<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------
SCHEDULE 14D-9
Solicitation/Recommendation Statement
Pursuant to Section 14(d)(4)
of the Securities Exchange Act of 1934
----------------
Global Crossing Ltd.
(Name of Subject Company)
Global Crossing Ltd.
(Name of Person(s) Filing Statement)
----------------
Common Stock, Par Value $.01 Per Share
(Title of Class of Securities)
G3921A100
(CUSIP Number of Class of Securities)
----------------
James C. Gorton, Esq.
Global Crossing Ltd.
150 El Camino Drive
Suite 204
Beverly Hills, California 90212
(310) 385-5200
(Name, address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing statement)
With a copy to:
Brian J. McCarthy, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90071
(213) 687-5600
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Item 1. Security and Subject Company.
The name of the subject company is Global Crossing Ltd., a company formed
under the laws of Bermuda ("Global" or the "Company"), and the address of its
principal executive offices is Wessex House, 45 Reid Street, Hamilton HM12,
Bermuda. The title of the class of equity securities to which this
Solicitation/Recommendation Statement on Schedule 14D-9 relates is the common
stock, par value $0.01 per share ("Common Stock" or "Shares"), of Global.
Item 2. Tender Offer of the Bidder.
This Statement relates to the cash tender offer (the "Offer") described in
the Tender Offer Statement on Schedule 14D-1 dated May 21, 1999, filed by U S
WEST, Inc., a Delaware corporation ("U S WEST" or the "Offeror"), with the
Securities and Exchange Commission, relating to an offer to purchase up to
39,259,305 outstanding shares of Common Stock (representing approximately
9.49% of the issued and outstanding shares as of May 16, 1999), at a price of
$62.75 per share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated May 21, 1999 and the
related Letter of Transmittal (as amended or supplemented, collectively, the
"Offer Documents").
The Offer is being made pursuant to the Tender Offer and Purchase Agreement,
dated as of May 16, 1999, between Global and U S WEST (the "Agreement").
According to the Offer Documents, the principal executive offices of U S
WEST are located at 1801 California Street, Suite 5100, Denver, Colorado
80202.
Item 3. Identity and Background.
(a) The name and business address of Global, which is the person filing this
Solicitation/Recommendation Statement, are set forth in Item 1 above.
(b) Except as set forth in this Item 3(b), to the knowledge of Global, as of
the date hereof, there are no material contracts, agreements, arrangements or
understandings and no actual or potential conflicts of interest between Global
or its affiliates and (i) Global, its executive officers, directors or
affiliates or (ii) U S WEST or its executive officers, directors or
affiliates.
TENDER OFFER AND PURCHASE AGREEMENT
General
The Agreement provides that U S WEST will commence the Offer. Because the
description of the tender offer agreement contained in this document is a
summary, it does not contain all the information that may be important to you.
A copy of the Agreement is filed as Exhibit 2 hereto.
The Offer
Subject to the satisfaction of certain conditions (see "--Offer
Conditions"), and unless the parties agree to exercise their respective
termination rights (see "--Termination"), U S WEST or one of its direct or
indirect wholly-owned subsidiaries will commence an offer to purchase for cash
up to 39,259,305 shares of Global common stock at a price of $62.75 per share
net to the seller in cash. The number of shares of Global common stock subject
to the tender offer will be adjusted for any change or distribution in respect
of Global's common stock by reason of a stock split, combination,
reclassification, stock dividend, or any similar event, so as to provide U S
WEST and the tendering shareholders the economic benefits provided under the
Agreement. If, at the expiration of the tender offer, more than 39,259,305
Shares of common stock have been tendered and not withdrawn, U S WEST will
purchase such shares on a pro rata basis, based on the number of shares
tendered by each Global shareholder, with appropriate adjustment to avoid
purchase of fractional shares. U S WEST and
2
<PAGE>
Global agree to cooperate to make necessary adjustments to the proration
mechanism to allow holders of exercisable options to purchase Global common
stock (issued by the Company) to tender shares issuable upon exercise of such
options without exercising such options until such time as it is determined
that such shares will be purchased by U S WEST pursuant to the tender offer.
U S WEST will pay for tendered shares of Global common stock as soon as it
is permitted to do so under applicable law. U S WEST's obligation to pay for
tendered shares of Global common stock is subject only to certain conditions
(see "--Offer Conditions"). U S WEST reserves the right to waive any tender
offer condition and make any other changes in the terms of the tender offer.
However, unless U S WEST receives the written approval of Global, it may not:
a. decrease the price offered per share of Global common stock;
b. change the form of consideration payable in the tender offer;
c. increase or reduce the maximum number of shares of Global common
stock to be purchased in the tender offer;
d. amend or impose additional tender offer conditions; or
e. make other changes adverse to Global or its shareholders or which
may delay the consummation of the tender offer.
Offering Period. The tender offer will remain open for an initial period of
twenty business days after its commencement. Unless the Agreement has been
terminated, U S WEST will extend the tender offer from time to time if, at the
then-scheduled expiration date, all the tender offer conditions (see --"Offer
Conditions") have not been satisfied or waived. Unless Global consents in
writing, each extension will not exceed ten business days. However, if U S
WEST and Global reasonably believe fewer than ten business days are necessary
to satisfy the tender offer conditions, then the extension will not exceed
such fewer number of days. Any extension will not be less than the minimum
number of days required by the Exchange Act or any applicable law.
Securities and Exchange Commission filings. As soon as reasonably
practicable on the date the tender offer is commenced, U S WEST will file a
tender offer statement on Schedule 14D-1 with the Securities and Exchange
Commission. The Schedule 14D-1 will contain an "Offer to Purchase" and forms
of the related letter of transmittal, in compliance with the rules under the
Exchange Act. U S WEST agrees to give Global and its counsel an opportunity to
review the Schedule 14D-1 before it is filed with the Securities and Exchange
Commission. U S WEST and Global agree to promptly correct any information they
provide which becomes false or misleading in any material respect. U S WEST
agrees to cause any corrected Schedule 14D-1 to be filed with the Securities
and Exchange Commission and to disseminate to Global common shareholders the
corrected "Offer to Purchase" and forms of the related letter of transmittal,
to the extent required by federal securities laws. As soon as U S WEST
receives any comments from the Securities and Exchange Commission, U S WEST
will provide Global with a copy of such comments.
Contemporaneously with the commencement of the tender offer, Global will
file with the Securities and Exchange Commission a Solicitation/Recommendation
Statement on Schedule 14D-9 containing Global's board
of directors' recommendation that shareholders accept the offer and tender
their shares of common stock. Global will also promptly mail the Schedule 14D-
9 to its shareholders. The Schedule 14D-9 and all amendments thereto will
comply in all material respect with the rules of the Exchange Act. Global and
U S WEST agree to promptly correct any information they provide which becomes
false or misleading in any material respect. Global agrees to cause any
corrected Schedule 14D-9 to be filed with the Securities and Exchange
Commission, and disseminated to its common shareholders, to the extent
required by federal securities laws.
Global Action. In connection with the tender offer, Global will promptly
furnish U S WEST with mailing labels, security position listings, any non-
objecting beneficial owner lists and any available listings or computer files
containing the names and addresses of the record holders of shares of Common
Stock. Global will furnish U S WEST with such additional information and
assistance as Global or its agents may reasonably require to
3
<PAGE>
communicate the tender offer to the record and beneficial holders of shares of
Common Stock. U S WEST will use such information only in connection with the
tender offer. U S WEST will deliver to Global all copies of such information
in its possession if the Agreement is terminated.
Representations and Warranties by Global
The Agreement contains representations and warranties, subject to
qualifications, made by Global to U S WEST as to, among other things:
. its due organization, valid existence and good standing;
. corporate authorization to enter into the Agreement, to perform its
obligations under the Agreement and to consummate the transactions
contemplated thereby, and the enforceability of the Agreement against
Global;
. absence of conflicts of the Agreement with its organizational documents,
any law or regulation and any agreement to which it is party (including
the registration rights agreement, dated as of August 12, 1998); and
. consents and filings needed in connection with the execution and
delivery by Global of the Agreement.
Representations and Warranties by U S WEST
The Tender Offer and Purchase Agreement contains representations and
warranties, subject to qualifications, made by U S WEST to Global as to, among
other things:
. its due organization, valid existence and good standing;
. corporate authorization to enter into the Agreement, to perform its
obligations under the Agreement and to consummate the transactions
contemplated thereby, and the enforceability of the Agreement against U
S WEST;
. absence of conflicts of the Agreement with its organizational documents,
any law or regulation and any agreement to which it is party;
. consents and filings needed in connection with the execution and
delivery by U S WEST of the Agreement;
. compliance with state and federal securities laws regarding unregistered
shares of Global common stock; and
. necessary financing.
Additional Agreements
Registration Rights. U S WEST will have the right to exercise certain
registration rights as provided in the registration rights agreement as if U S
WEST were a party thereto. Global entered an Agreement, dated as of May 16,
1999, with the shareholders who are parties to the registration rights
agreement granting U S WEST such registration rights. U S WEST cannot exercise
any of these registration rights until the later of (i) the termination of the
Frontier Merger Agreement (as defined below) (or consummation of the
transactions pursuant thereto) and (ii) the termination of the Merger
Agreement.
