<PAGE>
As filed with the Securities and Exchange Commission on March 23, 2000
Registration No. 333-32810
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
GLOBAL CROSSING LTD.
(Exact name of registrant as specified in its charter)
---------------
Bermuda 4813 98-0189783
(State or other (Primary standard industrial (I.R.S. employer
jurisdiction of classification number) identification
incorporation or number)
organization)
Wessex House
45 Reid Street
Hamilton HM12, Bermuda
(441) 296-8600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
CT Corporation System
1633 Broadway
New York, NY 10019
(212) 479-8200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
<TABLE>
<S> <C>
D. RHETT BRANDON, ESQ. JAMES C. GORTON, ESQ.
Simpson Thacher & Bartlett Global Crossing Ltd.
425 Lexington Avenue 360 N. Crescent Drive
New York, NY 10017 Beverly Hills, CA 90210
(212) 455-2000 (310) 385-5200
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective as
determined by market conditions and other factors.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which shall specifically state that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said Section 8(a), may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to completion, dated March 23, 2000
PROSPECTUS
$8,000,000,000
[Logo Global Crossing Ltd.]
Debt Securities
Preferred Stock
Common Stock
Warrants
-----------
This prospectus includes a general description of the debt securities, shares
of preferred stock, shares of common stock and warrants we may issue from time
to time. We will provide specific terms of these securities in supplements to
this prospectus. You should read this prospectus and each supplement carefully
before you invest.
Our common stock trades on the Nasdaq National Market and the Bermuda Stock
Exchange under the symbol "GBLX".
-----------
Investing in our securities involves risks, which we describe in the "Risk
Factors" section beginning on page 20 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
-----------
The date of this prospectus is .
<PAGE>
You should rely only on the information contained or incorporated by
reference in this prospectus and any prospectus supplement. We have not
authorized anyone to provide you with different information. We are not making
an offer to sell these securities in any state where the offer is not
permitted. You should not assume that the information contained in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front cover of those documents.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
About this Prospectus ..................................................... ii
Where You Can Find More Information........................................ ii
Incorporation by Reference................................................. ii
Summary.................................................................... 1
Risk Factors............................................................... 20
Cautionary Statement Regarding Forward-Looking Statements.................. 27
Use of Proceeds............................................................ 27
Dividend Policy............................................................ 27
Description of Debt Securities............................................. 28
Description of Preferred Stock............................................. 36
Description of Common Stock................................................ 38
Description of Warrants.................................................... 40
Certain Income Tax Consequences............................................ 42
Plan of Distribution....................................................... 55
Legal Matters.............................................................. 57
Experts.................................................................... 57
Service of Process and Enforcement of Liabilities.......................... 57
</TABLE>
----------------
The Bermuda Monetary Authority has given its consent to the issue and the
transfer of the securities that we may issue under this prospectus and each
prospectus supplement. Approvals or permissions received from the Bermuda
Monetary Authority do not constitute a guaranty by the Bermuda Monetary
Authority as to our performance or our credit worthiness. Accordingly, in
giving those approvals or permissions, the Bermuda Monetary Authority will not
be liable for our performance or default or for the correctness of any opinions
or statements expressed in this document.
The Bermuda Monetary Authority has classified us as non-resident in Bermuda
for exchange control purposes. Accordingly, we may convert currency, other than
Bermuda currency, held for our account to any other currency without
restriction. Persons, firms or companies regarded as residents of Bermuda for
exchange control purposes require specific consent under the Exchange Control
Act, 1972 of Bermuda, and regulations promulgated under that Act, to purchase
any shares in our capital stock or any other securities that we may issue.
Under the terms of the consent given to us by the Bermuda Monetary Authority,
the issuance and transfer of the securities that we may issue under this
prospectus and each prospectus supplement between persons, firms or companies
regarded as non-resident in Bermuda for exchange control purposes may be
effected without further permission from the Bermuda Monetary Authority.
----------------
i
<PAGE>
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
SEC using a shelf registration process. Under the shelf registration process,
we may offer from time to time debt securities, shares of preferred stock,
shares of common stock and warrants up to an aggregate amount of
$8,000,000,000. This prospectus provides you with a general description of the
securities we may offer. Each time we offer securities, in addition to this
prospectus we will provide you with a prospectus supplement that will contain
specific information about the securities being offered. The prospectus
supplement may also add, update or change information contained in this
prospectus. You should read both this prospectus and any prospectus supplement
as well as additional information described under "Where You Can Find More
Information" immediately below.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC. You
may read and copy these reports, proxy statements and other information at the
public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the SEC's regional offices located
at 7 World Trade Center, 13th floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You may also obtain copies
of those materials at prescribed rates from the public reference section of the
SEC at 450 Fifth Street, Washington, D.C. 20549. You may obtain copies from the
public reference room by calling the SEC at (800) 732-0330. In addition, we are
required to file electronic versions of those materials with the SEC through
the SEC's EDGAR system. The SEC maintains a web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. You may also
review reports and other information concerning us at the offices of the
National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20001-1500.
You may also request a copy of those materials, free of cost, by writing or
telephoning us at the following address:
Investor Relations
Global Crossing Ltd.
360 N. Crescent Drive
Beverly Hills, CA 90210
310-385-5200
INCORPORATION BY REFERENCE
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. We incorporate by reference in this
prospectus the information contained in the following documents:
. our annual report on Form 10-K for the fiscal year ended December 31,
1999;
. our current reports on Form 8-K filed on January 11, 2000, as amended by
Form 8-K/A filed on January 19, 2000; February 18, 2000; March 2, 2000;
and March 3, 2000;
. the financial statements of Frontier Corporation and the Global Marine
Systems business of Cable & Wireless Plc incorporated by reference or
included in our Registration Statement on Form S-4 filed on September 8,
1999 (File No. 333-86693); and
. all documents that we file with the SEC under Sections 13(a), 13(c), 14
or 15 of the Securities Exchange Act of 1934 until all the securities
that we may offer under this prospectus are sold.
You may obtain copies of those documents from us, free of cost, by
contacting us at the address or telephone number provided in "Where You Can
Find More Information" immediately above.
Information that we file later with the SEC and that is incorporated by
reference in this prospectus will automatically update and supersede
information contained in this prospectus. You will be deemed to have notice of
all information incorporated by reference in this prospectus as if that
information was included in this prospectus.
ii
<PAGE>
SUMMARY
This section contains a general summary of the information contained in this
prospectus. It may not include all the information that is important to you.
You should read the entire prospectus, any accompanying prospectus supplement
and the documents incorporated by reference before making an investment
decision.
Global Crossing Ltd.
We are building and offering services over the world's first integrated
global fiber optic network, consisting of 101,000 announced route miles and
serving five continents, 27 countries and more than 200 major cities. Upon
completion of our currently announced systems, our network and its
telecommunications and Internet product offerings will be available in markets
constituting over 80% of the world's international communications traffic.
We are included in both the S&P 500 index and the Nasdaq 100 index. Our
operations are headquartered in Hamilton, Bermuda, with executive offices in
Los Angeles, California; Morristown, New Jersey; and Rochester, New York.
We are incorporated in Bermuda, and the address of our principal executive
offices is Wessex House, 45 Reid Street, Hamilton HM12, Bermuda. Our telephone
number is 441-296-8600. You may visit us at our web site located at
www.globalcrossing.com.
The Securities We May Offer
Each time we offer securities under this prospectus, we will provide you
with a prospectus supplement that will contain the specific terms of the
securities being offered. The following is a summary of the securities we may
offer under this prospectus.
Debt Securities
We may offer unsecured general obligations of ours, which may be either
senior or subordinated and may be convertible into shares of our common stock
or preferred stock. In this prospectus, we refer to the senior debt securities
and the subordinated debt securities together as the "debt securities". The
senior debt securities will have the same rank as all our other unsecured and
unsubordinated debt. The subordinated debt securities will be entitled to
payment only after payment on our senior debt. In addition, the subordinated
debt securities will be effectively subordinated to creditors and preferred
shareholders of our subsidiaries. Our board of directors will determine the
terms of each series of debt securities being offered.
We will issue the debt securities under an indenture between us and United
States Trust Company of New York, as the trustee. In this document, we have
summarized general features of the debt securities from the indenture. We
encourage you to read the indenture which is an exhibit to the registration
statement of which this prospectus is a part.
Preferred Stock
We may issue shares of our preferred stock, par value $0.01 per share, in
one or more series. Our board of directors will determine the dividend, voting,
conversion and other rights of the series of shares of preferred stock being
offered.
Common Stock
We may issue shares of our common stock, par value $0.01 per share. In this
prospectus, we provide a general description of, among other things, our
dividend policy and the transfer and voting restrictions that apply to holders
of our common stock.
1
<PAGE>
Warrants
We may issue warrants for the purchase of debt securities, shares of
preferred stock or shares of common stock. Our board of directors will
determine the terms of the warrants.
Ratio of Earnings to Fixed Charges and Preferred Dividends
The following table presents our historical ratios of earnings to fixed
charges and preferred dividends for the periods indicated:
<TABLE>
<CAPTION>
Period From
Year Ended Year Ended March 19, 1997
December 31, December 31, (Date of Inception)
1999 1998 to December 31, 1997
------------ ------------ --------------------
<S> <C> <C> <C>
Ratio...................... -- -- --
Deficiency................. $(49,607) $(95,371) $(12,850)
</TABLE>
For the purpose of this computation, earnings are defined as income (loss)
before income taxes plus fixed charges and preferred dividends. Fixed charges
consist of interest expense, including amortization of deferred debt issuance
costs and the interest portion of capital lease obligations, and the portion of
rental expense that is representative of the interest factor, deemed to be one-
third of minimum operating lease rentals.
Selected historical financial information
We acquired Global Marine Systems on July 2, 1999 and Frontier on September
28, 1999.
On November 24, 1999, we formed, together with Softbank Corp. and Microsoft
Corporation, a new joint venture company called Asia Global Crossing. We have
contributed to Asia Global Crossing our 57.75% ownership interest in Pacific
Crossing and our development rights in East Asia Crossing. Among other things,
each of Softbank and Microsoft contributed $175 million in cash to Asia Global
Crossing. Also on November 24, 1999, we acquired Racal Telecom, a group of
wholly-owned subsidiaries of Racal Electronics plc. On January 12, 2000, we
formed a joint venture with Hutchison Whampoa Limited, called Hutchison Global
Crossing, and issued $400 million aggregate liquidation preference of our 6
3/8% cumulative convertible preferred stock, series B, to Hutchison Whampoa.
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 shares of
our common stock will be exchanged for each share of IXnet common stock not
owned by IPC and 5.417 shares of our common stock will be exchanged for each
share of IPC common stock. We expect the acquisition to be completed in the
second quarter of 2000. The acquisition is subject to regulatory approval and
customary closing conditions.
In the following tables, we provide selected historical financial
information for (1) Global Crossing, (2) Global Marine Systems, (3) Frontier,
(4) Racal Telecom and (5) HCL Holdings Limited, a group of wholly-owned
subsidiaries of Hutchison Whampoa which has been contributed into the Hutchison
Global Crossing joint venture. We do not provide any separate historical
financial information relating to the Asia Global Crossing joint venture, as
all relevant historical financial information is reflected in the historical
financial information of Global Crossing.
2
<PAGE>
The selected historical financial information presented in the following
tables has been derived from the audited and unaudited financial statements of
Global Crossing, Global Marine Systems, Frontier, Racal Telecom and HCL
Holdings for the periods presented. This information is only a summary, and you
should read it together with the more detailed historical financial information
included or incorporated by reference in this document. For instructions on how
to obtain information incorporated by reference, see "Where You Can Find More
Information" on page ii.
Global Crossing selected historical financial information
The table below shows the selected historical financial information for
Global Crossing. This information has been prepared using the consolidated
financial statements of Global Crossing as of the dates indicated and for each
of the fiscal years in the period from inception, March 19, 1997, to December
31, 1999. The consolidated income statement data below for each of the fiscal
years in the period from inception, March 19, 1997, to December 31, 1999 and
the consolidated balance sheet data as of December 31, 1999 and 1998 have been
derived from financial statements audited by Arthur Andersen, independent
public accountants, which are incorporated by reference in this document. We
derived the remaining data from unaudited condensed consolidated financial
statements.
In reading the following selected historical financial information, please
note the following:
. The statement of operations data for the year ended December 31, 1999
includes the results of Global Marine Systems for the period from July
2, 1999, date of acquisition, through December 31, 1999; the results of
Frontier for the period from September 30, 1999, date of acquisition,
through December 31, 1999; and the results of Racal Telecom for the
period from November 24, 1999; date of acquisition, through December 31,
1999. The consolidated balance sheet as of December 31, 1999 includes
amounts related to Global Marine Systems, Frontier and Racal Telecom.
. During the year ended December 31, 1999, we recorded a $15 million
expense, net of tax benefit, due to the adoption of Statement of
Position 98-5, "Reporting on the Cost of Start-Up Activities". See the
"Cumulative effect of change in accounting principles" item in the
statement of operations data.
. During the years ended December 31, 1999 and 1998, we recognized $51
million and $39 million, respectively, of stock-related expense relating
to stock options and rights to purchase stock issued during that period
which entitle the holders to purchase common stock. See the "Stock-
related expense" item in the statement of operations data.
. On December 15, 1999, we issued 2,600,000 shares of 7% cumulative
convertible preferred stock at a liquidation preference of $250.00 for
net proceeds of $630 million. Each share of preferred stock is
convertible into 4.6948 shares of common stock based on a conversion
price of $53.25. Dividends on the preferred stock are cumulative from
the date of issue and will be payable on February 1, May 1, August 1 and
November 1 of each year, beginning on February 1, 2000, at the annual
rate of 7%.
. On November 24, 1999, we completed our acquisition of Racal Telecom, a
group of wholly owned subsidiaries of Racal Electronics plc, for
approximately $1.6 billion in cash. Racal Telecom owns one of the most
extensive fiber telecommunications networks in the United Kingdom,
consisting of approximately 4,650 route miles of fiber and reaching more
than 2,000 cities and towns.
. On November 12, 1999, our wholly owned subsidiary, Global Crossing
Holdings Ltd., issued two series of senior unsecured notes, which we
refer to in this document as the "new senior notes". The 9 1/8% senior
notes are due November 15, 2006 with a face value of $900 million, and
the 9 1/2% senior notes are due November 15, 2009 with a face value of
$1,100 million. The new senior notes are guaranteed by us. Interest will
be paid on the notes on May 15 and November 15 of each year, beginning
on May 15, 2000.
3
<PAGE>
. On November 5, 1999, we issued 10,000,000 shares of 6 3/8% cumulative
convertible preferred stock at a liquidation preference of $100.00 for
net proceeds of approximately $969 million. Each share of preferred
stock is convertible into 2.2222 shares of common stock, based on a
conversion price of $45.00. Dividends on the preferred stock are
cumulative from the date of issue and will be payable on February 1, May
1, August 1 and November 1 of each year, beginning on February 1, 2000,
at the annual rate of 6 3/8%.
. On September 28, 1999, we completed the acquisition of Frontier in a
merger transaction valued at over $10 billion, with Frontier
shareholders receiving 2.05 shares of our common stock for each share of
Frontier common stock held. Frontier is one of the largest long distance
telecommunications companies in the United States and one of the leading
providers of facilities-based integrated communications and Internet
services.
. On July 2, 1999, we completed our acquisition of the Global Marine
Systems division of Cable & Wireless Plc for approximately $908 million
in cash and assumed liabilities. Global Marine Systems owns the largest
fleet of cable laying and maintenance vessels in the world and currently
services more than a third of the world's undersea cable miles.
. On May 16, 1999, we entered into a definitive agreement to merge with U
S WEST, Inc. On July 18, 1999, we and U S WEST agreed to terminate our
merger agreement, and U S WEST agreed to merge with Qwest Communications
International Inc. As a result, U S WEST paid us a termination fee of
$140 million in cash and returned 2,231,076 shares of our common stock
purchased in a related tender offer, and Qwest committed to purchase
capacity on the Global Crossing network at established market unit
prices for delivery over the next four years and committed to make
purchase price payments to us for this capacity of $140 million over the
next two years. During the year ended December 31, 1999, we recognized
$210 million, net of merger related expenses, of other income in
connection with the termination of the U S WEST merger agreement.
. The "Termination of advisory services agreement" item in the statements
of operations data includes a charge for the termination of the advisory
services agreement as of June 30, 1998. We acquired the rights from
those entitled to fees payable under the advisory services agreement in
consideration for the issuance of common stock having an aggregate value
of $135 million and the cancellation of approximately $3 million owed to
us under a related advance agreement. As a result of this transaction,
we recorded a non-recurring charge in the approximate amount of $138
million during the year ended December 31, 1998. In addition, we
recognized as an expense approximately $2 million of advisory fees
incurred before the termination of the contract.
. We granted warrants to Pacific Capital Group, Inc., a shareholder, and
some of its affiliates for the Pacific Crossing, Mid-Atlantic Crossing
and Pan American Crossing systems and related rights. The $275 million
value of the common stock was originally allocated to "Construction in
progress" in the amount of $112 million and as "Investment in and
advances to/from affiliates" in the amount of $163 million. See the
"property and equipment" item in the balance sheet data. The "Investment
in and advance to/from affiliates" item in the balance sheet data
includes $163 million as of December 31, 1999 and 1998, respectively,
representing the value of the warrants described in the bullet point
immediately above applicable to the Pacific Crossing system.
. Adjusted EBITDA is defined as operating income (loss), plus goodwill
amortization, depreciation and amortization, non-cash cost of capacity
sold, stock related expenses, incremental cash deferred revenue, and
amounts relating to the termination of the advisory services agreement
this definition is consistent with financial covenants contained in our
major financial agreements. This information should not be considered as
an alternative to any measure of performance as promulgated under
generally accepted accounting principles, which we refer to as "GAAP".
Our calculation of adjusted EBITDA may be different from the calculation
used by other companies and, therefore, comparability may be limited.
4
<PAGE>
Global Crossing Ltd. and Subsidiaries
(in thousands, except share and per share information)
<TABLE>
<CAPTION>
Period from
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------
<S> <C> <C> <C>
Statement of Operations
Data:
Revenue................. $ 1,664,824 $ 419,866 $ --
----------- ----------- -----------
Expenses:
Cost of sales.......... 850,483 178,492 --
Operations,
administration and
maintenance........... 133,202 18,056 --
Sales and marketing.... 149,119 26,194 1,366
Network development.... 26,153 10,962 78
General and
administrative........ 210,107 26,303 1,618
Stock related expense
...................... 51,306 39,374 --
Depreciation and
amortization.......... 124,294 541 39
Goodwill and
intangibles
amortization.......... 127,621 -- --
Termination of advisory
services agreement ... -- 139,669 --
----------- ----------- -----------
1,672,285 439,591 3,101
----------- ----------- -----------
Operating loss.......... (7,461) (19,725) (3,101)
Equity in income (loss)
of affiliates.......... 15,708 (2,508) --
Minority interest....... (1,338) -- --
Other income (expense):
Interest income........ 67,407 29,986 2,941
Interest expense....... (139,077) (42,880) --
Other income, net...... 180,765 -- --
Provision for income
taxes.................. (126,539) (33,067) --
----------- ----------- -----------
Loss before
extraordinary item and
cumulative effect of
change in accounting
principle.............. (10,535) (68,194) (160)
Extraordinary loss on
retirement of debt..... (45,681) (19,709) --
----------- ----------- -----------
Loss before cumulative
effect of change in
accounting principle... (56,216) (87,903) (160)
Cumulative effect of
change in accounting
principle, net of
income tax benefit of
$1,400................. (14,710) -- --
----------- ----------- -----------
Net loss................ (70,926) (87,903) (160)
Preferred stock
dividends.............. (66,642) (12,681) (12,690)
Redemption of preferred
stock.................. -- (34,140) --
----------- ----------- -----------
Net loss applicable to
common shareholders.... $ (137,568) $ (134,724) $ (12,850)
=========== =========== ===========
Net Loss Per Common
Share:
Loss applicable to
common shareholders
before extraordinary
item and cumulative
effect of change in
accounting principle
Basic and diluted....... $ (0.15) $ (0.32) $ (0.04)
=========== =========== ===========
Extraordinary item
Basic and diluted...... $ (0.09) $ (0.06) $ --
=========== =========== ===========
Cumulative effect of
change in accounting
principle
Basic and diluted...... $ (0.03) $ -- $ --
=========== =========== ===========
Net loss applicable to
common shareholders
Basic and diluted...... $ (0.27) $ (0.38) $ (0.04)
=========== =========== ===========
Shares used in computing
basic and diluted loss
per share.............. 502,400,851 358,735,340 325,773,934
=========== =========== ===========
Other Operating Data:
Cash from operating
activities............. $ 506,084 $ 208,727 $ 5,121
Cash used for investing
activities............. (4,009,977) (430,697) (428,743)
Cash from financing
activities............. 4,330,799 1,027,110 425,075
Adjusted EBITDA ........ $ 708,181 $ 364,948 $ 343,233
</TABLE>
5
<PAGE>
Global Crossing Ltd. and Subsidiaries
(in thousands)
<TABLE>
<CAPTION>
December 31,
---------------------------------
1999 1998 1997
----------- ---------- --------
<S> <C> <C> <C>
Balance sheet data:
Current assets including cash and cash
equivalents and restricted cash and cash
equivalents................................ $ 2,946,533 $ 976,615 $ 27,744
Long term restricted cash and cash
equivalents................................ 138,118 367,600 --
Long term accounts receivable............... 52,052 43,315 --
Capacity available for sale................. -- 574,849 --
Property and equipment, net ................ 6,026,053 433,707 518,519
Other assets................................ 661,442 65,757 25,934
Investment in and advances to/from
affiliates, net............................ 323,960 177,334 --
Goodwill and intangibles, net............... 9,557,422 -- --
----------- ---------- --------
Total assets............................... $19,705,580 $2,639,177 $572,197
=========== ========== ========
Current liabilities......................... $ 1,852,593 $ 256,265 $ 90,817
Long term debt.............................. 5,018,544 1,066,093 312,325
Deferred revenue............................ 383,287 25,325 --
Deferred credits and other.................. 796,606 34,174 3,009
----------- ---------- --------
Total Liabilities........................... 8,051,030 1,381,857 406,151
Minority interest........................... 351,338 -- --
Mandatorily redeemable and cumulative
convertible preferred stock ............... 2,084,697 483,000 91,925
Shareholders' equity
Common stock............................... 7,992 4,328 3,258
Treasury stock............................. (209,415) (209,415) --
Other shareholders' equity................. 9,578,927 1,067,470 71,023
Accumulated deficit........................ (158,989) (88,063) (160)
----------- ---------- --------
Total shareholders' equity.................. 9,218,515 774,320 74,121
----------- ---------- --------
Total liabilities and shareholders' equity.. $19,705,580 $2,639,177 $572,197
=========== ========== ========
</TABLE>
6
<PAGE>
Global Marine Systems selected historical financial information
The table below shows selected historical financial information for Global
Marine Systems presented in United States GAAP. This information has been
prepared using the combined financial statements of Global Marine Systems as of
the dates indicated and for each of the fiscal years in the five-year period
ended March 31, 1999. The combined income statement data below for each of the
three fiscal years ended March 31, 1999 and the combined balance sheet data at
March 31, 1999 and 1998 were derived from United Kingdom GAAP financial
statements audited by KPMG Audit Plc, chartered accountants, which are
incorporated by reference in this document. The combined income statement data
below for each of the fiscal years ended March 31, 1996 and 1995 and the
combined balance sheet data as of March 31, 1997, 1996 and 1995 were derived
from management accounts.
The unaudited translations of Global Marine Systems' sterling amounts into
United States dollars have been translated using convenience translation rates
for the fiscal year ended March 31, 1999. The convenience translations should
not be construed as representations that the sterling amounts have been, could
have been or could in the future be converted into United States dollars at
this rate or any other rate of exchange.
<TABLE>
<CAPTION>
For the Years Ended March 31,
----------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------------ --------------- --------------- --------------- ---------------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues...... $347,335 (Pounds)209,997 (Pounds)170,953 (Pounds)181,987 (Pounds)147,996 (Pounds) 79,778
Income from continuing
operations............. 47,051 28,447 13,843 18,992 26,923 10,829
Total assets............ 753,333 466,749 441,899 380,635 359,148 235,459
Long-term obligations... $261,923 (Pounds)162,282 (Pounds)198,055 (Pounds)163,209 (Pounds)167,454 (Pounds) 54,900
</TABLE>
Frontier selected historical financial information
The table below shows selected historical financial information for
Frontier. This information has been prepared using the consolidated financial
statements of Frontier as of the dates indicated and for each of the fiscal
years in the five-year period ended December 31, 1998 and for the nine months
ended September 30, 1999 and 1998. The consolidated income statement data below
for each of the fiscal years in the five-year period ending December 31, 1998
and the consolidated balance sheet data as of December 31, 1994 through
December 31, 1998 have been derived from financial statements audited by
PricewaterhouseCoopers LLP, independent accountants, of which the financial
statements for the three-year period ending December 31, 1998 are incorporated
by reference in this document. Global Crossing derived the remaining data from
unaudited consolidated financial statements, which are incorporated by
reference in this document.
Revenues have been impacted by the following acquisitions for the periods
presented:
. On February 27, 1998, Frontier acquired GlobalCenter Inc., a leading
provider in digital distribution, Internet and data services
headquartered in Sunnyvale, California. Frontier acquired all of the
outstanding shares of GlobalCenter and issued 6.4 million shares to
effect this merger. At the time of the merger, GlobalCenter had 1.1
million stock options and warrants outstanding as converted into
Frontier equivalents. This transaction was accounted for using the
pooling of interests method of accounting and, accordingly, historical
information has been restated to include GlobalCenter.
. In August 1995, Frontier merged with ALC Communications Corporation.
