<PAGE>
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- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number: 000-24565
GLOBAL CROSSING LTD.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
BERMUDA 98-0189783
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
WESSEX HOUSE
45 REID STREET
HAMILTON HM12, BERMUDA
(Address of principal executive offices)
(441) 296-8600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
The number of shares, $0.01 par value each, of the registrant's common stock
outstanding as of April 24, 2000: 839,687,652 shares, including 22,033,758
treasury shares.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
For the quarter ended March 31, 2000
INDEX
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Statements of Operations................. 3
Condensed Consolidated Balance Sheets........................... 4
Condensed Consolidated Statements of Cash Flows................. 5
Condensed Consolidated Statements of Comprehensive Income....... 7
Business Segment Information.................................... 8
Notes to Condensed Consolidated Financial Statements............ 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of
Operations..................................................... 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk...... 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................... 19
Item 2. Changes in Securities and Use of Proceeds....................... 19
Item 3. Defaults Upon Senior Securities................................. 19
Item 4. Submission of Matters to A Vote of Security Holders............. 19
Item 5. Other Information............................................... 19
Item 6. Exhibits and Reports on Form 8-K................................ 20
</TABLE>
2
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the
Three Months Ended
------------------------
March 31, March 31,
2000 1999
----------- -----------
<S> <C> <C>
REVENUE.............................................. $ 1,119,516 $ 176,319
----------- -----------
EXPENSES:
Cost of sales....................................... 579,907 69,387
Operations, administration and maintenance.......... 144,283 11,861
Sales and marketing................................. 103,719 9,758
Network development................................. 17,645 4,905
General and administrative.......................... 150,359 22,414
Stock related expense............................... 18,850 16,716
Depreciation and amortization....................... 140,943 211
Goodwill and intangibles amortization............... 131,634 --
----------- -----------
1,287,340 135,252
----------- -----------
OPERATING (LOSS) INCOME.............................. (167,824) 41,067
EQUITY IN LOSS OF AFFILIATES......................... (5,140) (2,736)
MINORITY INTEREST.................................... (15,731) --
OTHER INCOME (EXPENSE):
Interest income..................................... 22,798 14,392
Interest expense.................................... (85,676) (23,779)
Other expense, net.................................. (5,628) --
----------- -----------
(LOSS) INCOME BEFORE PROVISION FOR INCOME TAXES AND
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE........................................... (257,201) 28,944
Provision for income taxes.......................... (5,000) (16,142)
----------- -----------
(LOSS) INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE................................ (262,201) 12,802
Cumulative effect of change in accounting
principle, net of income tax benefit............... -- (14,710)
----------- -----------
NET LOSS............................................. (262,201) (1,908)
Preferred stock dividends........................... (45,258) (13,044)
----------- -----------
NET LOSS APPLICABLE TO COMMON SHAREHOLDERS........... $ (307,459) $ (14,952)
=========== ===========
NET LOSS PER COMMON SHARE:
Loss applicable to common shareholders before
cumulative effect of change in accounting
principle
Basic and diluted................................. $ (0.39) $ (0.00)
=========== ===========
Cumulative effect of change in accounting principle
Basic and diluted................................. $ -- $ (0.04)
=========== ===========
Net loss applicable to common shareholders
Basic and diluted................................. $ (0.39) $ (0.04)
=========== ===========
Shares used in computing income (loss) per share
Basic and diluted................................. 778,780,323 410,797,073
=========== ===========
</TABLE>
See accompanying notes to these unaudited condensed consolidated financial
statements.
3
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 1,250,953 $ 1,633,499
Restricted cash and cash equivalents.............. 133,016 93,294
Accounts receivable, net.......................... 912,072 966,973
Other assets and prepaid costs.................... 319,562 252,767
----------- -----------
Total current assets............................. 2,615,602 2,946,533
Restricted cash and cash equivalents................ 69,545 138,118
Accounts receivable, net............................ 42,419 52,052
Property and equipment, net......................... 7,985,651 6,026,053
Goodwill and intangibles, net....................... 9,436,715 9,557,422
Investment in and advances to/from affiliates, net.. 604,291 323,960
Other assets........................................ 735,746 661,442
----------- -----------
Total assets..................................... $21,489,970 $19,705,580
=========== ===========
LIABILITIES
Current liabilities:
Accrued construction costs........................ $ 570,461 $ 275,361
Accounts payable and accrued liabilities.......... 919,910 980,131
Accrued interest and preferred dividends.......... 162,260 66,745
Deferred revenue.................................. 216,234 127,367
Income taxes payable.............................. 88,325 140,034
Current portion of long term debt................. 11,649 5,496
Other current liabilities......................... 264,314 257,459
----------- -----------
Total current liabilities........................ 2,233,153 1,852,593
Long-term debt...................................... 6,031,662 5,018,544
Deferred revenue.................................... 489,331 383,287
Deferred credits and other.......................... 819,485 796,606
----------- -----------
Total liabilities................................ 9,573,631 8,051,030
Minority interest................................... 478,030 351,338
----------- -----------
Mandatorily redeemable and cumulative convertible
preferred stock:
10 1/2% mandatorily Redeemable Preferred Stock,
5,000,000 shares issued and outstanding, $100
liquidation preference per share................. 486,517 485,947
----------- -----------
6 3/8% Cumulative Convertible Preferred Stock,
10,000,000 shares issued and outstanding, $100
liquidation preference per share................. 969,000 969,000
----------- -----------
6 3/8% Cumulative Convertible Preferred Stock,
Series B, 400,000 shares issued and outstanding,
$1000 liquidation preference per share........... 400,000 --
----------- -----------
7% Cumulative Convertible Preferred Stock,
2,600,000 shares issued and outstanding, $250
liquidation preference per share................. 629,750 629,750
----------- -----------
SHAREHOLDERS' EQUITY
Common stock, 3,000,000,000 shares authorized, par
value $.01 per share, 803,604,237 and 799,137,142
shares issued as of March 31, 2000 and December 31,
1999, respectively................................. 8,030 7,992
Treasury stock, 22,033,758 shares................... (209,415) (209,415)
Additional paid-in capital and other shareholders'
equity............................................. 9,575,617 9,578,927
Accumulated deficit................................. (421,190) (158,989)
----------- -----------
Total stockholders' equity....................... 8,953,042 9,218,515
----------- -----------
Total liabilities and shareholders' equity....... $21,489,970 $19,705,580
=========== ===========
</TABLE>
See accompanying notes to these unaudited condensed consolidated balance
sheets.
4
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2000 and 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the
Three Months Ended
---------------------
March 31, March 31,
2000 1999
---------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................... $ (262,201) $ (1,908)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Cumulative effect of change in accounting principle.. -- 14,710
Equity in loss of affiliates......................... 5,140 2,736
Depreciation and amortization........................ 272,577 211
Provision for doubtful accounts...................... 13,483 1,864
Stock related expense................................ 18,850 16,716
Deferred income taxes................................ (9,210) 22,125
Capacity available for sale.......................... -- 58,539
Non-cash cost of sales............................... 99,056 --
Minority Interest.................................... 15,731 --
Other................................................ 2,596 (4,831)
Changes in operating assets and liabilities.......... 84,136 (129,603)
---------- ---------
Net cash provided by (used in) operating
activities........................................ 240,158 (19,441)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for construction in progress and capacity
available for sale.................................... (501,622) (143,337)
Investment in and advances to affiliates............... (68,851) (12,860)
Effect of the consolidation of PC-1, net of cash
acquired.............................................. (19,979) --
Purchase of marketable securities...................... (81,200) --
Purchases of property and equipment.................... (358,924) (1,811)
---------- ---------
Net cash used in investing activities.............. (1,030,576) (158,008)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net............ 40,867 834
Proceeds from long term debt........................... 300,703 9,083
Repayment of long term debt............................ (12,094) (26,825)
Preferred dividends.................................... (22,535)
Finance costs incurred................................. 694 (77)
Minority interest investment in subsidiary............. 53,472 --
Change in restricted cash and cash equivalents......... 46,765 (47,811)
---------- ---------
Net cash provided by (used in) financing
activities........................................ 407,872 (64,796)
---------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS.............. (382,546) (242,245)
CASH AND CASH EQUIVALENTS, beginning of period......... 1,633,499 806,593
---------- ---------
CASH AND CASH EQUIVALENTS, end of period............... $1,250,953 $ 564,348
========== =========
</TABLE>
See accompanying notes to these unaudited condensed consolidated financial
statements.
5
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)
For the Three Months Ended March 31, 2000 and 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the
Three Months Ended
--------------------
March 31, March 31,
2000 1999
--------- ---------
<S> <C> <C>
SUPPLEMENTAL INFORMATION ON NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Costs incurred for construction in progress and capacity
available for sale..................................... $(637,996) $(180,119)
Accrued construction costs.............................. 134,284 14,282
Accrued interest........................................ -- 19,448
Amortization of deferred finance costs and other........ 2,090 3,052
--------- ---------
Cash paid for construction in progress and capacity
available for sale..................................... $(501,622) $(143,337)
========= =========
Non-cash purchases of property and equipment............ $ -- $ (38,300)
========= =========
Investments in affiliates:
Costs of investments in affiliates.................... $(468,851) $ --
Preferred stock issued for investment in joint
venture.............................................. 400,000 --
--------- ---------
$ 68,851 $ --
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid and capitalized........................... $ 39,858 $ 6,132
========= =========
Interest paid (net of capitalized interest)............. $ 39,567 $ 772
========= =========
Cash paid for taxes..................................... $ 35,792 $ 1,788
========= =========
</TABLE>
See accompanying notes to these unaudited condensed consolidated financial
statements.
6
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 2000 and 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the
Three Months Ended
-----------------------------
March 31, 2000 March 31, 1999
-------------- --------------
<S> <C> <C>
Net loss.......................................... $(262,201) $(1,908)
Unrealized gain on securities..................... 157 --
Foreign currency translation adjustment........... (22,792) (4,930)
--------- -------
Comprehensive loss................................ $(284,836) $(6,838)
========= =======
</TABLE>
See accompanying notes to these unaudited condensed consolidated financial
statements.
7
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
As of and For the Three Months Ended March 31, 2000 and 1999
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, March 31,
2000 1999
----------- ----------
<S> <C> <C>
Telecommunications Services:
Revenue:
Commercial........................................... $ 327,020 $ --
Consumer............................................. 43,644 --
Carrier.............................................. 489,764 176,319
----------- ----------
Total revenue.......................................... $ 860,428 $ 176,319
=========== ==========
Operating (loss) income................................ $ (208,255) $ 41,607
=========== ==========
Adjusted EBITDA*....................................... $ 286,514 $ 128,208
=========== ==========
Cash paid for capital expenditures..................... $ 779,291 $ 145,148
=========== ==========
Total assets........................................... $18,389,031 $2,689,797
=========== ==========
Installation and Maintenance:
Revenue................................................ $ 72,266 $ --
=========== ==========
Operating loss......................................... $ (879) $ --
=========== ==========
Adjusted EBITDA*....................................... $ 20,733 $ --
=========== ==========
Cash paid for capital expenditures..................... $ 30,315 $ --
=========== ==========
Total assets........................................... $ 1,741,712 $ --
=========== ==========
Incumbent Local Exchange Carrier:
Revenue................................................ $ 186,822 $ --
=========== ==========
Operating income....................................... $ 53,895 $ --
=========== ==========
Adjusted EBITDA*....................................... $ 93,929 $ --
=========== ==========
Cash paid for capital expenditures..................... $ 50,940 $ --
=========== ==========
Total assets........................................... $ 1,359,227 $ --
=========== ==========
Corporate Operations and Other:
Operating loss......................................... $ (12,585) $ --
=========== ==========
Adjusted EBITDA*....................................... $ (12,585) $ --
=========== ==========
Consolidated:
Revenues............................................... $ 1,119,516 $ 176,319
=========== ==========
Operating (loss) income................................ $ (167,824) $ 41,067
=========== ==========
Adjusted EBITDA*....................................... $ 388,591 $ 128,208
=========== ==========
Cash paid for capital expenditures..................... $ 860,546 $ 145,148
=========== ==========
Total assets........................................... $21,489,970 $2,689,797
=========== ==========
</TABLE>
- --------
* Adjusted Earnings before Interest, Taxes, Depreciation and Amortization
(adjusted EBITDA) is calculated as operating (loss) income plus
depreciation and amortization, goodwill and intangibles amortization, stock
related expense and the cash portion of the change in deferred revenue.
8
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(In thousands, except share and per share amounts)
(Unaudited)
(1) Organization and Background
Global Crossing Ltd. (a Bermuda company, together with its consolidated
subsidiaries, ("GCL" or the "Company") is building and offering services over
the world's first independent global fiber optic network, consisting of
101,000 announced route miles serving five continents, 27 countries and more
than 200 major cities. Upon completion of our currently announced systems, our
network and our telecommunications and Internet product offerings will be
available in markets constituting over 80% of the world's international
communications traffic.
The Company's strategy is to be the premier provider of global broadband
Internet Protocol ("IP") and data services for both wholesale and retail
customers. The Company is building a state-of-the-art fiber optic network that
management believes to be of unprecedented global scope and scale to serve as
the backbone for this strategy. Management believes that the Company's network
will enable it to be the low cost service provider in most of its addressable
markets.
Global Crossing Ltd. serves as a holding company for its subsidiaries'
operations, including the operations of the following acquired entities:
Global Marine Systems (acquired July 2, 1999), Frontier Corporation (acquired
September 28, 1999), Racal Telecom (acquired November 24, 1999) and a 50%
interest in the Hutchison Global Crossing joint venture (completed January 12,
2000). The acquisition of these entities is hereinafter referred to as the
"Acquisitions." In addition the Company has a significant ownership interest
in Asia Global Crossing.
Asia Global Crossing, a joint venture with Softbank Corp. and Microsoft
Corporation, intends to become the first truly pan-Asian carrier to offer
worldwide bandwidth and data communications. The Asia Global Crossing joint
venture was established on November 24, 1999.
GlobalCenter, a wholly-owned subsidiary of GCL, will expand its product set
to become a single-source e-commerce service solution that will provide web-
centric businesses with the high availability, flexibility and scalability
necessary to compete in the rapidly expanding digital economy.
(2) Basis of Presentation
The accompanying unaudited interim condensed consolidated financial
statements as of March 31, 2000 and for the three months ended March 31, 2000
and 1999, include the accounts of Global Crossing Ltd. and its consolidated
subsidiaries. All material inter-company balances and transactions have been
eliminated. The unaudited interim condensed consolidated financial statements
reflect all adjustments, consisting of normal recurring items, which are, in
the opinion of management, necessary to present a fair statement of the
results of the interim period presented. The results of operations for any
interim period are not necessarily indicative of results for the full year.
These condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles 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 revenue and expenses during the reporting
period. Actual amounts and results could differ from those estimates.
The accompanying unaudited condensed consolidated financial statements do
not include all footnotes and certain financial presentations normally
required under generally accepted accounting principles. Therefore, these
9
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1999.
