<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
GLOBAL CROSSING HOLDINGS LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
BERMUDA 4813 98-0186828
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION
INCORPORATION OR CLASSIFICATION CODE NO.)
ORGANIZATION) NUMBER)
---------------
WESSEX HOUSE
45 REID STREET
HAMILTON HM12 BERMUDA
(441) 296-8600
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NEW YORK 10019
(212) 479-8200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
---------------
WITH COPIES TO:
D. RHETT BRANDON, ESQ. JAMES C. GORTON, ESQ.
SIMPSON THACHER & BARTLETT GLOBAL CROSSING HOLDINGS LTD.
425 LEXINGTON AVENUE 150 EL CAMINO DRIVE, SUITE 204
NEW YORK, NEW YORK 10017 BEVERLY HILLS, CALIFORNIA 90212
(212) 455-2000 (310) 281-4900
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE(1) REGISTRATION FEE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 1/2% Senior
Exchangeable Preferred
Stock due 2008........ 5,000,000 $100 $500,000,000 $139,000
- -------------------------------------------------------------------------------------------
10 1/2% Senior
Exchangeable Preferred
Stock due 2008........ 1,796,771(2) $100 $179,677,100 $49,950
- -------------------------------------------------------------------------------------------
10 1/2% Exchange Notes
due 2008.............. $500,000,000 100% $500,000,000 $0(3)
- -------------------------------------------------------------------------------------------
10 1/2% Exchange Notes
due 2008.............. $179,677,100 100% $179,677,100 $0(4)
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Represents shares of the Company's 10 1/2% Senior Exchangeable Preferred
Stock due 2008 (the "Preferred Stock") as may be issued and delivered to
holders of the Preferred Stock as an in-kind dividend payment on the
Preferred Stock.
(3) The registration statement covers the Company's 10 1/2% Exchange Notes due
2008 ("Exchange Notes") to be issued to holders of Preferred Stock when
and if the Company exchanges the Exchange Notes for the Preferred Stock.
Pursuant to Rule 457(i), no registration fee is required with respect to
the Exchange Notes.
(4) Represents aggregate principal amount of Exchange Notes that may be issued
as in-kind interest payments on the Exchange Notes. Pursuant to Rule
457(i), no registration fee is required with respect to the Exchange
Notes.
---------------
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.
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 SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. WE MAY NOT SELL THESE SECURITIES UNTIL +
+THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE. THIS PROSPECTUS IS NOT AN +
+OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE +
+SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
THE INFORMATION IN THIS PROSPECTUS WILL BE AMENDED OR COMPLETED, DATED DECEMBER
22, 1998
PROSPECTUS
OFFER TO EXCHANGE ALL OUTSTANDING
10 1/2% SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2008
FOR
10 1/2% SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2008
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
[LOGO OF GLOBAL CROSSING HOLDINGS LTD. APPEARS HERE]
Investment in these securities involves certain risks. See "Risk Factors"
beginning on page 16.
The Company:
.We are developing the world's first independent global fiber optic
network.
.Global Crossing Holdings Ltd.
Wessex House, 45 Reid Street
Hamilton, Bermuda
(441) 296-8600
globalcrossing.bm
Proposed Trading Format:
.The over-the-counter market, negotiated transactions, or a combination of
these methods.
The Exchange Offer:
. The Exchange Offer expires at 5:00 p.m., New York City time, on ,
1999, unless extended.
. All outstanding preferred stock that is validly tendered and not
withdrawn will be exchanged.
. Tenders of outstanding preferred stock may be withdrawn at any time
prior to the expiration of the Exchange Offer.
. The exchange of outstanding preferred stock for exchange preferred stock
should not be a taxable event for U.S. federal income tax purposes.
. We will not receive any proceeds from the Exchange Offer.
The Exchange Preferred Stock:
. The terms of the exchange preferred stock are substantially identical to
the outstanding preferred stock, except that the exchange preferred
stock will be freely tradeable.
The New Exchange Notes:
. The terms of the new exchange notes are substantially identical to the
exchange notes, except that the new exchange notes will be freely
tradeable.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved 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 , 1998.
<PAGE>
In this prospectus, the "Issuer" refers to Global Crossing Holdings Ltd., and
the "Company," "Global Crossing," "We," "Our" and "Us" refers to the Issuer and
its consolidated subsidiaries (unless the context otherwise requires). "GCL"
refers to Global Crossing Ltd., the parent company of the Issuer.
This prospectus uses a number of technical terms, such as DWDM, indefeasible
right of use, ISP and xDSL, that are not easily understandable. Certain
technical terms used in this prospectus are defined in the glossary which is
included at the end of this prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Service of Process and Enforcement of Liabilities........................ ii
Information Regarding Forward-Looking Statements......................... ii
Summary.................................................................. 1
Risk Factors............................................................. 16
Use of Proceeds.......................................................... 27
Capitalization........................................................... 27
Selected Consolidated Financial Data..................................... 28
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 31
The Exchange Offer....................................................... 42
Business................................................................. 50
Management............................................................... 65
Principal Shareholders................................................... 75
Certain Transactions..................................................... 77
Description of Preferred Stock........................................... 83
Description of Exchange Notes............................................ 100
Description of Certain Indebtedness...................................... 134
Tax Considerations....................................................... 137
Plan of Distribution..................................................... 148
Available Information.................................................... 149
Legal Matters............................................................ 149
Experts.................................................................. 149
Index to Consolidated Financial Statements............................... F-1
Glossary of Certain Defined Terms........................................ GL-1
</TABLE>
i
<PAGE>
SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES
We are organized under the laws of Bermuda. In addition, certain of our
directors and officers live outside of the United States and a large amount of
our assets are located outside of the United States. As a result, it may be
difficult for you to effect service of process upon those directors and
officers who live outside the United States. Also, it may be difficult for you
to enforce judgments of the courts of the United States under the U.S. federal
securities laws against our assets that are located outside the United States.
Furthermore, our Bermuda counsel, Appleby Spurling & Kempe, has advised us that
it may be hard for you to bring a case in Bermuda based on U.S. federal
securities laws. They have also advised us that it may be difficult for you to
enforce a judgment of a U.S. court based upon U.S. federal securities laws.
Since we are organized in a jurisdiction other than the United States, we
have expressly submitted to the jurisdiction of the U.S. federal and New York
state courts sitting the Borough of Manhattan, The City of New York for the
purposes of any suit action or proceeding arising out of this offering. We have
appointed CT Corporation to accept service of process in any such action.
----------------
In this prospectus, references to "dollars" and "$" are to United States
dollars, the terms "United States" and "U.S." mean the United States of
America, its states, its territories, its possessions and all areas subject to
its jurisdiction and the term "Exchange Offer" means the offer by Global
Crossing to exchange restricted preferred stock for unrestricted preferred
stock. See "Summary--Summary of Terms of the Exchange Offer."
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
We have included "forward-looking statements" throughout this prospectus.
These statements describe our attempt to predict future occurrences. We use the
words "believes," "anticipates," "expects," and similar expressions to identify
forward-looking statements. Forward-looking statements are subject to a number
of risks, assumptions and uncertainties, such as:
. risks associated with our ability to complete our systems within
currently estimated time frames and budgets,
. risks associated with our ability to sell capacity on our systems,
. risks associated with our successful transition from a system
development company to an operating company, and
. risks associated with our ability to effectively compete in a rapidly
evolving and price competitive marketplace.
This list is only an example of some of the risks, uncertainties and
assumptions that may affect our forward-looking statements. If any of these
risks or uncertainties materialize (or fail to materialize), or if the
underlying assumptions prove incorrect, actual results may differ materially
from those projected in the forward-looking statements. We do not intend to
update or revise any forward-looking statements included in this prospectus to
reflect future events. You should consider the information provided in the
section "Risk Factors" and other information in this prospectus before
investing in these securities.
ii
<PAGE>
SUMMARY
This summary highlights some information from this prospectus. Because this
is only a summary, it does not contain all of the information that may be
important to you. To understand this Exchange Offer you should read the entire
prospectus, especially "Risk Factors" and the Consolidated Financial Statements
and notes.
GLOBAL CROSSING
We are developing the world's first independent global fiber optic network,
consisting of both undersea and terrestrial digital fiber optic cable systems.
We operate as a "carriers' carrier", providing tiered pricing and segmented
products to licensed providers of international Internet and telecommunications
services. Our cable systems under development will form a state-of-the-art
interconnected worldwide high capacity fiber optic network (the "Global
Crossing Network"). The undersea component of the Global Crossing Network will
initially total 51,300 km and the terrestrial component will add 8,400 km for a
combined total of 59,700 km. We are also planning several new cable systems and
evaluating other business development opportunities which, if implemented, will
complement the Global Crossing Network.
Our business is designed to meet the varying needs of the global carrier
market. We offer customers the ability to purchase capacity which is available
on demand, thereby:
. eliminating their need to commit in advance the substantial capital
which would otherwise be required to build cable capacity, and
. decreasing the risks associated with forecasting their future capacity
requirements.
Compared with traditional cable systems, we offer more comprehensive, flexible
and low-cost purchasing alternatives.
We meet current market requirements of international carriers and Internet
service providers and provide them with:
. direct international city-to-city connectivity,
. the ability to purchase capacity periodically,
. discounts based upon aggregate volume purchased on the Global Crossing
Network, and
. one-stop shopping and customer service.
We are engineering and constructing the Global Crossing Network to allow for
multiple upgrades to its initial circuit capacity at a fraction of the original
network cost. We are focusing on expanding the products and services we offer
to our customers in order to increase revenues and profits. We anticipate that
our future revenues, beyond the sale of capacity on the initial components of
the Global Crossing Network, will derive from several sources, including:
. the sale of additional capacity resulting from system upgrades,
. the development of additional undersea cable projects,
. the development or purchase of additional terrestrial fiber capacity,
and
. the introduction of new services.