Frontier exchanged two shares of its common stock for each ALC common
share. The total shares issued by Frontier to effect the merger were
69.2 million. In March 1995, Frontier acquired American Sharecom Inc.
Frontier acquired all of the outstanding shares of American Sharecom for
approximately 8.7 million shares of Frontier common stock. These
transactions were accounted for as poolings of interests and,
accordingly, historical information has been restated to include ALC and
American Sharecom.
7
<PAGE>
. In 1995, Frontier paid $318.4 million in cash for several acquisitions
that were accounted for as purchases. These purchase acquisitions were
Minnesota Southern Cellular Telephone Company, ConferTech International,
Inc., WCT Communications, Inc., Enhanced Telemanagement, Schneider
Communications, Inc. and Schneider Communications' 80.8 percent interest
in LinkUSA Corporation and Link-VTC, Inc. In February 1996, Frontier
acquired the remaining 19.2 percent interest in LinkUSA Corporation for
$2.3 million in cash, and in June 1996 made a payment of $4.3 million to
Link-VTC, Inc. in settlement of the original earnout agreement.
The following extraordinary, unusual or infrequently occurring items have
impacted net income for the periods presented:
. During the nine-month period ended September 30, 1999, Frontier recorded
a $74.5 million charge for costs related to the merger with Global
Crossing. These charges primarily include investment banker fees, legal
fees, accelerated restricted stock compensation and other direct costs.
. In the first quarter of 1998, Frontier recorded a pre-tax charge of $6.5
million associated with the acquisition of GlobalCenter. These charges
included investment banker fees, legal fees and other direct costs.
. In October 1997, Frontier recorded a pre-tax charge of $86.8 million
consisting of a restructuring charge of $43.0 million and a provision
for asset and lease impairments of $43.8 million. The restructuring
charge was primarily associated with a workforce reduction, program
cancellations and discontinuing some product lines. The provision for
asset and lease impairments primarily relates to long term assets and
some lease obligations Frontier was in the process of disposing of or
exiting.
. In March 1997, Frontier recorded a $96.6 million pre-tax charge
primarily related to the write-off of certain leased network facilities
no longer required as a result of the migration of Frontier's major
carrier customer's one-plus traffic volume to other networks and
Frontier's overall network integration efforts.
. In November 1996, Frontier recorded a $48.8 million pre-tax charge. This
charge included $28.0 million for the curtailment of specified Frontier
pension plans and a $20.8 million charge primarily to the write-off of
unrecoverable product development costs for its conference calling
product line.
. In December 1996, Frontier, through GlobalCenter, recorded a pre-tax
charge of $18.9 million related to the write-off of in-process product
development costs associated with the 1996 merger with GCIS, an Internet
management services company.
. Frontier's 1995 operating results reflect pre-tax acquisition related
charges of $114.2 million associated with the integration of a number of
long distance companies acquired during the year, including the August
1995 merger with ALC Communications.
. Frontier determined in 1995 that Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation", was no longer applicable based upon changes in regulation,
increasingly rapid advancements in telecommunications technology and
other factors creating competitive markets. As a result of the
discontinuance of FAS 71, Frontier recorded a non-cash extraordinary
charge of $112.1 million, net of an income tax benefit of $68.4 million,
as of September 30, 1995. Frontier also recorded a $9.0 million loss on
the early extinguishment of debt in 1995.
8
<PAGE>
Frontier Corporation and Subsidiaries
(in thousands, except per share information)
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended Year Ended December 31,
September 30, September 30, ----------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------------- ------------- ---------- ---------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Income:
Revenues................ $ 1,995,556 $1,938,522 $2,593,558 $2,374,809 $2,588,519 $2,150,328 $1,667,545
Costs and expenses...... 1,835,514 1,708,518 2,276,162 2,288,651 2,220,296 1,865,492 1,341,919
----------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income........ 160,042 230,004 317,396 86,158 368,223 284,836 325,626
Interest expense........ (48,739) (39,516) (55,318) (48,239) (43,312) (53,572) (50,216)
Other income, net of
other expense.......... 19,643 33,480 45,025 38,070 15,850 14,991 20,922
Income taxes............ (77,181) (96,634) (129,560) (44,188) (142,556) (101,126) (109,078)
----------- ---------- ---------- ---------- ---------- ---------- ----------
Income before
extraordinary items and
cumulative effect of
changes in accounting
principles............. 53,765 127,334 177,543 31,801 198,205 145,129 187,254
Extraordinary items..... -- -- -- -- -- (121,208) --
Cumulative effect of
changes in accounting
principles............. -- (1,755) (1,755) -- (8,018) (1,477) (7,197)
----------- ---------- ---------- ---------- ---------- ---------- ----------
Consolidated net
income................. 53,765 125,579 175,788 31,801 190,187 22,444 180,057
Dividends on preferred
stock.................. (510) (754) (1,005) (1,019) (1,182) (1,191) (1,187)
----------- ---------- ---------- ---------- ---------- ---------- ----------
Income applicable to
common stock........... $ 53,255 $ 124,825 $ 174,783 $ 30,782 $ 189,005 $ 21,253 $ 178,870
=========== ========== ========== ========== ========== ========== ==========
Earnings per common
share:
Income before
extraordinary item and
cumulative effect of
changes in accounting
principles
Basic.................. $ 1.03 $ .18 $ 1.19 $ .94 $ 1.26
Diluted................ 1.02 .18 1.18 .88 1.16
Cash dividends declared
per common share....... $ .100 $ .668 $ .89 $ .875 $ .855 $ .835 $ .815
Consolidated Balance
Sheets (at period end):
Current assets.......... $ 644,023 $ 566,674 $ 490,305 $ 477,761 $ 524,200 $ 673,826
Property, plant and
equipment, net......... 2,189,138 1,677,559 1,046,884 975,982 883,046 1,034,442
Goodwill and customer
base, net.............. 7,794,241 484,015 517,754 538,296 550,081 222,442
Deferred and other
assets................. 431,614 330,495 432,977 237,353 154,088 130,084
----------- ---------- ---------- ---------- ---------- ----------
Total assets........... $11,059,016 $3,058,743 $2,487,920 $2,229,392 $2,111,415 $2,060,794
=========== ========== ========== ========== ========== ==========
Current liabilities..... $ 750,974 $ 567,697 $ 492,978 $ 424,397 $ 506,073 $ 305,698
Long-term debt.......... 1,800,651 1,350,821 934,681 677,570 618,867 661,549
Other long-term
liabilities............ 31,928 -- -- -- -- --
Deferred income taxes... -- 40,046 10,927 2,542 15,644 98,217
Deferred employee
benefits obligation.... 89,596 81,925 74,965 57,573 58,385 46,001
Shareholder's equity.... 8,385,867 1,018,254 974,369 1,067,310 912,446 949,329
----------- ---------- ---------- ---------- ---------- ----------
Total liabilities and
shareholders' equity.. $11,059,016 $3,058,743 $2,487,920 $2,229,392 $2,111,415 $2,060,794
=========== ========== ========== ========== ========== ==========
</TABLE>
9
<PAGE>
Racal Telecom selected historical financial information
The table below shows selected historical financial information for Racal
Telecom prepared in United States GAAP. This information has been prepared
using the combined financial statements of Racal Telecom as of the dates
indicated and for each of the fiscal years in the three-year period ended March
31, 1999. The combined income statement data below for each of the two years
ended March 31, 1999 and the combined balance sheet data at March 31, 1999 and
1998 were derived from financial statements audited by Deloitte & Touche,
independent auditors, which are incorporated by reference in this document. We
derived the remaining data from unaudited combined financial statements.
The unaudited translations of Racal Telecom's sterling amounts into United
States dollars have been translated using convenience translation rates for the
fiscal year ended March 31, 1999. The convenience translations should not be
construed as representations that the sterling amounts have been, could have
been or could in the future be converted into United States dollars at this
rate or any other rate of exchange.
<TABLE>
<CAPTION>
For the Years Ended March 31,
------------------------------------------------------------
1999 1998 1997
--------------------------- --------------- ---------------
(unaudited) (in thousands)
<S> <C> <C> <C> <C>
Revenues................ $492,130 (Pounds)295,800 (Pounds)273,000 (Pounds)260,000
Income (loss) from
continuing operations.. (30,450) (18,300) 12,100 16,000
Total assets............ 656,250 401,200 355,900 311,700
Long-term obligations... $118,920 (Pounds) 72,700 (Pounds) 86,400 (Pounds)101,200
</TABLE>
HCL Holdings selected historical financial information
The table below shows selected historical financial information for HCL
Holdings prepared in United States GAAP. This information has been prepared
using the combined financial statements of HCL Holdings as of the dates
indicated and for each of the years in the three-year period ended December 31,
1998 and for the nine months ended September 30, 1999 and 1998. The combined
financial information below as of and for each of the three years ended
December 31, 1998 were derived from financial statements audited by
PricewaterhouseCoopers, certified public accountants, which are incorporated by
reference in this document. The combined financial information below as of and
for the nine months ended September 30, 1999 and 1998 were derived from
unaudited combined financial statements.
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended For the Years Ended December 31,
September 30, September 30, --------------------------------------
1999 1998 1998 1997 1996
------------- ------------- ------------ ------------ ----------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Revenues................ HK$ 615,940 HK$ 735,933 HK$ 950,120 HK$1,262,106 HK$790,995
Income (loss) from
continuing operations.. (190,748) HK$(177,318) (279,526) (356,847) (153,626)
Total assets............ 2,364,497 1,857,539 1,369,610 705,687
Long-term obligations... HK$3,022,594 HK$2,306,024 HK$1,403,847 HK$704,586
</TABLE>
10
<PAGE>
The unaudited translations of HCL Holdings' Hong Kong dollar amounts into
United States dollars have been translated using convenience translation rates
for the fiscal year ended December 31, 1998 and for the nine months ended
September 30, 1999. The convenience translations should not be construed as
representations that the Hong Kong dollar amounts have been, could have been or
could in the future be converted into United States dollars at this rate or any
other rate of exchange.
<TABLE>
<CAPTION>
For the Nine For the Year
Months Ended Ended
September 30, December 31,
1999 1998
------------- ------------
(unaudited)
(in thousands)
<S> <C> <C>
Revenues...................................... $ 79,429 $122,664
Income (loss) from continuing operations...... (24,598) (36,088)
Total assets.................................. 304,401 239,794
Long-term obligations......................... $389,123 $297,690
</TABLE>
11
<PAGE>
Recent Financial Accounting Developments
During the third and fourth quarters of 1999, changes in our business
activities, together with a newly effective accounting standard, caused us to
modify some of our practices regarding recognition of revenue and costs related
to sales of capacity. None of the accounting practices described below affect
our cash flows.
As a result of Financial Accounting Standards Board (FASB) Interpretation
No. 43, "Real Estate Sales, an interpretation of FASB Statement No. 66" (FIN
43), which became effective July 1, 1999, we have accounted revenue from
terrestrial circuits sold after that date as operating leases and have
amortized that revenue over the terms of the related contracts. Previously, we
had recognized these sales as current revenue upon activation of the circuits.
This deferral in revenue recognition has no impact on cash flow.
With the consummation of the Frontier acquisition on September 28, 1999,
service offerings became a significant source of our revenue. Consequently, we
initiated service contract accounting for our subsea systems during the fourth
quarter, because we, since that date, no longer hold subsea capacity
exclusively for sale. As a result, since the beginning of the fourth quarter,
we have depreciated investments in both subsea and terrestrial systems over
their remaining economic lives and have recognized revenue related to service
contracts over the terms of the contracts. We have recognized revenue and costs
related to the sale of subsea circuits upon activation, if the criteria of
sales-type lease accounting have been satisfied with respect to those circuits.
During the fourth quarter, our global network service capabilities were
significantly expanded by the activation of several previously announced
systems and by the integration of other networks obtained through acquisition
and joint venture agreements. With this network expansion, we began offering
our customers flexible bandwidth products to multiple destinations, which makes
the historical practice of fixed, point-to-point routing of traffic and
restoration capacity both impractical and inefficient. To ensure the required
network flexibility, we will modify our future capacity purchase agreements and
our network management in a manner that precludes the use of sales-type lease
accounting.
Because of these contract changes and the network management required to
meet customer demands for flexible bandwidth, multiple destinations and system
performance, we anticipate that most of the contracts for subsea circuits
entered into after January 1, 2000 will be part of a service offering and,
therefore, will not meet the criteria of sales-type lease accounting and will
be accounted for as operating leases. Consequently, we will defer revenue
related to those circuits and amortize it over the appropriate term of the
contract. In certain circumstances, if a contract meets all of the requirements
of sales-type lease accounting, we will recognize revenue without deferral upon
payment and activation.
We note that accounting practice and authoritative guidance regarding the
applicability of sales-type lease accounting to the sale of capacity is still
evolving. Based on the accounting practices described above, we believe that
additional changes, if any, in accounting practice or authoritative guidance
affecting sales of capacity would have little or no impact on our results of
operations.
12
<PAGE>
Global Crossing Ltd.
Selected Unaudited Pro Forma Financial Information
The following unaudited pro forma condensed combined financial information
of Global Crossing, Global Marine Systems, Frontier, Racal Telecom and the
Hutchison Global Crossing joint venture, which we refer to as "Pro Forma Global
Crossing Ltd.", has been prepared to demonstrate how these companies or
businesses might have looked if (1) the Global Marine Systems acquisition and
related financing, (2) the Frontier acquisition, (3) the Racal Telecom
acquisition and related financing, (4) the Hutchison Global Crossing joint
venture, including the related issuance of the 6 3/8% cumulative convertible
preferred stock, series B, of Global Crossing, (5) the offering of our 6 3/8%
cumulative convertible preferred stock completed on November 5, 1999, (6) the
offering of the 9 1/8% senior notes due 2006 and 9 1/2% senior notes due 2009
of Global Crossing Holdings completed on November 19, 1999 and (7) the offering
of our 7% cumulative convertible preferred stock completed on December 15, 1999
had been completed as of the date or at the beginning of the period presented.
This pro forma information does not give effect to (a) the $350 million cash
received in connection with the formation of the Asia Global Crossing joint
venture or (b) the IPC and IXnet mergers.
We have prepared the pro forma financial information using the purchase
method of accounting. We expect that we will have reorganization and
restructuring expenses and potential synergies relating to the acquisitions of
Global Marine Systems and Racal Telecom, the Hutchison Global Crossing joint
venture and the acquisition of Frontier's long distance business and increased
opportunities to earn more revenue as a result of those transactions. The
unaudited pro forma information does not reflect these expenses and synergies.
The pro forma information, while helpful in illustrating the financial
characteristics of the combined company under one set of assumptions, does not
attempt to predict or suggest future results. The pro forma information also
does not attempt to show how the combined company would actually have performed
had the companies been combined throughout these periods. If the companies had
actually been combined in prior periods, these companies and businesses might
have performed differently. You should not rely on pro forma financial
information as an indication of the results that would have been achieved if
the Global Marine Systems, Frontier and Racal Telecom acquisitions and the
Hutchison Global Crossing joint venture had taken place earlier or the future
results that the companies will experience after completion of these
transactions.
You should read these unaudited pro forma condensed combined financial
statements in conjunction with the historical financial statements of Global
Crossing, Global Marine Systems, Frontier, Racal Telecom and HCL Holdings,
which are incorporated by reference in this document.
13
<PAGE>
Pro Forma Global Crossing Ltd.
Unaudited Pro Forma Condensed Combined Balance Sheet
as of December 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Global Hutchison Global
Crossing Global Crossing Crossing
Historical(1) Adjustments(2) Pro Forma
------------- --------------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash, restricted cash and
investments....................... $ 1,726,793 $(50,000) $ 1,676,793
Accounts receivable, net........... 966,973 -- 966,973
Other assets and prepaid costs..... 252,767 -- 252,767
----------- -------- -----------
Total Current Assets............. 2,946,533 (50,000) 2,896,533
Restricted cash and cash
equivalents........................ 138,118 -- 138,118
Accounts receivable................. 52,052 -- 52,052
Property and equipment, net......... 6,026,053 (83,800) 5,942,253
Goodwill and other intangibles,
net................................ 9,557,422 -- 9,557,422
Investment in and advances to/from
affiliates, net.................... 323,960 538,800 862,760
Other assets, net................... 661,442 -- 661,442
----------- -------- -----------
Total Assets..................... $19,705,580 $405,000 $20,110,580
=========== ======== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued construction costs......... $ 275,361 $ -- $ 275,361
Accounts payable and accrued
liabilities....................... 944,780 5,000 949,780
Accrued interest and preferred
dividends......................... 66,745 -- 66,745
Deferred revenue................... 127,367 -- 127,367
Income taxes payable............... 140,034 -- 140,034
Current portion of long term
debt.............................. 5,496 -- 5,496
Other current liabilities.......... 292,810 -- 292,810
----------- -------- -----------
Total Current Liabilities........ 1,852,593 5,000 1,857,593
Long term debt..................... 5,018,544 -- 5,018,544
Deferred revenue................... 383,287 -- 383,287
Deferred credits and other......... 796,606 -- 796,606
----------- -------- -----------
Total Liabilities................ 8,051,030 5,000 8,056,030
----------- -------- -----------
MINORITY INTEREST................... 351,338 -- 351,338
----------- -------- -----------
MANDATORILY REDEEMABLE AND
CUMULATIVE CONVERTIBLE PREFERRED
STOCK:
10 1/2% Mandatorily Redeemable
Preferred Stock, 5,000,000 shares
issued and outstanding as of
December 31, 1999, $100
liquidation preference per
share............................. 485,947 -- 485,947
----------- -------- -----------
6 3/8% Cumulative Convertible
Preferred Stock, 10,000,000
shares issued and outstanding as
of December 31, 1999, $100
liquidation preference per
share............................. 969,000 400,000 1,369,000
----------- -------- -----------
7% Cumulative Convertible
Preferred Stock, 2,600,000 and no
shares issued and outstanding as
of December 31, 1999, $250
liquidation preference per
share............................. 629,750 -- 629,750
----------- -------- -----------
SHAREHOLDERS' EQUITY:
Common stock, 3,000,000,000 shares
authorized, par value $.01,
799,137,142 issued as of December
31, 1999.......................... 7,992 -- 7,992
Treasury stock, 22,033,758
shares............................ (209,415) -- (209,415)
Other shareholders' equity......... 9,578,927 -- 9,578,927
Accumulated deficit................ (158,989) -- (158,989)
----------- -------- -----------
9,218,515 -- 9,218,515
----------- -------- -----------
Total Liabilities and
Shareholder's Equity............ $19,705,580 $405,000 $20,110,580
=========== ======== ===========
</TABLE>
14
<PAGE>
Pro Forma Global Crossing Ltd.
Unaudited Pro Forma Condensed Combined Statements of Operations
For the Year Ended December 31, 1999
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Global Global
Global Marine Marine Racal
Crossing Systems Systems Frontier Frontier Racal Telecom Telecom
Historical(3) Historical Adjustments Historical Adjustments Historical(13) Adjustments
------------- ---------- ----------- ---------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating
Revenues........... $ 1,664,824 $173,498 $ -- $1,995,556 $ -- $306,019 $ --
----------- -------- -------- ---------- --------- -------- ---------
Operating Expenses:
Operating,
selling, general
and
administrative.... 1,369,064 127,165 -- 1,551,234 -- 286,442 --
Stock-related
expense........... 51,306 -- -- 10,412 (10,412)(9) -- --
Merger Expenses... -- -- -- 74,519 -- 24,600 --
Depreciation and
amortization...... 124,294 12,817 -- 173,600 -- 52,716 --
Goodwill and
intangibles
amortization...... 127,621 812 (812)(5) 25,749 (25,749)(10) -- 55,843 (14)
19,690 (5) 303,774 (10)
----------- -------- -------- ---------- --------- -------- ---------
1,672,285 140,794 18,878 1,835,514 267,613 363,758 55,843
----------- -------- -------- ---------- --------- -------- ---------
Operating income
(loss)............. (7,461) 32,704 (18,878) 160,042 (267,613) (57,739) (55,843)
Equity in income
(loss) of
affiliates......... 15,708 4,539 -- 17,235 -- (560) --
Minority interest.. (1,338) -- -- -- -- -- --
Other income
(expense):
Interest
expense........... (139,077) (6,869) (24,000)(6) (48,739) -- (30,908) (96,363)(15)
Interest income... 67,407 511 -- 4,754 -- 3,856 --
Other income
(expenses)........ 180,765 143 -- (2,346) -- 369 --
----------- -------- -------- ---------- --------- -------- ---------
Income (loss)
before provision
for income taxes,
extraordinary item
and cumulative
effect of change in
accounting
principle.......... 116,004 31,028 (42,878) 130,946 (267,613) (84,982) (152,206)
(Provision)
benefit for
income taxes...... (126,539) (11,885) 7,200 (7) (77,181) -- 30,116 23,115 (16)
----------- -------- -------- ---------- --------- -------- ---------
Income (loss)
before
extraordinary item
and cumulative
effect of change in
accounting
principle.......... (10,535) 19,143 (35,678) 53,765 (267,613) (54,866) (129,091)
Preferred stock
dividends......... (66,642) -- -- (510) 510 (11) -- --
----------- -------- -------- ---------- --------- -------- ---------
Income (loss)
applicable to
common shareholders
before
extraordinary item
and cumulative
effect of change in
accounting
principle.......... (77,177) 19,143 (35,678) 53,255 (267,103) (54,866) (129,091)
Diluted earnings
adjustment........ -- -- -- 270 (270)(12) -- --
----------- -------- -------- ---------- --------- -------- ---------
Income (loss)
applicable to
common shareholders
before
extrarodinary item
and cumulative
effect of change in
accounting
principle
(Diluted).......... $ (77,177) $ 19,143 $(35,678) $ 53,525 $(267,373) $(54,866) $(129,091)
=========== ======== ======== ========== ========= ======== =========
Income (loss) per
common share:
Income (loss)
applicable to
common
shareholders
before
extraordinary
item and
cumulative effect
of change in
accounting principle
Basic and
diluted......... $ (0.15)
===========
Shares used in
computing
information
applicable to
common
shareholders
Basic and
diluted......... 502,400,851
===========
<CAPTION>
Hutchison
Global Global
Crossing Financing Crossing
Adjustments(2) Adjustments(17) Pro Forma
-------------- --------------- ----------------
<S> <C> <C> <C>
Operating
Revenues........... $ -- $ -- $ 4,139,897
-------------- --------------- ----------------
Operating Expenses:
Operating,
selling, general
and
administrative.... -- -- 3,333,905
Stock-related
expense........... -- -- 51,306
Merger Expenses... -- -- 99,119
Depreciation and
amortization...... -- -- 363,427
Goodwill and
intangibles
amortization...... -- -- 506,928
-------------- --------------- ----------------
-- -- 4,354,685
-------------- --------------- ----------------
Operating income
(loss)............. -- -- (214,788)
Equity in income
(loss) of
affiliates......... (15,825) -- (143)
(21,240) --
Minority interest.. -- (1,338)
Other income
(expense):
Interest
expense........... -- 93,577 (495,695)
(243,316)
Interest income... -- -- 76,528
Other income
(expenses)........ -- -- 178,931
-------------- --------------- ----------------
Income (loss)
before provision
for income taxes,
extraordinary item
and cumulative
effect of change in
accounting
principle.......... (37,065) (149,739) (456,505)
(Provision)
benefit for
income taxes...... -- (7,200) (162,374)
-------------- --------------- ----------------
Income (loss)
before
extraordinary item
and cumulative
effect of change in
accounting
principle.......... (37,065) (156,939) (618,879)
Preferred stock
dividends......... (25,529) (108,936) (201,107)
-------------- --------------- ----------------
Income (loss)
applicable to
common shareholders
before
extraordinary item
and cumulative
effect of change in
accounting
principle.......... (62,594) (265,875) (819,986)
Diluted earnings
adjustment........ -- --
-------------- --------------- ----------------
Income (loss)
applicable to
common shareholders
before
extrarodinary item
and cumulative
effect of change in
accounting
principle
(Diluted).......... $(62,594) $(265,875) $ (819,986)
============== =============== ================
Income (loss) per
common share:
Income (loss)
applicable to
common
shareholders
before
extraordinary
item and
cumulative effect
of change in
accounting principle
Basic and
diluted......... $ (1.07)
================
Shares used in
computing
information
applicable to
common
shareholders
Basic and
diluted......... 767,355,151 (18)
================
</TABLE>
15
<PAGE>
Pro Forma Global Crossing Ltd.
Notes to Unaudited Pro Forma Condensed Combined Financial
Statements
(1) This column represents the historical financial position of Global
Crossing as of December 31, 1999, including the assets acquired in the
Frontier merger and the Global Marine Systems and Racal Telecom
acquisitions.
(2) On January 12, 2000, we and Hutchison Whampoa Limited formed a joint
venture called Hutchison Global Crossing. This joint venture is owned in
equal parts by us and Hutchison Whampoa. In exchange for its 50%
interest, Hutchison Whampoa contributed to the joint venture its existing
building-to-building fixed-line telecommunications network in Hong Kong
and certain Internet-related assets previously held by Hutchison
Telecommunications Limited. In exchange for our 50% interest, we
contributed to the joint venture international telecommunications
capacity rights on our network and know-how related to Internet data
centers valued at $350 million and $50 million in cash. In addition, we
issued to Hutchison Whampoa $400 million aggregate liquidation preference
of our 6 3/8% cumulative convertible preferred stock, series B,
convertible into our common stock. The Hutchison Global Crossing joint
venture is anticipated to be accounted for as an unconsolidated joint
venture under the equity method of accounting.