(3) Net Loss Applicable to Common Shareholders
Basic Earnings Per Share (EPS) is computed by dividing net loss available
to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted. The dilutive effect of the assumed exercise of stock
options and convertible securities were anti-dilutive for the three months
ended March 31, 2000 and 1999, respectively. The impact of dilutive options,
warrants and convertible securities increases the weighted average shares
outstanding to 841,992,988 used in calculating Diluted EPS for the three
months ended March 31, 2000.
(4) Acquisitions
The Acquisitions, are being accounted for under the purchase method of
accounting for business combinations. The initial purchase price of the
Acquisition, was allocated based on the estimated fair value of acquired
assets and liabilities at the date of acquisition. The Company will make final
purchase price allocations based upon final values for certain assets and
liabilities. As a result, the final purchase price allocation may differ from
the presented estimate. Following is the unaudited pro forma results of the
Company, assuming the Acquisitions had been completed at the beginning of the
period presented:
<TABLE>
<CAPTION>
Three Months
Ended
March 31, 1999
--------------
<S> <C>
Revenue..................................................... $ 1,031,474
===========
Loss applicable to common shareholders before cumulative
effect of change in accounting principle................... $ (121,782)
===========
Loss applicable to common shareholders...................... $ (136,492)
===========
Loss per common share:
Loss applicable to common shareholders before cumulative
effect of change in accounting principle, basic and
diluted.................................................. $ (0.16)
===========
Loss applicable to common shareholders, basic and
diluted.................................................. $ (0.18)
===========
Shares used in computing loss per share, basic and
diluted.................................................. 762,470,473
===========
</TABLE>
10
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(5) Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
---------- ------------
<S> <C> <C>
Land................................................ $ 25,045 $ 14,886
Buildings........................................... 230,841 184,827
Leasehold improvements.............................. 32,571 29,096
Furniture, fixtures and equipment................... 927,764 771,585
Transmission equipment.............................. 3,324,643 2,544,903
---------- ----------
4,540,864 3,545,297
Accumulated depreciation............................ (265,817) (124,874)
---------- ----------
4,275,047 3,420,423
Construction in progress............................ 3,710,604 2,605,630
---------- ----------
Total property and equipment........................ $7,985,651 $6,026,053
========== ==========
</TABLE>
(6) Shareholders' Equity
Stock Option Plan. During the three months ended March 31, 2000, the
Company granted stock options for an aggregate of 6,212,890 shares of common
stock under the Company's 1998 Stock Incentive Plan. On March 31, 2000, stock
options covering 79,528,469 shares of common stock were outstanding. Details
of the Company's 1998 Stock Incentive Plan are included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
(7) Segment Information
The Company is a worldwide provider of Internet and long distance
telecommunications facilities and related services supplying its customers
with global "point to point" connectivity and, through its Global Marine
Systems subsidiary, providing cable installation and maintenance services. The
Company's reportable segments include telecommunications services,
installation and maintenance services, and incumbent local exchange carrier
services. There are other corporate related charges not attributable to a
specific segment. As a result, there are many shared expenses generated by the
various revenue streams and management believes that any allocation of the
expenses incurred to multiple revenue streams would be impractical and
arbitrary. The Company's chief decision maker monitors the revenue streams of
the various products and geographic locations and operations are managed and
financial performance, Adjusted EBITDA, is evaluated based on the delivery of
multiple, integrated services to customers over a single network.
(8) Reclassifications
Certain prior year amounts have been reclassified in the condensed
consolidated financial statements for consistent presentation to current year
amounts.
(9) Significant Events
On January 12, 2000, the Company established a joint venture, called
Hutchison Global Crossing, with Hutchison Whampoa Limited ("Hutchison") to
pursue fixed-line telecommunications and Internet opportunities in Hong Kong.
For its 50% share, Hutchison contributed to the joint venture its building-to-
building fixed-line telecommunications network in Hong Kong and a number of
Internet-related assets. In addition, Hutchison has
11
<PAGE>
GLOBAL CROSSING LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
agreed that any fixed-line telecommunications activities it pursues in China
will be carried out by the joint venture. For its 50% share, the Company
provided to Hutchison $400 million in Global Crossing convertible preferred
stock (convertible into shares of Global Crossing common stock at a rate of
$45 per share) and committed to contribute to the joint venture international
telecommunications capacity rights on our network and global media
distribution center capabilities which together are valued at $350 million, as
well as $50 million in cash. The Company intends to integrate its interest in
Hutchison Global Crossing into the Company's Asia Global Crossing joint
venture ("AGC").
On January 26, 2000, AGC announced an agreement to create GlobalCenter
Japan, a joint venture with Japan's Internet Research Institute, Inc. ("IRI").
GlobalCenter Japan will design, develop and construct a media distribution
center in Japan providing connectivity worldwide through the Global Crossing
Network. The joint venture will also develop and provide complex web hosting
services, e-commerce support and applications hosting solutions. AGC will own
89 percent of GlobalCenter Japan, with IRI owning the remaining 11 percent.
On February 22, 2000, we announced a definitive agreement to acquire IXnet,
Inc., a leading provider of specialized IP-based network services to the
global financial services community, and its parent company,
IPC Communications, Inc., in exchange for shares of our common stock valued at
approximately $3.8 billion. Under the terms of the definitive merger
agreement, 1.184 of our shares will be exchanged for each IXnet share not
owned by IPC, and 5.417 of our shares will be exchanged for each share of IPC.
We expect to complete the acquisition in the second quarter of 2000. That
acquisition is subject to regulatory approval and customary closing
conditions.
On March 2, 2000, we announced plans to create a new class of Global
Crossing common stock that would track the performance of the complex web
hosting business operated by our wholly-owned subsidiary, GlobalCenter, Inc.
The creation of this new class of stock will be subject to shareholder
approval.
On March 24, 2000, the Company increased its interest in the PC-1 cable
system to 65% by acquiring the remaining ownership of another partner in PC-1
and the PC-1 Shareholder Agreement was amended, which enabled the Company to
exercise effective control over PC-1.
On March 31, 2000, AGC announced its intention to effectuate an initial
public offering of its common stock and to file a registration statement under
the Securities Act of 1933 in respect of the proposed offering.
(10) Subsequent Events
In April 2000, we issued 21,673,706 shares of our common stock for net
proceeds of approximately $694 million. In connection with this issuance and
sale by the Company of common stock, certain existing shareholders sold an
aggregate of 21,326,294 shares of common stock, for which the Company received
no proceeds.
In April 2000, we issued 4,000,000 shares of 6 3/4% cumulative convertible
preferred stock at a liquidation preference of $250 for net proceeds of
approximately $970 million. Each share of preferred stock is convertible into
6.3131 shares of common stock, based on a conversion price of $39.60.
Dividends on the preferred stock are cumulative from the date of issue and
will be payable on January 15, April 15, July 15 and October 15 of each year
beginning on July 15, 2000, at the annual rate of 6 3/4%. In May 2000,
pursuant to an over-allotment option held by the underwriters of the preferred
stock, the Company issued an additional 600,000 shares of 6 3/4% cumulative
convertible preferred stock for net proceeds of approximately $146 million.
12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
During the second half of 1999, the Company completed its merger with
Frontier and its acquisitions of Global Marine Systems and Racal Telecom. The
increase in revenue and expenses for the three months ended March 31, 2000
compared to the three months ended March 31, 1999 is primarily due to these
transactions. As the Acquisitions occurred subsequent to March 31, 1999, the
comparability of the results of operations for the three months ended March
31, 2000 and 1999 is limited.
Results of Operations for the Three Months Ended March 31, 2000 and March 31,
1999
Revenue. Revenue for the three months ended March 31, 2000 increased 535%
to $1,120 million as compared to $176 million for the three months ended March
31, 1999. Cash revenue (revenue plus the cash portion of the change in
deferred revenue) for the three months ended March 31, 2000 increased 511% to
$1,285 million compared to $200 million for the three months ended March 31,
1999. The increase is due to the Acquisitions, which are included in the
results of the first quarter of 2000, partially off-set by the Company's
business practice of selling capacity under terms that require amortization of
revenue over the contract life rather than terms that qualify for immediate
revenue recognition.
On a pro forma basis, giving effect to the Acquisitions as of December 31,
1998, revenues for the three months ended March 31, 2000 increased 9% to
$1,120 as compared to $1,031 million for the three months ended March 31,
1999. The increase in pro forma revenue is primarily due to an increase in
revenue from data products.
Cost of sales. Cost of sales for the three months ended March 31, 2000 was
$580 million, or 52% of revenue, compared to $69 million, or 39% of revenue,
for the three months ended March 31, 1999. The increase is primarily
attributable to the increase in revenue. Reduced margins for the three months
ended March 31, 2000 compared to the three months ended March 31, 1999 was due
to lower margins in the businesses acquired and lower prices of subsea
capacity sold to customers.
Non-cash cost of undersea capacity sold was $99 million and $54 million
during the three months ended March 31, 2000 and 1999, respectively.
Operations, administration and maintenance (OA&M). OA&M costs for the three
months ended March 31, 2000 were $144 million, or 13% of revenue, compared to
$12 million, or 7% of revenue, for the three months ended March 31, 1999. The
increase is primarily a result of the costs incurred in connection with the
development of the Global Network Operations Center, the expansion of the
Global Crossing Network and the expenses of the 1999 acquired companies.
Sales and marketing. Sales and marketing expenses for the three months
ended March 31, 2000 were $104 million, or 9% of revenue, compared to $10
million, or 6% of revenue, for the three months ended March 31, 1999. The
increase from 1999 was due to the additional expenses attributable to the 1999
acquired companies, expenses related to additions in headcount, plus occupancy
costs, marketing costs and other promotional expenses.
Network development. Network development costs for the three months ended
March 31, 2000 were $18 million, or 2% of revenue, compared to $5 million, or
3% of revenue, for the three months ended March 31, 1999. The increase is due
to the additional expenses attributable to the 1999 acquired companies,
additional salaries, employee benefits and professional fees associated with
the expansion of the Global Crossing Network.
General and administrative. General and administrative expenses for the
three months ended March 31, 2000 were $150 million, or 13% of revenue,
compared to $22 million, or 13% of revenue, for the three months ended March
31, 1999. The increase was comprised principally of salaries, employee
benefits and recruiting for the Company's need for increased staffing for
multiple fiber optic systems, travel, professional fees, insurance costs and
occupancy costs. The increase in general and administrative expenses is
primarily attributable to the additional expenses of the 1999 acquired
companies.
13
<PAGE>
Stock related expense. Stock related expense for the three months ended
March 31, 2000 was $19 million compared to $17 million for the three months
ended March 31, 1999. The increase is primarily due to a $9 million charge in
the three months period ended March 31, 2000 related to accelerated vesting of
an executive's stock options.
Depreciation and amortization. Depreciation and amortization for the three
months ended March 31, 2000 was $141 million, or 13% of revenue, compared to
$0.2 million for the three months ended March 31, 1999. The increase is due to
the Acquisitions and depreciation of subsea systems placed in service.
Goodwill and intangibles amortization. Goodwill and intangibles
amortization for the three months ended March 31, 2000 was $132 million
resulting from the Acquisitions, which occurred after March 31, 1999.
Minority interest. Minority interest for the three months ended March 31,
2000 was $16 million and relates to minority interest in net income of PC-1
and AGC.
Interest income and interest expense. Interest income for the three months
ended March 31, 2000 was $23 million, compared to $14 million for the three
months ended March 31, 1999. The increase is due to interest earned on cash
raised from financings and on CPA deposits. Interest expense for the three
months ended March 31, 2000 was $86 million, compared to $24 million for the
three months ended March 31, 1999. The increase is due to higher levels of
debt outstanding resulting from the Acquisitions and capital spending on the
expansion of the Global Crossing Network.
Provision for income taxes. Provision for income taxes of $5 million and
$16 million for the three months ended March 31, 2000 and 1999, respectively,
provide for taxes on profits earned from telecommunications services,
installation and maintenance and other income where subsidiaries of the
Company have a presence in taxable jurisdictions.
Cumulative effect of change in accounting principle. The Company adopted
Statement of Position 98-5 (SOP 98-5), "Reporting on the Cost of Start-Up
Activities," issued by the American Institute of Certified Public Accountants,
on January 1, 1999. SOP 98-5 requires that certain start-up expenditures
previously capitalized during system development must now be expensed. The
Company incurred a one-time charge during the three months ended March 31,
1999 of $15 million (net of tax benefit of $1,400) that represents start-up
costs incurred and capitalized during previous periods.
Net loss. Net loss for the three months ended March 31, 2000 was $262
million compared to $2 million for the three months ended March 31, 1999.
Preferred stock dividends. Preferred stock dividends for the three months
ended March 31, 2000 were $45 million compared to $13 million for the three
months ended March 31, 1999. The increase is due to the additional issuances
of preferred stock, the proceeds of which are used to fund acquisitions and
capital spending.
Net loss applicable to common shareholders. During the three months ended
March 31, 2000, the Company reported net loss applicable to common
shareholders of $307 million compared to $15 million for the three months
ended March 31, 1999.
Adjusted EBITDA. Our operating (loss) income plus depreciation and
amortization, goodwill and intangibles amortization, stock related expense and
the cash portion of the change in deferred revenue ("Adjusted EBITDA") was
$389 million for the three months ended March 31, 2000 compared to $128
million for the three months ended March 31, 1999. The increase in Adjusted
EBITDA is due to the Acquisitions and the increase in the cash portion of the
change in deferred revenue for the three months ended March 31, 2000 compared
to the three months ended March 31, 1999. The definition of Adjusted EBITDA is
consistent with financial covenants contained in the Company's major financial
agreements. Although Adjusted EBITDA should not be used as an alternative to
operating (loss) income or net cash provided by (used in) operating
activities, investing activities
14
<PAGE>
or financing activities, each as measured under generally accepted accounting
principles, management believes that Adjusted EBITDA is an additional
meaningful measure of performance and liquidity. Our calculation of Adjusted
EBITDA may be different from the calculation used by other companies and,
therefore, comparability may be limited.
Liquidity and Capital Resources
Global Crossing estimates the total remaining cost of developing and
deploying the announced systems on the Global Crossing Network to be
approximately $4 billion, excluding costs of potential future upgrades. The
remaining financing needed to complete the Global Crossing Network and to fund
working capital requirements is expected to be obtained from issuances of
common or preferred stock, bank financing or through other corporate
financing. Some of this financing is expected to be incurred by wholly-owned
subsidiaries or joint venture companies as well as by GCL.
In April 2000, we issued 21,673,706 shares of our common stock for net
proceeds of approximately $694 million and 4,000,000 shares of 6 3/4%
cumulative convertible preferred stock at a liquidation preference of $250 for
net proceeds of approximately $970 million. In May 2000, pursuant to an over-
allotment option held by the underwriters of the preferred stock, the Company
issued an additional 600,000 shares of 6 3/4% cumulative convertible preferred
stock for net proceeds of approximately $146 million.
The Company has extended limited amounts of financing to customers in
connection with certain capacity sales. The financing terms provide for
installment payments of up to four years. The Company believes that its
extension of financing to its customers will not have a material effect on the
Company's liquidity.