Board Representation. After the merger agreement is terminated and as long
as U S WEST beneficially owns more than 5% of Global's outstanding shares of
Common Stock (for purposes hereof, if U S WEST's ownership of Common Stock is
reduced to less than 5% because of issuances by Global of Common Stock, U S
WEST will be deemed to beneficially own 5% until it transfers shares of Common
Stock), Global agrees to use its best efforts to cause one individual
designated by U S WEST to be nominated to serve on its board of directors.
Global agrees to solicit proxies for such individual to the same extent as for
other members of its slate of nominees. After U S WEST no longer beneficially
owns 5% of Common Stock, at the request of Global, U S WEST will cause any U S
WEST designee to resign.
4
<PAGE>
Hart-Scott-Rodino Act. U S WEST and Global agree to make all filings and
submissions required by the Hart-Scott-Rodino Act (with respect to the tender
offer). U S WEST and Global will provide to each other any assistance,
information, or documents necessary to comply with the Hart-Scott-Rodino Act.
U S WEST and Global will provide each other copies of all correspondence each
has with any governmental authority in connection with the Agreement.
Public Announcements. U S WEST and Global agree not to issue any press
release or public statement without prior approval, unless required by law.
Legend. Following consummation of the Offer, the parties agree to cooperate
to legend the Global common stock certificates purchased pursuant to the
tender offer to refer to the applicable restrictions on the transfer of such
certificate under the voting agreement, the standstill agreement, the
Agreement and applicable law.
Termination
The Tender Offer and Purchase Agreement provides that prior to the closing
of the tender offer, the Agreement may be terminated:
. by mutual written consent of U S WEST and Global; or
. by U S WEST or Global on or after May 16, 2000, but only if the merger
agreement has previously been terminated; or
. by U S WEST at any time after the termination of the merger agreement
pursuant to Section 9.1(d)(ii)(A) or 9.1(e) of the merger agreement (see
"--The Merger Agreement") or by Global pursuant to Section 9(h)(i) of
the merger agreement; or
. by Global at any time beginning on the first business day prior to the
mailing of the proxy statement in connection with the Agreement and Plan
of Merger, dated as of March 16, 1999 among Global, GCF Acquisition
Corp. and Frontier (the "Frontier Merger Agreement"); or
. by U S WEST at any time beginning on the first business day following
the termination of the Frontier Merger Agreement in accordance with its
terms.
If the Agreement is terminated, U S WEST will promptly terminate the tender
offer without accepting any shares of Common Stock for payment.
Amendment
U S WEST and Global may amend the Agreement at any time by a writing signed
by both parties.
Offer Conditions
U S WEST will not accept or pay for any shares tendered, if prior to the
termination of the tender offer the Hart-Scott Rodino Act waiting period is
not expired or the tender offer has been terminated. U S WEST will not be
required to accept or pay for any shares tendered, and may amend or terminate
the tender offer if, prior to the expiration of the tender offer, any order or
injunction is entered or any other action taken which makes illegal or
prohibits payment for shares of Common Stock pursuant to the tender offer.
The above tender offer conditions may be asserted by U S WEST regardless of
the circumstances (subject to the other terms of the Agreement). U S WEST may
waive any of the conditions only after giving five business days' notice to
Global.
5
<PAGE>
TENDER AND VOTING AGREEMENT
General
The tender and voting agreement establishes certain rights and obligations
of the signatory shareholders of the Company in connection with the tender
offer by U S WEST for Shares and the Merger. Because the description of the
tender and voting agreement contained in this document is a summary, it does
not contain all the information that may be important to you. A copy of the
tender and voting agreement is attached as Exhibit 5 hereto.
Agreement to Tender Shares
Each shareholder who is a party to the tender and voting agreement agrees to
tender and not to withdraw at least 12.3045% of the total number of Shares
owned by such shareholder.
Agreement to Vote Shares
Each shareholder who is a party to the tender and voting agreement agrees
to:
. be present, in person or by proxy, at all Global shareholders meetings,
so that all Shares then held by such shareholder and entitled to vote
may be counted; and
. vote, or deliver a written consent covering, all the Shares then held by
such shareholder to approve the merger and against any action which
would reasonably be expected to result in a failure of the conditions to
the Merger to occur.
Waiver of Appraisal Rights
To the extent permitted by law, each shareholder who is a party to the
tender and voting agreement agrees to waive any appraisal, dissenters' or
similar rights that such shareholder may have under Bermuda law with respect
to the merger.
Restriction on Transfer--Global Merger
Until the Merger is consummated or the Merger Agreement is terminated, the
shareholders who are a party to the Tender and Voting Agreement agree not to
transfer Shares representing 15% of the issued and outstanding
shares of Global Common Stock to any single person or group unless such
recipient agrees to comply with the voting requirements of the tender and
voting agreement.
Restriction on Transfer--Frontier Merger
Until Global's merger with Frontier is consummated or the Frontier Merger
Agreement is terminated, each shareholder who is a party to the tender and
voting agreement (other than certain shareholders identified on Exhibit A to
the tender and voting agreement) agrees not to transfer the shares without
Global's consent. The certain shareholders of Global identified as Exhibit A
to the tender and voting agreement have entered into a separate transfer
agreement with Global pursuant to which each such shareholder has agreed not
to transfer their shares until the Frontier merger is consummated or
terminated without Global's consent, which consent is not to be unreasonably
withheld. A copy of such transfer agreement is attached as Exhibit 8 hereto.
Representations and Warranties of Shareholders
Each shareholder who is a party to the tender and voting agreement
represents and warrants, among other things:
. if a corporation, that it is duly incorporated and validly existing and
has the authority and power to enter the tender and voting agreement;
6
<PAGE>
. valid execution and due authorization of the tender and voting agreement
and absence of any violation with the shareholder's charter documents;
. the agreement is binding and enforceable against each signing
shareholder;
. each shareholder is the owner of the shares listed beside its name on
Exhibit A to the tender and voting agreement; and
. absence of material litigation.
Termination
The obligations of the shareholders who are party to the tender and voting
agreement under the tender and voting agreement terminate upon the first to
occur of the consummation of the Global Merger, the termination of the Merger
Agreement, the approval of the Global Merger and the Merger Agreement have
been approved by the requisite vote of the shareholders of the Company and the
Offeror or the termination of the Agreement without the purchase of shares of
Common Stock.
THE STANDSTILL AGREEMENT
General
The standstill agreement establishes certain arrangements between U S WEST
and Global with respect to U S WEST's ownership of Common Stock. Because the
description of the standstill agreement contained in this document is a
summary, it does not contain all the information that may be important to you.
A copy of the standstill agreement is filed as Exhibit 3 hereto.
Covenants with Respect to Global Voting Securities
Acquisition of Global Common Stock. U S WEST and its affiliates (other than
Global) agree not to acquire any Common Stock during the standstill period,
except pursuant to the Agreement. However, U S WEST and its affiliates may buy
Common Stock directly from Global. The standstill period began on May 16, 1999
and continues until the earlier of May 16, 2009 or the effective time (as
defined in the Merger Agreement (see description of merger agreement)).
However, the standstill period will expire May 16, 2004 if the Merger
Agreement is terminated by Global or U S WEST pursuant to certain termination
provisions of the Merger Agreement.
Disposition of Global Common Stock. Until the later of the termination or
consummation of the merger agreement and the termination or consummation of
the Frontier Merger Agreement, U S WEST and its affiliates will not sell,
transfer, pledge or otherwise dispose of any beneficial interest in any Global
common stock. During the standstill period, U S WEST and its affiliates will
not sell or otherwise dispose of any Global common stock if U S WEST knows
that such transaction will result in any person or group controlling more than
5% of the voting power of Global, unless such transferee would own between 5%
and 9.5% of Global voting securities and agrees in writing to be bound by this
standstill agreement. However, U S WEST may sell Global voting securities
under the following circumstances: (i) to its affiliates that agree to be
bound by the provisions of the standstill agreement; (ii) pursuant to a tender
or exchange offer for Global voting securities which is not opposed by
Global's board of directors; (iii) in a business combination; or (iv) as
provided by the registration rights given U S WEST in the Agreement (see
description of Tender Offer and Purchase Agreement). U S WEST agrees not to
transfer all or a substantial part of any affiliate's or subsidiary's capital
stock which purchases Global common stock pursuant to the tender offer,
without first acquiring such Global Stock from its subsidiary or affiliate.
Proxy Solicitations/Voting. During the standstill period, U S WEST and its
affiliates will not solicit proxies or participate in a proxy solicitation in
opposition to Global's board of directors' recommendation or proposal.
U S WEST will not submit a proposal or induce any person to do so or influence
any person with respect to
7
<PAGE>
Global common stock without a formal resolution adopted by Global's board
approving such action. At any meeting or consent solicitation to elect the
Global board of directors, U S WEST and its affiliates will vote all of their
shares in favor of the individuals recommended for election by the Global
board of directors.
No Voting Trusts, Pooling Agreements or Formation of Groups. Except as
contemplated by the voting agreement, during the standstill period, U S WEST
and its affiliates will not participate in a pooling agreement, syndicate,
voting trust or other group for the purpose of acquiring, holding, voting or
disposing of Global common stock.