1
<PAGE>
BUSINESS STRATEGY
Global Crossing's mission is to create the world's first independent global
fiber optic network designed to offer the highest quality city-to-city
communications connectivity among approximately 100 of the largest metropolitan
communications markets worldwide. The principal elements of our business
strategy are to:
Create a Worldwide Network. Upon completion, the currently announced segments
of the Global Crossing Network will directly connect Asia, North America,
Europe, Central America and the Caribbean utilizing state-of-the-art fiber
optic technology. By developing or acquiring terrestrial capacity, we offer
customers low cost global city-to-city connectivity. We also intend to actively
pursue additional opportunities for the expansion and utilization of the Global
Crossing Network, including complementary businesses and facilities.
Maintain Position as a Leading Wholesale Service Provider. We are the world's
first independent provider of global Internet and long distance
telecommunications facilities and services utilizing a network of digital fiber
optic cable systems. Our products are segmented to meet the varying needs of
the global carrier market, with shore-to-shore capacity, city-to-city capacity
and network purchasing options. We also offer volume-based purchasing
flexibility.
Utilize State-of-the-Art Technology. The Global Crossing Network is being
engineered and constructed using the latest cable technology which we believe
will:
. provide a cost advantage over existing alternatives,
. make it more reliable than competing systems,
. allow us to offer substantially more capacity than existing cable
systems, and
. enable system capacity to be upgraded rapidly at a fraction of the
initial cost.
Maintain Position as Low-Cost Provider. Global Crossing believes that its
low-cost position results from:
. ownership of state-of-the-art facilities, resulting in low unit costs
and low operating and maintenance costs,
. low sales, marketing and general and administrative costs, and
. purchasing efficiencies.
Provide "One-Stop" Sales and Service. We offer one-stop sales and service to
carrier customers worldwide. Our marketing professionals located in our Bermuda
headquarters and in major cities throughout the world facilitate the sale of
our telecommunications capacity and increase market awareness and name
recognition.
Leverage Extensive Management Experience. Global Crossing has assembled and
will continue to build a strong management team comprised of executives with
extensive operating experience in the telecommunications industry and the
undersea cable sector. For more information, see "Management."
2
<PAGE>
THE GLOBAL CROSSING NETWORK
The following table contains summary information regarding the Company's
currently planned systems:
<TABLE>
<CAPTION>
ESTIMATED
SYSTEM COST EXPECTED INITIAL
SYSTEM MARKET (MILLIONS) RFS DATE
- ----------------------------- --------------------------------- ----------- ---------------------------
<S> <C> <C> <C>
Atlantic Crossing ("AC-1") United States and Europe $ 750 May 1998 (US-UK)
February 1999 (Full Ring)
Pacific Crossing ("PC-1") United States and Asia 1,200 March 2000
July 2000 (Full Ring)
Mid-Atlantic Crossing ("MAC") United States and the Caribbean 330 December 1999
Pan American Crossing ("PAC") Western United States, 475 February 2000
Central America and the Caribbean
Pan European Crossing ("PEC") 18 European cities and AC-1 700 December 1999 (First Phase)
Global Access Limited ("GAL") Cities in Japan and PC-1 110 December 1999 (First Phase)
------
$3,565
======
</TABLE>
ORGANIZATION OF GLOBAL CROSSING
[LOGO OF GLOBAL CROSSING NETWORK APPEARS HERE]
* We have a 58% economic interest in PC-1 and a 49% economic interest in GAL.
All other subsidiaries of the Issuer are wholly-owned.
Our executive offices are located at Wessex House, 45 Reid Street, Hamilton,
Bermuda and our telephone number is (441) 296-8600. Our home page on the
Internet is http://www.globalcrossing.bm.
3
<PAGE>
FINANCING PLAN
As of September 30, 1998, we have incurred approximately $708.6 million of
the $750 million in total estimated costs for AC-1 (excluding upgrades). All
future costs excluding upgrades with respect to AC-1 are fully financed. We
estimate that the total cost of developing and deploying PC-1, MAC, PAC, PEC
and GAL is approximately $2,815 million (excluding costs of potential future
upgrades and the amounts capitalized with respect to the warrants (the "PCG
Warrants") issued pursuant to the Warrant Agreement, dated as of January 21,
1998, as amended), which is comprised of $1,200 million for PC-1, $330 million
for MAC, $475 million for PAC, $700 million for PEC and $110 million for GAL.
On May 18, 1998, we consummated an offering (the "Senior Notes Offering")
pursuant to which we issued an aggregate of $800 million in principal amount of
notes (the "Senior Notes"). We utilized approximately $295 million of the net
proceeds of the Senior Notes Offering to refinance certain obligations incurred
as part of the initial financing of AC-1. The balance will be utilized to make
equity investments in certain of our systems and for general corporate
purposes.
On August 13, 1998, Global Crossing Ltd., our parent, and certain of its
shareholders sold 24,150,000 shares of common stock (the "GCL Common Stock")
offered in concurrent offerings made in the United States, Canada and
internationally (the "GCL Stock Offerings"). We received approximately $392.1
million of the net proceeds from the GCL Stock Offerings in the form of a
capital contribution from our parent. We intend to use these proceeds as
follows: (i) to make investments in the Global Crossing Network, (ii) to make
minority investments in telecommunications companies and Internet service
providers, (iii) to fund our equity investment in GAL and (iv) for general
corporate purposes.
4
<PAGE>
SUMMARY OF TERMS OF THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $500,000,000 aggregate
liquidation preference of our outstanding 10 1/2% Senior Exchangeable Preferred
Stock due 2008 ("Old Preferred Stock") for up to an equal aggregate liquidation
preference of our 10 1/2% Senior Exchangeable Preferred Stock due 2008 (the
"Exchange Preferred Stock"), which has been registered under the Securities Act
of 1933. The shares of the Exchange Preferred Stock will be our obligations
governed by our bye-laws, as amended (the "Bye-laws"). The form and terms of
the shares of the Exchange Preferred Stock are identical in all material
respects to the form and terms of the shares of the Old Preferred Stock except:
. that the shares of the Exchange Preferred Stock have been registered under
the Securities Act,
. that the shares of the Exchange Preferred Stock are not entitled to
certain registration rights which are applicable to the shares of the Old
Preferred Stock under a registration rights agreement, and
. for certain contingent interest rate provisions.
The shares of the Old Preferred Stock and the shares of the Exchange
Preferred Stock are together referred to herein as the "Preferred Stock." For
more information, see "Description of Preferred Stock."
The Exchange Offer.......... We are offering to exchange $100 liquidation
preference of Exchange Preferred Stock for each
$100 liquidation preference of Old Preferred
Stock.
As of the date hereof, $500,000,000 in aggregate
liquidation preference of Old Preferred Stock is
outstanding. The Old Preferred Stock was
originally issued in a private placement. As a
condition to the purchase of the Old Preferred
Stock, the initial purchasers required that we
make a registered offer to exchange the Old
Preferred Stock for other securities
substantially similar to the Old Preferred Stock.
We are making this Exchange Offer to satisfy this
contractual obligation.
Resale...................... Based on an interpretation by the staff of the
Securities and Exchange Commission set forth in
no-action letters issued to third parties, we
believe that Exchange Preferred Stock issued
pursuant to the Exchange Offer in exchange for
Old Preferred Stock may be offered for resale,
resold and otherwise transferred by you (unless
you are an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act of
1933, or a broker-dealer which acquired the Old
Preferred Stock directly from the Company)
without compliance with the registration and
prospectus delivery provisions of the Securities
Act of 1933, provided that you are acquiring the
Exchange Preferred Stock in the ordinary course
of your business and that you have not engaged
in, do not intend to engage in, and have no
arrangement or understanding with any person to
participate in the distribution of the Exchange
Preferred Stock. Each participating broker-dealer
that receives shares of Exchange Preferred Stock
for its own account pursuant to the Exchange
Offer in exchange for shares of Old Preferred
Stock that were acquired as a result of market-
making or other trading activity
5
<PAGE>
must acknowledge that it will deliver a
prospectus in connection with any resale of the
shares of Exchange Preferred Stock. See "Plan of
Distribution."
Any holder of Old Preferred Stock who (i) is an
affiliate of the Company, (ii) does not acquire
Exchange Preferred Stock in the ordinary course
of its business, (iii) tenders in the Exchange
Offer with the intention to participate, or for
the purpose of participating, in a distribution
of Exchange Preferred Stock, or (iv) is a broker-
dealer which acquired the Old Preferred Stock
directly from the Company, cannot rely on the
position of the staff of the Securities and
Exchange Commission enunciated in Exxon Capital
Holdings Corporation (as defined), Morgan Stanley
& Co. Incorporated (as defined) or similar no-
action letters and, in the absence of an
exemption therefrom, must comply with the
registration and prospectus delivery requirements
of the Securities Act of 1933 in connection with
the resale of the Exchange Preferred Stock.
Expiration Date............. 5:00 p.m., New York City time, on , 1999,
(20 business days after effectiveness of the
registration statement of which this prospectus
is a part), unless we extend the Exchange Offer,
in which case the term "Expiration Date" means
the latest date and time to which the Exchange
Offer is extended.
Accrued Dividends on the
Exchange Preferred Stock
and the Old Preferred
Stock......................
The shares of Exchange Preferred Stock will
accrue dividends from December 2, 1998. If your
shares of Old Preferred Stock are accepted for
exchange, you will not receive accrued dividends
on the shares of Old Preferred Stock, and will be
deemed to have waived the right to receive any
payment in respect of interest on such shares of
Old Preferred Stock from and after December 2,
1998.
Certain Conditions to the
Exchange Offer.............
The Exchange Offer is subject to certain
customary conditions, which we may waive. For
more information, see "The Exchange Offer--
Certain Conditions to the Exchange Offer."