Cash provided by (used in) operating activities was $240 million and
$(19) million for the three months ended March 31, 2000 and 1999,
respectively. The balances principally represent cash received from capacity
sales and interest income received, less sales and marketing, network
development and general and administrative expenses paid.
Cash used in investing activities was $1,031 million and $158 million for
the three months ended March 31, 2000 and 1999, respectively. The balances
represent cash paid for construction in progress, purchases of property and
equipment and investments in affiliates.
Cash provided by financing activities was $408 million for the three months
ended March 31, 2000 and primarily represents borrowings under the senior
secured corporate facility, proceeds from the issuance of common stock and a
decrease in restricted cash and cash equivalents, partially offset by
repayments of borrowings under long term debt and payment of dividends on
preferred stock. Cash used in financing activities was $65 million for the
three months ended March 31, 1999 and primarily relates to repayments of
borrowings under the AC-1 credit facility and the increase in restricted cash
and cash equivalents.
Global Crossing has a substantial amount of indebtedness. Based upon the
current level of operations, management believes that the Company's cash flows
from operations, together with available borrowings under its credit facility,
and its continued ability to raise capital, will be adequate to meet the
Company's anticipated requirements for working capital, capital expenditures,
acquisitions and other discretionary investments, interest payments and
scheduled principal payments for the foreseeable future. There can be no
assurance, however, that the Company's business will continue to generate cash
flow at or above current levels or that currently anticipated improvements
will be achieved. If the Company is unable to generate sufficient cash flow
and raise capital to service the Company's debt, the Company may be required
to reduce capital expenditures, refinance all or a portion of its existing
debt or obtain additional financing.
15
<PAGE>
Inflation
Management does not believe that its business is impacted by inflation to a
significantly different extent than the general economy.
Euro Conversion
On January 1, 1999, a single currency called the Euro was introduced in
Europe. Eleven of the fifteen member countries of the European Union agreed to
adopt the Euro as their common legal currency on that date. Fixed conversion
rates between these countries' existing currencies (legacy currencies) and the
Euro were established as of that date. The legacy currencies are scheduled to
remain legal tender in these participating countries between January 1, 1999
and January 1, 2002 (not later than July 1, 2002). During this transition
period, parties may settle transactions using either the Euro or a
participating country's legacy currency.
As most of the Company's sales and expenditures are denominated in United
States dollars, management does not believe that the Euro conversion will have
a material adverse impact on its the business or financial condition. The
Company does not expect the cost of system modifications to be material and
the Company will continue to evaluate the impact of the Euro conversion.
Information Regarding Forward-Looking Statements
The Company has included "forward-looking statements" throughout this
quarterly report filed on Form 10-Q. These forward-looking statements describe
management's intentions, beliefs, expectations or predictions for the future.
The Company uses the words "believe," "anticipate," "expect," "intend" and
similar expressions to identify forward-looking statements. Such forward-
looking statements are subject to a number of risks, assumptions and
uncertainties that could cause the Company's actual results to differ
materially from those projected in such forward-looking statements. These
risks, assumptions and uncertainties include:
. the ability to complete systems within the currently estimated time
frames and budgets;
. the ability to compete effectively in a rapidly evolving and price
competitive marketplace;
. changes in business strategy;
. changes in the nature of telecommunications regulation in the United
States and other countries;
. the successful integration of newly-acquired businesses; and
. the impact of technological change.
This list is only an example of some of the risks, uncertainties and
assumptions that may affect the Company's forward-looking statements. The
Company undertakes no obligation to update any forward-looking statements made
by it.
16
<PAGE>
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Interest Rate Risk
The table below provides information about the Company's market sensitive
financial instruments and constitutes a "forward-looking statement." The
Company's major market risk exposure is changing interest rates. The Company's
policy is to manage interest rates through use of a combination of fixed and
floating rate debt. Interest rate swaps may be used to adjust interest rate
exposures when appropriate, based upon market conditions.
<TABLE>
<CAPTION>
Fair Value
Expected maturity dates 2000 2001 2002 2003 2004 Thereafter Total March 31, 2000
- ------------------------ ------- ------- ------- -------- -------- ---------- ---------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DEBT
Non Current--US$
denominated
9 1/2% Senior Notes due
2009................... -- -- -- -- -- $1,100,000 $1,100,000 $1,057,375
Average interest
rates--fixed.......... 9.5%
9 1/8% Senior Notes due
2006................... -- -- -- -- -- 900,000 900,000 852,750
Average interest
rates--fixed.......... 9.1%
9 5/8% Senior Notes due
2008................... -- -- -- -- -- 800,000 800,000 772,000
Average interest
rates--fixed.......... 9.6%
Senior Secured Revolving
Credit Facility........ -- -- -- -- $884,597 -- 884,597 884,597
Average interest
rates--variable....... (1)
Racal Term Loan A....... -- -- -- -- -- 636,639 636,639 636,639
Average interest
rates--variable....... (2)
Medium Term Notes,
7.51%-9.3%
Due 2000 to 2021....... $87,500 $71,500 $40,000 -- 20,000 100,000 319,000 303,649
Average interest
rates--fixed.......... 9.0%
7% Senior Notes due
2004................... -- -- -- -- 300,000 -- 300,000 274,605
Average interest
rates--fixed.......... 7.3%
Pacific Crossing Term
Loan A-1............... -- 80,000 90,000 $110,000 115,000 30,000 425,000 425,000
Average interest
rates--variable....... (5)
Pacific Crossing Term
Loan B................. -- 3,260 3,260 3,260 3,260 311,960 325,000 325,000
Average interest
rates--variable....... (6)
6% Dealer Remarketable
Securities (DRS) due
2013................... -- -- -- -- -- 200,000 200,000 178,423
Average interest
rates--fixed.......... (4)
Other................... $ 2,565 $ 3,522 $ 3,618 $ 38,336 2,962 39,963 90,966 89,644
Average interest
rates--fixed.......... (7)
DERIVATIVE INSTRUMENTS
Interest rate swap
floating for fixed--
Contract notional
amount................. -- -- -- -- -- 200,000 200,000 210,984
Fixed rate assumed by
GCL................... (8)
Variable rate assumed
by Counterparty....... 7.3%
Interest rate swap fixed
for floating--Contract
notional amount........ -- -- -- -- $698,888 $ 198,888 $ 897,776 $ 872,775
Average floating rate
assumed by GCL........ (9)
Average fixed rate
assumed by
Counterparty.......... 5.6% 6.9%
</TABLE>
- --------
(1) The interest rate is 3 month US dollar LIBOR + 2.25% which was 8.5% as of
March 31, 2000.
(2) The interest rate is British pound LIBOR + 2.50%. The effective interest
rate was 8.7% as of March 31, 2000.
(3) The interest rate on Term Loan B and the Ancillary Facility is British
pound LIBOR + 2.50%. The weighted-average interest rate was 8.6% as of
March 31, 2000.
(4) The interest rate is fixed at 6.0% until October 2003. At that time, the
remarketing dealer (J.P. Morgan) has the option to remarket the notes at
prevailing interest rates or tender the notes for redemption.
(5) The interest rate is 1 month US dollar LIBOR + 2.25%, which was 8.4% as of
March 31, 2000.
17
<PAGE>
(6) The interest rate is 1 month US dollar LIBOR + 2.50%, which was 8.7% as of
March 31, 2000.
(7) Includes $81,512 of fixed rate debt with interest rates ranging from 2.0%
to 9.0%.
(8) The interest rate is 6 month US dollar LIBOR + 1.26%, which is set in
arrears.
(9) There are two fixed for floating interest rate swaps denominated in
British pounds. GCL receives interest rates based on 3 month British pound
LIBOR, which was 6.3% on March 31, 2000. GCL also has two US dollar
denominated swaps. The interest rate is 1 month US dollar LIBOR, which was
6.3% as of March 31, 2000.
Foreign Currency Risk
For those subsidiaries using the U.S. dollar as their functional currency,
translation adjustments are recorded in the accompanying condensed
consolidated statements of operations.
For those subsidiaries not using the U.S. dollar as their functional
currency, assets and liabilities are translated at exchange rates in effect at
the balance sheet date and income and expense accounts at average exchange
rates during the period. Resulting translation adjustments are recorded
directly to a separate component of shareholders' equity. As of and for the
three months ended March 31, 2000 and 1999, the Company incurred a foreign
currency translation loss of $23 million and $5 million, respectively. Foreign
currency transaction gains and losses are included in the statement of
operations as incurred.
18
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
On June 25, 1999, Frontier Corporation, a wholly-owned subsidiary of Global
Crossing Ltd., was served with a summons and complaint in a lawsuit commenced
in the New York State Supreme Court, Monroe County by a Frontier shareholder
alleging that Frontier and its Board of Directors had breached their fiduciary
duties to shareholders by endorsing a definitive merger agreement with the
Company without having adequately considered an alternative merger proposal
made by Qwest Communications International, Inc. The lawsuit was framed as a
purported class action brought on behalf of all shareholders of Frontier and
sought unstated compensatory damages and injunctive relief compelling
Frontier's board to evaluate Frontier's suitability as a merger partner, to
enhance Frontier's value as a merger candidate, to engage in discussions with
Qwest about possible business combinations, to act independently to protect
the interests of Frontier shareholders, and to ensure that no conflicts of
interest exist which would prevent maximizing value to shareholders. In July
1999, three additional lawsuits were also commenced against Frontier in the
New York State Supreme Court on behalf of a number of individual shareholders
seeking essentially identical relief. All four lawsuits were consolidated into
a single proceeding pending in Rochester New York. In February 2000, all four
lawsuits were voluntarily withdrawn.
On July 12, 1999, Frontier was served with a summons and complaint in a
lawsuit commenced in New York State Supreme Court, New York County by a
Frontier shareholder alleging that Frontier and its board breached their
fiduciary duties by failing to obtain the highest possible acquisition price
for Frontier in the definitive merger agreement with the Company. The action
has been framed as a purported class action and seeks compensatory damages and
injunctive relief. The claims against Frontier are asserted in the same action
as similar but separate claims against US West, Inc. However, the claims
against Frontier have been severed from the US West claims. In February 2000,
the Court granted the Company's motion to transfer the action to Monroe
County. The Company believes the asserted claims are without merit and is
defending itself vigorously.
Item 2. Changes in Securities and Use of Proceeds
In January 2000, the Company issued to Hutchison Whampoa Ltd. in a private
transaction 400,000 shares of its 6 3/8% cumulative convertible preferred
stock, Series B, for an aggregate liquidation preference of $400 million, in
connection with an equity investment by the Company in a joint venture. The
preferred stock is convertible into shares of Global Crossing common stock at
a rate of $45 per share. The Company received no cash proceeds from the
issuance of the convertible preferred stock.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
19
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<C> <S>
3.1 Certificate of Designations of 6 3/4% Cumulative Convertible Preferred
Stock of the Registrant dated April 14, 2000 (filed herewith).
10.1 Termination of Stockholders Agreement dated as of February 22, 2000 among
the Registrant and the investors named therein (filed herewith).
10.2 1998 Global Crossing Ltd. Stock Incentive Plan as amended and restated as
of May 1, 2000 (incorporated by reference to Annex A to the Registrant's
definitive proxy statement on Schedule 14A filed on May 8, 2000).
10.3 Global Crossing Senior Executive Incentive Compensation Plan
(incorporated by reference to Annex B to the Registrant's definitive
proxy statement on Schedule 14A filed on May 8, 2000).
10.4 Letter agreement dated March 2, 2000 relating to the termination of the
Employment Agreement dated as of February 9, 1999 between the Registrant
and Robert Annunziata (filed herewith).
10.5 Clarification letter dated April 17, 2000, relating to the Employment
Agreement dated as of December 5, 1999 between the Registrant and Leo J.
Hindery, Jr. (filed herewith)
10.6 Employment Term Sheet dated as of April 26, 2000 between the Registrant
and Gary A. Cohen (filed herewith).
10.7 Employment Term Sheet dated as of May 1, 2000 between the Registrant and
Joseph P. Perrone (filed herewith).
27.1 Financial Data Schedule (filed herewith).
</TABLE>
(b) Reports on Form 8-K.
During the quarter ended March 31, 2000, Global Crossing Ltd. filed the
following Current Reports on Form 8-K:
1. Current Report on Form 8-K dated November 15, 1999 (date of earliest
event reported), filed on January 11, 2000, for the purpose of reporting,
under Items 2, 5 and 7, the acquisition of Racal Telecom, the execution of an
agreement to establish a joint venture called Hutchison Global Crossing with
Hutchison Whampoa Ltd. and providing certain historical and pro forma
financial information relating thereto.
2. Current Report on Form 8-K/A dated November 15, 1999 (date of earliest
event reported), filed on January 19, 2000, for the purpose of reporting,
under Items 2 and 5, to amend the Current Report on Form 8-K dated November
15, 1999 specified above.
3. Current Report on Form 8-K dated February 18, 2000 (date of earliest
event reported), filed on February 18, 2000, for the purpose of reporting,
under Item 5, Global Crossing's results of operations for the fourth quarter
and fiscal year ended December 31, 1999.
4. Current Report on Form 8-K dated February 22, 2000 (date of earliest
event reported), filed on March 2, 2000, for the purpose of reporting, under
Item 5, the execution of an agreement and plan of merger with IPC Information
Systems, Inc. and IXnet, Inc.
5. Current Report on Form 8-K dated March 2, 2000 (date of earliest event
reported), filed on March 3, 2000, for the purpose of reporting, under Item 5,
the appointment of Leo Hindery as the new Chief Executive Officer of Global
Crossing Ltd.
20
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLOBAL CROSSING LTD.,
a Bermuda corporation
/s/ Dan J. Cohrs
By: _________________________________
Dan J. Cohrs
Senior Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
May 15, 2000
21
<PAGE>
Exhibit 3.1
Schedule to the Bye-Laws
of Global Crossing Ltd.
CERTIFICATE OF DESIGNATIONS
OF
6 3/4% CUMULATIVE CONVERTIBLE PREFERRED STOCK
The terms of the authorized 6 3/4% Cumulative Convertible Preferred
Stock (the "Preferred Stock") of Global Crossing Ltd., a company incorporated
under the laws of Bermuda (the "Company"), shall be as set forth below in this
Schedule to the Bye-Laws of the Company (this "Schedule").
(a) Designation. (i) There are hereby authorized 4,600,000 shares
-----------
of Preferred Stock as designated by the Board of Directors of the Company. Each
share of Preferred Stock will have a liquidation preference of $250 (the
ALiquidation Preference").
(ii) All shares of Preferred Stock redeemed, purchased, exchanged,
converted or otherwise acquired by the Company shall be retired and canceled
and, upon the taking of any action required by applicable law, shall be restored
to the status of authorized but unissued shares of preferred stock of the
Company, without designation as to series, and may thereafter be reissued.
(b) Currency. All shares of Preferred Stock shall be denominated in
--------
United States currency, and all payments and distributions thereon or with
respect thereto shall be made in United States currency. All references herein
to "$" or "dollars" refer to United States currency.
