reason of the fact that he is or
was serving, at the request of the Corporation, as a director, officer, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
Expenses incurred by a person who is or was a director or officer of
the Corporation in appearing at, participating in or defending any such action,
suit or proceeding shall be paid by the Corporation at reasonable intervals in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized by this Article. If a claim under
this Article is not paid in full by the Corporation within ninety days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be paid
also the expense of prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for expense incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if
<PAGE>
4
any is required, has been tendered to the Corporation) that the claimant has not
met the standards of conduct which make it permissible under the Delaware
General Corporation Law or other applicable law for the corporation to indemnify
the claimant for the amount claimed, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the Corporation (including
its board of directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he has
met the applicable standard of conduct set forth in the Delaware General
Corporation Law or other applicable law, nor an actual determination by the
Corporation (including its board of directors, independent legal counsel, or its
stockholders) that the claimant has not met the applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
ARTICLE V
GENERAL PROVISIONS
------------------
Section 1. Notices. Whenever any statute, the Certificate of
-------
Incorporation or these By-Laws require notice to be given to any Director or
stockholder, such notice may be given in writing by mail, addressed to such
Director or stockholder at his address as it appears in the records of the
Corporation, with postage thereon prepaid. Such notice shall be deemed to have
been given when it is deposited in the United States mail. Notice to Directors
may also be given personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by
-----------------
law, the Certificate of Incorporation or these By-laws, to be given to any
director, member of committee or stockholder, a waiver thereof in writing,
signed by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objection, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be
-----------
fixed by the Board of Directors.
<PAGE>
5
ARTICLE VI
AMENDMENTS
----------
Section 1. These By-laws may be altered, amended or repealed, in
whole or in part, or new By-laws may be adopted by the majority vote of the
entire Board of Directors.
Section 2. Entire Board of Directors. As used in this Article VI and
-------------------------
in these By-laws generally, the term "entire Board of Directors" means the total
number of the directors which the Corporation would have if there were no
vacancies.
<PAGE>
EXHIBIT 3.17
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
------------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
INCORPORATION OF "GLOBAL CROSSING DEVELOPMENT CO.", FILED IN THIS OFFICE ON THE
FOURTH DAY OF FEBRUARY, A.D. 1998, AT 12:30 O'CLOCK P.M.
[SEAL] /s/ Edward J. Freel
---------------------------------
Edward J. Freel, Secretary of State
2854958 8100 AUTHENTICATION: 8902353
981044725 DATE: 02-04-98
<PAGE>
CERTIFICATE OF INCORPORATION
OF
GLOBAL CROSSING DEVELOPMENT CO.
-------------------------------
The undersigned, in order to form a corporation for the purpose
hereinafter stated, under and pursuant to the provisions of the Delaware General
Corporation Law, hereby certifies that:
FIRST: The name of the corporation is GLOBAL CROSSING DEVELOPMENT
CO.
SECOND: The registered office and registered agent of the Corporation
is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH: The total number of shares of stock that the Corporation is
authorized to issue is one thousand (1000) shares of Common Stock, par value of
$.01 each.
FIFTH: The name and address of the incorporator is Tara Wortman, 425
Lexington Avenue, New York City, New York 10017-3954.
SIXTH: The Board of Directors of the Corporation, acting by majority
vote, may alter, amend or repeal the By-Laws of the Corporation.
SEVENTH: Except as otherwise provided by the Delaware General
Corporation Law as the same exists or may hereafter be amended, no director of
the Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
Any repeal or modification of this Article SEVENTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Incorporation on February 3, 1998.
/s/ Tara Wortman
-------------------------------------
Tara Wortman
Incorporator
<PAGE>
* * * * *
STATEMENT
OF
SOLE INCORPORATOR
OF
GLOBAL CROSSING DEVELOPMENT CO.
* * * * *
The certificate of incorporation of this corporation have been filed
in the office of the Secretary of State, the undersigned, being the sole
incorporator named in said certificate, does hereby state that the following
actions were taken on this day for the purpose of organizing this corporation:
1. By-laws for the regulation of the affairs of the corporation were
adopted by the undersigned incorporator and were ordered inserted in the minute
book immediately following a copy of the certificate of incorporation and before
this instrument.
2. Each of Gary Winnick, Lodwrick Cook and Abbott Brown has been
nominated and elected as a director to hold office for the ensuing year and
until the first annual meeting for the election of directors or until successors
to each of them is elected.
3. The incorporator shall have no further rights, duties or powers.
Dated: February 3, 1998
/s/ Tara Wortman
-------------------------------------
Tara Wortman
Sole Incorporator
<PAGE>
EXHIBIT 3.18
GLOBAL CROSSING DEVELOPMENT CO.
(HEREINAFTER CALLED THE "CORPORATION")
BY-LAWS
ARTICLE I
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. Place of Meeting and Notice. Meetings of the stockholders
---------------------------
of the Corporation shall be held at such place either within or without the
State of Delaware as the Board of Directors may determine.
Section 2. Annual and Special Meetings. Annual meetings of
---------------------------
stockholders shall be held, at a date, time and place fixed by the Board of
Directors and stated in the notice of meeting, to elect a Board of Directors and
to transact such other business as may properly come before the meeting.
Special meetings of the stockholders may be called by the President for any
purpose and shall be called by the President or Secretary if directed by the
Board of Directors or requested in writing by the holders of not less than 25%
of the capital stock of the Corporation. Each such stockholder request shall
state the purpose of the proposed meeting.
Section 3. Notice. Except as otherwise provided by law, at least 10
------
and not more than 60 days before each meeting of stockholders, written notice of
the time, date nd place of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be given to each
stockholder.
Section 4. Quorum. At any meeting of stockholders, the holders of
------
record, present in person or by proxy, of a majority of the Corporation's issued
and outstanding capital stock shall constitute a quorum for the transaction of
business, except as otherwise provided by law. In the absence of a quorum, any
officer entitled to preside at or to act as secretary of the meeting shall have
power to adjourn the meeting from time to time until a quorum is present.
Section 5. Voting. Except as otherwise provided by law, all matters
------
submitted to a meeting of stockholders shall be decided by vote of the holders
of record, present in person or by proxy, of a majority of the Corporation's
issued and outstanding capital stock.
<PAGE>
2
ARTICLE II
DIRECTORS
---------
Section 1. Number, Election and Removal of Directors. The number of
-----------------------------------------
Directors that shall constitute the Board of Directors shall not be less than
one or more than fifteen. The first Board of Directors shall consist of three
Directors. Thereafter, within the limits specified above, the number of
Directors shall be determined by the Board of Directors or the stockholders.
The Directors shall be elected by stockholders at their annual meeting.
Vacancies and newly created directorships resulting from any increase in the
number of Directors may be filled by a majority of the Directors then in office,
although less than a quorum, or by the sole remaining Director or by the
stockholders. A Director may be removed with or without cause by the
stockholders.
Section 2. Meetings. Regular meetings of the Board of Directors
--------
shall be held at such times and places as may from time to time be fixed by the
Board of Directors or as may be specified in a notice of meeting.
Section 3. Quorum. One-third of the total number of Directors shall
------
constitute a quorum for the transaction of business. If a quorum is not present
at any meeting of the Board of Directors, the Directors present may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until such a quorum is present. Except as otherwise provided by law,
the Certificate of Incorporation of the Corporation, these By-Laws or any
contract or agreement to which the Corporation is a party, the act of a majority
of the Directors present at any meeting at which there is a quorum shall be the
act of the Board of Directors.
Section 4. Committees. The Board of Directors may, by resolution
----------
adopted by a majority of the whole Board, designate one or more committees,
including, without limitation, an Executive Committee, to have and exercise such
power and authority as the Board of Directors shall specify. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another Director to act at the
absent or disqualified member.
Section 5. Duties and Powers. The business of the Corporation shall
-----------------
be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-laws directed or required to be exercised or done by the stockholders.
Section 6. Actions of Board. Unless otherwise provided by the
----------------
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all the members of the Board of Directors or
committee, as the case may be, consent thereto in
<PAGE>
3
writing, and the writing or writings are filed with the minutes of proceedings
of the Board or Directors or committee.
ARTICLE III
OFFICERS
--------
The officers of the Corporation shall consist of a President, a Vice
President, a Secretary, a Chief Financial Officer and such other additional
officers with such titles as the Board of Directors shall determine, all of
which shall be chosen by and shall serve at the pleasure of the Board of
Directors. Such officers shall have the usual powers and shall perform all the
usual duties incident to their respective offices. All officers shall be
subject to the supervision and direction of the Board of Directors. The
authority, duties or responsibilities of any officer of the Corporation may be
suspended by the President with or without cause. Any officer elected or
appointed by the Board of Directors may be removed by the Board of Directors
with or without cause.
ARTICLE IV
INDEMNIFICATION
---------------
To the fullest extent permitted by the Delaware General Corporation
Law, the corporation shall indemnify any current or former Director or officer
of the Corporation and may, at the discretion of the Board of Directors,
indemnify any current or former employee or agent of the Corporation against all
expenses, judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any threatened, pending or
completed action, suit or proceeding brought by or in the right of the
Corporation or otherwise, to which he was or is a party by reason of his current
or former position with the Corporation or by reason of the fact that he is or
was serving, at the request of the Corporation, as a director, officer, partner,
trustee, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
Expenses incurred by a person who is or was a director or officer of
the Corporation in appearing at, participating in or defending any such action,
suit or proceeding shall be paid by the Corporation at reasonable intervals in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized by this Article. If a claim under
this Article is not paid in full by the Corporation within ninety days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be paid
also the expense of prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if
<PAGE>
4
any is required, has been tendered to the Corporation) that the claimant has not
met the standards of conduct which make it permissible under the Delaware
General Corporation Law or other applicable law for the corporation to indemnify
the claimant for the amount claimed, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the Corporation (including
its board of directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he has
met the applicable standard of conduct set forth in the Delaware General
Corporation Law or other applicable law, nor an actual determination by the
Corporation (including its board of directors, independent legal counsel, or its
stockholders) that the claimant has not met the applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
ARTICLE V
GENERAL PROVISIONS
------------------
Section 1. Notices. Whenever any statute, the Certificate of
-------
Incorporation or these By-Laws require notice to be given to any Director or
stockholder, such notice may be given in writing by mail, addressed to such
Director or stockholder at his address as it appears in the records of the
Corporation, with postage thereon prepaid. Such notice shall be deemed to have
been given when it is deposited in the United States mail. Notice to Directors
may also be given personally or by telegram, telex or cable.
Section 2. Waivers of Notice. Whenever any notice is required by
-----------------
law, the Certificate of Incorporation or these By-laws, to be given to any
director, member of a committee or stockholder, a waiver thereof in writing,
signed by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of a person at a
meting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objection, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
Section 3. Fiscal Year. The fiscal year of the Corporation shall
-----------
be fixed by the Board of Directors.
<PAGE>
5
ARTICLE VI
AMENDMENTS
----------
Section 1. These By-laws may be altered, amended or repealed, in
whole or in part, or new By-laws may be adopted by the majority vote of the
entire Board of Directors.
Section 2. Entire Board of Directors. As used in this Article VI and
-------------------------
in these By-laws generally, the term "entire Board of Directors" means the total
number of the directors which the Corporation would have if there were no
vacancies.
<PAGE>
EXHIBIT 3.19
-1-
THE COMPANIES LAW (1995 REVISION)
Company Limited by Shares
AMENDED AND RESTATED
MEMORANDUM OF ASSOCIATION
OF
GLOBAL CROSSING LTD., LDC
1. The name of the Company is GLOBAL CROSSING LTD., LDC.
2. The Registered Office of the Company will be situate at the offices of W.S.
WALKER & COMPANY, CALEDONIAN HOUSE, MARY STREET, P.O. BOX 265G, GEORGE
TOWN, GRAND CAYMAN, CAYMAN ISLANDS or at such other location as the
Directors may from time to time determine.
3. The objects for which the Company is established are unrestricted and the
Company shall have full power and authority to carry out any object not
prohibited by any law as provided by Section 6(4) of The Companies Law
(1995 Revision).
4. The Company shall have and be capable of exercising all the functions of a
natural person of full capacity irrespective of any question of corporate
benefit as provided by Section 26(2) of The Companies Law (1995 Revision).
5. Nothing in the preceding sections shall be deemed to permit the Company to
carry on the business of a Bank or Trust Company without being licensed in
that behalf under the provisions of the Banks and Trust Companies Law (1995
Revision) or to carry on Insurance Business from within the Cayman Islands
or the business of an Insurance Manager, Agent, Sub-agent or Broker without
being licensed in that behalf under the provisions of the Insurance Law
(1995 Revision) or to carry on the business of Company Management without
being licensed in that behalf under the provisions of the Companies
Management Law (1996 Revision).
6. The Company will not trade in the Cayman Islands with any person, firm or
corporation except in furtherance of the business of the Company carried on
outside the Cayman Islands; Provided that nothing in this section shall be
construed as to prevent the Company effecting and concluding contracts in
the Cayman Islands, and exercising in the Cayman Islands all of its powers
necessary for the carrying on of its business outside the Cayman Islands.
7. The liability of the members is limited to the amount, if any, unpaid on
the shares respectively held by them.
<PAGE>
-2-
8. The capital of the Company is US$50,000.00 divided into 1,000,000,000 CLASS
A SHARES of a nominal or par value of US$0.000001 each, 1,000,000,000 CLASS
B SHARES of a nominal or par value of US$0.000001 each, 1,000,000,000
CLASS C SHARES of a nominal or par value of US$0.000001 each, 3,000,000,000
CLASS D SHARES of a nominal or par value of US$0.000001 each, 1,000,000,000
CLASS E SHARES of a nominal or par value of US$0.000001 each and
43,000,000,000 UNDESIGNATED SHARES of a nominal or par value of US$0.000001
each provided always that subject to the provisions of The Companies Law
(1995 Revision) and the Articles of Association the Company shall have
power to redeem or purchase any of its shares and to sub-divide or
consolidate the said shares or any of them and to issue all or any part of
its capital whether original, redeemed, increased or reduced with or
without any preference, priority or special privilege or subject to any
postponement of rights or to any conditions or restrictions whatsoever and
so that unless the conditions of issue shall otherwise expressly provide
every issue of shares whether stated to be Ordinary, Preference or
otherwise shall be subject to the powers on the part of the Company
hereinbefore provided.
9. The Company may exercise the power contained in Section 223 of The
Companies Law (1995 Revision) to deregister in the Cayman Islands and be
registered by way of continuation in some other jurisdiction.
10. The duration of the Company is limited to a period of thirty years from the
date of its incorporation.
<PAGE>
EXHIBIT 3.20
AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
GLOBAL CROSSING LTD., LDC
January [ ], 1998
<PAGE>
THE COMPANIES LAW
COMPANY LIMITED BY SHARES
-------------------------
AMENDED AND RESTATED
ARTICLES OF ASSOCIATION
OF
GLOBAL CROSSING LTD., LDC
INTERPRETATION
--------------
1. (a) The regulations contained or incorporated in Table "A" in the First
Schedule of the Companies Law (1995 Revision) shall not apply to this
Company and the following regulations shall comprise the Articles of
Association of the Company.
(b) In these Articles the words standing in the first column of the table
next hereinafter contained shall bear the meanings set opposite to
them respectively in the second column hereof, if not inconsistent
with the subject or context.
Words Meanings
----- --------
Administration Agreement The agreement dated March 25, 1997 or any
subsequent agreement in substitution therefor,
between the Company and the Administrator setting
forth the terms and conditions under which the
Administrator will be engaged by the Company.
Administrator W.S. Walker & Company, or such other independent
Cayman Islands company engaged by the Company to
perform certain administrative functions for and
on behalf of the Company.
Affiliate Shall mean any other person, directly or
indirectly, controlling or controlled by or under
direct or indirect common control with such
person.
Bank Event of Default Shall mean an event of default under the Senior
Credit Facilities or under the Senior Notes (each
as defined in the Purchase Agreement) or under
the Purchase Agreement that would permit the
lenders under such agreement or instrument to
accelerate the maturity of amounts owing
thereunder.
Board of Directors The Board of Directors of the Company.
<PAGE>
Business Day Any day (except Saturday and Sunday) on which
banks in the Cayman Islands, Bermuda and New
York, New York are open for business.
Cash Payment The initial payment made to the Company in respect
of Shares.
Class A Member A holder of Class A Shares.
Class B Member A holder of Class B Shares.
Class C Member A holder of Class C Shares.
Class D Member A holder of Class D Shares.
Class E Member A holder of Class E Shares.
Class A Shares The Company's Class A Common Shares, par value of
U.S.$0.000001 per share.
Class B Shares The Company's Class B Common Shares, par value of
U.S.$0.000001 per share.
Class C Shares The Company's Class C Common Shares, par value of
U.S.$0.000001 per share.
Class D Shares The Company's Class D Common Shares, par value of
U.S.$0.000001 per share.
Class E Shares The Company's Class E Common Shares, par value of
U.S. $0.000001 per share.
Code The United States Internal Revenue Code of 1986,
as amended.
Company Global Crossing Ltd., LDC.
Companies Law The Companies Law (1995 Revision) of the Cayman
Islands and any statutory amendment or modification
thereof. Any reference to a provision of the
Companies Law is to that provision as modified by
law for the time being in force.
Distribution All payments or distributions to holders of Shares.
Dollars The lawful currency of the United States.
Fiscal Quarters Shall have the meaning set forth in Article 20
hereof.
Fiscal Year Shall have the meaning set forth in Article 20
hereof.
2
<PAGE>
Investment Any investment authorized by the Memorandum of
Association of the Company.
in writing Written, printed, lithographed, photographed,
telefaxed or telexed or represented by any other
substitute for writing or partly one and partly
another.
Manager Initially, PCG, in its capacity as Manager.
Member A person who is registered as the holder of
Shares in the Register for the time being kept by
or on behalf of the Company.
month Calendar month.
"Net Income" or "Net Loss" For any taxable period, the net income or net
loss of the Company for such period, determined
in accordance with section 703(a) of the Code,
including any items that are separately stated
for purposes of section 702(a) of the Code, as
determined in accordance with Federal income tax
accounting principles with the following
adjustments: (i) any income of the Company that
is exempt from Federal income tax (or would be
exempt if the Company were subject to Federal
income taxation) shall be included as income,
(ii) any expenditures of the Company described in
section 705(a)(2)(B) of the Code or treated as
section 705(a)(2)(B) of the Code expenditures
pursuant to Treasury Regulation section 1.704-
1(b)(2)(iv) shall be treated as current expenses,
and (iii) without giving effect to any
adjustments made pursuant to section 734 or 743
of the Code.
Net Proceeds Proceeds derived from the Company's investments,
including all cash proceeds and other property
received by the Company in respect of its
investments, including without limitation, any
dividends, interest or other amounts received on
investments and any proceeds received in
connection with dispositions in whole or in part
of any Investment.
Non-Qualified Person A person or persons holding Shares in breach of
any restriction mentioned in Article 14 hereof.
PCG Pacific Capital Group, Inc., a California
corporation.
Purchase Agreement The Note Purchase Agreement (as defined in the
Stockholders Agreement).
Register The register of members of the Company maintained
in accordance with Section 39 of the Companies
Law as supplemented by these Articles.
3
<PAGE>
Seal The common seal of the Company including any
facsimile thereof.
Shares The Company's Class A Shares, Class B Shares, Class
C Shares, Class D Shares and Class E Shares.
signed Includes a signature or representation of a
signature affixed by mechanical means.
Stockholders Agreement Stockholders Agreement, dated as of March 25, 1997,
among the Company and the Members party thereto, as
amended, supplemented or otherwise modified from
time to time.
Subscription Agreement As defined in the Stockholders Agreement.
Term The term of the Company shall mean thirty years
from the date of organization subject to earlier
termination.
Treasury Regulations The regulations promulgated under the Code by the
United States Treasury Department.
U.S. Person The term "U.S. Person" shall mean (i) a citizen or
resident of the United States, (ii) a corporation,
partnership, or other entity created or organized
in the United States or under the laws of the
United States or of any political subdivision
thereof, (iii) an estate whose income is includible
in gross income for United States Federal income
tax purposes regardless of its source, or (iv) a
trust whose administration is subject to the
primary supervision of a United States court and
which has one or more United States fiduciaries who
have the authority to control all substantial
decisions of the trust.
2. In these Articles, unless there be something in the subject or context
inconsistent with such construction:
(a) Words importing the singular number shall include the plural number
and vice versa.
---- -----
(b) Words importing the masculine gender only shall include the feminine
gender.
(c) Words importing persons only shall include companies or associations
or bodies of persons, whether corporate or not.
(d) The word "may" shall be construed as permissive and the word "shall"
shall be construed as imperative.
(e) References to enactments shall include reference to any modification
or re-enactments thereof for the time being in force.
(f) References to dollars (or $) are references to dollars of the United
States of America.
4
<PAGE>
3. Subject to the two preceding Articles any words defined in the Companies
Law shall, if not inconsistent with the subject or context, bear the same
meaning in these Articles.
PRELIMINARY
-----------
4. The preliminary expenses incurred in forming the Company and in connection
with its initial offer and issue of its Shares shall be paid by the
Company.
5. The business of the Company shall be commenced as soon after the
organization of the Company as practicable.
SITUATION OF REGISTERED OFFICE OF THE COMPANY
---------------------------------------------
6. (a) The Registered Office shall be at such address in the Cayman Islands
as the Manager shall from time to time determine.
(b) The Company in addition to its Registered Office may establish and
maintain such other offices and places of business and agencies in the
Cayman Islands, Bermuda or elsewhere as the Manager may from time to
time determine.
MANAGEMENT
----------
7. The management of the Company shall be vested exclusively with the Manager
in accordance with these Articles and subject to the Stockholders
Agreement; provided, however, that the Manager shall have no authority with
-------- -------
respect to Global Telesystems Holdings Ltd., a Bermuda corporation and a
wholly owned subsidiary of the Company ("GTH"), and the subsidiaries of
GTH. All authority, including, without limitation, the election of
directors, with respect to GTH and its subsidiaries shall be vested
exclusively with the Board of Directors except as provided in the
Stockholders Agreement.
8. Except as provided under the Companies Law and as otherwise explicitly
stipulated in these Articles of Association, Members shall have no part in
the management of the Company and shall have no authority or right in their
capacity as Members to act on behalf of the Company in connection with any
matter. Employees of the Company and the Administrator shall have
authority to act on behalf and in the name of the Company only to the
extent authorized by the Manager or the Administration Agreement or as
expressly authorized by these Articles.
SHARE CAPITAL; RIGHTS
---------------------
9. (a) The authorized share capital of the Company at the date of the
adoption of these Articles is US$ $50,000, divided into 1,000,000,000
Class A Shares of par value $0.000001 per share, 1,000,000,000 Class B
Shares of par value $0.000001 per share, 1,000,000,000 Class C Shares
of par value $0.000001 per share, 3,000,000,000 Class D Shares of par
value $0.000001 per share, 1,000,000,000 Class E shares of par value
$0.000001 per share and 43,000,000,000 undesignated shares of par
value $.000001 per share.
(b) Subject to the Stockholders Agreement, each Class B Share shall be
exchangeable at any time or from time to time, at the option of the
holder thereof, into a Class A Share.
5
<PAGE>
(c) Each Class D Share shall be exchangeable at any time or from time to
time, at the option of the holder thereof, into (i) a Class E Share
upon the payment to the Company by the holder thereof of a cash
payment of US $2.20 per share (less actual cash distributions received
by such time on each Class C Share) or (ii) a fractional share of a
Class E Share, where the numerator of such fraction shall be the
difference between (x) the market value of each Class E Share at the
time of such exchange as determined by resolution of the Directors and
(y) US $2.20 (less actual cash distributions received by such time on
each Class C Share) and where the denominator of such fraction shall
be such market value. If any holder of a Class D Share shall exchange
its Class D Shares into Class E Shares in accordance with clause (ii)
of the preceding sentence then, at the time of any such exchange, the
holder shall receive from the Company, for no additional
consideration, a warrant (exercisable for ten years from the date of
the exchange) to receive additional Class E Shares in an amount equal
to the difference between (x) the number of Class D Shares exchanged
and (y) the number of Class E Shares received, in each case pursuant
to clause (ii) of the preceding sentence. The per share exercise price
in respect of such warrant shall be the per share market value of the
Class E Shares as determined in accordance with the foregoing clause
(ii). If the Company shall make any distribution or dividend on the
Common Stock in securities of another entity, the holder of each Class
D Share shall be entitled at its option to receive in exchange for
such Class D Share a warrant (exercisable for ten years from the date
of the exchange) to purchase voting common stock of such entity at the
equivalent of US $2.20 per share (less actual cash distributions
received by such time on each Class C Share), adjusted to give effect
to the revised capitalization structure of such new entity.
Immediately prior to an initial public offering or a change in control
transaction, each Class E Share shall be exchangeable, at the option
of the holder thereof, into a Class B Share for no consideration other
than the surrender of such Class E Share.
(d) Any share exchangeable pursuant to the terms of this Article into a
Share (including a multiple or fraction thereof) of another class
shall upon satisfaction of all preconditions to such exchange as set
forth above and subject to the Stockholders Agreement, be repurchased
by the Company in such manner as the Manager or the Board of Directors
shall determine and the Company shall issue such Share (including a
multiple or fraction thereof) of such other class as provided for
herein in consideration thereof, and such transaction shall not
constitute a Transfer in terms of the Stockholders Agreement.
ALTERATION OF SHARE CAPITAL
---------------------------
10 The Company may from time to time by ordinary resolution increase the share
capital by such sum, to be divided into shares of such amount as the
resolution shall prescribe.
11 The new Shares shall be subject to the same provisions with reference to
dividend, distribution, lien, transfer, transmission, forfeiture and
otherwise as the Shares in the original share capital.
12 The Company may by ordinary resolution:
(a) consolidate and divide all or any of its share capital into shares of
larger amount than its existing Shares;
(b) sub-divide its existing Shares, or any of them into shares of smaller
amount than is fixed by the Memorandum of Association, subject
nevertheless to the provisions of Section 12 of the Companies Law; and
6
<PAGE>
(c) cancel any shares which, at the date of the passing of the resolution,
have not been taken or agreed to be taken by any person.
13 The Company may by special resolution reduce its share capital and any
capital redemption reserve in any manner authorized by law.
NON-QUALIFIED PERSONS
---------------------
14 The Manager may impose such procedures and restrictions as it considers
necessary or desirable for the purpose of ensuring that no Shares of the
Company are held by any person or persons in circumstances (whether
directly or indirectly affecting such person or persons and whether taken
alone or in conjunction with any other person or persons, connected or not,
or any other circumstance appearing to the Manager to be relevant) which in
the opinion of the Manager might result in the Company incurring any tax
liability, the Company being involved in any litigation, the Company
becoming a reporting person, or otherwise subject to any other requirements
it was not subject to immediately prior to such transaction, under United
States federal or state securities laws or regulations, the Company or any
of its subsidiaries becoming a "controlled foreign corporation" under
section 951 et seq. of the Code, any person becoming a "U.S. shareholder"
-- ---
under section 951 et seq. of the Code, or the Company being registered or
-- ---
regulated as an investment company under the United States Investment
Company Act of 1940, as amended, or suffering any other pecuniary or fiscal
disadvantage or other adverse effect which the Company might not otherwise
incur or suffer.
15 A person who becomes aware that he is holding or owning Shares in breach of
any restriction mentioned in Article 14 above shall promptly notify the
Manager in writing of his status as a Non-Qualified Person.
16 If it comes to the notice of the Manager that any Shares are so held by any
such Non-Qualified Person, the Manager, by written notice, will instruct
the Non-Qualified Person as to the steps to be taken to cure such status in
accordance with the provisions of these Articles, and such Non-Qualified
Person will immediately comply with such instructions.
17 No person shall be recognized by the Company as holding any Share upon any
trust, and the Company shall not be bound by or recognize (even when having
notice thereof) any equitable, contingent, future or partial interest in
any Share, or (save only as by these Articles otherwise provided or as by
law required) any other right in respect of any Share, except an absolute
right thereto in the Register.
18 The Manager shall keep or cause to be kept a Register as required by
Section 39 of the Companies Law.
19 The Manager in each year shall prepare or cause to be prepared an annual
return and declaration setting forth the particulars required by Section
186 of the Companies Law and deliver a copy thereof to the Registrar of
Companies.
FISCAL PERIODS
--------------
7
<PAGE>
20 The "Fiscal Year" of the Company shall end on December 31 of each year.
The "Fiscal Quarters" of the Company shall end on March 31, June 30,
September 30 and December 31 of each Fiscal Year.
PURPOSES OF THE COMPANY
-----------------------
21 Without limiting the objects of the Company as set forth in the Company's
Memorandum of Association, the principal purposes for which the Company is
established are for seeking capital appreciation through investment in the
securities of companies engaged in the development, sales and operation of
telecommunications systems and to engage in all activities and transactions
as the Board of Directors may deem reasonably necessary or advisable or
incidental in connection therewith.
AUTHORITY OF THE MANAGER
------------------------
22 Subject to Articles 7 and 113 and the Stockholders Agreement, the Manager
shall have the power by itself on behalf and in the name of the Company to
carry out any and all of the objectives and purposes of the Company set
forth in the Memorandum of Association, and to perform all acts and enter
into and perform all contracts and other undertakings which it may deem
necessary or advisable or incidental thereto, including, without
limitation, the power to:
(a) engage the Administrator under such terms and conditions as the
Manager shall determine;
(b) open, maintain and close accounts with brokers, dealers, banks,
currency dealers and others, including the Manager and its affiliates,
and issue all instructions and authorizations to entities regarding
the purchase and sale or entering into, as the case may be, of
securities, options, certificates of deposit, bankers acceptances,
agreements for the lending of portfolio securities and other assets,
instruments and investments for the purpose of seeking to achieve the
Company's purposes as well as to facilitate capital contributions,
distributions, withdrawals, the payment of Company expenses and the
affairs of the Company in general;
(c) open, maintain and close bank accounts and draw cheques or other
orders for the payment of monies;
(d) acquire, lease, sell, hold or dispose of any assets or investments in
the name of or for the account of the Company or enter into any
contract or endorsement in the name of or for the account of the
Company with respect to any such assets or investments or in any other
manner bind the Company to acquire, lease, sell, hold or dispose of
any such assets or investments whatsoever on such terms as it shall
determine and to otherwise deal in any manner with the assets of the
Company in accordance with the purposes of the Company;
(e) borrow money, post margin on securities or enter into transactions
having a similar leveraging effect or for temporary purposes on behalf
of the Company, from any source or with any party, upon such terms and
conditions as it may deem advisable and proper, to execute promissory
notes, drafts, bills of exchange and other instruments and evidences
of indebtedness and to secure the payment thereof by mortgage, pledge
or assignment of or security interest in all or any part of property
then owned or thereafter acquired by the Company, and refinance,
recast, modify or extend any of the obligations of the Company and the
instruments securing those obligations;
8
<PAGE>
(f) employ, retain, or otherwise secure or enter into contracts,
agreements and other undertakings with persons in connection with the
management and operation of the Company, including, without
limitation, any attorneys and accountants, and including, without
limitation, contracts, agreements or other undertakings and
transactions with the Manager, any other Member, or any person
controlling, under common control with or controlled by the Manager or
any other Member, all on such terms and for such consideration as the
Manager deems advisable; provided, however, that any such contracts,
-------- -------
agreements or other undertakings and transactions with the Manager,
any other Member or any person controlling, under common control with
or controlled by the Manager or any other Member shall be on terms and
for consideration which are arm's length and fair to the parties
consistent with the fiduciary standards applicable to the Member;
(g) take any and all action which is permitted under the Companies Law and
which is customary or reasonably related to the operation of the
Company;
(h) make such elections under the Code, and other relevant tax laws as to
the treatment of items of Company income, gain, loss, deduction and
credit, and as to all other relevant matters, as the Manager deems
necessary or appropriate, including, without limitation, determination
of which items of cash outlay are to be capitalised or treated as
current expenses, and selection of the method of accounting and
bookkeeping procedures to be used by the Company;
(i) bring or defend, pay, collect, compromise, arbitrate, resort to legal
action, or otherwise adjust claims or demands of or against the
Company;
(j) deposit, withdraw, invest, pay, retain and distribute the Company's
funds in a manner consistent with the provisions of these Articles;
(k) cause the Company to carry such insurance as the Manager deems
necessary to protect it and any other individual or entity entitled to
indemnification by the Company pursuant to Article 27 hereof;
(l) do any and all acts on behalf of the Company, and exercise all rights
of the Company, with respect to its interest in any property or any
person, firm, corporation or other entity, including, without
limitation, the voting of securities, participation in arrangements
with creditors, if any, the institution and settlement or compromise
of suits and administrative proceedings and other like or similar
matters; and
(m) authorize any officer, director, employee or other agent of the
Manager and its subsidiaries or any Member, employee or agent of the
Company to act for and on behalf of the Company in any or all of the
foregoing matters and all matters incidental thereto as fully as if
such person were the Manager.