Procedures for Tendering
Shares of Old Preferred
Stock...................... If you wish to accept the Exchange Offer, you
must complete, sign and date the accompanying
letter of transmittal, or a facsimile thereof
(the "Letter of Transmittal"), in accordance with
its instructions and the instructions in this
prospectus, and mail or otherwise deliver the
Letter of Transmittal, or such facsimile,
together with the shares of Old Preferred Stock
and any other required documentation to the
Exchange Agent (as defined) at the address set
forth in the Letter of Transmittal. If you hold
Old Preferred Stock through the Depositary
(initially The Depository Trust Company ("DTC"))
and wish to accept the Exchange Offer,
6
<PAGE>
you must do so pursuant to DTC's Automated Tender
Offer Program, by which you will agree to be
bound by the Letter of Transmittal. By executing
or agreeing to be bound by the Letter of
Transmittal, you will represent to us that, among
other things, you are, or the person receiving
such shares of Exchange Preferred Stock is,
acquiring the shares of the Exchange Preferred
Stock in the ordinary course of business and that
neither you nor any such other person has any
arrangement or understanding with any person to
participate in the distribution of such shares of
the Exchange Preferred Stock within the meaning
of the Securities Act of 1933.
Special Procedures for
Beneficial Holders......... If you are a beneficial owner whose shares of Old
Preferred Stock are registered in the name of a
broker, dealer, commercial bank, trust company or
other nominee and you wish to tender in the
Exchange Offer, you should contact the person in
whose name your shares of Old Preferred Stock are
registered promptly and instruct such person to
tender on your behalf. If you wish to tender in
the Exchange Offer on your own behalf, you must,
prior to completing and executing the Letter of
Transmittal and delivering your shares of Old
Preferred Stock, either make appropriate
arrangements to register ownership of the shares
of Old Preferred Stock in your name or obtain a
properly completed bond power from the person
whose name your shares of Old Preferred Stock are
registered. The transfer of registered ownership
may take considerable time.
Guaranteed Delivery
Procedures................. If you wish to tender your shares of Old
Preferred Stock and your shares of Old Preferred
Stock are not immediately available or you cannot
deliver your shares of Old Preferred Stock, the
Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent (or comply with the procedures for
book-entry transfer) prior to the Expiration
Date, you must tender your shares of Old
Preferred Stock according to the guaranteed
delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures."
Withdrawal Rights........... Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration
Date pursuant to the procedures described under
"The Exchange Offer--Withdrawal Rights."
Acceptance of Old Preferred
Stock and Delivery of
Exchange Preferred Stock... We will accept for exchange any and all shares of
Old Preferred Stock that are properly tendered in
the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The shares of
Exchange Preferred Stock will be delivered
promptly after the Expiration Date. For more
details, see "The Exchange Offer--Terms of the
Exchange Offer."
7
<PAGE>
Certain Tax Consequences.... The exchange pursuant to the Exchange Offer will
generally not be a taxable event for federal
income tax purposes. For more details, see
"Certain Federal Income Tax Consequences."
Exchange Agent.............. EquiServe-First Chicago Trust Division is serving
as exchange agent (the "Exchange Agent") in
connection with the Exchange Offer.
8
<PAGE>
SUMMARY DESCRIPTION OF THE SECURITIES TO BE REGISTERED
EXCHANGE PREFERRED STOCK
Exchange Preferred Stock ... 5,000,000 shares of 10 1/2% Senior Exchangeable
Preferred Stock mandatorily redeemable on
December 1, 2008.
Dividends................... . Dividends will accumulate at 10 1/2% per annum
of the liquidation preference per share of
Exchange Preferred Stock.
.Payment frequency--every six months on June 1
and December 1.
. First payment--June 1, 1999.
. Before June 1, 2002, we have the option to pay
dividends in cash or additional shares of
Exchange Preferred Stock. On or after June 1,
2002, we are required to pay dividends only in
cash.
Ranking..................... The Exchange Preferred Stock will be junior in
right of payment to all of our consolidated
indebtedness and other liabilities.
Assuming the offering of the Old Preferred Stock
had been completed on September 30, 1998 and the
proceeds had been applied as intended, the
Exchange Preferred Stock would have been junior
in right of payment to $1,327.7 million of our
consolidated indebtedness and other liabilities.
Liquidation Preference...... $100.00 per share, plus accumulated and unpaid
dividends.
Mandatory Redemption........ On December 1, 2008, we must redeem all
outstanding shares of the Exchange Preferred
Stock. The redemption prices are discussed under
the caption "Description of Preferred Stock--
Redemption--Mandatory Redemption."
Optional Redemption......... On or after December 1, 2003, we may redeem some
or all of the Exchange Preferred Stock at any
time at the redemption prices listed in the
"Description of Preferred Stock" section under
the heading "Redemption--Optional Redemption."
Before December 1, 2001, we may redeem up to 35%
of the liquidation preference of the Exchange
Preferred Stock with the proceeds of one or more
equity offerings at the price listed in the
"Description of Preferred Stock--Redemption--
Optional Redemption."
Before December 1, 2003, if we experience
specific kinds of changes in control, we may also
redeem all, but not part, of the Exchange
Preferred Stock. See "Description of Preferred
Stock--Redemption--Optional Redemption."
Optional Tax Redemption..... If there is a Change in Tax Law (as defined)
requiring the payment of Additional Amounts (as
defined) by Global Crossing, we may redeem the
Exchange Preferred Stock, in whole but not in
part, at
9
<PAGE>
the price listed in the "Description of Preferred
Stock" section under the heading "Redemption--
Optional Tax Redemption."
Mandatory Offer to If we sell certain assets or experience specific
Repurchase................. kinds of changes of control and do not exercise
our rights to redeem the Exchange Preferred Stock
in full, we must offer to repurchase the Exchange
Preferred Stock at the prices listed in the
"Description of Preferred Stock" section.
Basic Covenants of the Bye- We will issue the Exchange Preferred Stock
Laws....................... pursuant to terms of the Bye-laws. The Bye-laws
will, among other things, restrict our ability
and the ability of our restricted subsidiaries
to:
. borrow money;
. pay dividends on stock or purchase stock;
. make investments; and
. sell certain assets or merge with or into other
companies.
For more details, see the "Description of
Preferred Stock" section under the heading
"Certain Covenants."
Exchange.................... Subject to certain conditions, we may exchange
all, but not less than all, outstanding shares of
Exchange Preferred Stock for New Exchange Notes
(as defined) on any date on which we are
scheduled to pay any dividends.
Voting Rights............... The holders of the Exchange Preferred Stock will
have no voting rights, except as:
. required by law; and
. provided in the terms of the Exchange Preferred
Stock.
The terms of the Exchange Preferred Stock will
provide that the holders of a majority of the
then outstanding shares of Exchange Preferred
Stock, voting as a separate single class, will be
entitled to elect two members to the Issuer's
Board of Directors upon certain voting rights
triggering events. The accumulation of accrued
and unpaid dividends on the outstanding Exchange
Preferred Stock in an amount equal to three semi-
annual dividend payments is one of the voting
rights triggering events.
These voting rights will continue until all
dividends in arrears have been paid in full and
all other voting rights triggering events have
been cured or waived.
In addition, holders of at least two-thirds of
the then outstanding Exchange Preferred Stock
must approve certain changes that would be
materially adverse to their rights.
10
<PAGE>
NEW EXCHANGE NOTES
New Exchange Notes ......... 10 1/2% Senior Subordinated Exchange Notes due
2008 (the "New Exchange Notes"). (The Exchange
Preferred Stock and the New Exchange Notes will
be referred to herein as the "Securities.") The
New Exchange Notes are issuable at our option in
exchange for Exchange Preferred Stock in an
aggregate principal amount equal to the
liquidation preference of the Exchange Preferred
Stock so exchanged, plus, without duplication,
accumulated and unpaid dividends to the date
fixed for the exchange thereof, plus any
additional New Exchange Notes issued from time to
time in lieu of cash interest.
Maturity.................... December 1, 2008.
Interest.................... Annual fixed rate--10 1/2%.
Payment frequency--every six months on June 1 and
December 1.
First payment--the first June 1 or December 1
following the date the New Exchange Notes were
issued.
Before June 1, 2002, we have the option to pay
interest in cash or additional New Exchange
Notes. On or after June 1, 2002, we are required
to pay interest only in cash.
Ranking..................... The New Exchange Notes are senior subordinated
indebtedness. They rank behind all of our current
and future indebtedness (other than trade
payables), except indebtedness that expressly
provides that it is not senior to the New
Exchange Notes.
Optional Redemption......... On or after December 1, 2003, we may redeem some
or all of the New Exchange Notes at any time at
the redemption prices listed in the "Description
of Exchange Notes" section under the heading
"Optional Redemption."
Before December 1, 2001, we may redeem up to 35%
of the principal amount of the New Exchange Notes
with the proceeds of one or more equity offerings
at the redemption price listed in the
"Description of Exchange Notes--Optional
Redemption."
Before December 1, 2003, if we experience
specific kinds of changes in control, we may
redeem all, but not part, of the New Exchange
Notes.
Optional Tax Redemption..... If there is a Change in Tax Law requiring the
payment of Additional Amounts by Global Crossing,
we may redeem the New Exchange Notes, in whole
but not in part, at the price listed in the
"Description of Exchange Notes" section under the
heading "Optional Tax Redemption."
Mandatory Offer to
Repurchase................. If we sell certain assets or experience specific
kinds of changes of control, and do not exercise
our rights to redeem the New Exchange Notes in
full, we must offer to repurchase the New
11
<PAGE>
Exchange Notes at the prices listed in the
"Description of Exchange Notes" section.
Basic Covenants of We will issue the New Exchange Notes under an
Indenture.................. indenture that will, among other things, restrict
our ability and the ability of our restricted
subsidiaries to:
. borrow money;
. pay dividends on stock or purchase stock;
. make investments;
. use assets as security in other transactions;
and
. sell certain assets or merge with or into other
companies.