<TABLE>
<S> <C> <C>
Total Consideration
Cash contributed................................... $ 50,000
6 3/8% Cumulative Convertible Preferred Stock,
Series B.......................................... 400,000
Estimated cost of capacity contributed............. 83,800
Global Crossing transaction costs.................. 5,000
--------
Total consideration.................................. 538,800
Less:Historical net tangible book value of HCL
Holdings:
Historical HCL Holdings net liabilities at December
31, 1999........................................... $(149,393)
Cash contributed................................... 50,000
Estimated cost of capacity contributed............. 83,800
---------
Adjusted net tangible book value................... (15,593)
50% ownership interest............................. 7,797
---------
(7,796)
--------
Total Goodwill....................................... $546,596
========
</TABLE>
We have tentatively considered the carrying value of the acquired assets to
approximate their fair value, with all of the excess of those acquisition
costs being attributable to goodwill. We are in the process of fully
evaluating the assets to be acquired and, as a result, the purchase price
allocation among the tangible and intangible assets acquired and their
useful lives may change. We currently anticipate that goodwill associated
with the merger will be amortized over a 25-year life.
These adjustments also include the assumed equity in the results of
operations of Hutchison Global Crossing for the year ended December 31,
1999.
(3) This column represents the historical results of operations for the year
ended December 31, 1999 including the results of Global Marine Systems
operations for the six months ended December 31, 1999, the results of
Frontier operations for the three months ended December 31, 1999 and
Racal Telecom for the period from November 24, 1999 to December 31, 1999.
(4) This column represents the historical results of operations of Global
Marine Systems for the six months ended June 30, 1999.
16
<PAGE>
(5) These adjustments reflect the amortization expense of the excess
consideration over the net assets acquired (goodwill), which we have
estimated to be approximately $693 million. We are amortizing goodwill and
other intangible assets on the straight-line method over 3-25 years. The
initial purchase price allocation is based on current estimates. We will
make the final purchase price allocation based upon final values for
certain assets and liabilities. As a result, the final purchase price
allocation may differ from the presented estimate.
(6) This amount reflects the assumed interest expense, at an 8% interest rate,
incurred on the $600 million debt assumed issued as of the earliest date
presented in connection with the acquisition of Global Marine Systems.
(7) This adjustment represents the tax benefit resulting from the interest
expense assumed in connection with the debt issued for the acquisition of
Global Marine Systems.
(8) This column represents Frontier's historical results of operations for the
nine months ended September 30, 1999.
(9) This adjustment assumes Frontier's stock related expenses would not have
been incurred had the merger occurred at the earliest date presented.
(10) These adjustments reflect the amortization expense of the excess
consideration over the net assets acquired (goodwill), which we have
estimated to be approximately $7.7 billion. We are amortizing goodwill and
other intangible assets on a straight-line method over 6-25 years. The
initial purchase price allocation is based on current estimates. We will
make the final purchase price allocation based upon final values for
certain assets and liabilities. As a result, the final purchase price
allocation may differ from the presented estimate.
(11) This adjustment assumes that Frontier's preferred stock dividends would
not have been incurred, as Frontier's preferred stock would have been
redeemed as of the earliest date presented.
(12) To eliminate diluted earnings adjustment due to the combined net loss
position.
(13) This column represents Racal Telecom's results from operations in United
States GAAP, the disposal of the Racal Translink and Racal Fieldforce
divisions of Racal Telecommunications Limited which we did not acquire and
pro forma adjustments to reflect the likely effect of the trading among
Racal Translink, Racal Fieldforce and Racal Telecom based on contractual
obligations among the divisions. We summarize these adjustments in the
table below:
17
<PAGE>
Racal Telecom Pro Forma
Unaudited Pro Forma Condensed Combined Statements of Operations
For the period from January 1, 1999 to November 23, 1999
(in thousands)
<TABLE>
<CAPTION>
US GAAP and Racal
BV Acquisition Accounting Telecom Racal
and Carve-Out Policy Interim Telecom
Historical(a) Adjustments Adjustments(d) Period(e) Pro Forma
------------ -------------- -------------- --------- ---------
<S> <C> <C> <C> <C> <C>
Operating Revenues...... $390,578 $(110,354)(c) $(22,447) $47,937 $306,019
305 (b)
-------- --------- -------- ------- --------
Operating Expenses:
Operating, selling,
general and
administrative........ 355,110 (99,595)(c) 1,737 53,544 311,042
246 (b)
Depreciation and
amortization.......... 61,774 (11,978)(c) (3,340) 6,265 52,716
(5)(b)
-------- --------- -------- ------- --------
416,884 (111,332) (1,603) 59,809 363,758
-------- --------- -------- ------- --------
Operating income
(loss)................. (26,306) 1,283 (20,844) (11,872) (57,739)
Equity in income (loss)
of affiliates.......... (560) -- -- (560)
Other income (expense):
Interest expense....... (30,905) (3)(b) -- -- (30,908)
Interest income........ -- 3,089 (c) -- 767 3,856
Other income
(expense)............. 76,390 (76,021)(c) -- -- 369
-------- --------- -------- ------- --------
Income (loss) before
extraordinary item,
taxes and cumulative
effect of changes in
accounting principle... 18,619 (71,652) (20,844) (11,105) (84,982)
(Provision) benefit for
income taxes.......... 3,563 (70)(b) 18,918 7,705 30,116
-------- --------- -------- ------- --------
Income (loss) before
extraordinary item and
cumulative effect of
changes in accounting
principle.............. $ 22,182 $ (71,722) $ (1,926) $(3,400) $(54,866)
======== ========= ======== ======= ========
</TABLE>
(a) This column represents the combined historical results of operations
of Racal Telecommunications Limited, Racal Telecommunications Networks
Limited, Racal Internet Services Limited and Racal Telecommunications
Inc., which we refer to as "Racal Telecom", in accordance with United
Kingdom GAAP translated into United States dollars for the 41 weeks
ended October 15, 1999.
(b) We are treated as having acquired the business and assets of Racal
Network Services BV as that company was in the process of being
reorganized into Racal Telecommunications Networks Limited in the
course of 1999. These adjustments reflect the financial position and
results of operations of Racal Network Services BV as if this
transaction had been completed as of the dates or at the beginning of
the periods presented.
(c) In July 1999, the Racal Telecom business was separated into three
divisions: Racal Telecom, Racal Translink and Racal Fieldforce. On
October 1, 1999, the Racal Translink and Racal Fieldforce businesses
were sold to another company within the Racal Electronics plc group.
This adjustment eliminates the results of operations of Racal
Translink and Racal Fieldforce, reflects the likely effect of the
trading among Racal Translink, Racal Fieldforce and Racal Telecom
based on contractual obligations among the divisions and adjusts the
profit on disposal of these operations. No taxation liabilities were
incurred on the disposal as this disposal was to another Racal
Electronics plc group company.
(d) The Racal Telecom combined financial statements are prepared in
accordance with United Kingdom GAAP which differ in certain material
respects from United States GAAP. The differences that are material
are disclosed in the notes to the combined financial statements,
incorporated by reference. In addition, an adjustment has been made to
treat sales of dark fiber made by Racal Telecom after July 1, 1999 as
operating leases, recognizing income over the period of the service
provision in accordance with the provision of FASB Interpretation No
43.
(e) This column represents Racal Telecom's historical results from October
16, 1999 to November 23, 1999.
18
<PAGE>
(14) This adjustment reflects the amortization expense of the excess
consideration over the net assets acquired (goodwill), which we have
preliminarily estimated to be $1.6 billion. We have tentatively considered
the carrying value of the acquired assets to approximate fair value, with
all excess of those acquisition costs being attributable to goodwill. We
are in the process of fully evaluating the assets to be acquired and, as a
result, the purchase price allocation among the tangible and intangible
assets acquired, and their related useful lives, may change. We currently
anticipate that goodwill associated with the transaction will be amortized
over a 25-year life.
(15) This amount reflects the assumed interest expense, at a 9% interest rate,
including the amortization of deferred financing fees incurred on the $1.1
billion debt assumed issued as of the earliest date presented in
connection with the acquisition of Racal Telecom.
(16) This adjustment represents the tax benefit resulting from the interest
expense assumed in connection with the debt issued for the acquisition of
Racal Telecom.
(17) These adjustments represent the assumed interest expenses, including
amortization of deferred financing fees, in connection with the issuance
and assumed repayment of existing debt related to the 9 1/8% senior notes
due 2006 and 9 1/2% senior notes due 2009 of Global Crossing Holdings, our
6 3/8% cumulative convertible preferred stock and our 7% cumulative
convertible preferred stock, including the over-allotment. In connection
with the issuance of the 9 1/8% senior notes due 2006 and 9 1/2% senior
notes due 2009 of Global Crossing Holdings, we incurred approximately
$29.7 million in financing fees. The financing fees will be amortized over
the life of the debt.
(18) Pro forma per share data are based on the number of our common shares that
would have been outstanding had the merger occurred at the earliest date
presented. We issued 355,181,000 shares in connection with the Frontier
merger.
19
<PAGE>
RISK FACTORS
Before investing in our securities, you should carefully consider the risks
described below and in any accompanying prospectus supplement as well as the
other information included or incorporated by reference in this prospectus.
Risk Factors Relating to Our Business
We cannot assure you of the successful integration of newly acquired
businesses. We cannot assure you that the expected benefits will be achieved.
Part of our growth strategy is to make selective strategic acquisitions of
businesses operated by others. Achieving the benefits of these acquisitions
will depend in part on the integration of those businesses with our business in
an efficient manner. We cannot assure you that this will happen or that it will
happen in a timely manner. The consolidation of operations following these
acquisitions will often require substantial attention from management. The
diversion of management attention and any difficulties encountered in the
transition and integration process could have a material adverse effect on the
revenue, levels of expenses and operating results of the combined company. We
cannot assure you that the combined company will realize any of the anticipated
benefits of any acquisition.
It may be difficult to evaluate our business because we have a limited
operating history.
We were organized in March 1997 and, with the exception of our Frontier,
Global Marine Systems and Racal Telecom subsidiaries, have a limited operating
history. Because of this limited history and our rapid growth through
successive acquisitions, it may be difficult for potential investors to
evaluate the performance of our operations. In particular, comparisons of our
results of operations from one period to another may not be fully indicative of
our current ability to conduct our business.
We may encounter difficulties in completing our cable systems currently under
development.
Our ability to achieve our strategic objectives will depend in large part
upon the successful, timely and cost-effective completion of our cable systems
currently under development, as well as on achieving substantial capacity sales
on these systems once they become operational and on our other operational
systems. The construction of these systems will be affected by a variety of
factors, uncertainties and contingencies, many of which are beyond our control,
including:
. our ability to manage their construction effectively;
. our ability to obtain all construction and operating permits and
licenses;
. third-party contractors performing their obligations on schedule; and
. our ability to enter into favorable construction contracts with a
limited number of suppliers.
These factors may significantly delay or prevent completion of one or more
of our systems currently under development, which could have a material adverse
effect on our business, financial condition and results of operations.
We cannot assure you that each of these systems will be completed at the
cost and in the time frame currently estimated by us, or even at all. Although
we award contracts for construction of our systems to suppliers who in most
cases are expected to be bound by a fixed-price construction cost schedule and
to provide guarantees in respect of completion dates and system design
specifications, we cannot assure you that the actual construction costs or the
time required to complete these systems will not exceed our current estimates.
These circumstances could have a material adverse effect on our business,
financial condition and results of operations.
20
<PAGE>
Our revenue growth plan depends on product and service expansion.
We intend to grow revenue and profits by:
. introducing new services and products;
. developing or acquiring additional cable systems; and
. upgrading capacity on our planned systems.
Our inability to effect these expansions of our products and services could
have a material adverse effect on our business, financial condition and results
of operations.
We face competition which may reduce demand for our products and services.
The international telecommunications industry is highly competitive. We
compete primarily on the basis of price, availability, service quality and
reliability, customer service and the location of our systems and services. The
ability of our competitors to provide comparable products and services at
similar prices could have a material adverse effect on demand for our products
and services. In addition, much of our planned growth is predicated upon the
growth in demand for international telecommunications capacity and services. We
cannot assure you that this anticipated demand growth will occur.
We are growing rapidly in a changing industry.
Our strategy is to be the premier provider of global broadband
telecommunication services for both wholesale and retail customers. As a result
of this aggressive strategy, we are experiencing rapid expansion and expect it
to continue for the foreseeable future. This growth has increased our operating
complexity. At the same time, the international telecommunications industry is
changing rapidly due to, among other things:
. the easing of regulatory constraints;
. the privatization of established carriers;
. the expansion of telecommunications infrastructure;
. the growth in demand for bandwidth caused by expansion of Internet and
data transmissions;
. the globalization of the world's economies; and
. the changing technology for wired, wireless and satellite communication.
We cannot assure you that we will succeed in adapting to the rapid changes
in the international telecommunications industry.
We may have difficulty in obtaining the additional financing required to
develop our business.
In order to further implement our aggressive growth strategy, we anticipate
that we will require substantial additional equity and debt financing. Under
our business plan, we and our affiliates expect to require significant
financing by the end of 2000 to build out the Global Crossing network and
provide additional services to our customers. Obtaining additional financing
will be subject to a number of factors, including:
. the state of operations of our company;
. our actual or anticipated results of operations, financial condition and
cash flows;
. investor sentiment towards companies with substantial international
operations; and
. generally prevailing market conditions.
21
<PAGE>
If additional funds are raised through the issuance of equity securities,
the percentage ownership of our then current shareholders will be reduced, and
the new equity securities may have rights, preferences or privileges senior to
those of the holders of our common stock. If additional funds are raised
through the issuance of debt securities, these securities would have some
rights, preferences and privileges senior to those of the holders of our common
stock, and the terms of this debt could impose restrictions on our operations
and result in significant interest expense to us. In the event that we are
unable to raise sufficient financing on satisfactory terms and conditions in
the future, our company would be adversely affected.
We face price declines that could adversely affect our business.
Advances in fiber optic technology have resulted in significant per circuit
price declines in the fiber optic cable transmission industry. Recent changes
in technology caused prices for telecommunications capacity and services to go
down even further. If there is less demand than we project or a bigger drop in
prices than we project, there could be a material adverse effect on our
business, financial condition and results of operations. We cannot assure you,
even if our projections with respect to those factors are realized, that we
will be able to implement our strategy or that our strategy will be successful
in the rapidly evolving telecommunications market.
We confront several system risks that could affect our operations.
Each of our systems is and will be subject to the risks inherent in a large-
scale, complex fiber optic telecommunications system. The operation,
administration, maintenance and repair of our systems requires the coordination
and integration of sophisticated and highly specialized hardware and software
technologies and equipment located throughout the world. We cannot assure you
that our systems will continue to function as expected in a cost-effective
manner. The failure of the hardware or software to function as required could
render a cable system unable to perform at design specifications.
Each of our undersea systems either has or is expected to have a design life
of generally 25 years, while each of our terrestrial systems either has or is
expected to have a design life of at least 20 years. The economic lives of
these systems, however, are expected to be shorter than their design lives, and
we cannot assure you of the actual useful life of any of these systems. A
number of factors will ultimately affect the useful life of each of our
systems, including:
. quality of construction;
. unexpected damage or deterioration; and
. technological or economic obsolescence.
Failure of any of our systems to operate for its full design life could have
a material adverse effect on our business, financial condition and results of
operations.
Our success depends on our ability to maintain, hire and successfully integrate
key personnel.
Our future success depends on the skills, experience and efforts of our
officers and key technical and sales employees. In particular, our senior
management has significant experience in the telecommunications and Internet
industries, and the loss of any of them could negatively affect our ability to
execute our business strategy. In addition, we cannot assure you that we will
be able to integrate new management into our existing operations. Competition
for these individuals is intense, and we may not be able to attract, motivate
and retain highly skilled qualified personnel. We do not have "key person" life
insurance policies covering any of our employees.
22
<PAGE>
We face risks associated with international operations.
Because we will derive substantial revenue from international operations and
intend to have substantial physical assets in several jurisdictions along our
routes, our business is subject to risks inherent in international operations,
including:
. political and economic conditions;
. unexpected changes in regulatory environments;
. exposure to different legal standards; and
. difficulties in staffing and managing operations.
We have not experienced any material adverse effects with respect to our
foreign operations arising from these factors. However, problems associated
with these risks could arise in the future. Finally, managing operations in
multiple jurisdictions may place further strain on our ability to manage our
overall growth.
Because many of our customers deal predominantly in foreign currencies, we may
be exposed to exchange rate risks and our net income may suffer due to currency
translations.
We primarily invoice for our services in United States dollars; however,
most of our customers and many of our prospective customers derive their
revenue in currencies other than United States dollars. The obligations of
customers with substantial revenue in foreign currencies may be subject to
unpredictable and indeterminate increases in the event that such currencies
devalue relative to the United States dollar. Furthermore, such customers may
become subject to exchange control regulations restricting the conversion of
their revenue currencies into United States dollars. In such event, the
affected customers may not be able to pay us in United States dollars. In
addition, where we invoice for our services in currencies other than United
States dollars, our net income may suffer due to currency translations in the
event that such currencies devalue relative to the United States dollar and we
do not elect to enter into currency hedging arrangements in respect of those
payment obligations.
Our operations are subject to regulation in the United States and abroad and
require us to obtain and maintain a number of governmental licenses and
permits. If we fail to comply with those regulatory requirements or obtain and
maintain those licenses and permits, we may not be able to conduct our
business.
In the United States, our intrastate, interstate, and international
telecommunications networks and services are subject to regulation at the
federal, state, and local levels. We also have facilities and provide services
in numerous countries in Europe, Latin America, and Asia. Our operations in
those countries are subject to regulation at the national level and, in some
cases, at the state, provincial, and local levels.
. Our interstate and international operations in the United States are
governed by the Communications Act of 1934, as amended by the
Telecommunications Act of 1996. There are several ongoing proceedings at
the FCC and in the federal courts regarding the implementation of
various aspects of the Telecommunications Act. The outcomes of these
proceedings may affect the manner in which we are permitted to provide
our services in the United States and may have a material adverse effect
on our operations.
. The intrastate activities of our local telephone service companies are
regulated by the states in which they do business. A number of states in
which we operate are conducting proceedings related to the provision of
services in a competitive telecommunications environment. These
proceedings may affect the manner in which we are permitted to provide
our services in one or more states and may have a material adverse
effect on our operations.
23
<PAGE>
. Our operations outside the United States are governed by the laws of the
countries in which we operate. The regulation of telecommunications
networks and services outside the United States varies widely. In some
countries, the range of services that we are legally permitted to
provide may be limited. In other countries, existing telecommunications
legislation is in the process of development, is unclear or
inconsistent, or is applied in an unequal or discriminatory fashion. Our
inability or failure to comply with the telecommunications laws and
regulations of one or more of the countries in which we operate could
result in the temporary or permanent suspension of operations in one or
more countries. We also may be prohibited from entering certain
countries at all or from providing all of our services in one or more
countries. In addition, many of the countries in which we operate are
conducting proceedings that will affect the implementation of their
telecommunications legislation. We cannot be certain of the outcome of
these proceedings. These proceedings may affect the manner in which we
are permitted to provide our services in these countries and may have a
material adverse effect on our operations.
. In the ordinary course of constructing our networks and providing our
services we are required to obtain and maintain a variety of
telecommunications and other licenses and authorizations in the
countries in which we operate. We also must comply with a variety of
regulatory obligations. Our failure to obtain or maintain necessary
licenses and authorizations, or to comply with the obligations imposed
upon license-holders in one or more countries, may result in sanctions,
including the revocation of authority to provide services in one or more
countries.
We depend on third parties for many functions. If the services of those third
parties are not available to us, we may not be able to conduct our business.
We depend and will continue to depend upon third parties to:
. construct some of our systems and provide equipment and maintenance;
. provide access to a number of origination and termination points of our
systems in various jurisdictions;
. construct and operate landing stations in a number of those
jurisdictions;
. acquire rights of way;
. provide terrestrial capacity to our customers through contractual
arrangements; and
. act as joint venture participants with regard to some of our current and
potential future systems.
We cannot assure you that third parties will perform their contractual
obligations or that they will not be subject to political or economic events
which may have a material adverse effect on our business, financial condition
and results of operations. If they fail to perform their obligations, we may
not be able to conduct our business. If any of our joint venture participants
experiences a change in strategic direction such that their strategy regarding
our mutual joint venture diverges from our own, we may not be able to realize
the benefits anticipated to be derived from the joint venture.
We have substantial leverage which may limit our ability to comply with the
terms of our indebtedness and may restrict our ability to operate.
Our significant indebtedness could adversely affect us by leaving us with
insufficient cash to fund operations and impairing our ability to obtain
additional financing. The amount of our debt could have important consequences
for our future, including, among other things:
. cash from operations may be insufficient to meet the principal and
interest on our indebtedness as it becomes due;
. payments of principal and interest on borrowings may leave us with
insufficient cash resources for our operations; and
. restrictive debt covenants may impair our ability to obtain additional
financing.
24
<PAGE>
We have incurred a high level of debt. As of December 31, 1999, we and our
consolidated subsidiaries had a total of $8,051 million of total liabilities,
including approximately $5,056 million in senior indebtedness, of which $1,295
million was secured. As of that date, we additionally had outstanding
cumulative convertible preferred stock with a face value of $1,650 million. Our
subsidiary, Global Crossing Holdings, also has mandatorily redeemable preferred
stock outstanding with a face value of $500 million. In addition, our Pacific
Crossing joint venture entered into an $850 million non-recourse credit
facility, under which it had incurred $750 million of indebtedness as of
December 31, 1999.
Our ability to repay our debt depends upon a number of factors, many of
which are beyond our control. In addition, we rely on dividends, loan
repayments and other intercompany cash flows from our subsidiaries to repay our
obligations. Our operating subsidiaries have entered into a senior secured
corporate credit facility. Accordingly, the payment of dividends from these
operating subsidiaries and the making and repayments of loans and advances are
subject to statutory, contractual and other restrictions.
In addition, if we are unable to generate sufficient cash flow to meet our
debt service requirements, we may have to renegotiate the terms of our long-
term debt. We cannot assure you that we would be able to renegotiate
successfully those terms or refinance our indebtedness when required or that
satisfactory terms of any refinancing would be available. If we were not able
to refinance our indebtedness or obtain new financing under these
circumstances, we would have to consider other options, such as:
. sales of some assets;
. sales of equity;
. negotiations with our lenders to restructure applicable indebtedness; or
. other options available to us under applicable law.
Our principal shareholders may be able to influence materially the outcome of
shareholder votes.
As of March 3, 2000, Pacific Capital Group and its affiliates had a 11.98%
beneficial ownership interest in us. We have entered into various transactions
with Pacific Capital Group and its affiliates and assumed the on-going
development of some of our systems from an affiliate of Pacific Capital Group.
Mr. Gary Winnick, chairman of our board of directors, controls Pacific Capital
Group and its subsidiaries. In addition, several of our other officers and
directors are affiliated with Pacific Capital Group. Furthermore, as of March
3, 2000, Canadian Imperial Bank of Commerce and its affiliates had a 9.69%
beneficial ownership interest in us. Canadian Imperial Bank of Commerce and its
affiliates have acted as underwriter, lender or initial purchaser in several of
our financial transactions in connection with the development and construction
of our systems. Several members of our board of directors are employees of an
affiliate of Canadian Imperial Bank of Commerce.
As of March 3, 2000, Pacific Capital Group and Canadian Imperial Bank of
Commerce collectively beneficially owned 21.67% of the outstanding shares of
our common stock. Accordingly, Pacific Capital Group and Canadian Imperial Bank
of Commerce may be able to influence materially the outcome of matters
submitted to a vote of our shareholders, including the election of directors.
Officers and directors own a substantial portion of us and may have conflicts
of interest.
Our executive officers and directors have substantial equity interests in
us. As of March 3, 2000, all our directors and executive officers as a group
collectively beneficially owned 24.72% of our outstanding common stock,
including shares beneficially owned by Pacific Capital Group and certain shares
beneficially owned by Canadian Imperial Bank of Commerce. Some of these
individuals have also received amounts from us due to advisory services fees
paid to Pacific Capital Group and its affiliates.
25
<PAGE>
Some of our directors and executive officers also serve as officers and
directors of other companies. Additionally, some of our officers and directors
are active investors in the telecommunications industry. Service as one of our
directors or officers and as a director or officer of another company could
create conflicts of interest when the director or officer is faced with
decisions that could have different implications for us and the other company.
A conflict of interest could also exist with respect to allocation of time and
attention of persons who are our directors or officers and directors and
officers of another company. The pursuit of these other business interests
could distract these officers from pursuing opportunities on our behalf. These
conflicts of interest could have a material adverse effect on our business,
financial condition and results of operations.
We cannot predict our future tax liabilities.
We believe that a significant portion of the income derived from our
undersea systems will not be subject to tax by any of (1) Bermuda, which
currently does not have a corporate income tax, or (2) some other countries in
which we conduct activities or in which our customers are located. However, we
base this belief upon:
. the anticipated nature and conduct of our business, which may change;
and
. our understanding of our position under the tax laws of the various
countries in which we have assets or conduct activities, which position
is subject to review and possible challenge by taxing authorities and to
possible changes in law, which may have retroactive effect.
We cannot predict the amount of tax to which we may become subject and
cannot be certain that any of these factors would not have a material adverse
effect on our business, financial condition and results of operations.
Our shareholders may be subject to Foreign Personal Holding Company, Passive
Foreign Investment Company, Controlled Foreign Corporation and Personal
Holding Company rules.
We believe that neither we nor any of our non-United States subsidiaries
are a foreign personal holding company and do not expect that either we or any
of our affiliates will become a foreign personal holding company. However, we
cannot assure you in this regard. If one of our shareholders is a United
States person and we or one of our non-United States subsidiaries are
classified as a foreign personal holding company, then that shareholder would
be required to pay tax on its pro rata share of our or our relevant non-United
States subsidiary's undistributed foreign personal holding income. We intend
to manage our affairs so as to attempt to avoid or minimize having income
imputed to United States persons under these rules, to the extent this
management of our affairs would be consistent with our business goals,
although we cannot assure you in this regard.