9
<PAGE>
REMOVAL OF THE MANAGER
----------------------
23 (a) The Board of Directors may remove the Manager (i) upon the vote of
eleven members of the Board of Directors, for any reason, or (ii) upon
the vote of a majority of the members of the Board of Directors
following a determination, by a court of competent jurisdiction no
longer subject to review or appeal, that the Manager had been grossly
negligent or engaged in willful misconduct in the performance of its
duties hereunder.
(b) Upon the removal of the Manager in accordance with the provisions of
Article 23(a), or the resignation or death of the Manager, the Board
of Directors may appoint a new Manager upon the vote of eight members
of the Board of Directors. Any new Manager shall be a shareholder of
the Company.
ADMINISTRATOR
-------------
24 The Manager will appoint the Administrator and shall entrust to and confer
upon the Administrator so appointed certain of the powers exercisable by it
as the Manager upon such terms and conditions including the right of the
Administrator to remuneration and with such restrictions and with such
powers of delegation as it thinks fit collaterally with or to the exclusion
of its own powers.
25 Subject to obtaining the consent of the Manager, which may be withheld in
its sole discretion, the Administrator may assign, sub-contract or delegate
the performance of any of its duties either in whole or in part, to such
persons or corporations as its deems fit, provided, however, that an
assignment, as the case may be, and/or any subcontracting or delegation of
administrative functions to an Affiliate of the Administrator shall not
require a special resolution.
ACTIVITIES OF MANAGER; CONFLICTS OF INTEREST
--------------------------------------------
26 Except as specifically provided in this Article 26 or with respect to the
construction, management or operation of, or sale of capacity on, (i)
submarine fiber optic cable telecommunications systems and directly related
services (including, without limitation, spurs to the Cable System (as
defined in the Stockholders Agreement)), (ii) terrestrial fiber optic cable
telecommunications systems and (iii) satellite telecommunications systems
which are competitive with fiber optic cable telecommunications systems
owned by the Company (collectively, the "Company Business") these Articles
shall not be construed in any manner to preclude the Manager or its
Affiliates from engaging in any activity whatsoever, including, without
limitation, receiving reasonable compensation for services from companies
in which the Company invests, managing investments, advising entities whose
investment objectives are the same as or overlap with those of the Company,
participating in investments made directly by any stockholder or the
Company (without regard to whether such stockholder or the Company has
secured its full desired investment position), entering into any brokerage
or consulting arrangements with or acting as a director or officer of,
advisor to or participant in any corporation, partnership, trust or other
business entity or receiving compensation or profit therefor. Except with
respect to companies primarily engaged in the Company Business, the Manager
and its Affiliates shall not be precluded from investing in, or causing the
Company to invest in, companies that are competitive with the Company or
companies that engage in business with affiliates of the Manager. The
foregoing notwithstanding, the provisions of this Article 26 shall not
preclude the Manager or its Affiliates from (x) engaging in any such
activity or making any such investment if the Board of Directors chooses
not to authorize the Company to pursue such activity or investment
presented to the Finance Committee of the Board of Directors by the Manager
or its Affiliates or (y) making passive investments in public companies.
The provisions of this
10
<PAGE>
Article 26 shall terminate upon the occurrence of the IPO (as defined in
the Stockholders Agreement).
INDEMNIFICATION AND EXCULPATION
-------------------------------
27 (a) To the full extent permitted by law, the Company, out of the Company's
assets and not out of the assets of any Member, shall indemnify and
hold harmless the Manager, the Administrator and any partner,
director, officer, employee or agent of the Manager and the
Administrator, and/or the legal representatives or controlling persons
of any of them and any employee or agent of the Company and each
member of the Board of Directors (herein collectively called the
"Indemnified Persons"), from and against any loss, expense, judgment,
settlement, fee and related expenses (including attorneys' fees and
expenses), costs or damages suffered or sustained by reason of being
or having been the Manager, the Administrator, an officer, partner,
employee or agent (or a legal representative or controlling person of
any of them) of them or any employee or agent of the Company or any
member of the Board of Directors, or arising out of or in connection
with action or failure to act on the part of such Indemnified Person
unless such act or failure to act shall have been finally, judicially
determined to have resulted from the wilful misconduct, bad faith or
knowing violation of law of such Indemnified Person. The Company
shall advance to any Indemnified Person reasonable attorneys' fees and
other costs and expenses incurred in connection with the defense of
any action or proceeding which arises out of conduct which is the
subject of the indemnification provided hereunder. Each Indemnified
Person shall agree, as a precondition to any advance to such
Indemnified Person as aforesaid, that in the event such Indemnified
Person receives any such advance, such Indemnified Person shall
reimburse the Company for such advance to the extent that it shall be
finally judicially determined that such Indemnified Person was not
entitled to indemnification under this Article.
(b) No Indemnified Person shall be liable to any Member or the Company for
any act or failure to act on behalf of the Company, unless such act or
failure to act shall have been finally, judicially determined to have
resulted from the willful misconduct, bad faith or knowing violation
of law of the Indemnified Person. Each Indemnified Person may consult
with legal counsel and accountants in respect of Company affairs and
shall be fully protected and justified in any action or inaction which
is taken in accordance with the advice or opinion of such counsel or
accountants. Notwithstanding any of the foregoing to the contrary,
the provisions of this subsection (b) shall not be construed so as to
relieve (or attempt to relieve) any Indemnified Person of any
liability, to the extent (but only to the extent) that such liability
may not be waived, modified or limited under applicable law, but shall
be construed so as to effect the provisions of this subsection (b) to
the full extent permitted by law.
CAPITAL ACCOUNTS
----------------
28 (a) The Company shall establish and maintain a separate account (the
"Capital Account") for each Member. The initial balance of the
Capital Account for each Member shall be such Member's Cash Payment.
The Capital Account of each Member shall be adjusted as of the last
day of each Fiscal Year. The Capital Account of each Member shall be
increased by (i) the dollar amount of any additional contributions
made by such Member, (ii) the fair market value of any property (other
than cash) contributed to the Company by such Member (net of any
liabilities to which such property is subject), and (iii) allocations
to such Member of income and gain (including income exempt from tax).
The Capital Ac-
11
<PAGE>
count of each Member shall be decreased by (i) the dollar amount of
any distributions made to such Member, (ii) the fair market value of
any property distributed to such Member (net of any liabilities to
which such property is subject), and (iii) allocations to such Member
of loss and deduction (including expenditures not deductible in
computing the Company's income or loss for Federal income tax
purposes).
(b) Notwithstanding any other provision of this Agreement to the contrary,
the foregoing provisions of Article 28(a) regarding the maintenance of
Capital Accounts shall be construed so as to comply with the
provisions of the Treasury Regulations promulgated pursuant to Section
704 of the Code (the "Treasury Regulations"). The Members may modify
the foregoing provisions to the minimum extent necessary to comply
with such Treasury Regulations. Any such modification shall be made
in a manner that does not alter the Members' rights to distributions
under Article 33.
ALLOCATIONS OF NET PROFIT AND LOSS
----------------------------------
29 (a) Except as otherwise provided in these Articles of Association , Net
Income and Net Loss of the Company for any Fiscal Year shall be
allocated among the Members in a manner such that the Capital Account
of each Member immediately after making such allocation, is, as nearly
as possible, equal (proportionately) to the distributions that would
be made to such Member during such Fiscal Year pursuant to Article 33
if (i) the Company were dissolved and its affairs wound up and any
remaining assets were sold for cash in an amount equal to their
adjusted basis (or, in the case of a Fiscal Year in which the Company
terminates pursuant to Article 135, such assets were sold for cash in
an amount equal to their fair market value), (ii) all Company
liabilities were satisfied (limited with respect to each nonrecourse
liability to the fair market value of the assets securing such
liability), and (iii) the net assets of the Company were distributed
in accordance with Article 33 to the Members immediately after making
such allocation.
(b) For U.S. federal income tax purposes only, each item of income, gain,
loss and deduction of the Company shall be allocated among the Members
in the same manner as the corresponding items of Net Income and Net
Loss and specially allocated items are allocated for Capital Account
purposes; provided that (i) the allocation of taxable profit and loss
--------
for U.S. Federal income tax purposes will be adjusted to eliminate, to
the extent possible, any disparity between a Member's Capital Account
and the tax basis of Company property, consistent with principles set
forth in section 704(c) of the Code and (ii) solely for U.S. federal
income tax purposes, in the event that the Company engages in any
reorganization transaction pursuant to which (A) the Company receives
stock and warrants in any corporation and (B) the Company subsequently
distributes such stock and warrants to the Members pursuant to a
liquidation of the Company, then items of Company taxable income and
gain, if any, attributable to the receipt of warrants shall be
specifically allocated to those Members to whom such warrants are
distributed. The amount of taxable income and gain allocated to a
Member pursuant to proviso (ii) in the previous sentence shall be
determined by multiplying the taxable income and gain attributable to
the warrants by a fraction, the numerator of which is the value of the
warrants distributed to such Member and the denominator of which is
the aggregate value of all the warrants received by the Company.
SPECIAL ALLOCATIONS FOR U.S. FEDERAL TAX PURPOSES
-------------------------------------------------
30 The following special allocations shall be made in the following order:
12
<PAGE>
(a) Qualified Income Offset. If any Member unexpectedly receives any
-----------------------
adjustment, allocation or distribution described in Treasury
Regulation section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of
Company income and gain shall be specifically allocated to such Member
in an amount and manner sufficient to eliminate, to the extent
required by the Treasury Regulations, any deficit in its Capital
Account created by such adjustment, allocation or distribution as soon
as practicable. This Article 30(a) is intended to constitute a
"qualified income offset" within the meaning of Treasury Regulation
section 1.704-1(b)(2)(ii)(d)(3).
(b) Basis Adjustment. In the event of a transfer of all or any part of
----------------
the Shares of a Member, the death of a Member, or the distribution of
assets in kind to a Member, the Manager may cause the Company to elect
to adjust the basis of the Company's assets pursuant to an election
made under section 754 of the Code.
(c) Assignment During Fiscal Year. If a Member's Shares in the Company
-----------------------------
are transferred at any time other than at the end of a Fiscal Year of
the Company, each item of income, gain, loss, deduction and credit
attributable to such Shares for the Fiscal Year in which the transfer
occurs shall be divided and allocated proportionately between the
transferor and the transferee in the same ratio as the number of days
in the Fiscal Year respectively before and after the date the transfer
is recognized by the Company bears to the number of days in such
Fiscal Year.
(d) Nonrecourse Deductions. Any Nonrecourse Deductions for any Fiscal
----------------------
Year or other period shall be allocated to each Member by multiplying
the Nonrecourse Deductions by a fraction the numerator of which is the
Capital Account of such Member and the denominator of which is the
aggregate Capital Accounts of all Members.
(e) Notwithstanding the foregoing, if, upon the final dissolution and
termination of the Company and after taking into account all
allocations of Net Profit and Net Losses (and other tax items) under
Articles 29 and 30, the Distributions to be made in accordance with
the positive Capital Account balances of the Members would result in a
Distribution that would be different from the Distributions under
Article 33 then gross items of income and gain (and other tax items)
for the taxable year of the final dissolution and termination (and to
the extent permitted under section 761(c) of the Code, gross items of
income and gain (and other tax items) for the immediately preceding
taxable year) shall be allocated to the Members to increase or
decrease Capital Account balances, as the case may be, in a manner so
that the final Distribution will occur as nearly as possible in the
same manner as a Distribution under Article 33.
LIMITATION ON REDEMPTIONS AND DISTRIBUTIONS
-------------------------------------------
31 Except with the unanimous approval of the Board of Directors, no Member
shall be entitled (i) to receive Distributions from the Company other than
as provided in Article 33; or (ii) to cause the Company to redeem such
Member's Shares.
REDEMPTION AND PURCHASE OF COMPANY'S SHARES
-------------------------------------------
32 (a) Subject to the provisions of the Companies Law and the Stockholders
Agreement and solely in connection with redemptions of Shares as
provided in these Articles, the Company may:
13
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(i) issue shares which are to be redeemed or are liable to be
redeemed;
(ii) purchase its own shares (including any redeemable shares); and
(iii) make a payment in respect of the redemption or purchase of its
own shares otherwise than out of profits or the proceeds of a
new issue of shares.
(b) A Share that is liable to be redeemed may be redeemed by the Company
giving to the Member not fewer than thirty days notice in writing of
the intention to redeem such Shares specifying the date of such
redemption which must be a day on which banks in the Cayman Islands
are open for business.
(c) The amount payable on such redemption on each Share so redeemed shall
be the amount determined by the Manager.
(d) Any Share in respect of which notice of redemption has been given
shall not be entitled to participate in the profits of the Company in
respect of the period after the date specified as the date of
redemption in the notice of redemption.
(e) The redemption or purchase of any Share shall not be deemed to give
rise to the redemption or purchase of any other Share.
(f) At the date specified in the notice of redemption or purchase, the
holder of the Shares being redeemed or purchased shall be bound to
deliver up to the Company at its registered office the certificate
thereof for cancellation and thereupon the Company shall pay to him
the redemption or purchase monies in respect thereof.
(g) The Manager may when making payments in respect of redemption or
purchase of Shares in accordance with the provisions of this Article,
if authorized by the terms of issue of the Shares being redeemed or
purchased or with the agreement of the holder of such Shares, make
such payment either in cash or in specie.
(h) The Shares are not redeemable, whether at the request of a holder or
the Company, except in accordance with the provisions of the
Stockholders Agreement and the Subscription Agreement.
DISTRIBUTIONS
-------------
33 Distributions shall be made to the Members in the sole discretion of the
Manager (except as otherwise provided in Section 1(e) (v) of the
Stockholders Agreement). The Net Proceeds derived from the Company's
investments, after provision for reserves, expenses, fees and taxes, if
any, of the Company, shall be distributed to the Members in the manner and
order of priority set forth below.
(a) first, 100% to the Class A, B, C and E Members, proportionate to their
-----
ownership of the total number of Class A, B, C and E Shares
outstanding, until the Class C Members have received cumulative
distributions in an amount that will yield an internal rate of return
of 10% (the "10% IRR"), compounded annually, on the aggregate Cash
Payments paid in respect of the Class C Shares; provided, however,
-------- -------
that any distributions made to the Class C Members in respect of their
Class C Shares prior to the third anniversary of initial
14
<PAGE>
issuance of the Class C Shares shall be deemed to be made, solely for
purposes of computing the 10% IRR hereunder, on the date of such third
anniversary.
(b) second, 90% to the Class A, B, C and E Members, proportionate to their
------
ownership of the total number of Class A, B, C and E Shares
outstanding, and 10% to the Class D Members proportionate to their
ownership of the Class D Shares, until the Class C Members have
received cumulative distributions in an amount that will yield an
internal rate of return of 30% (the "30% IRR"), compounded annually,
on the aggregate Cash Payments paid in respect of the Class C Shares;
provided, however, that any distributions made to the Class C Members
-------- -------
in respect of their Class C Shares prior to the third anniversary of
initial issuance of the Class C Shares shall be deemed to be made,
solely for purposes of computing the 30% IRR hereunder, on the date of
such third anniversary.
(c) third, 80% of the remaining Net Proceeds, if any, to the Class A, B, C
-----
and E Members, proportionate to their ownership of the Class total
number of A, B, C and E Shares outstanding, and 20% of the remaining
Net Proceeds, if any, to the Class D Members proportionate to their
ownership of the Class D Shares.
34 The Manager shall use its best efforts to make Distributions only in cash
or marketable securities unless members holding a majority of the shares
consent to an in-kind Distribution pursuant to which all members
participate in each asset distributed in the proportions established under
Article 33. In the context of a liquidation of the Company, the Manager
shall use its best efforts to make Distributions only in cash or marketable
securities, provided that if such distributions cannot, with such best
efforts, be made, the Manager may cause the Company to make in-kind
Distributions pursuant to which all members participate in each asset
distributed in the proportions established under Article 33. In the event
that the Manager makes a Distribution of property other than in cash, such
property shall be deemed to be sold for its fair market value on the date
of such Distribution and any gain or loss associated with such deemed sale
shall be included in determining Net Profit and Net Loss for the applicable
Fiscal Year. Any such Distribution shall be made after giving effect to
the allocations of Net Profit and Net Loss required under Article 29. All
Distributions pursuant to this Article 34 shall be made in the same
priority and proportions as Distributions at such time would be made
pursuant to Article 33.
35 Notwithstanding anything in these Articles to the contrary, no Distribution
shall be made (i) if such Distribution would violate any contract or
agreement to which the Company is then a party or any law then applicable
to the Company, or (ii) to the extent that the Manager, in its sole
discretion, determines that any amount otherwise distributable should be
retained by the Company to pay, or establish a reserve for the payment of,
any liability or obligation of the Company, including obligations to pay or
withhold any U.S. federal income or other taxes or taxes imposed by any
other jurisdiction.
36 Notwithstanding anything in these Articles to the contrary, the Manager is
authorized to take any action that it determines to be necessary or
appropriate to cause the Company to comply with any U.S. federal
withholding requirement or any withholding requirements of any other
jurisdictions with respect to any payment or Distribution by the Company to
any Member or other person. All amounts so withheld, and, in the manner
determined by the Manager, amounts withheld with respect to any payment or
Distribution by any person to the Company shall be treated as Distributions
to the Members to which such amounts would have been distributed (under
these Articles) but for withholding. If any such withholding requirement
with respect to any Member exceeds the amount distributable to such Member
under these Articles or if any such withholding requirement was not
satisfied with respect to any amount previously distributed to such Member,
such Member and any successor or assignee with respect to such Member's
interest in the Shares of the Company will
15
<PAGE>
indemnify and hold harmless the Manager and the Company for such excess
withholding requirement, as the case may be.
37 No Distribution shall be paid otherwise than out of profits, the share
premium account or, subject to the restrictions of the Companies Law,
capital.
38 If several persons are registered as joint holders of any Share, any of
them may give effectual receipts for any Distribution or other monies
payable on or in respect of the Share.
39 No Distribution shall bear interest against the Company.
CLASS A SHARES
--------------
40 The names of all of the Class A Members shall be filed with the Register.
41 The Class A Members of the Company shall not be liable for the repayment
and discharge of any debts and obligations of the Company except to the
extent of the Cash Payments made in respect of the Class A Shares held by
them, the amount of which Cash Payments, less any portion that previously
has been dividended to a holder thereof, or distributed to a holder thereof
or applied in accordance with the provisions of the Companies Law, may be
used to discharge all liabilities and expenses of the Company.
42 In no event shall any Class A Member be obligated to make any contribution
to the Company.
CLASS B SHARES
--------------
43 The names of all the Class B Members shall be filed with the Register.
44 The Class B Members shall not be liable for the repayment and discharge of
any debts and obligations of the Company except to the extent of the Cash
Payments made in respect of the Class B Shares held by them, the amount of
which Cash Payments, less any portion that previously has been dividended
to a holder thereof, or distributed to a holder thereof or applied in
accordance with the provisions of the Companies Law, may be used to
discharge all liabilities and expenses of the Company.
45 In no event shall any Class B Member be obligated to make any contribution
to the Company.
CLASS C SHARES
--------------
46 (a) The names of all the Class C Members shall be filed with the Register.
(b) No Class C Shares shall be, nor shall any Class C Member take any
actions or knowingly fail to take any actions that would cause the
Class C Shares to be, owned directly or treated as being owned
indirectly, constructively, by means of attribution, or otherwise, by,
for, or on behalf of a U.S. Person for purposes of section 951 et seq.
-- ---
of the Code.
16
<PAGE>
47 The Class C Members shall not be liable for the repayment and discharge of
any debts and obligations of the Company except to the extent of the Cash
Payments made in respect of the Class C Shares held by them, the amount of
which Cash Payments, less any portion that previously has been dividended
to a holder thereof, or distributed to a holder thereof or applied in
accordance with the provisions of the Companies Law, may be used to
discharge all liabilities and expenses of the Company.
48 In no event shall any Class C Member be obligated to make any contribution
to the Company.
CLASS D SHARES
--------------
49 The names of all the Class D Members shall be filed with the Register.
50 The Class D Members shall not be liable for the repayment and discharge of
any debts and obligations of the Company except to the extent of the Cash
Payments made in respect of the Class D Shares held by them, the amount of
which Cash Payments, less any portion that previously has been dividended
to a holder thereof, or distributed to a holder thereof or applied in
accordance with the provisions of the Companies Law, may be used to
discharge all liabilities and expenses of the Company.
51 In no event shall any Class D Member be obligated to make any contribution
to the Company.
CLASS E SHARES
--------------
52 The names of all the Class E Members shall be filed with the Register.
53 The Class E Members shall not be liable for the repayment and discharge of
any debts and obligations of the Company except to the extent of the Cash
Payments made in respect of the Class E Shares held by them, the amount of
which Cash Payments, less any portion that previously has been dividended
to a holder thereof, or distributed to a holder thereof or applied in
accordance with the provisions of the Companies Law, may be used to
discharge all liabilities and expenses of the Company.
54 In no event shall any Class E Member be obligated to make any contribution
to the Company.
MODIFICATION OF RIGHTS
----------------------
55 Whenever the capital of the Company is divided into different classes of
shares the special rights attached to any class may (unless otherwise
provided by the terms of issue of the shares of that class) be varied or
abrogated either whilst the Company is a going concern or during or in
contemplation of a winding up, with the consent in writing of the holders
of not less than 80% of the issued shares of the class, or with the
sanction of a resolution passed at a separate meeting of the holders of the
Shares of the class by 80% of the votes cast at such meeting, but not
otherwise. To every such separate meeting all the provisions of these
Articles relating to general meetings of the Company or to the proceedings
thereat shall, mutatis mutandis, apply except that the necessary quorum
------- --------
shall be one or more persons at least holding or representing by proxy one-
half in nominal amount of the issued shares of the class (but so that if at
any adjourned meeting of such holders a
17
<PAGE>
quorum as above defined is not present, those Members who are present shall
be a quorum) and that every member of the class shall on a poll have one
vote for each share of the class held by him.
56 The rights attached to Class A Shares, Class B Shares, Class C Shares,
Class D Shares and Class E Shares shall be deemed to be varied by the
creation or issue of any shares (other than Class A Shares, Class B Shares,
Class C Shares, Class D Shares and Class E Shares) ranking pari passu with
---- -----
or in priority to them as regards participating in the profits or assets of
the Company.
CERTIFICATES
------------
57 Every person whose name is entered as a Member in the Register shall be
entitled, without payment, to a certificate specifying the share or shares
held by him, provided that in the case of shares held jointly by several
--------
persons, the Company shall not be bound to issue more than one certificate
therefor, and delivery of a certificate for a Share to one of several joint
holders shall be sufficient delivery to all.
58 Where a Member has transferred or exchanged part of the Shares comprised in
his holding he shall be entitled to a certificate for the balance.
59 If a share certificate is defaced, lost or destroyed, it may be renewed on
such terms (if any) as to evidence any indemnity as the Manager thinks fit.
TRANSFER OF SHARES
------------------
60 The instrument of transfer of any share shall be executed by or on behalf
of the transferor and if so required by the Manager shall also be executed
on behalf of the transferee and the transferor shall be deemed to remain a
holder of the share until the name of the transferee is entered in the
Register of Members in respect thereof.
61 The following provisions shall apply to all shares:
(a) Shares shall be transferred in any usual or common form approved by
the Manager or failing such determination in the following form
accompanied by any certificate or other documentation required by the
Stockholders Agreement:
I [Transferor] for good and valuable consideration received by me from
[Transferee] do hereby transfer to the said [Transferee] the [ ]
share(s) standing in my name in the Register of Global Crossing Ltd.,
LDC to hold unto the said [Transferee] his executors, administrators
and assigns, and I, the said [Transferor] do hereby consent that my
name remain on the Register of the said Company until such time as the
said Company may enter the transferee's name thereon; And I the said
[Transferee] do hereby agree to take the said share(s).
As witness our hands
Signed by the said [Transferor]
on the day of [month, year]
in the presence of:
18
<PAGE>
________________ ______________________
Witness Transferor
Signed by the said [Transferee]
on the day of [month, year]
in the presence of:
________________ ______________________
Witness Transferor
(b) The Manager may suspend the registration of transfers during the
fourteen days immediately preceding a general meeting. The Manager
may decline to recognize any instrument of transfer unless the
instrument of transfer is accompanied by the certificate of the shares
to which it relates, and such other evidence as the Manager may
reasonably require to show the right of the transferor to make the
transfer. If the Manager refuses to register a transfer of any
shares, the Manager shall within two months after the day on which the
transfer was lodged with the Company send to the transferee notice of
the refusal.
(c) The transfer of shares shall be subject to the terms and conditions
set forth in the Stockholders Agreement including those relating to
transfer, first refusal, "tag along" and "drag along."
(d) The legal personal representative of a deceased sole holder of a share
shall be the only person recognized by the Company as having any title
to the share. In the case of a share registered in the name of two or
more holders, the survivors or survivor, or the legal personal
representatives of the deceased survivor, shall be the only person
recognized by the Company as having any title to the share.
(e) Any person becoming entitled to a share in consequence of the death or
bankruptcy of a member shall, upon such evidence being produced as may
from time to time be properly required by the Manager, have the right
either to be registered as a member in respect of the share or,
instead of being registered himself, to make such transfer of the
share as the deceased or bankrupt person could have made; but the
Manager shall, in either case, have the same right to decline or
suspend registration as the Manager would have had in the case of a
transfer of the share by the deceased or bankrupt person before the
death or bankruptcy.
(f) A person becoming entitled to a share by reason of the death or
bankruptcy of the holder shall be entitled to the same dividends and
other advantages to which he would be entitled if he were the
registered holder of the share, except that he shall not, before being
registered as a member in respect of the share, be entitled in respect
of it to exercise any right conferred by membership in relation to
meetings of the Company.
GENERAL MEETING
---------------
62 The Manager may, whenever it thinks fit, convene a general meeting of all
Members or of the Class A, Class B, Class C, Class D and Class E Members.
19
<PAGE>
63 Articles 65 through 87 below shall apply to any general meetings of Members
or any class of Members. Class A Members, Class B Members, Class C Members,
Class D Members and Class E Members shall be entitled to receive notice of,
and attend, general meetings held by Class A Members, Class B Members and
Class C Members. Only Class D Members and Class E Members, as the case may
be, shall be entitled to receive notice of, and attend, general meetings
held by Class D Members and Class E Members, respectively.
64 Holders of 10% of the outstanding Shares of any class may convene a general
meeting of the members of such class in the same manner as nearly as
possible as that in which meetings may be convened by the Manager. Holders
of 25% of the Class B Shares or Class C Shares may convene a general
meeting of the Members in the same manner as nearly as possible as that in
which meetings may be convened by the Manager.
NOTICE OF GENERAL MEETINGS
--------------------------
65 Subject to the provisions of Section 59 of the Companies Law relating to
special resolutions, seven days' notice at the least counting from the date
service is deemed to take place as provided in these Articles specifying
the place, the day and the hour of the meeting and, in case of special
business, the general nature of that business, shall be given in the manner
hereafter provided or in such other manner (if any) as may be prescribed by
the Company in general meeting to such persons as are, under the Articles
of the Company, entitled to receive such notices from the Company; but with
the consent of all the Members entitled to receive notice of some
particular meeting, that meeting may be convened by such shorter notice or
without notice and in such manner as those Members may think fit.
66 The accidental omission to give notice of a meeting to or the non-receipt
of a notice of a meeting by any Member shall not invalidate the proceedings
at any meeting.
PROCEEDINGS AT GENERAL MEETINGS
-------------------------------
67 All business carried out at a general meeting shall be deemed special with
the exception of the consideration of the accounts, balance sheets, and
ordinary report of the Manager and Auditors, the election of directors by
the Members, and the fixing of the remuneration of the Auditors. No
special business shall be transacted at any general meeting without the
consent of all Members entitled to receive notice of that meeting unless
notice of such special business has been given in the notice convening that
meeting.
68 No business shall be transacted at any general meeting of the Class A, B
and C members unless a quorum of such Members and a majority of the holders
of Class B Shares and a majority of the holders of Class C Shares are
present at the time when the meeting proceeds to business; save as herein
otherwise provided, Members holding at least a majority in number of the
issued Shares in the applicable class of the Company present in person or
by proxy shall be a quorum.
69 If within two hours from the time appointed for the meeting a quorum is not
present, the meeting, if convened upon the requisition of Members, shall
stand adjourned to the second business day thereafter, at the same time and
place, and the quorum necessary for the transaction of the business of
Members at such meeting shall be a majority of the Shares. In any other
case it shall stand adjourned to the second business day thereafter, at the
same time and place, and the quorum necessary for the transaction of the
business of Members at such meeting shall be a majority of the Shares.
20
<PAGE>
70 The Chairman of the Board of Directors shall preside as chairman at every
general meeting of the Company.
71. If there is no such Chairman, or if at any meeting he is not present in
person or by proxy within one hour after the time appointed for holding the
meeting or is unwilling to act as chairman, the Manager shall choose one of
the directors or officers of the Company or Members to be chairman.
72. The Chairman may with the consent of any meeting at which a quorum is
present (and shall if so directed by the meeting) adjourn a meeting from
time to time and from place to place, but no business shall be transacted
at any adjourned meeting other than the business left unfinished at the
meeting from which the adjournment took place. When a meeting is adjourned
for ten days or more, notice of the adjourned meeting shall be given as in
the case of an original meeting. Save as aforesaid it shall not be
necessary to give any notice of an adjournment or of the business to be
transacted at an adjourned meeting.
73. At any general meeting a resolution put to the vote of the meeting shall be
decided by a poll.
VOTES OF MEMBERS
----------------
74. (a Every Class A Member, Class B Member and Class C Member present in
person or by proxy shall be entitled to one vote in respect of each
Class A, Class B and Class C Share held by him.
(b The Class A Members, voting separately as a class, shall be entitled
to elect one member of the Board of Directors.
(c Subject to the following sentence, the Class B Members, voting
separately as a class, shall be entitled to elect six members of the
Board of Directors and, if the number of directors shall be increased
to 15 in accordance with the provisions of Article 87, shall be
entitled to elect eight members of the Board of Directors.
Notwithstanding the foregoing, (i) MRCo., Inc. ("MRC"), a Maryland
corporation and a wholly owned subsidiary of ULLICO, Inc., a Maryland
corporation ("ULLICO"), shall be entitled to elect one of the
directors provided for in the preceding sentence, so long as MRC or
any 80% or more owned subsidiary of ULLICO shall own, in the
aggregate, more than 10% of the outstanding shares of Class B Stock;
(ii) Ridgestone Corp., a Delaware corporation, shall be entitled to
elect one of the directors provided for in the preceding sentence, so
long as it or its Permitted Transferees (as defined in the
Stockholders Agreement) owns not less than 75% of the shares of Class
B Stock purchased by it pursuant to the Subscription Agreement; (iii)
San Pasqual Corp., a Delaware corporation, shall be entitled to elect
one of the directors provided for in the preceding sentence, so long
as it or its Permitted Transferees owns not less than 75% of the
shares of Class B Stock purchased by it pursuant to the Subscription
Agreement; (iv) Galenight Corp., a Delaware corporation, shall be
entitled to elect one of the directors provided for in the preceding
sentence, so long as it or its Permitted Transferees owns not less
than 75% of the shares of Class B Stock purchased by it pursuant to
the Subscription Agreement and (v) Lodwrick Cook shall be entitled to
elect one of the directors provided for in the preceding sentence, so
long as Lodwrick Cook or his Permitted Transferees owns not less than
75% of the shares of Class B Stock purchased by him pursuant to the
Subscription Agreement, dated January [ ], 1998.