For more details, see the "Description of
Exchange Notes" section under the heading
"Certain Covenants."
GENERAL
Exchange Offer; Holders of Exchange Preferred Stock and New
Registration Rights........ Exchange Notes are not entitled to registration
rights with respect to such securities. To remove
the transferability restrictions on the Old
Preferred Stock, we have agreed:
. to file the registration statement of which
this prospectus is a part with the Securities
and Exchange Commission under the Securities
Act of 1933, to exchange the Old Preferred
Stock for the Exchange Preferred Stock by March
2, 1999,
. to use our reasonable best efforts to cause the
registration statement to be declared effective
under the Securities Act by May 28, 1999, and
. to keep the Exchange Offer open for not less
than 20 business days and cause the Exchange
Offer to be consummated no later than the 30th
business day after the registration statement
is declared effective.
If the exchange offer is not permitted by
applicable law or Securities and Exchange
Commission policy, or a holder is not otherwise
able to exchange its shares of the Old Preferred
Stock for certain reasons, we will file with the
Securities and Exchange Commission, subject to
our receipt of certain information, a shelf
registration statement to register the shares of
Old Preferred Stock for public resale. If we
default on any of these registration obligations,
we will pay certain liquidated damages to each
holder of shares of Old Preferred Stock. For more
information, see "Description of Exchange Notes--
Exchange Offer; Registration Rights."
Use of Proceeds............. We will not receive any cash proceeds from the
Exchange Offer. For more details, see the "Use of
Proceeds" section.
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<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The summary data presented below under the captions "Statement of Operations
Data" and "Balance Sheet Data" as of December 31, 1997 and for the period from
March 19, 1997 (date of inception) through December 31, 1997 are derived from
the Consolidated Financial Statements of the Company included herein, which
financial statements are prepared in accordance with United States Generally
Accepted Accounting Principles ("U.S. GAAP") and have been audited by Arthur
Andersen & Co., independent public accountants, as indicated in their report
thereon included elsewhere in this prospectus. The financial data as of and for
the three and nine months ended September 30, 1998 are derived from the
Company's unaudited interim financial statements. The unaudited interim
financial statements include all adjustments, consisting of normal recurring
adjustments, that management considers necessary for fair presentation of the
financial position as of September 30, 1998 and results of operations for the
interim periods presented. Results of operations for the interim periods are
not necessarily indicative of the results of operations for a full year. The
operating data presented below are derived from the Company's records. The
financial data presented herein and elsewhere in this prospectus are not
necessarily indicative of the financial position or results of operations of
the Company in the future. You should read the summary data below along with
the discussion under "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and the Consolidated Financial
Statements and the notes thereto appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
FOR THE PERIOD
THREE MONTHS NINE MONTHS MARCH 19, 1997
ENDED ENDED (DATE OF INCEPTION)
SEPTEMBER 30, SEPTEMBER 30, TO DECEMBER 31,
1998 1998 1997
------------- ------------- -------------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales and Operating Revenues.. $117,692,925 $ 218,948,792 $ --
------------ ------------- ------------
Expenses:
Cost of Capacity Sold........ 49,237,947 90,438,176 --
Sales, General,
Administrative and Other
(1)......................... 24,063,902 192,430,368 3,101,708
------------ ------------- ------------
Total Expenses................ 73,301,849 282,868,544 3,101,708
------------ ------------- ------------
Operating Income (Loss)....... 44,391,076 (63,919,752) (3,101,708)
Equity in loss of Pacific
Crossing Ltd................. (1,036,536) (1,036,536) --
Interest Income (Expense)
Interest Income.............. 8,265,769 12,939,207 2,941,352
Interest Expense............. (17,983,947) (25,659,937) --
Provision for Income Taxes
(2).......................... (7,331,590) (16,331,590) --
Extraordinary Loss on
Retirement of GTH Senior
Notes (3).................... -- (19,709,472) --
------------ ------------- ------------
Net Income (Loss)............. 26,304,772 (113,718,080) (160,356)
GTH Preference Share Non-Cash
Dividends (4)................ -- (8,306,433) (12,689,923)
Redemption of GTH Preference
Shares (5)................... -- (34,140,067) --
------------ ------------- ------------
Net Income (Loss) Applicable
to Common Shareholder........ $ 26,304,772 $(156,164,580) $(12,850,279)
============ ============= ============
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
1998 1997
-------------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and Restricted Cash (6).................... $ 877,499,797 $26,727,880
Accounts Receivable, Net of Allowance for
Doubtful Accounts.............................. 62,750,201 --
Construction in Progress and Capacity Available
for Sale (7)................................... 870,976,856 518,518,509
Investment in Pacific Crossing Ltd. (8)......... 162,109,023 --
Deferred Finance and Organizational Costs, Net
of Accumulated Amortization.................... 41,599,923 25,934,021
Other Assets.................................... 34,160,267 1,015,958
-------------- ------------
Total Assets.................................... $2,049,096,067 $572,196,368
============== ============
Long Term Debt and Other Obligations(9)......... $1,164,255,472 $315,334,000
GTH Preference Shares(10)....................... -- 90,643,919
Shareholder's Equity:
GCL Common Stock.............................. 12,000 12,000
Other Shareholder's Equity.................... 835,226,100 74,269,032
Accumulated Deficit........................... (113,878,436) (160,356)
-------------- ------------
Total Shareholder's Equity...................... 721,359,664 74,120,676
-------------- ------------
Total Capitalization............................ $1,885,615,136 $480,098,595
============== ============
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1998
--------------
<S> <C> <C>
OPERATING DATA:
Executed CPAs..................................... $767 million
<CAPTION>
ESTIMATED (11)
--------------
<S> <C> <C>
Route Kilometers
In Service....................................... 5,000
Under Contract................................... 51,300
Announced........................................ 59,700
Network Service Capacity
(STM-1 Circuits)................................. 128
Estimated System Costs (excluding potential future
upgrades and amounts capitalized with respect to
the PCG Warrants)
AC-1 ........................................... $750 million
Other Systems Under Development (PC-1, MAC, PAC,
PEC and GAL)................................... $2,815 million
</TABLE>
- --------
(1) Includes a charge for the Advisory Services Agreement Termination on June
30, 1998. See "Certain Transactions." GCL acquired the rights on behalf of
the Company of those entitled to fees payable under the Advisory Services
Agreements in consideration for the issuance of GCL Common Stock having an
aggregate value of $135 million and the cancellation of approximately $2.7
million owed to GCL under a related advance agreement. As a result of this
transaction, the Company has recorded a non-recurring charge in the
approximate amount of $137.7 million during the nine months ended
September 30, 1998. Also, during the nine months ended September 30, 1998,
we recognized $8.2 million from a total of $22.9 million of stock-related
expense relating to stock options issued during such period, which entitle
the holders to purchase GCL Common Stock. The remaining $14.7 million will
be recognized as follows: $1.7 million in the fourth quarter of 1998, $6.8
million in 1999, $5.0 million in 2000 and $1.2 million in 2001.
(2) Reflects income taxes on profits earned during the three and nine months
ended September 30, 1998 attributable to both United States and other
foreign jurisdictions. A significant portion of our operating losses have
been incurred in non-taxable jurisdictions and therefore these operating
losses cannot be applied to offset our future taxable earnings.
(3) On May 18, 1998, a portion of the proceeds from the issuance of the Senior
Notes was used to repurchase the 12% Senior Notes Due 2004 ("GTH Senior
Notes") of Global Telesystems Holdings Ltd., a direct subsidiary of the
Company. We recognized an extraordinary loss of $19.7 million on this
14
<PAGE>
repurchase, comprising a repurchase premium of approximately $9.8 million
and a write-off of approximately $9.9 million of unamortized deferred
financing costs.
(4) The holders of the 14% senior increasing rate redeemable exchangeable
preference shares of GTH (the "GTH Preference Shares") were entitled to
receive cumulative, compounding dividends at an initial annual rate of
14%. Preference share dividends include cumulative 14% dividends and
amortization of the discount and issuance costs. Effective June 17, 1998,
we used proceeds from the Senior Notes to redeem all outstanding GTH
Preference Shares. All dividends prior to the redemption had been paid
through the issuance of additional preference shares and charged against
additional paid-in-capital.
(5) As a result of the redemption of the GTH Preference Shares, we incurred a
one time $34.1 million charge against additional paid-in-capital. The
charge was comprised of: (i) a $15.9 million charge for the redemption
premium and (ii) a write-off of $18.2 million of unamortized discount and
unamortized deferred financing costs.
(6) The majority of Cash and Restricted Cash is comprised of proceeds from the
issuance of the Senior Notes and from the GCL Stock Offerings contributed
to the Company.
(7) Construction in Progress and Capacity Available for Sale includes direct
and indirect expenditures for construction of AC-1 and other systems and
is stated at cost. Includes costs incurred under (i) the construction
contracts; (ii) advisory, consulting and legal fees; (iii) interest
(including amortization of debt issuance costs incurred during the
construction phase); and (iv) other costs necessary for developing AC-1
and other systems. Additionally, GCL granted the PCG Warrants to Pacific
Capital Group, Inc. ("PCG"), a shareholder of GCL, for the PC-1, MAC and
PAC systems and related rights. The $275.3 million value of the GCL Common
Stock issued under the PCG Warrants was contributed to the Company and
allocated to Construction in Progress in the amount of $112.2 million and
as Investment in Pacific Crossing Ltd. ("PCL") in the amount of $163.1
million.
(8) Includes $163.1 million as of September 30, 1998, as described above,
representing the value of the PCG Warrants applicable to Pacific Crossing
Ltd., less $1.0 million representing the Company's equity share in the
loss of PCL for the nine months ended September 30, 1998.