(c) Ranking. The Preferred Stock shall, with respect to dividend
-------
rights and rights upon liquidation, winding up or dissolution, rank junior to
(i) each other class or series of capital stock of the Company, other than (A)
the Common Stock of the Company and any other class or series of capital stock
of the Company which by its terms ranks junior to the Preferred Stock, as to
which the Preferred Stock shall rank prior and (B) any other class or series of
capital stock of the Company which by its terms ranks on a parity with the
Preferred Stock, as to which the Preferred Stock shall rank on a parity or (ii)
other equity interests in the Company, in each case, including, without
limitation, warrants, rights, calls or options exercisable for or convertible
into such capital stock or equity interests, except as provided in the last
sentence of this paragraph (c). All equity securities of the Company to which
the Preferred Stock ranks prior (whether with respect to dividends or upon
liquidation, winding up, dissolution or otherwise), including the Common Stock
of the Company, are collectively referred to herein as the "Junior Stock". All
equity securities of the Company to which the Preferred Stock ranks on a parity
(whether with respect to dividends or upon liquidation, winding up, dissolution
or otherwise) are collectively referred to herein as the "Parity
<PAGE>
2
Stock". All equity securities of the Company to which the Preferred Stock ranks
junior (whether with respect to dividends or upon liquidation, winding up,
dissolution or otherwise) are collectively referred to herein as the "Senior
Stock". The respective definitions of Junior Stock, Parity Stock and Senior
Stock shall also include any warrants, rights, calls or options exercisable for
or convertible into any Junior Stock, Parity Stock or Senior Stock, as the case
may be. The Preferred Stock shall, with respect to dividend rights and upon
liquidation, winding up or dissolution, rank on a parity with the Company's (i)
6 3/8% Cumulative Convertible Preferred Stock, (ii) 6 3/8% Cumulative
Convertible Preferred Stock, Series B and (iii) 7% Cumulative Convertible
Preferred Stock.
(d) Dividends. (i) The holders of shares of Preferred Stock shall be
---------
entitled to receive, when, as and if declared by the Board of Directors of the
Company out of funds legally available therefor, dividends on the shares of
Preferred Stock, cumulative from the first date of issuance of any such shares
(the "Initial Issuance Date"), at a rate per annum of 6 3/4% of the Liquidation
Preference per share, payable in cash, subject to paragraph (d)(vi). Dividends
on the shares of Preferred Stock shall be payable quarterly in equal amounts
(subject to paragraph (d)(v) hereunder with respect to shorter periods,
including the first such period with respect to newly issued shares of Preferred
Stock) in arrears on January 15, April 15, July 15 and October 15 of each year,
or if any such date is not a Business Day, on the next succeeding Business Day
(each such date, a "Dividend Payment Date", and each such quarterly period, a
"Dividend Period"), in preference to and in priority over dividends on any
Junior Stock. Such dividends shall be paid to the holders of record of the
shares of Preferred Stock as they appear on the applicable Record Date. As used
herein, the term "Record Date" means, with respect to the dividends payable on
January 15, April 15, July 15 and October 15 of each year, December 31, March
31, June 30 and September 30, of each year, respectively, or such other record
date, not more than 60 days and not less than 10 days preceding the applicable
Dividend Payment Date, as shall be fixed by the Board of Directors of the
Company. Dividends on the shares of Preferred Stock shall be fully cumulative
and shall accrue (whether or not declared and whether or not there are funds of
the Company legally available for the payment of dividends) from the Issuance
Date (or the last Dividend Payment Date for which dividends were paid, as the
case may be) based on a 360-day year comprised of twelve 30-day months. Accrued
and unpaid dividends for any past Dividend Period and dividends in connection
with any optional redemption may be declared and paid at any time, without
reference to any Dividend Payment Date, to holders of record on such date, not
more than 45 days prior to the payment thereof, as may be fixed by the Board of
Directors of the Company.
(ii) No dividend shall be declared or paid or set apart for payment or
other distribution declared or made, whether in cash, obligations or shares of
capital stock of the Company or other property, directly or indirectly, upon any
shares of Junior Stock or Parity Stock, nor shall any shares of Junior Stock or
Parity Stock be redeemed, repurchased or otherwise acquired for consideration by
the Company through a sinking fund or otherwise, unless all accrued and unpaid
dividends through the most recent Dividend Payment Date (whether or not such
dividends have been declared and whether or not there are funds of the Company
legally available for the payment of dividends) on the
<PAGE>
3
shares of Preferred Stock and any Parity Stock have been or contemporaneously
are declared and paid in full; provided, however, that, notwithstanding any
provisions in this subparagraph (ii) to the contrary, the Company shall be
entitled to (a) declare and pay dividends on shares of Junior Stock payable
solely in shares of Junior Stock and on shares of Parity Stock payable solely in
shares of Parity Stock or Junior Stock, or in each case by an increase in the
liquidation preference of the Junior Stock or Parity Stock and (b) redeem,
repurchase or otherwise acquire Junior Stock or Parity Stock in exchange for
consideration consisting of Parity Stock or Junior Stock, in the case of Parity
Stock, or of Junior Stock, in the case of Junior Stock. When dividends are not
paid in full, as aforesaid, upon the shares of Preferred Stock, all dividends
declared on the Preferred Stock and any other Parity Stock shall be declared and
paid either (A) pro rata so that the amount of dividends so declared on the
shares of Preferred Stock and each such other class or series of Parity Stock
shall in all cases bear to each other the same ratio as accrued dividends on the
shares of Preferred Stock and such class or series of Parity Stock bear to each
other or (B) on another basis that is at least as favorable to the holders of
the Preferred Stock entitled to receive such dividends.
(iii) Any dividend payment made on the Preferred Stock shall first be
credited against the dividends accrued with respect to the earliest Dividend
Period for which dividends have not been paid.
(iv) All dividends paid with respect to shares of Preferred Stock
pursuant to this paragraph (d) shall be paid pro rata to the holders entitled
thereto.
(v) Dividends (or cash amounts equal to accrued and unpaid dividends)
payable on the Preferred Stock for any period shorter than six months shall be
computed on the basis of the actual number of days elapsed (in a 30-day month)
since the applicable Dividend Payment Date or from the Issuance Date with
respect to newly issued shares, as applicable, and based on a 360-day year of
twelve 30-day months. No interest shall accrue or be payable in respect of
unpaid dividends.
(vi) The Company shall have the option to pay all or any part of a
dividend by delivering shares of Common Stock, par value $0.01 per share, of the
Company (the "Common Stock"), to the transfer agent for the Preferred Stock (the
"Transfer Agent"). In such case, the Company shall be obligated to deliver to
the Transfer Agent a number of shares of Common Stock which, when resold by the
Transfer Agent, shall result in net cash proceeds sufficient to pay the
applicable dividend in cash to the holders of shares of Preferred Stock. If the
proceeds of any resale of shares of Common Stock do not result in sufficient
cash proceeds to pay a dividend, the Company shall promptly provide cash to the
Transfer Agent in an amount equal to the difference between the amount of the
applicable dividend and the proceeds of such sale. All shares of Common Stock
that the Company may deliver to the Transfer Agent as provided in this
subparagraph (vi) shall be registered under the Securities Act of 1933, as
amended.
(e) Liquidation Preference. (i) Upon any voluntary or involuntary
----------------------
liquidation,
<PAGE>
4
dissolution or winding up of the Company or a reduction or decrease in the
Company's capital stock resulting in a distribution of assets to the holders of
any class or series of the Company's capital stock, each holder of shares of
Preferred Stock shall be entitled to payment out of the assets of the Company
available for distribution of an amount equal to the then effective Liquidation
Preference per share of Preferred Stock held by such holder, plus all
accumulated and unpaid dividends therein to the date of such liquidation,
dissolution, winding up or reduction or decrease in capital stock, before any
distribution is made on any Junior Stock, including, without limitation, Common
Stock of the Company. After payment in full of the then effective Liquidation
Preference and all accumulated and unpaid dividends to which holders of shares
of Preferred Stock are entitled, such holders shall not be entitled to any
further participation in any distribution of assets of the Company. If, upon any
voluntary or involuntary liquidation, dissolution or winding up of the Company
or a reduction or decrease in the Company's capital stock, the amounts payable
with respect to shares of Preferred Stock and all other Parity Stock are not
paid in full, the holders of shares of Preferred Stock and the holders of the
Parity Stock shall share equally and ratably in any distribution of assets of
the Company in proportion to the full liquidation preference and all accumulated
and unpaid dividends to which each such holder is entitled.
(ii) Neither the voluntary 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, merger or amalgamation of the Company with or into any
corporation or the consolidation, merger or amalgamation of any corporation with
or into the Company shall be deemed to be a voluntary or involuntary
liquidation, dissolution or winding up of the Company or a reduction or decrease
in the capital stock of the Company.
(iii) No funds are required to be set aside to protect the
Liquidation Preference of the shares of Preferred Stock, although such
Liquidation Preference will be substantially in excess of the par value of the
shares of the Preferred Stock.
(f) Redemption. Shares of Preferred Stock shall be redeemable by the
----------
Company as provided below.
(i) Optional Redemption After the Initial Redemption Date. The
-----------------------------------------------------
shares of Preferred Stock shall not be redeemable prior to April 17, 2005 (the
AInitial Redemption Date"). After the Initial Redemption Date, the shares of
Preferred Stock shall be subject to redemption at any time at the option of the
Company, in whole or in part, at a price (the "Redemption Price"), payable in
cash, equal to the percentage set forth below of the Liquidation Preference per
share for redemption during the 12-month periods beginning on the Initial
Redemption Date or the dates indicated below, plus in each case an amount equal
to accumulated and unpaid dividends thereon (whether or not declared and whether
or not there are funds of the Company legally available for the payment of
dividends) to the date fixed for redemption.
<PAGE>
5
Period Redemption Price
------ ----------------
April 17, 2005........................... 103.375%
April 15, 2006........................... 102.700%
April 15, 2007........................... 102.025%
April 15, 2008........................... 101.350%
April 15, 2009........................... 100.675%
April 15, 2010 and thereafter............ 100.000%
(ii) Optional Tax Redemption. The shares of Preferred Stock shall be
-----------------------
subject to redemption at the option of the Company or a successor corporation at
any time, in whole or in part, at a Redemption Price equal to 100% of the then
effective Liquidation Preference thereof, plus all accumulated and unpaid
dividends thereon to the redemption date if, as a result of any change in or
amendment to any laws, regulations or rulings promulgated thereunder of (A)
Bermuda or any political subdivision or governmental authority thereof or
therein having the power to tax, (B) any jurisdiction, other than the United
States, from or through which payment on the shares of Preferred Stock 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 (C) 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 party (each, a "Change in Tax Law"), which becomes
effective on or after the date hereof, the Company or a successor corporation is
or would be required on the next succeeding Dividend Payment Date to pay
Additional Amounts (as defined below) with respect to the shares of Preferred
Stock, 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 shares of Preferred Stock shall be subject to
redemption at the option of the Company at any time, in whole or in part, at a
Redemption Price equal to 100% of the then effective Liquidation Preference
thereof, plus all accumulated and unpaid dividends thereon to the redemption
date, if the person formed by a consolidation, merger or amalgamation of the
Company or into which the Company is consolidated, merged or amalgamated 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, merger, amalgamation, conveyance, transfer or lease and as a
consequence of a Change in Tax Law occurring after the date of such
consolidation, merger, amalgamation, conveyance, transfer or lease, to pay
Additional Amounts in respect of any tax,
<PAGE>
6
assessment or governmental charge imposed on any holder of shares of Preferred
Stock.
(iii) 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 shares of Preferred Stock 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 with respect to the shares of Preferred
Stock, the Company or a successor corporation will pay to each holder of shares
of Preferred Stock as additional dividends, such additional amounts
(collectively, the "Additional Amounts") as may be necessary in order that the
net amounts paid to such holder of such shares of Preferred Stock 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 shares of
Preferred Stock 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 (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 shares of
Preferred Stock (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) the presentation of shares of Preferred
Stock for payment in Bermuda or any political subdivision thereof or
therein, unless such shares of Preferred Stock 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
<PAGE>
7
by withholding from payment of the Liquidation Preference of or any
dividends on the shares of Preferred Stock;
(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 shares of Preferred Stock 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
(E) any combination of items (A), (B), (C) and (D) above;
nor shall Additional Amounts be paid with respect to any payment of the
Liquidation Preference of or dividends on any shares of Preferred Stock to any
holder who is a fiduciary or partnership or limited liability company or other
beneficial owner of shares of Preferred Stock 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
shares of Preferred Stock 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 shares of Preferred Stock.
The Company shall provide the Transfer Agent 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 shares of Preferred Stock or the Transfer
Agent, as applicable, upon request therefor.
All references herein to dividends on the shares of Preferred Stock
shall include any Additional Amounts payable by the Company in respect of such
shares of Preferred Stock.
(iv) Whenever shares of Preferred Stock are to be redeemed pursuant
to this paragraph (f), a notice of such redemption shall be mailed, addressed to
each holder, by overnight
<PAGE>
8
mail, postage prepaid, or delivered to each holder of the shares to be redeemed
at such holder's address as the same appears on the stock transfer books of the
company. Such notice shall be mailed to be delivered not less than 30 days and
nor more than 60 days prior to the date fixed for redemption. Each such notice
shall state: (A) the date fixed for redemption; (B) the number of shares of
Preferred Stock to be redeemed; (C) the Redemption Price and the amount of
dividends accrued and unpaid through the date fixed for redemption; (D) the
place or places where such shares of Preferred Stock are to be surrendered for
payment of the Redemption Price; and (E) that dividends on the shares to be
redeemed will cease to accrue on such date fixed for redemption unless the
Company shall default in the payment of the Redemption Price. If fewer than all
shares of Preferred Stock held by a holder are to be redeemed, the notice mailed
to such holder shall specify the number of shares to be redeemed from such
holder.
Notice having been given as provided in the preceding paragraph, and
if on or before the redemption date specified in such notice, an amount in cash
sufficient to redeem in full on the redemption date and at the applicable
Redemption Price (together with an amount equal to accrued and unpaid dividends
thereon (whether or not declared and whether or not there are funds of the
Company legally available for the payment of dividends) to such redemption date)
and all shares of Preferred Stock called for redemption shall have been set
apart and deposited in trust so as to be available for such purpose and only for
such purpose, or shall have been paid to the holders thereof then effective as
of the close of business on such redemption date, and unless there shall be a
subsequent default in the payment of the Redemption Price plus accrued and
unpaid dividends, the shares of Preferred Stock so called for redemption shall
cease to accrue dividends, and such shares shall no longer be deemed to be
outstanding and shall have the status of authorized but unissued shares of
preferred stock of the Company, undesignated as to series, and all rights of the
holders thereof, as such, as shareholders of the Company (except the right to
receive from the Company the Redemption Price and an amount equal to any accrued
and unpaid dividends (whether or not declared and whether or not there are funds
of the Company legally available for the payment of dividends) to such
redemption date) shall cease. Upon surrender in accordance with such notice of
the certificates for any shares so redeemed (properly endorsed or assigned for
transfer, if the notice shall so state), such shares shall be redeemed by the
Company at the Redemption Price as set forth above. In case fewer than all of
the shares represented by any such certificate are redeemed, a new certificate
of like terms and having the same date of original issuance shall be issued
representing the unredeemed shares without cost to the holder thereof.