We believe that we are not a passive foreign investment company and do not
expect to become a passive foreign investment company in the future. However,
we cannot assure you in this regard. In addition, our expectations are based,
in part, on interpretations of existing law that we believe are reasonable,
but which have not been approved by any taxing authority. If we were a passive
foreign investment company, then any of our shareholders that is a United
States person could be liable to pay tax at the then prevailing rates on
ordinary income plus an interest charge upon some distributions by us or when
that shareholder sold our capital stock at a gain.
Furthermore, additional tax considerations would apply if we or any of our
affiliates were a controlled foreign corporation or a personal holding
company.
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
We have included or incorporated by reference in this prospectus forward-
looking statements that state our own or our management's intentions, beliefs,
expectations or predictions for the future. Forward-looking statements are
subject to a number of risks, assumptions and uncertainties which could cause
our actual results to differ materially from those projected in the 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 the nature of telecommunications regulation in the United
States and other countries;
. changes in business strategy;
. the successful integration of newly acquired businesses;
. the impact of technological change; and
. other risks referenced from time to time in our filings with the SEC.
USE OF PROCEEDS
We will use the net proceeds from the sale of securities that we may offer
under this prospectus and any accompanying prospectus supplement for general
corporate purposes. General corporate purposes may include repayment of debt,
capital expenditures, possible acquisitions, investments, repurchase of our
capital stock and any other purposes that we may specify in any prospectus
supplement. We may invest the net proceeds temporarily or use them to repay
short-term debt until we use them for their stated purpose.
DIVIDEND POLICY
We do not anticipate paying dividends on our common stock in the foreseeable
future. The terms of some of our debt instruments place limitations on our
ability to pay dividends. Future dividends on our common stock, if any, will be
at the discretion of our board of directors and will depend on, among other
things, our operations, capital requirements and surplus, general financial
condition, contractual restrictions and such other factors as our board of
directors may deem relevant.
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DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the debt securities summarizes
some general terms that will apply to the debt securities. The description is
not complete, and we refer you to the indenture which we filed with the SEC as
an exhibit to the registration statement of which this prospectus is a part.
General
The debt securities will be either our senior debt securities or our
subordinated debt securities. We will issue our debt securities under an
indenture between us and United States Trust Company of New York, as trustee.
The indenture may be supplemented by one or more supplemental indentures. We
refer to the indenture, together with any supplemental indenture, as the
"indenture" throughout the remainder of this prospectus.
The indenture does not limit the amount of debt securities that we may
issue. The indenture provides that debt securities may be issued up to the
principal amount that we authorize from time to time. The senior debt
securities will be unsecured and will have the same rank as all of our other
unsecured and unsubordinated debt. The subordinated debt securities will be
unsecured and will be subordinated and junior to all senior indebtedness. The
terms of the indenture do not contain any covenants or other provisions
designed to give holders of any debt securities protection against changes in
our operations, financial condition or transactions involving us, but those
provisions may be included in the documents that include the specific terms of
the debt securities.
We may issue the debt securities in one or more separate series of senior
debt securities and subordinated debt securities. The prospectus supplement
relating to the particular series of debt securities being offered will specify
the particular amounts, prices and terms of those debt securities. These terms
may include:
. the title of the debt securities;
. any limit upon the aggregate principal amount of the debt securities;
. if other than United States dollars, the currency or currencies,
including the euro and other composite currencies, in which payments on
the debt securities will be payable and whether the holder may elect
payment to be made in a different currency;
. the date or dates when payments on the principal must be made or the
method of determining that date or dates;
. interest rates, and the dates from which interest, if any, will accrue,
and the dates when interest is payable and the maturity;
. the right, if any, to extend the interest payment periods and the
duration of the extensions;
. the places where payments may be made and the manner of payments;
. any mandatory or optional redemption provisions;
. subordination provisions;
. the denominations in which debt securities will be issued;
. the terms applicable to any debt securities issued at a discount from
their stated principal amount;
. the currency or currencies of payment of principal or interest; and the
period, if any, during which a holder may elect to pay in a currency
other than the currency in which the debt securities are denominated;
. if the amount of payments of principal or interest is to be determined
by reference to an index or formula, or based on a coin or currency
other than that in which the debt securities are stated to be payable,
the manner in which these amounts are determined and the calculation
agent, if any;
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. whether the debt securities will be issued in fully registered form
without coupons or in bearer form, with or without coupons, or any
combination of these, and whether they will be issued in the form of one
or more global securities in temporary or definitive form;
. whether and on what terms we will pay additional amounts to holders of
the debt securities that are not United States persons in respect of any
tax, assessment or governmental charge withheld or deducted and, if so,
whether and on what terms we will have the option to redeem the debt
securities rather than pay the additional amounts;
. the certificates or forms required for the issuance of debt securities
in definitive form;
. the trustees, depositaries, authenticating or paying agents, transfer
agents or registrars of the debt securities;
. any deletions of, or changes or additions to, the events of default or
covenants;
. conversion or exchange provisions, if any, including conversion or
exchange prices or rates and adjustments to those prices and rates; and
. any other specific terms of the debt securities.
If any debt securities are sold for any foreign currency or currency unit or
if any payments on the debt securities are payable in any foreign currency or
currency unit, the prospectus supplement will contain any restrictions,
elections, tax consequences, specific terms and other information with respect
to the debt securities and the foreign currency or currency unit.
Some of the debt securities may be issued as original issue discount debt
securities. Original issue discount securities may bear no interest or bear
interest at below-market rates and will be sold at a discount below their
stated principal amount and may bear no or below market interest. The
prospectus supplement will also contain any special tax, accounting or other
information relating to original issue discount securities other kinds of debt
securities that may be offered, including debt securities linked to an index or
payable in currencies other than United States dollars.
Registrar and Paying Agent
The debt securities may be presented for registration of transfer or for
exchange at the corporate trust office of the security registrar or at any
other office or agency that we maintain for those purposes. In addition, the
debt securities may be presented for payment of principal, interest and any
premium at the office of the paying agent or at any office or agency that we
maintain for those purposes.
United States Trust Company of New York is our designated security registrar
and paying agent for the debt securities.
Global Securities
We may issue the debt securities of a series in whole or in part in the form
of one or more global certificates that will be deposited with a depositary we
will identify in a prospectus supplement. We may issue global debt securities
in either registered or unregistered form and in either temporary or definitive
form. We will describe the specific terms of the depositary arrangement with
respect to any series of debt securities in the prospectus supplement.
Conversion or Exchange Rights
Debt securities may be convertible into or exchangeable for shares of our
equity securities or equity securities of our subsidiaries or affiliates. The
terms and conditions of conversion or exchange will be stated in the applicable
prospectus supplement. The terms will include, among others, the following:
. the conversion or exchange price;
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. the conversion or exchange period;
. provisions regarding the convertibility or exchangeability of the debt
securities, including who may convert or exchange;
. events requiring adjustment to the conversion or exchange price;
. provisions affecting conversion or exchange in the event of our
redemption of the debt securities; and
. any anti-dilution provisions, if applicable.
Registered Global Securities
Unless and until it is exchanged in whole or in part for debt securities in
definitive registered form, a registered global security may not be
transferred except as a whole:
. by the depositary for that registered global security to its nominee;
. by a nominee of the depositary to the depositary or another nominee of
the depositary; or
. by the depositary or its nominee to a successor of the depositary or a
nominee of the successor.
The prospectus supplement relating to a series of debt securities will
describe the specific terms of the depositary arrangement involving any
portion of the series represented by a registered global security.
We anticipate that the following provisions will apply to all depositary
arrangements for debt securities:
. ownership of beneficial interests in a registered global security will
be limited to persons that have accounts with the depositary for that
registered global security, these persons being referred to as
"participants", or persons that may hold interests through participants;
. upon the issuance of a registered global security, the depositary for
the registered global security will credit, on its book-entry
registration and transfer system, the participants' accounts with the
respective principal amounts of the debt securities represented by the
registered global security beneficially owned by the participants;
. any dealers, underwriters or agents participating in the distribution of
the debt securities will designate the accounts to be credited; and
. ownership of beneficial interest in that registered global security will
be shown on, and the transfer of that ownership interest will be
effected only through, records maintained by the depositary for that
registered global security for interests of participants and on the
records of participants for interests of persons holding through
participants.
The laws of some states may require that specified purchasers of securities
take physical delivery of the securities in definitive form. These laws may
limit the ability of those persons to own, transfer or pledge beneficial
interests in registered global securities.
So long as the depositary for a registered global security, or its nominee,
is the registered owner of that registered global security, the depositary or
that nominee will be considered the sole owner or holder of the debt
securities represented by the registered global security for all purposes
under the indenture. Except as stated below, owners of beneficial interests in
a registered global security:
. will not be entitled to have the debt securities represented by a
registered global security registered in their names;
. will not receive or be entitled to receive physical delivery of the debt
securities in definitive form; and
. will not be considered the owners or holders of the debt securities
under the indenture.
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Accordingly, each person owning a beneficial interest in a registered global
security must rely on the procedures of the depositary for the registered
global security and, if the person is not a participant, on the procedures of a
participant through which the person owns its interest, to exercise any rights
of a holder under the indenture.
We understand that under existing industry practices, if we request any
action of holders or if an owner of a beneficial interest in a registered
global security desires to give or take any action that a holder is entitled to
give or take under the indenture, the depositary for the registered global
security would authorize the participants holding the relevant beneficial
interests to give or take the action, and the participants would authorize
beneficial owners owning through the participants to give or take the action or
would otherwise act upon the instructions of beneficial owners holding through
them.
We will make payments of principal and premium, if any, and interest, if
any, on debt securities represented by a registered global security registered
in the name of a depositary or its nominee to the depositary or its nominee as
the registered owners of the registered global security. None of us, the
trustee or any other of our agents or agents of the trustee will be responsible
or liable for any aspect of the records relating to, or payments made on
account of, beneficial ownership interests in the registered global security or
for maintaining, supervising or reviewing any records relating to the
beneficial ownership interests.
We expect that the depositary for any debt securities represented by a
registered global security, upon receipt of any payments of principal and
premium, if any, and interest, if any, in respect of the registered global
security, will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the
registered global security as shown on the records of the depositary. We also
expect that standing customer instructions and customary practices will govern
payments by participants to owners of beneficial interests in the registered
global security held through the participants, as is now the case with the
securities held for the accounts of customers in bearer form or registered in
"street name". We also expect that any of these payments will be the
responsibility of the participants.
If the depositary for any debt securities represented by a registered global
security is at any time unwilling or unable to continue as depositary or stops
being a clearing agency registered under the Exchange Act, we will appoint an
eligible successor depositary. If we fail to appoint an eligible successor
depositary within 90 days, we will issue the debt securities in definitive form
in exchange for the registered global security. In addition, we may at any time
and in our sole discretion decide not to have any of the debt securities of a
series represented by one or more registered global securities. In that
event,we will issue debt securities of the series in a definitive form in
exchange for all of the registered global securities representing the debt
securities. The trustee will register any debt securities issued in definitive
form in exchange for a registered global security in the name or names as the
depositary, based upon instructions from its participants, will instruct the
trustee.
We may also issue bearer debt securities of a series in the form of one or
more global securities, referred to as "bearer global securities". We will
deposit these securities with a common depositary for Euroclear System and
Clearstream Banking, or with a nominee for the depositary identified in the
prospectus supplement relating to the series. The prospectus supplement
relating to a series of debt securities represented by a bearer global security
will describe the applicable terms and procedures. These will include the
specific terms of the depositary arrangement and any specific procedures for
the issuance of debt securities in definitive form in exchange for a bearer
global security, in proportion to the series represented by a bearer global
security.
Events of Default
Unless otherwise provided for in the prospectus supplement, the term "event
of default", when used in the indenture means any of the following:
. failure to pay interest for 30 days after the date payment is due and
payable; however, if we extend an interest payment period under the
terms of the debt securities, the extension will not be a failure to pay
interest;
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. failure to pay principal or premium, if any, on any debt security when
due, either at maturity, upon any redemption, by declaration or
otherwise;
. failure to make sinking fund payments, if any, when due;
. failure to perform other covenants for 60 days after notice that
performance was required;
. events in bankruptcy, insolvency or reorganization of our company; or
. any other event of default provided in the applicable resolution of our
board of directors or the supplemental indenture under which we issue a
series of debt securities.
An event of default for a particular series of debt securities does not
necessarily constitute an event of default for any other series of debt
securities issued under the indenture. If an event of default relating to the
payment of interest, principal or any sinking fund installment involving any
series of debt securities has occurred and is continuing, the trustee or the
holders of not less than 25% in aggregate principal amount of the debt
securities of each affected series may declare the entire principal of all the
debt securities of that series to be due and payable immediately.
If an event of default relating to the performance of other covenants occurs
and is continuing for a period of 60 days after notice of that event of
default, or if any other event of default occurs and is continuing involving
all of the series of senior debt securities, then the trustee or the holders of
not less than 25% in aggregate principal amount of all of the series of senior
debt securities may declare the entire principal amount of all of the series of
senior debt securities due and payable immediately.
Similarly, if an event of default relating to the performance of other
covenants occurs and is continuing for a period of 60 days after notice, or if
any other event of default occurs and is continuing involving all of the series
of subordinated debt securities, then the trustee or the holders of not less
than 25% in aggregate principal amount of all of the series of subordinated
debt securities may declare the entire principal amount of all of the series of
subordinated debt securities due and payable immediately.
If, however, the event of default relating to the performance of other
covenants or any other event of default that has occurred and is continuing is
for less than all of the series of senior debt securities or subordinated debt
securities, then, the trustee or the holders of not less than 25% in aggregate
principal amount of each affected series of the senior debt securities or the
subordinated debt securities, as the case may be, may declare the entire
principal amount of all debt securities of that affected series due and payable
immediately. The holders of not less than a majority, or any applicable
supermajority, in aggregate principal amount of the debt securities of a series
may, after satisfying conditions, rescind and annul any of the above-described
declarations and consequences involving the series.
If an event of default relating to events in bankruptcy, insolvency or
reorganization occurs and is continuing, then the principal amount of all of
the debt securities outstanding, and any accrued interest, will automatically
become due and payable immediately, without any declaration or other act by the
trustee or any holder.
The indenture imposes limitations on suits brought by holders of debt
securities against us. Except for actions for payment of overdue principal or
interest, no holder of debt securities of any series may institute any action
against us under the indenture unless:
. the holder has previously given to the trustee written notice of default
and continuance of that default;
. the holders of at least 25% in principal amount of the outstanding debt
securities of the affected series have requested that the trustee
institute the action;
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. the requesting holders have offered the trustee reasonable indemnity for
expenses and liabilities that may be incurred by bringing the action;
. the trustee has not instituted the action within 60 days of the request;
and
. the trustee has not received inconsistent direction by the holders of a
majority in principal amount of the outstanding debt securities of the
series.
We will be required to file annually with the trustee a certificate, signed
by an officer of our company, stating whether or not the officer knows of any
default by us in the performance, observance or fulfillment of any condition or
covenant of the indenture.
Discharge, Defeasance and Covenant Defeasance
We can discharge or defease our obligations under the indenture as stated
below or as provided in the prospectus supplement.
Unless otherwise provided in the applicable prospectus supplement, we may
discharge obligations to holders of any series of debt securities that have not
already been delivered to the trustee for cancellation and that have either
become due and payable or are by their terms to become due and payable, or are
scheduled for redemption, within one year. We may effect a discharge by
irrevocably depositing with the trustee cash or United States government
obligations, as trust funds, in an amount certified to be enough to pay when
due, whether at maturity, upon redemption or otherwise, the principal of,
premium, if any, and interest on the debt securities and any mandatory sinking
fund payments.
Unless otherwise provided in the applicable prospectus supplement, we may
also discharge any and all of our obligations to holders of any series of debt
securities at any time, which we refer to as "defeasance". We may also be
released from the obligations imposed by any covenants of any outstanding
series of debt securities and provisions of the indenture, and we may omit to
comply with those covenants without creating an event of default under the
trust declaration, which we refer to as "covenant defeasance". We may effect
defeasance and covenant defeasance only if, among other things:
. we irrevocably deposit with the trustee cash or United States government
obligations, as trust funds, in an amount certified to be enough to pay
at maturity, or upon redemption, the principal, premium, if any, and
interest on all outstanding debt securities of the series;
. we deliver to the trustee an opinion of counsel from a nationally
recognized law firm to the effect that (a) in the case of covenant
defeasance, the holders of the series of debt securities will not
recognize income, gain or loss for United States federal income tax
purposes as a result of the defeasance, and will be subject to tax in
the same manner and at the same times as if no covenant defeasance had
occurred and (b) in the case of defeasance, either we have received
from, or there has been published by, the Internal Revenue Service a
ruling or there has been a change in applicable United States federal
income tax law, and based on that ruling or change, the holders of the
series of debt securities will not recognize income, gain or loss for
United States federal income tax purposes as a result of the defeasance
and will be subject to tax in the same manner as if no defeasance had
occurred; and
. in the case of subordinated debt securities, no event or condition will
exist that, based on the subordination provisions applicable to the
series, would prevent us from making payments of principal of, premium,
if any, and interest on any of the applicable subordinated debt
securities at the date of the irrevocable deposit referred to above or
at any time during the period ending on the 91st day after the deposit
date.
Although we may discharge or decrease our obligations under the indenture as
described in the two preceding paragraphs, we may not avoid, among other
things, our duty to register the transfer or exchange of any series of debt
securities, to replace any temporary, mutilated, destroyed, lost or stolen
series of debt securities or to maintain an office or agency in respect of any
series of debt securities.
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Modification of the Indenture
Except as provided in the prospectus supplement, the indenture provides that
we and the trustee may enter into supplemental indentures without the consent
of the holders of debt securities to:
. secure any debt securities;
. evidence the assumption by a successor corporation of our obligations
and the conversion of any debt securities into the capital stock of that
successor corporation, if the terms of those debt securities so provide;
. add covenants for the protection of the holders of debt securities;
. cure any ambiguity or correct any inconsistency in the indenture;
. establish the forms or terms of debt securities of any series; and
. evidence and provide for the acceptance of appointment by a successor
trustee.
The indenture also provides that we and the trustee may, with the consent of
the holders of not less than a majority in aggregate principal amount of debt
securities of all series of senior debt securities or of subordinated debt
securities then outstanding and affected, voting as one class, add any
provisions to, or change in any manner, eliminate or modify in any way the
provisions of, the indenture or modify in any manner the rights of the holders
of the debt securities. We and the trustee may not, however, without the
consent of the holder of each outstanding debt security affected:
. extend the final maturity of any debt security;
. reduce the principal amount or premium, if any;
. reduce the rate or extend the time of payment of interest;
. reduce any amount payable on redemption;
. change the currency in which the principal, unless otherwise provided
for a series, premium, if any, or interest is payable;
. reduce the amount of the principal of any debt security issued with an
original issue discount that is payable upon acceleration or provable in
bankruptcy;
. impair the right to institute suit for the enforcement of any payment on
any debt security when due; or
. reduce the percentage of holders of debt securities of any series whose
consent is required for any modification of the indenture.
Concerning the Trustee
The indenture provides that there may be more than one trustee under the
indenture, each for one or more series of debt securities. If there are
different trustees for different series of debt securities, each trustee will
be a trustee of a trust under the indenture separate and apart from the trust
administered by any other trustee under the indenture. Except as otherwise
indicated in this prospectus or any prospectus supplement, any action permitted
to be taken by a trustee may be taken by that trustee only on the one or more
series of debt securities for which it is the trustee under the indenture. Any
trustee under the indenture may resign or be removed from one or more series of
debt securities. All payments of principal of, premium, if any, and interest
on, and all registration, transfer, exchange, authentication and delivery of,
the debt securities of a series will be effected by the trustee for that series
at an office designated by the trustee of that series in New York, New York.
If the trustee becomes a creditor of our company, the indenture places
limitations on the right of the trustee to obtain payment of claims or to
realize on property received in respect of any such claim as security or
otherwise. The trustee may engage in other transactions. If it acquires any
conflicting interest relating to any duties concerning the debt securities,
however, it must eliminate the conflict or resign as trustee.
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The holders of a majority in aggregate principal amount of any series of
debt securities then outstanding will have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy available to
the trustee concerning the applicable series of debt securities, so long as the
direction:
. would not conflict with any rule of law or with the indenture;
. would not be unduly prejudicial to the rights of another holder of the
debt securities; and
. would not involve any trustee in personal liability.
The indenture provides that if an event of default occurs, is not cured and
is known to any trustee, the trustee must use the same degree of care as a
prudent person would use in the conduct of his or her own affairs in the
exercise of the trust's power. The trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
of the holders of the debt securities, unless they have offered to the trustee
security and indemnity satisfactory to the trustee.
No Individual Liability of Incorporators, Shareholders, Officers or Directors
The indenture provides that no incorporator and no past, present or future
shareholder, officer or director of our company or any successor corporation in
those capacities will have any individual liability for any of our obligations,
covenants or agreements under the debt securities or the indenture.
Governing Law
The indenture and the debt securities will be governed by, and construed in
accordance with, the laws of the State of New York.
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DESCRIPTION OF PREFERRED STOCK
We have authorized 20,000,000 shares of preferred stock, par value $0.01 per
share. At March 20, 2000, we had (1) 10,000,000 shares of our 6 3/8% cumulative
convertible preferred stock issued and outstanding, (2) 2,600,000 shares of our
7% cumulative convertible preferred stock issued and outstanding and (3)
400,000 shares of our 6 3/8% cumulative convertible preferred stock, series B,
issued and outstanding.
Our board of directors is authorized to:
.authorize the issuance of shares of preferred stock in one or more series;
. establish the number of shares in each series; and
. fix the designations, powers, preferences and rights of each series and
the qualifications, limitations or restrictions of each series.
Each time that we issue a new series of preferred stock, we will file with
the SEC a definitive certificate of designations. In addition, the prospectus
supplement relating to that new series of preferred stock will specify the
particular amount, price and other terms of that new series. These terms will
include:
. the designation of the title of the series;
. dividend rates;
. redemption provisions, if any;
. special or relative rights in the event of liquidation, dissolution,
distribution or winding up of Global Crossing;
. sinking fund provisions, if any;
. whether the preferred stock will be convertible into our common stock or
any other of our securities or exchangeable for securities of any other
person;
. voting rights; and
. any other preferences, privileges, powers, rights, qualifications,
limitations and restrictions, not inconsistent with our bye-laws.
The shares of any series of preferred stock will be, when issued, fully paid
and non-assessable. The holders of the preferred stock will not have preemptive
rights.
Ranking
Each new series of preferred stock will rank with respect to each other
series of our preferred stock as specified in the prospectus supplement
relating to that new series of preferred stock.
Dividends
Holders of each new series of preferred stock will be entitled to receive
cash dividends or dividends in kind, if declared by our board of directors out
of funds legally available for dividends. For each series of preferred stock,
we will specify in the prospectus supplement:
. the dividend rates;
. whether the rates will be fixed or variable or both;
. the dates of distribution of the cash dividends; and
. whether the dividends on any series of preferred stock will be
cumulative or non-cumulative.
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Conversion and exchange
The prospectus supplement for any new series of preferred stock will state
the terms and other provisions, if any, on which shares of the new series of
preferred stock are convertible into shares of our common stock or exchangeable
for securities of a third party.
Redemption
We will specify in the prospectus supplement relating to each new series of
preferred stock:
. whether that new series will be redeemable at any time, in whole or in
part, at our option or at the option of the holder of the shares of
preferred stock;
. whether that new series will be subject to mandatory redemption under a
sinking fund or on other terms; and
. the redemption prices.
Liquidation preference
Upon our voluntary or involuntary liquidation, dissolution or winding up,
holders of each series of preferred stock will be entitled to receive:
. distributions upon liquidation in the amount provided in the prospectus
supplement of that series of preferred stock; plus
. any accrued and unpaid dividends.
These payments will be made to holders of preferred stock out of our assets
available for distribution to shareholders before any distribution is made on
any securities ranking junior to the preferred stock regarding liquidation
rights.
After payment of the full amount of the liquidation preference to which they
are entitled, the holders of each series of preferred stock will not be
entitled to any further participation in any distribution of our assets.
Voting rights
The holders of shares of any series of preferred stock will have no voting
rights except as indicated in the certificate of designations or prospectus
supplement relating to that series or as required by law.
Transfer agent and registrar
We will specify each of the transfer agent, registrar, dividend disbursing
agent and redemption agent for shares of each new series of preferred stock in
the prospectus supplement relating to that series.
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DESCRIPTION OF COMMON STOCK
The following summary is a description of the material terms of our common
stock, does not purport to be complete and is subject in all respects to the
applicable provisions of Bermuda law and of our constituent documents and of
the constituent documents of our subsidiaries. We have filed our memorandum of
association and bye-laws as exhibits to the registration statement of which
this prospectus is a part.
General
Under our memorandum of association, our authorized share capital is
$30,200,000, divided into:
. 3,000,000,000 shares of common stock, par value $0.01 per share; and
. 20,000,000 shares of preferred stock, par value $0.01 per share.
Voting and transfer restrictions
Voting restriction. Each share of our common stock has one vote, except that
if any shareholder owns, directly, indirectly or constructively under Section
958 of the Internal Revenue Code or beneficially directly or indirectly as a
result of the possession of sole or shared voting power within the meaning of
Section 13(d) of the Exchange Act and the rules and regulations promulgated
under that act, more than 9.5%, or, in the case of Canadian Imperial Bank of
Commerce and its affiliates, collectively, more than 20%, of the votes cast in
connection with any matter which our shareholders are voting on, the number of
votes of that shareholder will be limited to 9.5%, or, in the case of the
Canadian Imperial Bank of Commerce and its affiliates, collectively, to 20% of
those votes cast, based on a formula contained in our bye-laws. The additional
votes that could be cast by that shareholder but for the restrictions on the
voting rights will be allocated to the other shareholders pro rata, based on
their number of shares of common stock. Shareholders that have been allocated
additional votes may not exceed the voting limitations as a result of that
allocation.