(9) Not including current portion of borrowings under the AC-1 Credit Facility
of $27.4 million and $33.3 million current portion of obligations under
inland service agreements and capital leases.
(10) The December 31, 1997 amount is comprised of (i) $100 million of GTH
Preference Shares originally issued, plus (ii) $9.8 million of GTH
Preference Shares issued as dividends thereon, less (iii) $19.2 million
reflecting the unamortized discount and issue costs associated therewith.
The Company redeemed all of the outstanding GTH Reference Shares effective
as of June 17, 1998.
(11) Assumes full completion of AC-1, PC-1, MAC, PAC, PEC and GAL based upon
our current estimates, including anticipated financing costs. See "Risk
Factors--Risks Related to Completing our Cable Systems" and "Risk of Error
in Forward-Looking Statements."
15
<PAGE>
RISK FACTORS
Before you participate in the Exchange Offer, you should be aware that there
are various risks, including the ones listed below. You should carefully
consider these risk factors, as well as the other information contained in this
prospectus, in evaluating your participation in the Exchange Offer.
CONSEQUENCES OF FAILURE TO EXCHANGE OLD PREFERRED STOCK
We will issue Exchange Preferred Stock in exchange for the Old Preferred
Stock pursuant to the Exchange Offer only following the satisfaction of the
procedures and conditions set forth in "The Exchange Offer--Procedures for
Tendering Shares of Old Preferred Stock." Such procedures and conditions
include timely receipt by the Exchange Agent of such shares of Old Preferred
Stock, and of a properly completed and duly executed Letter of Transmittal.
Shares of Old Preferred Stock which you do not tender or we do not accept will,
following the Exchange Offer, continue to be restricted securities and you may
not offer or sell them except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act of 1933 and applicable state
securities law.
Any shares of Old Preferred Stock tendered and exchanged in the Exchange
Offer will reduce the aggregate principal amount of the Old Preferred Stock
outstanding. Following the Exchange Offer, if you did not tender your shares of
Old Preferred Stock you generally will not have any further registration
rights, and such shares of Old Preferred Stock will continue to be subject to
certain transfer restrictions. Accordingly, the liquidity of the market for
such shares of Old Preferred Stock could be adversely affected. The shares of
Old Preferred Stock are currently eligible for sale pursuant to Rule 144A
through the Private Offerings, Resale and Trading through Automated Linkages
("PORTAL") market of the National Association of Securities Dealers, Inc.
Because we anticipate that most holders of Old Preferred Stock will elect to
exchange such shares of Old Preferred Stock, we anticipate that the liquidity
of the market for any shares of Old Preferred Stock remaining after the
consummation of the Exchange Offer may be substantially limited.
LACK OF PUBLIC MARKET FOR THE SECURITIES
The shares of Exchange Preferred Stock will be new securities for which there
currently is no established trading market. We do not intend to apply for
listing of the Exchange Preferred Stock on a national securities exchange or
automatic quotation system. Although the initial purchasers of the Old
Preferred Stock have informed us that they currently intend to make a market in
the Exchange Preferred Stock, the initial purchasers are not obligated to do
so, and any such market making may be discontinued at any time without notice.
The liquidity of any market for the shares of Exchange Preferred Stock will
depend upon the number of holders of the Exchange Preferred Stock, the interest
of securities dealers in making a market in the Exchange Preferred Stock and
other factors. Accordingly, there can be no assurance as to the development or
liquidity of any market for the shares of Exchange Preferred Stock. If an
active trading market for the shares of Exchange Preferred Stock does not
develop, the market price and liquidity of the shares of Exchange Preferred
Stock may be adversely affected. If the shares of Exchange Preferred Stock are
traded, they may trade at a discount from their initial offering price,
depending upon prevailing interest rates, the market for similar securities,
our financial performance and certain other factors. The liquidity of, and
trading markets for, the shares of Exchange Preferred Stock also may be
adversely affected by general declines in the market for payment-in-kind
preferred stock. Such declines may adversely affect the liquidity of, and
trading markets for, the shares of Exchange Preferred Stock, independent of our
financial performance or prospects.
Historically, the market for payment-in-kind preferred stock has been subject
to disruptions that have caused substantial volatility in the prices of
securities similar to the Exchange Preferred Stock. There can be no assurance
that the market, if any, for the shares of Exchange Preferred Stock will not be
subject to similar disruptions. Any such disruptions may have an adverse effect
on the holders of the Exchange Preferred Stock.
16
<PAGE>
LIMITED OPERATING HISTORY
Global Crossing was organized in March 1997 and has a limited operating
history. Our financial information relates principally to a period in which we
were constructing and developing AC-1 and, until June 1998, had minimal
revenues and operating costs. Despite recognizing approximately $218.9 million
in revenues, we have incurred a net loss applicable to common shareholder of
approximately $169.0 million for the period from March 19, 1997 (date of
inception) through September 30, 1998, due primarily to the termination of
certain advisory services agreements, awards under our Stock Incentive Plan,
the extraordinary loss on the retirement of the GTH Senior Notes and the
redemption of GTH Preference Shares. Global Crossing has financed its net
losses, debt service, capital expenditures and other cash needs to date through
the proceeds of sales of common and preferred equity and the issuance of debt,
including non-recourse indebtedness of Atlantic Crossing Ltd., PCL and Mid-
Atlantic Crossing Ltd. In addition, we will require substantial additional
capital in order to carry out our business plan. For more information, see "--
Substantial Future Capital Requirements."
Our success will depend substantially on sales of capacity on our systems. We
have been marketing and selling capacity primarily on AC-1 which has resulted
in executed capacity purchase agreements and inland capacity purchase
agreements as of September 30, 1998 to purchase capacity totaling $767 million,
including related sales of terrestrial capacity. We cannot be certain that we
will continue to be successful in selling capacity on AC-1 or our other systems
under development. Additionally, we cannot be certain that we will be able to
realize our business plan. Furthermore, even if we realize our plan, we still
may not be able to sustain operating profitability or generate sufficient cash
flow to service our indebtedness. For more information, see "--Sales of
Capacity; Realization of Other Revenues," "--Termination of Capacity Purchase
Agreements," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business."
LEVERAGE
We have incurred a high level of debt. As of September 30, 1998, we had a
total of $1,328 million of total liabilities, including approximately $1,213
million in senior indebtedness, of which $365 million was secured. In addition,
PCL has entered into a $850 million non-recourse credit facility with respect
to PC-1, under which as of September 30, 1998, PCL had incurred $200 million of
indebtedness. Furthermore, in November 1998, Mid-Atlantic Crossing Ltd. entered
into a $260 million non-recourse credit facility with respect to MAC. We have
also entered into a $300 million commitment letter for project financing for
PAC. For more information, see "Description of Certain Indebtedness."
The amount of our debt could have important consequences for our future,
including, among other things:
. restrictive debt covenants may impair our ability to pay cash dividends
or make required redemption payments on the Preferred Stock,
. cash from operations may be insufficient to meet the principal and
interest on our indebtedness, including the Exchange Notes, as they
become 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.
For more information see "Description of Certain Indebtedness."
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 intend to enter into various credit arrangements.
Accordingly, once they enter into these credit arrangements, the payment of
dividends from our operating subsidiaries and the making and repayments of
loans and advances will become subject to statutory, contractual and other
restrictions.
17
<PAGE>
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. There can be no assurance that we would be able to successfully
renegotiate such terms or refinance our indebtedness when required or that
satisfactory terms of any such 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 certain assets to meet our debt service obligations,
.sales of equity,
.negotiations with our lenders to restructure applicable indebtedness, or
.other options available to us under applicable law.
SUBSTANTIAL FUTURE CAPITAL REQUIREMENTS
We will require substantial capital investment to implement our business
plan. Because we anticipate that each of our systems will require separate
financing in addition to our equity investment in each system, we intend to
raise additional non-recourse debt or equity capital at the system level to
meet these financing requirements. We currently estimate that our capital
resources, together with the additional capital that we intend to raise at the
system level, will be sufficient to fund our currently planned systems. If we
are unable to fund the development of our systems, our business, financial
condition and results of operations will be materially adversely affected. For
more information, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
RISKS RELATED TO COMPLETING OUR CABLE SYSTEMS
Our ability to achieve our strategic objectives will depend in large part
upon the successful, timely and cost-effective completion of our planned cable
systems as well as on achieving substantial capacity sales on these systems
once they become operational. The construction of our systems will be affected
by a variety of factors, uncertainties and contingencies, many of which are
beyond our control. There can be no assurance that each of these systems will
be completed at the cost and in the time frame currently estimated by Global
Crossing, or even at all. Although we will be awarding contracts for
construction of our systems to certain suppliers who in most cases are expected
to be bound by a fixed-price construction cost schedule, and to provide
guarantees in respect of completion dates and system design specifications,
there can be no assurance that the actual construction costs or the time
required to complete these systems will not exceed our current estimates. Such
circumstances could have a material adverse effect on our results of operations
or financial condition. For more information, see "Business--Suppliers."
Our successful completion of our cable systems will depend, among other
things, upon:
.our ability to manage their construction effectively,
.our ability to obtain all construction 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.
Failure with respect to any of the foregoing may significantly delay or
prevent completion of one or more of our systems, which could have a material
adverse effect on our business, financial condition and results of operations.
HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION OF THE SECURITIES
We are a holding company and derive substantially all of our revenues from
our subsidiaries. We intend to lend or contribute all of the net proceeds from
the offering of the Old Preferred Stock to certain of our subsidiaries. We will
rely on
18
<PAGE>
payments from our subsidiaries to be able to meet our obligations. We will not
be able to pay out cash dividends on the Preferred Stock, redeem the Preferred
Stock or pay interest and principal on the Exchange Notes or redeem the
Exchange Notes without receiving dividends from our subsidiaries. Our
subsidiaries' ability to make such payments to us will be subject to the
availability of sufficient cash. Some subsidiaries' abilities to pay dividends
to us may also be subject to restrictive covenants in existing or future debt
agreements.