(v) In the event that fewer than all of the shares of Preferred Stock
are to be redeemed pursuant to this paragraph (f), the Company shall call for
redemption shares of Preferred Stock pro rata among the holders, based on the
number of shares of Preferred Stock held by each holder (with adjustments to
avoid fractional shares), except that the Company may redeem all of the shares
of Preferred Stock held by any holders of fewer than 100 shares of Preferred
Stock (or all the shares of Preferred Stock held by holders who would hold less
than 100 shares of Preferred Stock as a result of such redemption). Any
redemption for which shares are called for redemption on a pro rata basis
<PAGE>
9
shall comply with this subparagraph (v).
(vi) In the event that the redemption date falls after a dividend
payment Record Date and prior to the related dividend payment date, the holders
of the shares of Preferred Stock at the close of business on such dividend
payment Record Date shall be entitled to receive the dividend payable on such
shares on the corresponding dividend payment date, even if such shares are
redeemed after such dividend payment Record Date.
(vi) Mandatory Redemption. On April 15, 2012, the Company shall be
--------------------
obligated to redeem all outstanding shares of Preferred Stock for cash, upon not
less than 30 nor more than 60 days' notice sent by first class mail to each
holder's registered address, at 100.0% of the Liquidation Preference per share,
plus accumulated and unpaid dividends to the date of redemption.
(g) Voting Rights. Except as required by applicable Bermuda law and
-------------
as may otherwise be provided herein or in any amendment hereto, the holders of
shares of Preferred Stock shall not be entitled to any voting rights as
shareholders of the Company except as follows:
(i) The affirmative vote of the holders of at least a majority
of the outstanding shares of Preferred Stock, voting with holders of shares
of all other series of preferred stock affected in the same way as a single
class, in person or by proxy, at a special or annual meeting called for the
purpose, or by written consent in lieu of a meeting, shall be required to
amend, repeal or change any provisions of this Schedule in any manner which
would adversely affect, alter or change the powers, preferences or special
rights of the Preferred Stock and any such securities affected in the same
way; provided, however, that the creation, authorization or issuance of any
other class or series of capital stock or the increase or decrease in the
amount of authorized capital stock of any such class or series or of the
Preferred Stock, or any increase, decrease or change in the par value of
any class or series of capital stock (including the Preferred Stock), shall
not require the consent of the holders of the Preferred Stock and shall not
be deemed to affect adversely, alter or change the powers, preferences and
special rights of the shares of Preferred Stock. With respect to any
matter on which the holders are entitled to vote as a separate class, each
share of Preferred Stock shall be entitled to one vote.
(ii) If at any time the equivalent of six quarterly dividends
payable on the shares of Preferred Stock are accrued and unpaid (whether or
not consecutive and whether or not declared), the holders of all
outstanding shares of Preferred Stock and any Parity Stock or Senior Stock
having similar voting rights then exercisable, voting separately as a
single class without regard to series, shall be entitled to elect at the
next annual meeting of the shareholders of the Company two directors to
serve until all dividends accumulated and unpaid on any such voting shares
have been paid or declared and funds set aside to provide for payment in
full. In exercising any such vote, each outstanding share of Preferred
Stock shall be entitled to one vote, excluding shares held by the Company
or any entity controlled
<PAGE>
10
by the Company, which shares shall have no vote.
(h) Conversion. (i) Each share of Preferred Stock shall be
----------
convertible at any time and from time to time at the option of the holder
thereof into fully paid and nonassessable shares of Common Stock. The number of
shares of Common Stock deliverable upon conversion of a share of Preferred
Stock, adjusted as hereinafter provided, is referred to herein as the
AConversion Ratio". The Conversion Ratio as of the Issuance Date shall be
6.3131 and shall equal the ratio the nominator of which shall be the Liquidation
Preference and the denominator of which shall be the Conversion Price. The
Conversion Price shall be $39.60, subject to adjustment from time to time as
provided in paragraph (i).
(ii) Conversion of shares of Preferred Stock may be effected by any
holder upon the surrender to the Company at the principal office of the Company
or at the office of the Transfer Agent, as may be designated by the Board of
Directors of the Company, of the certificate or certificates for such shares of
Preferred Stock to be converted accompanied by a written notice stating that
such holder elects to convert all or a specified whole number of such shares in
accordance with the provisions of this paragraph (h) and specifying the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued. In case such notice shall specify a name or names
other than that of such holder, such notice shall be accompanied by payment of
all transfer taxes payable upon the issuance of shares of Common Stock in such
name or names. Other than such taxes, the Company shall pay any documentary,
stamp or similar issue or transfer taxes that may be payable in respect of any
issuance or delivery of shares of Common Stock upon conversion of shares of
Preferred Stock pursuant hereto. As promptly as practicable after the surrender
of such certificate or certificates and the receipt of such notice relating
thereto and, if applicable, payment of all required transfer taxes (or the
demonstration to the satisfaction of the Company that such taxes have been
paid), the Company shall deliver or cause to be delivered (x) certificates
representing the number of validly issued, fully paid and nonassessable full
shares of Common Stock to which the holder (or the holder's transferee) of
shares of Preferred Stock being converted shall be entitled and (y) if less than
the full number of shares of Preferred Stock evidenced by the surrendered
certificate or certificates is being converted, a new certificate or
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificate or certificates less the number of shares being
converted. Such conversion shall be deemed to have been made at the close of
business on the date of giving such notice and of such surrender of the
certificate or certificates representing the shares of Preferred Stock to be
converted so that the rights of the holder thereof as to the shares being
converted shall cease except for the right to receive shares of Common Stock and
accrued and unpaid dividends with respect to the shares of Preferred Stock being
converted, in each case in accordance herewith, and the person entitled to
receive the shares of Common Stock shall be treated for all purposes as having
become the record holder of such shares of Common Stock at such time.
(iii) If a holder of shares of Preferred Stock exercises conversion
rights under
<PAGE>
11
paragraph (h)(i), upon delivery of the shares for conversion, such shares shall
cease to accrue dividends pursuant to paragraph (d) as of the end of the day
immediately preceding the date of such delivery, but such shares shall continue
to be entitled to receive all accrued dividends which such holder is entitled to
receive through the last preceding Dividend Payment Date unless such conversion
follows a call for redemption by the Company in which case pro rata dividends
shall also be payable through the date immediately preceding such delivery, in
each case as if such holder continued to hold such shares of Preferred Stock.
Any such accrued and unpaid dividends shall be payable by the Company as and
when such dividends are paid to any remaining holders or, if none, on the date
which would have been the next succeeding Dividend Payment Date had there been
remaining holders or such later time at which the Company believes it has
adequate available capital under applicable law to make such a payment.
Notwithstanding the foregoing, shares of Preferred Stock surrendered for
conversion (other than after notice of redemption has been given with respect to
such shares) after the close of business on any record date for the payment of
dividends declared and prior to the opening of business on the Dividend Payment
Date relating thereto must be accompanied by a payment in cash of an amount
equal to the dividend declared in respect of such shares.
(iv) In case any shares of Preferred Stock are to be redeemed
pursuant to paragraph (f), such right of conversion shall cease and terminate,
as to the shares of Preferred Stock to be redeemed, at the close of business on
the Business Day immediately preceding the date fixed for redemption unless the
Company shall default in the payment of the Redemption Price therefor, as
provided herein.
(v) In connection with the conversion of any shares of Preferred
Stock, no fractions of shares of Common Stock shall be issued, but in lieu
thereof, the Company shall pay a cash adjustment in respect of such fractional
interest in an amount equal to (x) such fractional interest multiplied by the
Liquidation Preference per share, divided by (y) the Conversion Price. If more
than one share of Preferred Stock shall be surrendered for conversion by the
same holder at the same time, the number of full shares of Common Stock
issuable on conversion thereof shall be computed on the basis of the total
number of shares of Preferred Stock so surrendered.
(vi) The Company shall at all times reserve and keep available, free
from preemptive rights, for issuance upon the conversion of shares of Preferred
Stock such number of its authorized but unissued shares of Common Stock as will
from time to time be sufficient to permit the conversion of all outstanding
shares of Common Stock if necessary to permit the conversion of all outstanding
shares of Preferred Stock. Prior to the delivery of any securities which the
Company shall be obligated to deliver upon conversion of the Preferred Stock,
the Company shall comply with all applicable federal and state laws and
regulations which require action to be taken by the Company. All shares of
Common Stock delivered upon conversion of the Preferred Stock will upon delivery
be duly and validly issued and fully paid and nonassessable, free of all liens
and charges and not subject to any preemptive rights.
<PAGE>
12
(i)Conversion Price Adjustments. (i) The Conversion Price shall be
----------------------------
subject to adjustment from time to time as follows:
(A) Stock Splits and Combinations. In case the Company shall at any
-----------------------------
time or from time to time after the Issuance Date (a) subdivide or split the
outstanding shares of Common Stock, (b) combine or reclassify the outstanding
shares of Common Stock into a smaller number of shares or (c) issue by
reclassification of the shares of Common Stock any shares of capital stock of
the Company, then, and in each such case, the Conversion Price in effect
immediately prior to such event or the record date therefor, whichever is
earlier, shall be adjusted so that the holder of any shares of Preferred Stock
thereafter surrendered for conversion shall be entitled to receive the number of
shares of Common Stock or other securities of the Company which such holder
would have owned or have been entitled to receive after the occurrence of any of
the events described above, had such shares of Preferred Stock been surrendered
for conversion immediately prior to the occurrence of such event or the record
date therefor, whichever is earlier. An adjustment made pursuant to this
subparagraph (A) shall become effective at the close of business on the day upon
which such corporate action becomes effective. Such adjustment shall be made
successively whenever any event listed above shall occur.
(B) Stock Dividends in Common Stock. In case the Company shall at
-------------------------------
any time or from time to time after the Issuance Date pay a dividend or make a
distribution in shares of Common Stock on any class of capital stock of the
Company other than dividends or distributions of shares of Common Stock or other
securities with respect to which adjustments are provided in paragraph (i)(A)
above, and the total number of shares constituting such dividend or distribution
shall exceed 25% of the total number of shares of Common Stock outstanding at
the close of business on the record date fixed for determination of shareholders
entitled to receive such dividend or distribution, the Conversion Price shall be
adjusted so that the holder of each share of Preferred Stock shall be entitled
to receive upon conversion thereof, the number of shares of Common Stock
determined by multiplying (1) the applicable Conversion Price by (2) a fraction,
the numerator of which shall be the number of shares of Common Stock theretofore
outstanding and the denominator of which shall be the sum of such number of
shares and the total number of shares issued in such dividend or distribution.
In case the total number of shares constituting such dividend or distribution
shall not exceed 25% of the total number of shares of Common Stock outstanding
at the close of business on the record date fixed for such dividend or
distribution, such shares of Common Stock shall be considered to be issued at
the time of any such next succeeding dividend or other distribution in which the
number of shares of Common Stock issued, together with the number of shares
issued in all previous such dividends and distributions, shall exceed such 25%.
(C) Issuance of Rights or Warrants. In case the Company shall issue
------------------------------
to all holders of Common Stock rights or warrants expiring within 45 days
entitling such holders to subscribe for or purchase Common Stock at a price per
share less than the Current Market Price (as defined below), the Conversion
Price in effect immediately prior to the close of business on the record date
fixed for
<PAGE>
13
determination of shareholders entitled to receive such rights or warrants shall
be reduced by multiplying such Conversion Price by a fraction, the numerator of
which is the sum of the number of shares of Common Stock outstanding at the
close of business on such record date and the number of shares of Common Stock
that the aggregate offering price of the total number of shares of Common Stock
so offered for subscription or purchase would purchase at such Current Market
Price and the denominator of which is the sum of the number of shares of Common
Stock outstanding at the close of business on such record date and the number of
additional shares of Common Stock so offered for subscription or purchase. For
purposes of this subparagraph (C), the issuance of rights or warrants to
subscribe for or purchase securities convertible into Common Stock shall be
deemed to be the issuance of rights or warrants to purchase the Common Stock
into which such securities are convertible at an aggregate offering price equal
to the sum of the aggregate offering price of such securities and the minimum
aggregate amount (if any) payable upon conversion of such securities into Common
Stock. Such adjustment shall be made successively whenever any such event shall
occur.
(D) Distribution of Indebtedness, Securities or Assets. In case the
--------------------------------------------------
Company shall distribute to all holders of Common Stock (whether by dividend or
in a merger, amalgamation or consolidation or otherwise) evidences of
indebtedness, shares of capital stock of any class or series, other securities,
cash or assets (other than Common Stock, rights or warrants referred to in
subparagraph (C) above or a dividend payable exclusively in cash and other than
as a result of a Fundamental Change (as defined below)), the Conversion Price in
effect immediately prior to the close of business on the record date fixed for
determination of shareholders entitled to receive such distribution shall be
reduced by multiplying such Conversion Price by a fraction, the numerator of
which is the Current Market Price on such record date less the fair market value
(as determined by the Board of Directors of the Company, whose determination in
good faith shall be conclusive) of the portion of such evidences of
indebtedness, shares of capital stock, other securities, cash and assets so
distributed applicable to one share of Common Stock and the denominator of which
is the Current Market Price. Such adjustment shall be made successively
whenever any such event shall occur.
In respect of a dividend or other distribution of shares of capital
stock of any class or series or similar equity interests of or relating to a
subsidiary of other business unit of the Company (a "Spin-Off"), the adjustment
to the Conversion Price pursuant to this paragraph (D) shall occur at the
earlier of (i) 20 trading days after the effective date of the Spin-Off and (2)
the initial public offering of securities pertaining to the subsidiary or other
business unit to which the Spin-Off relates, if such initial public offering is
effected simultaneously with such Spin-Off.
(E) Fundamental Changes. In case any transaction or event
-------------------
(including, without limitation, any merger, consolidation, sale of assets,
tender or exchange offer, reclassification, compulsory share exchange or
liquidation) shall occur in which all or substantially all outstanding Common
Stock is converted into or exchanged for stock, other securities, cash or assets
(each, a "Fundamental Change"), the holder of each share of Preferred Stock
outstanding immediately prior to the occurrence of such Fundamental Change shall
have the right upon any subsequent conversion
<PAGE>
14
to receive (but only out of legally available funds, to the extent required by
applicable law) the kind and amount of stock, other securities, cash and assets
that such holder would have received if such share had been converted
immediately prior thereto.