21
<PAGE>
(d The Class C Members, voting separately as a class, shall be entitled
to elect six members of the Board of Directors.
(e For the avoidance of doubt, it is declared that the Class D Members
and the Class E Members shall have no right to vote at any general
meeting of the Company; provided, however, that such Members shall
-------- -------
be entitled to vote on matters in accordance with Article 55 and the
Companies Law and shall be entitled to one vote with respect thereto
for each Class D Share and each Class E Share held by such Member.
75. In the case of joint holders of a Share, the vote of the senior who tenders
a vote, whether in person or by proxy, shall be accepted to the exclusion
of the votes of the other joint holders, and for this purpose seniority
shall be determined by the order in which the names stand in the Register
in respect of the Shares.
76. A Member who has appointed special or general attorneys or a Member who is
subject to a disability may vote, by his said attorney, curator, committee,
receiver, curator bonis or other person in the nature of a committee,
receiver, or curator bonis appointed by a court and such attorney,
committee, receiver, curator bonis or other person may on a poll vote by
proxy.
77. No objection shall be raised to the qualification of any voter except at
the meeting or adjourned meeting at which the vote objected to is given or
tendered, and every vote not disallowed at such meeting shall be valid for
all purposes. Any such objection made in due time shall be referred to the
Chairman of the meeting, whose decision shall be final and conclusive.
78. Votes may be given either personally or by proxy.
79. A Member entitled to more than one vote need not, if it votes, use all his
votes or cast all the votes it uses in the same way.
80. The instrument appointing a proxy shall be in writing under the hand of the
appointee or of his attorney duly authorized in writing, or if the
appointor is a corporation, either under its common seal or under the hand
of an officer or attorney so authorized.
81. Any person (whether a Member of the Company or not) may be appointed to act
as a proxy. A Member may appoint more than one proxy to attend on the same
occasion.
82. No instrument appointing a proxy shall be valid after the expiration of
twelve months from the date named in it as the date of its execution,
except at an adjourned meeting or on a poll demanded at a meeting or an
adjourned meeting in cases where the meeting was originally held within
twelve months from such date.
83. An instrument of proxy shall be in the following form or such other form as
the Manager may approve:
GLOBAL CROSSING LTD., LDC
-------------------------
(Name or Names) of (address) being a Member/Members of the above-named
Company hereby appoint (Name of Proxy) or failing him, (Name of
Alternative Proxy) of (Address) as my/our proxy to vote for me/us on
my/our behalf at the general meeting of the Class __ Members to be
held on the day of , and at all contributions or
adjournments thereof.
22
<PAGE>
Signed this day of .
------------------------------
(Signature)
84. The Manager may at the expense of the Company send, by post or otherwise,
to the Members instruments of proxy (with or without prepaid postage for
their return) for use at any general meeting or at any meeting of any class
of Members of the Company. If for the purpose of any meeting invitations to
appoint as proxy a person or one of a number of persons specified in the
invitations are issued at the expense of the Company, such invitations
shall be issued to all (and not to some only) of the Members entitled to be
sent a notice of the meeting and to vote thereat by proxy.
85. A vote given in accordance with the terms of an instrument of proxy shall
be valid notwithstanding the death or insanity of the principal or the
revocation of the instrument of proxy, or of the authority under which the
instrument of proxy was executed, or the transfer of the Share in respect
of which the instrument of proxy is given; provided that no intimation in
--------
writing of such death, insanity, revocation or transfer shall have been
received by the Company at the registered office before commencement of the
meeting or adjourned meeting at which the instrument of proxy is used.
86. Any corporation which is a Member of the Company may by resolution of its
directors or other governing body, authorize such person as it thinks fit
to act as its representative at any meeting of the Company or at any
meeting of any class of Members of the Company, and the person so
authorized shall be entitled to exercise the same powers on behalf of the
corporation which he represents as that corporation could exercise if it
were an individual Member of the Company and such corporation shall for the
purposes of these presents be deemed to be present in person at any such
meeting if a person so authorized is present thereat.
DIRECTORS
---------
87. The number of Directors shall be 13, provided that upon the occurrence and
--------
during the continuance of a Bank Event of Default, the number of Directors
shall, upon the vote or consent of the holders of a majority of the Class B
Stock owned by PCG or its Permitted Transferees, be increased to 15 until
such time as the Bank Event of Default shall no longer be continuing, when
the number of Directors shall be decreased to 13 and the term of office of
the two Directors elected to fill vacancies created by such increase of the
number of Directors from 13 to 15 shall terminate. The first Directors
shall be appointed by the subscriber to the Memorandum of Association.
88. Subject to the provisions of these Articles of Association and the
Stockholders Agreement, a Director shall hold office until such time as he
is removed from office by an ordinary resolution of the Company in general
meeting.
89. The remuneration of the Directors shall from time to time be determined by
the Board of Directors.
90. There will be no share qualification for Directors.
ALTERNATE DIRECTOR
------------------
91. Any Director may in writing appoint another person to be his alternate to
act in his place at any meeting of the Directors at which he is unable to
be present. Every such alternate shall be entitled to notice of meetings
of the Directors and to attend and vote thereat as a Director when the
person
23
<PAGE>
appointing him is not personally present and where he is a Director
to have a separate vote on behalf of the Director he is representing in
addition to his own vote. A Director may at any time in writing revoke the
appointment of an alternate appointed by him. Such alternate shall not be
an officer of the Company and shall be deemed to be the agent of the
Director appointing him. The remuneration of such alternate shall be
payable out of the remuneration of the Director appointing him and the
proportion thereof shall be agreed between them.
92. Any Director may appoint any person, whether or not a Director of the
Company, to be the proxy of that Director to attend and vote on his behalf,
in accordance with instructions given by that Director, or in the absence
of such instructions at the discretion of the proxy, at a meeting or
meetings of the Directors which that Director is unable to attend
personally. The instrument appointing the proxy shall be in writing under
the hand of the appointing Director and shall be in the form printed below
or any other form approved by the Directors, and must be lodged with the
chairman of the meeting of the Directors at which such proxy is to be used,
or first used, prior to the commencement of the meeting:
GLOBAL CROSSING LTD., LDC
-------------------------
I the undersigned being a Director of the above Company HEREBY APPOINT [
], and when failing, [ ] to be my Proxy and on my behalf to attend,
vote at a meeting of Directors of the said Company to be held on the
day of and at all continuations and adjournments thereof
Date: _____________ _______________________
Signature of Director
POWERS AND DUTIES
-----------------
93. Subject to the provisions of Article 7 and the Stockholders Agreement, the
business of the Company shall be managed by the Directors, who may pay all
expenses incurred in setting up and registering the Company and may
exercise all such powers of the Company as are not, by the Law or these
Articles, required to be exercised by the Company in general meeting,
subject, nevertheless, to any Regulation of these Articles, to the
provisions of the Law, and to such regulations, being not inconsistent with
the aforesaid Regulations, or provisions as may be prescribed by the
Company in general meeting; but no regulation made by the Company in
general meeting shall invalidate any prior act of the Directors which would
have been valid if that regulation had not been made.
94. Subject to the provisions of Article 7 and the Stockholders Agreement, the
Directors may from time to time appoint any person, whether or not a
director of the Company to hold such office in the Company as the Directors
may think necessary for the administration of the Company, including
without prejudice to the foregoing generality, the office of Chief
Executive Officer, Chief Operating Officer, President, one or more Vice-
Presidents, Treasurer, Assistant Treasurer, Chief Financial Officer,
Manager or Controller, and for such term and at such remuneration (whether
by way of salary or commission or participation in profits or partly in one
way and partly in another), and with such powers and duties at the
Directors may think fit.
95. The Directors shall appoint the Company Secretary (and if need be an
Assistant Secretary or Assistant Secretaries) who shall hold office for
such term, at such remuneration and upon such
24
<PAGE>
conditions and with such powers as they think fit. Any Secretary or
Assistant Secretary so appointed by the Directors may be removed by the
Directors.
96. Subject to the provisions of Article 7 and the Stockholders Agreement:
(a The Directors may from time to time and at any time by power of
attorney appoint any company, firm or person or body of persons,
whether nominated directly or indirectly by the Directors, to be the
attorney or attorneys of the Company for such purposes and with such
powers, authorities and discretion (not exceeding those vested in or
exercisable by the Directors under these Articles) and for such period
and subject to such conditions as they may think fit, and any such
power of attorney may contain such provisions for the protection and
convenience of persons dealing with any such attorney as the Directors
may think fit, and may also authorize any such attorney to delegate
all or any of the powers, authorities and discretion vested in him.
(b The Directors may from time to time provide for the management of the
affairs of the Company in such manner as they shall think fit.
DISQUALIFICATION OF DIRECTORS
-----------------------------
97. The office of Director shall be vacated, if the Director:
(a files a petition in bankruptcy or makes any arrangement or composition
with his creditors;
(b is found to be or becomes of unsound mind; or
(c resigns his office by notice in writing to the Company.
PROCEEDINGS OF DIRECTORS
------------------------
98. The Directors may meet together (either within or without the Cayman
Islands) for the despatch of business, adjourn, and otherwise regulate
their meetings and proceedings as they think fit consistent with the
Stockholders Agreement. Questions arising at any meeting shall be decided
by a majority of votes consistent with the Stockholders Agreement. A
Chairman or the Manager may at any time summon a meeting of the Directors,
and 25% of the Directors may at any time summon a meeting of the Directors
in the same manner as nearly as possible as that in which meetings may be
summoned by the Chairman or the Manager.
99. A Director or Directors may participate in any meeting of the Board, or of
any committee appointed by the Board of which such Director or Directors
are members, by means of telephone or similar communication equipment by
way of which all persons participating in such meeting can hear each other
and such participation shall be deemed to constitute presence in person at
the meeting.
100. (a The quorum necessary for the transaction of the business of Directors
shall be a majority of the Directors, provided, that one director
--------
elected by the Class B Members and one director elected by the Class C
Members is present. A director represented by proxy or by an
Alternate Director at any meeting shall be deemed to be present for
the purposes of determining whether or not a quorum is present.
25
<PAGE>
(b If within two hours from the time appointed for the meeting a director
elected by the Class B Members or a Class C Members, as the case may
be, is not present, the meeting shall stand adjourned to the second
business day thereafter, at the same time and place, at which the
quorum necessary for the transaction of the business of Directors
shall be a majority of the Directors.
101. A Director who is in any way, whether directly or indirectly, interested in
a contract or proposed contract with the Company shall declare the nature
of his interest at a meeting of the Directors. A general notice given to
the Directors by any Director to the effect that he is a member of any
specified company or firm and is to be regarded as interested in any
contract which may thereafter be made with that company or firm shall be
deemed a sufficient declaration of interest in regard to any contract so
made. A Director may vote in respect of any contract or proposed contract
or arrangement notwithstanding that he may be interested therein and if he
does so his vote shall be counted and he may be counted in the quorum at
any meeting of the Directors at which any such contract or proposed
contract or arrangement shall come before the meeting for consideration.
102. A Director may hold any other office or place of profit under the Company
(other than the office of auditor) in conjunction with his office of
Director for such period and on such terms (as to remuneration and
otherwise) as the Directors may determine and no Director or intending
Director shall be disqualified by his office from contracting with the
Company either with regard to his tenure of any such other office or place
of profit or as vendor, purchaser or otherwise, nor shall any such contract
or arrangement entered into by or on behalf of the Company in which any
Director is in any way interested, be liable to be avoided, nor shall any
Director so contracting or being so interested be liable to account to the
Company for any profit realized by any such contract or arrangement by
reason of such Director holding that office or of the fiduciary relation
thereby established. A Director, notwithstanding his interest, may be
counted in the quorum present at any meeting whereat he or any other
Director is appointed to hold any such office or place of profit under the
Company or whereat the terms of any such appointment are arranged and he
may vote on any such appointment or arrangement.
103. Any Director may act by himself or his firm in a professional capacity for
the Company, and he or his firm shall be entitled to remuneration for
professional services as if he were not a Director; provided that nothing
herein contained shall authorize a Director or his firm to act as auditor
to the Company.
104. The Directors shall cause minutes to be made in books or loose-leaf folders
provided for the purpose of recording:
(a all appointments of officers made by the Directors;
(b the names of the Directors present at each meeting of the Directors
and of any committee of the Directors;
(c all resolutions and proceedings at all meetings of the Company, and of
the Directors and of committees of Directors.
105. When the Chairman and Secretary of a meeting of the Directors sign the
minutes of such meeting the same shall be deemed to have been duly held
notwithstanding that all the Directors have not actually come together or
that there may have been a technical defect in the proceedings.
106. A resolution signed by all the Directors shall be as valid and effectual as
if it had been passed at a Meeting of the Directors duly called and
constituted. When signed a resolution may consist of several documents
each signed by one or more of the Directors.
26
<PAGE>
107. The continuing Directors may act notwithstanding any vacancy in their body
but if and so long as their number is reduced below the number fixed by or
pursuant to the Articles of the Company as the necessary quorum of
Directors, the continuing Directors may act for the purpose of increasing
the number, or of summoning a general meeting of the Company, but for no
other purpose.
108. Subject to the Stockholders Agreement, the Directors may elect a chairman
of their meetings and determine the period for which he is to hold office;
but if no such chairman is elected, or if at any meeting the chairman is
not present within one hour after the time appointed for holding the same,
the Director Designees (as defined in the Stockholders Agreement) of the
Class B Members present may choose one of their number to be chairman of
the meeting.
109. A committee appointed by the Directors may elect a chairman of its
meetings; if no such chairman is elected, or if at any meeting the chairman
is not present within 30 minutes after the time appointed for holding the
same, the members present may choose one of their number to be chairman of
the meeting.
110. A committee appointed by the Directors may meet and adjourn as it thinks
proper. Questions arising at any meeting shall be determined by a majority
of votes of the committee members present and in case of an equality of
votes the chairman shall have a second or casting vote.
111. All acts done by any meeting of the Directors or of a committee of
Directors, or by any person acting as a Director, shall notwithstanding
that it be afterwards discovered that there was some defect in the
appointment of any such Director or person acting as aforesaid, or that
they or any of them were disqualified, be a valid act as if every such
person had been duly appointed and was qualified to be a Director.
EXPENSES OF THE COMPANY
-----------------------
112. The Company shall pay all expenses incurred by the Company (and shall
reimburse to the Manager all reasonable bona fide out-of-pocket expenses
incurred by the Manager on behalf of the Company).
LIMITATIONS
-----------
113. [Intentionally Omitted]
ACCOUNTS
--------
114. The Manager shall cause to be kept proper accounts with respect to:
(a all sums of money received and expended by the Company and the matters
in respect of which such receipt and expenditure take place; and
(b all sales and purchases by the Company; and
(c the assets and liabilities of the Company.
115. The books of account shall be kept at the registered office or at such
other place outside the U.S. as the Manager thinks fit, and shall always be
open to inspection by the Directors. No Member, other than the Manager,
shall have any right of inspecting any account or book or document of the
27
<PAGE>
Company except as conferred by the Companies Law or authorized by the
Manager or by the Class B Members in general meeting.
INDEPENDENT ACCOUNTANTS
-----------------------
116. The books and records of the Company shall be audited outside the United
States by independent certified accountants selected by the Board of
Directors, as of the end of each Fiscal Year, commencing with the first
partial Fiscal Year, of the Company.
FILING OF TAX RETURNS
---------------------
117. The Manager shall prepare and file, or cause the accountants of the Company
to prepare and file, a federal information tax return in compliance with
Section 6031 of the Code, if required by applicable U.S. law, and any tax
or other information returns required by Cayman Islands law or any other
law of any other jurisdiction for each tax year of the Company, and shall
be authorized to make any tax elections as permitted by the Company. The
Manager shall cause the Company to be treated as a partnership for United
States Federal income tax purposes, including, without limitation, cause
the Company to file Form 8832 and any successor forms thereto.
TAX
---
118. The Manager shall be designated on the Company's annual U.S. federal
information tax return, if any is filed for a particular year, as the Tax
Matters Partner of the Company (the "Tax Matters Partner") as provided in
Section 6231(a)(7) of the Code. In the event the Company shall be the
subject of an income tax audit by any U.S. federal, state or local
authority or taxing authority of any other jurisdiction, to the extent the
Company is treated as an entity for purposes of such audit, including
administrative settlement and judicial review, the Tax Matters Partner
shall be authorized to act for, and its decision shall be final and binding
upon, the Company and each Member thereof unless otherwise required by
applicable law; provided, however, that, in any such material proceeding,
-------- -------
the Tax Matters Partner shall furnish to the holders of Shares a copy of
all material notices and other written communications received by the Tax
Matters Partner from any such taxing authority and shall keep the holders
of Shares reasonably informed of all material matters which may come to its
attention in its capacity as Tax Matters Partner; and provided further
that, unless all Members of the same class are adversely affected in a
proportionate manner, the Manager may not take any action under this
Article 118 that could reasonably be expected to result in a material tax
liability to any Member without such Member's consent. All expenses
incurred in connection with any such audit, investigation, settlement or
review shall be borne by the Company.
REPORTS TO CURRENT MEMBERS
--------------------------
119. Within 90 days after the end of each Fiscal Year, the Company shall prepare
and mail to each Member annual audited financial statements, prepared in
accordance with U.S. Generally Accepted Accounting Principles at the
Members' respective registered address, as maintained in the Register of
the Company by March 31 of the following year. Within 60 days from the end
of each quarter, the Company shall prepare and mail to each Member,
quarterly unaudited financial statements. Upon written request, a Member
holding 5% of the outstanding shares shall have reasonable access to the
books and records of the Company during normal business hours and shall
have reasonable access to appropriate Company management.
28
<PAGE>
120. The financial report for each Fiscal Year shall be accompanied by the
report thereon of the independent accountants for the Company selected by
the Tax Matters Partner.
CAPITALIZATION OF PROFITS
-------------------------
121. The Manager may determine that it is desirable to capitalize any part of
the amount for the time being standing to the credit of any of the
Company's reserve accounts or to the credit of the profit and loss account
or otherwise available for distribution, and accordingly that such sum be
set free for distribution amongst the Members who would have been entitled
thereto if distributed by way of dividend and in the same proportions on
condition that the same be not paid in cash but be applied either in or
towards paying up any amounts for the time being unpaid on any Shares held
by such Members respectively or paying up in full unissued shares or
debentures of the Company to be allotted and distributed credited as fully
paid up to and amongst such Members in the proportion aforesaid, or partly
in the one way and partly in the other, and the Manager shall give effect
to such determination; provided always that a share premium account and
capital redemption reserve may only be applied in accordance with the
provisions of the Companies Law.
122. When such determination pursuant to Article 121 hereof has been made, the
Manager shall make all appropriations and applications of the undivided
profits resolved to be capitalised thereby, and all allotments and issues
of fully paid shares or debentures, if any, and generally shall do all acts
and things required to give effect thereto, with full power to the Manager
to make such provision by payment in cash or otherwise as it thinks fit for
the case of shares or debentures becoming distributable in fractions.
NOTICES
-------
123. Any notice or document may be served by the Company, from the Cayman
Islands or any other location, on any Member either personally, by
facsimile or by sending it through the post in a prepaid letter or via a
recognized courier service, fees prepaid, addressed to such Member at his
address as appearing in the Register. In the case of joint holders of a
Share, all notices shall be given to that one of the joint holders whose
name stands first in the Register in respect of the joint holding, and
notice so given shall be sufficient notice to all the joint holders.
124. Notices to be posted to addresses outside the Cayman Islands shall be
forwarded by prepaid airmail.
125. Any Member present, either personally or by proxy, at any meeting of the
Company shall for all purposes be deemed to have received due notice of
such meeting and, where requisite, of the purposes for which such meeting
was convened.
126. Any notice or other document, if served by (a) post, shall be deemed to
have been served five days after the time when the letter containing the
same is posted and if served by courier, shall be deemed to have been
served five days after the time when the letter containing the same is
delivered to the courier (in proving such service it shall be sufficient to
prove that the letter containing the notice or document was properly
addressed and duly posted or delivered to the courier), or, (b) facsimile,
shall be deemed to have been served upon confirmation of receipt or (c)
recognized delivery service, shall be deemed to have been served 48 hours
after the time when the letter containing the same is delivered to the
courier service and in proving such service it shall be sufficient to prove
that the letter containing the notice or document was properly addressed
and duly posted or delivered to the courier.
29
<PAGE>
127. Any notice or document delivered or sent by post to or left at the
registered address of any Member in pursuance of these Articles shall
notwithstanding that such Member be then dead or bankrupt, and whether or
not the Company has notice of his death or bankruptcy, be deemed to have
been duly served in respect of any share registered in the name of such
Member as sole or joint holder, unless his name shall at the time of the
service of the notice or document, have been removed from the Register as
the holder of the share, and such service shall for all purposes be deemed
a sufficient service of such notice or document on all persons interested
(whether jointly with or as claiming through or under him) in the share.
CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE
-------------------------------------------------
128. For the purpose of determining Members entitled to notice of or to vote at
any Meeting of Members or any adjournment thereof, or in order to make a
determination of Members for any other proper purpose, the Manager of the
Company may provide that the Register shall be closed for transfers for a
stated period.
129. In lieu of or apart from closing the Register the Manager may fix in
advance a date as the record date for any such determination of Members
entitled to notice of or to vote at a Meeting of the Members and for the
purpose of determining the Members entitled to receive a Distribution the
Manager may either before or on the date of declaration of such
Distribution fix a date as the record date for such determination.
130. If the Register is not so closed and no record date is fixed for the
determination of Members entitled to notice of or to vote at a Meeting of
Members or Members entitled to receive a Distribution, the date on which
notice of the Meeting is mailed or the date on which the resolution of the
Manager declaring such Distribution is adopted, as the case may be, shall
be the record date for such determination of Members. When a determination
of Members entitled to vote at any Meeting has been made in the manner
provided in this Article, such determination shall apply to any adjournment
thereof.
THE SEAL
--------
131. The Manager shall provide for the safe custody of the Seal and the Seal
shall never be used except by the authority of the Manager. The Manager
may keep for use outside the Cayman Islands a facsimile Seal. The Manager
may from time to time as it sees fit (subject to the provisions of these
Articles relating to share certificates) determine the persons and the
number of such persons in whose presence the Seal or the facsimile thereof
shall be used, and until otherwise so determined the Seal or the facsimile
thereof shall be affixed in the presence of the Manager or of some other
person duly authorized by the Manager.
DISCLOSURE
----------
132. The Manager shall if lawfully required to do so under the laws of any
jurisdiction to which the Company is subject or in compliance with the
rules of any Stock Exchanges upon which Shares are listed be entitled to
disclose any information regarding the affairs of the Company including
without limitation information contained in the Register and transfer books
of the Company.
REGISTRATION BY WAY OF CONTINUATION
-----------------------------------
30
<PAGE>
133. (a The Company may by special resolution resolve to be registered by way
of continuation in a jurisdiction outside the Cayman Islands or such
other jurisdiction in which it is for the time being incorporated,
registered or existing.
(b In furtherance of a resolution adopted pursuant to sub-clause (a) of
this Article, the Manager may cause an application to be made to the
Registrar of Companies to deregister the Company in the Cayman Islands
or such other jurisdiction in which it is for the time being
incorporated, registered or existing and may cause all such further
steps as they consider appropriate to be taken to effect the transfer
by way of continuation of the Company.
DISTRIBUTION OF SHARES
----------------------
134. If the Company shall make any distribution or dividend on the Shares in
securities of another entity, the Members shall enter into an agreement
with respect to such securities containing provisions substantially the
same as contained in these Articles and the Stockholders Agreement. Prior
to any liquidation or dissolution of the Company or any distribution by the
Company of any equity securities of GTH, the Company shall take all action
as is required to effect the following: (a) the amendment of the Memorandum
of Association and bye-laws of GTH so that the provisions thereof, taken as
a whole, resemble, as closely as would be permitted by the laws of Bermuda,
the provisions of these Articles and the Stockholders Agreement (including,
without limitation, the terms of the Class A, Class B, Class C, Class D and
Class E Stock), (b) the redemption of its Shares in exchange for shares of
GTH that have rights that resemble, as closely as would be permitted by the
laws of Bermuda, the rights of the Shares and (c) the execution and
delivery among GTH and the Members of an agreement that resembles, as
closely as would be permitted by the laws of Bermuda, the terms and
provisions of these Articles and the Stockholders Agreement.
TERMINATION
-----------
135. The Company shall be dissolved and terminated and its affairs wound up upon
the occurrence of any of the following events (an "Event of Termination"):
(a the expiration of its Term;
(b ninety days after the removal of the Manager by the Board of Directors
pursuant to Article 23; or
(c the written consent of the Manager and the approval of the holders of
80% of the outstanding shares of Class B Stock, voting as a class and
the approval of the holders of 80% of the outstanding shares of Class
C Stock, voting as a class;
provided, however, the Company will not terminate in accordance with clause
-------- -------
(b) above if the Directors elect in accordance with the provisions of
Article 23 (b), within ninety days of the removal of the Manager, a new
Manager (other than the removed Manager) to continue the activities of the
Company; and Section 199(1)(c) of the Companies Law shall not apply.
136. Upon the occurrence of an Event of Termination, the Company shall be
dissolved and wound up. In connection with the dissolution and winding-up
of the Company, the Manager or, if there is no Manager, a liquidator,
appointed by a majority of the Class B Members shall proceed, in its sole
31
<PAGE>
discretion, with the sale or liquidation of all of the assets of the
Company and the final distribution of the assets of the Company, in the
following manner and order of priority:
(a to payment and discharge of the claims of all creditors of the Company
who are not Members;
(b to payment and discharge of the claims of all creditors of the Company
who are Members; and
(c to payment and discharge to the Members in accordance with the
provisions of Article 33, after giving effect to any prior payments in
accordance with the such provisions.
32
<PAGE>
EXHIBIT 4.2
EXECUTION COPY
================================================================================
GLOBAL CROSSING HOLDINGS LTD.
$800,000,000
SERIES A AND SERIES B
9-5/8% SENIOR NOTES DUE 2008
INDENTURE
------------------------------
Dated as of May 18, 1998
------------------------------
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
______________
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section
310 (a)(1)................................................. 7.10
(a)(2)..................................................... 7.10
(a)(3)..................................................... N.A.
(a)(4)..................................................... N.A.
(a)(5)..................................................... 7.10
(b)........................................................ 7.10
(c)........................................................ N.A.
311(a)..................................................... 7.11
(b)........................................................ 7.11
(i)(c)..................................................... N.A.
312 (a).................................................... 2.05
(b)........................................................ 12.03
(c)........................................................ 12.03
313(a)..................................................... 7.06
(b)(2)..................................................... 7.07
(c)........................................................ 7.06; 12.02
(d)........................................................ 7.06
314(a)..................................................... 4.03; 12.02
(c)(1)..................................................... 12.04
(c)(2)..................................................... 12.04
(c)(3)..................................................... N.A.
(e)........................................................ 12.05
(f)........................................................ N.A.
315 (a).................................................... 7.01
(b)........................................................ 7.05; 12.02
(A)(c)..................................................... 7.01
(d)........................................................ 7.01
(e)........................................................ 6.11
316 (a)(last sentence)..................................... 2.09
(a)(1)(A).................................................. 6.05
(a)(1)(B).................................................. 6.04
(a)(2)..................................................... N.A.
(b)........................................................ 6.07
(c)........................................................ 2.12
317 (a)(1)................................................. 6.08
(a)(2)..................................................... 6.09
(b)........................................................ 2.04
318 (a).................................................... 12.01
(b)........................................................ N.A.
(c)........................................................ 12.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
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TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE........................................1
Section 1.01. Definitions.................................................................1
Section 1.02. Other Definitions..........................................................18
Section 1.03. Trust Indenture Act Definitions............................................19
Section 1.04. Rules of Construction......................................................19
ARTICLE 2. THE NOTES........................................................................19
Section 2.01. Form and Dating............................................................19
Section 2.02. Execution and Authentication...............................................21
Section 2.03. Registrar and Paying Agent.................................................21
Section 2.04. Paying Agent to Hold Money in Trust........................................22
Section 2.05. Holder Lists...............................................................22
Section 2.06. Transfer and Exchange......................................................22
Section 2.07. Replacement Notes..........................................................34
Section 2.08. Outstanding Notes..........................................................34
Section 2.09. Treasury Notes.............................................................35
Section 2.10. Temporary Notes............................................................35
Section 2.11. Cancellation...............................................................35
Section 2.12. Defaulted Interest.........................................................35
Section 2.13. CUSIP Numbers..............................................................36
ARTICLE 3. REDEMPTION AND PREPAYMENT........................................................36
Section 3.01. Notices to Trustee.........................................................36
Section 3.02. Selection of Notes to Be Redeemed..........................................36
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Section 3.03. Notice of Redemption.......................................................36
Section 3.04. Effect of Notice of Redemption.............................................37
Section 3.05. Deposit of Redemption Price................................................37
Section 3.06. Notes Redeemed in Part.....................................................38
Section 3.07. Optional Redemption........................................................38
Section 3.08. Optional Tax Redemption....................................................39
Section 3.09. Payment of Additional Amounts..............................................39
Section 3.10. Mandatory Redemption.......................................................41
Section 3.11. Offer to Purchase by Application of Excess Proceeds........................41
ARTICLE 4. COVENANTS........................................................................43
Section 4.01. Payment of Notes...........................................................43
Section 4.02. Maintenance of Office or Agency............................................43
Section 4.03. Reports....................................................................44
Section 4.04. Compliance Certificate.....................................................44
Section 4.05. Taxes......................................................................45
Section 4.06. Stay, Extension and Usury Laws.............................................45
Section 4.07. Restricted Payments........................................................45
Section 4.08. Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries................................................................48
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.................49
Section 4.10. Asset Sales................................................................52
Section 4.11. Transactions with Affiliates...............................................53
Section 4.12. Liens......................................................................54
Section 4.13. Sale and Leaseback Transactions..........................................54
Section 4.14. Corporate Existence........................................................54
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II
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Section 4.15. Offer to Repurchase Upon Change of Control.................................54
Section 4.16. Business Activities........................................................55
Section 4.17. Future AC Subsidiary Guarantees............................................55
Section 4.18. Additional Restricted Subsidiary Guarantees................................56
Section 4.19. Issuances and Sales of Equity Interests in Wholly Owned Restricted
Subsidiaries................................................................56
Section 4.20. Payments For Consent.......................................................56
Section 4.21. Money for Payments to Be Held In Trust.....................................56
ARTICLE 5. SUCCESSORS.......................................................................58
Section 5.01. Merger, Consolidation, or Sale of Assets...................................58
Section 5.02. Successor Corporation Substituted..........................................58
ARTICLE 6. DEFAULTS AND REMEDIES............................................................59
Section 6.01. Events of Default..........................................................59
Section 6.02. Acceleration...............................................................60
Section 6.03. Other Remedies.............................................................61
Section 6.04. Waiver of Past Defaults....................................................61
Section 6.05. Control by Majority........................................................61
Section 6.06. Limitation on Suits........................................................61
Section 6.07. Rights of Holders of Notes to Receive Payment..............................62
Section 6.08. Collection Suit by Trustee.................................................62
Section 6.09. Trustee May File Proofs of Claim...........................................62
Section 6.10. Priorities.................................................................63
Section 6.11. Undertaking for Costs......................................................63
ARTICLE 7. TRUSTEE..........................................................................63
Section 7.01. Duties of Trustee..........................................................63
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III
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Section 7.02. Rights of Trustee..........................................................64
Section 7.03. Individual Rights of Trustee...............................................65
Section 7.04. Trustee's Disclaimer.......................................................65
Section 7.05. Notice of Defaults.........................................................65
Section 7.06. Reports by Trustee to Holders of the Notes.................................65
Section 7.07. Compensation and Indemnity.................................................66
Section 7.08. Replacement of Trustee.....................................................67
Section 7.09. Successor Trustee by Merger, etc...........................................67
Section 7.10. Eligibility; Disqualification..............................................68
Section 7.11. Preferential Collection of Claims Against Company..........................68
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.........................................68
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance...................68
Section 8.02. Legal Defeasance and Discharge.............................................68
Section 8.03. Covenant Defeasance........................................................69
Section 8.04. Conditions to Legal or Covenant Defeasance.................................69
Section 8.05. Deposited Money and Government Securities to be Held in Trust; Other
Miscellaneous Provisions....................................................70
Section 8.06. Repayment to Company.......................................................71
Section 8.07. Reinstatement..............................................................71
Section 8.08. Survival...................................................................71
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.................................................72
Section 9.01. Without Consent of Holders of Notes........................................72
Section 9.02. With Consent of Holders of Notes...........................................72
Section 9.03. Compliance with Trust Indenture Act........................................74
Section 9.04. Revocation and Effect of Consents..........................................74
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Section 9.05. Notation on or Exchange of Notes...........................................74
Section 9.06. Trustee to Sign Amendments, etc............................................74
ARTICLE 10. GUARANTEES......................................................................75
Section 10.01. Guarantee.................................................................75
Section 10.02. Limitation on Guarantor Liability.........................................76
Section 10.03. Execution and Delivery of Guarantee.......................................76
Section 10.04. Guarantors May Consolidate, etc., on Certain Terms........................76
Section 10.05. Releases Following Sale of Assets.........................................77
ARTICLE 11. SATISFACTION AND DISCHARGE......................................................78
Section 11.01. Satisfaction and Discharge of Indenture...................................78
Section 11.02. Application of Trust Money................................................78
ARTICLE 12. MISCELLANEOUS...................................................................79
Section 12.01. Trust Indenture Act Controls..............................................79
Section 12.02. Notices...................................................................79
Section 12.03. Communication by Holders of Notes with Other Holders of Notes.............80
Section 12.04. Certificate and Opinion as to Conditions Precedent........................80
Section 12.05. Statements Required in Certificate or Opinion.............................81
Section 12.06. Rules by Trustee and Agents...............................................81
Section 12.07. No Personal Liability of Directors, Officers, Employees and
Shareholders................................................................81
Section 12.08. Governing Law.............................................................81
Section 12.09. Currency Indemnity........................................................82
Section 12.10. Consent to Jurisdiction and Service.......................................82
Section 12.11. No Adverse Interpretation of Other Agreements.............................83
Section 12.12. Successors................................................................83
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Section 12.13. Severability..............................................................83
Section 12.14. Counterpart Originals.....................................................83
Section 12.15. Table of Contents, Headings, etc..........................................83
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EXHIBITS
Exhibit A-1 FORM OF NOTE
Exhibit A-2 FORM OF REGULATION S TEMPORARY GLOBAL NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL
ACCREDITED INVESTOR
Exhibit E FORM OF NOTATION OF GUARANTEE
Exhibit F FORM OF SUPPLEMENTAL INDENTURE
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INDENTURE dated as of May 18, 1998 by and among Global Crossing
Holdings Ltd., a Bermuda company (the "Company"), the Guarantors (as herein
defined) and United States Trust Company of New York, as trustee (the
"Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 9-5/8% Series A Senior Notes due 2008 (the "Series A Notes") and the 9-5/8%
Series B Senior Notes due 2008 (the "Series B Notes" and, together with the
Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"AC-1 Credit Facility" means that certain Credit Agreement, dated as
of June 27, 1997 and amended as of December 15, 1997, between ACL and the
lenders named therein.