Transfer restriction. Our bye-laws also provide that any transfer of shares
of common stock or any interest in those shares that results in a shareholder,
other than Pacific Capital Group, GKW Unified Holdings, Canadian Imperial Bank
of Commerce, Continental Casualty Company or MRCo or their affiliates or some
of their lenders, beneficially owning within the meaning of Section 13(d) of
the Exchange Act, directly or indirectly, 5% of the outstanding shares of our
common stock, if that shareholder is a natural person, or otherwise 9.5% of the
outstanding shares of our common stock, without the approval of a majority of
the members of the board of directors and of shareholders holding at least a
majority of the total votes cast at the shareholder meeting called to approve
that transfer will not be registered in the share register and will be void and
of no effect.
Amendments to the voting reallocation and transfer restriction provisions of
our bye-laws require the approval of our board of directors and shareholders
holding at least 75% of the votes of all outstanding shares of common stock. In
the event of any amendment to these bye-laws, under some circumstances, we have
the obligation to indemnify and hold harmless any shareholder who, as a result
of that amendment, becomes subject to treatment as a U.S. shareholder for
purposes of Section 951 and subsequent sections of the Internal Revenue Code
from and against all losses, costs, damages, liabilities and expenses directly
or indirectly arising out of that treatment.
These voting and transfer restrictions could make it difficult for any
person or group of persons acting in concert, other than some existing owners,
to acquire control of Global Crossing.
Distributions
Holders of common stock are treated equally with respect to all
distributions to our shareholders.
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Global Crossing stockholders agreement and registration rights agreement
Pacific Capital Group, GKW Unified Holdings, affiliates of Canadian Imperial
Bank of Commerce, Continental Casualty Company, MRCo, ourselves and some other
shareholders of ours, including some of our officers and directors and their
affiliates, have entered into a stockholders agreement and a registration
rights agreement, each filed as an exhibit to our registration statements.
Under the stockholders agreement, we have been granted a right of first
refusal on specified private transfers by these shareholders during the first
two years after the consummation of our initial public offering on August 14,
1998. In addition, subject to the exceptions in the stockholders agreement,
some of these shareholders have rights, which are referred to as tag-along
rights, permitting these shareholders to participate, on the same terms and
conditions, in some transfers of shares by any other of these shareholders as
follows:
(1) Pacific Capital Group, GKW Unified Holdings and Canadian Imperial
Bank of Commerce and their affiliates and permitted transferees have the
right to participate in any transaction initiated by any of them to
transfer 5% or more of our outstanding securities; and
(2) Pacific Capital Group, GKW Unified Holdings, Canadian Imperial Bank
of Commerce, Continental Casualty Company and MRCo and their affiliates and
permitted transferees have the right to participate in any transaction
initiated by any of them to transfer any of our securities if that
transaction would result in a change of control of Global Crossing.
Under the registration rights agreement, our shareholders who are parties to
that agreement and a number of their transferees have demand and piggyback
registration rights and will receive indemnification and, in some
circumstances, reimbursement for expenses from us in connection with an
applicable registration.
Some of our principal shareholders representing at that time over a majority
of the voting power of our common stock entered into a voting agreement with
Frontier in March 1999 in connection with the Frontier merger. These
shareholders reaffirmed their voting obligations under the voting agreement in
connection with subsequent amendments made to the merger agreement during 1999.
Under the second reaffirmation of voting agreement and share transfer
restriction agreement dated September 2, 1999, these shareholders also agreed,
from September 2, 1999 until March 28, 2000, not to transfer record or
beneficial ownership of any shares of our common stock held by those
shareholders, other than transfer to charities, transfers made with our consent
and other limited exceptions, and to work in good faith toward implementing a
program with the purpose that, if these shareholders wish to sell or transfer
their shares after March 28, 2000, these sales or transfers would be completed
in a manner that would provide for an orderly trading market for the shares of
our common stock.
Also on September 2, 1999, fourteen of our executive officers and three
executive officers of Frontier entered into a share transfer restriction
agreement with us. Under this agreement, our executive officers agreed not to
sell or transfer shares of our common stock, and the Frontier executive
officers agreed not to sell or transfer shares of Frontier common stock and the
shares of our common stock they would receive in exchange for their Frontier
common stock in the merger, until March 28, 2000, subject to substantially the
same exceptions as are applicable to the second reaffirmation of voting
agreement and share transfer restriction agreement described in the paragraph
immediately above.
Transfer Agent, Registrar and Dividend Disbursing Agent
The transfer agent, registrar, dividend disbursing agent and redemption
agent for the shares of our common stock will be EquiServe.
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DESCRIPTION OF WARRANTS
We may issue warrants, including debt warrants, which are warrants to
purchase debt securities, and equity warrants, which are warrants to purchase
common stock or preferred stock.
Each series of warrants will be issued under a separate warrant agreement to
be entered into between us and a warrant agent. The warrant agent will act
solely as our agent in connection with a series of warrants and will not assume
any obligation or relationship of agency for or with holders or beneficial
owners of warrants. The following describes the general terms and provisions of
the warrants offered by this prospectus. The applicable prospectus supplement
will describe any other terms of the warrant and the applicable warrant
agreement.
Debt warrants
The applicable prospectus supplement will describe the terms of any debt
warrants, including the following:
. the title and aggregate number of the debt warrants;
. any offering price of the debt warrants;
. the number of debt warrants and debt securities that will be separately
transferable;
. any date on and after which the debt warrants and debt securities will
be separately transferable;
. the title, total principal amount, ranking and terms, including
subordination and conversion provisions, of the underlying debt
securities that may be purchased upon exercise of the debt warrants;
. the time or period when the debt warrants are exercisable, the minimum
or maximum amount of debt warrants which may be exercised at any one
time and the final date on which the debt warrants may be exercised;
. the principal amount of underlying debt securities that may be purchased
upon exercise of each debt warrant and the price, or the manner of
determining the price, at which the principal amount may be purchased
upon exercise;
. the terms of any right to redeem or call the debt warrants;
. any book-entry procedure information;
. any currency or currency units in which the offering price and the
exercise price are payable; and
. any other terms of the debt warrants not inconsistent with the
provisions of the debt warrant agreement.
Equity warrants
The applicable prospectus supplement will describe the terms of any equity
warrants, including the following:
. the title and aggregate number of the equity warrants;
. any offering price of the equity warrants;
. the designation and terms of any shares of preferred stock that are
purchasable upon exercise of the equity warrants;
. if applicable, the designation and terms of the securities with which
the equity warrants are issued and the number of the equity warrants
issued with each security;
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. if applicable, the date from and after which the equity warrants and any
securities issued with those warrants will be separately transferrable;
. the number of shares of common stock or preferred stock purchasable upon
exercise of an equity warrant and the price;
. the time or period when the equity warrants are exercisable and the
final date on which the equity warrants may be exercised and terms
regarding any of our rights to accelerate this final date;
. if applicable, the minimum or maximum amount of the equity warrants
exercisable at any one time;
. any currency or currency units in which the offering price and the
exercise price are payable;
. any applicable anti-dilution provisions of the equity warrants;
. any applicable redemption or call provisions; and
. any additional terms of the equity warrants not inconsistent with the
provisions of the equity warrant agreement.
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CERTAIN INCOME TAX CONSEQUENCES
Taxation of Global Crossing
We believe that a significant portion of the income derived from our subsea
systems will not be subject to tax in Bermuda, which currently has no corporate
income tax, or other countries in which we or our affiliates conduct activities
or in which our customers are located, including the United States. However,
this belief is based upon the anticipated nature and conduct of our business,
which may change, and upon our understanding of our position under the tax laws
of the various countries in which we have assets or conduct activities, which
position is subject to review and possible challenge by taxing authorities and
to possible changes in law, which may have retroactive effect. The extent to
which certain taxing jurisdictions may require us to pay tax or to make
payments in lieu of tax cannot be determined in advance. In addition, our
operations and payments due to us may be affected by changes in taxation,
including retroactive tax claims or assessments of withholding on amounts
payable to us or other taxes assessed at the source, in excess of the taxation
we anticipate based on business contacts and practices and the current tax
regimes. We cannot assure you that these factors will not have a material
adverse effect on us.
Bermuda Tax Considerations
Under current Bermuda law, we are not subject to tax on income or capital
gains. Furthermore, we have obtained from the Minister of Finance of Bermuda
under the Exempted Undertakings Tax Protection Act 1966, an undertaking that,
in the event that Bermuda enacts any legislation imposing tax computed on
profits, income, any capital asset, gain or appreciation, then the imposition
of that tax will not be applicable to us or to any of our operations, neither
will that tax, or any tax in the nature of estate duty or inheritance tax,
become applicable to our stock, until March 28, 2016. This undertaking does
not, however, prevent the imposition of any tax or duty on persons ordinarily
resident in Bermuda or any property tax on any company, including ourselves,
owning real property or leasehold interests in Bermuda.
United States Federal Income Tax Considerations
We and our non-United States subsidiaries will be subject to United States
federal income tax at regular corporate rates, and to United States branch
profits tax, on our income, if any, that is effectively connected with the
conduct of a trade or business within the United States, and will be required
to file federal income tax returns reflecting that income. We intend to conduct
our operations so as to reduce the amount of our effectively connected income.
However, we cannot assure you that the Internal Revenue Service will agree with
the positions we take in this regard. Moreover, our United States subsidiaries
will be subject to United States federal income tax on their worldwide income
regardless of its source, subject to reduction by allowable foreign tax
credits, and distributions by our United States subsidiaries to us or to our
non-United States subsidiaries generally will be subject to United States
withholding tax.
Taxation of Holders
Bermuda Tax Considerations
Under current Bermuda law, no income, withholding or other taxes or stamp or
other duties are imposed upon the issue, transfer or sale of the shares of
common stock, shares of preferred stock, equity warrants, debt warrants or debt
securities, or on any payments thereunder. See "Taxation of Global Crossing--
Bermuda Tax Considerations" above for a description of the undertaking on taxes
obtained by us from the Minister of Finance of Bermuda.
United States Federal Income Tax Considerations
The following is a summary of certain United States federal income tax
consequences, as of the date of this document, of the ownership of shares of
common stock, shares of preferred stock, equity warrants or debt securities by
beneficial owners that purchase the shares, equity warrants or debt securities
in connection with their initial issuance, that hold the shares, equity
warrants or debt securities as capital assets and that are "United States
persons" under the Internal Revenue Code. Under the Internal Revenue Code, you
are a "United States person" if you are:
. a citizen or resident of the United States;
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. a corporation or partnership created or organized in or under the laws
of the United States or any political subdivision thereof;
. an estate the income of which is subject to United States federal income
taxation regardless of its source;
. a trust that is subject to the supervision of a court within the United
States and the control of one or more United States persons; or
. a trust that has a valid election in effect under applicable United
States Treasury regulations to be treated as a United States person.
This summary is based on current law, which is subject to change, perhaps
retroactively, is for general purposes only and should not be considered tax
advice. This summary does not represent a detailed description of the United
States federal income tax consequences to you in light of your particular
circumstances. In addition, it does not present a description of the United
States federal income tax consequences applicable to you if you are subject to
special treatment under the United States federal income tax laws, including if
you are:
. a dealer in securities or currencies;
. a trader in securities if you elect to use a mark-to-market method of
accounting for your securities holdings;
. a financial institution;
. an insurance company;
. a tax-exempt organization;
. a person liable for alternative minimum tax;
. a person holding shares of common stock, shares of preferred stock,
equity warrants or debt securities as part of a hedging, integrated or
conversion transaction, constructive sale or straddle;
. a person owning, actually or constructively, 10% or more of our voting
stock or 10% or more of the voting stock of any of our non-United States
subsidiaries; or
. a United States person whose "functional currency" is not the United
States dollar.
We cannot assure you that a later change in law will not alter significantly
the tax considerations that we describe in this summary. The discussion below
assumes that all debt securities issued hereunder will be classified as debt
for United States federal income tax purposes, and holders should note that in
the event of an alternative characterization, the tax consequences would differ
from those discussed below.
If a partnership holds our shares of common stock, shares of preferred
stock, equity warrants or debt securities, the tax treatment of a partner will
generally depend upon the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding our shares of common
stock, shares of preferred stock, equity warrants or debt securities, you
should consult your tax advisor.
You should consult your own tax advisor concerning the particular United
States federal income tax consequences to you of the ownership and disposition
of the shares of common stock, shares of preferred stock, equity warrants or
debt securities, as well as the consequences to you arising under the laws of
any other taxing jurisdiction.
Common and Preferred Stock
Taxation of Dividends
Subject to the passive foreign investment company rules discussed below, the
gross amount of distributions you receive on your shares of common stock or
shares of preferred stock, will generally be treated as dividend income to you
if the distributions are made from our current and accumulated earnings and
profits,
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calculated according to United States federal income tax principles. Such
income will be includible in your gross income as ordinary income on the day
you receive it. You will not be entitled to claim a dividends received
deduction with respect to distributions you receive from us.
Although we expect to have earnings and profits with respect to 2000, the
existence of current or accumulated earnings and profits in subsequent years
will depend on future levels of profits and losses which we cannot accurately
predict at this time. To the extent that the amount of any distribution exceeds
our current and accumulated earnings and profits for a taxable year, the
distribution will first be treated as a tax-free return of capital, causing a
reduction in your adjusted basis in the shares of common stock or shares of
preferred stock, thereby increasing the amount of gain, or decreasing the
amount of loss, you will recognize on a subsequent disposition of the shares,
and the balance in excess of adjusted basis will be taxed as capital gain
recognized on a sale or exchange.
If, for United States federal income tax purposes, we are classified as a
"United States-owned foreign corporation", distributions made to you with
respect to your shares of common stock or shares of preferred stock that are
taxable as dividends generally will be treated for United States foreign tax
credit purposes as (1) foreign source "passive income" or, in the case of some
holders, foreign source "financial services income" and (2) United States
source income, in proportion to our earnings and profits in the year of such
distribution allocable to foreign and United States sources, respectively. For
this purpose, we will be treated as a United States-owned foreign corporation
so long as stock representing 50% or more of the voting power or value of our
stock is owned, directly or indirectly, by United States persons.
Preferred Stock Redemption Premium
Under Section 305(c) of the Internal Revenue Code and the applicable
regulations thereunder, if in certain circumstances the redemption price of the
preferred stock exceeds its issue price by more than a de minimis amount, the
difference--which we refer to as "redemption premium"--will be taxable as a
constructive distribution to you over time of additional preferred stock. These
constructive distributions would be treated first as a dividend to the extent
of our current and accumulated earnings and profits and otherwise would be
subject to the treatment described above for dividends. If the preferred stock
provides for optional rights of redemption by us at prices in excess of the
issue price, you could be required to recognize such excess if, based on all of
the facts and circumstances, the optional redemptions are more likely than not
to occur. Applicable regulations provide a "safe harbor" under which a right to
redeem will not be treated as more likely than not to occur if (1) you are not
related to us within the meaning of the regulations; (2) there are no plans,
arrangements, or agreements that effectively require or are intended to compel
us to redeem the stock and (3) exercise of the right to redeem would not reduce
the yield of the stock, as determined under the regulations. Regardless of
whether the optional redemptions are more likely than not to occur,
constructive dividend treatment will not result if the redemption premium does
not exceed a de minimis amount or is in the nature of a penalty for premature
redemption. You should also consult the applicable prospectus supplement for
information regarding any additional consequences under Section 305(c) in light
of the particular terms of an issuance of preferred stock.
Disposition of the Shares of Common Stock or Shares of Preferred Stock
Subject to the passive foreign investment company rules discussed below,
when you sell or otherwise dispose of your shares of common stock or shares of
preferred stock, you will recognize capital gain or loss in an amount equal to
the difference between the amount you realize for the shares and your adjusted
tax basis in them. In general, your adjusted tax basis in the shares of common
stock will be your cost of obtaining the shares reduced by any previous
distributions that are not characterized as dividends. In general, your
adjusted tax basis in the shares of preferred stock will be your cost of
obtaining the shares of preferred stock increased by any redemption premium
previously included in income by you and reduced by any previous distributions
that are not characterized as dividends. For foreign tax credit limitation
purposes, such gain or loss will generally be treated as United States source.
If you are an individual, and the shares of common stock or shares
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of preferred stock being sold or otherwise disposed of are capital assets that
you have held for more than one year, your gain recognized will be taxed at a
maximum tax rate of 20%. Your ability to deduct capital losses is subject to
limitations.
A redemption of the shares of common stock or the shares of preferred stock
by us would be treated, under Section 302 of the Internal Revenue Code, as a
sale giving rise to capital gain or loss, or as described below as a dividend.
If a redemption of shares for cash is treated as a dividend with respect to you
under Section 302 of the Internal Revenue Code, you (1) will not recognize any
loss on the exchange and (2) will recognize dividend income, rather than
capital gain, equal to the amount of cash received, without regard to your
basis in the shares of the common stock or the shares of preferred stock
surrendered in the exchange, to the extent of your proportionate share of our
current or accumulated earnings and profits. Under Section 302 of the Internal
Revenue Code, the redemption will not be treated as a dividend provided that,
after giving effect to the constructive ownership rules of Section 318 of the
Internal Revenue Code, the redemption (1) represents a "complete termination"
of your stock interest in us, (2) is "substantially disproportionate" with
respect to you or (3) is "not essentially equivalent to a dividend" with
respect to you, all within the meaning of Section 302(b) of the Internal
Revenue Code. A redemption will be "not essentially equivalent to a dividend"
as to you if it results in a "meaningful reduction" in your interest in us,
after application of the constructive ownership rules of Section 318 of the
Internal Revenue Code. In general, there are no fixed rules for determining
whether a "meaningful reduction" has occurred. You should consult your tax
advisor as to your ability in light of your own particular circumstances to
satisfy any of the foregoing tests.
Conversion of Convertible Preferred Stock into Common Stock
Generally, no gain or loss will be recognized upon conversion of shares of
convertible preferred stock into shares of common stock, except with respect to
any cash paid in lieu of fractional shares of common stock. The tax basis of
shares of common stock received upon conversion of shares of preferred stock
generally will be equal to the tax basis of the shares of preferred stock so
converted and the holding period of the shares of common stock generally will
include the holding period of the shares of preferred stock so converted.
Adjustments to the conversion ratio of the preferred stock pursuant to anti-
dilution provisions, if any, may result in a taxable deemed distribution to you
pursuant to Section 305 of the Code if (1) as a result of such adjustment your
proportionate interest in our assets or earnings and profits is increased and
(2) the adjustment is not made pursuant to a bona fide, reasonable anti-
dilution formula. An adjustment to the conversion ratio of the preferred stock
would not be considered made pursuant to such a formula if the adjustment were
made to compensate you for certain taxable distributions to other common stock
holders. Thus, under certain circumstances, an adjustment might give rise to a
taxable dividend to you even though you did not receive any cash. You should
consult the applicable prospectus supplement for information regarding
adjustments, if any, to the conversion ratio of shares of convertible preferred
stock and regarding the terms of any preferred stock that is convertible or
exchangeable for securities other than our common stock.
Passive Foreign Investment Company
We do not believe that we are a passive foreign investment company for
United States federal income tax purposes and do not expect to become one in
the future, although we can provide no assurance in this regard. This
conclusion is based, in part, on interpretations of existing law that we
believe are reasonable, but which have not been approved by any taxing
authority. A company is considered a passive foreign investment company for any
taxable year if either:
. at least 75% of its gross income is passive income; or
. at least 50% of the value of its assets is attributable to assets that
produce or are held for the production of passive income.
The 50% of value test is based on the average of the value of our assets for
each quarter during the taxable year. If we own at least 25% by value of
another company's stock, we will be treated as owning our
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proportionate share of the assets and earning our proportionate share of the
income of that company. The determination of whether we are a passive foreign
investment company is made annually. Accordingly, it is possible that we may
become a passive foreign investment company in the current or any future
taxable year due to changes in our asset or income composition.
If we are a passive foreign investment company for any taxable year during
which you hold shares of common stock, shares of preferred stock or equity
warrants, unless you make a "QEF election" or a "mark to market election" as
described below, you will be subject to special tax rules with respect to any
"excess distribution" that you receive and any gain you realize from a sale or
other disposition, including a pledge, of those shares or equity warrants.
Distributions you receive in a taxable year that are greater than 125% of the
average annual distributions you received during the shorter of the three
preceding taxable years or your holding period for the shares will be treated
as excess distributions. Under these special tax rules
. the excess distribution or gain will be allocated ratably over your
holding period for the shares;
. the amount allocated to the current taxable year, and any taxable year
prior to the first taxable year in which we were a passive foreign
investment company, will be treated as ordinary income; and
. the amount allocated to each other year will be subject to tax at the
highest tax rate in effect for that year and the interest charge
generally applicable to underpayments of tax will be imposed on the
resulting tax attributable to each such year.
If you hold shares of common stock or shares of preferred stock in any year
in which we are a passive foreign investment company, you are required to file
Internal Revenue Service Form 8621.
The special passive foreign investment company tax rules described above
will not apply to you if you elect to have us treated as a "qualified electing
fund", which we will refer to as the "QEF election", and we provide certain
information to you. If we are treated as a passive foreign investment company,
we intend to notify you and to provide to you such information as may be
required for you to make the QEF election effective.
If you make a QEF election, you will be taxable currently on your pro rata
share of our ordinary earnings and net capital gain, at ordinary income and
capital gain rates, respectively, for each taxable year during which we are
treated as a passive foreign investment company, regardless of whether or not
you receive distributions, so that you may recognize taxable income without the
corresponding receipt of cash from us with which to pay your resulting tax
obligation. Your basis in the shares of common stock or shares of preferred
stock will be increased to reflect taxed but undistributed income.
Distributions of income that had previously been taxed will result in a
corresponding reduction of basis in the shares and will not be taxed again as a
distribution to you. Under current law, the QEF election is not available to
holders of warrants.
Alternatively, if you own shares of common stock or shares of preferred
stock and such stock is treated as "marketable stock", you may make a mark to
market election. If you make such an election, you will not be subject to the
passive foreign investment company rules described above. Instead, in general,
you will include in income each year as ordinary income the excess, if any, of
the fair market value of your marketable stock at the end of the taxable year
over its adjusted basis and will be permitted an ordinary loss in respect of
the excess, if any, of the adjusted basis of such stock over its fair market
value at the end of the taxable year, but only to the extent of the net amount
previously included in income as a result of the mark to market election. Your
basis in the marketable stock will be adjusted to reflect any such income or
loss amounts. Any gain or loss on the sale of the marketable stock will be
ordinary income or loss, except that that loss will be ordinary loss only to
the extent of the previously included net mark to market gain. The mark to
market election is only available with respect to stock that is regularly
traded on certain United States exchanges and other exchanges as indicated in
the appropriate Treasury Regulations. You should consult the applicable
prospectus supplement for information regarding the exchange, if any, upon
which a particular issuance of common stock or preferred stock will be listed.
Under current law, it is unclear whether the warrants will be treated as
marketable stock.
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You should consult your own tax advisors concerning the United States
federal income tax consequences of holding shares of common stock, or shares of
preferred stock or equity warrants if we are considered a passive foreign
investment company in any taxable year, including the advisability and
availability of making any of the foregoing elections.
Foreign Personal Holding Company
If we or one of our non-United States subsidiaries were classified as a
foreign personal holding company, you would be required, regardless of your
percentage ownership, to include in income, as a dividend, your pro rata share
of our or our relevant non-United States subsidiary's undistributed foreign
personal holding company income--generally, taxable income with certain
adjustments--if you held shares of common stock or shares of preferred stock on
the last day of our taxable year or, if earlier, the last day on which we
satisfied the shareholder test described below. In addition, if we were
classified as a foreign personal holding company, and you acquired your shares
of common stock or shares of preferred stock from a decedent, you would not
receive a "stepped-up" basis in that stock. Instead, you would have a tax basis
equal to the lower of the fair market value of those shares or the decedent's
basis in them.
A foreign corporation will be classified as a foreign personal holding
company if:
(1) at any time during the corporation's taxable year, five or fewer
individuals, who are United States citizens or residents, directly or
indirectly own more than 50% of the corporation's stock, by either voting
power or value; we will refer to this test as the "shareholder test"; and
(2) the corporation receives at least 60% of its gross income, 50% after
the initial year of qualification, in each case as adjusted, for the
taxable year from certain passive sources; we will refer to this test as
the "income test".
It is possible that we and our non-United States subsidiaries could meet the
shareholder test in a given taxable year. It is also possible that we or one of
our non-United States subsidiaries would meet the income test in a given year
and would be treated as a foreign personal holding company. We intend to manage
our affairs so as to attempt to avoid or minimize having income imputed to you
under these rules, to the extent such management of our affairs is consistent
with our business goals, although there can be no assurance in this regard.
Personal Holding Company
A corporation classified as a personal holding company is subject to a 39.6%
tax on its undistributed personal holding company income. Foreign corporations
determine their liability for personal holding company tax by considering only
(1) gross income derived from United States sources and (2) gross income that
is effectively connected with a United States trade or business. A corporation
will be classified as a personal holding company if (1) at any time during the
last half of the corporation's taxable year, five or fewer individuals own more
than 50% of the corporation's stock (by value) directly or indirectly and (2)
the corporation receives at least 60% of its gross income, as adjusted, from
certain passive sources. However, if a corporation is a foreign personal
holding company or a passive foreign investment company, it cannot be a
personal holding company. It is possible that we and our subsidiaries could
meet the personal holding company shareholder test in a given taxable year. It
is also possible that we or one of our subsidiaries would meet the income test
in a given year and would be treated as a personal holding company. We intend
to manage our affairs so as to attempt to avoid or minimize the imposition of
the personal holding company tax, to the extent such management of our affairs
is consistent with our business goals, although there can be no assurance in
this regard.