Limitation on Various Other Actions. During the standstill period, U S WEST
and its affiliates will not, among other things, take any of the following
actions:
. seek to effect a change in control or reorganization of Global;
. seek to effect any influence over Global's management, directors, or
policies;
. assist anyone in circumventing the provisions of the standstill
agreement;
. present any proposal, or encourage any person to make such a proposal,
expected to result in any of the above-mentioned actions or result in U
S WEST increasing its Global common stock in violation of the standstill
agreement;
. publicly suggest its willingness to engage in any of the above-mentioned
actions; or
. request a waiver or amendment of any of the covenants with respect to
Global common stock.
Representations
During standstill period and if requested by Global, U S WEST will be
present at all meetings of shareholders at which Global board members are to
be elected.
VOTING AGREEMENT
General
The voting agreement establishes, among other things, how U S WEST will vote
its shares of Global common stock. Because the description of the voting
agreement contained in this document is a summary, it does not contain all the
information that may be important to you. A copy of the voting agreement is
filed as Exhibit 4 hereto.
Agreement to Vote Shares
The voting agreement provides that at every Global shareholder meeting and
on every action taken by written consent, U S WEST agrees to vote its shares
in favor of the following:
. the Merger (See "--The Merger Agreement") and any action required in
furtherance thereof; and
. the Frontier Merger Agreement and any action required in furtherance
thereof.
The voting agreement also provides that at every Global shareholder meeting
and on every action taken by written consent, unless otherwise agreed to by
Global, U S WEST agrees to vote its shares against the following:
. any action which would reasonably be expected to result in a failure to
satisfy the conditions to the consummation of the merger agreement.
8
<PAGE>
Representations and Warranties of U S WEST
The voting agreement contains representations and warranties, subject to
qualifications, made by U S WEST to Global as to, among other things:
. its current ownership of no shares of Common Stock;
. its sole power to vote, dispose of, convert, or demand appraisal rights
with respect to shares of Global Common Stock it acquires;
. corporate authorization to enter into the voting agreement, to
consummate the transactions contemplated thereby, and the enforceability
of the voting agreement against U S WEST;
. absence of conflicts with its organizational documents, any law or
regulation and any agreement to which it is a party;
. consents and filings required in connection with the voting agreement;
and
. absence of liens on U S WEST's shares of Common Stock.
Representations and Warranties of Global
The voting agreement contains representations and warranties, subject to
qualifications, made by Global to U S WEST as to, among other things:
. corporate authorization to enter into the voting agreement, to
consummate the transactions contemplated thereby, and the enforceability
of the voting agreement against Global;
. absence of conflicts with its organizational documents, any law or
regulation and any agreement to which it is a party; and
. consents and filings required in connection with the voting agreement.
Covenants of U S WEST
Restriction on Transfer, Proxies and Noninterference. The voting agreement
contains certain covenants whereby U S WEST agrees not to:
. offer, sell, or otherwise dispose of, or enter into an arrangement to
offer, sell or otherwise dispose of, any shares of Common Stock;
. grant proxies or powers of attorney with respect to such shares;
. deposit such shares into a voting trust or enter into a voting agreement
with respect to such shares.
U S WEST further agrees not to take any action that would make any of its
representations and warranties contained in the voting agreement (see "--
Representations and Warranties" of U S WEST) untrue or which would prevent U S
WEST from performing its obligations under the voting agreement. U S WEST
agrees to use its reasonable efforts to consummate the transactions
contemplated by the merger agreement and the voting agreement.
Termination
The voting agreement terminates upon the later of:
. the earlier of (a) the consummation of the merger and (b) the
termination of the merger agreement pursuant to its terms; and
. the earlier of (a) the consummation of the Frontier merger and (b) the
termination of the Frontier merger agreement pursuant to its terms.
Upon termination, the voting agreement will become void and there will be no
liability on any party or any of its directors, officers, partners,
shareholders, employees, agents, advisors, representatives and affiliates in
connection with the voting agreement or the transactions contemplated thereby.
However, parties remain liable for their breach of the voting agreement. The
voting agreement provides that it does not limit or modify the rights,
obligations or liabilities of any person under any other contract, including
the merger agreement.
9
<PAGE>
THE MERGER AGREEMENT
General
The merger agreement provides that U S WEST and Global will form a
corporation under Delaware law that, after the merger becomes effective, will
be the Parent corporation. Parent will be equally owned by U S WEST and
Global. Parent will issue two classes of common stock. One class, the Parent
Class A Common Stock, will reflect the local service provider business of
Parent. The other class, the Parent Class B Common Stock will reflect the
global service provider business of Parent. Promptly after the formation of
Parent, U S WEST and Global will cause Parent to form two wholly owned
subsidiaries. At the effective time of the merger, U S WEST Merger Sub will be
merged into U S WEST and U S WEST will be the surviving company and Global
Merger Sub will merge into Global and Global will be the surviving company.
This section of the document describes material provisions of the merger
agreement. Because the description of the merger agreement contained in this
document is a summary, it does not contain all the information that may be
important to you. A copy of the Merger Agreement is filed as Exhibit 1 hereto.
General Information Regarding the Mergers
Closing of the Mergers. The mergers will close as soon as practicable upon
the fulfillment or waiver of all closing conditions. The mergers are expected
to close shortly after the approval of the shareholders of U S WEST and
Global, respectively.
Effective Time of the Mergers. At the closing of the mergers, the parties to
the merger agreement will file a certificate of merger with the Delaware
Secretary of State and an application for a certificate of amalgamation with
the Bermuda Registrar of Companies. The mergers will become effective at the
time specified in the certificate of merger and the certificate of
amalgamation referenced in the preceding sentence.
Operation of Parent Following the Mergers. In addition to containing the
terms of Parent Class A Common Stock and Parent Class B Common Stock (as
described elsewhere in this Statement), the certificate of incorporation of
Parent will contain such other provisions as are customary for public
companies, including a classified board of directors. In addition, the parties
have agreed that Parent will also adopt an appropriate shareholder rights
plan.
Parent's board of directors will have twenty-two members, ten of whom will
be designated by U S WEST, ten of whom will be designated by Global and two of
whom will be designated by U S WEST (and be reasonably satisfactory to Global)
and will not be affiliated with either U S WEST or Global.
The merger agreement also provides that Mr. Trujillo and Robert Annunziata,
currently the Chief Executive Officer of Global, will serve as Co-Chairmen and
Co-Chief Executive Officers of Parent following the Closing.
Alternative Structure. U S WEST and Global agree to use their best efforts
to restructure the mergers to qualify as tax-free, if Global's acquisition of
Frontier is consummated pursuant to Section 1.10 of the Frontier Merger
Agreement.
Location and Corporate Identity of Parent. At the effective time, the
Parent's headquarters will be located in New York City and Parent's corporate
name will be "Global Crossing, Inc."
Conversion
Common Stock. At the time the merger becomes effective, each share of Global
Common Stock and each share of U S WEST Common Stock (excluding treasury
shares and shares of Global Common Stock owned by
U S WEST and shares of U S WEST Common Stock owned by Global) shall be
converted into shares of Parent Class A Common Stock and shares of Parent
Class B Common Stock according to the conversion and election procedures
below.
10
<PAGE>
Options, Warrants and Other Rights. Each option, warrant and other right to
purchase or otherwise acquire Global Common Stock or U S WEST Common Stock
(excluding any such options, warrants or other rights owned by U S WEST or
Global) shall be converted into options, warrants or rights to purchase or
otherwise acquire Parent Class A Common Stock and Parent Class B Common Stock
according to the conversion and election procedures below. The exercise price
of the new options, warrant or rights will be adjusted in proportion to the
Class B to Class A Value Ratio (as defined below).
Conversion Ratio. Each holder of Global Common Stock or options, warrants,
or rights to purchase or otherwise acquire Global Common Stock (with the same
exceptions as noted above) shall have the right to make a number of elections
for Parent Class A Common Stock and Parent Class B Common Stock equal to the
sum of the number of shares of Global Common Stock held by the holder at the
effective time of the merger and the number of shares of Global Common Stock
issuable upon exercise of options, warrants or rights held by the holder at
the effective time (with the same exceptions as noted above) could be
exchanged if exercised. Each holder of U S WEST Common Stock or options,
rights or warrants to purchase or otherwise acquire U S WEST Common Stock
(with the same exceptions as noted above) shall have the right to make a
number of elections between Parent Class A Common Stock and Parent Class B
Common Stock equal to the sum of the shares of U S WEST Common Stock held by
the holder at the effective time of the merger and the number of shares of U S
WEST Common Stock issuable upon exercise of options, warrants or rights held
by the holder at the effective time of the merger (with the same exceptions as
noted above) multiplied by the conversion ratio. The conversion ratio is
determined by dividing the total number of shares of Global Common Stock
outstanding on the date of the Merger Agreement (on a fully diluted basis,
using the treasury method of calculation) less 39,259,305, divided by the
total number of shares of U S WEST Common Stock outstanding on the date of the
Merger Agreement (on a fully diluted basis, using the treasury method of
calculation). For the purpose of calculating the conversion ratio above, the
number of outstanding shares of Global Common Stock outstanding on the date of
the Merger Agreement includes the number of shares of Global Common Stock to
be issued in exchange for Frontier shares according to the terms of the
Frontier Merger Agreement.