SUBORDINATION
The Exchange Notes, if and when issued, will rank behind all of our existing
indebtedness (other than trade payables) and all of our future borrowings
(other than trade payables), except any future indebtedness that expressly
provides that it ranks equal with, or subordinated in right of payment to, the
Exchange Notes. As a result, upon any distribution to our creditors in a
bankruptcy, liquidation or reorganization or similar proceeding relating to us
or our property, the holders of senior debt of our Company will be entitled to
be paid in full in cash before any payment may be made with respect to the
Exchange Notes.
In addition, all payments on the Exchange Notes will be blocked in the event
of a payment default on designated senior debt and may be blocked for up to 179
of 360 consecutive days in the event of certain non-payment defaults on senior
debt.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to our Company, holders of the Exchange Notes will
participate with trade creditors and all other holders of subordinated
indebtedness of the Company in the assets remaining after we have paid all of
the senior debt. However, because the indenture will require that amounts
otherwise payable to holders of the Exchange Notes in a bankruptcy or similar
proceeding be paid to holders of senior debt instead, holders of the Exchange
Notes may receive less, ratably, than holders of trade payables in any such
proceeding. In any of these cases, we may not have sufficient funds to pay all
of our creditors and holders of Exchange Notes may receive less, ratably, than
the holders of senior debt.
Assuming we had completed the offering of the Old Preferred Stock on
September 30, 1998, the Exchange Notes would have been subordinated to $1,213
million of senior debt. We will be permitted to borrow substantial additional
indebtedness, including senior debt, in the future under the terms of the
indenture.
SALES OF CAPACITY; REALIZATION OF OTHER REVENUES
Our ability to achieve our business objectives will also depend in large part
upon our sales and marketing capabilities. Through our wholly-owned subsidiary,
Global Crossing International, Ltd. ("GCI"), we have assembled a dedicated
sales and marketing force. We depend upon the ability of such employees to
effectively market and sell capacity. We cannot be certain that we will be able
to effectively sell capacity on our cable systems. If we are unable to
effectively sell capacity on our cable systems, our results of operations could
be materially affected.
We intend to grow revenues and profits by:
.upgrading capacity on our planned systems,
.developing additional undersea cable projects,
.developing or purchasing additional terrestrial fiber capacity, and
.introducing new services.
For more information, see "Business." If we are unable to effect these
upgrades, develop additional cable projects or develop or obtain additional
terrestrial capacity, our business, financial condition and results of
operations could be adversely affected.
19
<PAGE>
TERMINATION OF CAPACITY PURCHASE AGREEMENTS
Under all of our capacity purchase agreements for AC-1, the customer may
terminate the agreement for capacity on any segment other than the United
States-United Kingdom segment if the ready for service date for the applicable
segment has not occurred by June 30, 1999. Furthermore, under some AC-1
capacity purchase agreements, the customer will receive a refund on the United
States-United Kingdom segment if the ready for service date for the full AC-1
system has not occurred by June 30, 1999. In addition, under some AC-1
capacity purchase agreements, the customer may terminate the agreement if we
do not obtain and hold certain governmental authorizations, approval,
consents, licenses and permits. Capacity purchase agreements for our other
systems may contain similar provisions. If a substantial number of capacity
purchase agreements are terminated for any of the foregoing reasons, our
business, financial condition and results of operations could be adversely
affected. For more information, see "Business--Sales and Marketing" and "--
Summary of Principal Terms of Standard Contractual Documentation."
COMPETITION
The international telecommunications industry is highly competitive. We face
competition from existing and planned systems along each of our planned
routes. We also compete with satellite providers, including existing
geosynchronous satellites and low-earth orbit systems now under construction.
On certain routes, we compete against terrestrial cable systems. We compete
primarily on the basis of price, availability, transmission quality and
reliability, customer service and the location of our systems. Traditionally,
carriers have made substantial long term investments in ownership of cable
capacity. This has meant that low price and high-end service have not been
determining factors in such carriers' decisions to purchase additional
capacity. Accordingly, there can be no assurance that we will be able to
compete successfully against systems to which prospective customers have made
long term commitments.
The routes underlying our systems are currently served by several undersea
cables, terrestrial systems as well as satellites. Primary future sources of
competition for Global Crossing may result from, among others:
(1) TAT-14, a transatlantic cable system which is being developed by its
consortium members,
(2) Gemini, a transatlantic cable system being operated and marketed by MCI
WorldCom, Inc., and Cable & Wireless PLC,
(3) China-US, a transpacific system being developed as a "private cable
system" by fourteen large carriers, including SBC Communications Inc.,
MCI WorldCom, Inc, AT&T Corp. and Sprint Corp., most of whom have
traditionally sponsored consortium cables, and
(4) the Japan-US Cable Network, a transpacific system being developed by a
consortium of major telecommunications carriers including MCI WorldCom,
Inc., AT&T Corp., KDD, Nippon Telegraph & Telephone Corp., Cable &
Wireless PLC and GTE Corporation.
Other regional and global systems are being considered by developers,
including Project Oxygen, a global system being evaluated by CTR Group, Ltd.
We believe that the other transatlantic systems will directly compete with AC-
1 and may reduce customer demand on AC-1. We believe that the other planned
transpacific systems will not satisfy the demand for capacity between the
United States and Japan and that there is currently enough demand projected to
accommodate all such systems. Nevertheless, the other planned transpacific
systems will receive commitments for capacity that PC-1 could have received in
their absence. In addition, we may face competition from existing and planned
regional undersea cable systems and satellites on our MAC and PAC routes,
where entrants are vying for purchases from a small but rapidly growing
customer base. Furthermore, we will face competition on PEC from various
carriers who are either currently building or
20
<PAGE>
planning to build trans-European network assets. For more information, see "--
Rapid Growth in a Changing Industry; Pricing Uncertainties" and "Business--
Competition."
RELATIONSHIP WITH PRINCIPAL SHAREHOLDERS; CONFLICTS OF INTEREST
As of September 30, 1998, Pacific Capital Group, Inc. ("PCG") had a 23.51%
beneficial ownership interest in GCL. Global Crossing and GCL have entered into
various transactions with PCG and have assumed the on-going development of PC-
1, PAC and MAC from an affiliate of PCG. Mr. Gary Winnick, Co-Chairman of GCL's
Board of Directors, controls PCG and its subsidiaries. In addition, several
other officers and directors of GCL and the Company are affiliated with PCG.
Furthermore, through an affiliate, Canadian Imperial Bank of Commerce ("CIBC")
had a 22.39% beneficial ownership interest in GCL as of September 30, 1998. An
affiliate of CIBC was an initial purchaser of the Old Preferred Stock, was an
underwriter in the GCL Stock Offerings, was an initial purchaser in the Senior
Notes Offering, and CIBC and its affiliates have also entered into certain
financing transactions with Global Crossing in connection with the development
and construction of its systems. Several members of GCL's Board of Directors
are affiliated with CIBC. For more information, see "Management," "Principal
Shareholders," and "Certain Transactions."
Upon completion of the GCL Stock Offerings, PCG and CIBC collectively
beneficially owned 46.46% of the outstanding GCL Common Stock. Accordingly, PCG
and CIBC may be able to determine the vote on matters submitted to a vote of
the stockholders of GCL, including the election of directors of GCL.
Certain of GCL's officers and directors also serve as officers and directors
of other companies. Additionally certain of GCL's officers and directors are
active investors in the telecommunications industry. For more information, see
"Management." Service as GCL's director or officer 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 GCL
or Global Crossing and the other company. A conflict of interest could also
exist with respect to allocation of time and attention of persons who are
officers of both GCL and another company. The pursuit of these other business
interests could distract these officers and directors from pursuing
opportunities on GCL's behalf. Such conflicts of interest could have a material
adverse affect on our financial condition.
TRANSITION FROM MANAGEMENT TO OPERATING COMPANY
The transition from a development stage company to an operating company
places significant demands on our management and operations. We are in the
process of expanding the management and operational capabilities necessary for
this transition.
Our ability to manage this transition successfully will depend on, among
other things:
. expanding, training and managing our employee base, including
attracting, retaining and motivating highly skilled personnel,
. taking over or outsourcing our customer interface and operations,
administrative and maintenance systems,
.procuring terrestrial capacity to provide connectivity to inland cities,
and
.controlling expenses.
There can be no assurance that we will succeed in developing all or any of
these capabilities, and any failure to do so could have a material adverse
effect on our results of operations. For more information, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Management."
21
<PAGE>
RAPID GROWTH IN A CHANGING INDUSTRY; PRICING UNCERTAINTIES
Part of our strategy is to construct several cable systems in a short time
frame in order to take advantage of the supply and demand imbalance that
currently exists and is projected to exist in the global marketplace. Each of
our currently announced systems is expected to be operational between now and
2000. 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 globalization of the world's economies, and
.the changing technology for wireless and satellite communication.
Much of our planned growth is predicated upon the growth in demand for
international telecommunications capacity. There can be no assurance that such
anticipated demand growth will occur.
The fiber optic cable transmission industry has experienced significant per
circuit price declines resulting from technological advances in fiber optic
technology. Recent changes in technology caused prices for circuits to go down
even further. If there is less demand than we project or a bigger drop in
prices per circuit than we project, there could be a material adverse effect on
our business, financial condition and results of operations. There can be no
assurance, even if our projections with respect to such 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.