"AC" or "Atlantic Crossing" means the four fiber pair, self healing
ring, fiber optic submarine cable system known as "Atlantic Crossing" or "AC-1"
which will provide direct telecommunications service between the United States
and Northern Europe with landing stations in the United States, United Kingdom,
The Netherlands and Germany, and all extensions and upgrades thereto.
"ACL" means Atlantic Crossing Ltd., a Bermuda company.
"AC Subsidiaries" means GTH and all of its direct and indirect
Subsidiaries.
"AC-2" means the planned fiber optic submarine cable system known as
"AC-2" which will provide direct telecommunications service between the United
States and Europe.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
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"Agent" means any Registrar, Paying Agent or co-registrar.
"all or substantially all" shall have the meaning given such phrase in
the Revised Model Business Corporation Act.
"Applicable Premium" means, with respect to any Note on any Redemption
Date, the greater of (i) 1.0% of the principal amount of such Note or (ii) the
excess of (A) the present value at such Redemption Date of (1) the redemption
price of such Note at May 15, 2003 (such redemption price being set forth in the
table in Section 3.07 hereof) plus (2) all required interest payments due on
such Note through May 15, 2003 (excluding accrued but unpaid interest), computed
using a discount rate equal to the Treasury Rate and such Redemption Rate plus
50 basis points over (B) the principal amount of such Note, if greater.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and CEDEL that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, transfer, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business and other than any sale, lease, transfer, conveyance or other
disposition of capacity on any cable system owned, controlled or operated by the
Company or any Restricted Subsidiary or of telecommunications capacity or
transmission rights acquired by the Company or any Restricted Subsidiary for use
in a Permitted Business (provided that the sale, lease, transfer, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole shall be governed by the provisions
of Section 5.01 hereof and not by the provisions of Section 4.10 hereof), and
(ii) the issue or sale by the Company or any of its Restricted Subsidiaries of
Equity Interests of its Subsidiaries, in the case of either clause (i) or (ii),
whether in a single transaction or a series of related transactions (a) that
have a fair market value in excess of $25.0 million or (b) for net proceeds in
excess of $25.0 million. Notwithstanding the foregoing, the following items
shall not be deemed to be Asset Sales: (i) a transfer of assets by the Company
to a Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary, (ii)
an issuance of Equity Interests by a Wholly Owned Restricted Subsidiary to the
Company or to another Wholly Owned Restricted Subsidiary, (iii) a Restricted
Payment that is permitted by Section 4.07 hereof, (iv) a transfer of assets by
the Company or a Restricted Subsidiary in connection with a Qualified
Receivables Transaction and (v) a disposition of obsolete or worn out equipment
or equipment that is no longer useful in the conduct of a Permitted Business and
that is disposed of in the ordinary course of business.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law or any similar provisions of Bermuda law for the relief of debtors.
2
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"Board of Directors" means the board of directors or other governing
body of the Company or, if the Company is owned or managed by a single entity,
the board of directors or other governing body of such entity, or, in either
case, any committee thereof duly authorized to act on behalf of such board or
governing body.
"Board Resolution" means a duly authorized resolution of the Board of
Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within six months after the date of acquisition and (vi) money market
funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i)-(v) of this definition.
"CEDEL" means CEDEL Bank, SA.
"Change of Control" means the occurrence of any of the following: (i)
prior to the first public offering of Voting Stock of the Company, GCL or New
GCL, the Permitted Holders cease to be the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in
calculating the beneficial ownership of any particular "person," such "person"
shall be deemed to have beneficial ownership of all securities that such person
has the right to acquire, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition), directly or
indirectly, of at least a majority of the Voting Stock (measured by voting power
rather than number of shares) of the Company, GCL or New GCL, (ii) following the
first public offering of Voting Stock of the Company, GCL or New GCL, any
"person" (as such term is unused in Section 13(d)(3) of the Exchange Act), other
than a Permitted Holder, is or becomes the beneficial owner, directly or
indirectly, of 35% or more of the Voting Stock (measured by voting power rather
than number of shares) of the Company, GCL or New GCL, and the Permitted Holders
own, in the aggregate, a lesser percentage of the total Voting Stock (measured
by voting power rather than by number of shares)
3
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of the Company, GCL or New GCL than such person and do not have the right or
ability by voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of the Company, GCL or New GCL
(for the purposes of this clause, such other person shall be deemed to
"beneficially own" any Voting Stock of a specified corporation held by a parent
corporation if such other person beneficially owns, directly or indirectly, more
than 35% of the Voting Stock (measured by voting power rather than by number of
shares) of such parent corporation and the Permitted Holders beneficially own,
directly or indirectly, in the aggregate a lesser percentage of Voting Stock
(measured by voting power rather than by number of shares) of such parent
corporation and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the board of
directors of such parent corporation), (iii) during any period of two
consecutive years, Continuing Directors cease for any reason to constitute a
majority of the Board of Directors of the Company, GCL or New GCL, (iv) the
Company, GCL or New GCL consolidates or merges with or into any other Person,
other than a consolidation or merger (a) of the Company into GCL or New GCL, GCL
or New GCL into the Company, or the Company, GCL or New GCL into a Wholly Owned
Restricted Subsidiary of the Company or (b) pursuant to a transaction in which
the outstanding Voting Stock of the Company, GCL or New GCL is changed into or
exchanged for cash, securities or other property with the effect that the
beneficial owners of the outstanding Voting Stock of the Company, GCL or New
GCL, respectively, immediately prior to such transaction, beneficially own,
directly or indirectly, more than 35% of the Voting Stock (measured by voting
power rather than number of shares) of the surviving corporation immediately
following such transaction or (v) the sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the assets of GCL or New
GCL or the Company and its Restricted Subsidiaries taken as a whole to any
person other than a Wholly Owned Restricted Subsidiary of the Company or a
Permitted Holder or a person more than 50% of the Voting Stock (measured by
voting power rather than by number of shares) of which is owned, directly or
indirectly, following such transaction or transactions by the Permitted Holders;
provided, however, that sales, transfers, conveyances or other dispositions in
the ordinary course of business of capacity on cable systems owned, controlled
or operated by the Company or any Restricted Subsidiary or of telecommunications
capacity or transmission rights acquired by the Company or any Restricted
Subsidiary for use in its business, including, without limitation. for sale,
lease, transfer, conveyance or other disposition to any customer of the Company
or any Restricted Subsidiary shall not be deemed a disposition of assets for
purposes of this clause (v).
The definition of a Change of Control includes a phrase relating to
the sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the assets of GCL or New GCL or the Company and its
Restricted Subsidiaries taken as a whole, as such phrase is used in the Revised
Model Business Corporation Act. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of such phrase under applicable law. Accordingly, the ability of a
Holder of Notes to require the Company to purchase such Notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of GCL or New GCL or the Company and its Restricted Subsidiaries taken as
a whole to another Person or group may be uncertain.
"Company" means Global Crossing Holdings Ltd., and any and all
successors thereto.
"Consolidated Capital Ratio" means, with respect to the Company as of
any date, the ratio of (i) the aggregate consolidated principal amount of
Indebtedness of the Company and its
4
<PAGE>
Restricted Subsidiaries then outstanding to (ii) the Consolidated Net Worth of
the Company and its Restricted Subsidiaries as of such date, in each case as
shown on the consolidated balance sheet of the Company in accordance with GAAP.
"Consolidated Cash Flow" means, with respect to the Company for any
period, the Consolidated Net Income of the Company and its Restricted
Subsidiaries for such period plus, to the extent that any of the following items
were deducted or added in computing such Consolidated Net Income, (i) an amount
equal to any extraordinary loss (less any gain) plus any net loss (less any
gain) realized in connection with any Asset Sale, plus (ii) provision for taxes
based on income or profits of the Company and its Restricted Subsidiaries for
such period, plus (iii) consolidated interest expense of the Company and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of Letter of Credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles and the
amount of capacity available for sale (other than for backhaul capacity) charged
to cost of sales), but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash expenses (excluding any such non-cash
expense to the extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash expense that was
paid in a prior period) of the Company and its Restricted Subsidiaries for such
period, minus (v) non-cash items increasing such Consolidated Net Income for
such period (other than items that were accrued in the ordinary course of
business), in each case, on a consolidated basis and determined in accordance
with GAAP. Notwithstanding the foregoing, the provision for taxes on the income
or profits of, and the depreciation and amortization and other non-cash expenses
of, a Restricted Subsidiary of the Company shall be added to Consolidated Net
Income to compute Consolidated Cash Flow of the Company only to the extent that
a corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements
(excluding the AC-1 Credit Facility, to which this provision shall not apply),
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its shareholders.
"Consolidated Leverage Ratio" means, with respect to the Company, as
of any date, the ratio of (i) the aggregate consolidated principal amount of
Indebtedness of the Company and its Restricted Subsidiaries then outstanding to
(ii) the Consolidated Cash Flow of the Company and its Restricted Subsidiaries.
"Consolidated Net Income" means, with respect to the Company for any
period, the aggregate of the Net Income of the Company and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Restricted
Subsidiary that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the Company or a Wholly Owned Restricted Subsidiary thereof by such
Restricted Subsidiary, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at the
date of determination permitted without any prior governmental approval (that
has not been obtained) or, directly or indirectly,
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by operation of the terms of its charter or any agreement (excluding the AC-1
Credit Facility, to which this clause (ii) shall not apply), instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
that Restricted Subsidiary or its shareholders, except that the Company's equity
in the net income of any such Restricted Subsidiary for such period shall be
included in such Consolidated Net Income up to the aggregate amount of cash that
could have been distributed by such Restricted Subsidiary during such period to
the Company or another Restricted Subsidiary as a dividend, (iii) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition shall be excluded, (iv) the equity of the
Company or any Restricted Subsidiary in the net income of any Unrestricted
Subsidiary shall be included in such Consolidated Net Income up to the aggregate
amount of cash actually distributed by such Unrestricted Subsidiary during such
period to the Company or a Restricted Subsidiary as a dividend or other
distribution (but not in excess of the amount of the Net Income of such
Unrestricted Subsidiary for such period) and (v) the cumulative effect of a
change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to the Company as of any
date, the sum of (i) the consolidated equity of the common shareholders of the
Company and its consolidated Restricted Subsidiaries as of such date plus (ii)
the respective amounts reported on the Company's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by the Company upon issuance of such preferred stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within twelve
months after the acquisition of such business) subsequent to the date hereof in
the book value of any asset owned by the Company or a consolidated Restricted
Subsidiary of the Company, (y) all investments as of such date in unconsolidated
Restricted Subsidiaries and in Persons that are not Restricted Subsidiaries
(except, in each case, Permitted Investments), and (z) all unamortized debt
discount and expense and unamortized deferred charges as of such date, all of
the foregoing determined in accordance with GAAP.
"Consolidated Tangible Assets" means the total amount of assets (less
applicable reserves and other properly deductible items) which under generally
accepted accounting principles would be included on a consolidated balance sheet
of the Company and its Restricted Subsidiaries after deducting therefrom all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, which in each case under generally accepted
accounting principles would be included on such consolidated balance sheet.
"Continuing Directors" means individuals who at the beginning of the
period of determination constituted the Board of Directors of the Company, GCL
or New GCL, as the case may be, together with any new directors whose election
by such Board of Directors or whose nomination for election by the shareholders
of the Company, GCL or New GCL, as the case may be, was approved by a vote of at
least a majority of the directors of the Company, GCL or New GCL, as the case
may be, then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so approved
or is designee of any one of the Permitted Holders or any combination thereof or
was nominated or elected by any such Permitted Holder(s) or any of their
designees.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give notice to the Company.
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"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party or beneficiary.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A-1 hereto except that such Note shall not bear the Global Note
-----------
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature; provided, however, that any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require the Company to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with Section 4.07 hereof.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an offering for cash by GCL, New GCL or the
Company of its common stock, or options, warrants or rights to acquire such
common stock.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Series B Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
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"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the AC-1 Credit Facility)
in existence on the date hereof, until such amounts are repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date hereof.
"GCL" means Global Crossing Ltd., LDC, a Cayman Islands company
limited by shares.
"GCL Expenses" means (i) costs (including all professional fees and
expenses) incurred by GCL or New GCL to comply with its reporting obligations
under federal or state laws or under this Indenture, including any reports filed
with respect to the Securities Act, the Exchange Act or the respective rules and
regulations promulgated thereunder, (ii) indemnification obligations of GCL or
New GCL owing to directors, officers, employees or other Persons under its
charter or by-laws or pursuant to written agreements with any such Person, (iii)
fees and expenses payable by GCL or New GCL in connection with the issuance of
the Series A Notes and the Series B Notes, (iv) other operational expenses of
GCL or New GCL incurred in the ordinary course of business and (v) expenses
incurred by GCL or New GCL in connection with any public offering of Capital
Stock or Indebtedness (x) where the net proceeds of such offering are intended
to be received by or contributed or loaned to the Company or a Restricted
Subsidiary, or (y) in a prorated amount of such expenses in proportion to the
amount of such net proceeds intended to be so received, contributed or loaned,
or (z) otherwise on an interim basis prior to completion of such offering so
long as GCL or New GCL shall cause the amount of such expenses to be repaid to
the Company or the relevant Restricted Subsidiary out of the proceeds of such
offering promptly if completed.
"GTH" means Global Telesystems Holdings Ltd., a Bermuda company.
"GTH Preference Shares" means the Senior Increasing Rate Redeemable
Exchangeable Preference Shares of GTH.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A-1 or A-2 hereto issued in accordance with Section 2.01, 2.06(b)(iv),
- ----------- ---
2.06(d)(ii) or 2.06(f) hereof.
"Government Securities" means securities that are (a) direct
obligations (or certificates representing an ownership interest in such
obligations) of the United States of America (including any agency or
instrumentally thereof) of the payment of which the full faith and credit of the
United States of America is pledged, (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America or (c) obligations of a Person
the payment
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<PAGE>
of which is unconditionally guaranteed as a full faith and credit obligation by
the United States of America, which, in each case, are not callable or
redeemable at the issuer's option.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Guarantors" means each of (i) GCL (until such time, if any, that the
Guarantee of GCL may be terminated by GCL immediately prior to any liquidation
or dissolution of GCL in connection with an initial public offering of Capital
Stock of New GCL), New GCL, GTH, Global Crossing International, Ltd., Global
Crossing Holdings U.K. Ltd., Global Crossing Marketing U.K. Ltd., Global
Crossing Development Co. and Global Crossing Marketing USA Inc., and (ii) any
other Restricted Subsidiary of the Company that executes a Guarantee in
accordance with the provisions of this Indenture, and their respective
successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under any Interest Rate Agreement or Currency
Agreement.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means the global Note in the form of Exhibit A-1
-----------
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Initial Public Offering" means, as applicable, an initial public
offering of common stock by the Company, GCL or New GCL that results in gross
cash proceeds to the Company, GCL or New GCL, as applicable, of at least $200.0
million.
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"Initial Purchaser" shall have the meaning assigned to such term in
the Offering Memorandum.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Interest Rate Agreement" means, with respect to any Person, any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement to which such Person is a party or
beneficiary.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to directors, officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If the Company or any of its Restricted Subsidiaries sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary such that,
after giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company or such Restricted Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the fair market value of the Equity Interests of such Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Letters of Credit" means one or more irrevocable direct pay letters
of credit issued by a bank or other financial institution to support the payment
of equity obligations of the Company to its Project Subsidiaries.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in, and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"MAC Subsidiaries" means Mid-Atlantic Crossing Holdings Ltd., a
Bermuda company, and all of its direct and indirect Subsidiaries.
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"Management Advances" means loans or advances made to directors,
officers or employees of GCL or New GCL, the Company or any Restricted
Subsidiary (i) in respect of travel, entertainment or moving-related expenses
incurred in the ordinary course of business, (ii) in respect of moving-related
expenses incurred in connection with any closing or consolidation of any
facility or (iii) in the ordinary course of business not exceeding $2.5 million
in the aggregate at any time outstanding.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions made pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (ii) any extraordinary gain or loss, together
with any related provision for taxes on such extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP.
"New GCL" means Global Crossing Ltd., a Bermuda company.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any Restricted Subsidiary (a) provides any guarantee or credit
support of any kind (including any undertaking, guarantee, indemnity, agreement
or instrument that would constitute Indebtedness) or (b) is directly or
indirectly liable (as a guarantor or otherwise) and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default under such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering Memorandum" means the Offering Memorandum, dated May 13,
1998, pursuant to which the Series A Notes were offered and sold.
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<PAGE>
"Officer" means, with respect to the Company or any Guarantor, any Co-
Chairman of the Board, President, Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer, Senior Vice President, Vice President,
Treasurer or Secretary of such Person.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
11.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"PAC Subsidiaries" means Pan American Crossing Holdings Ltd., a
Bermuda company, and all of its direct and indirect Subsidiaries.
"PC-1 Subsidiaries" means Pacific Crossing Holdings Ltd., a Bermuda
company, and all of its direct and indirect Subsidiaries.
"Participant" means, with respect to the Depositary, Euroclear or
CEDEL, a Person who has an account with the Depositary, Euroclear or CEDEL,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and CEDEL).
"Permitted Business" means any business that is the same as or
related, ancillary or complementary to any of the businesses of the Company or
any of its Restricted Subsidiaries on the date hereof.
"Permitted Holder" means Pacific Capital Group, Inc. and CIBC
Oppenheimer Corp., and their respective Affiliates.
"Permitted Investments" means (a) any Investment in the Company or in
a Wholly Owned Restricted Subsidiary of the Company that is engaged in a
Permitted Business; (b) any Investment in Cash Equivalents; (c) any Investment
by the Company or any of its Restricted Subsidiaries in a Person, if as a result
of such Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary
of the Company that is engaged in a Permitted Business or (ii) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Wholly Owned Restricted Subsidiary of the Company that is engaged in a Permitted
Business; (d) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with Section 4.10 hereof; (e) any acquisition of assets solely in exchange for
the issuance of Equity Interests (other than Disqualified Stock) of the Company;
(f) other Investments in any Project Subsidiary having an aggregate fair market
value (measured on the date each such Investment was made and without giving
effect to subsequent changes in value), when taken together with all other
Investments made pursuant to this clause (f) that are at the time outstanding,
not to exceed $10.0 million; and (g) any Investment made in a Receivables Entity
in a Qualified Receivables Transaction.
"Permitted Liens" means (i) Liens to secure Indebtedness permitted by
clauses (d), (e), (m) and (n) of Section 4.09 hereof covering only the assets
acquired with such Indebtedness; (ii) Liens in favor of the Company; (iii) Liens
on property of a Person existing at the time such Person is merged with or into
or consolidated with the Company or any of its Restricted Subsidiaries; provided
that such Liens were in existence prior to the contemplation of such merger or
consolidation and do not extend to any
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assets other than those of the Person merged into or consolidated with the
Company or such Restricted Subsidiary; (iv) Liens on property existing at the
time of acquisition thereof by the Company or any of its Restricted
Subsidiaries, provided that such Liens were in existence prior to the
contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vi)
Liens existing on the date hereof; (vii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(viii) Liens incurred in the ordinary course of business of the Company or any
of its Restricted Subsidiaries with respect to obligations that do not exceed
$5.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Restricted Subsidiary; and (ix) Liens not otherwise permitted by the foregoing
clauses (i) through (viii) securing Indebtedness in an aggregate amount not to
exceed 10% of the Company's Consolidated Tangible Assets.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is expressly subordinated in right of
payment to, the Notes on terms at least as favorable to the Holders of the Notes
as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company, a Restricted Subsidiary that is
a Guarantor or the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, incorporated or unincorporated association,
joint-stock company, trust, unincorporated organization or government or other
agency or political subdivision thereof or other entity of any kind.
"Project Subsidiary" means any of the AC Subsidiaries, PC-1
Subsidiaries, MAC Subsidiaries or PAC Subsidiaries, and any other Subsidiary of
the Company formed to develop, own and operate undersea fiber optic
telecommunications cable systems.
"Preferred Stock," of any person, means Capital Stock of such Person
of any class or series (however designated) that ranks prior, as to payment of
dividends or as to the distribution of assets
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upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class or series of such Person.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Purchase Money Indebtedness" means Indebtedness (including Acquired
Debt and Capital Lease Obligations, mortgage financings and purchase money
obligations) incurred for the purpose of financing all or any part of the cost
of construction, installation, acquisition, lease, development or improvement of
any assets used or useful in a Permitted Business, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, as the same may be amended, supplemented, modified or
restated from time to time.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any of its Subsidiaries may sell, convey or
otherwise transfer to (a) a Receivables Entity (in the case of a transfer by the
Company or any of its Subsidiaries) and (b) any other Person (in the case of a
transfer by a Receivables Entity), or may grant a security interest in, any
receivables (whether now existing or arising in the future) of the Company or
any of its Subsidiaries, and any assets related thereto including, without
limitation, all collateral securing such receivables, all contracts and all
guarantees or other obligations in respect of such receivables, and the proceeds
of such receivables.
"Receivables Entity" means a Wholly Owned Subsidiary of the Company
(or another Person in which the Company or any Subsidiary of the Company may
make an Investment and to which the Company or any Subsidiary of the Company
transfers receivables and related assets) which engages in no activities other
than in connection with the financing of receivables and which is designated by
the Board of Directors (as provided below) as a Receivables Entity, (a) no
portion of the Indebtedness or any other Obligations (contingent or otherwise)
of which (i) is guaranteed by the Company or any Subsidiary of the Company
(excluding guarantees of Obligations (other than the principal of, and interest
on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is
recourse to or obligates the Company or any Subsidiary of the Company in any way
other than pursuant to Standard Securitization Undertakings or (iii) subjects
any property or asset of the Company or any Subsidiary of the Company, directly
or indirectly, contingently or otherwise, to the satisfaction thereof, other
than pursuant to Standard Securitization Undertakings, (b) with which neither
the Company nor any Subsidiary of the Company has any material contract,
agreement, arrangement or understanding other than on terms no less favorable to
the Company or such Subsidiary than those that might be obtained at the time
from Persons that are not Affiliates of the Company, other than fees payable in
the ordinary course of business in connection with servicing receivables, and
(c) to which neither the Company nor any Subsidiary of the Company has any
obligation to maintain or preserve such entity's financial condition or cause
such entity to achieve certain levels of operating results. Any such designation
by the Board of Directors shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the resolution of the Board of Directors giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions.
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"Related Taxes" means any taxes, charges or assessments, including,
but not limited to, sales, use, transfer, rental, ad valorem, value-added,
stamp, property, consumption, franchise, license, capital, net worth, gross
receipts, excise, occupancy, intangibles or similar taxes, charges or
assessments (other than taxes measured by income and withholding imposed on
payments made by GCL or New GCL required to be paid by GCL or New GCL by virtue
of its being incorporated or having Capital Stock outstanding (but not by virtue
of owning stock or other equity interests of any corporation or other entity
other than the Company or any of its Subsidiaries), or being a holding company
parent of the Company of receiving dividends from or other distributions in
respect of the Capital Stock of the Company, or having guaranteed any
obligations of the Company of any Subsidiary thereof, or having made any payment
in respect of any of the items for which the Company is permitted to make
payments to GCL or New GCL pursuant to the covenant described under Section 4.07
hereof.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date hereof, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in
the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
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Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A-2 hereto bearing the Private Placement Legend and
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deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
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"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary. As of the date hereof,
all of the Guarantors (except for GCL) and AC Subsidiaries will be Restricted
Subsidiaries; provided, however, that at no time may the AC Subsidiaries or any
successor to any of them or any entities that provide extensions, upgrades or
additions to AC-1 (including AC-2) be designated as Unrestricted Subsidiaries.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date of this Indenture.
"Special Interest" means all special interest then owing pursuant to
Section 5 of the Registration Rights Agreement.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or any
Subsidiary of the Company which are reasonably customary in securitization of
receivables transactions.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
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"Treasury Rate" means, as of any Redemption Date, the yield to
maturity as of such Redemption Date of United States Treasury securities with a
constant maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the Redemption Date to May 15, 2003; provided,
however, that if the period from the Redemption Date to May 15, 2003 is less
than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent global Note in the form
of Exhibit A-1 attached hereto that bears the Global Note Legend and that has
-----------
the "Schedule of Exchanges of Interests in the Global Note" attached thereto,
and that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
(other than the AC Subsidiaries or any successor to any of them) that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation to maintain or preserve such Person's financial condition or
to cause such Person to achieve any specified levels of operating results; and
(c) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of the Company or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors shall be evidenced
by filing with the Trustee a certified copy of the Board Resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
covenant described under Section 4.07 hereof. If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of this Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under Section 4.09 hereof, the Company shall be in
default of such covenant). The Board of Directors of the Company may at any
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under Section 4.09 hereof,
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period, and (ii) no Default or Event of
Default would be in existence following such designation. As of the date hereof,
all of the PC-1 Subsidiaries, MAC Subsidiaries and PAC Subsidiaries are
Unrestricted Subsidiaries.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
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"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
Section 1.02. Other Definitions.
Defined in
Term Section
---- -----------
"Additional Amounts" 3.09
"Affiliate Transaction" 4.11
"Asset Sale Offer" 4.10
"Authentication Order" 2.02
"Change in Tax Law" 3.08
"Change of Control Offer" 4.15
"Change of Control Payment" 4.15
"Change of Control Payment Date" 4.15
"Covenant Defeasance" 8.03
"Designation" 4.07
"Event of Default" 6.01
"Excess Proceeds" 4.10
"incur" 4.09
"Legal Defeasance" 8.02
"Offer Amount" 3.11
"Offer Period" 3.11
"Paying Agent" 2.03
"Permitted Indebtedness" 4.09
"Purchase Date" 3.11
"Redemption Date" 3.07
"Registrar" 2.03
"Restricted Payments" 4.07
"Revocation" 4.07
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Section 1.03. Trust Indenture Act Definitions
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes means the Company and any successor obligor
upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections or
rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
Section 2.01. Form and Dating.
(a) General.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibits A-1 and A-2 hereto. The Notes may have
------------ ---
notations, legends or endorsements required
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by law, stock exchange rule or usage or agreements to which the Company is
subject. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes.
Notes issued in global form shall be substantially in the form of
Exhibits A-1 or A-2 attached hereto (including the Global Note Legend thereon
- ------------ ---
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A-1 attached hereto (but without the Global Note Legend thereon and
- -----------
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the Note
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes.
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Temporary Global Note, which shall be
deposited on behalf of the purchasers of the Notes represented thereby with the
Trustee, at its New York office, as custodian for the Depositary, and registered
in the name of the Depositary or the nominee of the Depositary for the accounts
of designated agents holding on behalf of Euroclear or CEDEL Bank, duly executed
by the Company and authenticated by the Trustee as hereinafter provided. The
Restricted Period shall be terminated upon the receipt by the Trustee of (i) a
written certificate from the Depositary, together with copies of certificates
from Euroclear and CEDEL Bank certifying that they have received certification
of non-United States beneficial ownership of 100% of the aggregate principal
amount of the Regulation S Temporary Global Note (except to the extent of any
beneficial owners thereof who acquired an interest therein during the Restricted
Period pursuant to another exemption from registration under the Securities Act
and who will take delivery of a beneficial ownership interest in a 144A Global
Note or an IAI Global Note bearing a Private Placement Legend, all as
contemplated by Section 2.06(a)(ii) hereof), and (ii) an Officers' Certificate
from the Company. Following the termination of the Restricted Period,
beneficial interests in the Regulation S Temporary Global Note shall be
exchanged for beneficial interests in Regulation S Permanent Global Notes
pursuant to the Applicable Procedures. Simultaneously with the authentication
of Regulation S Permanent Global Notes, the Trustee shall cancel the Regulation
S Temporary Global Note. The aggregate principal amount of the Regulation S
Temporary Global Note and the Regulation S Permanent Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee and the Depositary or its nominee, as the case may be, in connection
with transfers of interest as hereinafter provided.
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(d) Euroclear and CEDEL Procedures Applicable.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of CEDEL Bank" and "Customer Handbook" of CEDEL Bank shall be
applicable to transfers of beneficial interests in the Regulation S Temporary
Global Note and the Regulation S Permanent Global Notes that are held by
Participants through Euroclear or CEDEL Bank.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount stated in paragraph 4 of the Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity
as Registrar or Paying Agent, the Trustee shall act as such. The Company or any
of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
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The Trustee is authorized to enter into a letter of representations
with DTC in the form provided to the Trustee by the Company and to act in
accordance with such letter.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Special Interest, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes.
A Global Note may not be transferred as a whole except by the
Depositary to a nominee of the Depositary, by a nominee of the Depositary to the
Depositary or to another nominee of the Depositary, the Depositary or any such
nominee to a successor Depositary or a nominee of such successor Depositary.