Election. Each election entitles the holder to make an election for Parent
Class A Common Stock or Parent Class B Common Stock. For each election made
for Parent Class B Common Stock, the holder shall be entitled to receive a
number of shares of Parent Class B Common Stock equal to the sum of 1 plus the
Class B to Class A Value Ratio (as defined below) divided by the Class B to
Class A Value Ratio (as defined below) for each election made for. If Parent
Class A Common Stock, the holder shall be entitled to receive a number of
shares of Parent Class A Common Stock equal to the sum of 1 plus the Class A
to Class B Value Ratio (as defined below) multiplied by the number of
elections.
Pro Rata Adjustment. The maximum aggregate number of shares of Parent Class
A Common Stock or Parent Class B Common Stock that may be elected equal the
maximum number of elections that can be made. If the holders of Global Common
Stock and U S WEST Common Stock and the holders of options, warrants or rights
to purchase Global Common Stock or U S WEST Common Stock elect, in the
aggregate, a number of shares of Parent Class A Common Stock or Parent Class B
common stock exceeding the applicable cap, the number of shares exceeding the
cap will be reduced pro rata.
Election Procedures
Not later than thirty days prior to the anticipated effective time of the
merger or such other date as the parties may agree in writing, Global and U S
WEST shall fix a record date for determining which of its shareholders and
holders of options, warrants or rights to purchase common stock are entitled
to make an election and will mail a form of election together with a letter of
transmittal to such holders and each person who subsequently becomes a holder.
The election will be made by delivering the form of election to the exchange
agent mutually chosen by Global and U S WEST. Such election will be made in
terms of the percentage (in increments of one percent (1%)) that such holder
seeks of shares of Parent Class B Common Stock and/or shares of Parent Class A
Common Stock. The form of election must be properly completed, signed and
submitted to the exchange agent
11
<PAGE>
by 5:00 p.m. (New York City time) on the last business day prior to the
effective time of the merger (or such other time and date as the Parties may
agree) and accompanied by the following (other than in the case of holders of
Global and U S WEST options, warrants and rights to acquire their respective
common stock):
. the certificates as to which the election is being made; or
. an appropriate guarantee of delivery of such certificates from a firm
which is a member of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., or a commercial bank
or trust company having an office or correspondent in the United States
and such certificates are delivered to the exchange agent:
(i) within three NYSE trading days after the date of execution of
the guarantee of delivery, and
(ii) with a properly completed and signed letter of transmittal.
Failure to deliver certificates covered by a guarantee of delivery within
three New York Stock Exchange trading days will invalidate the election.
Parent will have the discretion, which it may delegate to the exchange
agent, to determine in good faith whether forms of election have been
properly completed and is under no obligation to notify any person of a
defect. Any form of election may be changed or revoked prior to the
election deadline, and if so revoked Parent or the exchange agent will
return the certificates representing the shares of the Global or U S WEST
common stock covered by such form of election to be promptly returned
without charge. If a holder of Global or U S WEST common stock or holder of
options, warrants or rights to purchase such common stock:
. does not submit a form of election which is received by the exchange
agent prior to the Election deadline (including a holder who submits and
then revokes his or her form of election and does not resubmit a form
election which is timely received by the exchange agent); or
. submits a form of election without the corresponding certificates or
guarantee; or
. if the exchange agent cannot reasonably determine the election
preference of such holder submitting a form of election
then such holder shall be deemed to have elected shares of Parent Class B
Common Stock and shares of Parent Class A Common Stock in the same
proportion as the holders of Global Common Stock or U S WEST Common Stock,
respectively, who actually made elections.
Certificates surrendered for exchange by any affiliate of Global or U S
WEST shall not be exchanged until Parent shall have received a signed
agreement from such affiliate.
Exchange of Shares
Exchange Agent. Prior to the merger, Global and U S WEST will choose an
exchange agent to effect the exchange of certificates representing shares of U
S WEST and Global common stock for certificates representing shares of Parent
Class A Common Stock and Parent Class B Common Stock and cash to be paid in
lieu of fractional shares. From time to time after the merger, Parent will
deposit with the exchange agent certificates representing Parent Class A and
Class B stock.
Exchange of Shares. U S WEST and Global shareholders who surrender their
stock certificates to the exchange agent, or to the Parent (if the exchange
agent's appointment is terminated) will receive certificates representing the
number of whole shares of Parent Class A Common Stock and Class B Common Stock
to which the holders are entitled in accordance with the election procedure
described above, with cash being paid in lieu of fractional shares. Holders of
unexchanged U S WEST and Global stock certificates will not receive any
dividends or other distributions made by Parent after the mergers until their
stock certificates are surrendered. Upon surrender, however, the holders will
receive all dividends and distributions made on the related Parent shares
subsequent to the mergers, without interest, together with cash in lieu of
fractional shares. If the exchange agent's appointment is terminated, holders
will look solely to the Parent for payment of such dividends and distributions.
No party will be liable to U S WEST or Global shareholders for any Parent shares
or cash delivered to a public official pursuant to any abandoned property,
escheat or similar laws.
12
<PAGE>
Fractional Shares. No fractional Parent Common Stock shares will be issued
to holders of U S WEST or Global common stock. In lieu of fractional shares,
each holder of fractional shares of Parent common stock will receive a cash
payment.
Conditions to the Mergers
Conditions to Each Party's Obligation to Effect the Mergers. The obligations
of each party to effect the mergers are subject to the following conditions:
. the approval by the shareholders of Global and U S WEST of the mergers;
. the approval by Parent shareholders of the issuance of Parent Class A
Common Stock and Parent Class B Common Stock;
. the absence of any order, injunction or other legal restraint making
illegal or prohibiting the consummation of the mergers or creating an
adverse effect on Global or U S WEST;
. the expiration or early termination of the waiting period under the
Hart-Scott-Rodino Act;
. the receipt of all material approvals or permits from any governmental
authority necessary to consummate the mergers;
. the Securities and Exchange Commission not having issued a stop order
suspending the effectiveness of the registration statement and there not
being pending or threatened any proceedings for such purpose;
. the receipt of all required state securities or "blue sky" permits or
approvals;
. the approval for listing on the New York Stock Exchange or the Nasdaq
National Market System of the Parent Class A Common Stock and Parent
Class B Common Stock, subject to official notice of issuance;
. the receipt by Global and U S WEST of all approvals or consents required
under any agreement, except where it would not materially adversely
affect Parent, U S WEST or Global;
. the consummation of Global's acquisition of Frontier pursuant to the
Frontier Merger Agreement; and
. Global's filing of a notice of discontinuance, an application for the
sanctioning of a "scheme of arrangement", or an application for a
certificate of amalgamation, as the case may be, with the appropriate
Bermuda authority.
Additional Conditions to Obligations of Global. The obligations of Global to
effect the mergers are further subject to the following additional conditions:
. the representations and warranties of U S WEST set forth in the merger
agreement being true and correct in all material respects on May 16,
1999 and as of the closing date, or another date stated any
representation or warranty, and an officer's certificate received by
Global to such effect;
. compliance by U S WEST in all material respects with its agreements and
covenants under the merger agreement, and an officer's certificate
received by Global to such effect;
. the receipt by Global of a written opinion of Skadden, Arps, Slate,
Meagher & Flom LLP that the consummation of the transactions will for
U.S. federal income tax purposes:
a. constitute a tax-free exchange of shares of Global Common Stock
for shares of Parent Common Stock; and
b. be a non-recognition transaction for both Global and Parent
. if the opinion of Cadwalader, Wickersham & Taft that the consummation of
the transactions will be a non-recognition transaction as to U S WEST
and Parent is not rendered to U S WEST, then Global will not be
obligated to effect the mergers (even if U S WEST waives the condition)
provided that Global has received an opinion of Skadden, Arps, Slate,
Meagher & Flom LLP that there exists a substantial likelihood of a tax
liability that would result in a material adverse effect on U S WEST or
Parent, as the case may be.
13
<PAGE>
. the receipt by Global of affiliate agreements from each affiliate of U S
WEST;
. U S WEST taking all actions necessary so that the Parent's board will
have the agreed-upon composition as described under "Operation of Parent
Following the Mergers."
Additional Conditions to Obligations of U S WEST. The obligations of U S
WEST to effect the merger are further subject to the following additional
conditions:
. the representations and warranties of Global set forth in the merger
agreement being true and correct in all material respects on May 16,
1999 and as of the closing date, or another date stated in any
representation or warranty, and an officer's certificate received by U S
WEST to such effect;
. compliance by Global in all material respects with its agreements and
covenants under the merger agreement, and an officer's certificate
received by U S WEST to such effect;
. the receipt by U S WEST of a written opinion of Cadwalader, Wickersham &
Taft that the consummation of the transactions will for U.S. federal
income tax purposes:
a. not cause the spin-off of U S WEST completed on June 12, 1998 to
become taxable, including taxability pursuant to Section 355(e) of the
Internal Revenue Code;
b. constitute for U.S. federal income tax purposes a tax-free
exchange of shares of U S WEST common stock for shares of Parent common
stock; and
c. be a non-recognition transaction as to U S WEST and Parent.
. if the opinion of Skadden, Arps, Slate, Meagher & Flom LLP that the
consummation of the transactions will be a non-recognition as to Global
and Parent are not rendered, with respect to Global or Parent, then U S
WEST shall not be obligated to effect the mergers even if Global waives
the condition provided that U S WEST has received an opinion of
Cadwalader, Wickersham & Taft, that there exists a substantial
likelihood of a tax liability that would represent a material adverse
effect to Global or Parent, as the case may be.