(F) Special Adjustment for Some Changes in Control. (i) If the
-----------------------------------------------
Company becomes subject to a Change in Control (as defined below) in a
transaction or series of related transactions in which (i) the Company's
shareholders receive consideration per share of Common Stock that is greater
than the Conversion Price, without giving effect to the adjustment described
below, at the effective time of such Change in Control and (ii) at least 10%,
but less than 75%, of the total consideration paid to the Company's shareholders
consists of cash, cash equivalents, securities that are not publicly traded or
other assets (collectively, the "non-public consideration"), then the Conversion
Price shall be adjusted so that, upon conversion of shares of Preferred Stock
after such Change in Control, in addition to the Common Stock or other
securities deliverable upon the conversion of the Preferred Stock as provided
herein and in paragraphs (A) through (E) above, each holder shall receive
securities having a value equal to the number of publicly traded securities of
the acquiror determined through the following calculation:
PV cash flows x (non-public consideration/total consideration)Acquiror
stock price
where:
PV cash flows = the present value of the aggregate dividend payments
that would have been payable to the preferred stock
from the date of conversion through April 17, 2005.
The present value for this purpose will be calculated
using the rate equal to the yield to maturity of U.S.
Treasury securities having a maturity closest to, but
not exceeding, April 17, 2005, plus 3.25%;
Total
consideration = the total value of the consideration payable to the
Company's shareholders at the effective time of such
Change in Control, with the value of any assets or
securities other than cash or a publicly traded
security being determined in good faith by the
Company's board of directors based on an opinion as to
such value obtained from an accounting, appraisal or
investment banking firm of international standing; and
Acquiror stock
price = the price of the acquiror's publicly traded Common
Stock or other publicly traded securities delivered in
connection with such Change in Control at the
effective time of such Change in Control;
<PAGE>
15
provided that if the consideration received by the Company's shareholders in
- --------
respect of such Change in Control consists of at least 75% non-public
consideration or if the acquiror's Common Stock is not publicly traded, then
upon conversion of shares of Preferred Stock after such Change in Control, in
lieu of the foregoing conversion rate adjustment set forth in this subparagraph
(F), each holder shall be entitled to receive an additional amount in cash
calculated as follows:
PV cash flows x (non-public consideration/total consideration)
(ii) Anything in this paragraph (i) to the contrary notwithstanding,
the Company shall not be required to give effect to any adjustment in the
Conversion Price unless and until the net effect of one or more adjustments
(each of which shall be carried forward until counted toward adjustment),
determined as above provided, shall have resulted in a change of the Conversion
Price by at least 1%, and when the cumulative net effect of more than one
adjustment so determined shall be to change the Conversion Price by at least 1%,
such change in the Conversion Price shall thereupon be given effect. In the
event that, at any time as a result of the provisions of this paragraph (i), the
holder of shares of Preferred Stock upon subsequent conversion shall become
entitled to receive any shares of capital stock of the Company other than Common
Stock, the number of such other shares so receivable upon conversion of shares
of Preferred Stock shall thereafter be subject to adjustment from time to time
in a manner and on terms as nearly equivalent as practicable to the provisions
contained herein.
(iii) There shall be no adjustment of the Conversion Price in case of
the issuance of any stock of the Company in a merger, reorganization,
acquisition, reclassification, recapitalization or other similar transaction
except as set forth in this paragraph (i).
(iv) In any case in which this paragraph (i) requires that an
adjustment as a result of any event become effective from and after a record
date, the Company may elect to defer until after the occurrence of such event
(A) issuing to the holder of any shares of Preferred Stock converted after such
record date and before the occurrence of such event the additional shares of
Common Stock issuable upon such conversion over and above the shares issuable on
the basis of the conversion price in effect immediately prior to adjustment and
(B) paying to such holder any amount in cash in lieu of a fractional share of
Common Stock.
(v) If the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to shareholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted by this
paragraph (i) or in the Conversion Price then in effect shall be required by
reason of the taking of such record.
(vi) The Board of Directors of the Company shall have the power to
resolve any ambiguity or correct any error in this paragraph (i), and its action
in so doing shall be final and
<PAGE>
16
conclusive.
(j) Exchange of Shares of Preferred Stock. Notwithstanding anything
-------------------------------------
herein to the contrary, if the Company is reorganized such that the Common Stock
is exchanged for the Common Stock of a new entity (ANewco"), the Common Stock of
which is traded on the National Association of Securities Dealers, Inc.
Automated Quotation System or another recognized securities exchange, then the
Company, by notice to the holders of the Preferred Stock but without any
required consent on their part, shall have the option to cause the exchange of
the shares of Preferred Stock for preferred stock of Newco having the same terms
and conditions as set forth herein, provided that, in the event that Newco is
not solely incorporated as a Bermuda company or in the event the Newco share
structure is not identical to that of the Company, the rights attaching to the
preferred stock of Newco may be adjusted so as to comply with the local law of
the country of incorporation of Newco or the new share structure of Newco. If
the Company exercises such option, the Company shall indemnify each holder of
shares of Preferred Stock if an exchange described in this paragraph (j) would,
under then applicable United States Federal income tax law, result in the
recognition of tax by such holder; provided, however, that the Company shall not
be obligated to indemnify any holder for any payments described under
subparagraphs (f)(ii) and (f)(iii), unless and to the extent provided in such
subparagraphs.
(k) Termination of Conversion Rights. On or after April 17, 2005,
--------------------------------
the Company may, at its option, upon not less than 30 nor more than 60 days'
prior notice sent by first class mail to each holder's registered address, cause
the conversion rights of the shares of Preferred Stock set forth in paragraph
(h) to terminate. The Company may exercise such option only if for at least 20
trading days within any period of 30 consecutive days, including the last
trading day of such period, the Current Market Price of the Company's Common
Stock exceeds 140% of the Conversion Price, subject to adjustment as provided in
paragraph (i) herein.
(l) Change in Control Put Right. (i) If a Change in Control occurs
---------------------------
with respect to the Company, each holder of shares of Preferred Stock shall have
the right to require the Company to purchase all or any part of such holder's
shares of Preferred Stock at a purchase price in cash equal to 100% of the
Liquidation Preference of such shares, plus all accumulated and unpaid dividends
on such shares to the date of purchase. The Company shall have the option to pay
for such shares of Preferred Stock in shares of the Company's Common Stock
valued at 95% of the average closing bid price of the Company's Common Stock for
the five trading days before and including the third trading day before the
repurchase date. Within 30 days following such Change in Control, the Company
shall mail a notice to each holder of shares of preferred stock describing the
transaction or transactions that constitute such Change in Control and offering
to purchase such holder's shares of Preferred Stock on the date specified in
such notice, which date shall be no earlier than 30 days and no later than 60
days from the date such notice is mailed.
(ii) The Company shall comply with the requirements of Rule 14e-1
under the
<PAGE>
17
Securities Exchange Act of 1934, as amended, and any other securities laws and
regulations to the extent such laws and regulations are applicable in connection
with the purchase of Preferred Stock as a result of a Change in Control with
respect to the Company. To the extent that the provisions of any securities laws
or regulations conflict with any of the provisions of this paragraph (k), the
Company shall comply with the applicable securities laws and regulations and
shall be deemed not to have breached its obligations under this paragraph (l).
(iii) In certain cases of a Change in Control of the Company, holders
of shares of Preferred Stock who elect to convert such shares into shares of
Common Stock rather than exercise their rights set forth in this paragraph (l)
shall be entitled to receive additional compensation as set forth in paragraph
(i)(F).
(iv) On the date scheduled for payment of shares of Preferred Stock
tendered to the Company for repurchase as provided in this paragraph (l), the
Company shall, to the extent lawful, (a) accept for payment all shares of
Preferred Stock properly tendered, (b) deposit with the Transfer Agent an amount
equal to the purchase price of the shares of Preferred Stock so tendered and (c)
deliver or cause to be delivered to the Transfer Agent shares of Preferred Stock
so accepted together with an officers' certificate stating the aggregate
Liquidation Preference of the shares of Preferred Stock being purchased by the
Company. The Transfer Agent shall promptly mail or deliver to each holder of
shares of Preferred Stock so tendered the applicable payment for such shares of
Preferred Stock, and the Transfer Agent shall promptly countersign and mail or
deliver, or cause to be transferred by book-entry, to each holder new shares of
Preferred Stock equal in Liquidation Preference to any unpurchased portion of
the shares of Preferred Stock surrendered, if any. The Company shall publicly
announce the results of its offer on or as soon as practicable after the payment
date for the purchase of shares of Preferred Stock in connection with a Change
in Control of the Company.
(v) The Company shall not be required to make an offer to purchase
any shares of Preferred Stock upon the occurrence of a Change in Control of the
Company if a third party makes such offer in the manner, at the times and
otherwise in compliance with the requirements described in this paragraph (l)
and purchases all shares of Preferred Stock validly tendered and not withdrawn.
(vi) The right of the holders of shares of Preferred Stock described
in this paragraph (k) shall be subject to the obligation of Global Crossing
Holdings Ltd., a company incorporated under the laws of Bermuda (AGlobal
Crossing Holdings"), to:
(a) repay its debt obligations in full under the Credit
Agreement, dated as of July 2, 1999, among the Company, Global Crossing
Holdings, The Chase Manhattan Bank and the other parties named therein, as
amended or supplemented from time to time; and
<PAGE>
18
(b) offer to purchase and purchase all of its outstanding 9e% Senior
Notes Due 2008 that have been tendered for purchase in connection with a
Change in Control of the Company.
In addition, the right of the holders of shares of Preferred Stock
described in this paragraph (k) shall be subject to the repurchase or repayment
of the Company's future indebtedness, which the Company shall be required to
repurchase or repay in connection with a Change in Control of the Company.
When the Company shall have satisfied the obligations set forth above
in this subparagraph (v) and, subject to the legal availability of funds for
such purpose, the Company shall purchase all shares of Preferred Stock tendered
for purchase by the Company upon a Change in Control of the Company pursuant to
this paragraph (k).
(m) Certain Definitions. As used in this Schedule, the following
-------------------
terms shall have the following meanings, unless the context otherwise requires:
"Affiliate" of any person means any other person who, directly or
---------
indirectly, Controls, is under common Control or is Controlled by such other
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 power, directly or
indirectly, to direct or cause the direction of the management or policies of
such person, whether through the ownership of voting securities, by contract or
otherwise; provided that beneficial ownership of 10% or more of the Voting Stock
--------
of a person shall be deemed to be Control.
"Business Day" means any day other than a Saturday, Sunday or a
------------
United States federal or Bermuda holiday.
"Change in Control" means, with respect to the Company, the occurrence
-----------------
of any of the following: (i) any "person" (as such term is unused in paragraph
13(d)(3) of the Securities Exchange Act of 1934, as amended (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, 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 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 (for the purposes of this clause, such other person shall be deemed to
Abeneficially 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
<PAGE>
19
majority of the board of directors of such parent corporation), (ii) 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, (iii) the
Company consolidates or merges with or into any other person, other than a
consolidation or merger (a) of the Company into Global Crossing Holdings or
Global Crossing Holdings into the Company, or the Company with or into a
Subsidiary of the Company or (b) pursuant to a transaction in which the
outstanding Voting Stock of the Company 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 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 (iv) 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 the Company and its Subsidiaries, taken as a whole, to any person
other than a 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 Subsidiary
or of telecommunications capacity or transmission rights acquired by the Company
or any 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 Subsidiary shall not be deemed a disposition of assets for
purposes of this clause (iv).
"Continuing Directors" means individuals who at the beginning of the
--------------------
period of determination constituted the Board of Directors of the Company,
together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company was approved by
a vote of at least a majority of the directors of the Company 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.
"Current Market Price" means, with respect to any event set forth in
--------------------
paragraph (i) herein, as applicable, the average of the daily closing prices for
the five consecutive trading days selected by the Board of Directors of the
Company commencing not more than 20 trading days before, and ending not later
than the date of such event and the date immediately preceding the record date
fixed in connection with such event; provided that the Current Market Price of
the Company's Common Stock in connection with a Spin-Off shall mean the average
of the daily closing prices of the Company's Common Stock for the same five
consecutive trading days in determining the Fair Market Value of the securities
being distributed in such Spin-Off; provided further that if an initial public
offering of the securities being distributed in any Spin-Off is to be effected
simultaneously with such Spin-Off, the Current Market Price of the Company's
Common Stock shall mean the
<PAGE>
20
closing price of the Company's Common Stock on the trading day on which the
initial public offering price of such securities is determined.
"Fair Market Value" of the securities to be distributed to the holders
-----------------
of the Company's Common Stock in connection with a Spin-Off shall mean the
average of the daily closing prices of such securities for the five consecutive
trading days selected by the Company's board of directors beginning on the first
day of trading of such securities after the effectiveness of such Spin-Off;
provided, however, that if an initial public offering of the securities being
distributed in any Spin-Off is to be effected simultaneously with such Spin-Off,
the Fair Market Value of such securities shall mean the initial public offering
price.
"Permitted Holder" means Pacific Capital Group, Inc. and CIBC
----------------
Oppenheimer Corp., and their respective Affiliates.
"Spin-Off" is defined in paragraph (i)(D).
--------
"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).
"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.
(o) Headings. The headings of the paragraphs of this Schedule are
--------
for convenience of reference only and hall not define, limit or affect any of
the provisions hereof.
(p) Bye-Laws. This Schedule shall be attached to the Bye-Laws of the
--------
Company and shall become incorporated in such Bye-Laws.
<PAGE>
Exhibit 10.1
Termination of Stockholders Agreement
-------------------------------------
This Termination of Stockholders Agreement (this "Termination"), dated as of
February 22, 2000, is entered into by and between Global Crossing Ltd., a
company organized under the laws of Bermuda (the "Company") and the Stockholders
(as that term is defined in that certain Stockholders Agreement (the
"Stockholders Agreement") dated as of August 12, 1998, as amended.
WHEREAS, the Company and the Stockholders previously entered into the
Stockholders Agreement; and
WHEREAS, the parties desire to terminate the Stockholders Agreement;
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound
hereby, agree that, effective as of March 28, 2000, the Stockholders Agreement
shall be terminated in its entirety and shall be of no further force or effect.
[Signature Pages to Follow]
1
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
GLOBAL CROSSING LTD.
By: /s/ James C. Gorton
Name: James C. Gorton
Title: Senior Vice President & General Counsel
CANADIAN IMPERIAL BANK OF COMMERCE
By: /s/ Michelle Buchignani /s/ PK Kilgour
Name: Michelle Buchignani PK Kilgour
Title: Corporate Secretary Director
CIBC WG FARGOSY MERCHANT FUND 3, L.P.
By: /s/ Michelle Buchignani /s/ PK Kilgour
Name: Michelle Buchignani PK Kilgour
Title: Corporate Secretary Director
CO-INVESTMENT MERCHANT FUND, LLC.
By: /s/ Michael Capitides
Name: Michael Capitides
Title:_________________________
CIBC CAPITAL PARTNERS (CAYMAN) NO.1
By: /s/ Jay Levine
Name: Jay Levine
Title: Managing Director
CIBC CAPITAL PARTNERS (CAYMAN) NO.3
By: /s/ Jay Levine
Name: Jay Levine
Title: Managing Director
2
<PAGE>
GLOBAL CROSSING TRUST 1998
By: /s/ Hillel Weinberger
Name: Hillel Weinberger
Title: Trustee
GLOBAL CROSSING PARTNERS
By: /s/ Hillel Weinberger
Name: Hillel Weinberger
Title: General Partner
CONTINENTIAL CASUALTY CORPORATION
By: /s/ Marilou R. McGirr
Name: Marilou R. McGirr
Title: Vice President
CONTINENTAL CASUALTY CORP. DESIGNATED HIGH YIELD
By: /s/ Marilou R. McGirr
Name: Marilou R. McGirr
Title: Vice President
MRCO, INC.