All Global Notes will be exchanged by the Company for Definitive Notes if (i)
the Company delivers to the Trustee notice from the Depositary that it is
unwilling or unable to continue to act as Depositary or that it is no longer a
clearing agency registered under the Exchange Act and, in either case, a
successor Depositary is not appointed by the Company within 120 days after the
date of such notice from the Depositary or (ii) the Company in its sole
discretion determines that the Global Notes (in whole but not in part) should be
exchanged for Definitive Notes and delivers a written notice to such effect to
the Trustee; provided that in no event shall the Regulation S Temporary Global
Note be exchanged by the Company for Definitive Notes prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of any
certificates determined by the Company to be required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be
22
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exchanged for another Note other than as provided in this Section 2.06(a),
however, beneficial interests in a Global Note may be transferred and exchanged
as provided in Section 2.06(b),(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the provisions of
this Indenture and the Applicable Procedures. Beneficial interests in the
Restricted Global Notes shall be subject to restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial
interests in any Restricted Global Note may be transferred to Persons who take
delivery thereof in the form of a beneficial interest in the same Restricted
Global Note in accordance with the transfer restrictions set forth in the
Private Placement Legend; provided, however, that prior to the expiration of
the Restricted Period, transfers of beneficial interests in the Temporary
Regulation S Global Note may not be made to a U.S. Person or for the account
or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial
interests in any Unrestricted Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note. No written orders or instructions shall be required to be
delivered to the Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global
Notes. In connection with all transfers and exchanges of beneficial interests
that are not subject to Section 2.06(b)(i) above, the transferor of such
beneficial interest must deliver to the Depositary either (A) (1) a written
order from a Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to credit
or cause to be credited a beneficial interest in another Global Note in an
amount equal to the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures containing
information regarding the Participant account to be credited with such
increase or (B) (1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to cause to be issued a Definitive Note in
an amount equal to the beneficial interest to be transferred or exchanged and
(2) instructions given by the Depositary to the Registrar containing
information regarding the Person in whose name such Definitive Note shall be
registered to effect the transfer or exchange referred to in (1) above,
provided that in no event shall Definitive Notes be issued upon the transfer
or exchange of beneficial interests in the Regulation S Temporary Global Note
prior to (x) the expiration of the Restricted Period and (y) the receipt by
the Registrar of any certificates determined by the Company to be required
pursuant to Rule 903 under the Securities Act. Upon consummation of an
Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the
requirements of this Section 2.06(b)(ii) shall be deemed to have been
satisfied upon receipt by the Registrar of the instructions contained in the
Letter of Transmittal delivered by the Holder of such beneficial interests in
the Restricted Global Notes. Upon satisfaction of all of the requirements for
transfer or exchange of beneficial interests in Global Notes contained in this
Indenture and the Notes or otherwise applicable under the Securities Act, the
Trustee shall adjust the principal amount of the relevant Global Note(s)
pursuant to Section 2.06(h) hereof.
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(iii) Transfer of Beneficial Interests to Another Restricted Global Note.
A beneficial interest in any Restricted Global Note may be transferred to a
Person who takes delivery thereof in the form of a beneficial interest in
another Restricted Global Note if the transfer complies with the requirements
of Section 2.06(b)(ii) above and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a beneficial
interest in the 144A Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications
---------
in item (1) thereof;
(B) if the transferee will take delivery in the form of a beneficial
interest in the Regulation S Temporary Global Note or the Regulation S
Global Note, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (2) thereof;
---------
and
(C) if the transferee will take delivery in the form of a beneficial
interest in the IAI Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications
---------
and certificates and Opinion of Counsel required by item (3) thereof, if
applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global
Note for Beneficial Interests in the Unrestricted Global Note. A beneficial
interest in any Restricted Global Note may be exchanged by any holder thereof
for a beneficial interest in an Unrestricted Global Note or transferred to a
Person who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note if the exchange or transfer complies with the
requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of the beneficial interest to be transferred, in the case of an exchange,
or the transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal or via the Depositary's book-entry system that it
is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Restricted Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item (1)(a)
---------
thereof; or
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(2) if the holder of such beneficial interest in a Restricted Global
Note proposes to transfer such beneficial interest to a Person who shall
take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof;
---------
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Restricted Definitive Note, then, upon
receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Restricted
Definitive Note, a certificate from such holder in the form of Exhibit C
---------
hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule
904, a certificate to the effect set forth in Exhibit B hereto, including
---------
the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in
accordance with Rule 144, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a) thereof;
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(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to the effect set
forth in Exhibit B hereto, including the certifications, certificates and
---------
Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the Company or
any of its Subsidiaries, a certificate to the effect set forth in Exhibit
-------
B hereto, including the certifications in item (3)(b) thereof; or
-
(G) if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the certifications
---------
in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
make available for delivery such Definitive Notes to the Persons in whose
names such Notes are so registered. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c)(i) shall bear the Private Placement Legend and shall be
subject to all restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a beneficial
interest in the Regulation S Temporary Global Note may not be exchanged for a
Definitive Note or transferred to a Person who takes delivery thereof in the
form of a Definitive Note prior to (x) the expiration of the Restricted Period
and (y) the receipt by the Registrar of any certificates determined by the
Company to be required pursuant to Rule 903(c)(3)(ii)(B) under the Securities
Act, except in the case of a transfer pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 903 or Rule
904.
(iii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive Note
or may transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the holder
of such beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable Letter
of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
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(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Restricted Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Definitive Note
that does not bear the Private Placement Legend, a certificate from such
holder in the form of Exhibit C hereto, including the certifications in
---------
item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted Global
Note proposes to transfer such beneficial interest to a Person who shall
take delivery thereof in the form of a Definitive Note that does not bear
the Private Placement Legend, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof;
---------
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause
the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute
and the Trustee shall authenticate and make available for delivery to the
Person designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall be registered in such
name or names and in such authorized denomination or denominations as the
holder of such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect Participant.
The Trustee shall make available for delivery such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive Note
issued in exchange for a beneficial interest pursuant to this Section
2.06(c)(iii) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or to
transfer such Restricted Definitive Notes to a Person who takes delivery
27
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thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note,
a certificate from such Holder in the form of Exhibit C hereto, including
---------
the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a QIB
in accordance with Rule 144A, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1) thereof;
---------
(C) if such Restricted Definitive Note is being transferred to a Non-
U.S. Person in an offshore transaction in accordance with Rule 903 or
Rule 904, a certificate to the effect set forth in Exhibit B hereto,
---------
including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred pursuant
to an exemption from the registration requirements of the Securities Act
in accordance with Rule 144, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a) thereof;
---------
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to the effect set
forth in Exhibit B hereto, including the certifications, certificates and
---------
Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (3)(b) thereof;
---------
or
(G) if such Restricted Definitive Note is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
---------
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note, in the case of clause (c) above, the
Regulation S Global Note, and in all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes. A Holder of a Restricted Definitive Note may exchange such Note
for a beneficial interest in an Unrestricted Global Note or transfer such
Restricted Definitive Note to a Person who takes delivery thereof in the form
of a beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
Holder, in the case of an
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exchange, or the transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a broker-dealer, (2)
a Person participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Restricted Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to exchange such
Notes for a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C hereto, including the
---------
certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to transfer such
Notes to a Person who shall take delivery thereof in the form of a
beneficial interest in the Unrestricted Global Note, a certificate from
such Holder in the form of Exhibit B hereto, including the certifications
---------
in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note or
transfer such Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note at any time.
Upon receipt of a request for such an exchange or transfer, the Trustee shall
cancel the applicable Unrestricted Definitive Note and increase or cause to be
increased the aggregate principal amount of one of the Unrestricted Global
Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest in a Global Note is effected pursuant to subparagraphs
(ii)(B), (ii)(D) or (iii) above at a time when an Unrestricted Global Note has
not yet been issued, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of Definitive Notes so transferred.
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(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance
with the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of
transfer or exchange, the requesting Holder shall present or surrender to the
Registrar the Definitive Notes duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing. In addition, the
requesting Holder shall provide any additional certifications, documents and
information, as applicable, required pursuant to the following provisions of
this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name of
Persons who take delivery thereof in the form of a Restricted Definitive Note
if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
---------
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904,
then the transferor must deliver a certificate in the form of Exhibit B
---------
hereto, including the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other exemption from
the registration requirements of the Securities Act, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including the
---------
certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
Holder, in the case of an exchange, or the transferee, in the case of a
transfer, certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the distribution
of the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by a Restricted Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Rights Agreement; or
(D) the Registrar receives the following:
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<PAGE>
(1) if the Holder of such Restricted Definitive Notes proposes to
exchange such Notes for an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto, including the certifications
---------
in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the form
of an Unrestricted Definitive Note, a certificate from such Holder in the
form of Exhibit B hereto, including the certifications in item (4) thereof;
---------
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests, an Opinion of Counsel in form reasonably acceptable to the
Company to the effect that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A
Holder of Unrestricted Definitive Notes may transfer such Notes to a Person
who takes delivery thereof in the form of an Unrestricted Definitive Note.
Upon receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions from
the Holder thereof.
(f) Exchange Offer.
Upon the occurrence of the Exchange Offer in accordance with the
Registration Rights Agreement, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate (i) one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of the beneficial interests in the
Restricted Global Notes tendered for acceptance by Persons that certify in the
applicable Letters of Transmittal or via the Depositary's book-entry system that
(x) they are not broker-dealers, (y) they are not participating in a
distribution of the Exchange Notes and (z) they are not affiliates (as defined
in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and
(ii) Definitive Notes in an aggregate principal amount equal to the principal
amount of the Restricted Definitive Notes accepted for exchange in the Exchange
Offer. Concurrently with the issuance of such Notes, the Trustee shall cause
the aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and make available for delivery to the Persons designated by the
Holders of Definitive Notes so accepted Definitive Notes in the appropriate
principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global Note
and each Definitive Note (and all Notes issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the
following form:
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"THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT, (3) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE
144 THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS."
(B) Notwithstanding the foregoing, any Global Note or Definitive Note
issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii),
(d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes
issued in exchange therefor or substitution thereof) shall not bear the
Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE
FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER
NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL
BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes.
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At such time as all beneficial interests in a particular Global Note
have been exchanged for Definitive Notes or a particular Global Note has been
redeemed, repurchased or canceled in whole and not in part, each such Global
Note shall be returned to or retained and canceled by the Trustee in accordance
with Section 2.11 hereof. At any time prior to such cancellation, if any
beneficial interest in a Global Note is exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Note or for Definitive Notes, the principal amount of Notes represented
by such Global Note shall be reduced accordingly and an endorsement shall be
made on such Global Note by the Trustee or by the Depositary at the direction of
the Trustee to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note, such other Global Note
shall be increased accordingly and an endorsement shall be made on such Global
Note by the Trustee or by the Depositary at the direction of the Trustee to
reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Global Notes and Definitive Notes
upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial interest
in a Global Note or to a Holder of a Definitive Note for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.11, 4.10,
4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of or
exchange any Note selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration of
transfer or exchange of Global Notes or Definitive Notes shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Global Notes or Definitive Notes
surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the opening
of business 15 days before the day of the mailing of notice of redemption
under Section 3.02 hereof and ending at the close of business on such day, (B)
to register the transfer of or to exchange any Note so selected for redemption
in whole or in part, except the unredeemed portion of any Note being redeemed
in part or (c) to register the transfer of or to exchange a Note between a
record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for the
purpose of receiving payment of principal of and interest on such Notes and
for all other purposes, and none of the Trustee, any Agent or the Company
shall be affected by notice to the contrary.
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<PAGE>
(vii) The Trustee shall authenticate Global Notes and Definitive Notes in
accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel required
to be submitted to the Registrar pursuant to this Section 2.06 to effect a
registration of transfer or exchange may be submitted by facsimile.
(ix) Each Holder of a Note agrees to indemnify the Trustee and the
Registrar against any liability that may result from the transfer, exchange or
assignment of such Holder's Note in violation of any provision of this
Indenture and/or applicable United States federal or state securities law.
(x) Neither the Trustee nor the Registrar shall have any obligation or duty
to monitor, determine or inquire as to compliance with any restrictions on
transfer imposed under this Indenture or under applicable law with respect to
any transfer of any interest in any Note (including any transfers between or
among Participants or beneficial owners of interests in any Global Note) other
than to require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when expressly
required by the terms of, this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
Section 2.07. Replacement Notes
If any mutilated Note is surrendered to the Trustee or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser or protected purchaser.
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If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so disregarded.
Section 2.10. Temporary Notes
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirements of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it
has paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee
in writing of the amount of defaulted interest proposed to be paid on each Note
and the date of the proposed payment. The Company shall fix or cause to be
fixed each such special record date and payment date, provided that no such
special record date shall be less than 10 days prior to the related payment date
for such defaulted interest. At least 15 days before the special record date,
the Company (or, upon the written request of the
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Company, the Trustee in the name and at the expense of the Company) shall mail
or cause to be mailed to Holders a notice that states the special record date,
the related payment date and the amount of such interest to be paid.
Section 2.13. CUSIP Numbers.
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of
redemption as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such numbers either as
printed on the Notes or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Notes, and any such redemption shall not be affected by any defect in or the
omission of such numbers. The Company will promptly notify the Trustee of any
change in the CUSIP numbers.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed, (iv) the redemption price and (v) the CUSIP
numbers of the Notes to be redeemed.
Section 3.02. Selection of Notes to Be Redeemed
If less than all of the Notes are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Notes to be redeemed
or purchased among the Holders of the Notes in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption
Subject to the provisions of Section 3.11 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
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<PAGE>
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant to
which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of the
CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price
Prior to 10 a.m. on the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note
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was registered at the close of business on such record date. If any Note called
for redemption shall not be so paid upon surrender for redemption because of the
failure of the Company to comply with the preceding paragraph, interest shall be
paid on the unpaid principal, from the redemption date until such principal is
paid, and to the extent lawful on any interest not paid on such unpaid
principal, in each case at the rate provided in the Notes and in Section 4.01
hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in Sections 3.07(b) and (c) below and in
Section 3.08 hereof, the Notes shall not be redeemable at the Company's option
prior to May 15, 2003. Thereafter, the Notes shall be subject to redemption at
any time or from time to time at the option of the Company, in whole or in part,
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on May 15 of the years indicated below:
Percentage of
Principal
Year Amount
---- -------------
2003...................................... 104.813%
2004...................................... 103.208%
2005...................................... 101.604%
2006 and thereafter....................... 100.000%
(b) Notwithstanding the foregoing, at any time prior to May 15, 2001,
the Company may, on any one or more occasions, redeem up to 25% of the aggregate
principal amount of Notes originally issued pursuant to this Indenture at a
redemption price of 109.625% of the principal amount thereof, plus accrued and
unpaid interest thereon to the redemption date, with the net cash proceeds
received from one or more Equity Offerings made by the Company, GCL or New GCL
(to the extent such net cash proceeds received by GCL or New GCL were
contributed to the Company as common equity capital); provided that at least 75%
of the aggregate principal amount of Notes originally issued pursuant to this
Indenture remain outstanding immediately after the occurrence of any such
redemption. The Company may make any such redemption upon not less than 30 nor
more than 60 days' notice (but in no event more than 90 days after the closing
of the related Equity Offering). Any such notice may be given prior to the
completion of the related Equity Offering and any such redemption may, at the
Company's discretion, be subject to the satisfaction of one or more conditions
precedent, including, but not limited to, the completion of the related Equity
Offering.
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(c) In addition, at any time prior to May 15, 2003, the Notes may also
be redeemed at the option of the Company, in whole but not in part, upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice (but in no event may any such redemption occur more than 90 days
after the occurrence of such Change of Control) mailed by first-class mail to
each Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest, if any, to, the date of redemption (the "Redemption Date").
(d) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Optional Tax Redemption
The Notes will be subject to redemption at the option of the Company
or a successor corporation at any time, in whole but not in part, upon not less
than 30 nor more than 60 days' notice, at a redemption price equal to the
principal amount thereof, plus accrued and unpaid interest thereon to the
redemption date if, as a result of any change in or amendment to the laws or any
regulations or ruling promulgated thereunder of (x) Bermuda or any political
subdivision or governmental authority thereof or therein having the power to
tax, (y) any jurisdiction, other than the United States, from or through which
payment on the Notes is made by the Company or a successor corporation, or its
paying agent in its capacity as such or any political subdivision or
governmental authority thereof or therein having the power to tax or (z) any
other jurisdiction, other than the United States, in which the Company or a
successor corporation is organized, or any political subdivision or governmental
authority thereof or therein having the power to tax, or any change in the
official application or interpretation of such laws, regulations or rulings, or
any change in the official application or interpretation of, or any execution of
or amendment to, any treaty or treaties affecting taxation to which such
jurisdiction (or such political subdivision or taxing authority) is a party (a
"Change in Tax Law"), which becomes effective on or after May 13, 1998, the
Company or a successor corporation is or would be required on the next
succeeding interest payment date to pay Additional Amounts with respect to the
Notes (as described under Section 3.09 hereof), and the payment of such
Additional Amounts cannot be avoided by the use of any reasonable measures
available to the Company or a successor corporation.
In addition, the Notes will be subject to redemption at the option of
the Company at any time, in whole but not in part, upon not less than 30 nor
more than 60 days' notice, at a redemption price equal to the principal amount
thereof, plus accrued and unpaid interest thereon to the redemption date, if the
Person formed by a consolidation or amalgamation of the Company or into which
the Company is merged or to which the Company conveys, transfers or leases its
properties and assets substantially as an entirety is required, as a consequence
of such consolidation, amalgamation, merger, conveyance, transfer or lease and
as a consequence of a Change in Tax Law occurring after the date of such
consolidation, amalgamation, merger, conveyance, transfer or lease, to pay
Additional Amounts in respect of any tax, assessment or governmental charge
imposed on any Holder of Notes.
Section 3.09. Payment of Additional Amounts.
If any deduction or withholding for any present or future taxes,
assessments or other governmental charges of (x) Bermuda or any political
subdivision or governmental authority thereof or therein having power to tax,
(y) any jurisdiction, other than the United States, from or through which
payment on the Notes is made by the Company or a successor corporation, or its
paying agent in its
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capacity as such or any political subdivision or governmental authority thereof
or therein having the power to tax or (z) any other jurisdiction, other than the
United States, in which the Company or a successor corporation is organized, or
any political subdivision or governmental authority thereof or therein having
the power to tax shall at any time be required by such jurisdiction (or any such
political subdivision or taxing authority) in respect of any amounts to be paid
by the Company or a successor corporation under the Notes, the Company or a
successor corporation will pay to each Holder of Notes as additional interest,
such additional amounts ("Additional Amounts") as may be necessary in order that
the net amounts paid to such holder of such Notes who, with respect to any such
tax, assessment or other governmental charge, is not resident in, or a citizen
of, such jurisdiction, after such deduction or withholding, shall be not less
than the amount specified in such Notes to which such Holder is entitled;
provided, however, that the Company or a successor corporation shall not be
required to make any payment of Additional Amounts for or on account of:
(a) Any tax, assessment or other governmental charge that would not have
been imposed but for (i) the existence of any present or former connection
between such Holder (or between a fiduciary, settlor, beneficiary, member or
shareholder of, or possessor of a power over, such Holder, if such Holder is an
estate, trust, partnership, limited liability company or corporation) and the
taxing jurisdiction or any political subdivision or territory or possession
thereof or area subject to its jurisdiction, including, without limitation, such
Holder (or such fiduciary, settlor, beneficiary, member, shareholder or
possessor) being or having been a citizen or resident thereof or being or having
been present or engaged in a trade or business therein or having or having had a
permanent establishment therein, (ii) the presentation of a Note (where
presentation is required) for payment on a date more than 30 days after (x) the
date on which such payment became due and payable or (y) the date on which
payment thereof is duly provided for, whichever occurs later, or (iii) the
presentation of a Note for payment in Bermuda or any political subdivision
thereof or therein, unless such Note could not have been presented for payment
elsewhere;
(b) Any estate, inheritance, gift, sales, transfer, personal property or
similar tax, assessment or other governmental charge;
(c) Any tax, assessment or other governmental charge that is payable
otherwise than by withholding from payment of principal of, premium, if any, or
any interest on the Notes;
(d) Any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure by the Holder or the beneficial owner of the
Note to comply with a request of the Company addressed to the Holder (i) to
provide information, documents or other evidence concerning the nationality,
residence or identity of the Holder or such beneficial owner or (ii) to make and
deliver any declaration or other similar claim (other than a claim for refund of
a tax, assessment or other governmental charge withheld by the Company) or
satisfy any information or reporting requirements, which, in the case of (i) or
(ii), is required or imposed by a statute, treaty, regulation or administrative
practice of the taxing jurisdiction as a precondition to exemption from all or
part of such tax, assessment or other governmental charge; or
(e) Any combination of items (a), (b), (c) and (d) above;
nor shall Additional Amounts be paid with respect to any payment of
the principal of, or any premium or interest on, any Note to any Holder who is a
fiduciary or partnership or limited liability
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company or other than the sole beneficial owner of such payment to the extent
such payment would be required by the laws of (x) Bermuda or any political
subdivision or governmental authority thereof or therein having the power to
tax, (y) any jurisdiction, other than the United States, from or through which
payment on the Notes is made by the Company or a successor corporation, or its
paying agent in its capacity as such or any political subdivision or
governmental authority thereof or therein having the power to tax or (z) any
other jurisdiction, other than the United States, in which the Company or a
successor corporation is organized, or any political subdivision or governmental
authority thereof or therein having the power to tax to be included in the
income for tax purposes of a beneficiary or settlor with respect to such
fiduciary or a member of such partnership, limited liability company or
beneficial owner who would not have been entitled to such Additional Amounts had
it been the Holder of such Note.
The Company shall provide the Trustee with the official acknowledgment
of the relevant taxing authority (or, if such acknowledgment is not available, a
certified copy thereof) evidencing the payment of the withholding taxes, if any,
by the Company. Copies of such documentation shall be made available to the
Holders of the Notes or the Paying Agent, as applicable, upon request therefor.
All references in this Indenture to principal of, premium, if any, and
interest on the Notes shall include any Additional Amounts payable by the
Company in respect of such principal, such premium, if any, and such interest.
Section 3.10. Mandatory Redemption.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
Section 3.11. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall
be required to commence an Asset Sale Offer, it shall follow the procedures
specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale
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Offer shall be made to all Holders. The notice, which shall govern the terms of
the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.11
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may only elect to have all of such Note purchased and may not elect
to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by Holders
exceeds the Offer Amount, the Company shall select the Notes to be purchased on
a pro rata basis (with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000, or integral multiples
thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before 10:00 a.m. on the Purchase Date, the Company shall, to
the extent lawful, accept for payment, on a pro rata basis to the extent
necessary, the Offer Amount or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.11. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly issue a new
Note, and the Trustee, upon written request from the Company shall authenticate
and mail or deliver such new Note to such Holder, in a principal amount
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equal to any unpurchased portion of the Note surrendered. Any Note not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Asset Sale Offer
on the Purchase Date.
Other than as specifically provided in this Section 3.11, any purchase
pursuant to this Section 3.11 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest and Special Interest, if any, on the Notes on the dates and
in the manner provided in the Notes. Principal, premium, if any, and interest
and Special Interest, if any, shall be considered paid on the date due if the
Paying Agent, if other than the Company or a Subsidiary thereof, holds as of
10:00 a.m. Eastern Time on the due date money deposited by the Company in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest and Special Interest, if any, then due.
The Company shall pay all Special Interest, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Special Interest (without regard to any applicable grace period) at the same
rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03 hereof.
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Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company and the Guarantors will furnish
to the Trustee and the Holders of the Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the SEC on Forms 10-Q and 10-K if the Company and the Guarantors were required
to file such Forms, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" that describes the financial
condition and results of operations of the Company and its consolidated
Subsidiaries and, with respect to the annual information only, a report thereon
by the Company's and the Guarantors' certified independent accountants, and (ii)
all current reports that would be required to be filed with the SEC on Form 8-K
if the Company and the Guarantors were required to file such reports, in each
case within the time periods specified in the SEC's rules and regulations (with
the exception of the quarterly financial information that would be required to
be contained in a filing with the SEC on Form 10-Q for the three months ended
March 31, 1998, which will be required to be furnished on or prior to May 31,
1998). In addition, following the consummation of the Exchange Offer
contemplated by the Registration Rights Agreement, whether or not required by
the rules and regulations of the SEC, the Company and the Guarantors will file a
copy of all such information and reports with the SEC for public availability
within the time periods specified in the SEC's rules and regulations (unless the
SEC will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company and the
Guarantors shall be deemed to have satisfied such requirements if GCL or New GCL
files and provides reports, documents and information of the types otherwise so
required by the SEC, in each case within the applicable time periods, and the
Company and the Guarantors are not required by the SEC to file such reports,
documents and information separately under the applicable rules and regulations
of the SEC (after giving effect to any exemptive relief) because of the filings
by GCL or New GCL. The Company shall at all times comply with TIA (S) 314(a).
(b) For so long as any Series A Notes remain outstanding (and regardless of
the penultimate sentence of paragraph (a) above), the Company and the Guarantors
shall furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company and each Guarantor shall deliver to the Trustee (to the
extent that such Guarantor is so required under the TIA), within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto. For
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purposes of this paragraph, such compliance shall be determined without regard
to any period of grace or requirement of notice provided under this Indenture.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) hereof shall be accompanied by
a written statement of the Company's independent public accountants (who shall
be a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any Officer becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Company is taking or proposes to take with respect
thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company and each of the Guarantors covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and the
Company and each of the Guarantors (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company or
any of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or to the Company or a Restricted Subsidiary of the
Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company (other than any such Equity Interests owned by
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the Company or any Wholly Owned Restricted Subsidiary of the Company); (iii)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated to
the Notes, except a payment of interest or principal at Stated Maturity; or (iv)
make any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless:
(a) at the time of and after giving effect to such Restricted Payment,
no Default or Event of Default shall have occurred and be continuing or would
occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to either clause (i)
or (ii) of the first paragraph of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
after the date hereof (excluding Restricted Payments permitted by clauses (ii),
(iii), (iv), (vi), (vii), (viii), (ix) (but only to the extent that such
Restricted Payments are reflected as an expense on the income statement of GCL
or New GCL, as applicable) and (x) of the next succeeding paragraph), is less
than the sum, without duplication, of (i) 50% of the Consolidated Net Income of
the Company for the period (taken as one accounting period) beginning on the
last day of the fiscal quarter immediately preceding the date hereof and ending
on the last day of the fiscal quarter immediately preceding the date of such
Restricted Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash
proceeds and the fair market value (as determined in good faith by the Board of
Directors) of property or assets received by the Company since the date hereof
as a contribution to its common equity capital or from the issue or sale of
Equity Interests of the Company (other than Disqualified Stock) or from the
issue or sale of Disqualified Stock or debt securities of the Company that have
been converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of the
Company), plus the amount of cash or the fair market value (as determined above)
of property or assets received by the Company or any Restricted Subsidiary upon
such conversion or exchange, plus (iii) the aggregate amount equal to the net
reduction in Investments in Unrestricted Subsidiaries resulting from (x)
dividends, distributions, interest payments, return of capital, repayments of
Investments or other transfers of assets to the Company or any Restricted
Subsidiary from any Unrestricted Subsidiary, (y) proceeds realized by the
Company or any Restricted Subsidiary upon the sale of such Investment to a
Person other than GCL, New GCL, the Company or any Subsidiary of the Company, or
(z) the redesignation of any Unrestricted Subsidiary as a Restricted Subsidiary,
not to exceed in the case of any of the immediately preceding clauses (x), (y)
or (z) the aggregate amount of Restricted Investments made by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary after the date hereof,
plus (iv) to the extent that any Restricted Investment that was made after the
date hereof is sold for cash or otherwise liquidated or repaid for cash, the
lesser of (A) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (B) the initial amount of
such Restricted Investment; provided, however, that amounts determined pursuant
to subclauses (x) and (y) of clause (iii) or clause (iv) shall exclude amounts
arising from the reallocation of an Investment made in accordance with the
provisions described below in clause (vi) of the immediate following paragraph.
The foregoing provisions will not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have
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complied with the foregoing provisions; (ii) the redemption, repurchase,
retirement, defeasance or other acquisition of any subordinated Indebtedness or
Equity Interests of the Company in exchange for, or out of the net cash proceeds
of the substantially concurrent sale (other than to a Subsidiary of the Company)
of, other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (c)(ii) of the preceding paragraph; (iii) the
defeasance, redemption, retirement, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the payment of any dividend by a
Restricted Subsidiary of the Company to the holders of its Equity Interests on a
pro rata basis; (v) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any of its
Restricted Subsidiaries held by any member of the Company's or such Restricted
Subsidiary's management; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$5.0 million in any twelve-month period (with unused amounts being carried over
to succeeding twelve-month periods, subject to a maximum of $10.0 million in any
twelve-month period); (vi) Investments in Project Subsidiaries made with a
portion of the net proceeds of the Offering in an aggregate amount not to exceed
the amount identified in the Offering Memorandum under the caption "Use of
Proceeds" as `Investments in Cable Systems Under Development' made within one
year of the date hereof, or a reallocation of any such Investments to the extent
of any reduction of such Investment during such one-year period resulting from
an investment by any third party (including, without limitation, pursuant to a
Joint Venture) in the formation of such Project Subsidiary, provided that such
reallocation is made within one year from the date of such third party
Investment; (vii) Investments in Project Subsidiaries made with the net cash
proceeds received from an Equity Offering made by the Company, GCL or New GCL
(but only to the extent such net cash proceeds received by GCL or New GCL were
contributed to the Company as common equity capital); provided that the amount
of any such net cash proceeds that are utilized for any such Investment shall be
excluded from clause (c)(ii) of the preceding paragraph; (viii) Investments in
GTH of amounts necessary to effect the redemption of the outstanding GTH
Preference Shares in accordance with the terms thereof; (ix) the payment of any
dividend or the making of any distribution to GCL or New GCL by the Company or
any Restricted Subsidiary to pay or permit GCL or New GCL to pay any GCL
Expenses or any Related Taxes; (x) any payments made pursuant to an incurrence
of Indebtedness pursuant to clause (i) of Section 4.09 hereof; and (xi) other
Restricted Payments in an aggregate amount not to exceed $5.0 million prior to
an Initial Public Offering or $10.0 million subsequent to an Initial Public
Offering.
The Board of Directors may not designate any Subsidiary of the Company
(other than a newly created Subsidiary in which no Investment has previously
been made (other than the amount required to capitalize such Subsidiary in
connection with its organization)) as an Unrestricted Subsidiary (a
"Designation") unless: (i) no Default or Event of Default shall have occurred
and be continuing at the time of or after giving effect to such Designation;
(ii) the Company would, immediately after giving effect to such Designation,
have been permitted to incur at least $1.00 of additional Indebtedness pursuant
to either clause (i) or (ii) of the first paragraph of Section 4.09 hereof and
(iii) the Company would not be prohibited under this Indenture from making an
Investment at the time of such Designation (assuming the effectiveness of such
Designation for purposes of clauses (a) and (b) of the first paragraph of this
Section 4.07) in an amount equal to the fair market value of the net Investment
of the Company or any other Restricted Subsidiary in such Subsidiary on such
date; provided, however, that in no event will Atlantic Crossing be transferred
to or held by an Unrestricted Subsidiary.
In the event of any such Designation, all outstanding Investments
owned by the Company and its Restricted Subsidiaries in the Subsidiary so
designated will be deemed to be an
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Investment made as of the time of such Designation and will reduce the amount
available for Restricted Payments under the first paragraph of this covenant or
Permitted Investments, as applicable. All such outstanding Investments will be
deemed to constitute Restricted Payments in an amount equal to the fair market
value of such Investments at the time of such Designation.
A Designation may be revoked (a "Revocation") by a resolution of the
Board of Directors delivered to the Trustee, provided that Company will not make
any Revocation unless: (i) no Default or Event of Default shall have occurred
and be continuing at the time of or after giving effect to such Designation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding
immediately following such Revocation would, if incurred at such time, have been
permitted to be incurred at such time for all purposes under this Indenture.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or (such
Restricted Subsidiary, as the case may be) pursuant to the Restricted Payment.
The fair market value of any asset(s) or securities that are required to be
valued by this covenant shall be determined in good faith by the Board of
Directors (such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $15.0 million).