RAPID TECHNOLOGICAL CHANGE
The telecommunications industry is subject to rapid and significant changes
in technology. For instance, recent technological advances permit substantial
increases in the transmission capacity of both new and existing fiber. The
introduction of new products or the emergence of new technologies also may
reduce the cost and increase the supply of certain services similar to those
provided by Global Crossing. While we believe that being the first to construct
and to market cable systems with significant capacity on certain routes may
stop competitors from overbuilding in those situations, we cannot predict the
behavior of potential competitors who might otherwise build a system even if it
would be uneconomical. We believe that for the foreseeable future, technology
changes will neither materially affect the continued use of fiber optic cable
nor materially hinder our ability to deploy the state-of-the-art technology.
However, we cannot predict the effect of technological changes on our
operations and such changes could have a material effect on our business,
financial condition and results of operations.
OPERATIONS RISKS
Each of our systems will be subject to the risks inherent in a large-scale,
complex fiber optic telecommunications system. The operations, administration,
maintenance and repair of these systems requires the coordination and
integration of sophisticated and highly specialized hardware and software
technologies and equipment located throughout the world. There can be no
assurance that, even if built to specifications, our systems will function as
expected in a cost-effective manner. The failure of the hardware or software to
function as required could render a cable system unable to perform at design
specifications.
AC-1 has, and each of our other systems are expected to have, a design life
of not less than 25 years; however, there can be no assurance of the actual
useful life of any of these systems. A number of factors will affect the useful
life of each of our systems, including, among other things:
.quality of construction,
22
<PAGE>
.unexpected 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.
DEPENDENCE ON KEY PERSONNEL
Our future success depends on the skills, experience and efforts of certain
of the officers and key technical and sales employees of GCL and of Global
Crossing. Some of these officers and employees are new to Global Crossing. We
cannot be certain that we will be able to integrate new management into our
existing operations. In addition, 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. For more information, see "Management--Employment Contracts and
Termination of Employment and Change-in-Control Arrangements."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
We will derive substantial revenues from international operations. We intend
to have substantial physical assets in several jurisdictions along the routes
of our planned systems.
Accordingly, our business is subject to certain risks inherent in
international operations. These risks include:
.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 such factors. However, problems associated with
such risks could arise in the future. Finally, managing operations in multiple
jurisdictions will place further strain on our ability to manage our overall
growth.
FOREIGN EXCHANGE; EXCHANGE CONTROLS
We will invoice the majority of our sales in U.S. dollars, and the majority
of our customers will incur maintenance and other obligations denominated in
U.S. dollars. Many of our actual and prospective customers derive their
revenues in currencies other than U.S. dollars. Such customers will have to pay
more money for the same maintenance if their currencies devalue relative to the
U.S. dollar. Furthermore, such customers may be or may become subject to
exchange control regulations which might restrict or prohibit the conversion of
their revenue currencies into dollars. We then may be unable to receive payment
because the customer may not have any U.S. dollars available to it. We cannot
be certain that the occurrence of any such factors will not have a material
adverse effect on our business, financial condition and results of operations.
EFFECT OF GOVERNMENT REGULATION
We will be required to obtain and maintain various permits, licenses and
other authorizations in both the United States and in foreign jurisdictions
where our cables land and exist. In particular, undersea cable landing or
similar licenses will be required in many of the jurisdictions where Global
Crossing's systems will land and exist. These licenses are typically issued for
a term of years, subject to renewal. Moreover, these licenses may subject our
business and operations to varying forms of regulation, which could change over
the course of time.
23
<PAGE>
If we fail to obtain or renew a license or if there is a material change in the
nature of the regulation to which we are subject, there could be a material
adverse effect on our business, financial condition and results of operations.
In addition, political developments and national and locals laws may affect our
international operations. Specifically, we must obtain construction and
operating licenses during the construction phase of each of our cable systems.
Although Global Crossing intends that the construction contracts for each of
its cable systems will impose the burden of acquiring and maintaining
construction licenses and permits on the contractor for each of such systems,
there can be no assurance that such contractor will successfully obtain such
permits and licenses. If we or the contractor fails to obtain or maintain any
construction or operating license, there could be a material adverse effect on
our business, financial condition and results of operations. For more
information, see "Business--Regulation."
DEPENDENCE ON THIRD PARTIES
We depend and will continue to depend upon third parties to:
.construct systems and provide equipment,
.provide access to certain origination and termination points of our
systems in various countries,
.construct and operate landing stations in certain countries,
.acquire rights of way,
.provide terrestrial capacity to our customers through contractual
arrangements, and
.act as joint venture participants with regard to PC-1, GAL and other
possible future systems.
There can be no assurance that such third parties will perform their
contractual obligation 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.
RISK OF ERROR IN FORWARD-LOOKING STATEMENTS
We have included "forward-looking statements" throughout this prospectus.
These statements describe our attempt to predict future occurrences. We use the
words "believes," "anticipates," "expects," and similar expressions to identify
forward-looking statements. Forward-looking statements are subject to a number
of risks, assumptions and uncertainties, such as:
. risks associated with our ability to complete our systems within
currently estimated time frames and budgets,
. risks associated with our ability to sell capacity on our systems,
. risks associated with our successful transition from a system
development company to an operating company, and
. risks associated with our ability to effectively compete in a rapidly
evolving and price competitive marketplace.
This list is only an example of some of the risks, uncertainties and
assumptions that may affect our forward-looking statements. If any of these
risks or uncertainties materialize (or fail to materialize), or if the
underlying assumptions prove incorrect, actual results may differ materially
from those projected in the forward-looking statements. We do not intend to
update or revise any forward-looking statements included in this prospectus to
reflect future events. Factors that could cause actual results to differ
materially are those set forth in this section of the prospectus. You should
carefully read this section before making any decision to purchase these
Securities.
24
<PAGE>
COVENANT RESTRICTIONS
The terms of the Exchange Preferred Stock and the New Exchange Notes will
impose certain operating and financial restrictions on us and our Restricted
Subsidiaries. These restrictions will significantly limit or prohibit, among
other things, our ability and our Restricted Subsidiaries' ability to:
. incur additional indebtedness,
. repay indebtedness prior to stated maturities,
. sell assets,
. make investments,
. engage in transactions with shareholders and affiliates,
. issue capital stock,
. create liens, or
. engage in mergers or acquisitions.
These restrictions could also limit our ability and our Restricted
Subsidiaries' ability to:
. effect future financings,
. make needed capital expenditures,
. withstand a future downturn in our business or the economy in general, or
. otherwise conduct necessary corporate activities.
Our ability and our Restricted Subsidiaries' ability to comply with the
covenants and restrictions contained in the Bye-laws or the Indenture may be
affected by events beyond our control, including prevailing economic and
financial concerns. If we or our Restricted Subsidiaries fail to comply with
these restrictions, it could lead to a default under the terms of the Preferred
Stock or the Exchange Notes. In addition, in such circumstances we and our
Restricted Subsidiaries may not be able to meet our respective debt service
obligations. In the event of a default, holders of the Preferred Stock or the
Exchange Notes could elect to declare all of the indebtedness to be due and
payable together with accrued and unpaid interest. In such event, a significant
portion of our and our Restricted Subsidiaries' other indebtedness may become
immediately due and payable and there can be no assurance that we and our
Restricted Subsidiaries would be able to make such payments or borrow
sufficient funds from alternative sources to make any such payment. See
"Description of Preferred Stock--Certain Covenants" and "Description of
Exchange Notes--Certain Covenants."
PURCHASE OF SECURITIES UPON A CHANGE OF CONTROL
The terms of the Preferred Stock and the Exchange Notes will require us to
make an offer to purchase the Securities upon the occurrence of a Change of
Control (if we do not exercise our rights to redeem the Preferred Stock in
full) at a purchase price equal to 101% of the liquidation preference of the
Preferred Stock or the principal amount of the Exchange Notes, plus accumulated
and unpaid dividends at the time of purchase or interest to the date of
purchase. Prior to commencing such an offer to purchase, we would be required
to (i) repay in full all of our indebtedness that would prohibit the purchase
of the Securities or (ii) obtain any requisite consent to permit the purchase.
If we are unable to repay all of such indebtedness or are unable to obtain the
necessary consents, we will be unable to offer to purchase the Securities and
such failure will constitute a voting rights triggering event under the terms
of the Preferred Stock or an event of default under the terms of the Exchange
Notes. There can be no assurance that we will have sufficient funds available
at the time of any Change of Control to make any debt payment (including
purchases of Securities) as described above. See "Description of Preferred
Stock--Repurchase at the Option of Holders--Change of Control" and "Description
of Exchange Notes--Repurchase at the Option of Holders--Change of Control."
TAX MATTERS
We believe that a significant portion of the income derived from our subsea
systems will not be subject to tax by any of (i) Bermuda, which currently does
not have a corporate income tax, or (ii) certain other countries in which we
conduct activities or in which our customers are located, including the United
States. However, we
25
<PAGE>
base our belief 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. Our
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. We cannot be certain
that any of the foregoing factors would not have a material adverse effect on
our business, financial condition and results of operations. For more
information, see "Tax Considerations."
FOREIGN PERSONAL HOLDING COMPANY, PASSIVE FOREIGN INVESTMENT COMPANY,
CONTROLLED FOREIGN CORPORATION AND PERSONAL HOLDING COMPANY RULES
It is possible that the Issuer or one of its non-United States subsidiaries
will be classified as a foreign personal holding company (an "FPHC") under the
United States Internal Revenue Code. If you are a United States Holder as
defined below and the Issuer or one of its non-United States subsidiaries is
classified as an FPHC, then you would be required to pay tax on your pro-rata
share of the Issuer's (or its relevant subsidiary's) undistributed FPHC income.
We intend to manage our affairs so as to attempt to avoid or minimize having
income imputed to United States Holders under these rules, to the extent such
management of our affairs is consistent with our business goals. However, there
can be no assurance that we will be successful in this endeavor.