By: /s/ John K. Grelle
Name: John K. Grelle
Title: Chief Financial Officer
3
<PAGE>
/s/ Gary Winnick
- -----------------------------
GARY WINNICK
PACIFIC CAPITAL GROUP, INC.
By: /s/ Gary Winnick
Name: Gary Winnick
Title: Chairman
GKW UNIFIED HOLDINGS, LLC
By: /s/ Gary Winnick
Name: Gary Winnick
Title: Chairman, Pacific Capital Group, Inc.
/s/ Abbott Brown
- -----------------------------
ABBOTT BROWN
RIDGESTONE CORP.
By: /s/ Abbott Brown
Name: Abbott Brown
Title: President
/s/ Barry Porter
- -----------------------------
BARRY PORTER
GALENIGHT CORP.
By: /s/ Barry Porter
Name: Barry Porter
Title: President
4
<PAGE>
/s/ David Lee
- ----------------------------
DAVID LEE
SAN PASQUAL CORP.
By: /s/ David Lee
Name: David Lee
Title: President
DAVID AND ELLEN FAMILY TRUST
By: /s/ David Lee
Name: David Lee
Title: Trustee
/s/ Lodwrick M. Cook
- ----------------------------
LODWRICK M. COOK
<PAGE>
Exhibit 10.4
March 2, 2000
Robert Annunziata
Global Crossing Ltd.
360 North Crescent Drive
Beverly Hills, CA 90210
Dear Robert:
This letter agreement (this "Agreement") confirms our
understanding and agreement with respect to the termination of the Employment
Agreement (the "Employment Agreement") entered into by and between you and
Global Crossing Ltd. (the "Company") on February 19, 1999, and the termination
of your employment with the Company, and sets forth the rights and obligations
of you and the Company in respect of the termination of your employment, as
follows:
1. Termination Of Employment. Effective as of March 2, 2000 (the
"Termination Date"), your employment with the Company and its affiliates shall
be terminated. You also hereby resign, effective as of the Termination Date,
from all positions that you hold with the Company and any of its affiliates,
except that you (a) shall remain on the Board of Directors as an independent
director until such time as the Chairman of the Board of Directors requests your
resignation and, unless otherwise requested by the Chairman of the Board of
Directors, you shall not resign from the Board of Directors prior to the
Company's next scheduled annual meeting (which is currently scheduled for June,
2000) and (b) shall perform consulting services to the Company on a mutually
agreeable basis when requested to do so (consistent with your other obligations)
for a period that shall continue from month to month until terminated by either
party upon thirty days prior written notice.
2. Severance Payments and Other Benefits. In consideration for
your entering into this Agreement, specifically including the General Release
and covenants contained herein, the Company will pay you a lump sum cash payment
equal to $4.4 million (the "Severance Payment"). The Severance Payment will be
paid to you by wire transfer promptly after the date hereof, but in no event
later than 5 business days after the date hereof. In addition, until March 3,
2001, the Company shall provide you, at its expense, with your current office
(or other comparable office space in the Morristown, New Jersey area) and a
secretary and driver, reasonably satisfactory to you.
3. Effect of Termination of Employment on Your Equity.
(a) The Company and you hereby acknowledge and agree that,
in accordance with the Non-Qualified Stock Option Agreement, dated as of
February 22, 1999, by and between you and the Company (i) you were awarded an
option to purchase 2,000,000 ordinary
<PAGE>
2
shares of the Company ("Shares") at an exercise price of $39.625 per share and,
as a result of a 2-for-1 stock split which occurred on March 9, 1999 (the
"Stock Split"), said option was adjusted to an option to acquire 4,000,000
Shares at an exercise price of $19.813 per share, (ii) on June 18, 1999, you
exercised your right to purchase 81,576 Shares, (iii) as a result, you now have
an option to acquire 3,918,424 Shares, (iv) said option shall, subject to
paragraph (d) below, be fully exercisable immediately upon the Termination Date
and (v) said option will expire on February 22, 2009, ten years from the date of
grant.
(b) The Company and you hereby acknowledge and agree that,
in accordance with another Non-Qualified Stock Option Agreement, dated as of
February 22, 1999, by and between you and the Company (i) you were awarded an
option to purchase 250,000 Shares at an exercise price of $49.625 per share and,
as a result of the Stock Split, said option was adjusted to an option to acquire
500,000 Shares at an exercise price of $24.813 per share, (ii) no portion of
said option has been exercised by you, (iii) said option shall, subject to
paragraph (d) below, be fully exercisable immediately upon the Termination Date
and (iv) said option will expire on February 22, 2009, ten years from the date
of grant.
(c) The Company and you hereby acknowledge and agree that,
in accordance with another Non-Qualified Stock Option Agreement, dated as of
December 3, 1999, by and between you and the Company (i) you were awarded an
option to purchase 3,000,000 Shares at an exercise price of $45.00 per share,
(ii) no portion of said option has been exercised by you, (iii) your option to
acquire 1,020,000 of said 3,000,000 Shares shall, subject to paragraph (d)
below, be fully exercisable immediately upon the Termination Date, (iv) your
option to acquire 1,980,000 of said 3,000,000 Shares shall automatically
terminate upon the Termination Date and (iv) said option to acquire 1,020,000
Shares will expire on December 3, 2009, ten years from the date of grant. The
Non-Qualified Option Agreements referred to in paragraph (a), (b) and (c) of
this section are referred to herein as the "Option Agreements."
(d) You hereby agree that, prior to December 31, 2000, you
will not exercise any of the options referred to above with respect to more than
1.5 million Shares in the aggregate except in connection with an offering made
to all shareholders of the Company.
4. Full Satisfaction. You hereby acknowledge and agree that,
except as provided for herein or as required by law, you will not be entitled to
any other compensation or benefits from the Company or its affiliates,
including, without limitation, any other severance or termination benefits under
the Employment Agreement or otherwise, and you hereby agree that you will have
no further interest, rights or benefits arising out of or in connection with the
Employment Agreement (except as otherwise specifically provided for herein).
5. Confidentiality of this Agreement and Nondisparagement;
Confidentiality and Covenant Not to Solicit; Return of Property to the Company.
(a) You will keep secret and retain in strictest confidence
and will not release or divulge either orally or in writing to any person, firm
or entity except as may be required by law or regulation or by order of any
court, and will not use for the benefit of yourself
<PAGE>
3
or others, each and every term of this Agreement (or any information with
respect thereto) or any confidential or proprietary information concerning the
Company, its subsidiaries, affiliates, employees, officers or directors. In
addition, you will not issue or make any public or private comment, statement or
remark which would reasonably be construed or intended to disparage, criticize
or denigrate the Company, its subsidiaries, affiliates or any of their
employees, officers or directors. The Company shall not issue any press release
or make any public statement that would reasonably be construed or intended to
disparage, criticize or denigrate you. Except with respect to the press release
substantially in the form attached hereto, no press release will be issued by
either party about the other party without the consent of such other party
(which consent will not be unreasonably withheld).
(b) You hereby acknowledge and agree that you are bound by
the confidentiality covenants and the covenant not to solicit (as set forth in
Sections 9(b) and 16, respectively, of the Employment Agreement) for two years
following the Termination Date.
(c) You also hereby acknowledge and agree that you are bound
by the covenant to return all Company property, in accordance with Section 9 of
the Employment Agreement.
6. General Release.
(a) For and in consideration of the Severance Payment and
the other benefits and consideration provided hereby, you hereby agree on behalf
of yourself, your agents, assignees, attorneys, successors, assigns, heirs and
executors, to, and you do hereby, fully and completely forever release the
Company and its affiliates, predecessors and successors and all of their
respective past and/or present officers, directors, partners, members, managing
members, managers, employees, agents, representatives, administrators,
attorneys, insurers and fiduciaries in their individual and/or representative
capacities (hereinafter collectively referred to as the "Releasees"), from any
and all causes of action, suits, agreements, promises, damages, disputes,
controversies, contentions, differences, judgments, claims, debts, dues, sums of
money, accounts, reckonings, bonds, bills, specialities, covenants, contracts,
variances, trespasses, extents, executions and demands of any kind whatsoever,
which you or your heirs, executors, administrators, successors and assigns ever
had, now have or may have against the Releasees or any of them, in law,
admiralty or equity, whether known or unknown to you, for, upon, or by reason
of, any matter, action, omission, course or thing whatsoever occurring up to the
date this Agreement is signed by you, including, without limitation, in
connection with or in relationship to your employment or other service
relationship with the Company or its affiliates, the termination of any such
employment or service relationship and any applicable employment, compensatory
or equity arrangement with the Company or its respective affiliates; provided
--------
that such released claims shall not include any claims to enforce your rights
under, or with respect to, this Agreement or any of the Option Agreements (such
released claims are collectively referred to herein as the "Released Claims").
(b) Notwithstanding the generality of clause (a) above, the
Released Claims include, without limitation, (i) any and all claims under Title
VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of
1967, the Civil Rights Act of 1971, the Civil
<PAGE>
4
Rights Act of 1991, the Fair Labor Standards Act, the Employee Retirement Income
Security Act of 1974, the Americans with Disabilities Act, the Family and
Medical Leave Act of 1993, and any and all other federal, state or local laws,
statutes, rules and regulations pertaining to employment or otherwise, and (ii)
any claims for wrongful discharge, breach of contract, fraud, misrepresentation
or any compensation claims, or any other claims under any statute, rule or
regulation or under the common law, including compensatory damages, punitive
damages, attorney's fees, costs, expenses and all claims for any other type of
damage or relief.
(c) THIS MEANS THAT, BY SIGNING THIS AGREEMENT, YOU WILL
HAVE WAIVED ANY RIGHT YOU MAY HAVE HAD TO BRING A LAWSUIT OR MAKE ANY CLAIM
AGAINST THE RELEASEES BASED ON ANY ACTS OR OMISSIONS OF THE RELEASEES UP TO THE
DATE OF THE SIGNING OF THIS AGREEMENT.
(d) You represent that you have read carefully and fully
understand the terms of this Agreement, and that you have been advised to
consult with an attorney and have had the opportunity to consult with an
attorney prior to signing this Agreement. You acknowledge that you are executing
this Agreement voluntarily and knowingly and that you have not relied on any
representations, promises or agreements of any kind made to you in connection
with your decision to accept the terms of this Agreement, other than those set
forth in this Agreement. To the extent you have executed this Agreement within
less than twenty-one (21) days after its delivery to you, you hereby acknowledge
that your decision to execute this Agreement prior to the expiration of such
twenty-one (21) day period was entirely voluntary.
(e) For and in consideration of you entering into this
Agreement, the Company hereby agrees on behalf of itself, its agents, assignees,
attorneys, successors and assigns, to, and the Company does hereby, fully and
completely forever release you, from any and all causes of action, suits,
agreements, promises, damages, disputes, controversies, contentions,
differences, judgments, claims, debts, dues, sums of money, accounts,
reckonings, bonds, bills, specialities, covenants, contracts, variances,
trespasses, extents, executions and demands of any kind whatsoever, which the
Company, successors and assigns ever had, now have or may have against you, in
law, admiralty or equity, whether known or unknown to the Company, for, upon, or
by reason of, any matter, action, omission, course or thing whatsoever occurring
up to the date this Agreement is signed by the Company, including, without
limitation, in connection with or in relationship to your employment or other
service relationship with the Company or its affiliates, the termination of any
such employment or service relationship and any applicable employment,
compensatory or equity arrangement with the Company or its respective
affiliates; provided, however, that such released claims shall not include any
claims to enforce our rights under, or with respect to, this Agreement or any of
the Option Agreements.
<PAGE>
5
7. Governing Law; Arbitration. This Agreement will be governed,
construed and interpreted under the laws of the State of California. Any dispute
arising out of this Agreement shall be determined by arbitration in Los Angeles,
California, under the rules of the American Arbitration Association then in
effect and judgment upon any award pursuant to such arbitration may be enforced
in any court having jurisdiction thereof, provided each of the parties to this
Agreement will appoint one person as an arbitrator to hear and determine the
dispute, and if they are unable to agree, than the two arbitrators so chosen
will select a third impartial arbitrator whose decision will be final and
conclusive upon the parties to this Agreement.
8. Entire Agreement/Counterparts. This constitutes the entire
agreement between the parties with respect to the subject matter contained
herein, except to the extent that this Agreement refers to the Employment
Agreement. It may not be modified or changed except by written instrument
executed by all parties. This Agreement may be executed in counterparts, each of
which shall constitute an original and which together shall constitute a single
instrument.
If this letter correctly sets forth your understanding of our
agreement with respect to the foregoing matters, please so indicate by signing
below on the line provided for your signature.
Very truly yours,
GLOBAL CROSSINGS LTD.
By: /S/ Lodwrick Cook
---------------------------------
Name: Lodwrick Cook
Title: Co-Chairman
Reviewed, approved and agreed:
/s/ Robert Annunziata
- ---------------------------------
Robert Annunziata
<PAGE>
Exhibit 10.5
[GLOBALCENTER LOGO]
April 17, 2000
Mr. Leo J. Hindery, Jr.
Chairman & Chief Executive Officer
GlobalCenter Inc.
141 Caspian Court
Sunnyvale, California 94089
Dear Leo:
This letter agreement is made to reflect the original intent of the parties
regarding, and to clarify certain terms of, the Employment Agreement made
between GlobalCenter Inc., a Delaware corporation ("GlobalCenter"), and you
effective as of December 5, 1999 (the "Agreement").
The stock option granted to you under the Agreement to purchase 5.5% of the
outstanding common stock of GlobalCenter has an aggregate strike price of
$110,000,000, rather than $100,000,000.
In addition, under the Agreement, you have the discretion to exercise the
GlobalCenter stock option described above either for GlobalCenter common stock
or for an equivalent percentage of the shares of a stock issued by Global
Crossing Ltd. to track the business of GlobalCenter (the "Tracking Stock"),
subject to appropriate adjustments without any adverse effect upon you.
These terms of the Agreement as described in this letter agreement are
effective ab initio.
We look forward to continuing our mutually rewarding relationship.
Very truly yours,
GLOBALCENTER INC.
By: /s/ Mark J. Coleman
---------------------
AGREED TO AND ACCEPTED BY:
/s/ Leo J. Hindery, Jr.
------------------------
Leo J. Hindery, Jr.
Dated April 18, 2000
<PAGE>
EXHIBIT 10.6
[LOGO OF GLOBAL CROSSING]
Employment Term Sheet - Gary Cohen
----------------------------------
Position: Chief Operating Officer, reporting to the CEO
Employer: Global Crossing Ltd. ("GCL")
Base Salary: $500,000 per year
Annual Bonus: Target bonus equal to 100% of base salary. Bonuses are
awarded in the sole discretion of GCL. Notwithstanding
the foregoing, the performance bonus for the 2000 plan
year, to be paid during the first quarter of 2001,
will be at least $500,000.