Section 4.08. Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary to (i)(a) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness owed to the Company or any
of its Restricted Subsidiaries, (ii) make loans or advances to the Company or
any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries. However, the
foregoing restrictions shall not apply to encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date hereof,
(b) the AC-1 Credit Facility as in effect as of the date hereof, (c)
Indebtedness incurred in accordance with clause (e) of Section 4.09 hereof,
provided that any such encumbrances or restrictions contained in the agreements
governing such Indebtedness do not encumber or restrict the ability of any
Restricted Subsidiary of the Company to make any payments (as described in
clauses (i) through (iii) above) in an amount sufficient for the Company to make
the timely payment of interest on the Notes, (d) Indebtedness incurred in
accordance with clauses (m) or (n) of the second paragraph of Section 4.09
hereof, provided that such encumbrances or restrictions are customary with
respect to such types of Indebtedness (as determined in good faith by the Chief
Financial Officer of the Company), (e) this Indenture and the Notes, (f)
applicable law, (g) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, provided, that in the case of Indebtedness, such
Indebtedness was permitted by the terms of this Indenture to be incurred, (h)
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (i) purchase money
obligations for property
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acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (j) any
agreement for the sale or other disposition of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale or other
disposition, (k) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those contained in
the agreements governing the Indebtedness being refinanced, (l) Liens securing
Indebtedness otherwise permitted to be incurred pursuant to the provisions of
Section 4.12 hereof that limit the right of the Company or any of its Restricted
Subsidiaries to dispose of the assets subject to such Lien, (m) provisions with
respect to the disposition or distribution of assets or property in joint
venture agreements and other similar agreements entered into in the ordinary
course of business and (n) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and the Company shall not issue any Disqualified Stock and shall not
permit any of its Restricted Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company may incur Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock and its Restricted
Subsidiaries that are Guarantors may incur Indebtedness or issue Disqualified
Stock if either:
(i) the Consolidated Leverage Ratio at the end of the Company's most
recently ended fiscal quarter for which a consolidated balance sheet of the
Company is available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been
less than 5.5 to 1 (prior to May 15, 2001), or 5.0 to 1.0 (subsequent to May 15,
2001), determined on a pro forma basis (including a pro forma application of the
net proceeds therefrom), as if the additional Indebtedness had been incurred, or
the Disqualified Stock had been issued, as the case may be, at the beginning of
the four fiscal quarters ended on the date of such consolidated balance sheet;
or
(ii) the Consolidated Capital Ratio for the Company's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock is issued would have been less than 2.5
to 1.0, determined on a pro forma basis (including a pro forma application of
the net proceeds therefrom) as if the additional Indebtedness had been incurred,
or the Disqualified Stock had been issued, as the case may be, at the beginning
of such four-quarter period.
Notwithstanding the foregoing, the provisions of the paragraph set
forth above will not apply to the incurrence of any of the following items of
Indebtedness (collectively, "Permitted Indebtedness"):
(a) The incurrence by the Company of Indebtedness represented by the
Notes;
(b) The incurrence by the Company or any of its Restricted
Subsidiaries of Existing Indebtedness;
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(c) The incurrence of Indebtedness by the Company to any Wholly Owned
Restricted Subsidiary or Indebtedness of any Restricted Subsidiary to the
Company or any Wholly Owned Restricted Subsidiary (but only for so long as such
Indebtedness is held by the Company or such Wholly Owned Restricted Subsidiary);
(d) The incurrence by the AC Subsidiaries of Indebtedness under the
AC-1 Credit Facility in an aggregate principal amount not to exceed $500.0
million at any time outstanding, less the aggregate amount of all repayments,
mandatory or optional (including any repayments made pursuant to clause (m) of
this paragraph, but excluding any repayments of revolving credit borrowings
thereunder, provided that the maximum amount of revolving credit Indebtedness
permitted to be incurred under this clause shall not exceed $10.0 million at any
time outstanding), made by the Company or any of its Restricted Subsidiaries
thereunder since the date hereof;
(e) The incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness pursuant to the construction of extensions or
upgrades of Atlantic Crossing, including AC-2, not to exceed $150.0 million at
any time outstanding, less the aggregate amount of all repayments, mandatory or
optional (including any repayments made pursuant to clause (m) of this
paragraph, but excluding any repayments of revolving credit borrowings
thereunder, provided that the maximum amount of revolving credit Indebtedness
permitted to be incurred under this clause shall not exceed $10.0 million at any
time outstanding), made by the Company or any of its Restricted Subsidiaries
thereunder; provided that such Indebtedness is incurred for the purpose of
financing all or any part of the cost of construction of such planned extensions
or upgrades of Atlantic Crossing;
(f) The incurrence by the Company or any of its Restricted
Subsidiaries of Capital Lease Obligations (other than leases of backhaul
services), mortgage financings or purchase money obligations, in each case
incurred for the purpose of financing all or any part of the purchase price or
cost of construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate principal
amount not to exceed $25.0 million at any time outstanding;
(g) The incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness pursuant to acquisitions of backhaul capacity made
in the ordinary course of business;
(h) The incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing
or hedging interest or foreign currency exchange rate risk with respect to any
floating rate Indebtedness that is permitted by the terms of this Indenture to
be outstanding;
(i) The incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness of a Restricted Subsidiary incurred and outstanding
on the date on which such Restricted Subsidiary was acquired by the Company;
provided, however, that at the time such Restricted Subsidiary is acquired by
the Company (giving effect to such acquisition), the Company would have been
able to incur $1.00 of additional Indebtedness pursuant to the immediately
preceding paragraph;
(j) The incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace Indebtedness (other
than intercompany Indebtedness) that was permitted by this
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Indenture to be incurred under the first paragraph hereof or clauses (a), (b),
(d), (e), (f), (i), (k), (l) or (n) of this paragraph;
(k) The incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness not otherwise permitted to be incurred
pursuant to this paragraph in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (k), not to exceed $25.0 million;
(l) The incurrence by the Company or any of its Restricted
Subsidiaries that are Guarantors of Indebtedness to finance the construction of
AC-2, provided that such Indebtedness is expressly subordinated to the Notes and
the Stated Maturity and Weighted Average Life to Maturity of such Indebtedness
is not less than the Stated Maturity and Weighted Average Life to Maturity of
the Notes and, provided further, that such Indebtedness is incurred for the
purpose of financing all or any part of the cost of construction of AC-2;
(m) The incurrence of Indebtedness by a Receivables Entity in a
Qualified Receivables Transaction, provided that the proceeds thereof are
applied to the repayment of Indebtedness permitted to be incurred by clause (d)
or (e) of this paragraph;
(n) The incurrence by any Project Subsidiary that is a Restricted
Subsidiary of the Company (excluding the AC Subsidiaries) of Purchase Money
Indebtedness, provided that the amount of such Purchase Money Indebtedness does
not exceed 80% of the cost of construction, installation, acquisition, lease,
development or improvement of assets used in the business of such Restricted
Subsidiary;
(o) Letters of Credit in an aggregate principal amount not to exceed
$70.0 million at any time outstanding, provided that such Letters of Credit are
cash collateralized by a portion of the net proceeds received from the sale of
the Notes; and
(p) The guarantee by the Company or any of its Restricted Subsidiaries
that are Guarantors of Indebtedness of the Company or any Restricted Subsidiary
of the Company that was permitted to be incurred by another provision of this
Section 4.09.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, incur any Indebtedness (including Permitted Indebtedness) that
is contractually subordinated in right of payment to any other Indebtedness of
the Company or such Restricted Subsidiary unless such Indebtedness is also
contractually subordinated in right of payment to the Notes on substantially
identical terms; provided, however, that no Indebtedness of the Company shall be
deemed to be contractually subordinated in right of payment to any other
Indebtedness of the Company solely by virtue of being unsecured.
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Section 4.10. Asset Sales
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, consummate any Asset Sale unless, (i)
the Company (or such Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined in good faith by the Board of Directors (including as to
the value of all noncash consideration) and set forth in an Officer's
Certificate delivered to the Trustee) of the assets or Equity Interests issued
or sold or otherwise disposed of and (ii) at least 75% of the consideration
therefor is in the form of cash and/or Cash Equivalents, and (iii) the Net
Proceeds received by the Company (or such Restricted Subsidiary, as the case may
be) from such Asset Sale are applied within 360 days following the receipt of
such Net Proceeds (a) first, to the extent the Company (or such Restricted
Subsidiary, as the case may be) elects, to the redemption or repurchase of
outstanding Indebtedness incurred pursuant to clauses (d) and (e) of the second
paragraph of Section 4.09 hereof and (b) second, to the extent of the balance of
such Net Proceeds after application as described in (a) above and to the extent
the Company (or such Restricted Subsidiary, as the case may be) elects, to
reinvest, or enter into a legally binding agreement to reinvest, such Net
Proceeds (or any portion thereof) in assets that are used or useful in a
Permitted Business. The balance of such Net Proceeds, after the application of
such Net Proceeds as described in the immediately preceding clauses (a) and (b),
shall constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds equals or exceeds $15.0
million (taking into account income earned on such Excess Proceeds), the Company
will be required to make an offer to all Holders of Notes and pari passu
Indebtedness (an "Asset Sale Offer") to purchase the maximum principal amount of
Notes and pari passu Indebtedness that may be purchased out of the Excess
Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest thereon to the date
of purchase, in accordance with the procedures set forth in Article 3 of this
Indenture and the agreements governing such pari passu Indebtedness. To the
extent that any Excess Proceeds remain after consummation of an Asset Sale
Offer, the Company may use such Excess Proceeds for any purpose not otherwise
prohibited by this Indenture. If the aggregate principal amount of Notes and
pari passu Indebtedness tendered into such Asset Sale Offer surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes and pari passu Indebtedness to be purchased on a pro rata basis. Upon
completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero for purposes of the first sentence of this paragraph.
The amount of (x) any liabilities (as shown on the Company's (or such
Restricted Subsidiary's, as the case may be) most recent balance sheet) of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to an
agreement that releases the Company or any Restricted Subsidiary from all
liability in respect thereof, (y) Indebtedness of any Restricted Subsidiary that
is no longer a Restricted Subsidiary as a result of such Asset Sale, to the
extent that the Company and each other Restricted Subsidiary are released from
any guarantee of payment of the principal amount of such Indebtedness in
connection with such Asset Sale and (z) any securities, notes or other
obligations received by the Company (or such Restricted Subsidiary, as the case
may be) from such transferee that are contemporaneously (subject to ordinary
settlement periods) converted by the Company (or such Restricted Subsidiary, as
the case may be) into cash and/or Cash Equivalents (to the extent of the cash
and/or Cash Equivalents received), will be deemed to be cash and/or Cash
Equivalents for purposes of this provision.
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To the extent that the provisions of any securities laws or
regulations conflict with the Asset Sale provisions of this Indenture, the
Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the Asset Sale
provisions of this Indenture by virtue thereof.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are not materially less
favorable to the Company or the relevant Restricted Subsidiary than those that
would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $15.0 million, the Company delivers to the
Trustee a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction is approved by a majority of the
disinterested members of the Board of Directors and an opinion as to the
fairness to the Holders of such Affiliate Transaction from a financial point of
view is obtained from an accounting, appraisal or investment banking firm of
national standing. Notwithstanding the foregoing, the following items shall not
be deemed to be Affiliate Transactions: (i) (a) the entering into, maintaining
or performance of any employment contract, collective bargaining agreement,
benefit plan, program or arrangement, related trust agreement or any other
similar arrangement for or with any employee, officer or director heretofore or
hereafter entered into in the ordinary course of business, including vacation,
health, insurance, deferred compensation, retirement, savings or other similar
plans, (b) the payment of compensation, performance of indemnification or
contribution obligations, or an issuance, grant or award of stock, options, or
other equity-related interests or other securities, to employees, officers or
directors in the ordinary course of business, (c) any transaction with an
officer or director in the ordinary course of business not involving more than
$100,000 in any one case, or (d) Management Advances and payments in respect
thereof, (ii) transactions between or among the Company and/or its Restricted
Subsidiaries or any Receivables Entity, (iii) payment of reasonable directors
fees, (iv) any sale or other issuance of Equity Interests (other than
Disqualified Stock) of the Company, (v) Affiliate Transactions in effect or
approved by the Board of Directors on the date hereof, including any amendments
thereto (provided that the terms of such amendments are not materially less
favorable to the Company than the terms of such agreement prior to such
amendment), (vi) transactions with respect to capacity between the Company or
any Restricted Subsidiary and any Unrestricted Subsidiary or other Affiliate and
joint sales and marketing pursuant to an agreement or agreements between the
Company or any Restricted Subsidiary and any Unrestricted Subsidiary or other
Affiliate (provided that in the case of this clause (vi), such agreements are on
terms that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that could have been obtained at the time of such
transaction in an arm's-length transaction with an unrelated third party or, in
the case of a transaction with an Unrestricted Subsidiary, are either (x)
entered into in connection with a transaction involving the selection by a
customer of cable system capacity entered into in the ordinary course of
business or (y) involve the provision by the Company or a Restricted Subsidiary
to an Unrestricted Subsidiary of sales and marketing services, operations,
administration and maintenance services or development services for which the
Company or such Restricted Subsidiary receives a fair rate of return (as
determined by the Board of Directors and set forth
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in an Officers' Certificate delivered to the Trustee) above its expenses of
providing such services; and (vii) Restricted Payments that are permitted by
Section 4.07 hereof.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien of any kind (other than Permitted Liens) upon any of
their property or assets, now owned or hereafter acquired, unless all payments
due under this Indenture and the Notes are secured on an equal and ratable basis
with the obligations so secured until such time as such obligations are no
longer secured by a Lien.
Section 4.13. Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company or any of its Restricted Subsidiaries may enter into a sale and
leaseback transaction if (i) the Company (or such Restricted Subsidiary, as the
case may be) could have (a) incurred Indebtedness in an amount equal to the
Attributable Debt relating to such sale and leaseback transaction pursuant to
either of the Consolidated Leverage Ratio or Consolidated Capital Ratio tests
set forth in the first paragraph of section 4.09 hereof and (b) incurred a Lien
to secure such Indebtedness pursuant to Section 4.12 hereof, (ii) the gross cash
proceeds of such sale and leaseback transaction are at least equal to the fair
market value (as determined in good faith by the Board of Directors and set
forth in an Officers' Certificate delivered to the Trustee) of the property that
is the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is treated as an Asset Sale, and
the Company applies the proceeds of such transaction in compliance with, Section
4.10 hereof.
Section 4.14. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
Section 4.15. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
will have the right to require the Company to purchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at a purchase price in
cash (the "Change of Control Payment") equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon to the date of purchase
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date); provided, however,
that the Company shall not be obligated to repurchase Notes pursuant to this
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covenant in the event that it has exercised its rights to redeem all of the
Notes as described in Section 3.07 hereof. Within 30 days following any Change
of Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to purchase Notes on the date specified in such notice, which date shall be no
earlier than 30 and no later than 60 days from the date such notice is mailed
(the "Change of Control Payment Date"), in accordance with the procedures
required by this Indenture and described in such notice. The Company will
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations to the extent such laws and regulations are
applicable in connection with the purchase of Notes as a result of a Change of
Control. To the extent that the provisions of any securities laws or regulations
conflict with any of the provisions of this Section 4.15, the Company will
comply with the applicable securities laws and regulations and will be deemed
not to have breached its obligations under this covenant by virtue thereof.
(b) On the Change of Control Payment Date, the Company will, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail or deliver to each Holder of Notes
so tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail or deliver (or cause to be transferred by book
entry) to each Holder a new Note equal in principal amount to any unpurchased
portion of Notes surrendered, if any; provided that each such new Note will be
in a principal amount of $1,000 or an integral multiple thereof. The Company
will publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.15, the
Company shall not be required to make a Change of Control Offer upon the
occurrence of a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 4.15, and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
Section 4.16. Business Activities.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in any business other than a Permitted Business.
Section 4.17. Future AC Subsidiary Guarantees.
The Company shall cause each of the AC Subsidiaries to become a
Guarantor (other than GTH, which is a Guarantor as of the date of this
Indenture) and execute a supplemental indenture in the form attached as Exhibit
F hereto and deliver an Opinion of Counsel, in accordance with the terms of this
Indenture, in each case when such action is permitted under the terms of the AC-
1 Credit Facility or the AC-1 Credit Facility has been retired.
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Section 4.18. Additional Restricted Subsidiary Guarantees.
If the Company or any of its Restricted Subsidiaries shall acquire or
create another Restricted Subsidiary after the date of this Indenture, then such
newly acquired or created Restricted Subsidiary shall become a Guarantor and
execute a supplemental indenture and deliver an Opinion of Counsel, in
accordance with the terms hereof.
Section 4.19. Issuances and Sales of Equity Interests in Wholly Owned
Restricted Subsidiaries.
The Company (i) shall not, and shall not permit any of its Restricted
Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any
Equity Interests in any Wholly Owned Restricted Subsidiary of the Company to any
Person (other than the Company or a Wholly Owned Restricted Subsidiary of the
Company), unless (a) such transfer, conveyance, sale, lease or other disposition
is of all the Equity Interests in such Wholly Owned Restricted Subsidiary and
(b) the cash Net Proceeds from such transfer, conveyance, sale, lease or other
disposition are applied in accordance with Section 4.10 hereof, and (ii) shall
not permit any Wholly Owned Restricted Subsidiary of the Company to issue any of
its Equity Interests (other than, if necessary, shares of its Capital Stock
constituting directors' qualifying shares) to any Person other than to the
Company or a Wholly Owned Restricted Subsidiary of the Company.
Section 4.20. Payments For Consent.
Neither the Company nor any of its Restricted Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
or is paid to all Holders of the Notes that consent, waive or agree to amend
such terms or provisions of this Indenture or the Notes in the time frame set
forth in the solicitation documents relating to such consent, waiver or
agreement.
Section 4.21. Money for Payments to Be Held In Trust.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal, premium, interest or Special
Interest, if any, with respect to the Notes, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal,
premium, interest or Special Interest, if any, so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein provided, and
will promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Notes, it will, on or before each due date of the principal, premium, interest
or Special Interest, if any, with respect to the Notes, deposit with a Paying
Agent a sum in same day funds (or New York Clearing House funds if such deposit
is made prior to the date on which such deposit is required to be made)
sufficient to pay the principal, premium, interest or Special Interest, if any,
so becoming due (or at the option of the Company, payment of interest may be
mailed by check to the Holders of the Notes at their respective addresses set
forth in the register of Holders of Notes; provided that all payments with
respect to Notes represented by one or more permanent global Notes will be paid
by wire transfer of
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immediately available funds to the account of the Depository Trust Company or
any successor thereto) such sum to be held in trust for the benefit of the
Persons entitled to such principal, premium, interest or Special Interest, if
any, and (unless such Paying Agent is the Trustee) the Company will promptly
notify the Trustee of such action or any failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of, premium,
if any, or interest on Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed of
as herein provided;
(b) give the Trustee notice of any default by the Company (or any other
obligor upon the Notes) in the making of any payment of principal, premium,
interest or Special Interest, if any;
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all respects with the
provisions of this Indenture relating to the duties, rights and obligations of
such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal, premium, interest or
Special Interest, if any, with respect to a Note and remaining unclaimed for two
years after such principal, premium, if any, or interest has become due and
payable shall be paid to the Company at the request of the Company or (if then
held by the Company) shall be discharged from such trust; and the Holder of such
Note shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, shall at
the expense of the Company cause notice to be promptly sent to each Holder that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such notification any unclaimed
balance of such money then remaining will be repaid to the Company.
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ARTICLE 5.
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not, directly or indirectly, consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, convey or otherwise dispose of all or substantially all of its
properties or assets, in one or more related transactions, to another Person
unless: (i) the Company is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, conveyance or other disposition shall
have been made is a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia, or Bermuda; (ii)
the Person formed by or surviving any such consolidation or merger (if other
than the Company) or the Person to which such sale, assignment, transfer,
conveyance or other disposition shall have been made assumes all the obligations
of the Company under the Registration Rights Agreement, the Notes and this
Indenture pursuant to a supplemental indenture in a form and substance
reasonably satisfactory to the Trustee; (iii) immediately after such transaction
no Default or Event of Default exists; and (iv) except in the case of a merger
of the Company with or into a Wholly Owned Restricted Subsidiary of the Company,
the Company or the Person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made (A) will have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) will, immediately after such transaction and after giving pro forma effect
thereto and any related financing transactions as if the same had occurred at
the beginning of the applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to either clause (i) or (ii) of
the first paragraph Section 4.09 hereof. The Company shall not, directly or
indirectly, lease all or substantially all of its properties or assets, in one
or more related transactions, to any other Person. The provisions of this
covenant will not be applicable to a sale, assignment, transfer, conveyance or
other disposition of assets between or among the Company and its Wholly Owned
Restricted Subsidiaries and any of the Guarantors.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
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ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
"Event of Defaults" are:
(i) default for 30 days in the payment when due of interest on the
Notes;
(ii) default in the payment when due of the principal of, or premium,
if any, on, the Notes;
(iii) failure by the Company or any of its Restricted Subsidiaries to
comply with Sections 4.07, 4.09, 4.10 or 4.15;
(iv) failure by the Company or any of its Restricted Subsidiaries for
60 days after notice to comply with any of its other agreements in this
Indenture or the Notes;
(v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date of this Indenture, which default results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness or the maturity of which has been so
accelerated, aggregates $15.0 million or more;
(vi) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments not subject to appeal aggregating in excess of $15.0 million
(net of applicable insurance coverage which is acknowledged in writing by the
insurer), which judgments are not paid, discharged or stayed for a period of 60
days;
(vii) except as permitted by this Indenture, any Guarantee shall be
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect (other than in the case of GCL as
the result of the liquidation or dissolution of GCL in connection with an
initial public offering of Capital Stock of New GCL) or any Guarantor, or any
Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under its Guarantee;
(viii) the Company or any of its Restricted Subsidiaries:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an
involuntary case,
(c) consents to the appointment of a custodian of it or for all or
substantially all of its property,
(d) makes a general assignment for the benefit of its creditors, or
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(e) generally is not paying its debts as they become due;
(ix) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(a) is for relief against the Company or any of its Restricted
Subsidiaries;
(b) appoints a custodian of the Company or any of its Restricted
Subsidiaries or for all or substantially all of the property of the Company or
any of its Restricted Subsidiaries; or
(c) orders the liquidation of the Company or any of its Restricted
Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive
days; and
(x) failure by GCL or New GCL, upon an Initial Public Offering, to
contribute the net proceeds received thereby to the Company as common equity
capital within 30 days of the receipt of such net proceeds.
Section 6.02. Acceleration.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, if an Event of Default specified in clause (viii) or (ix) of Section
6.01 hereof occurs with respect to the Company, any of its Restricted
Subsidiaries that constitutes a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary, all outstanding Notes shall be due and payable immediately without
further action or notice. The Holders of a majority in aggregate principal
amount of the then outstanding Notes by written notice to the Trustee may on
behalf of all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium that has
become due solely because of the acceleration) have been cured or waived.
If an Event of Default occurs by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding payment of the premium that the Company would have had to pay if the
Company then had elected to redeem the Notes pursuant to Section 3.07 hereof,
then, upon acceleration of the Notes, an equivalent premium shall also become
and be immediately due and payable, to the extent permitted by law, anything in
this Indenture or in the Notes to the contrary notwithstanding. If an Event of
Default occurs prior to May 15, 2003 by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding the prohibition on redemption of the Notes prior to such date, then,
upon acceleration of the Notes, an additional premium shall also become and be
immediately due and payable in an amount, for each of the years beginning on May
15 of the years set forth below, as set forth below (expressed as a percentage
of the aggregate principal amount to the date of payment that would otherwise be
due but for the provisions of this sentence):
YEAR PERCENTAGE
---- ----------
1998.......................... 109.625%
1999.......................... 108.662%
2000.......................... 107.700%
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2001.......................... 106.738%
2002.......................... 105.775%
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest and Special Interest, if any, on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Special Interest, if any, or interest
on, the Notes (including in connection with an offer to purchase). Upon any
such waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
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(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Special
Interest, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(i) or (ii) hereof
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium and Special Interest, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to participate as a member, voting or otherwise, of
any official committee of creditors appointed in such matter and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization,
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arrangement, adjustment or composition affecting the Notes or the rights of any
Holder, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Special Interest, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Special Interest, if any, and
interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of
a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only those duties
that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee; and
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(ii) in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the Trustee shall
examine the certificates and opinions to determine whether or not they conform
to the requirements of this Indenture (but need not confirm or investigate the
accuracy of mathematical calculations or other facts stated therein or
otherwise verify the contents thereof).
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or expense
including reasonable attorneys' fees that might be incurred by it in compliance
with such request or direction.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document. The
Trustee shall receive and retain financial reports and statements of the Company
as provided herein, but it shall have no duty to review or analyze such reports
or statements to determine compliance with convenants or other obligations of
the Company.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel of its selection and the advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
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(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
(a) The Trustee shall not be deemed to have notice of any Default or Event
of Default unless a Responsible Officer of the Trustee has actual knowledge
thereof or unless written notice of any event which is in fact such a default is
received by the Trustee at the Corporate Trust Office of the Trustee, and such
notice references the Notes and this Indenture.
(b) If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA (S) 313(a) (but if no event described
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in TIA (S) 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA (S)
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA (S) 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation for its acceptance of this Indenture and services hereunder as the
parties shall agree from time to time. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld or
delayed.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(viii) or (ix) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to
the extent applicable.
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Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10 hereof, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
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Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100.0
million as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA
(S) 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all of its obligations
under such Notes and this Indenture (and the Trustee, on demand of and at the
expense of the Company, shall execute proper instruments acknowledging the
same), except for the following provisions which shall survive until otherwise
terminated or discharged hereunder: (a) the rights of Holders of outstanding
Notes to receive payments in respect of the principal of, premium, if any, and
interest on such Notes when such payments are due from the trust referred to
below; (b) the Company's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment and money
for security payments held in trust; (c) the rights, powers, trusts, duties and
immunities of the Trustee, and the Company's obligations in connection
therewith; and (d) the Legal Defeasance provisions of this Indenture. Subject
to compliance with this Article 8, the Company may exercise its option under
this Section 8.02 notwithstanding the prior exercise of its option under Section
8.03 hereof.
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Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company and each Guarantor shall, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, be
released from their respective obligations under the covenants contained in
Article 5 and in Sections 4.03, 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.15,
4.16, 4.17, 4.18, 4.19 and 4.20 hereof with respect to the outstanding Notes on
and after the date the conditions set forth in Section 8.04 are satisfied
(hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such covenant, whether directly or
indirectly, by reason of any reference elsewhere herein to any such covenant or
by reason of any reference in any such covenant to any other provision herein or
in any other document and such omission to comply shall not constitute a Default
or an Event of Default under Section 6.01 hereof, but, except as specified
above, the remainder of this Indenture and such Notes shall be unaffected
thereby. In addition, upon the Company's exercise under Section 8.01 hereof of
the option applicable to this Section 8.03, subject to the satisfaction of the
conditions set forth in Section 8.04 hereof, Sections 6.01(iii) through
6.01(vii) hereof and 6.01(x) hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit, or cause to be deposited, with
the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S.
dollars, non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest on the outstanding Notes on the stated maturity thereof or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date;
(b) in the case of Legal Defeasance, the Company must deliver to the
Trustee an Opinion of Counsel in the United States reasonably acceptable to the
Trustee confirming that the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or since the Issue Date,
there has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance, and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance had
not occurred;
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(c) in the case of Covenant Defeasance, the Company must deliver to the
Trustee an Opinion of Counsel in the United States reasonably acceptable to the
Trustee confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance, and such Holders will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default resulting
from the borrowing of funds to be applied to such deposit) or insofar as Events
of Default from bankruptcy or insolvency events are concerned, at any time in
the period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound;
(f) the Company must deliver to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee to the effect that after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights and remedies generally;
(g) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of the Notes over other creditors of the Company, or with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others;
(h) the Company must deliver to the Trustee an Opinion of Counsel in
Bermuda reasonably acceptable to the Trustee to the effect that the Holders of
the outstanding Notes will not be adversely affected under Bermuda law; and
(i) the Company must deliver to the Trustee an Officers' Certificate and an
Opinion of Counsel in the United States reasonably acceptable to the Trustee,
each stating that all conditions precedent provided for or relating to Legal
Defeasance or Covenant Defeasance, as applicable, have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
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The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, interest
or Special Interest, if any, on any Note and remaining unclaimed for two years
after such principal, and premium, if any, or interest has become due and
payable shall be paid to the Company on its request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as a secured creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
Section 8.08. Survival.
The Trustee's rights under this Article 8 shall survive termination of
this Indenture.
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ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 hereof, the Company, the Guarantors and
the Trustee may amend or supplement this Indenture, the Guarantees or the Notes
without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's or any Guarantor's
obligations to the Holders of the Notes by a successor to the Company or a
Guarantor pursuant to Article 5 or Article 10 hereof;
(d) to make any change that would provide any additional rights or benefits
to the Holders of the Notes or that does not adversely affect the legal rights
hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA; or
(f) to allow any Guarantor to execute a supplemental indenture and/or a
Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company, a
Guarantor (with respect to a Guarantee or the Indenture to which it is a party)
and the Trustee may amend or supplement this Indenture (including Section 3.11,
4.10 and 4.15 hereof), the Notes and the Guarantees with the consent of the
Holders of at least a majority in principal amount of the then outstanding Notes
then outstanding voting as a single class (including consents obtained in
connection with a tender offer or exchange offer for, or purchase of, the
Notes), and, subject to Sections 6.04 and 6.07 hereof, any existing Default or
Event of Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, or interest on the Notes, except a payment
default resulting from an acceleration that has been rescinded) or compliance
with any provision of this Indenture, the Notes or the Guarantees may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Notes
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voting as a single class (including consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Notes).
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental indenture
unless such amended or supplemental indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes then
outstanding voting as a single class may waive compliance in a particular
instance by the Company with any provision of this Indenture or the Notes.
However, without the consent of each Holder affected, an amendment or waiver
under this Section 9.02 may not (with respect to any Notes held by a non-
consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the
Notes, other than provisions relating to Sections 3.11 or 4.15 hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of or
premium or Special Interest, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the then outstanding Notes and a waiver of the
payment default that resulted from such acceleration;
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to waivers
of past Defaults or the rights of Holders of Notes to receive payments of
principal of or premium, interest or Special Interest, if any, on the Notes;
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(g) waive a redemption payment with respect to any Note, other than a
payment required by Section 3.11 or 4.15 hereof;
(h) make any change in the foregoing amendment and waiver provisions.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental indenture that complies with the TIA as
then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon an Officer's Certificate and an Opinion
of Counsel stating that the execution of such amended or supplemental indenture
is authorized or permitted by this Indenture and that such amendment is the
legal, valid and binding obligation of the Company and any Guarantors,
enforceable against them in accordance with their terms, subject to customary
exceptions, and complies with the provisions hereof (including Section 9.03).
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ARTICLE 10.
GUARANTEES
Section 10.01. Guarantee.
Subject to this Article 10, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Holder of a Note authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Company hereunder or thereunder, that: (a) the principal
of and interest on the Notes will be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, that same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed or any performance so
guaranteed for whatever reason, the Guarantors shall be jointly and severally
obligated to pay the same immediately. Each Guarantor agrees that this is a
guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors or any custodian, trustee, liquidator or
other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6 hereof, such obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Guarantee. The Guarantors shall have the right to seek
contribution from any non-paying Guarantor so long as the exercise of such right
does not impair the rights of the Holders under the Guarantee.
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Section 10.02. Limitation on Guarantor Liability.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Guarantee of such
Guarantor not constitute a fraudulent transfer or conveyance for purposes of
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law to the extent applicable to any
Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and
the Guarantors hereby irrevocably agree that the obligations of such Guarantor
under its Guarantee and this Article 10 shall be limited to the maximum amount
as will, after giving effect to such maximum amount and all other contingent and
fixed liabilities of such Guarantor that are relevant under such laws, and after
giving effect to any collections from, rights to receive contribution from or
payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under this Article 10, result in the
obligations of such Guarantor under its Guarantee not constituting a fraudulent
transfer or conveyance.
Section 10.03. Execution and Delivery of Guarantee.