Controlled Foreign Corporations
For the purposes of this paragraph, we will refer to United States persons
that own--or are deemed for United States federal income tax purposes to own,
pursuant to complex attribution and constructive ownership rules--10% or more
of our voting stock or the voting stock of any of our non-United States
subsidiaries as
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"10% Shareholders". If 10% Shareholders own, in the aggregate, more than 50%,
measured by voting power or value, of our shares or the shares of any of our
non-United States subsidiaries, directly, indirectly, or by attribution, we or
any such non-United States subsidiary would be a controlled foreign
corporation. If characterized as controlled foreign corporations, then a
portion of our undistributed income may be includible in the taxable income of
our 10% Shareholders, and all or a portion of the gain recognized by such 10%
Shareholders on the disposition of their shares, which could otherwise qualify
for capital gains treatment, may be converted into ordinary dividend income. It
is possible that we and our non-United States corporate subsidiaries may be
controlled foreign corporations or may become controlled foreign corporations
in the future. However, as discussed above, controlled foreign corporation
status generally only has potentially adverse consequences to 10% Shareholders.
Information Reporting and Backup Withholding
In general, unless you are an exempt recipient such as a corporation,
information reporting will apply to dividends in respect of the shares of
common stock or shares of preferred stock or the proceeds received on the sale,
exchange, or redemption of those shares of common stock, shares of preferred
stock or equity warrants paid to you within the United States and, in some
cases, outside of the United States. Additionally, if you fail to provide your
taxpayer identification number, or fail either to report in full dividend and
interest income or to make certain certifications, you will be subject to
backup withholding at the rate of 31%. Any amounts withheld under the backup
withholding rules will be allowed as a refund or a credit against your United
States federal income tax liability, provided you furnish the required
information to the United States Internal Revenue Service.
Debt Securities
Payment of Interest
Except as provided below, interest on a debt security will generally be
taxable to you as ordinary income at the time it is paid or accrued in
accordance with your method of accounting for tax purposes.
Original Issue Discount
If you own debt securities issued with original issue discount, which we
refer to as "OID", you will be subject to special tax accounting rules, as
described in greater detail below. In that case, you should be aware that you
generally must include OID in gross income in advance of the receipt of cash
attributable to that income. However, you generally will not be required to
include separately in income cash payments received on the debt securities,
even if denominated as interest, to the extent those payments do not constitute
qualified stated interest, as defined below. Notice will be given in the
applicable prospectus supplement when we determine that a particular debt
security will be an original issue discount debt security.
A debt security with an issue price that is less than its "stated redemption
price at maturity" (the sum of all payments to be made on the debt security
other than "qualified stated interest") generally will be issued with OID if
that difference is at least 0.25% of the stated redemption price at maturity
multiplied by the number of complete years to maturity. The "issue price" of
each debt security in a particular offering will be the first price at which a
substantial amount of that particular offering is sold to the public. The term
"qualified
stated interest" means stated interest that is unconditionally payable in cash
or in property, other than debt instruments of the issuer, and the interest to
be paid meets all of the following conditions:
. it is payable at least once per year;
. it is payable over the entire term of the debt security; and
. it is payable at a single fixed rate or, subject to certain conditions,
based on one or more interest indices.
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We will give you notice in the applicable prospectus supplement when we
determine that a particular debt security will bear interest that is not
qualified stated interest.
If you own a debt security issued with de minimis OID, i.e., discount that
is not OID because it is less than 0.25% of the stated redemption price at
maturity multiplied by the number of complete years to maturity, you generally
must include the de minimis OID in income at the time payments, other than
qualified stated interest, on the debt securities are made in proportion to the
amount paid. Any amount of de minimis OID that you have included in income will
be treated as capital gain.
Certain of the debt securities may contain provisions permitting them to be
redeemed prior to their stated maturity at our option and/or at the option of
the holder. Original issue discount debt securities containing those features
may be subject to rules that differ from the general rules discussed herein. If
you are considering the purchase of original issue discount debt securities
with those features, you should carefully examine the applicable prospectus
supplement and should consult your own tax advisors with respect to those
features since the tax consequences to you with respect to OID will depend, in
part, on the particular terms and features of the debt securities.
If you own original issue discount debt securities with a maturity upon
issuance of more than one year you generally must include OID in income in
advance of the receipt of some or all of the related cash payments using the
"constant yield method" described in the following paragraph. This method takes
into account the compounding of interest. The accruals of OID on an original
issue discount debt security will generally be less in the early years and more
in the later years.
The amount of OID that you must include in income if you are the initial
United States holder of an original issue discount debt security is the sum of
the "daily portions" of OID with respect to the debt security for each day
during the taxable year or portion of the taxable year in which you held that
debt security (we will refer to this amount as "accrued OID"). The daily
portion is determined by allocating to each day in any "accrual period" a pro
rata portion of the OID allocable to that accrual period. The "accrual period"
for an original issue discount debt security may be of any length and may vary
in length over the term of the debt security, provided that each accrual period
is no longer than one year and each scheduled payment of principal or interest
occurs on the first day or the final day of an accrual period. The amount of
OID allocable to any accrual period is an amount equal to the excess, if any,
of:
. the debt security's adjusted issue price at the beginning of the accrual
period times its yield to maturity, determined on the basis of
compounding at the close of each accrual period and properly adjusted
for the length of the accrual period, over
. the aggregate of all qualified stated interest allocable to the accrual
period.
OID allocable to a final accrual period is the difference between the amount
payable at maturity, other than a payment of qualified stated interest, and the
adjusted issue price at the beginning of the final accrual period. The
"adjusted issue price" of a debt security at the beginning of any accrual
period is equal to its issue price increased by the accrued OID for each prior
accrual period, determined without regard to the amortization of any
acquisition or bond premium, as described below, and reduced by any payments
made on the debt security (other than qualified stated interest) on or before
the first day of the accrual period. Under these rules, you will have to
include in income increasingly greater amounts of OID in successive accrual
periods. We are required
to provide information returns stating the amount of OID accrued on debt
securities held of record by persons other than corporations and other exempt
holders.
Floating rate debt securities are subject to special OID rules. In the case
of an original issue discount debt security that is a floating rate debt
security, both the "yield to maturity" and "qualified stated interest" will be
determined solely for purposes of calculating the accrual of OID as though the
debt security will bear interest in all periods at a fixed rate generally equal
to the rate that would be applicable to interest payments on the
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debt security on its date of issue or, in the case of certain floating rate
debt securities, the rate that reflects the yield to maturity that is
reasonably expected for the debt security. Additional rules may apply if:
. the interest on a floating rate debt security is based on more than one
interest index;
. the principal amount of the debt security is indexed in any manner; or
. if the debt securities otherwise qualify as "contingent payment debt
instruments".
This discussion does not address the tax rules applicable to any of these
types of debt securities. If you are considering the purchase of floating rate
original issue discount debt securities, you should carefully examine the
applicable prospectus supplement and should consult your own tax advisors
regarding the United States federal income tax consequences to you of holding
and disposing of those debt securities.
You may elect to treat all interest on any debt security as OID and
calculate the amount includible in gross income under the constant yield method
described above. For purposes of this election, interest includes stated
interest, acquisition discount, OID, de minimis OID, market discount, de
minimis market discount and unstated interest, as adjusted by any amortizable
bond premium or acquisition premium. You must make this election for the
taxable year in which you acquired the debt security, and you may not revoke
the election without the consent of the Internal Revenue Service. You should
consult with your own tax advisors about this election.
Short-Term Debt Securities
In the case of debt securities having a term of one year or less, all
payments, including all stated interest, will be included in the stated
redemption price at maturity and will not be qualified stated interest. As a
result, you will generally be taxed on the discount instead of stated interest.
The discount will be equal to the excess of the stated redemption price at
maturity over the issue price of a short-term debt security, unless you elect
to compute this discount using tax basis instead of issue price. In general,
individual and certain other cash method United States holders of short-term
debt securities are not required to include accrued discount in their income
currently unless they elect to do so but may be required to include stated
interest in income as the income is received. United States holders that report
income for United States federal income tax purposes on the accrual method and
certain other United States holders are required to accrue discount on short-
term debt securities (as ordinary income) on a straight-line basis, unless an
election is made to accrue the discount according to a constant yield method
based on daily compounding. If you are not required, and do not elect, to
include discount in income currently, any gain you realize on the sale,
exchange or retirement of a short-term debt security will generally be ordinary
income to you to the extent of the discount accrued by you through the date of
sale, exchange or retirement. In addition, if you do not elect to currently
include accrued discount in income you may be required to defer deductions for
a portion of your interest expense with respect to any indebtedness
attributable to the short-term debt securities.
Market Discount
If you purchase a debt security, other than an original issue discount debt
security, for an amount that is less than its stated redemption price at
maturity, or, in the case of an original issue discount debt security, its
adjusted issue price, the amount of the difference will be treated as "market
discount" for United States federal income tax purposes, unless that difference
is less than a specified de minimis amount. Under the market discount rules,
you will be required to treat any payment, other than qualified stated
interest, on, or any
gain on the sale, exchange, retirement or other disposition of, a debt security
as ordinary income to the extent of the market discount that you have not
previously included in income and are treated as having accrued on the debt
security at the time of its payment or disposition. In addition, you may be
required to defer, until the maturity of the debt security or its earlier
disposition in a taxable transaction, the deduction of all or a portion of the
interest expense on any indebtedness attributable to the debt security.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the debt security, unless
you elect to accrue on a constant interest method. You may elect
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to include market discount in income currently as it accrues, on either a
ratable or constant interest method, in which case the rule described above
regarding deferral of interest deductions will not apply. Your election to
include market discount in income currently, once made, applies to all market
discount obligations acquired by you on or after the first taxable year to
which your election applies and may not be revoked without the consent of the
Internal Revenue Service.
Acquisition Premium, Amortizable Bond Premium
If you purchase an original issue discount debt security for an amount that
is greater than its adjusted issue price but equal to or less than the sum of
all amounts payable on the debt security after the purchase date other than
payments of qualified stated interest, you will be considered to have purchased
that debt security at an "acquisition premium." Under the acquisition premium
rules, the amount of OID that you must include in gross income with respect to
the debt security for any taxable year will be reduced by the portion of the
acquisition premium properly allocable to that year.
If you purchase a debt security, including an original issue discount debt
security, for an amount in excess of the sum of all amounts payable on the debt
security after the purchase date other than qualified stated interest, you will
be considered to have purchased the debt security at a "premium" and, if it is
an original issue discount debt security, you will not be required to include
any OID in income. You generally may elect to amortize the premium over the
remaining term of the debt security on a constant yield method as an offset to
interest when includible in income under your regular accounting method. In the
case of instruments that provide for alternative payment schedules, bond
premium is calculated by assuming that (a) you will exercise or not exercise
options in a manner that maximizes your yield, and (b) we will exercise or not
exercise options in a manner that minimizes your yield, except that we will be
assumed to exercise call options in a manner that maximizes your yield. If you
do not elect to amortize bond premium, that premium will decrease the gain or
increase the loss you would otherwise recognize on disposition of the debt
security. Your election to amortize premium on a constant yield method will
also apply to all debt obligations held or subsequently acquired by you on or
after the first day of the first taxable year to which the election applies.
You may not revoke the election without the consent of the Internal Revenue
Service.
Sale, Exchange and Retirement of Debt Securities
Your tax basis in a debt security will, in general, be your cost for that
debt security, increased by OID, market discount or any discount with respect
to a short-term debt security that you previously included in income, and
reduced by any amortized premium and any cash payments on the debt security
other than qualified stated interest. Upon the sale, exchange, retirement or
other disposition of a debt security, you will recognize gain or loss equal to
the difference between the amount you realize upon the sale, exchange,
retirement or other disposition, less an amount equal to any accrued qualified
stated interest previously includible in income, which will be taxable as such,
and the adjusted tax basis of the debt security. Except as described above with
respect to certain short-term debt securities, with respect to gain or loss
attributable to changes in exchange rates as described below with respect to
certain foreign currency debt securities, which we discuss under "--Foreign
Currency Debt Securities" on page 52, with respect to market discount, or with
respect to gain, and to some extent loss, on contingent payment debt
instruments, which generally are not described herein, that gain or loss will
be United States source capital gain or loss. Capital gains of individuals
derived in respect of capital assets held for more than one year are eligible
for reduced rates of taxation. The deductibility of capital losses is subject
to limitations.
Extendible Debt Securities, Reset Debt Securities and Renewable Debt Securities
If we specify in an applicable prospectus supplement relating to a debt
security, we or you may have the option to extend the maturity of a debt
security. In addition, we may have the option to reset the interest rate, the
Spread or the Spread Multiplier. If such an option is exercised, your tax
treatment may depend, in part, on the terms, which we refer to as the "revised
terms", established for those debt securities by us as a result of the exercise
of that option. You may be treated for United States federal income tax
purposes as having exchanged
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those debt securities, which we will refer to as the "old debt securities", for
new debt securities with the revised terms, which we will refer to as the "new
debt securities". If the exercise of the option by us is not treated as an
exchange of old debt securities for new debt securities, you will not recognize
gain or loss as a result of the exercise. If the exercise of the option is
treated as an exchange of old debt securities for new debt securities, you
would generally realize gain or loss equal to the difference between the issue
price of the new debt securities and your tax basis in the old debt securities.
You will recognize this gain unless the exchange is treated as a tax-free
recapitalization for United States federal income tax purposes.
The presence of such options may also affect the calculation of OID, among
other things. Solely for purposes of the accrual of OID, if we have an option
or combination of options to extend the term of the debt securities, we will be
presumed to exercise such option or options in the manner that minimizes the
yield on the debt securities. Conversely, if you have a put option, an option
to extend the term of the debt securities or a combination of such options, you
will be presumed to exercise such option or options in a manner that maximizes
the yield on the debt securities. If the exercise of that option or options to
extend the term of the debt securities actually occurs or the option to put
does not occur contrary to the presumption made under applicable Treasury
regulations--we will cal this a "change of circumstances"--then, solely for
purposes of the accrual of OID, the debt securities will be treated as reissued
on the date of the change in circumstances for an amount equal to their
adjusted issue price on that date. You should carefully examine the applicable
prospectus supplement and should consult your own tax advisors regarding the
United States federal income tax consequences of holding and disposing of
extendible debt securities, reset debt securities and renewable debt
securities.
Foreign Currency Debt Securities
The following is a summary of the principal United States federal income tax
consequences to you if you own a debt security denominated in a specified
currency other than the United States dollar, which we will refer to as a
"foreign currency debt security".
Interest Payments
If you are a cash basis taxpayer, you are required to include in income the
United States dollar value of interest payments you receive, based on the
exchange rate in effect on the date of receipt, regardless of whether you
convert such interest payments into United States dollars. You will not
recognize exchange gain or loss upon the receipt of such payment.
If you are an accrual basis taxpayer, you may determine the amount of income
you recognize with respect to such interest payment in accordance with either
of two methods. Under the first method, you will be required to include in
income for each taxable year the United States dollar value of the interest
that has accrued during the year, determined by translating such interest at
the average rate of exchange for the period or periods during which such
interest accrued. Under the second method, you may elect to translate interest
income at the spot rate on the last day of the accrual period, or last day of
the taxable year in the case of an accrual period that straddles your taxable
year, or on the date you receive the interest payment if such date is within
five days of the end of the accrual period. When you receive an interest
payment, including a payment attributable to accrued but unpaid interest on the
sale or other disposition of a debt security, on a debt security, you will
recognize ordinary income or loss in an amount equal to the difference between
the United States dollar value of such payment, determined by translating any
foreign currency received at the "spot rate" for such foreign currency on the
date received, and the United States dollar value of the interest income that
you have previously included in income with respect to such payment.
Foreign Currency Original Issue Discount Debt Securities
OID on a debt security that is also a foreign currency debt security will be
determined for any accrual period in the applicable foreign currency and then
translated into United States dollars in the same manner as interest income
accrued by a holder on the accrual basis, as described above. Additionally, you
will recognize
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exchange gain or loss when the OID is paid, including a payment attributable to
OID upon the sale or other disposition of a foreign currency debt security, to
the extent of the difference between the United States dollar value of such
payment, determined by translating any foreign currency received at the spot
rate for such foreign currency on the date of payment, and the United States
dollar value of the accrued OID, determined in the same manner as for accrued
interest.
Market Discount
You will determine market discount on foreign currency debt securities
includible in income by translating the market discount determined in the
foreign currency into United States dollars at the spot rate on the date the
foreign currency debt security is retired or you otherwise dispose of the debt
security. If you have elected to accrue market discount currently, then the
amount you accrue is determined in the foreign currency and then translated
into United States dollars on the basis of the average exchange rate in effect
during the accrual period. You will recognize exchange gain or loss with
respect to market discount you accrue currently using the approach applicable
to the accrual of interest income as described above.
Amortizable Bond Premium
You will compute bond premium on a foreign currency debt security in the
applicable foreign currency. If you elect to amortize the premium, the
amortizable bond premium will reduce interest income in the applicable foreign
currency. At the time bond premium is amortized, you will realize exchange gain
or loss, which is generally ordinary income or loss, based on the difference
between spot rates at such time and at the time of acquisition of the foreign
currency debt security. If you do not elect to amortize bond premium, you will
translate the bond premium, computed in the applicable foreign currency, into
United States dollars at the spot rate on the maturity date and such bond
premium will constitute a capital loss which may be offset or eliminated by
exchange gain.
Sale or Other Disposition of Foreign Currency Debt Security
Your tax basis in a foreign currency debt security will be the United States
dollar value of the foreign currency amount you paid for such foreign currency
debt security determined at the time of your purchase. If you purchase a debt
security with previously owned foreign currency, you will recognize exchange
gain or loss at the time of purchase attributable to the difference at the time
of purchase, if any, between your tax basis in such foreign currency and the
fair market value of the debt security in United States dollars on the date of
purchase. Such gain or loss will be ordinary income or loss.
For purposes of determining the amount of any gain or loss you will
recognize on the sale, exchange, retirement or other disposition of a foreign
currency debt security, the amount realized upon such sale, exchange,
retirement or other disposition will be the United States dollar value of the
amount realized in foreign currency, other than amounts attributable to accrued
but unpaid interest not previously included in the holder's income, determined
at the time of the sale, exchange, retirement or other disposition.
You will recognize exchange gain or loss attributable to the movement in
exchange rates between the time of purchase and the time of sale, exchange,
retirement or other disposition of a foreign currency debt security. Such gain
or loss will be treated as ordinary income or loss. Your realization of such
gain or loss will be limited to the amount of overall gain or loss realized on
your sale of a foreign currency debt security. Under proposed Treasury
Regulations issued on March 17, 1992, if a foreign currency debt security is
denominated in one of certain hyperinflationary currencies, generally (1) you
would realize exchange gain or loss with respect to movements in the exchange
rate between the beginning and end of each taxable year, or such shorter
period,
that you held the debt security and (2) you would treat the exchange gain or
loss as an addition or offset, respectively, to the accrued interest income on,
and an adjustment to the holder's tax basis in, the foreign currency debt
security.
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Exchange Gain or Loss With Respect to Foreign Currency
Your tax basis in foreign currency received as interest on, or OID with
respect to, or received on the sale, exchange, retirement or other disposition
of, a foreign currency debt security will be the United States dollar value
thereof at the spot rate at the time you receive such foreign currency. Gain or
loss you recognize on a sale, exchange, retirement or other disposition of
foreign currency will be ordinary income or loss and will not be treated as
interest income or expense, except to the extent provided in Treasury
Regulations or administrative pronouncements of the Internal Revenue Service.
Indexed Debt Securities
If you purchase an indexed debt security, or a security that otherwise
qualifies as a contingent payment debt instrument, your tax treatment will
depend on factors including the specific index or indices used to determine
indexed payments on the debt security and the amount and timing of any
contingent payments of principal and interest. If you are considering
purchasing indexed debt securities, you should carefully examine the applicable
prospectus supplement and should consult your own tax advisor regarding the
United States federal income tax consequences of holding and disposing of such
debt securities.
Information Reporting and Backup Withholding
In general, unless you are an exempt recipient such as a corporation,
information reporting will apply to certain payments of principal, interest,
OID and premium paid on debt securities and to the proceeds of sale of a debt
security. Additionally, if you fail to provide your taxpayer identification
number, or in the case of interest payments, fail either to report in full
dividend and interest income or to make certain certifications, you will be
subject to backup withholding at a 31% rate. Any amounts withheld under the
backup withholding rules will be allowed as a refund or a credit against your
United States federal income tax liability, provided you furnish the required
information to the Internal Revenue Service.
Warrants
Equity Warrants
You will generally not recognize any gain or loss upon the exercise of
equity warrants except with respect to cash received in lieu of a fractional
share of common or preferred stock. You will have an initial tax basis in the
shares of common or preferred stock received on exercise of the equity warrants
equal to the sum of your tax basis in the equity warrants and the aggregate
cash exercise price paid in respect of such exercise. Your holding period in
the shares of common or preferred stock received on exercise of the equity
warrants will commence on the date after the equity warrants are exercised.
If an equity warrant expires without being exercised, you will recognize a
capital loss in an amount equal to your tax basis in the equity warrant. Upon
the sale or exchange of an equity warrant, you will generally recognize a
capital gain or loss equal to the difference, if any between the amount
realized on such sale or exchange and your tax basis in such equity warrant.
Under Section 305 of the Code, you may be deemed to have received a
constructive distribution from us, which may result in the inclusion of
ordinary dividend income, in the event of certain adjustments, or the failure
to make certain adjustments, to the number of shares of common or preferred
stock to be issued upon exercise of an equity warrant.
Debt Warrants
If a decision is made to issue debt warrants, we will discuss the relevant
income tax consequences in the applicable prospectus supplement.
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PLAN OF DISTRIBUTION
We may sell our debt securities, shares of preferred stock, shares of common
stock and warrants in any of three ways:
. through underwriters;
. through agents; or
. directly to a limited number of institutional purchasers or to a single
purchaser.
The prospectus supplement for the securities we sell will describe that
offering, including:
. the name or names of any underwriters;
. the purchase price and the proceeds to us or the selling shareholders
from that sale;
. any underwriting discounts and other items constituting underwriters'
compensation;
. any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers; and
. whether the securities will trade on any securities exchanges or the
Nasdaq National Market.
Underwriters
If underwriters are used in the sale, we will execute an underwriting
agreement with those underwriters relating to the securities that we will
offer. Unless otherwise provided in the prospectus supplement, the obligations
of the underwriters to purchase these securities will be subject to conditions.
The underwriters will be obligated to purchase all of these securities if any
are purchased
The securities subject to the underwriting agreement will be acquired by the
underwriters for their own account and may be resold by them from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale.
Underwriters may be deemed to have received compensation from us in the form of
underwriting discounts or commissions and may also receive commissions from the
purchasers of these securities for whom they may act as agent. Underwriters may
sell these securities to or through dealers. These dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agent. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
We also may sell the securities in connection with a remarketing upon their
purchase, in connection with a redemption or repayment, by a remarketing firm
acting as principal for its own account or as our agent. Remarketing firms may
be deemed to be underwriters in connection with the securities that they
remarket.
We may authorize underwriters to solicit offers by institutions to purchase
the securities subject to the underwriting agreement from us at the public
offering price stated in the prospectus supplement under delayed delivery
contracts providing for payment and delivery on a specified date in the future.
If we sell securities under these delayed delivery contracts, the prospectus
supplement will state that as well as the conditions to which these delayed
delivery contracts will be subject and the commissions payable for that
solicitation.
Agents
We may also sell any of the securities through agents designated by us from
time to time. We will name any agent involved in the offer or sale of these
securities and will list commissions payable by us to these agents in the
prospectus supplement. These agents will be acting on a best efforts basis to
solicit purchases for the period of their appointment, unless we state
otherwise in the prospectus supplement.
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Direct Sales
We may sell any of the securities directly to purchasers. In this case, we
will not engage underwriters or agents in the offer and sale of these
securities.
Indemnification
We may indemnify underwriters, dealers or agents who participate in the
distribution of the securities against certain liabilities, including
liabilities under the Securities Act, and agree to contribute to payments which
these underwriters, dealers or agents may be required to make.
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LEGAL MATTERS
Certain Bermuda legal matters with respect to the securities will be passed
upon for us by Appleby, Spurling & Kempe. As of January 14, 2000, lawyers of
Appleby, Spurling & Kempe who have participated in the preparation of this
document beneficially owned approximately 4,000 shares of our common stock.
EXPERTS
The consolidated financial statements of Global Crossing and its
subsidiaries incorporated by reference in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference in reliance upon the authority of said firm as
experts in giving said reports.
The consolidated financial statements incorporated by reference in this
Registration Statement of which this prospectus is a part to the Annual Report
on Form 10-K of Frontier Corporation for the year ended December 31, 1998 and
audited historical financial statements included on pages 22-42 of Frontier
Corporation's Form 8-K dated January 26, 1999, have been so incorporated in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The combined financial statements of Global Marine Systems incorporated by
reference in this prospectus have been incorporated by reference in reliance
upon the report of KPMG Audit Plc, chartered accountants, incorporated by
reference in this prospectus and upon the authority of said firm as experts in
accounting and auditing.
The financial statements of Racal Telecom incorporated by reference in this
registration statement of which this prospectus is a part have been audited by
Deloitte & Touche, independent auditors, as stated in their report incorporated
by reference in this registration statement of which this prospectus is a part.