. the receipt by U S WEST of affiliate agreements from each affiliate of
Global;
. Global taking all actions necessary so that the Parent's board will be
comprised of twenty-two people, ten of which appointed by Global, ten of
which appointed by U S WEST, and the remaining two shall be appointed by
U S WEST, but shall be independent directors not affiliated with U S
WEST; and
. the Mergers being accounted for under the purchase method of accounting,
with U S WEST as the acquiror.
Representations and Warranties
In the merger agreement U S WEST and Global each make similar
representations and warranties, which include, among other things:
. its organization and the organization of its significant subsidiaries;
. effectiveness of its certificate of incorporation and bylaws, and the
certificate and bylaws of its significant subsidiaries, and there being
no violation of such certificates and bylaws;
. its capital structure;
. corporate power and authorization to enter into the merger agreement and
to consummate the merger and related transactions;
. absence of conflict with its charter documents and receipt of all
required consents and approvals;
. all recent required reports having been filed with the SEC and the
accuracy of those reports;
. absence of material adverse changes since December 31, 1998;
. the absence of material litigation;
14
<PAGE>
. compliance with laws and permits;
. accuracy of information supplied for use in the registration statement
and joint proxy statement;
. employee benefit matters;
. labor matters;
. environmental matters;
. board approval;
. approval by a majority of votes cast being the only shareholder vote
required;
. the opinion of its financial advisor;
. brokers' and finders' fees;
. tax matters;
. intellectual property matters;
. insurance matters;
. its ownership of less than 10% of the other's outstanding shares;
. material contracts;
. necessary licenses;
. year 2000 readiness matters; and
. no violation of, among other things, Section 104 of the Foreign Corrupt
Practices Act or similar laws.
Conduct of U S WEST and Global prior to the Mergers
Transition Planning. Global and U S WEST have agreed to establish a four-
person committee (with two members designated by Global and two members
designated by U S WEST) responsible for coordinating all transition planning
and implementation relating to the mergers, including examining alternatives
regarding the future organization and management of Global and U S WEST and
the coordination of policies and strategies with respect to regulatory
authorities.
Operating Covenants. Prior to the mergers, Global, U S WEST and their
respective subsidiaries have agreed to conduct their operations in the
ordinary course consistent with past practice, and will use their best efforts
to preserve intact their business organization, keep available the services of
their officers and employees and maintain advantageous relationships with
persons having business relationships with them. Subject to some exceptions,
including obtaining the written consent of the transition committee, the
merger agreement places specific restrictions on the ability of Global and U S
WEST and their respective subsidiaries to, among other things:
. issue, sell, encumber or dispose of its capital stock or securities
convertible into or exercisable for its capital stock (excluding
employee benefit plans);
. amend or propose to amend its certificate of incorporation, bylaws, or
shareholder rights plan except as disclosed in the draft proxy statement
of Global and Frontier to be filed in connection with the Frontier
Merger Agreement;
. split, combine or reclassify its outstanding shares of common stock;
. with respect to Global, declare or pay any dividend (U S WEST is
permitted to pay dividends consistent with past practice);
. redeem, purchase or acquire its capital stock, except in connection with
its employee benefit plans;
15
<PAGE>
. acquire any corporation, partnership or business or increase any
investment if the aggregate of such transactions exceeds $3 billion;
. except in the ordinary course of business, make certain capital
expenditures;
No Solicitation. Pursuant to the merger agreement and except as described
below, Global and U S WEST agree that neither they nor their respective
subsidiaries will, solicit, initiate, encourage (including by way of
furnishing information) or knowingly facilitate any alternative transaction,
as defined below, or participate in any discussions regarding any alternative
transaction.
Under the merger agreement, "alternative transaction" means, with respect to
Global or U S WEST:
. any acquisition by a third party of more than 20% of its outstanding
shares pursuant to a tender offer, exchange offer or otherwise;
. any merger or other business combination involving it or one of its
subsidiaries, regardless of who the surviving corporation may be; or
. any other transaction pursuant to which any third party acquires control
of its assets or its subsidiaries' assets for consideration equal to 20%
or more of the fair market value of its outstanding common stock.
Notwithstanding the foregoing, the board of directors of Global or U S WEST,
as the case may be, is permitted under the merger agreement to:
. engage in discussions or negotiations with, or provide information to,
any person in response to an unsolicited alternative transaction
proposal submitted to it prior to the date its shareholders adopt the
merger agreement, if, among other things, prior to participating in
discussions or furnishing information:
a. it executes a confidentiality agreement with the third party in
question containing terms at least as favorable to it as the one
previously entered into between Global and U S WEST; and
b. it determines that the alternative transaction proposal is a
superior proposal (as defined in the merger agreement) and, after
receiving the advice of outside Counsel, determines that failing to
participate in discussions with the third party in question or to
furnish information would result in a reasonable likelihood that it
would breach its fiduciary duties to its shareholders.
Global and U S WEST must also provide the other with contemporaneous notice
of entering into any discussions or furnishing any information and prompt
notice of the terms and conditions of any alternative transaction and the
identity of the person making it.
Global and U S WEST agree not to release any third party from any provision
of any standstill agreement which could affect an alternative transaction and
agree that either party will be entitled to enforce the other party's rights
and remedies in connection with such agreements. Nothing shall prohibit either
party (i) from taking and disclosing to its shareholders a position
contemplated by Rule 14e-9 or Rule 14e-2(a) under the Exchange Act regarding
the tender offer or (ii) from making any disclosure to its shareholders if, in
the good faith judgment of such party's board of directors, after receipt of
advice from outside counsel, failure to disclose would result in a possible
breach of fiduciary duty.
Other Covenants Regarding the Period Prior to the Mergers.
. Global and U S WEST have agreed to consult regarding their disclosure
and filings of financial statements prior to the merger; and
. neither U S WEST nor Global has the right to control the other's
operations prior to the merger.
16
<PAGE>
Covenants and Other Agreements. The merger agreement contains additional
agreements relating to, among other things:
. the preparation, filing, and distribution of the registration statement
and the mailing of the joint proxy statement subject to the delivery of
"comfort" letters from each company's independent accountants;
. mutual access to information;
. cooperation in the issuance of press releases relating to the merger;
. cooperation regarding certain filings with governmental authorities and
other agencies and organizations;
. notification upon the occurrence or non-occurrence of an event that
would:
a. violate a representation, warranty, covenant or condition in the
merger agreement or,
b. have a material adverse effect on such party or require an amendment
to the registration and joint proxy statement.
. cooperation to cause the merger to qualify as a tax free exchange;
. each parties' best efforts to obtain blue sky permits for Parent Class A
Common Stock and Parent Class B Common Stock prior to the merger; and
. obtaining the prior written consent of the other party to engage in
acquisitions prior to the merger in excess of $3 billion in the
aggregate.
Board Recommendation; Shareholders Meetings. Global and U S WEST have each
agreed to convene a shareholders meeting as soon as practicable for the
purpose of voting on the adoption of the merger agreement. Each company's
board of directors may not withdraw or modify its recommendation in any manner
adverse to the other company, unless:
. it has concluded in good faith, on the advice of its outside financial
advisors, that the proposal is a superior proposal.
Affiliate Agreements. Each of Global and U S WEST have agreed to disclose to
the other party all persons who may be deemed an affiliate of such party for
purposes of Rule 145 under the Securities Act. Each of Global and U S WEST has
further agreed to use its reasonable best efforts to deliver to the other
party, a letter from each such affiliate in the form agreed to in the Merger
Agreement.
Listing of Shares. The parties agree to use their best efforts to cause the
Parent Class A Common Stock and Parent Class B Common Stock shares to be
listed on the New York Stock Exchange or Nasdaq.
Directors' and Officers' Indemnification and Insurance. For a period of six
years following the merger, U S WEST and Global agree:
. not to modify the provisions in their respective charter documents
regarding director and officer indemnification;
. to maintain in effect their current director and officer liability
insurance; and
. to indemnify the directors of U S WEST and Global, respectively, as
permitted by their charter documents and applicable law.
Determination of Class B to Class A Value Ratio. At least sixty days prior
to the anticipated effective time, U S WEST and Global will retain a
nationally recognized investment bank as an appraiser to determine the "Class
B to Class A Value Ratio", The Class B to Class A Value Ratio represents the
appraiser's assessment of the relative value of Parent Class B Common Stock to
Parent Class A Common Stock. In determining such
17
<PAGE>
valuations, the appraiser will employ methodologies and analyses consistent
with those traditionally utilized by investment banking firms in performing
public company valuations:
Global/Frontier Merger. In connection with Frontier Merger, Global agrees
to:
. use its reasonable best efforts to close the transactions contemplated
by the Frontier Merger Agreement;
. not take any action which would materially adversely impact the timing
of the closing of the transactions contemplated by the Frontier Merger
Agreement;
. not waive or amend any material economic provision of the Frontier
Merger Agreement without the prior written approval of U S WEST (Global
may increase the merger consideration without consent in the event an
Acquisition Proposal (as defined in the Frontier Merger Agreement) is
made to Frontier, but, if the increase is in cash, not in excess of $3
billion.