To evidence its Guarantee set forth in Section 10.01, each Guarantor
hereby agrees that a notation of such Guarantee substantially in the form
included in Exhibit E shall be endorsed by an Officer of such Guarantor on each
---------
Note authenticated and delivered by the Trustee and that this Indenture shall be
executed on behalf of such Guarantor by an Officer thereof.
Each Guarantor hereby agrees that its Guarantee set forth in Section
10.01 shall remain in full force and effect notwithstanding any failure to
endorse on each Note a notation of such Guarantee.
If an Officer whose signature is on this Indenture or on the Guarantee
no longer holds that office at the time the Trustee authenticates the Note on
which a Guarantee is endorsed, the Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee set forth in
this Indenture on behalf of the Guarantors.
When permitted under the terms of the AC-1 Credit Facility or when the
AC-1 Credit Facility has been retired, if required by Section 4.17 hereof, the
Company shall cause each of the AC Subsidiaries (other than GTH, which is a
Guarantor as of the date of this Indenture) to execute supplemental indentures
to this Indenture and Guarantees in accordance with Section 4.17 hereof, and
this Article 10, to the extent applicable.
In the event that the Company creates or acquires any new Restricted
Subsidiaries subsequent to the date of this Indenture, if required by Section
4.18 hereof, the Company shall cause such Restricted Subsidiaries to execute
supplemental indentures to this Indenture and Guarantees in accordance with
Section 4.18 hereof, and this Article 10, to the extent applicable.
Section 10.04. Guarantors May Consolidate, etc., on Certain Terms.
No Guarantor may consolidate with or merge with or into (whether or
not such Guarantor is the surviving Person) another Person whether or not
affiliated with such Guarantor unless:
(a) subject to Section 10.05 hereof, the Person formed by or surviving
any such consolidation or merger (if other than a Guarantor or the Company)
unconditionally assumes all the
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obligations of such Guarantor, pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the Notes, this
Indenture, the Registration Rights Agreement and the Guarantee on the terms set
forth herein or therein; and
(b) immediately after giving effect to such transaction, no Default or
Event of Default exists.
In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the
Guarantee endorsed upon the Notes and the due and punctual performance of all of
the covenants and conditions of this Indenture to be performed by the Guarantor,
such successor Person shall succeed to and be substituted for the Guarantor with
the same effect as if it had been named herein as a Guarantor. Such successor
Person thereupon may cause to be signed any or all of the Guarantees to be
endorsed upon all of the Notes issuable hereunder which theretofore shall not
have been signed by the Company and delivered to the Trustee. All the
Guarantees so issued shall in all respects have the same legal rank and benefit
under this Indenture as the Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Guarantees had
been issued at the date of the execution hereof.
Notwithstanding clauses (a) and (b) above, nothing contained in this
Indenture or in any of the Notes shall prevent any consolidation or merger of a
Guarantor with or into the Company or another Guarantor, or shall prevent any
sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety to the Company or another Guarantor.
Section 10.05. Releases Following Sale of Assets.
In the event of a sale or other disposition of all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of merger, consolidation or
otherwise, of all of the capital stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will be released and relieved
of any obligations under its Guarantee; provided that the Net Proceeds of such
sale or other disposition are applied in accordance with the applicable
provisions of this Indenture, including without limitation Section 4.10 hereof.
Upon delivery by the Company to the Trustee of an Officers' Certificate and an
Opinion of Counsel to the effect that such sale or other disposition was made by
the Company in accordance with the applicable provisions of this Indenture,
including without limitation Section 4.10 hereof, the Trustee shall execute any
documents reasonably required in order to evidence the release of any Guarantor
from its obligations under its Guarantee.
Any Guarantor not released from its obligations under its Guarantee
shall remain liable for the full amount of principal of and interest on the
Notes and for the other obligations of any Guarantor under this Indenture as
provided in this Article 10.
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ARTICLE 11.
SATISFACTION AND DISCHARGE
Section 11.01. Satisfaction and Discharge of Indenture.
This Indenture shall be discharged and will cease to be of further
effect as to all Notes issued hereunder, when either
(a) all such Notes theretofore authenticated and delivered (except lost,
stolen or destroyed Notes which have been replaced or paid and Notes for whose
payment money has theretofore been deposited in trust and thereafter repaid to
the Company) have been delivered to the Trustee for cancellation; or
(b) (i) all such Notes not theretofore delivered to such Trustee for
cancellation have become due and payable by reason of the making
of a notice of redemption or otherwise or will become due and
payable within one year and the Company or a Guarantor, has
irrevocably deposited or caused to be deposited with such Trustee
as trust funds in trust an amount of money sufficient to pay and
discharge the entire Indebtedness on such Notes not theretofore
delivered to the Trustee for cancellation for principal, premium,
accrued interest and Special Interest, if any, to the date of
maturity or redemption;
(ii) no Default or Event of Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of
such deposit or shall occur as a result of such deposit and such
deposit will not result in a breach or violation of, or
constitute a default under, any other instrument to which the
Company or a Guarantor, is a party or by which the Company or a
Guarantor is bound;
(iii) the Company or a Guarantor has paid or caused to be paid all sums
payable by it under this Indenture; and
(iv) the Company has delivered irrevocable instructions to the Trustee
under this Indenture to apply the deposited money toward the
payment of such Notes at maturity or the redemption date, as the
case may be.
In addition, the Company must deliver an Officers' Certificate and an
Opinion of Counsel to the Trustee stating that all conditions precedent to
satisfaction and discharge have been satisfied.
Section 11.02. Application of Trust Money
Subject to the provisions of the last paragraph of Section 4.19
hereof, all money deposited with the Trustee pursuant to Section 11.01 hereof
shall be held in trust and applied by it, in accordance with the provisions of
the Notes and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as Paying Agent) as the Trustee may
determine, to Persons entitled thereto, of the principal (and premium, if any),
interest and Special Interest, if any, for whose payment such money has been
deposited with the Trustee.
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<PAGE>
If the Trustee or Paying Agent is unable to apply any money or
Government Securities in accordance with Section 11.01 hereof by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though such deposit had occurred pursuant to
Section 11.01 hereof; provided that if the Company has made any payment of
principal of, premium, if any, or interest on any Notes because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or
Government Securities held by the Trustee or Paying Agent.
ARTICLE 12.
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA (S) 318(c), the imposed duties shall control.
Section 12.02. Notices.
Any notice or communication by the Company, any Guarantor or the
Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company and/or any Guarantor:
Global Crossing Holdings Ltd.
Wessex House
45 Reid Street
Hamilton HM 12
Telecopier No.: (441) 296-8606
Attention: Secretary of the Company
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Telecopier No.: (212) 455-2502
Attention: D. Rhett Brandon, Esq.
If to the Trustee:
United States Trust Company of New York
114 West 47th Street - 25th Floor
New York, New York 10036
Telecopier No.:(212) 852-1626
Attention: Cynthia Chaney
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With a copy to:
Winston & Strawn
200 Park Avenue
New York, NY 10166
Telecopier No.:(212) 294-4700
Attention: Jeffrey H. Elkin, Esq.
The Company, any Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA (S) 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it except that any notice or communication to the Trustee shall be
deemed to have been duly given to the Trustee when received at the Corporate
Trust Office of the Trustee.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 12.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, except with respect to the initial
authentication of Notes on the date of this Indenture, the Company shall furnish
to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion
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of the signers, all conditions precedent and covenants, if any, provided for in
this Indenture relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA
(S) 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has or
they have made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.07. No Personal Liability of Directors, Officers, Employees and
Shareholders.
No past, present or future director, officer, employee, incorporator
or shareholder of the Company or any Guarantor, as such, shall have any
liability for any obligations of the Company or such Guarantor under the Notes,
the Subsidiary Guarantees, this Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
Section 12.08. Governing Law.
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
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Section 12.09. Currency Indemnity.
U.S. dollars are the sole currency of account and payment for all sums
payable by the Company and the Guarantors under or in connection with the Notes,
including damages. Any account received or recovered in a currency other than
dollars (whether as a result of, or the enforcement of, a judgment or order of a
court of any jurisdiction, in the liquidation, dissolution or other winding-up
of the affairs of the Company or the Guarantors or otherwise) by any Holder of a
Note in respect of any sum expressed to be due to it from the Company or the
Guarantors shall only constitute a discharge to the Company and the Guarantors
to the extent of the dollar amount which the recipient is able to purchase with
the amount so received or recovered in that other currency on the date of that
receipt or recovery (or, if it is not practicable to make that purchase on that
date, on the first date on which it is practicable to do so). If that dollar
amount is less than the dollar amount expressed to be due to the recipient under
any Note, the Company and the Guarantors shall indemnify it against any loss
sustained by it as a result. In any event, the Company and the Guarantors shall
indemnify the recipient against the cost of making any such purchase. For the
purposes of this paragraph, it will be sufficient for the Holder of a Note to
certify in a satisfactory manner (indicating the sources of information used)
that it would have suffered a loss had an actual purchase of dollars been made
with the amount so received in that other currency on the date of receipt or
recovery (or, if a purchase of dollars on such date had not been practicable, on
the first date on which it would have been practicable, it being required that
the need for a change of date be certified in the manner mentioned above). These
indemnities constitute a separate and independent obligation from the Company's
and the Guarantors' other obligations, shall give rise to a separate and
independent cause of action, shall apply irrespective of any indulgence granted
by any Holder of a Note and shall constitute in full force and effect despite
any other judgment, order, claim or proof for a liquidated amount in respect of
any sum due under any Note.
Section 12.10. Consent to Jurisdiction and Service.
To the fullest extent permitted by applicable law, the Company and
each of the Guarantors hereby irrevocably submit to the jurisdiction of any
Federal or State court located in the Borough of Manhattan in The City of New
York, New York in any suit, action or proceeding based on or arising out of or
relating to this Agreement or any Notes or Exchange Notes, and irrevocably agree
that all claims in respect of such suit or proceeding may be determined in any
such court. The Company and each of the Guarantors irrevocably waive, to the
fullest extent permitted by law, any objection which they may have to the laying
of the venue of any such suit, action or proceeding brought in such a court and
any claim that any suit, action or proceeding brought in such a court has been
brought in an inconvenient forum. The Company and each of the Guarantors agree
that final judgment in any such suit, action or proceeding brought in such a
court shall be conclusive and binding upon the Company and each such Guarantor
and may be enforced in the courts of Bermuda (or any other courts to the
jurisdiction of which the Company or such Guarantor is subject) by a suit upon
such judgment, provided that service of process is effected upon the Company or
--------
such Guarantor in the manner specified herein or as otherwise permitted by law.
The Company and each of the Guarantors hereby irrevocably designate and appoint
CT Corporation System, 1633 Broadway - 23rd Floor, New York, New York (the
"Process Agent"), as the authorized agent of the Company and each such Guarantor
upon whom process may be served in any such suit or proceeding, it being
understood that the designation and appointment of the Process Agent as such
authorized agent shall become effective immediately without any further action
on the part of the Company or any Guarantor. The Company and each of the
Guarantors hereby represent to each Initial Purchaser that they have notified
the Process Agent of such designation and appointment and that the Process Agent
has accepted the same in writing. The Company and each of the Guarantors
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<PAGE>
hereby irrevocably authorize and direct the Process Agent to accept such
service. The Company and each of the Guarantors further agree that service of
process upon the Process Agent and written notice of said service to the Company
mailed by prepaid registered first class mail or delivered to the Process Agent
at its principal office, shall be deemed in every respect effective service of
process upon the Company and each Guarantor in any such suit or proceeding.
Nothing herein shall affect the right of any Initial Purchaser or any person
controlling any Initial Purchaser to serve process in any other matter permitted
by law. The Company and each of the Guarantors further agree to take any and all
action, including the execution and filing of any and all such documents and
instruments as may be necessary to continue such designation and appointment of
the Process Agent in full force and effect so long as the Company or any
Guarantor has any outstanding obligations under this Agreement, the Notes, the
Exchange Notes or the Indenture. To the extent that the Company or any Guarantor
has or hereafter may acquire any immunity from jurisdiction of any court or from
any legal process (whether through service of note, attachment prior to
judgment, attachment in aid of execution, executor or otherwise) with respect to
itself or its property, the Company and each such Guarantor hereby irrevocably
waive such immunity in respect of their respective obligations under this
Agreement, to the extent permitted by law.
Section 12.11. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 12.12. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
Section 12.13. Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 12.14. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 12.15. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Indenture signature pages(s) follow]
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[Indenture signature pages(s)]
Dated as of May 18, 1998
Global Crossing Holdings Ltd.
By: /s/ Ian McLean
----------------------------
Name: Ian McLean
Title:
Guarantors:
Global Crossing Ltd., LDC
By:
----------------------------
Name:
Title:
Global Crossing Ltd.
By:
----------------------------
Name:
Title:
Global Telesystems Holdings Ltd.
By: /s/ Ian McLean
----------------------------
Name: Ian McLean
Title:
<PAGE>
[Indenture signature pages(s)]
Dated as of May 18, 1998
GLOBAL CROSSING HOLDINGS LTD.
BY:
--------------------------
Name:
Title:
Guarantors:
GLOBAL CROSSING LTD., LDC
BY: /s/ Abbott Brown
--------------------------
Name:
Title:
GLOBAL CROSSING LTD.
BY: /s/ Abbott Brown
--------------------------
Name:
Title:
GLOBAL TELESYSTEMS HOLDINGS LTD.
BY:
--------------------------
Name:
Title:
<PAGE>
Global Crossing International, Ltd.
By: /s/ Cameron Adderley
-------------------------------
Name: Cameron Adderley
Title:
Global Crossing Holdings U.K. Ltd.
By: /s/ Ian McLean
-------------------------------
Name: Ian McLean
Title:
Global Crossing Marketing U.K. Ltd.
By: /s/ Ian McLean
-------------------------------
Name: Ian McLean
Title:
Global Crossing Development Co.
By:
-------------------------------
Name:
Title:
Global Crossing Marketing USA Inc.
By: /s/ Ian McLean
-------------------------------
Name: Ian McLean
Title:
<PAGE>
Global Crossing International, Ltd.
By:
-------------------------------
Name:
Title:
Global Crossing Holdings U.K. Ltd.
By:
-------------------------------
Name:
Title:
Global Crossing Marketing U.K. Ltd.
By:
-------------------------------
Name:
Title:
Global Crossing Development Co.
By: /s/ Abbott Brown
-------------------------------
Name:
Title:
Global Crossing Marketing USA Inc.
By:
-------------------------------
Name:
Title:
<PAGE>
United States Trust Company of New York,
as Trustee
By: /s/ James D. Nesci
-----------------------------
Name: JAMES D. NESCI
Title: Assistant Vice President
<PAGE>
Exhibit 5.1
[Letterhead of Appleby, Spurling & Kempe]
CEA/ar
#73846.002
17th September, 1998
Global Crossing Holdings Ltd.
Wessex House
First Floor
45 Reid Street
Hamilton HM 12
Bermuda
Dear Sirs,
RE: REGISTRATION STATEMENT ON FORM S-4 (NO. 333-61457)
-------------------------------------------------------
We have acted as Bermuda counsel for Global Crossing Holdings Ltd., a Bermuda
company (the "Company"), and Global Crossing Ltd., Global Telesystems Holdings
Ltd. and Global Crossing International, Ltd. (the "Bermuda Guarantors"), in
connection with the proposed offer and exchange (the "Exchange Offer") by the
Company of (i) US$800,000,000 aggregate principal amount of the Company's 9 %
Senior Notes due 2008 (the "Exchange Notes"), which have been registered with
the United States Securities and Exchange Commission (the "Commission") under
the United States Securities Act of 1933, as amended (the "Securities Act"), for
(ii) an equal principal amount of its outstanding 9 % Senior Notes due 2008
(the "Restricted Notes"). The Exchange Notes are to be issued pursuant to an
Indenture dated as of May 18th, 1998 (the "Indenture") by and among the Company,
the Guarantors (including the Bermuda Guarantors) and United States Trust
Company of New York, as trustee (the "Trustee").
We are giving this opinion in connection with the Registration Statement on Form
S-4 (Registration No. 333-61457), as amended, relating to the Exchange Offer.
Unless otherwise defined herein, capitalized terms used herein have the
respective meanings ascribed to those terms in the Registration Statement.
<PAGE>
-2-
For the purposes of the opinions herein expressed, we have examined and relied
upon the documents listed and where appropriate defined in the Schedule to this
opinion.
This opinion is confined to and given on the basis of the laws of Bermuda
presently in force as currently applied by the courts of Bermuda. We have made
no investigation of and express no opinion as to the laws of any jurisdiction
other than Bermuda.
Assumptions
- -----------
In giving our opinion we have assumed:
(i) the capacity, power and authority of each of the parties to the Documents
other than the Company and the Bermuda Guarantors;
(ii) that each party, other than the Company and the Bermuda Guarantors, has
duly authorised, and that each party has duly executed, delivered and
taken such other action as may be required for such party to enter into
each of the Documents to which such party is a party;
(iii) that each of the Documents constitutes the legal, valid and binding
obligation of each party, other than the Company and the Bermuda
Guarantors and is enforceable against each such party in accordance with
its terms;
(iv) that the Documents are valid, binding and enforceable under the laws of
the State of New York, by which each is expressed to be governed;
(v) that the information disclosed by our Searches did not fail to disclose
any material information which had been delivered for filing or
registration but which was not disclosed or did not appear on the public
file at the time of our Searches;
(vi) that there is no provision of the law of any jurisdiction, other than
Bermuda, which would have any implication in relation to the opinions
herein expressed;
(vii) the genuineness of all signatures on the documents which we have examined
and that the Registration Statement has been signed on behalf of the
Company and the Guarantors by the respective persons whose names appear
on the signature pages thereof;
(viii) the conformity to original documents of all documents produced to us as
copies and the authenticity of all original documents which, or copies
of which, have been submitted to us;
<PAGE>
-3-
(ix) the accuracy and completeness of all factual representations (and not
any representations as to matters of Bermuda law) made in the
Resolutions, the Documents and the Registration Statement examined by
us;
(x) that the Resolutions are in full force and effect and have not been
rescinded or amended; and
(xi) that the Restricted Notes have only been issued in global form and that
no definitive Restricted Notes have been issued.
Opinion
- -------
Based upon and subject to the foregoing, and subject to the reservations
mentioned below and to any matters not disclosed to us, we are of the opinion
that:
(1) The Company and each of the Bermuda Guarantors have taken all necessary
corporate action to authorise the execution and delivery of the
Registration Statement and the Documents to which each is a party and to
authorise the performance of the transactions contemplated therein and, in
the case of the Company, to authorise the issue and delivery of the
Company's Exchange Notes due 2008 and in the case of the Bermuda Guarantors
to authorise the giving of the guarantee set forth in the Indenture and the
execution and delivery of the notation of such guarantee on the Exchange
Notes in accordance with the terms of the Indenture.
(2) The Exchange Notes, when issued in accordance with the terms of the
Indenture, duly executed by the Company, duly authenticated by the Trustee,
and issued and delivered against exchange of the Restricted Notes in
accordance with the terms set forth in the Prospectus that forms a part of
the Registration Statement, will constitute the legal and binding
obligations of the Company under the laws of Bermuda.
Reservations
- ------------
Our reservations are as follows:
(A) We express no opinion as to whether specific performance or injunctive
relief, being equitable remedies, would necessarily be available in respect
of any of the obligations of the Company or the Bermuda Guarantors as set
out in the Documents or the Exchange Notes.
<PAGE>
-4-
(B) Any provision that certain calculations and/or certificates will be
conclusive and binding will not be effective if such calculations or
certificates are fraudulent or erroneous on their face, and will not
necessarily prevent judicial enquiries into the merits of any claim by an
aggrieved party.
(C) Where an obligation is to be performed in a jurisdiction other than
Bermuda, a Bermudian court may refuse to enforce it to the extent that such
performance would be illegal under the laws of, or contrary to the public
policy of, such other jurisdiction.
(D) The obligations of the Company or the Bermuda Guarantors under the
Documents to which they are a party and the Exchange Notes will be subject
to any laws from time to time in effect relating to bankruptcy or
liquidation and to any other laws or other legal procedures affecting
generally the enforcement of creditors' rights and may also be the subject
of a statutory limitation of the time within which proceedings may be
brought.
(E) To the extent that it is provided in the Documents or the Exchange Notes
that interest may be payable at a higher rate of interest on a default or
on overdue amounts than on amounts which are current, we express no opinion
as to the validity or the binding effect of such provision. A Bermuda
court might not give effect to such a provision if it could be established
that the amount expressed as being payable was in the nature of a penalty;
that is to say a requirement for a stipulated sum to be paid irrespective
of, or necessarily greater than, the loss likely to be sustained.
(F) Section 9 of the Interest and Credit Charges (Regulations) Act, 1975
provides that a judgment debt shall unless the Court otherwise orders carry
interest at the statutory rate from the time the judgment is given until
the judgment is satisfied. The current rate is 7% per annum.
(G) A Bermuda court may refuse to give effect to any provisions of the
documents in respect of costs of unsuccessful litigation brought before the
Bermuda court or where that court has itself made an order for costs.
This opinion is addressed to you in connection with and for the purposes of the
transaction contemplated by the Documents. We hereby consent to the filing of
this opinion as an Exhibit to the Registration Statement and we further consent
to the reference to our Firm under the caption "Service of Process and
Enforcement of Liabilities" and "Legal Matters" in the Prospectus that forms a
part of the Registration Statement. In giving this consent, we do not concede
that we are an "expert" for the purposes of the Securities Act.
This opinion may not be relied upon or reproduced or delivered in any other
context or by any other person without prior written consent, except that the
law firm of Simpson
<PAGE>
-5-
Thacher & Bartlett may rely on this opinion as if it were addressed to them for
the purposes of rendering their opinion to the Company dated the date hereof in
connection with the Registration Statement.
This opinion is issued on the basis that it will be governed by and construed in
accordance with the laws of Bermuda.
Yours faithfully,
/s/ Appleby, Spurling & Kempe
APPLEBY, SPURLING & KEMPE
<PAGE>
-6-
SCHEDULE
---------
DOCUMENTS
---------
(i) a copy of the Pre-Effective Amendment No.1 to Form S-4 Registration
Statement under the Securities Act of 1933, as filed with the Securities
and Exchange Commission on August 21, 1998, without the Exhibits thereto,
(the "Registration Statement");
(ii) a copy of the executed Purchase Agreement dated May 13, 1998 (the
"Purchase Agreement");
(iii) a copy of the executed Indenture (the "Indenture") dated as of May 18,
1998 among the Company, the Guarantors (including the Bermuda Guarantors)
and the Trustee;
(iv) a copy of the executed Registration Rights Agreement (the "Registration
Agreement") dated May 18, 1998 among the Company, the Guarantors
(including the Bermuda Guarantors) and the Initial Purchases;
(the Purchase Agreement, the Indenture and the Registration Agreement are
hereinafter together called the "Documents")
(v) certified copies of the Certificate of Incorporation, Register of
Directors and Officers (as at 13th May 1998, 18th May 1998 and 14th
September 1998), Memorandum of Association and Bye-Laws of the Company and
of each of the Bermuda Guarantors;
(vi) certified copies of Minutes of Meetings of the Board of Directors and of
the Shareholders of the Company and of each of the Bermuda Guarantors as
listed below (the "Resolutions") :
THE COMPANY
- -----------
Meetings of the Board of Directors held:
. 30th April, 1998
. 13th May, 1998
THE BERMUDA GUARANTORS
- ----------------------
1. Global Crossing International, Ltd.
-----------------------------------
Meetings of the Board of Directors held:
<PAGE>
-7-
. 15th October, 1997
. 20th March, 1998
. 4th May, 1998
. 13th May, 1998
2. Global Telesystems Holdings Ltd.
--------------------------------
(i) Meetings of the Board of Directors held:
. 25th March, 1997
. 20th March, 1998
. 4th May, 1998
. 13th May, 1998
(ii) Meetings of the Members held:
. 25th March, 1997
3. Global Crossing Ltd.
-------------------
Meeting of the Board of Directors held:
. 18th March, 1998
. 27th April, 1998
(vii) the documents of public record in respect of the Company and the Bermuda
Guarantors, maintained by the Register of Companies in Bermuda as
revealed by searches conducted on 14 September, 1998;
(viii) the entries and filings shown in respect of the Company and the Bermuda
Guarantors in the Supreme Court Causes Book at the Registry of the
Supreme Court in Hamilton, Bermuda, as revealed by a search conducted on
14 September, 1998;
(the searches referred to in items (vii) and (viii) are referred to as the
"Searches")
We have also examined originals or copies certified or otherwise identified to
our satisfaction, of certificates of public officials and such other documents
of public record (the "Public Documents") as we have deemed necessary or
appropriate for the purpose or rendering this opinion.
<PAGE>
EXHIBIT 5.2
September 17, 1998
Global Crossing Holdings Ltd.
Wessex House
45 Reid Street
Hamilton HM12, Bermuda
Ladies and Gentlemen:
We have acted as counsel for Global Crossing Holdings Ltd., a
corporation organized under the laws of Bermuda (the "Company"), in connection
with the Registration Statement on Form S-4 (the "Registration Statement") filed
by the Company with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
the issuance by the Company of U.S.$800,000,000 aggregate principal amount of
its 9-5/8% Senior Notes due 2008 (the "Exchange Notes"), guaranteed (the
"Guarantees") by the entities listed on Schedule A hereto (collectively, the
"Guarantors"). The Exchange Notes are to be offered by the Company in exchange
for (the "Exchange Offer") U.S.$800,000,000 aggregate principal amount of its
outstanding 9-5/8% Senior Notes due 2008 (the "Notes"). The Notes have been,
and the Exchange Notes will be, issued under an Indenture, dated as of May 18,
1998 (the "Indenture"), among the Company, the Guarantors and United States
Trust Company of New York, as Trustee.
We have examined the Registration Statement and the Indenture which has
been filed with the Commission as an exhibit to the Registration Statement. In
addition, we
<PAGE>
Global Crossing Holdings Ltd. -2- September 17, 1998
have examined, and have relied as to matters of fact upon, the originals or
copies, certified or otherwise identified to our satisfaction, of such corporate
records, agreements, documents and other instruments and such certificates or
comparable documents of public officials and of officers and representatives of
the Company, and have made such other and further investigations, as we have
deemed relevant and necessary as a basis for the opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents.
We have further assumed, with your consent and without independent
investigation or inquiry, that, with respect to each of the parties to the
Indenture, the Exchange Notes and the Guarantees, as the case may be, other than
Global Crossing Development Co., a corporation organized under the laws of the
State of Delaware ("GCDC") and Global Crossing Marketing USA Inc., also a
corporation organized under the laws of the State of Delaware ("GCM-USA")
(collectively, the "Delaware Guarantors"), (i) such person was duly organized
and is validly existing under the laws of the jurisdiction in which it was
organized, (ii) such person has the power and authority to execute the
Indenture, the Exchange Notes and the Guarantees, as the case may be, to which
it is a party and to take all actions contemplated to be taken by it thereunder
and (iii) such person has duly authorized, executed and delivered the Indenture,
the Exchange Notes and the Guarantees, as the case may be, to which it is a
party in accordance with the charter or other organizational documents of such
person.
<PAGE>
Global Crossing Holdings Ltd. -3- September 17, 1998
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion that:
1. When (1) the Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), (2) the
Board of Directors of the Company, a duly constituted and acting
committee thereof or duly authorized officers thereof have taken all
necessary corporate action to approve the issuance and terms of the
Exchange Notes and related matters, and (3) the Exchange Notes have been
duly executed, authenticated, issued and delivered in accordance with
the provisions of the Indenture upon the Exchange Offer, the Exchange
Notes will constitute valid and legally binding obligations of the
Company enforceable against the Company in accordance with their terms
and entitled to the benefits of the Indenture.
2. When (1) the Indenture has been duly qualified under the Trust
Indenture Act, (2) the Board of Directors of the Company, a duly
constituted and acting committee thereof or duly authorized officers
thereof have taken all necessary corporate action to approve the
issuance and terms of the Exchange Notes, the terms of the Exchange
Offer and related matters, (3) the Board of Directors of each Guarantor,
a duly constituted and acting committee thereof or duly authorized
officers thereof have taken all necessary corporate action to approve
the issuance and terms of such Guarantor's Guarantee and (4) the
Exchange Notes and the Guarantees endorsed thereon have been duly
executed, authenticated, issued and delivered in accordance with the
provisions of the Indenture upon the Exchange Offer, each Guarantor's
Guarantee will constitute a valid and legally binding obligation of such
Guarantor enforceable against such Guarantor in accordance with its
terms and entitled to the benefits of the Indenture.
Our opinions set forth in paragraphs 1 and 2 above are subject to (i)
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, (ii) general equitable principles (whether considered in a proceeding
in equity or at law), (iii) an implied covenant of good faith and fair dealing
and (iv) the effects of the possible judicial application of foreign laws or
foreign governmental or judicial action affecting creditors' rights.
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the laws of the State
of New York and the
<PAGE>
Global Crossing Holdings Ltd. -4- September 17, 1998
federal laws of the United States. Insofar as the opinions set forth herein
relate to issues governed by the laws of Bermuda, we have assumed the
correctness of the opinion of Appleby, Spurling & Kempe, as to issues governed
by the laws of England, we have assumed the correctness of the opinion of Wiggin
and Co and as to issues governed by the laws of the Cayman Islands, we have
assumed the correctness of the opinion of W.S. Walker & Company, all of which
are also filed as exhibits to the Registration Statement.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus included therein.
Very truly yours,
/s/ Simpson Thacher & Bartlett
SIMPSON THACHER & BARTLETT
<PAGE>
SCHEDULE A
Guarantors
- ----------
Global Crossing Ltd.
Global Telesystems Holdings Ltd.
Global Crossing International, Ltd
Global Crossing Holdings U.K. Ltd.
Global Crossing Marketing U.K. Ltd.
Global Crossing Development Co.
Global Crossing Marketing USA Inc.
Global Crossing Ltd., LDC
<PAGE>
EXHIBIT 5.3
17th September 1998
To: Global Crossing Holdings Ltd
Wessex House
First Floor
45 Reid Street
Hamilton HM12
Bermuda
Dear Sirs,
RE: GLOBAL CROSSING HOLDINGS LTD.
1. We have acted as solicitors in England to Global Crossing Holdings U.K.
Ltd. and Global Crossing Marketing U.K. Ltd. (the "UK Guarantors") in
connection with the Registration Statement on Form S-4 (the "Registration
Statement") filed by Global Crossing Holdings Ltd. (the "Company") with
the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), relating to
the issuance by the Company of $800,000,000 aggregate principal amount of
its 9-5/8% Senior Notes due 2008 (the "Exchange Notes"), guaranteed (the
"Exchange Guarantees") by the Guarantors named in the Indenture (as
defined below) (collectively, the "Guarantors"). The Exchange Notes are
to be offered by the Company in exchange for (the "Exchange")
$800,000,000 aggregate principal amount of its outstanding 9-5/8% Senior
Notes due 2008 (the "Notes"). The Notes have been, and the Exchanges
Notes will be, issued under an Indenture, dated as of May 18, 1998 (the
"Indenture" and, together with the Exchange Notes and the Exchange
Guarantees, the "Operative Documents"), among the Company, the Guarantors
named therein (including the U.K. Guarantors) and United States Trust
Company of New York, as Trustee.
2. In our capacity as solicitors to the U.K Guarantors we have examined and
relied on the following documents:
(a) copies of the Memoranda and Articles of Association of the U.K
Guarantors filed with the Companies Registry upon incorporation of
the U.K Guarantors;
<PAGE>
(b) a copy of a Special Resolution of Global Crossing Holdings U.K.
Ltd. of September 22nd, 1997 amending the Articles of Association
of that Company;
(c) a copy of the executed Indenture;
(d) the results of searches of the U.K Guarantors conducted at the
Companies Registry on 17th September, 1998 and at the Central
Index of Winding Up Petitions on 17th September, 1998 ; and
(e) a copy of the resolutions of the Boards of Directors of the U.K
Guarantors dated 13th May, 1998 approving the Exchange
Guarantees and the transactions contemplated thereby.