The consolidated financial statements incorporated by reference in this
registration statement of which this prospectus is a part of HCL Holdings
Limited and subsidiaries have been so incorporated in reliance on the reports
of PricewaterhouseCoopers, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES
We are organized under the laws of Bermuda. In addition, a number of our
directors and officers reside outside of the United States and a substantial
portion of our assets are located outside of the United States. As a result, it
may be difficult for you to effect service of process within the United States
upon those persons or to realize against them in courts of the United States
upon judgments of courts of the United States predicated upon civil liabilities
under the United States federal securities laws. Furthermore, our Bermuda
counsel, Appleby Spurling & Kempe, has advised us that there is doubt as to the
enforcement in Bermuda, in original actions or in actions of enforcement of
judgments of United States courts, of liabilities predicated upon United States
federal securities laws, although Bermuda courts will enforce foreign judgments
for liquidated amounts in civil matters subject to some conditions and
exceptions.
57
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$8,000,000,000
Debt Securities
Preferred Stock
Common Stock
Warrants
[LOGO] Global Crossing Ltd.
----------------
PROSPECTUS
, 2000
----------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
Item 14. Other Expenses of Issuance and Distribution.
The registrant estimates that expenses in connection with the offering
described in this Registration Statement will be as follows:
<TABLE>
<S> <C>
SEC registration fee.......................................... $2,112,000
Nasdaq National Market listing fee............................ 53,000
Bermuda Stock Exchange listing fee............................ 40,000
Printing and engraving expenses............................... 1,500,000
Legal fees and expenses....................................... 1,000,000
Accounting fees and expenses.................................. 500,000
Blue Sky fees and expenses.................................... 15,000
Transfer agent, registrar and trustee fees.................... 45,000
Miscellaneous................................................. 85,000
----------
Total....................................................... $5,350,000
</TABLE>
Item 15. Indemnification of Directors and Officers.
The Bye-laws of the Registrant provide for indemnification of the
Registrant's officers and directors against all liabilities, loss, damage or
expense incurred or suffered by such party as an officer or director of the
Registrant; provided that such indemnification shall not extend to any matter
which would render it void pursuant to the Companies Act of 1981 as in effect
from time to time in Bermuda.
The Companies Act provides that a Bermuda company may indemnify its
directors in respect of any loss arising or liability attaching to them as a
result of any negligence, default, breach of duty or breach of trust of which
they may be guilty. However, the Companies Act also provides that any
provision, whether contained in the company's bye-laws or in a contract or
arrangement between the company and the director, indemnifying a director
against any liability which would attach to him in respect of his fraud or
dishonesty will be void.
The directors and officers of the Registrant are covered by directors' and
officers' insurance policies maintained by the Registrant.
Item 16. Exhibits.
The following is a complete list of Exhibits filed as part of this
Registration Statement, which are incorporated herein:
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
1.1 Form of Underwriting Agreement for [Common Stock] [Preferred Stock]
(previously filed with this Registration Statement).
1.2 Form of Underwriting Agreement for [Convertible] [Senior]
[Subordinated] Debt Securities (previously filed with this
Registration Statement).
2.1 Agreement and Plan of Merger, dated as of March 16, 1999 (the
"Frontier Merger Agreement"), among the Registrant, Frontier
Corporation and GCF Acquisition Corp. (incorporated by reference to
Exhibit 2 to the Registrant's Current Report on Form 8-K filed on
March 19, 1999 (the "March 19, 1999 8-K")).
2.2 Consent and Amendment No. 1 to the Frontier Merger Agreement, dated as
of May 16, 1999, among the Registrant, GCF Acquisition Corp. and
Frontier Corporation (incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K filed on May 18, 1999 (the
"May 18, 1999 8-K")).
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
2.3 Amendment No. 2 to the Frontier Merger Agreement, dated as of
September 2, 1999, among the Registrant, GCF Acquisition Corp. and
Frontier Corporation (incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K filed on September 3, 1999
(the "September 3, 1999 8-K")).
2.4 Sale and Purchase Agreement, dated as of April 26, 1999, between Cable
& Wireless plc and the Registrant (incorporated by reference to
Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on
July 16, 1999 (the "July 16, 1999 8-K")).
2.5 Amendment to the Sale and Purchase Agreement, dated as of June 25,
1999, between Cable & Wireless plc and the Registrant (incorporated by
reference to Exhibit 2.2 to the July 16, 1999 8-K).
2.6 Agreement and Plan of Merger, dated as of May 16, 1999, between the
Registrant and U S West, Inc. (incorporated by reference to Exhibit 2
to the Registrant's Current Report on Form 8-K filed on May 21, 1999
(the "May 21, 1999 8-K")).
2.7 Letter Agreement, dated as of May 16, 1999, between the Registrant and
U S West, Inc. (incorporated by reference to Exhibit 99 to the May 21,
1999 8-K).
2.8 Termination Agreement, dated as of July 18, 1999, between the
Registrant and U S West, Inc. (incorporated by reference to Exhibit
10.1 to the Registrant's Current Report on Form 8-K filed on July 20,
1999 (the "July 20, 1999 8-K")).
2.9 Agreement and Plan of Merger, dated as of February 22, 2000, among the
Registrant, Georgia Merger Sub Corporation, IPC Communications, Inc.,
IPC Information Systems, Inc., Idaho Merger Sub Corporation and IXnet,
Inc. (incorporated by reference to Exhibit 2.10 to Registrant's annual
report on Form 10-K for the year ended December 31, 1999).
3.1 Memorandum of Association of the Registrant (incorporated by reference
to Exhibit 3.1 to the Registrant's Registration Statement on Form S-
1/A filed on July 2, 1998 (the "July 2, 1998 S-1/A")).
3.2 Certificate of Incorporation of Change of Name of the Registrant dated
April 30, 1998 (incorporated by reference to Exhibit 3.3 to the
Registrant's Registration Statement on Form S-1/A filed on July 23,
1998 (the "July 23, 1998 S-1/A")).
3.3 Memorandum of Increase of Share Capital of the Registrant dated July
9, 1998 (incorporated by reference to Exhibit 3.4 to the July 23, 1998
S-1/A).
3.4 Memorandum of Increase of Share Capital of the Registrant dated
September 27, 1999 (incorporated by reference to Exhibit 3.1 to the
Registrant's Quarterly Report on Form 10-Q filed on November 15, 1999
(the "November 15, 1999 10-Q")).
3.5 Bye-laws of the Registrant as in effect on October 14, 1999
(incorporated by reference to Exhibit 3.2 to the November 15, 1999 10-
Q).
3.6 Certificate of Designations of 6 3/8% Cumulative Convertible Preferred
Stock of the Registrant dated November 5, 1999 (incorporated by
reference to Exhibit 3.3 to the November 15, 1999 10-Q).
3.7 Certificate of Designations of 7% Cumulative Convertible Preferred
Stock of the Registrant, dated December 15, 1999 (incorporated by
reference to Exhibit 3.9 to the Global Crossing Holdings Ltd.
Registration Statement on Form S-4 filed on January 11, 2000 (File No.
333-94449)).
3.8 Certificate of Designations of 6 3/8% Cumulative Convertible Preferred
Stock, Series B, of the Registrant, dated January 12, 2000
(incorporated by reference to Registrant's annual report on Form 10-K
for the year ended December 31, 1999).
4.1 Certificate of Designations of 10 1/2% Senior Exchangeable Preferred
Stock Due 2008 of Global Crossing Holdings Ltd. dated December 1, 1998
(incorporated by reference to Schedule A to Exhibit 3.2 to the Global
Crossing Holdings Ltd. Registration Statement on Form S-4 filed on
December 22, 1998.)
4.2 Indenture, dated as of May 18, 1998, between Global Crossing Holdings
Ltd. and United States Trust Company of New York, as Trustee
(incorporated by reference to Exhibit 4.2 to the Global Crossing
Holdings Ltd. Registration Statement on Form S-4 filed on December 22,
1998).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
4.3 Supplemental Indenture, dated as of June 25, 1999, between Global
Crossing Holdings Ltd. and United States Trust Company of New York, to
the Indenture dated as of May 18, 1998 (incorporated by reference to
Exhibit 4.4 to the Registrant's Registration Statement on Form S-4
filed on July 12, 1999).
4.4 Credit Agreement, dated as of July 2, 1999, among the Registrant,
Global Crossing Holdings Ltd., the Lenders party thereto and The Chase
Manhattan Bank as Administrative Agent (incorporated by reference to
Exhibit 10.7 to the Registrant's Registration Statement on Form S-4/A
filed on August 5, 1999).
4.5 Indenture, dated as of November 19, 1999, among Global Crossing Ltd.,
Global Crossing Holdings Ltd. and United States Trust Company of New
York (incorporated by reference to Exhibit 4.5 to the Global Crossing
Holdings Ltd. Registration Statement on Form S-4 filed on January 11,
2000 (File No. 333-94449)).
Except as hereinabove provided, there is no instrument with respect to
long-term debt of the Registrant and its consolidated subsidiaries
under which the total authorized amount exceeds 10 percent of the
total consolidated assets of the Registrant. The Registrant agrees to
furnish to the SEC upon its request a copy of any instrument relating
to long-term debt.
4.6 Form of Indenture between the Registrant and United States Trust
Company of New York, as Trustee (previously filed with this
Registration Statement).
4.7 Form of Certificate of Designations, Powers, Preferences and Rights
for Preferred Stock (previously filed with this Registration
Statement).
4.8 Form of Common Stock Certificate. (The Form of Common Stock
Certificate included as Exhibit 4.1 to the Registrant's registration
statement on Form S-1 filed on July 23, 1998 is hereby incorporated
herein by reference.)
4.9 Form of Preferred Stock Certificate (previously filed with this
Registration Statement).
4.10 Form of Debt Warrant Agreement (previously filed with this
Registration Statement).
4.11 Form of Equity Warrant Agreement (previously filed with this
Registration Statement).
4.12 Form of Debt Security (previously filed with this Registration
Statement).
5.1 Opinion of Appleby, Spurling & Kempe (filed herewith).
10.1 Project Development and Construction Contract, dated as of March 18,
1997, among AT&T Submarine Systems, Inc. and Atlantic Crossing Ltd.
(formerly Global Telesystems Ltd.) (incorporated by reference to
Exhibit 10.2 to the July 23, 1998 S-1/A).
10.2 Project Development and Construction Contract, dated as of April 21,
1998, among Tyco Submarine Systems, Ltd. and Pacific Crossing Ltd.
(incorporated by reference to Exhibit 10.3 to the July 23, 1998 S-
1/A).
10.3 Project Development and Construction Contract, dated as of June 2,
1998, among Alcatel Submarine Networks and Mid-Atlantic Crossing Ltd.
(incorporated by reference to Exhibit 10.4 to the July 23, 1998 S-
1/A).
10.4 Project Development and Construction Contract, dated as of July 21,
1998, among Tyco Submarine Systems, Ltd. and Pan American Crossing
Ltd. (incorporated by reference to Exhibit 10.5 to the Registrant's
Quarterly Report on Form 10-Q filed on November 16, 1998).
10.5 Project Development and Construction Contract, dated as of July 30,
1999, among Alcatel Submarine Networks and South American Crossing
Ltd. (incorporated by reference to Exhibit 10.5 to the Global Crossing
Holdings Ltd. Registration Statement on Form S-4 filed on January 11,
2000 (File No. 333-94449) (portions have been omitted pursuant to a
request for confidential treatment).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
10.6 Lease made as of October 1, 1999 between North Crescent Realty V, LLC
and Global Crossing Development Company (incorporated by reference to
Exhibit 10.1 to the November 15, 1999 10-Q).
10.7 Form of Stockholders Agreement dated as of August 12, 1998 among the
Registrant and the investors named therein (incorporated by reference
to Exhibit 9.1 to the July 23, 1998 S-1/A).
10.8 Form of Registration Rights Agreement dated as of August 12, 1998
among the Registrant and the investors named therein (incorporated by
reference to Exhibit 4.4 to the July 23, 1998 S-1/A).
10.9 Voting Agreement, dated as of March 16, 1999, among certain
shareholders of the Registrant parties thereto, Frontier Corporation
and, for certain purposes only, the Registrant (incorporated by
reference to Exhibit 10.2 to the March 19, 1999 8-K).
10.10 Second Reaffirmation of Voting Agreement and Share Transfer
Restriction Agreement, dated as of September 2, 1999 (incorporated by
reference to Annex S-B to the joint proxy statement/prospectus
supplement included in the Registrant's Registration Statement on Form
S-4 filed on September 8, 1999 (the "September 8, 1999 S-4").
10.11 Share Transfer Restriction Agreement, dated as of September 2, 1999,
among certain shareholders of Global Crossing Ltd., certain
shareholders of Frontier Corporation and Global Crossing Ltd.
(incorporated by reference to Annex S-C to the joint proxy
statement/prospectus supplement included in the September 8, 1999 S-
4).
10.12 Tender Offer and Purchase Agreement, dated as of May 16, 1999, between
the Registrant and U S WEST, Inc. (incorporated by reference to
Exhibit (c)(2) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21,
1999).
10.13 Standstill Agreement dated as of May 16, 1999 between U S WEST, Inc.
and the Registrant (incorporated by reference to Exhibit (c)(4) to U S
WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).
10.14 Voting Agreement dated as of May 16, 1999 between U S WEST, Inc. and
the Registrant (incorporated by reference to Exhibit (c)(3) to U S
WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).
10.15 Tender and Voting Agreement dated as of May 16, 1999 among U S WEST,
Inc., the Registrant and the shareholders party thereto (incorporated
by reference to Exhibit (c)(5) to U S WEST, Inc.'s Schedule 14D-1
filed on May 21, 1999).
10.16 Agreement dated as of May 16, 1999 among the Registrant and the
shareholders party thereto (incorporated by reference to Exhibit
(c)(6) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).
10.17 Transfer Agreement dated as of May 16, 1999 among the Registrant and
the shareholders party thereto (incorporated by reference to Exhibit
(c)(8) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).
10.18 Amendment No. 1 dated as of July 18, 1999 to Tender Offer and Purchase
Agreement dated as of May 16 1999 between the Registrant and U S WEST,
Inc. (incorporated by reference to Exhibit 10.2 to the July 20, 1999
8-K).
10.19 Agreement, dated as of July 18, 1999, between Qwest Communications
International Inc. and the Registrant (incorporated by reference to
Exhibit 10.3 to the July 20, 1999 8-K).
10.20 Agreement, dated as of July 18, 1999, between Global Crossing Holdings
Ltd. and Qwest Communications International Inc. (incorporated by
reference to Exhibit 10.4 to the July 20, 1999 8-K).
10.21 Registration Rights Agreement, dated as of November 5, 1999, among the
Registrant and the initial purchasers of the Registrant's 6 3/8%
Cumulative Convertible Preferred Stock named therein (incorporated by
reference to Exhibit 10.21 to the Registrant's Registration Statement
on Form S-3 (File No. 333-94805) filed on January 18, 2000).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
10.22 1998 Global Crossing Ltd. Stock Incentive Plan, as amended and
restated effective December 7, 1999 (incorporated by reference to
Exhibit 10.21 to the Global Crossing Holdings Ltd. Registration
Statement on Form S-4 filed on January 11, 2000 (File No. 333-94449)).
10.23 Form of Non-Qualified Stock Option Agreement as in effect on September
30, 1999 (incorporated by reference to Exhibit 10.2 to the November
15, 1999 10-Q).
10.24 Frontier Corporation Supplemental Retirement Savings Plan as amended
and restated effective January 1, 1996 (incorporated by reference to
Exhibit 10.13 to Frontier Corporation's Annual Report on Form 10-K
filed March 28, 1997).
10.25 Amendment No. 1, effective March 16, 1999, to Frontier Corporation
Supplemental Retirement Savings Plan (incorporated by reference to
Exhibit 10.2 to Frontier Corporation's Quarterly Report on Form 10-Q
filed August 3, 1999).
10.26 Amendment No. 2, dated September 21, 1999, to Frontier Corporation
Supplemental Retirement Savings Plan (incorporated by reference to
Exhibit 10.5 to the November 15, 1999 10-Q).
10.27 Employment Agreement dated as of February 19, 1999 between the
Registrant and Robert Annunziata (incorporated by reference to Exhibit
10.8 to the Registrant's Quarterly Report on Form 10-Q filed on May
10, 1999).
10.28 Executive Contract dated January 1, 1998 between Joseph P. Clayton and
Frontier Corporation (incorporated by reference to Exhibit 10.22 to
Frontier Corporation's Annual Report on Form 10-K filed March 26,
1998).
10.29 Amendment dated May 1, 1999 to Executive Contract between Joseph P.
Clayton and Frontier Corporation (incorporated by reference to Exhibit
10.9 to the November 15, 1999 10-Q).
10.30 Sale Agreement, dated October 10, 1999, among Controls and
Communications Limited, The Racal Corporation, Racal Electronics plc
and the Registrant (incorporated by reference to Exhibit 2.1 of the
Registrant's Current Report on Form 8-K filed on October 21, 1999).
10.31 Subscription and Sale and Purchase Agreement, dated November 15, 1999,
among Hutchison Whampoa Limited, Hutchison Telecommunications Limited,
the Registrant and HCL Holdings Limited (incorporated by reference to
Exhibit 10.33 to the Global Crossing Holdings Ltd. Registration
Statement on Form S-4 filed on January 11, 2000 (File No. 333-94449)).
10.32 Registration Rights Agreement, dated as of December 15, 1999, among
the Registrant and the initial purchasers of the Registrant's 7%
Cumulative Convertible Preferred Stock named therein (incorporated by
reference to Exhibit 10.21 to the Registrant's Registration Statement
on Form S-3 (File No. 333-94803) filed on January 18, 2000).
10.33 Employment Agreement, dated as of December 5, 1999, between the
Registrant and Leo J. Hindery, Jr. (incorporated by reference to
Exhibit 10.32 to the Registrant's annual report on Form 10-K for the
year ended December 31, 1999).
10.34 Form of Change in Control Agreement between the Registrant and
Executive Officers of the Registrant approved by the Board of
Directors in January 2000 (incorporated by reference to Exhibit 10.33
to the Registrant's annual report on Form 10-K for the year ended
December 31, 1999).
10.35 Employment Agreement, dated as of December 3, 1999, between the
Registrant and John A. Scarpati (incorporated by reference to Exhibit
10.36 to Registrant's annual report on Form 10-K for the year ended
December 31, 1999).
12.1 Statement of Computation of Earnings to Fixed Charges (incorporated by
reference to Exhibit 12.1 to Registrant's annual report on Form 10-K
for the year ended December 31, 1999).
21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit
21.1 to Registrant's annual report on Form 10-K for the year ended
December 31, 1999).
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
23.1 Consent of Arthur Andersen (filed herewith).
23.2 Consent of PricewaterhouseCoopers LLP (filed herewith).
23.3 Consent of KPMG Audit Plc (filed herewith).
23.4 Consent of Deloitte & Touche (filed herewith).
23.5 Consent of PricewaterhouseCoopers (filed herewith).
23.6 Consent of Appleby, Spurling & Kempe (included in Exhibit 5.1).
24.1 Power of Attorney of the Registrant (previously filed with this
Registration Statement).
</TABLE>
Item 17. Undertakings.
(1) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to be
the initial bona fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(3) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
II-6
<PAGE>
(b) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(c) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(d) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on March 23, 2000.
Global Crossing Ltd.
By:
/s/ Dan J. Cohrs
----------------------------------
Name: Dan J. Cohrs
Title: Senior Vice President and
Chief FinancialOfficer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/*/ Chairman of the Board and March 23, 2000
___________________________________________ Director
Gary Winnick
/*/ Co-Chairman of the Board March 23, 2000
___________________________________________ and Director
Lodwrick M. Cook
/*/ Vice Chairman of the Board March 23, 2000
___________________________________________ and Director
Thomas J. Casey
/*/ Director; Vice Chairman of March 23, 2000
___________________________________________ the Board, Asia Global
Jack M. Scanlon Crossing
/*/ Chief Executive Officer March 23, 2000
___________________________________________ and Director; Chairman
Leo J. Hindery and Chief Executive
Officer, GlobalCenter,
Inc.
/*/ President, Chief Operating March 23, 2000
___________________________________________ Officer and Director
David L. Lee
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/*/ Director, President, March 23, 2000
___________________________________________ Global Crossing North
Joseph P. Clayton America
/*/ Senior Vice President and March 23, 2000
___________________________________________ Director
Barry Porter
/*/ Senior Vice President and March 23, 2000
___________________________________________ Chief Financial Officer
Dan J. Cohrs (principal financial
officer and principal
accounting officer)
___________________________________________ Director
Abbott Brown
/*/ Director March 23, 2000
___________________________________________
Jay R. Bloom
/*/ Director March 23, 2000
___________________________________________
William E. Conway, Jr.
/*/ Director March 23, 2000
___________________________________________
Dean C. Kehler
/*/ Director March 23, 2000
___________________________________________
Geoffrey J.W. Kent
/*/ Director March 23, 2000
___________________________________________
Bruce Raben
/*/ Director March 23, 2000
___________________________________________
Michael R. Steed
/*/ Director March 23, 2000
___________________________________________
Robert Annunziata
/*/ Director March 23, 2000
___________________________________________
James F. McDonald
/*/ Director March 23, 2000
___________________________________________
Eric Hippeau
/*/ Director March 23, 2000
___________________________________________
Douglas H. McCorkindale
Director
___________________________________________
Cunning Fok
* By Power-of-Attorney______________
/s/ Dan J. Cohrs Attorney-in-Fact March 23, 2000
___________________________________________
Dan J. Cohrs
</TABLE>
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
1.1 Form of Underwriting Agreement for [Common Stock] [Preferred Stock]
(previously filed with this Registration Statement).
1.2 Form of Underwriting Agreement for [Convertible] [Senior]
[Subordinated] Debt Securities (previously filed with this
Registration Statement).
2.1 Agreement and Plan of Merger, dated as of March 16, 1999 (the
"Frontier Merger Agreement"), among the Registrant, Frontier
Corporation and GCF Acquisition Corp. (incorporated by reference to
Exhibit 2 to the Registrant's Current Report on Form 8-K filed on
March 19, 1999 (the "March 19, 1999 8-K")).
2.2 Consent and Amendment No. 1 to the Frontier Merger Agreement, dated as
of May 16, 1999, among the Registrant, GCF Acquisition Corp. and
Frontier Corporation (incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K filed on May 18, 1999 (the
"May 18, 1999 8-K")).
2.3 Amendment No. 2 to the Frontier Merger Agreement, dated as of
September 2, 1999, among the Registrant, GCF Acquisition Corp. and
Frontier Corporation (incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K filed on September 3, 1999
(the "September 3, 1999 8-K")).
2.4 Sale and Purchase Agreement, dated as of April 26, 1999, between Cable
& Wireless plc and the Registrant (incorporated by reference to
Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on
July 16, 1999 (the "July 16, 1999 8-K")).
2.5 Amendment to the Sale and Purchase Agreement, dated as of June 25,
1999, between Cable & Wireless plc and the Registrant (incorporated by
reference to Exhibit 2.2 to the July 16, 1999 8-K).
2.6 Agreement and Plan of Merger, dated as of May 16, 1999, between the
Registrant and U S West, Inc. (incorporated by reference to Exhibit 2
to the Registrant's Current Report on Form 8-K filed on May 21, 1999
(the "May 21, 1999 8-K")).
2.7 Letter Agreement, dated as of May 16, 1999, between the Registrant and
U S West, Inc. (incorporated by reference to Exhibit 99 to the May 21,
1999 8-K).
2.8 Termination Agreement, dated as of July 18, 1999, between the
Registrant and U S West, Inc. (incorporated by reference to Exhibit
10.1 to the Registrant's Current Report on Form 8-K filed on July 20,
1999 (the "July 20, 1999 8-K")).
2.9 Agreement and Plan of Merger, dated as of February 22, 2000, among the
Registrant, Georgia Merger Sub Corporation, IPC Communications, Inc.,
IPC Information Systems, Inc., Idaho Merger Sub Corporation and IXnet,
Inc. (incorporated by reference to Exhibit 2.10 to Registrant's annual
report on Form 10-K for the year ended December 31, 1999).
3.1 Memorandum of Association of the Registrant (incorporated by reference
to Exhibit 3.1 to the Registrant's Registration Statement on Form S-
1/A filed on July 2, 1998 (the "July 2, 1998 S-1/A")).
3.2 Certificate of Incorporation of Change of Name of the Registrant dated
April 30, 1998 (incorporated by reference to Exhibit 3.3 to the
Registrant's Registration Statement on Form S-1/A filed on July 23,
1998 (the "July 23, 1998 S-1/A")).
3.3 Memorandum of Increase of Share Capital of the Registrant dated July
9, 1998 (incorporated by reference to Exhibit 3.4 to the July 23, 1998
S-1/A).
3.4 Memorandum of Increase of Share Capital of the Registrant dated
September 27, 1999 (incorporated by reference to Exhibit 3.1 to the
Registrant's Quarterly Report on Form 10-Q filed on November 15, 1999
(the "November 15, 1999 10-Q")).
3.5 Bye-laws of the Registrant as in effect on October 14, 1999
(incorporated by reference to Exhibit 3.2 to the November 15, 1999 10-
Q).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
3.6 Certificate of Designations of 6 3/8% Cumulative Convertible Preferred
Stock of the Registrant dated November 5, 1999 (incorporated by
reference to Exhibit 3.3 to the November 15, 1999 10-Q).
3.7 Certificate of Designations of 7% Cumulative Convertible Preferred
Stock of the Registrant, dated December 15, 1999 (incorporated by
reference to Exhibit 3.9 to the Global Crossing Holdings Ltd.
Registration Statement on Form S-4 filed on January 11, 2000 (File No.
333-94449)).
3.8 Certificate of Designations of 6 3/8% Cumulative Convertible Preferred
Stock, Series B, of the Registrant, dated January 12, 2000
(incorporated by reference to Registrant's annual report on Form 10-K
for the year ended December 31, 1999).