Global's Cable & Wireless Acquisition. Global agrees, in connection with its
acquisition of Cable & Wireless Global Marine, to use its reasonable efforts
to close the Cable & Wireless acquisition and not to take any action which
would materially adversely impact the timing of the closing of the Cable &
Wireless acquisition or on its ability to satisfy the conditions precedent.
Interim Dividend Policy. Global agrees not to declare any dividend without U
S WEST's written consent. U S WEST is permitted, without Global's consent, to
pay dividends not in excess of $0.75 per quarter. Additionally, U S WEST may
declare and pay to shareholders of record on the date immediately prior to the
effective time: (i) a special dividend of $1.00 per share and (ii) the pro
rata portion of the then regular quarterly dividend through such date.
Services Agreement. U S WEST and Global have agreed to use their best
efforts to enter into a retail marketing and services agreement within thirty
30 days of the date of the merger agreement, covering the marketing of U S
WEST's services and the purchase by U S WEST of Global's services. U S WEST
and Global further agree to use their best efforts to enter into an agreement
to form and operate outside of U S WEST's service territory a data-focused
competitive local exchange carrier.
Global Group/Local Group Definitions. Sixty days prior to the merger, U S
WEST and Global will agree on the definitions of Global Group and Local Group
to be used for purposes of the determination of the Class B to Class A Value
Ratio.
Termination
The merger agreement provides that prior to the merger, the merger agreement
may be terminated:
. by mutual written consent of Global and U S WEST;
. by either Global or U S WEST if:
a. the merger is not consummated by May 16, 2000 (or November 30,
2000 if all conditions, except those relating to the expiration of the
Hart-Scott-Rodino Act waiting period and other regulatory consents,
have been fulfilled prior to May 16, 2000), so long as the party
seeking to terminate did not prevent consummation by failing to fulfill
any of its obligations under the merger agreement;
b. any court or other governmental authority issues a non-appealable
final order, decree or ruling or takes any other action which prohibits
the merger, so long as the party seeking termination on that basis has
used its reasonable best efforts to prevent such action;
c. the shareholders of Global or U S WEST fail to adopt the merger
agreement;
d. the other party materially breaches the merger agreement and the
breach is incapable of being cured prior to May 16, 2000 (or November
30, 2000 if all conditions, except those relating to the
18
<PAGE>
expiration of the Hart-Scott-Rodino Act waiting period and other
regulatory consents, have been fulfilled prior to May 16, 2000);
e. the other party's board of directors withdraws or adversely
modifies its approval or recommendation that its shareholders adopt the
merger agreement, or fails to reaffirm such approval or recommendation
upon request;
f. the other party's board of directors approves or recommends any
alternative transaction;
g. the other party's board of directors fails to include its
unqualified recommendation that its shareholders approve the merger;
h. the other party's board resolves to take any of the action
specified in e. through f. above;
i. the Frontier Merger Agreement is terminated;
j. prior to the vote of its respective shareholders adopting the
merger agreement, its board of directors decides to accept a
transaction proposal which is a superior proposal provided that:
i. it has complied with the covenant described under "--No
Solicitation";
ii. its board determines in good faith, on the basis of advice
from outside counsel that proposal is a superior proposal; and
iii. its board determines in good faith, on the basis of advice
from outside counsel, that accepting the superior proposal
would likely be required to prevent the board from breaching
its fiduciary duties.
. by Global, if:
a. U S WEST fails to consummate the purchase of Global shares
pursuant to its tender offer by July 31, 1999 (or August 30, 1999, if
the Hart-Scott-Rodino Act waiting period applicable to the tender offer
has not expired) (see description of Tender Offer).
b. it determines that the approval of the fair value of Global common
stock, as determined by the Bermuda Court, is excessive.
Termination Fees and Expenses
Termination Fee Payable to Global
The merger agreement provides for U S WEST to pay Global a termination fee,
in cash, of $850 million if the merger agreement is:
. terminated by Global because:
a. U S WEST's board withdraws or adversely modifies its approval or
recommendation that U S WEST's shareholders adopt the merger agreement
or fails to reaffirm such approval or recommendation upon request;
b. U S WEST's board approves or recommends any "alternative
transaction";
c. U S WEST's board fails to include its unqualified recommendation
that its shareholders approve the merger; or
d. U S WEST's board resolves to take any of the above actions.
. terminated by U S WEST or Global because of the failure to obtain U S
WEST's shareholder approval (and the agreement could not have been
terminated by Global for any of the conditions listed in a. through d.
above), and:
19
<PAGE>
a.prior to U S WEST's shareholders' meeting an "alternative
transaction" proposal is made involving the acquisition of more than
40% of the outstanding shares of U S WEST or any of its subsidiaries,
and
b.within twelve months after the termination of the merger agreement,
U S WEST enters into a definitive agreement with respect to an
"alternative transaction."
. terminated by Global as a result of U S WEST's material breach
concerning:
a. its covenant concerning the preparation, filing, and distribution
of the registration statement and the mailing of the joint proxy
statement to its shareholders, subject to the delivery of "comfort"
letters from its independent accountants, which remains uncured for 30
days after notice.
b. its covenant regarding the convening of a shareholders meeting as
soon as practicable for the purposes of voting on the adoption of the
merger agreement which remains uncured for 30 days after notice, and
its board of directors not withdrawing or modifying its recommendation
in any manner adverse to Global unless it has concluded in good faith,
on the advice of its outside financial advisors, that the proposal is a
superior proposal.
. terminated by U S WEST pursuant to the provision which allows
termination where prior to the vote of its shareholders adopting the
merger agreement, its board of directors decides to accept a transaction
proposal which is a superior proposal provided that:
i. it has complied with the covenant described under "--No
Solicitation";
ii. its board determines in good faith, on the basis of advice from
outside counsel that proposal is a superior proposal; and
iii. its board determines in good faith, on the basis of advice from
outside counsel, that accepting the superior proposal would
likely be required to prevent the board from breaching its
fiduciary duties.
Termination Fee Payable to U S WEST
The merger agreement provides for the payment by Global to U S WEST of a
termination fee, in cash, of $850 million if the merger agreement is:
. terminated by U S WEST because:
a. Global's board withdraws or adversely modifies its approval or
recommendation that Global's shareholders adopt the merger agreement or
fails to reaffirm such approval or recommendation upon request;
b. Global's board approves or recommends any "alternative
transaction";
c. Global's board fails to include its unqualified recommendation
that its shareholders approve the merger; or
d. Global's board resolves to take any of the above actions.
. terminated by Global or U S WEST because of the failure to obtain
Global's shareholder approval (and where the agreement could have been,
but was not, terminated by U S WEST for any of the conditions listed in
a. through d. above.)
. terminated by Global or U S WEST because of the failure to obtain
Global's shareholder approval (and the agreement could not have been
terminated by U S WEST for any of the conditions listed in a. through d.
above), and:
a. prior to Global's shareholders' meeting an "alternative
transaction" proposal is made involving the acquisition of more than
40% of the outstanding shares of Global or any of its subsidiaries, and
b. within twelve months after the termination of the merger
agreement, Global enters into a definitive agreement with respect to an
"alternative transaction."
20
<PAGE>
. terminated by U S WEST as a result of Global's material breach
concerning:
a. its covenant concerning the preparation, filing, and distribution
of the registration statement and the mailing of the joint proxy
statement to its shareholders, subject to the delivery of "comfort"
letters from its independent accountants, which remains uncured for 30
days after notice.
b. its covenant regarding the convening of a shareholders meeting as
soon as practicable for the purposes of voting on the adoption of the
merger agreement which remains uncured for 30 days after notice, and
its board of directors not withdrawing or modifying its recommendation
in any manner adverse to U S WEST unless it has concluded in good
faith, on the advice of its outside financial advisors, that the
proposal is a superior proposal.
. terminated by Global pursuant to the provision which allows termination
where prior to the vote of its shareholders adopting the merger
agreement, its board of directors decides to accept a transaction
proposal which is a superior proposal provided that:
i. it has complied with the covenant described under "--No
Solicitation";
ii. its board determines in good faith, on the basis of advice from
outside counsel that proposal is a superior proposal; and
iii. its board determines in good faith, on the basis of advice from
outside counsel, that accepting the superior proposal would
likely be required to prevent the board from breaching its
fiduciary duties.
The termination fee is payable within one business day following the
delivery of notice of termination to the other party, or within one business
day after such party enters into any definitive agreement regarding an
"alternative transaction" which gives rise to the termination fee. If either
party fails to promptly pay the other any termination fee, they will pay the
costs and expenses (including legal fees and expenses) in connection with any
action taken to collect payment.
Amendment; Extension and Waiver.
Global and U S WEST may amend the merger agreement pursuant to a writing
adopted by their respective boards at any time before the merger, but after
the merger agreement is adopted by either Global's or U S WEST's shareholders,
no amendment may reduce or change the consideration to be paid in the merger,
or alter or change any of the terms and conditions of the merger agreement if
such change would adversely affect U S WEST's or Global's shareholders. At any
time before the merger, either Global or U S WEST may:
. extend the other party's time to perform their obligations;
. waive any inaccuracies in the representations and warranties contained
in the merger agreement; and
. waive compliance with any of the agreements or conditions contained in
the merger agreement.