3. For the purposes of this opinion, we have assumed:
(a) the genuineness of all signatures;
(b) the authenticity and completeness of all documents submitted to us
as originals;
(c) the conformity to original documents of all documents submitted to
us as drafts or copies and the authenticity and completeness of all
such original documents;
(d) that the Exchange Guarantees and the rights and obligations created
thereby constitute the legal, valid and binding obligations of each
of the parties thereto in accordance with their terms under the
laws of the State of New York by which the Exchange Guarantees are
expressed to be governed and that the choice of the laws of the
State of New York to govern the Exchange Guarantees is recognised
by and enforceable under the laws of the State of New York;
(e) that no amendments have been made to the Memoranda and Articles of
Association referred to in paragraph 2(a) above which are not
incorporated in such copies other than the amendments to the
Articles of Association referred to in paragraph 2(b) above;
(f) that the searches and enquiries referred to in paragraph 2(d) above
were accurate and complete. It should be noted, however, that
searches at the Companies Registry are not capable of revealing
whether or not a winding up petition or a petition for an
administration order has been presented. Notice of a winding up
order made or resolutions passed, or an administration order made,
or a receiver or an administrative receiver appointed may not be
filed at the Companies Registry immediately. Also, the results of
oral telephone enquiries of the Central Index of Winding Up
Petitions have been found to be unreliable; and
(g) that the board meetings giving rise to the resolutions referred to
in paragraph 2(e) above were properly conducted have not been
amended or rescinded.
2
<PAGE>
We do not express any opinion herein as to, nor have we investigated or
taken account of for the purposes of this opinion, the laws of any
jurisdiction other than England (including those of the European
Union (save to the extent incorporated into English law)). Further,
it is assumed that no foreign law (including those of the European
Union), which may apply with respect to the Exchange Guarantees or
any of the transactions and matters contemplated thereby would be such as
to affect any of the conclusions stated in this opinion. We express no
opinion as to matters of fact. This opinion is given on the basis that
it will be governed by and construed in accordance with English law.
4. Based upon, and subject to, the foregoing and subject to the
qualifications set out below and to any matters not disclosed to us, it
is our opinion that, so far as the present laws of England and Wales, as
applied by the English courts at the date of this opinion, are concerned:
(a) Status: The U.K Guarantors are limited liability companies duly
------
incorporated and validly existing under the laws of England and
Wales.
(b) Power and Authority: The U.K Guarantors have the requisite
-------------------
corporate power and authority under their respective Memoranda and
Articles of Association to execute and deliver the Exchange
Guarantees and to perform their obligations thereunder, and have
taken all necessary corporate action under their respective
Memoranda and Articles of Association to authorise the execution,
delivery and performance of the Exchange Guarantees.
(c) Execution: The Exchange Guarantees, when issued in accordance with
---------
the terms of the Indenture, duly executed by the U.K. Guarantors,
duly authenticated by the Trustee, and issued and delivered against
exchange of the Guarantees in accordance with the terms set forth
in the Prospectus that forms a part of the Registration Statement,
will constitute legal and binding obligations of the U.K.
Guarantors under the English law.
(d) Non-violation: Based on our review of those laws, rules, and
-------------
regulations which are normally applicable to transactions of the
type contemplated by the Exchange Guarantees, the execution and
delivery by the U.K Guarantors of the Exchange Guarantees and the
performance by the U.K Guarantors of their obligations thereunder,
will not, in the case of the U.K Guarantors, violate their
Memoranda or Articles of Association or, any provision of any
existing English law or regulation pertaining to them in force at
the date of this opinion and the Exchange Guarantees will not
result in the creation of any lien or encumbrance against the
assets of the U.K Guarantors.
(e) Approvals: Based on our review of those laws, rules, and
---------
regulations which are normally applicable to transactions of the
type contemplated by the Exchange Guarantees, no consents,
approvals, authorisations or orders are required by the U.K
Guarantors from any governmental authority in England in connection
with the execution and delivery by the U.K Guarantors or the
performance of obligations under the Exchange Guarantees.
3
<PAGE>
(f) Registration Requirements: No registration, filing or recording of
-------------------------
the Exchange Guarantees with any court or other authority in
England is necessary as a condition to the legality, validity or
enforceability or admissibility in evidence of the Exchange
Guarantees.
(g) Enforcement of Foreign Judgements:
----------------------------------
The U.K Guarantors are authorised and empowered by their
respective Articles of Association to submit to New York
jurisdiction and to appoint a Process Agent in connection with each
of the documents, and such appointment and submission is valid as a
matter of English law. However, we make no comment as to its
validity under US law. A valid judgement entered against the U.K
Guarantors under the Exchange Guarantees by a court of competent
jurisdiction in the State of New York is not currently capable of
registration for enforcement by the English Courts. In the event
that proceedings were issued in the English Courts, such a
judgement would have the status of evidence of a debt due from the
relevant Company and would entitle the judgement creditor to make
an application for summary judgement on the ground that such
Company had no defence to such English proceedings. The U.K
Guarantors are not entitled to immunity from suit or enforcement of
judgements, in the UK. The Company would have an unfettered right
to show cause against the Plaintiff's application in such
proceedings:
(i) by a preliminary or technical objection, for example that
the case is not within the relevant order of the rules of
the Supreme Court or that the Statement of Claim or the
Affidavit in support is defective; and
(ii) on the merits, for example that the Defendant has a good
defence to the claim, that a difficult point of law is
involved, or a dispute as to the facts which ought to be
tried, or a real dispute as to the amount due which requires
the taking of an account to determine, or any other
circumstances showing reasonable grounds for a bona fide
defence.
By way of illustration only, and without purporting to be an
exhaustive list:
(1) leave to defend has been refused in an action on a
judgement of the Supreme Court in the State of New
York, notwithstanding that the said judgement was
still under appeal in that State and thus still
unenforceable in the sister States of the US;
(2) leave to defend has been refused where a Defendant
failed to raise defences available to him under the
laws of the country in which the judgement was
obtained;
4
<PAGE>
(3) leave to defend will be granted where the Defendant
sets up the defence that the judgement was obtained
by fraud, unless it is obvious that the allegation of
fraud is frivolous, even though the question of fraud
was investigated in the foreign country and there
decided that the fraud had not been committed;
(4) leave to defend will be granted if the foreign court
had no jurisdiction to pronounce the judgement,
either because the foreign court exceeded the
jurisdiction given to them by their foreign law, or
because the Defendant was not subject to that
jurisdiction; and
(5) leave to defend will be granted where enforcement
would offend natural justice or public policy.
We have no reason to believe that any judgement obtained against
either Company in connection with any provision of the Security
Agreements would be contrary to natural justice or public policy
(although we express no opinion as to whether any method or
procedure by which such judgement was obtained might be contrary to
the principles of natural justice or public policy as applied by
the English Courts).
5. Notwithstanding the foregoing, this opinion is subject to the following
qualifications:
(a) The enforceability of any judgment obtained against the U.K
Guarantors in England in the circumstances set out in paragraph 4
(g) above will also be subject to the following:
(i) validity, performance and enforcement may be limited by laws
affecting bankruptcy, insolvency (including, without
limitation, Sections 238 and 239 of the Insolvency Act),
reorganisation or similar laws affecting creditors' rights
generally, as well as to principles of equity and public
policy from time to time in force;
(ii) enforcement may be limited by general principles of equity;
for example, and without limitation to the generality of the
foregoing, equitable remedies such as specific performance
or the issue of an injunction are discretionary
notwithstanding any agreement purporting to confer the
availability thereof and may not be available where damages
are considered by the court to be an adequate alternative
remedy;
(iii) English Courts are now prepared to render judgements for a
monetary amount in foreign currencies but the Defendant may
pay the sterling equivalent of the judgement debt at the
time of payment. A judgement entered in foreign currency
will carry the statutory rate of interest on the amount of
the judgement and such interest will be added to the amount
of the judgement itself for the
5
<PAGE>
purposes of enforcement. Where the Plaintiff desires to
proceed to enforce a judgement expressed in foreign currency
the current exchange rate and sterling equivalent of the
judgement sum at the date nearest to or most nearly
preceding the date of the issue of the relevant enforcement
process (depending upon the method of enforcement selected)
must be certified. In a voluntary liquidation for the
purpose of applying the property of a company in
satisfaction of its liabilities pari passu under section 107
of the Insolvency Act 1986, debts of the company in foreign
currency, existing at the date of liquidation should be
converted into sterling at the rate of exchange prevailing
on the date of the resolution to wind up, and not at the
date of payment;
(iv) claims may become barred under the Limitation Acts 1939 to
1980, subject also to the Foreign Limitation Periods Act
1984, or may be or become subject to set-off or
counterclaim; and
(v) where obligations are to be performed in a jurisdiction
other than England, they may not be enforceable so as to
give rise to a valid liability on the party to perform them
to the extent that their performance would be illegal under
the laws of the jurisdiction in which they are to be so
performed.
(b) An English court will not give effect to any provision of a
contract if it could be established that the amount expressed as
being payable was such that the provision was in the nature of a
penalty irrespective of any provision in such contract whereby the
parties agree that such amount should not be treated as a penalty.
A provision will be held to be in the nature of a penalty to the
extent that it requires a stipulated sum to be paid irrespective
of, or necessarily greater than, the loss likely to be sustained.
(c) An English court might not treat as conclusive those certificates
and determinations which any Security Document states are to be so
treated.
(d) An English court may stay proceedings if concurrent proceedings are
being brought elsewhere.
(e) The effectiveness of certain provisions exculpating a party from a
liability or duty otherwise owed may be limited by law and
applicable equitable principles.
(f) We express no opinion as to any provision of the Exchange
Guarantees which constitutes, or purports to constitute, a
restriction on the exercise of any statutory power by any party
thereto or any other person.
(g) An English court may not give effect to any indemnity for legal
costs incurred by an unsuccessful litigant.
This opinion is solely for the benefit of the specific persons to whom it is
addressed and for the purposes of the Exchange Guarantees and the transactions
described therein, and is not to be
6
<PAGE>
relied upon by, or communicated to, any other person or for any other purpose
nor is it to be quoted or made public in any way without our prior written
consent, except that the law firm of Simpson Thacher & Bartlett may rely on this
opinion as if it were addressed to them for the purpose of rendering their
opinion to the Company in connection with the Registration Statement. We hereby
consent to the filing of this opinion as an Exhibit to the Registration
Statement and to the reference to our firm under the caption "Legal Matters" in
the Prospectus included therein.
Yours faithfully
/s/ Wiggin & Co
7
<PAGE>
EXHIBIT 5.4
W.S. WALKER & COMPANY
Attorneys-at-Law
P.O. Box 265G, Caledonian House,
Grand Cayman, Cayman Islands
Tel: (345) 949-0100 Fax: (345) 949-7886
Email: [email protected]
Our Ref: SH/nk/S87-14505
GLOBAL CROSSING LTD., LDC
PO BOX 265
CALEDONIAN HOUSE
MARY STREET
GEORGE TOWN
GRAND CAYMAN
CAYMAN ISLANDS
25 September, 1998
Dear Sirs,
We have been asked to provide this legal opinion to you with regard to the laws
of the Cayman Islands in relation to the Exchange Guarantees (as defined in
Schedule 1 hereto) to be entered into by Global Crossing Ltd., LDC (the
"Company").
For the purposes of giving this opinion, we have examined the documents listed
in Schedule 1 hereto.
In giving this opinion we have relied upon the assumptions set out in Schedule 2
hereto, which we have not independently verified.
We are Attorneys-at-Law in the Cayman Islands and express no opinion as to any
laws other than the laws of the Cayman Islands in force and as interpreted at
the date hereof. Except as explicitly stated herein, we express no opinion in
relation to any representation or warranty contained in the Exchange Guarantees
nor upon the commercial terms of the transactions contemplated by the Exchange
Guarantees.
Based upon the foregoing examinations and assumptions and upon such searches as
we have conducted and having regard to legal considerations which we deem
relevant, and subject to the qualifications set out in Schedule 3 hereto, we are
of the opinion that under the laws of the Cayman Islands the Exchange Guarantees
have been duly authorised by the Company and assuming that the Exchange
Guarantees have been duly authorised by each other party thereto (other than the
Company) if and when duly executed and delivered by the Company and the other
parties thereto will constitute valid and binding obligations of the Company
enforceable in accordance with their respecting terms.
<PAGE>
This opinion is limited to the matters referred to herein and shall not be
construed as extending to any other matter or document not referred to herein.
This opinion is given solely for your benefit and the benefit of your legal
advisers acting in that capacity in relation to this transaction and may not be
relied upon by any other person without our prior written consent. We hereby
consent to the filing of our opinion as an exhibit to the Registration Statement
of Global Crossing Holdings Ltd. relating to the Exchange Guarantees and we
further consent to the reference to our firm under the captions "Service of
Process and Enforcement of Liabilities" and "Legal Matters" in the Prospectus
that forms part of the Registration Statement.
Yours faithfully,
W. S. WALKER & COMPANY
<PAGE>
SCHEDULE 1
LIST OF DOCUMENTS EXAMINED
(1) the Memorandum and Articles of Association of the Company;
(2) an executed copy of minutes of a meeting of the Board of Directors of the
Company dated 27 April, 1998 (the "Resolutions");
(3) the Purchase Agreement dated 13 May, 1998 between the Company, Global
Crossing Holdings Ltd. ("Holdings"), Global Crossing Ltd., Global Crossing
Development Holdings, Ltd., Global Crossing International, Ltd., Global
Crossing Holdings U.K. Ltd., Global Crossing Marketing U.K. Ltd., Global
Crossing Development Co., Global Crossing Marketing USA Inc. (the "Global
Companies"), Salomon Brothers Inc., CIBC Oppenheimer Corp., Deutsche Morgan
Grenfell Inc. and Merrill, Lynch, Pierce, Fenner & Smith Incorporated;
(4) the Registration Rights Agreement dated 18 May, 1998 between the Global
Companies, Salomon Brothers Inc., CIBC Oppenheimer Corp., Deutsche Morgan
Grenfell Inc. and Merrill, Lynch, Pierce, Fenner & Smith Incorporated;
(5) the Indenture dated 18 May, 1998 between the Global Companies and United
States Trust Company of New York;
(6) the Guarantees dated 18 May, 1998 by the Company;
(7) the form of Exchange Guarantees to be executed by the Company (the
"Exchange Guarantees"); and
(8) such other documents as we have considered necessary for the purposes of
rendering this opinion.
<PAGE>
SCHEDULE 2
ASSUMPTIONS
The opinions hereinbefore given are based upon the following assumptions:
(1) There are no provisions of the laws of any jurisdiction outside the Cayman
Islands which would be contravened by the execution or delivery of the
Exchange Guarantees and that, in so far as any obligation expressed to be
incurred under the Exchange Guarantees is to be performed in or is
otherwise subject to the laws of any jurisdiction outside the Cayman
Islands, its performance will not be illegal by virtue of the laws of that
jurisdiction.
(2) The Exchange Guarantees are within the capacity and powers of and have been
or will be duly authorised, executed and delivered by each of the parties
thereto (other than the Company) and constitute or will, when executed and
delivered, constitute the legal, valid and binding obligations of each of
the parties thereto enforceable in accordance with their terms as a matter
of the laws of all relevant jurisdictions (other than the Cayman Islands).
(3) The choice of the laws of the jurisdiction selected to govern the Exchange
Guarantees has been made in good faith and will be regarded as a valid and
binding selection which will be upheld in the courts of that jurisdiction
and all other relevant jurisdictions (other than the Cayman Islands).
(4) All authorisations, approvals, consents, licences and exemptions required
by and all filings and other requirements of each of the parties to the
Exchange Guarantees outside the Cayman Islands to ensure the legality,
validity and enforceability of the Exchange Guarantees have been or will be
duly obtained, made or fulfilled and are and will remain in full force and
effect and that any conditions to which they are subject have been
satisfied.
(5) All conditions precedent contained in the Exchange Guarantees have been or
will be satisfied or waived.
(6) No disposition of property effected by any of the Exchange Guarantees is
made willfully to defeat an obligation owed to a creditor and at an
undervalue.
(7) The Company will on the date of execution of the Exchange Guarantees be
able to pay its debts as they became due from its own moneys, and that any
disposition or settlement of property effected by any of the Exchange
Guarantees is made in good faith and for valuable consideration.
(8) None of the Exchange Guarantees has been or will be executed or delivered
in the Cayman Islands.
(9) All original documents are authentic, that all signatures and seals are
genuine, that all documents purporting to be sealed have been so sealed,
that all copies are complete and conform to their original and that the
Exchange Guarantees conform in every material respect to the latest drafts
of the same produced to us.
<PAGE>
(10) The Minute Book of the Company examined by us on 22 September, 1998 at its
Registered Office contains a complete and accurate record of the business
transacted by it.
(11) The corporate records of the Company examined by us on 22 September, 1998
at its Registered Office constitute its complete and accurate corporate
records and that all matters required by law to be recorded therein are so
recorded.
(12) None of the parties to any of the Exchange Guarantees is
(a) a "person in Iraq" as that term is defined in The Iraq and Kuwait
(United Nations Sanctions) (Dependent Territories) Order 1990 or an
"Iraqi person" as defined in The Iraq (United Nations) (Sequestration
of Assets) (Dependent Territories) Order 1993 or a person resident in
the Republic of Iraq for the purposes of The Caribbean Territories
(Control of Gold, Securities, Payment and Credits: Kuwait and Republic
of Iraq) Order 1990; or
(b) a "person connected with Libya" as that term is defined in The Libya
(United Nations Sanctions) (Dependent Territories) Order 1992.
(13) The meeting of the Board of Directors at which the Resolutions were duly
adopted was called and held in accordance with the Articles of Association
of the Company.
<PAGE>
SCHEDULE 3
QUALIFICATIONS
The opinions hereinbefore given are subject to the following qualifications:
1. The term "enforceable" as used above means that the obligations assumed by
the Company under the Exchange Guarantees are of a type which the courts of
the Cayman Islands enforce; it does not mean that those obligations will
necessarily be enforced in all circumstances in accordance with their
terms. In particular:
(a) enforcement may be limited by bankruptcy, insolvency, liquidation,
reorganisation and other laws of general application relating to or
affecting the rights of creditors;
(b) enforcement may be limited by general principles of equity;
(c) claims may become barred under statutes of limitation or may be or
become subject to defences of set-off or counterclaim;
(d) where obligations are to be performed in a jurisdiction outside the
Cayman Islands, they may not be enforceable in the Cayman Islands to
the extent that performance would be illegal under the laws of that
jurisdiction;
(e) an award of a court of the Cayman Islands may be required to be made
in Cayman Islands dollars;
(f) to the extent that any provision of the Exchange Guarantees is
adjudicated to be penal in nature, it will not be enforceable in the
courts of the Cayman Islands; in particular, the enforceability of any
provision of the Exchange Guarantees which imposes additional
obligations in the event of any breach or default, or of payment or
prepayment being made other than on an agreed date may be limited to
the extent that it is subsequently adjudicated to be penal in nature
and not an attempt to make a reasonable pre-estimate of loss;
(g) to the extent that the performance of any obligation arising under the
Exchange Guarantees would be fraudulent or contrary to public policy,
it will not be enforceable in the courts of the Cayman Islands; and
(h) a Cayman Islands court will not necessarily award costs in litigation
in accordance with contractual provisions in this regard.
2. Cayman Islands stamp duty will be payable if the Exchange Guarantees are
executed in, brought to, or produced before a court of the Cayman Islands.
Such duty would be nominal except in the case of:
(a) a legal or equitable mortgage or charge of immovable property or a
debenture:
(i) where the sum secured is CI$300,000 (US$360,000) or less, in
which case such duty would be 1% of the sum secured;
<PAGE>
(ii) where the sum secured is more than CI$300,000 (US$360,000), in
which case such duty would be 1.5% of the sum secured;
(b) a legal or equitable mortgage of movable property (not including a
debenture), in which case such duty would be 1.5% of the sum secured;
(c) a bill of sale, in which case such duty would be 1% of the sum
secured;
PROVIDED that no duty shall be payable where the property is situated
outside the Cayman Islands and that in the case of a mortgage of moveable
property situated in the Cayman Islands granted by an exempted company or
by an ordinary non-resident company (as defined in the Companies Law (1995
Revision)) or by a body corporate incorporated outside the Cayman Islands,
the maximum duty payable shall be CI$500.00. (US$600.00).
3. A certificate, determination, calculation or designation of any party to
the Exchange Guarantees as to any matter provided therein might be held by
a Cayman Islands court not to be conclusive, final and binding,
notwithstanding any provision to that effect therein contained, if, for
example, it could be shown to have an unreasonable, arbitrary or improper
basis or in the event of manifest error.
4. If any provision of the Exchange Guarantees is held to be illegal, invalid
or unenforceable, severance of such provision from the remaining provisions
will be subject to the discretion of the Cayman Islands courts.
5. Any term of any of the Exchange Guarantees may be amended orally by the
parties thereto, notwithstanding provisions to the contrary contained
therein.
6. Notwithstanding any purported date of execution in any of the Exchange
Guarantees, the rights and obligations therein contained take effect only
on the actual execution and delivery thereof but the Exchange Guarantees
may provide that they have retrospective effect as between the parties
thereto alone.
7. The effectiveness of terms in the Exchange Guarantees excusing any party
from a liability or duty otherwise owed or indemnifying that party from the
consequences of incurring such liability or breaching such duty are limited
by law.
<PAGE>
EXHIBIT 12.1
GLOBAL CROSSING LTD., LDC AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
Historical Proforma
---------- --------
For the Period For the Period
March 19, 1997 March 19, 1997
(Date of (Date of
Three Months Six Months Inception) to Three Months Six Months Inception) to
Ended June 30, Ended June 30, December 31, Ended June 30, Ended June 30, December 31,
1998 1998 1997 1998 1998 1997
-------------- -------------- ------------ -------------- -------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
LOSS BEFORE INCOME TAXES AND EXTRAORDINARY
ITEM $(126,724,885) $(130,446,037) $ (160,356) $(126,724,885) $(130,446,037) $ (160,356)
ADD:
Capitalized interest included in cost
of capacity sold 892,780 892,780 - 892,780 892,780 -
-------------- -------------- ------------ -------------- -------------- -------------
(125,832,105) (129,553,257) (160,356) (125,832,105) (129,553,257) (160,356)
-------------- -------------- ------------ -------------- -------------- -------------
FIXED CHARGES:
Interest expense, including amortization
of deferred finance fees and issuance
discount 7,403,037 7,426,271 - 15,112,160 22,692,831 42,030,654
Portion of rents representative of an
interest factor 109,584 143,032 2,147 109,584 143,032 2,147
-------------- -------------- ------------ -------------- -------------- -------------
7,512,621 7,569,303 2,147 15,221,744 22,835,863 42,032,801
============== ============== ============ ============== ============== =============
LOSS, AS ADJUSTED, BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM $(118,319,484) $(121,983,954) $ (158,209) $(110,610,361) $(106,717,394) $ 41,872,445
============== ============== ============ ============== ============== =============
FIXED CHARGES:
Fixed Charges, as above $ 7,512,621 $ 7,569,303 $ 2,147 $ 15,221,744 $ 22,835,863 $ 42,032,801
Interest capitalized 13,909,608 24,401,876 9,776,767 13,575,485 27,112,850 20,832,224
Interest capitalized and included
in Investment in Pacific Crossing Ltd. 379,468 379,468 - 379,468 379,468 -
-------------- -------------- ------------ -------------- -------------- -------------
$ 21,801,697 $ 32,350,647 $ 9,778,914 $ 29,176,697 $ 50,328,181 $ 62,865,025
============== ============== ============ ============== ============== =============
EXCESS OF FIXED CHARGES OVER EARNINGS $ 140,121,181 $ 154,334,601 $ 9,937,123 $ 139,787,058 $ 157,045,575 $ 20,992,580
============== ============== ============ ============== ============== =============
SUPPLEMENTAL DISCLOSURE
Loss, as adjusted, before income taxes
and extraordinary item $(118,319,484) $(121,983,954) $ (158,209) $(110,610,361) $(106,717,394) $ 41,872,445
Non-recurring item:
Termination of advisory services
agreement(1) $ 137,700,000 $ 137,700,000 - $ 137,700,000 $ 137,700,000 -
-------------- -------------- ------------ -------------- -------------- -------------
Earnings, as adjusted, before income taxes,
extraordinary item and non-recurring item $ 19,380,516 $ 15,716,046 $ (158,209) $ 27,089,639 $ 30,982,606 $ 41,872,445
============== ============== ============ ============== ============== =============
Fixed charges, as above $ 21,801,697 $ 32,350,647 $ 9,778,914 $ 29,176,697 $ 50,328,181 $ 62,865,025
============== ============== ============ ============== ============== =============
Excess of fixed charges over earnings,
before non-recurring item $ 2,421,181 $ 16,634,601 $ 9,937,123 $ 2,087,058 $ 19,345,575 $ 20,992,580
============== ============== ============ ============== ============== =============
</TABLE>
(1) Included in earnings for the six months ended June 30, 1998 was a non-
recurring charge resulting from the termination of the advisory services
agreement of $137.7 million as described in Note 12 of the Company's
consolidated financial statements.
<PAGE>
Exhibit 23.2
------------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this Amendment
No. 2 to Registration Statement File No 333-61457.
/s/ ARTHUR ANDERSEN & Co.
ARTHUR ANDERSEN & Co.
Hamilton, Bermuda
September 29, 1998
<PAGE>
EXHIBIT 25.2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
Pre-Effective Amendment No. 1
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
_______________________
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)_______
_______________________
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
114 West 47th Street 10036-1532
New York, New York (Zip Code)
(Address of principal
executive offices)
_______________________
Global Crossing Holdings, Ltd.
(Exact name of obligor as specified in its charter)
Bermuda 98-0186828
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
_______________________
Global Crossing, Ltd.
(Exact name of obligor as specified in its charter)
Bermuda 98-0189783
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
<PAGE>
-2-
_______________________
Global Telesystems Holdings, Ltd.
(Exact name of obligor as specified in its charter)
Bermuda Not Required
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
_______________________
Global Crossing International, Ltd.
(Exact name of obligor as specified in its charter)
Bermuda Not Required
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
_______________________
Global Crossing Holdings U.K. Ltd.
(Exact name of obligor as specified in its charter)
United Kingdom Not Required
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
_______________________
Global Crossing Marketing U.K. Ltd.
(Exact name of obligor as specified in its charter)
United Kingdom Not Required
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Wessex House HM12
45 Reid Street (Zip code)
Hamilton, Bermuda
(Address of principal executive offices)
_______________________
Global Crossing Development Co.
(Exact name of obligor as specified in its charter)
Delaware 95-4670902
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
<PAGE>
-3-
_______________________
Global Crossing Marketing USA Inc.
(Exact name of obligor as specified in its charter)
Delaware 95-4670978
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 El Camino Drive 90212
Suite 204 (Zip code)
Beverly Hills, CA
(Address of principal executive offices)
_______________________
Global Crossing Ltd., LDC
(Exact name of obligor as specified in its charter)
Cayman Islands 98-0167638
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o W.S. Walker & Company
P.O. Box 265 (Zip code)
Caledonian House, Mary Street
Georgetown, Grand Cayman, Cayman Islands
Address of principal executive offices)
_______________________
9-5/8% Senior Notes due 2008
(Title of the indenture securities)
<PAGE>
-4-
GENERAL
1. General Information
-------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. Affiliations with the Obligor
-----------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15:
Global Crossing Holdings, Ltd., Global Crossing, Ltd., Global Telesystems
Holdings, Ltd., Global Crossing International, Ltd., Global Crossing
Holdings U.K. Ltd., Global Crossing Marketing U.K. Ltd., Global Crossing
Development Co., Global Crossing Marketing USA Inc. and Global Crossing
Ltd., LDC currently are not in default. Accordingly, responses to Items 3,
4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not required
under General Instruction B.
16. List of Exhibits
----------------
T-l.l -- Organization Certificate, as amended, issued by the State of New
York Banking Department to transact business as a Trust Company,
is incorporated by reference to Exhibit T-l.l to Form T-1
filed on September 15, 1995 with the Commission pursuant to the
Trust Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990 (Registration No. 33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.l.
<PAGE>
-5-
16. List of Exhibits
----------------
(cont 'd)
T-1.4 -- The By-Laws of United States Trust Company of New York, as
amended, is incorporated by reference to Exhibit T-1.4 to
Form T-1 filed on September 15, 1995 with the Commission
pursuant to the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990 (Registration No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b) of the
Trust Indenture Act of 1939, as amended by the Trust Indenture
Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the trustee pursuant
to law or the requirements of its supervising or examining
authority.
NOTE
- ----
As of September 28, 1998, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States Trust
Company of New York and its parent company, U.S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information to
be furnished by the obligor and the trustee disclaims responsibility for the
accuracy or completeness of such information.
____________________
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 28th day
of September 1998.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
/s/ Cynthia Chaney
By:______________________
Cynthia Chaney
Assistant Vice President
CC/kk
<PAGE>
Exhibit T-1.6
-------------
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990, and subject to the
limitations set forth therein, United States Trust Company of New York ("U.S.
Trust") hereby consents that reports of examinations of U.S. Trust by Federal,
State, Territorial or District authorities may be furnished by such authorities
to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
/s/ Gerard F. Ganey
By:___________________
Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
JUNE 30, 1998
-------------
($ IN THOUSANDS)
ASSETS
- ------
Cash and Due from Banks $ 99,322
Short-Term Investments 171,315
Securities, Available for Sale 626,426
Loans 1,857,795
Less: Allowance for Credit Losses 16,708
-----------
Net Loans 1,841,087
Premises and Equipment 59,304
Other Assets 122,476
-----------
Total Assets $2,919,930
===========
LIABILITIES
- -----------
Deposits:
Non-Interest Bearing $ 648,072
Interest Bearing 1,646,049
-----------
Total Deposits 2,294,121
Short-Term Credit Facilities 306,807
Accounts Payable and Accrued Liabilities 144,419
-----------
Total Liabilities $2,745,347
===========
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
Capital Surplus 49,541
Retained Earnings 107,703
Unrealized Gains on Securities
Available for Sale (Net of Taxes) 2,344
-----------
Total Stockholder's Equity 174,583
-----------
Total Liabilities and
Stockholder's Equity $2,919,930
===========
I, Richard E. Brinkmann, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory authority
and is true to the best of my knowledge and belief.
Richard E. Brinkmann, SVP & Controller
July 31, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<CIK> 0001061323
<NAME> GLOBAL CROSSING HOLDING LTD.
<MULTIPLIER> 1
<S> <C> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 JAN-01-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 APR-01-1998 MAR-19-1997
<PERIOD-END> JUN-30-1998 JUN-30-1998 DEC-31-1997
<CASH> 541,610,392 541,610,392 26,727,880
<SECURITIES> 0 0 0
<RECEIVABLES> 33,954,617 33,954,617 0
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 605,891,695 605,891,695 27,743,838
<PP&E> 0 0 0
<DEPRECIATION> 0 0 0
<TOTAL-ASSETS> 1,564,233,024 1,564,233,024 572,196,368
<CURRENT-LIABILITIES> 141,021,956 141,021,956 92,097,773
<BONDS> 1,214,442,751 1,214,442,751 315,334,000
0 0 90,643,919
0 0 0
<COMMON> 110 110 110
<OTHER-SE> 237,779,141 237,779,141 74,120,566
<TOTAL-LIABILITY-AND-EQUITY> 1,564,233,024 1,564,233,024 572,196,368
<SALES> 101,255,867 101,255,867 0
<TOTAL-REVENUES> 105,929,303 105,583,469 0
<CGS> 41,200,229 41,200,229 0
<TOTAL-COSTS> 186,736,723 182,692,971 0
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 1,012,117 1,012,117 0
<INTEREST-EXPENSE> 7,426,271 7,403,037 0
<INCOME-PRETAX> (130,446,037) (126,724,885) (160,356)
<INCOME-TAX> 9,000,000 9,000,000 0
<INCOME-CONTINUING> (139,446,037) (135,724,885) (160,356)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 19,709,471 19,709,471 0
<CHANGES> 0 0 0
<NET-INCOME> (201,602,008) (193,472,626) (12,850,279)
<EPS-PRIMARY> (1.17) (1.22) (0.08)
<EPS-DILUTED> (1.17) (1.22) (0.08)
</TABLE>