4.1 Certificate of Designations of 10 1/2% Senior Exchangeable Preferred
Stock Due 2008 of Global Crossing Holdings Ltd. dated December 1, 1998
(incorporated by reference to Schedule A to Exhibit 3.2 to the Global
Crossing Holdings Ltd. Registration Statement on Form S-4 filed on
December 22, 1998.)
4.2 Indenture, dated as of May 18, 1998, between Global Crossing Holdings
Ltd. and United States Trust Company of New York, as Trustee
(incorporated by reference to Exhibit 4.2 to the Global Crossing
Holdings Ltd. Registration Statement on Form S-4 filed on December 22,
1998).
4.3 Supplemental Indenture, dated as of June 25, 1999, between Global
Crossing Holdings Ltd. and United States Trust Company of New York, to
the Indenture dated as of May 18, 1998 (incorporated by reference to
Exhibit 4.4 to the Registrant's Registration Statement on Form S-4
filed on July 12, 1999).
4.4 Credit Agreement, dated as of July 2, 1999, among the Registrant,
Global Crossing Holdings Ltd., the Lenders party thereto and The Chase
Manhattan Bank as Administrative Agent (incorporated by reference to
Exhibit 10.7 to the Registrant's Registration Statement on Form S-4/A
filed on August 5, 1999).
4.5 Indenture, dated as of November 19, 1999, among Global Crossing Ltd.,
Global Crossing Holdings Ltd. and United States Trust Company of New
York (incorporated by reference to Exhibit 4.5 to the Global Crossing
Holdings Ltd. Registration Statement on Form S-4 filed on January 11,
2000 (File No. 333-94449)).
Except as hereinabove provided, there is no instrument with respect to
long-term debt of the Registrant and its consolidated subsidiaries
under which the total authorized amount exceeds 10 percent of the
total consolidated assets of the Registrant. The Registrant agrees to
furnish to the SEC upon its request a copy of any instrument relating
to long-term debt.
4.6 Form of Indenture between the Registrant and United States Trust
Company of New York, as Trustee (previously filed with this
Registration Statement).
4.7 Form of Certificate of Designations, Powers, Preferences and Rights
for Preferred Stock (previously filed with this Registration
Statement).
4.8 Form of Common Stock Certificate. (The Form of Common Stock
Certificate included as Exhibit 4.1 to the Registrant's registration
statement on Form S-1 filed on July 23, 1998 is hereby incorporated
herein by reference.)
4.9 Form of Preferred Stock Certificate (previously filed with this
Registration Statement).
4.10 Form of Debt Warrant Agreement (previously filed with this
Registration Statement).
4.11 Form of Equity Warrant Agreement (previously filed with this
Registration Statement).
4.12 Form of Debt Security (previously filed with this Registration
Statement).
5.1 Opinion of Appleby, Spurling & Kempe (filed herewith).
10.1 Project Development and Construction Contract, dated as of March 18,
1997, among AT&T Submarine Systems, Inc. and Atlantic Crossing Ltd.
(formerly Global Telesystems Ltd.) (incorporated by reference to
Exhibit 10.2 to the July 23, 1998 S-1/A).
10.2 Project Development and Construction Contract, dated as of April 21,
1998, among Tyco Submarine Systems, Ltd. and Pacific Crossing Ltd.
(incorporated by reference to Exhibit 10.3 to the July 23, 1998 S-
1/A).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
10.3 Project Development and Construction Contract, dated as of June 2,
1998, among Alcatel Submarine Networks and Mid-Atlantic Crossing Ltd.
(incorporated by reference to Exhibit 10.4 to the July 23, 1998 S-
1/A).
10.4 Project Development and Construction Contract, dated as of July 21,
1998, among Tyco Submarine Systems, Ltd. and Pan American Crossing
Ltd. (incorporated by reference to Exhibit 10.5 to the Registrant's
Quarterly Report on Form 10-Q filed on November 16, 1998).
10.5 Project Development and Construction Contract, dated as of July 30,
1999, among Alcatel Submarine Networks and South American Crossing
Ltd. (incorporated by reference to Exhibit 10.5 to the Global Crossing
Holdings Ltd. Registration Statement on Form S-4 filed on January 11,
2000 (File No. 333-94449) portions have been omitted pursuant to a
request for confidential treatment).
10.6 Lease made as of October 1, 1999 between North Crescent Realty V, LLC
and Global Crossing Development Company (incorporated by reference to
Exhibit 10.1 to the November 15, 1999 10-Q).
10.7 Form of Stockholders Agreement dated as of August 12, 1998 among the
Registrant and the investors named therein (incorporated by reference
to Exhibit 9.1 to the July 23, 1998 S-1/A).
10.8 Form of Registration Rights Agreement dated as of August 12, 1998
among the Registrant and the investors named therein (incorporated by
reference to Exhibit 4.4 to the July 23, 1998 S-1/A).
10.9 Voting Agreement, dated as of March 16, 1999, among certain
shareholders of the Registrant parties thereto, Frontier Corporation
and, for certain purposes only, the Registrant (incorporated by
reference to Exhibit 10.2 to the March 19, 1999 8-K).
10.10 Second Reaffirmation of Voting Agreement and Share Transfer
Restriction Agreement, dated as of September 2, 1999 (incorporated by
reference to Annex S-B to the joint proxy statement/prospectus
supplement included in the Registrant's Registration Statement on Form
S-4 filed on September 8, 1999 (the "September 8, 1999 S-4").
10.11 Share Transfer Restriction Agreement, dated as of September 2, 1999,
among certain shareholders of Global Crossing Ltd., certain
shareholders of Frontier Corporation and Global Crossing Ltd.
(incorporated by reference to Annex S-C to the joint proxy
statement/prospectus supplement included in the September 8, 1999 S-
4).
10.12 Tender Offer and Purchase Agreement, dated as of May 16, 1999, between
the Registrant and U S WEST, Inc. (incorporated by reference to
Exhibit (c)(2) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21,
1999).
10.13 Standstill Agreement dated as of May 16, 1999 between U S WEST, Inc.
and the Registrant (incorporated by reference to Exhibit (c)(4) to U S
WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).
10.14 Voting Agreement dated as of May 16, 1999 between U S WEST, Inc. and
the Registrant (incorporated by reference to Exhibit (c)(3) to U S
WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).
10.15 Tender and Voting Agreement dated as of May 16, 1999 among U S WEST,
Inc., the Registrant and the shareholders party thereto (incorporated
by reference to Exhibit (c)(5) to U S WEST, Inc.'s Schedule 14D-1
filed on May 21, 1999).
10.16 Agreement dated as of May 16, 1999 among the Registrant and the
shareholders party thereto (incorporated by reference to Exhibit
(c)(6) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).
10.17 Transfer Agreement dated as of May 16, 1999 among the Registrant and
the shareholders party thereto (incorporated by reference to Exhibit
(c)(8) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
10.18 Amendment No. 1 dated as of July 18, 1999 to Tender Offer and Purchase
Agreement dated as of May 16 1999 between the Registrant and U S WEST,
Inc. (incorporated by reference to Exhibit 10.2 to the July 20, 1999
8-K).
10.19 Agreement, dated as of July 18, 1999, between Qwest Communications
International Inc. and the Registrant (incorporated by reference to
Exhibit 10.3 to the July 20, 1999 8-K).
10.20 Agreement, dated as of July 18, 1999, between Global Crossing Holdings
Ltd. and Qwest Communications International Inc. (incorporated by
reference to Exhibit 10.4 to the July 20, 1999 8-K).
10.21 Registration Rights Agreement, dated as of November 5, 1999, among the
Registrant and the initial purchasers of the Registrant's 6 3/8%
Cumulative Convertible Preferred Stock named therein (incorporated by
reference to Exhibit 10.21 to the Registrant's Registration Statement
on Form S-3 (File No. 333-94805) filed on January 18, 2000).
10.22 1998 Global Crossing Ltd. Stock Incentive Plan, as amended and
restated effective December 7, 1999 (incorporated by reference to
Exhibit 10.21 to the Global Crossing Holdings Ltd. Registration
Statement on Form S-4 filed on January 11, 2000 (File No. 333-94449)).
10.23 Form of Non-Qualified Stock Option Agreement as in effect on September
30, 1999 (incorporated by reference to Exhibit 10.2 to the November
15, 1999 10-Q).
10.24 Frontier Corporation Supplemental Retirement Savings Plan as amended
and restated effective January 1, 1996 (incorporated by reference to
Exhibit 10.13 to Frontier Corporation's Annual Report on Form 10-K
filed March 28, 1997).
10.25 Amendment No. 1, effective March 16, 1999, to Frontier Corporation
Supplemental Retirement Savings Plan (incorporated by reference to
Exhibit 10.2 to Frontier Corporation's Quarterly Report on Form 10-Q
filed August 3, 1999).
10.26 Amendment No. 2, dated September 21, 1999, to Frontier Corporation
Supplemental Retirement Savings Plan (incorporated by reference to
Exhibit 10.5 to the November 15, 1999 10-Q).
10.27 Employment Agreement dated as of February 19, 1999 between the
Registrant and Robert Annunziata (incorporated by reference to Exhibit
10.8 to the Registrant's Quarterly Report on Form 10-Q filed on May
10, 1999).
10.28 Executive Contract dated January 1, 1998 between Joseph P. Clayton and
Frontier Corporation (incorporated by reference to Exhibit 10.22 to
Frontier Corporation's Annual Report on Form 10-K filed March 26,
1998).
10.29 Amendment dated May 1, 1999 to Executive Contract between Joseph P.
Clayton and Frontier Corporation (incorporated by reference to Exhibit
10.9 to the November 15, 1999 10-Q).
10.30 Sale Agreement, dated October 10, 1999, among Controls and
Communications Limited, The Racal Corporation, Racal Electronics plc
and the Registrant (incorporated by reference to Exhibit 2.1 of the
Registrant's Current Report on Form 8-K filed on October 21, 1999).
10.31 Subscription and Sale and Purchase Agreement, dated November 15, 1999,
among Hutchison Whampoa Limited, Hutchison Telecommunications Limited,
the Registrant and HCL Holdings Limited (incorporated by reference to
Exhibit 10.33 to the Global Crossing Holdings Ltd. Registration
Statement on Form S-4 filed on January 11, 2000 (File No. 333-94449)).
10.32 Registration Rights Agreement, dated as of December 15, 1999, among
the Registrant and the initial purchasers of the Registrant's 7%
Cumulative Convertible Preferred Stock named therein (incorporated by
reference to Exhibit 10.21 to the Registrant's Registration Statement
on Form S-3 (File No. 333-94803) filed on January 18, 2000).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
10.33 Employment Agreement, dated as of December 5, 1999, between the
Registrant and Leo J. Hindery, Jr. (incorporated by reference to
Exhibit 10.32 to the Registrant's annual report on Form 10-K for the
year ended December 31, 1999).
10.34 Form of Change in Control Agreement between the Registrant and
Executive Officers of the Registrant approved by the Board of
Directors in January 2000 (incorporated by reference to Exhibit 10.33
to the Registrant's annual report on Form 10-K for the year ended
December 31, 1999).
10.35 Employment Agreement, dated as of December 3, 1999, between the
Registrant and John A. Scarpati (incorporated by reference to Exhibit
10.36 to Registrant's annual report on Form 10-K for the year ended
December 31, 1999).
12.1 Statement of Computation of Earnings to Fixed Charges (incorporated by
reference to Exhibit 12.1 to Registrant's annual report on Form 10-K
for the year ended December 31, 1999).
21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit
21.1 to Registrant's annual report on Form 10-K for the year ended
December 31, 1999).
23.1 Consent of Arthur Andersen (filed herewith).
23.2 Consent of PricewaterhouseCoopers LLP (filed herewith).
23.3 Consent of KPMG Audit Plc (filed herewith).
23.4 Consent of Deloitte & Touche (filed herewith).
23.5 Consent of PricewaterhouseCoopers (filed herewith).
23.6 Consent of Appleby, Spurling & Kempe (included in Exhibit 5.1).
24.1 Power of Attorney of the Registrant (previously filed with this
Registration Statement).
</TABLE>
<PAGE>
Exhibit 5.1
-----------
[Letterhead of Appleby, Spurling & Kempe]
-----------------------------------------
23 May 2000
Global Crossing Ltd.
Wessex House
45 Reid Street
Hamilton HM 12
Bermuda
Dear Sirs:
Re: Global Crossing Ltd. (the "Company")
- ----------------------------------------
We have acted as legal counsel in Bermuda to the Company and this opinion as to
Bermuda law is addressed to you in connection with the filing by the Company
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"), of a Registration Statement on Form S-3, as
amended (File No. 333-32810) (the "Registration Statement") in relation to the
shelf registration of debt securities (the "Debt Securities"), shares of
preferred stock (the "Preferred Shares"), shares of common stock, (the "Common
Shares") and warrants (the "Warrants") (together the "Securities") to be offered
from time to time by the Company up to an aggregate amount of US$8,000,000,000.
-------------
For the purposes of this opinion we have examined and relied upon the documents
listed (which, in some cases, are also defined) in the Schedule to this opinion
(the "Documents").
Assumptions
- -----------
In stating our opinion we have assumed:-
(a) the authenticity, accuracy and completeness of all Documents (including,
without limitation, public records) submitted to us as originals and the
conformity to authentic original Documents of all Documents submitted to
us as certified, conformed, notarised or photostatic copies;
(b) the genuineness of all signatures on the Documents;
(c) the authority, capacity and power of each of the persons signing the
Documents (other than the Company);
<PAGE>
2
(d) that any factual statements made in any of the Documents are true,
accurate and complete;
(e) that the Operative Documents will constitute the legal, valid, and binding
obligations of each of the parties thereto, other than the Company, under
the laws of its jurisdiction of incorporation or its jurisdiction of
formation;
(f) that the Operative Documents will be validly authorised by each of the
parties (other than the Company), and will be validly executed and
delivered by each of the parties thereto and the performance thereof is
within the capacity and powers of each such party thereto (other than the
Company), and that each such party to which the Company will deliver the
Operative Documents will accept delivery of such Operative Documents;
(g) that the Operative Documents will effect, and will constitute legal, valid
and binding obligations of each of the parties thereto, enforceable in
accordance with their terms, under the laws of the State of New York by
which they are expressed to be governed;
(h) that the Operative Documents will be in the proper legal form to be
admissible in evidence and enforced in the courts of the State of New
York and in accordance with the laws of the State of New York;
(i) that there are no provisions of the laws or regulations of any jurisdiction
other than Bermuda which would be contravened by the execution or delivery
of the Operative Documents or which would have any implication in relation
to the opinions expressed herein and that, in so far as any obligation
under, or action to be taken under, the Operative Documents and the Bye-
laws of the Company it will be required to be performed or taken in any
jurisdiction outside Bermuda, the performance of such obligation or the
taking of such action will constitute a valid and binding obligation of
each of the parties thereto under the laws of that jurisdiction and will
not be illegal by virtue of the laws of that jurisdiction.
(j) that the Resolutions are in full force and effect and have not been
rescinded, either in whole or in part, and accurately record the
resolutions passed by the Board of Directors of the Company or the
Shareholders, as the case may be, at meetings which were duly convened and
at which duly constituted quorums were present and voting throughout and
accurately record the resolutions adopted by the Directors and Shareholders
of the Company;
(k) that the Company will enter into its obligations under the Operative
Documents in good faith for the purpose of carrying on its business and
that, at the time it does so, there will be reasonable grounds for
believing that the transactions contemplated by the Operative Documents
will benefit the Company;
<PAGE>
3
(l) that the approval of the issue of any Securities will be made at a duly
convened and quorate meeting of the Board of Directors of the Company and,
if required, at a duly convened and quorate meeting of the shareholders of
the Company in a manner complying with the terms of the Resolutions and
the Constitutional Documents;
(m) that when the Board of Directors of the Company authorises the issue of
any Common Shares and any Preferred Shares, the issue price will not be
less than the par values thereof and the Company will have sufficient
authorised capital to effect the issue; and
(n) that when executed any document presented to us in draft (including, for
the avoidance of doubt, the Operative Documents) will not differ in any
material way from the draft which we have examined.
Opinion
Based upon and subject to the foregoing and subject to the reservations set out
below and to any matters not disclosed to us, we are of the opinion that:-
(1) Any Common Shares and any Preferred Shares issued under the authority
granted by the Resolutions and the terms set forth in the Prospectus that
forms part of the Registration Statement, provided that such issue is
undertaken subject to and in accordance with the Constitutional Documents
of the Company and in accordance with Bermuda law, will be duly
authorised, validly issued, fully paid and non-assessable shares of the
Company.
(2) The Debt Securities, when issued in accordance with the terms of the
Indenture, and the Warrants, when issued under the Warrant Agreement, both
duly executed by the Company, and issued under the authority granted by
the Resolutions in accordance with the terms set forth in the Prospectus
that forms part of the Registration Statement, will constitute the legal
and binding obligations of the Company under the laws of Bermuda.
(3) The statements in the Prospectus included in the Registration Statement
under the captions "Description of Debt Securities", "Description of
Preferred Stock", "Description of Common Stock", "Description of
Warrants", "Service of Process and Enforcement of Liabilities", "Certain
Income Tax Consequences-Bermuda Tax Considerations" and Taxation of
Shareholders-Bermuda Tax Considerations" insofar as they purport to
describe the provisions of the laws of Bermuda referred to therein, as
accurate and correct in all material respects.
Reservations
We have the following reservations:-
<PAGE>
4
(a) We express no opinion as to the availability of equitable remedies such
as specific performance or injunctive relief, or as to any matters which
are within the discretion of the courts of Bermuda in respect of any
obligations of the Company as set out in the Operative Documents, the
Securities and in the Bye-laws of the Company. Further, we express no
opinion as to the validity or binding effect of any waiver of or
obligation to waive either any provision of law (whether substantive or
procedural) or any right or remedy.
(b) Enforcement of the obligations of the Company under the Bye-laws of the
Company and under the Operative Documents may be limited or affected by
applicable laws from time to time in effect relating to bankruptcy,
insolvency or liquidation or any other laws or other legal procedures
affecting generally the enforcement of creditors' rights.
(c) Enforcement of the obligations of the Company may be the subject of a
statutory limitation of the time within which such proceedings may be
brought.
(d) We express no opinion as to any law other than Bermuda law and none of
the opinions expressed herein relates to compliance with or matters
governed by the laws of any jurisdiction except Bermuda. This opinion is
limited to Bermuda law as applied by the Courts of Bermuda at the date
hereof.
(e) Where an obligation is to be performed in a jurisdiction other than
Bermuda, the courts of Bermuda may refuse to enforce it to the extent
that such performance would be illegal under the laws of, or contrary to
public policy of, such other jurisdiction.
(f) We express no opinion as to the validity, binding effect or
enforceability of any provision incorporated into the Bye-laws of the
Company or either of the Operative Documents by reference to a law other
than that of Bermuda, or as to the availability in Bermuda of remedies
which are available in other jurisdictions.
(g) Where a person is vested with a discretion or may determine a matter in
his or its opinion, such discretion may have to be exercised reasonably
or such an opinion may have to be based on reasonable grounds.
(h) We express no opinion as to the validity or binding effect of any
provision of the Operative Documents which provides for the severance of
illegal, invalid or unenforceable provisions.
(i) A Bermuda Court may refuse to give effect to any provisions of the
Operative Documents and the Bye-laws of the Company in respect of costs
of unsuccessful litigation brought before the Bermuda court or where
that court has itself made an order for costs.
<PAGE>
5
(j) We express no opinion as to the validity or binding effect of any
provision in the Operative Documents or the Securities for the payment
of interest at a higher rate on overdue amounts than on amounts which
are current, or that liquidated damages or a penalty are or may be
payable. Such a provision may not be enforceable if it could be
established that the amount expressed as being payable was in the nature
of a penalty; that is to say a requirement for a stipulated sum to be
paid irrespective of, or necessarily greater than, the loss likely to be
sustained or if it is expressed as a penalty. If it cannot be
demonstrated to the Bermuda court that the higher payment was a
reasonable pre-estimate of the loss suffered, the court will determine
and award what it considers to be reasonable damages. Section 9 of The
Interest and Credit Charges (Regulations) Act 1975 provides that the
Bermuda courts have discretion as to the amount of interest, if any,
payable on the amount of a judgment after date of judgment. If the Court
does not exercise that discretion, then interest will accrue at the
statutory rate which is currently 7% per annum.
(k) Any reference in this opinion to shares being "non-assessable" shall
mean, in relation to fully-paid shares of the Company and subject to any
contrary provision in any agreement in writing between the Company and
the holder of shares, that: no shareholder shall be obliged to
contribute further amounts to the capital of the Company, either in
order to complete payment for their shares, to satisfy claims of
creditors of the Company, or otherwise; and no shareholder shall be
bound by an alteration of the Memorandum of Association or Bye-Laws of
the Company after the date on which he became a shareholder, if and so
far as the alteration requires him to take, or subscribe for additional
shares, or in any way increases his liability to contribute to the share
capital of, or otherwise to pay money to the Company.
Disclosure
This opinion is addressed to you solely for your benefit and is neither to be
transmitted to any other person, nor relied upon by any other person or for any
other purpose nor quoted or referred to in any public document nor filed with
any governmental agency or person, without our prior written consent, except as
may be required by law or regulatory authority. Further, this opinion speaks as
of its date and is strictly limited to the matters stated herein.
We consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement and to the reference to our firm under the captions "Legal Matters"
and "Service of Process and Enforcement of Liabilities" in the Prospectus which
is part of the Registration Statement.
<PAGE>
6
This opinion is governed by and is to be construed in accordance with Bermuda
law. It is given on the basis that it will not give rise to any legal
proceedings with respect thereto in any jurisdiction other than Bermuda.
Yours faithfully
/s/ Appleby, Spurling & Kempe
- -----------------------------
<PAGE>
THE SCHEDULE
1. An electronic copy of an original Registration Statement on Form S-3
with respect to the Securities excluding Exhibits and the documents
incorporated by reference.
2. A faxed copy of an original document describing itself as part of a
prospectus, covering securities that are to be registered under the
Securities Act of 1933, as amended (the "Prospectus").
3. A certified copy of unanimous written resolutions of the Board of
Directors of the Company adopted on 4 November 1999 and 7 December 1999
and the resolutions adopted by the Executive Committee of the Board of
Directors of the Company on 14 March 2000 (the "Resolutions").
4. Certified copies dated 13 March 2000 of the Certificate of
Incorporation, Memorandum of Association and Bye-laws of the Company
(the "Constitutional Documents").
5. A copy certified on 13 March 2000, of the Register of Directors and
Officers in respect of the Company.
6. Copies of letters dated 13 March 2000 and 22 March 2000 evidencing the
consent of the Bermuda Monetary Authority to the issue by the Company of
the Securities.
7. An electronic copy of a draft form of indenture to be entered into
between the Company and United States Trust Company of New York (the
"Indenture").
8. An electronic copy of a draft form of warrant agreement to be entered
into between the Company and a warrant agent (the "Warrant Agreement").
(The documents referred to in paragraphs 7 and 8 above are together referred to
as the "Operative Documents").
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or incorporated by
reference in this this Registration Statement on Form S-3.
/s/ Arthur Andersen
March 23, 2000
Hamilton, Bermuda
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Pre-Effective
Amendment No. 2 to the Registration Statement on Form S-3 (File No. 333-32810)
of Global Crossing Ltd. of our report dated January 25, 1999 relating to the
financial statements, which appears in Frontier Corporation's 1998 Annual Report
to Shareholders, which is incorporated by reference in its Annual Report on Form
10-K for the year ended December 31, 1998, and which appears on Page 20 of the
Frontier Corporation Current Report on Form 8-K dated January 26, 1999. We also
consent to the incorporation by reference of our report dated January 25, 1999
relating to the financial statement schedule, which appears in such Annual
Report on Form 10-K. We also consent to the reference to us under the heading
"Experts" and "Selected Historical Financial Information" in such Registration
Statement.
/s/ PricewaterhouseCoopers LLP
- ----------------------------------
PricewaterhouseCoopers LLP
Rochester, New York
March 23, 2000
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion of our report dated 26 May 1999 with respect to
the balance sheets of Cable & Wireless Global Marine as of 31 March 1999 and
1998 and the results of their operations and cashflows for each of the years in
the three-year period ended 31 March 1999, incorporated by reference into the
Pre-Effective Amendment No. 2, dated 23 March 2000 to this Registration
Statement on Form S-3 (333-32810), of Global Crossing Ltd. and to the references
to our firm under the headings "Experts" and "Global Marine Systems selected
historical financial information" in the Pre-Effective Amendment No. 2 to this
Registration Statement.
Yours faithfully
/s/ KPMG Audit Plc
-------------------------------
KPMG Audit Plc
Ipswich, England
March 23, 2000
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Amendment
No. 2 to Registration Statement No. 333-32810 on Form S-3 of our report dated 8
October 1999, (2 December 1999 as to note 5 and 17 December 1999 as to notes 29,
30, 31 and 32) on the combined balance sheets of Racal Telecommunications
Limited, Racal Telecommunications Networks Limited, Racal Internet Services
Limited and Racal Telecommunications Inc. (collectively "Racal Telecom") as of
31 March 1999 and 1998 and the combined profit and loss accounts and combined
cash flow statements for each of the years in the three year period ended 31
March 1999, appearing in the current report on Form 8-K of Global Crossing Ltd.
and to the references to our firm under the headings "Experts" and "Racal
Telecom selected historical financial information" in this Registration
Statement.
/s/ Deloitte & Touche
-------------------------------
Deloitte & Touche
London, England
March 23, 2000
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of Global Crossing Ltd. of our report dated December 15,
1999 relating to the financial statements of HCL Holdings Limited for each of
the three years ended December 31, 1998. We also consent to the reference to us
under the heading "Experts" in such registration statement.
/s/ PricewaterhouseCoopers
- ----------------------------------
PricewaterhouseCoopers
Hong Kong
March 23, 2000