Stockholders Agreement and Registration Rights Agreement
Global, Pacific Capital Group ("PCG"), GKW Unified Holdings, LLC ("GKW"),
Canadian Imperial Bank of Commerce ("CIBC"), Continental Casualty Company
("CCC"), MRCo, Inc. ("MRC") and certain other shareholders of Global
(including certain of Global's officers and directors and their affiliates)
(collectively, the "Holders") have entered into a Stockholders Agreement and a
Registration Rights Agreement, each dated August 12, 1998.
Under the Stockholders Agreement, Global has been granted a right of first
refusal on certain private transfers by the Holders until August 12, 2000. The
Stockholders Agreement was amended in connection with the Tender Offer and
Purchase Agreement to permit transfers pursuant to the Offer without
compliance with the right of first refusal procedure. In addition to the right
of first refusal, subject to the exceptions set forth in the Stockholders
Agreement, certain of the Holders have rights permitting such Holder to
participate, on the same terms and conditions, in certain transfers of shares
by other Holders as follows: (i) PCG, GKW and CIBC (and their affiliates and
permitted transferees) have the right to participate in any transaction
initiated by any of them to transfer 5% or more of the outstanding securities
of Global and (ii) PCG, GKW, CIBC, CCC and MRC (and
21
<PAGE>
their affiliates and permitted transferees) have the right to participate in
any transaction initiated by any of them to transfer any securities of Global
which transaction would result in a change of control of Global. As part of
the Tender Offer and Purchase Agreement, Global and the existing shareholders
party to the Stockholders Agreement agreed to extend this participation right
to U S WEST in the event of 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 Securities Exchange Act of 1934, as amended) at least 15% of the
outstanding shares of Common Stock, any PCG Holder is entitled to seek
appraisal of the fair value of the Common Stock beneficially owned by such
person and to receive the payment thereof in cash in connection with any
merger or consolidation of Global or the sale, lease or transfer of all or
substantially all of the assets of Global. This appraisal right is available
only to those PCG Holders who shall not have voted in favor of or given
consent with respect to such transaction and beneficially own the Common Stock
as to which appraisal is sought immediately prior to the consummation of such
transaction.
Pursuant to the Registration Rights Agreement, the existing Holders have
demand and piggyback registration rights. In connection with the Tender Offer
and Purchase Agreement, Global and the other parties to the Registration
Rights Agreement agreed to grant demand and piggyback registration rights to U
S WEST as well.
Item 4. The Solicitation or Recommendation.
(a) Recommendation of Global's Board of Directors
Global's board of directors, at a meeting duly called and held on May 16,
1999, unanimously approved the Offer and the Tender Offer and Purchase
Agreement and the transactions contemplated thereby. The Global board of
directors recommends that shareholders of Global who desire to receive cash at
this time tender their shares of Common Stock pursuant to the Offer. See
"Background of the Offer; Reasons for the Recommendation" for a discussion of
the factors considered by the board in making its recommendation.
As set forth in the Offer, upon the terms and subject to the conditions of
the Offer, U S WEST will accept for payment and pay for up to 39,259,305
shares of Common Stock validly tendered on or prior to the initial expiration
date and not properly withdrawn.
A copy of the press release announcing execution of the Merger Agreement is
filed as Exhibit 7 to this Statement and is incorporated herein by reference.
(b) Background of the Offer; Reasons for the Recommendation
Background of the Offer
On October 25, 1997, the Board of Directors of the former parent of the
Offeror ("Old U S WEST") adopted a proposal to separate Old U S WEST into two
independent companies (the "Separation"). The Separation became effective on
June 12, 1998. Subsequent to the Separation, the Offeror commenced a
comprehensive review of its strategic position and objectives in light of
changes in the competitive marketplace as evidenced by recent significant
consolidations and mergers in the telecommunications industry, swiftly
advancing technology and changes in the regulatory landscape.
From September 30 through October 2, 1998, the Board of Directors of the
Offeror held a strategy session during which it reviewed the changes in the
competitive marketplace, technology, regulation and customer demands. With
this background it considered various strategic alternatives. These
alternatives included potential relationships and alliances with other
entities.
Following this session, during the Fall of 1998, senior management of the
Company and the Offeror met on various occasions to discuss a potential
transaction involving the Company and the Offeror's data business. These
discussions ended in January, 1999.
22
<PAGE>
On February 4 and 5, 1999, in the context of the discussion of a potential
opportunity, the Board of Directors of the Offeror had lengthy discussions
regarding the various strategies the Offeror could pursue.
Through February and into April, 1999, senior management of the Company and
the Offeror had further discussions about ways of combining the Company and
the data business of the Offeror.
At a regular meeting of the Board of Directors of the Offeror held on April
4, 1999, the Board reviewed the strategic objectives of the Offeror and
requested that Solomon D. Trujillo, the Chief Executive Officer of the
Offeror, together with senior management of the Offeror, further investigate
possible long-term strategic alternatives and options for the Offeror
including the possibility of a business combination transaction involving the
Company. Analysis of possible strategies to either acquire or build the
technology necessary to advance the Offeror into the forefront of the rapidly
expanding data and telecommunication industry was undertaken. The Offeror
considered a number of potential acquisition candidates with a variety of
technologies that would enhance the Offeror's products or services.
Thereafter, the Offeror had preliminary discussions with a number of
significant potential partners that could strategically fit with the Offeror's
goals of becoming a global leader in the data/communications race. The Offeror
retained Merrill Lynch to advise it with respect to a possible transaction.
On April 22, 1999, Mr. Trujillo and Gary Winnick, Co-Chairman of the Board
of Directors of the Company, met in Beverly Hills, California for the purpose
of discussing industry-related matters. At such meeting, Messrs. Trujillo and
Winnick discussed the possibility of a business combination or a joint venture
between the Offeror and the Company. At the end of the meeting, Messrs.
Trujillo and Winnick agreed to meet again and direct their respective senior
managements to pursue further the possibility of a business combination
between the Offeror and the Company. Shortly following these meetings, in
light of the pending merger transaction with Frontier Corporation
("Frontier"), Mr. Winnick preliminarily advised senior management of Frontier
of his discussions with the Offeror.
Subsequent thereto, senior management of the Offeror and representatives of
Merrill Lynch had several meetings with senior management of the Company and
its financial advisor, Salomon Smith Barney, Inc., to discuss the feasibility
and advisability of a business alliance or combination between the Offeror and
the Company, including tours of various facilities.
On May 3, 1999, the Offeror and the Company executed a mutual
confidentiality agreement and agreed to exchange non-public information.
During the first two weeks of May, senior managements of the Company and the
Offeror and their respective financial and legal advisors met to discuss a
possible structure for a business combination between the Offeror and the
Company and agreed that any business combination transaction between the
Company and the Offeror would include the Offer.
On May 11, 1999, at a regular meeting of the Board of Directors of the
Offeror, senior management of the Offeror and the Offeror's financial and
legal advisors reviewed with the Board of Directors of the Offeror possible
long-term strategic alternatives for the Offeror and the status of the
discussions between the Offeror and the Company. The Board of Directors of the
Offeror then authorized senior management of the Offeror to continue
discussions with the Company.
Senior management of the Offeror and the Company and their respective legal
and financial advisors continued to meet to negotiate the terms of a possible
business combination including the terms of the Offer and commenced
negotiations for the Mergers and the Offer.
On May 16, 1999, the Board of Directors of the Offeror met for the purpose
of considering the terms and conditions of the Merger Agreement, the Mergers,
the Offer and the related transactions and agreements. The
23
<PAGE>
Offeror's financial and legal advisors were present at such meeting. The Board
of Directors of the Offeror was advised that another company that had become
aware of the possible combination with the Company and requested that the
Offeror delay negotiations while it continued to consider making an
alternative proposal. However, the third party indicated that it was unwilling
to make an offer at that time. Throughout the day and evening, management
encouraged the third party to make a firm and specific proposal that could be
considered. No proposal was received and the Offeror was informed that no
proposal was imminent. At the Board of Directors meeting, senior management of
the Offeror and representatives of the Offeror's legal and financial advisors
reviewed with the Board of Directors the terms and conditions of the Merger
Agreement, the Mergers, the Offer and the related transactions. Merrill Lynch
addressed certain financial aspects of the Mergers. Counsel reviewed legal
considerations to be considered by the Board of Directors of the Offeror in
approving the Merger and the Offer. Extensive discussion followed relating to
the financial and legal aspects of the transaction as well as the status of
the conversations with the third party. After discussion, the Board of
Directors of the Offeror unanimously approved the Merger, the Offer, the
Merger Agreement and the related transactions and agreements and agreed to
reconvene later that evening to authorize management to execute and deliver
the Merger Agreement and the related agreements.
Following the meeting of the Board of Directors of the Offeror, the Board of
Directors of the Company met to consider, among other things, the terms and
conditions of the Merger Agreement, the Mergers, the Offer and the related
transactions and agreements. The Company's financial and legal advisors
attended the meeting. Senior management of the Company and representatives of
the Company's legal and financial advisors reviewed with the Board of
Directors of the Company the terms and conditions of the Merger Agreement, the
Mergers, the Offer and the related transactions. Counsel to the Company
reviewed legal considerations to be considered by the Board of Directors of
the Company in approving the Merger and the Offer. Extensive discussion
followed relating to the financial and legal aspects of the transaction. After
discussion, the Board of Directors of the Company unanimously approved the
Merger, the Offer, the Merger Agreement and the related transactions and
agreements. Senior management of the Company was authorized to execute and
deliver the Merger Agreement.