Signing Bonus: You will receive a signing bonus equal to $5,000,000.
The signing bonus will be reduced by the amount of any
gain realized from the exercise of any vested stock
options you have received from your previous employer
(i.e., the difference between the "strike price" of
any such options and the price at which such shares
close on the date exercised or the actual selling
price on that date). You will provide the necessary
documentation to establish the amount of such realized
gain and the resulting reduced signing bonus amount
(the "Net Signing Bonus"). The Net Signing Bonus will
be paid as follows:
50% on the later of 30 days after the employment start
date or 7 days after the Net Signing Bonus is
determined
25% on the first anniversary of your employment start
date;
15% on the second anniversary of your employment start
date; and
10% on the third anniversary of your employment start
date.
In the event that you resign without Good Reason or
are terminated for cause within one (1) year after
your employment start date, you agree to return to GCL
the first payment of the Signing Bonus, prorated on a
monthly basis for the period worked.
Global Crossing Ltd.
Stock Options: You shall receive 1,000,000 options to purchase common
stock of Global Crossing Ltd. (the "Global Crossing
Stock Options"), vesting as follows:
25% on the employment start date
25% on the first anniversary of your employment start
date;
25% on the second anniversary of your employment start
date; and
25% on the third anniversary of your employment start
date.
1
<PAGE>
The exercise price for such options shall be $26.25
per share. Any unvested Global Crossing Stock Options
shall automatically cancel upon termination of
employment with GCL. Stock options will be granted
consistent with the terms and conditions of the 1998
Global Crossing Stock Incentive Plan (the "Plan").
Employment
Start Date: You will start your employment with GCL on a date to
be determined by you but in no event later than May
16, 2000.
Benefits: Insurance benefits in accordance with company policy
as attached hereto as Exhibit "A" including 401(k)
-----------
plan participation.
Vacation: Four weeks. Maximum vacation accrual shall be four
weeks.
Annual Performance
Reviews: In conjunction with the annual performance review
process, you will be eligible for salary increases,
cash bonus awards and additional stock option awards.
The salary increases, cash bonus awards and stock
option awards will be determined based on overall
company performance, functional group performance and
individual performance. Stock options are awarded at
the discretion of GCL. The annual review process
currently takes place during the first quarter of each
calendar year and shall be conducted in the same
manner and utilizing the same standards as with other
senior corporate officers.
Employment
At-Will: Employment at GCL is at-will. You may resign at any
time and GCL may terminate your employment at any
time, with or without cause.
Termination Without
Cause or With Good
Reason: In the event you are terminated without cause or that
you resign your employment for Good Reason (as defined
below) before the first anniversary of your employment
start date, you shall receive an amount equal to two
(2) times the total of your annual base salary and
targeted bonus plus any remaining Signing Bonus
payments In the event you are terminated without cause
or that you resign your employment for "Good Reason"
before the second anniversary of your employment start
date, you shall receive an amount equal to two times
(2) the total of your annual base salary and targeted
bonus based on the target percentage determined at the
beginning of the year in which the termination is
effective less any salary payments made to you between
the first anniversary and second anniversary of your
employment date plus any remaining Signing Bonus
2
<PAGE>
payments. In the event you are terminated without
cause or that you resign your employment for Good
Reason after the second anniversary but before the
third anniversary of your employment date, you shall
receive an amount equal to the total of your annual
base salary and targeted bonus based on the target
percentage determined at the beginning of the year in
which the termination is effective plus any remaining
Signing Bonus payments.
In the event that you are terminated without cause or
resign with Good Reason within one (1) year after a
Change in Control (as defined in the Plan), you will
receive a severance payment equal to three (3) years'
salary and bonus. The terms and conditions of the
Change in Control agreement shall be the same as other
corporate officers.
"Good Reason" as used herein shall mean:
(i) a substantial reduction by GCL of your duties or
responsibilities or a change in your reporting
line; or
(ii) a reduction by GCL of your base salary or Annual
Bonus potential.
You must provide written notice to GCL within 20 days
after the occurrence of an event constituting Good
Reason. GCL shall have 20 days after receipt of
written notice to cure. If GCL fails to cure and you
resign within 30 days after the end of the 20-day cure
period, then such resignation shall constitute
resignation for Good Reason.
Termination For
Cause: "Cause" as utilized herein shall mean:
(i) conviction of a felony; or conviction of a
crime of moral turpitude which causes serious
economic injury or serious injury to Global
Crossing's reputation; or
(ii) material breach of the Proprietary Information
Agreement attached hereto and incorporated
herein by reference as Exhibit "B" ; or
-----------
(iii) fraud or embezzlement; intentional misconduct;
or gross negligence which has caused serious
and demonstrable injury to Global Crossing or
its affiliates, except that a good faith
exercise of business judgment shall not be
deemed gross negligence; or
3
<PAGE>
(iv) egregious performance or failure to perform
your duties as Chief Operating Officer which
performance or failure to perform continues
beyond twenty-one (21) days after a written
demand for substantial improvement in your
performance, identifying specifically and in
detail the manner in which improvement is
sought, is delivered to you by GCL; provided
that a failure to achieve performance
objectives shall not by itself constitute
Cause.
Upon notice by GCL to you that it is terminating your
employment pursuant to a Termination for Cause, the
"Termination Date" shall be the date on which such
notice is mailed or hand-delivered, or as otherwise
specified in the notice of termination, to you. Upon
Termination for Cause, you shall not be entitled to
receive any further compensation or payments hereunder
(except for Base Salary relating to your services
prior to the Termination Date and any earned but
unpaid Annual Bonus payments. Any unvested Global
Crossing Stock Options shall immediately cancel as of
the Termination Date. Vested Global Crossing Stock
Options shall be subject to the provisions of your
stock option agreement and the Global Crossing stock
option Plan.
Withholdings: All payments set forth herein which are subject to
withholdings, shall be made less any required
withholdings.
Binding Arbitration: Any controversy arising out of or
relating to this Term Sheet or the Proprietary
Information Agreement shall be settled by binding
arbitration in accordance with the National Rules for
the Resolution of Employment Disputes of the American
Arbitration Association before a single arbitrator who
shall be a retired federal judge, and judgment upon
the award rendered may be entered in any court having
jurisdiction thereof. The costs of any such
arbitration proceedings shall be borne equally by GCL
and you. Neither party shall be entitled to recover
attorneys' fee or costs expended in the course of such
arbitration or enforcement of the award rendered
thereunder. The location for the arbitration shall be
New York City, New York.
4
<PAGE>
We look forward to you joining Global Crossing. Please sign below and return to
John Comparin via facsimile at 973-889-5970. If not fully executed on or before
April 26, 2000, this Term Sheet shall be void.
GLOBAL CROSSING LTD.
A Bermuda corporation
By: /s/ John L. Comparin
----------------------
Name: John L. Comparin
Title: SVP Human Resources
/s/ Gary Cohen
- --------------------------
GARY COHEN
5
<PAGE>
EXHIBIT 10.7
[LOGO OF GLOBAL CROSSING]
Employment Term Sheet - Joseph P. Perrone ("Executive")
-------------------------------------------------------
Position: Sr. Vice President - Finance, reporting to the CFO and
providing services for Global Crossing Ltd. ("GCL")
and Asia Global Crossing Ltd. ("AGC")
Employer: Global Crossing Ltd. ("GCL")
Base Salary: $400,000 per year
Annual Bonus: Target bonus equal to 100% of base salary. Bonuses are
awarded in the sole discretion of GCL. Notwithstanding
the foregoing, the performance bonus for the remainder
of 2000, to be paid during the first quarter of 2001,
will be at least $400,000.
Signing Bonus: Global Crossing agrees to pay you a signing
bonus equal to $2,500,000, payable within 10 days
after your employment start date. In the event that
you resign or are terminated for cause within one (1)
year after your employment start date, you agree to
return to the Company the Signing Bonus, prorated on a
monthly basis for the period not worked.
Global Crossing Ltd.
Stock Options: Subject to Board (or a committee of the Board)
approval, 500,000 options to purchase common stock of
Global Crossing Ltd. and an amount to be determined
(commensurate with other comparable Company
executives) of options to purchase common stock of
Asia Global Crossing Ltd. (when issued), vesting over
3 years as follows:
25% on the employment start date
25% on the first anniversary of your employment start
date;
25% on the second anniversary of your employment start
date; and
25% on the third anniversary of your employment start
date.
The Compensation Committee of Board of Directors will
determine the strike prices. Stock options are subject
to the additional terms and conditions set forth in
the 1998 Global Crossing Ltd., Stock Incentive Plan
and the Non-Qualified Stock Option Agreement to be
provided to you which will provide for exercise for a
period of not less than six months after termination
without cause or termination for disability.
In addition, Executive shall receive options to
purchase common stock of GlobalCenter Inc.
commensurate with other comparable Company executives,
if so awarded.
1
<PAGE>
The GCL Stock Options shall immediately vest in the
event of a Change in Control (as that term is defined
in the Plan). In the event you suffer a disability (as
that term is defined in the Plan) that renders you
unable to continue employment at Global Crossing Ltd.
or a subsidiary thereof, the GCL Stock Options shall
immediately vest as of the date that your employment
is formally terminated.
Employment Start Date: You will start your employment with GCL on a date to
be determined by you but in no event later than May
16, 2000.
Benefits: Insurance benefits in accordance with Company policy
as attached hereto as Exhibit "A" including 401(k)
-----------
plan participation. Relocation expenses will be paid
and/or reimbursed per the Company's relocation policy
if you relocate your residence at the Company's
request
Vacation: Four weeks. Maximum vacation accrual shall be four
weeks.
Annual Performance
Reviews: In conjunction with the annual performance review
process, you will be eligible for salary increases,
cash bonus awards and additional stock option awards.
The salary increases, cash bonus awards and stock
option awards will be determined based on overall
company performance, functional group performance and
individual performance and commensurate with other
comparable Company executives. Stock options are
awarded at the discretion of GCL. The annual review
process currently takes place during the first quarter
of each calendar year and shall be conducted in the
same manner and utilizing the same standards as with
other senior corporate officers.
Employment At-Will: Employment at GCL is at-will. You may resign at any
time and GCL may terminate your employment at any
time, with or without cause.
Termination Without
Cause or With Good
Reason: In the event you are terminated without cause or that
you resign your employment for Good Reason (as defined
below) before the first anniversary of your employment
start date, you shall receive an amount equal to the
total of your annual base salary and targeted bonus.
In the event that you are terminated without cause or
resign with Good Reason within one (1) year after a
Change in Control (as defined in the Plan), you will
receive a severance payment equal to three (3) years'
salary and
2
<PAGE>
bonus. The terms and conditions of the Change in
Control agreement shall be the same as other
comparable corporate officers.
"Good Reason" as used herein shall mean:
(i) a substantial reduction by GCL of your
duties or responsibilities or a change in
your reporting line; or
(ii) a reduction by GCL of your base salary or
Annual Bonus potential.
You must provide written notice to GCL within 20 days
after the occurrence of an event constituting Good
Reason. GCL shall have 20 days after receipt of
written notice to cure. If GCL fails to cure and you
resign within 30 days after the end of the 20-day cure
period, then such resignation shall constitute
resignation for Good Reason.
Termination For Cause: "Cause" as utilized herein shall mean:
(i) conviction of a felony; or conviction of
a crime of moral turpitude which causes
serious economic injury or serious injury
to Global Crossing's reputation; or
(ii) material breach of the Proprietary
Information Agreement attached hereto and
incorporated herein by reference as
Exhibit "B" ; or
-----------
(iii) fraud or embezzlement; intentional
misconduct; or gross negligence which has
caused serious and demonstrable injury to
Global Crossing or its affiliates, except
that a good faith exercise of business
judgment shall not be deemed gross
negligence; or
(iv) egregious performance or failure to
perform your duties as Sr. Vice President
- Finance (other than for reason of
disability) which performance or failure
to perform continues beyond twenty-one
(21) days after a written demand for
substantial improvement in your
performance, identifying specifically and
in detail the manner in which improvement
is sought, is delivered to you by GCL;
provided that a failure to achieve
performance objectives shall not by
itself constitute Cause.
Upon notice by GCL to you that it is terminating your
employment pursuant to a Termination for Cause, the
"Termination Date" shall be the date on which such
notice is mailed or hand-delivered, or as otherwise
specified in the notice of termination, to you. Upon
Termination for Cause, you shall not be entitled to
receive any further compensation or payments hereunder
(except for Base Salary relating to your services
prior
3
<PAGE>
to the Termination Date and any earned but unpaid
Annual Bonus payments. Any unvested Global Crossing
Stock Options shall immediately cancel as of the
Termination Date. Vested Global Crossing Stock Options
shall be subject to the provisions of your stock
option agreement and the Global Crossing stock option
plan.
Withholdings: All payments set forth herein which are subject to
withholdings, shall be made less any required
withholdings.
Binding Arbitration: Any controversy arising out of or relating to this
Term Sheet or the Proprietary Information Agreement
shall be settled by binding arbitration in accordance
with the National Rules for the Resolution of
Employment Disputes of the American Arbitration
Association before a single arbitrator who shall be a
retired federal judge, and judgment upon the award
rendered may be entered in any court having
jurisdiction thereof. The costs of any such
arbitration proceedings shall be borne equally by GCL
and you. Neither party shall be entitled to recover
attorneys' fee or costs expended in the course of such
arbitration or enforcement of the award rendered
thereunder. The location for the arbitration shall be
New York City, New York
We look forward to your joining Global Crossing and Asia Global Crossing. Please
sign below and return to John Comparin via facsimile at 973-889-5970. If not
fully executed on or before May 2, 2000, this Term Sheet shall be void. The
foregoing terms are agreed to.
GLOBAL CROSSING LTD. AGREED:
A Bermuda corporation
By: /s/ John L. Comparin /s/ Joseph P. Perrone
--------------------- ----------------------
Name: John L. Comparin Joseph P. Perrone
Title: SVP Human Resources
Date: May 1, 2000 Date: May 1, 2000
-----------------
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 AND CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,453,514
<SECURITIES> 0
<RECEIVABLES> 1,139,017
<ALLOWANCES> (92,262)
<INVENTORY> 0
<CURRENT-ASSETS> 2,615,602
<PP&E> 8,251,468
<DEPRECIATION> (265,817)
<TOTAL-ASSETS> 21,489,970
<CURRENT-LIABILITIES> 2,233,153
<BONDS> 6,043,311
486,517
1,998,750
<COMMON> 8,030
<OTHER-SE> 8,945,012
<TOTAL-LIABILITY-AND-EQUITY> 21,489,970
<SALES> 163,631
<TOTAL-REVENUES> 1,119,516
<CGS> 570,907
<TOTAL-COSTS> 1,287,340
<OTHER-EXPENSES> 707,433
<LOSS-PROVISION> 13,483
<INTEREST-EXPENSE> 85,676
<INCOME-PRETAX> (257,201)
<INCOME-TAX> (5,000)
<INCOME-CONTINUING> (262,201)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (262,201)
<EPS-BASIC> 0.39
<EPS-DILUTED> 0.39
</TABLE>