At approximately 10:30 p.m., the Board of Directors of the Offeror
reconvened and, after being advised that no proposal from the third party was
imminent and that the Company would not defer entering into the Merger
Agreement, authorized senior management of the Offeror to execute and deliver
the Merger Agreement and commence the Offer.
Prior to the opening of business on May 17, 1999, each of the Offeror and
the Company executed and delivered the Merger Agreement and the related
documents.
Reasons for the Recommendation
In approving the Offer and the Tender Offer and Purchase Agreement and
recommending that Global shareholders who desire to receive cash at this time
tender their shares pursuant to the Offer, the Global board of directors
considered a number of factors, including:
(a) the fact that the $62.75 per share price to be paid pursuant to the
Offer represents a premium of 13% on the average closing price of $55.525 per
share during the 20 trading days prior to the announcement of the Offer;
(b) the fact that the Offer is conditioned only upon obtaining antitrust
approvals and there being no legal or similar restriction prohibiting U S WEST
from purchasing shares of Common Stock in the Offer;
(c) the fact that entering into the Tender Offer and Purchase Agreement and
the making of the Offer pursuant thereto facilitated the agreement of U S WEST
and Global to enter into the Merger Agreement;
(d) the board's belief that having U S WEST as a significant shareholder, on
the terms contemplated in the Tender Offer and Purchase Agreement and the
other agreements entered into in connection therewith, would be in the best
interest of Global in the long-term, whether or not the Merger is consummated;
and
24
<PAGE>
(e) the fact that the Offer will allow all shareholders of the Company
(subject to specified limitations applicable to officers, directors and other
affiliates of the Company in order to limit their participation in the Offer)
to realize cash for a small percentage of their total shareholdings.
The foregoing discussion of the information and factors considered and given
weight by the board is not intended to be exhaustive. In view of the variety
of factors considered in connection with its evaluation, the board did not
find it practicable to, and did not, quantify or otherwise assign relative
weights to the specific factors considered in reaching its determinations and
recommendation. In addition, individual members of the board may have given
different weight to different factors.
Based on the foregoing factors, the board determined to recommend the
acceptance of the Offer by Global shareholders as described above.
Item 5. Persons Retained, Employed or to be Compensated.
Neither Global nor any person acting on its behalf has employed, retained or
compensated any person to make solicitations or recommendations to others with
respect to the Offer.
Item 6. Recent Transactions and Intent with Respect to Securities.
(a) Except as set forth below, there have been no transactions in shares of
Common Stock which were effected during the past 60 days by Global, or to the
best knowledge of Global, by any executive officer, director, affiliate or
subsidiary of Global.
TRANSACTIONS IN COMMON STOCK
BY EXECUTIVE OFFICERS OF GLOBAL
<TABLE>
<CAPTION>
Transaction Option Transaction
Name Date Price Shares Type
- ---- -------------- ------ ------- ---------------
<S> <C> <C> <C> <C>
Wim Hulsman....................... March 24, 1999 $13.26 36,668 Option Exercise
Martin Klapper.................... March 31, 1999 $0.835 119,760 Option Exercise
John Scanlon...................... April 1, 1999 $0.835 119,760 Option Exercise
</TABLE>
(b) To the best knowledge of Global, each of its executive officers,
directors and affiliates presently intends to tender some or all shares of
Global common stock beneficially owned by them to the Offeror pursuant to the
tender offer. Certain of such executive officers, directors and affiliates
have agreed with U S WEST pursuant to the Tender and Voting Agreement to
tender at least 12.3045% of the shares of Common Stock owned by them as of May
16, 1999. See Item 3(b) for a description of the Tender and Voting Agreement.
In addition, Gary Winnick and members of the Company's senior management have
agreed not to tender more than 30% of the Shares beneficially owned by them in
the Offer. Directors of Global, and the entities which they represent, have
agreed not to tender more than 50% of the Shares beneficially owned by them in
the Offer.
Item 7. Certain Negotiations and Transactions by the Subject Company.
(a) Except as set forth in this Statement, no negotiation is being
undertaken or is underway by Global in response to the Offer which relates to
or would result in: (i) an extraordinary transaction such as a merger or
reorganization, involving Global or any subsidiary of Global; (ii) a purchase,
sale or transfer of a material amount of assets by Global or any subsidiary of
Global; (iii) a tender offer for or other acquisition of securities by or of
Global; or (iv) any material change in the present capitalization or dividend
policy of Global.
(b) Except as set forth in this Statement, there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to
in Item 7(a) above.
25
<PAGE>
Item 8. Additional Information to be Furnished.
Global is not aware of any additional information which is necessary to
furnish to make the required statements in this Statement, in light of the
circumstances under which they are made, not materially misleading.
Item 9. Material to be filed as Exhibits.
The following exhibits are filed herewith:
<TABLE>
<C> <S>
Exhibit 1 Agreement and Plan of Merger dated May 16, 1999 among U S WEST and
Global. (Incorporated by reference to Exhibit 2 to Global's Current
Report on Form 8-K filed with the Securities and Exchange Commission
on May 21, 1999.)
Exhibit 2 Tender Offer and Purchase Agreement dated as of May 16, 1999, among
U S WEST and Global. (Incorporated by reference to Exhibit (c)(2) to
U S WEST's Schedule 14D-1 filed with the Securities and Exchange
Commission on May 21, 1999.)
Exhibit 3 Standstill Agreement dated as of May 16, 1999 among U S WEST and
Global. (Incorporated by reference to Exhibit (c)(4) to U S WEST's
Schedule 14D-1 filed with the Securities and Exchange Commission on
May 21, 1999.)
Exhibit 4 Voting Agreement dated as of May 16, 1999 among U S WEST and Global.
(Incorporated by reference to Exhibit (c)(3) to U S WEST's Schedule
14D-1 filed with the Securities and Exchange Commission on May 21,
1999.)
Exhibit 5 Tender and Voting Agreement dated as of May 16, 1999 among U S WEST,
Global and the shareholders party thereto. (Incorporated by
reference to Exhibit (c)(5) to U S WEST's Schedule 14D-1 filed with
the Securities and Exchange Commission on May 21, 1999.)
Exhibit 6 Agreement dated as of May 16, 1999 among Global and the shareholders
party thereto. (Incorporated by reference to Exhibit (c)(6) to U S
WEST's Schedule 14D-1 filed with the Securities and Exchange
Commission on May 21, 1999.)
Exhibit 7 Joint Press Release of Global and U S WEST dated May 17, 1999.
(Incorporated by reference to Exhibit 99.1 to Global's Current
Report on Form 8-K filed with the Securities and Exchange Commission
on May 18, 1999.)
Exhibit 8 Transfer Agreement dated as of May 16, 1999 among Global and the
shareholders party thereto. (Incorporated by reference to Exhibit
(c)(8) to U S WEST's Schedule 14D-1 filed with the Securities and
Exchange Commission on May 21, 1999.)
</TABLE>
26
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Global Crossing Ltd.
By: /s/ James C. Gorton
-------------------------------------
James C. Gorton Senior Vice
President and General Counsel
Dated: May 24, 1999
27
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
Exhibit 1 Agreement and Plan of Merger dated May 16, 1999 among U S WEST and
Global. (Incorporated by reference to Exhibit 2 to Global's Current
Report on Form 8-K filed with the Securities and Exchange Commission
on May 21, 1999.)
Exhibit 2 Tender Offer and Purchase Agreement dated as of May 16, 1999, among
U S WEST and Global. (Incorporated by reference to Exhibit (c)(2) to
U S WEST's Schedule 14D-1 filed with the Securities and Exchange
Commission on May 21, 1999.)
Exhibit 3 Standstill Agreement dated as of May 16, 1999 among U S WEST and
Global. (Incorporated by reference to Exhibit (c)(4) to U S WEST's
Schedule 14D-1 filed with the Securities and Exchange Commission on
May 21, 1999.)
Exhibit 4 Voting Agreement dated as of May 16, 1999 among U S WEST and Global.
(Incorporated by reference to Exhibit (c)(3) to U S WEST's Schedule
14D-1 filed with the Securities and Exchange Commission on May 21,
1999.)
Exhibit 5 Tender and Voting Agreement dated as of May 16, 1999 among U S WEST,
Global and the shareholders party thereto. (Incorporated by
reference to Exhibit (c)(5) to U S WEST's Schedule 14D-1 filed with
the Securities and Exchange Commission on May 21, 1999.)
Exhibit 6 Agreement dated as of May 16, 1999 among Global and the shareholders
party thereto. (Incorporated by reference to Exhibit (c)(6) to U S
WEST's Schedule 14D-1 filed with the Securities and Exchange
Commission on May 21, 1999.)
Exhibit 7 Joint Press Release of Global and U S WEST dated May 17, 1999.
(Incorporated by reference to Exhibit 99.1 to Global's Current
Report on Form 8-K filed with the Securities and Exchange Commission
on May 18, 1999.)
Exhibit 8 Transfer Agreement dated as of May 16, 1999 among Global and the
shareholders party thereto. (Incorporated by reference to Exhibit
(c)(8) to U S WEST's Schedule 14D-1 filed with the Securities and
Exchange Commission on May 21, 1999.)
</TABLE>
28