The Issuer believes that it is not a passive foreign investment company (a
"PFIC") and does not expect to become a PFIC in the future. However, there can
be no assurance in this regard. In addition, this belief is based, in part, on
the Issuer 's interpretations of existing law that the Issuer believes are
reasonable, but which have not been approved by any taxing authority. If the
Issuer were a PFIC and you are a United States Holder, then you could be liable
to pay tax at the then prevailing rates on ordinary income plus an interest
charge upon certain distributions by the Issuer or when you sell the Preferred
Stock at a gain. For more information, see "Tax Considerations."
Furthermore, additional tax considerations would apply if the Issuer or any
of its affiliates were a controlled foreign corporation (a "CFC") or a personal
holding company (a "PHC"). For more information, see "Tax Considerations."
26
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the Exchange Offer.
CAPITALIZATION
The following table sets forth as of September 30, 1998 (i) the historical
consolidated capitalization of the Company and (ii) the capitalization as
adjusted to reflect the offering of the Old Preferred Stock and the application
of the net proceeds therefrom. This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and the notes thereto
appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
------------------------------
ACTUAL AS ADJUSTED(1)
-------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Long Term Debt:
AC-1 Credit Facility(2).................. $ 337,754,772 $ 337,754,772
9 5/8% Senior Notes due 2008(3).......... 796,370,623 796,370,623
Long term deferred revenue............... 12,406,592 12,406,592
Obligations under inland service agree-
ments and capital leases(4)............. 17,723,485 17,723,485
-------------- --------------
Total Long Term Debt................... 1,164,255,472 1,164,255,472
-------------- --------------
10 1/2% Senior Exchangeable Preferred Stock
due 2008(5)............................... -- 483,000,000
Shareholder's Equity:
GCL Common Stock......................... 12,000 12,000
Other Shareholder's Equity............... 835,226,100 835,226,100
Accumulated Deficit...................... (113,878,436) (113,878,436)
-------------- --------------
Total Shareholder's Equity............. 721,359,664 721,359,664
-------------- --------------
Total Capitalization................... $1,885,615,136 $2,368,615,136
============== ==============
</TABLE>
- --------
(1) As adjusted to reflect the offering of the Old Preferred Stock.
(2) The AC-1 Credit Facility provides non-recourse financing at the ACL level
for the construction and development of AC-1. A total of $482.0 million was
available to be borrowed under this facility, of which $337.8 million (not
including current portion totaling $27.4 million) was outstanding as of
September 30, 1998. See "Description of Certain Indebtedness--AC-1 Credit
Facility."
(3) The Senior Notes provided funds for refinancing corporate indebtedness and
investments in the Company's PC-1, MAC and PAC systems.
(4) Net of the $33.3 million current portion of such obligations.
(5) Net of $17 million in unamortized commissions and expenses from the
offering of the Old Preferred Stock.
27
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected data presented below under the captions "Statement of Operations
Data" and "Balance Sheet Data" as of December 31, 1997 and for the period from
March 19, 1997 (date of inception) through December 31, 1997 are derived from
the Consolidated Financial Statements of the Company included herein, which
financial statements are prepared in accordance with U.S. GAAP and have been
audited by Arthur Andersen & Co., independent public accountants, as indicated
in their report thereon included elsewhere in this prospectus. The financial
data as of and for the three and nine months ended September 30, 1998 are
derived from the Company's unaudited interim financial statements. The
unaudited interim financial statements include all adjustments, consisting of
normal recurring adjustments, that management considers necessary for fair
presentation of the financial position as of September 30, 1998 and results of
operations for the interim periods presented. Results of operations for the
interim periods are not necessarily indicative of the results of operations for
a full year. The operating data presented below are derived from the Company's
records. The financial data presented herein and elsewhere in this prospectus
is not necessarily indicative of the financial position or results of
operations of the Company in the future. The information set forth below should
be read in conjunction with the discussion under "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business" and the
Consolidated Financial Statements and the notes thereto appearing elsewhere in
this prospectus.
<TABLE>
<CAPTION>
FOR THE PERIOD
NINE MONTHS MARCH 19, 1997
ENDED (DATE OF INCEPTION)
THREE MONTHS ENDED SEPTEMBER 30, TO DECEMBER 31,
SEPTEMBER 30, 1998 1998 1997
------------------ -------------- -------------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA
Sales and Operating
Revenues............... $117,692,925 $ 218,948,792 $ --
------------ -------------- ------------
Expenses:
Cost of Capacity Sold... 49,237,947 90,438,176 --
Operations,
Administration and
Maintenance............ 8,182,206 10,652,206 --
Sales and Marketing..... 6,342,016 13,655,010 1,366,724
Network Development..... 2,912,062 7,233,645 78,000
General and
Administrative......... 3,773,808 10,760,377 1,656,984
Termination of Advisory
Services Agreement(1).. -- 139,669,340 --
Stock Related
Compensation(2)........ 1,654,932 8,248,795 --
Provision for Doubtful
for Accounts........... 1,198,878 2,210,995 --
------------ -------------- ------------
73,301,849 282,868,544 3,101,708
------------ -------------- ------------
Operating Income
(loss)................. 44,391,076 (63,919,752) (3,101,708)
Equity in Loss of
Pacific Crossing Ltd... (1,036,536) (1,036,536) --
Interest Income
(Expense): --
Interest Income....... 8,265,769 12,939,207 2,941,352
Interest Expense...... (17,983,947) (25,659,937) --
Provision for Income
Taxes (3).............. (7,331,590) (16,331,590) --
Extraordinary Loss on
Retirement of GTH
Senior Notes (4)....... -- (19,709,472) --
------------ -------------- ------------
Net Income (loss)....... 26,304,772 (113,718,080) (160,356)
Preference Share Non-
cash Dividends (5)..... -- (8,306,433) (12,689,923)
Redemption of GTH
Preference Shares (6).. -- (34,140,067) --
------------ -------------- ------------
Net Income (Loss)
Applicable to Common
Shareholders........... $ 26,304,772 $ (156,164,580) $(12,850,279)
============ ============== ============
OTHER FINANCIAL DATA:
Ratio of Earnings to
Fixed Charges (13)..... 1.72 -- --
Pro Forma Ratio of
Earnings to Fixed
Charges (14)........... 1.72 -- --
Excess of Earnings over
Fixed Charges (Excess
of Fixed Charges over
Earnings) (13)......... $ 22,020,673 $ (112,620,959) $ (9,937,123)
============ ============== ============
Pro Forma Excess
Earnings over Fixed
Charges (Fixed Charges
over Earnings) (14).... $ 22,020,673 $ (112,620,959) $ (9,937,123)
============ ============== ============
Ratio of Earnings to
Combined Fixed Charges
and Preferred Dividends
(13)................... 1.72 -- --
Pro Forma Ratio of
Earnings to Combined
Fixed Charges and
Preferred Dividends
(14)................... 1.20 -- --
Excess of Earnings over
Combined Fixed Charges
and Preferred Dividends
(Excess of Combined
Fixed Charges and
Preferred Dividends
over Earnings) (13).... $ 22,020,673 $ (120,927,392) $(22,627,046)
============ ============== ============
Pro Forma Excess of
Earnings over Combined
Fixed Charges and
Preferred Dividends
(Excess of Combined
Fixed Charges and
Dividends over
Earnings) (14)......... $ 8,895,673 $ (160,302,392) $(63,907,868)
============ ============== ============
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF
SEPTEMBER 30, DECEMBER 31,
1998 1997
-------------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Current Assets Including Cash and Restricted
Cash (7)..................................... $ 940,770,580 $ 27,743,838
Long Term Accounts Receivable................. 33,639,685 --
Construction in Progress and Capacity
Available for Sale (8)....................... 870,976,856 518,518,509
Deferred Finance and Organization Costs, Net
of Accumulated Amortization.................. 41,599,923 25,934,021
Investment in Pacific Crossing Ltd. (9)....... 162,109,023 --
-------------- --------------
$2,049,096,067 $ 572,196,368
============== ==============
Current Liabilities........................... $ 154,162,431 $ 92,097,773
Long Term Debt................................ 337,754,772 162,325,000
Senior Notes.................................. 796,370,623 150,000,000
Long Term Deferred Revenue.................... 12,406,592 --
Obligations under inland service agreements
and capital leases (10)...................... 17,723,485 3,009,000
Deferred income taxes......................... 9,318,500 --
GTH Preference Shares (11).................... -- 90,643,919
Shareholder's Equity..........................
GCL Common Stock............................ 12,000 12,000
Other Shareholder's Equity.................. 835,226,100 74,269,032
Accumulated Deficit......................... (113,878,436) (160,356)
-------------- --------------
Total Shareholder's Equity.................... 721,359,664 74,120,676
-------------- --------------
Total Liabilities and Shareholder's Equity.... $2,049,096,067 $ 572,196,368
============== ==============
OTHER FINANCIAL DATA:
Debt to Equity Ratio.......................... 1.84:1 5.50:1
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1998
--------------
<S> <C>
OPERATING DATA:
Executed CPAs.................................................... $ 767 million
</TABLE>
<TABLE>
<CAPTION>
ESTIMATED(12)
--------------
<S> <C>
Route Kilometers
In Service.................................................... 5,000
Under Contract................................................ 51,300
Announced..................................................... 59,700
Network Service Capacity
(STM-1) Circuits)............................................. 128
Estimated System Costs (excluding potential future upgrades and
amounts capitalized with respect to the PCG Warrants)
AC-1 ......................................................... $ 750 million
Other Systems Under Development (PC-1, MAC, PAC, PEC and
GAL)......................................................... $2,815 million
</TABLE>
- --------
(1) Includes a charge for the Advisory Services Agreement Termination on June
30, 1998. See "Certain Transactions." GCL acquired the rights on behalf of
the Company of those entitled to fees payable under the Advisory Services
Agreements in consideration for the issuance of GCL Common Stock having an
aggregate value of $135 million and the cancellation of approximately $2.7
million owed to GCL under a related advance agreement. As a result of this
transaction, the Company has recorded a non-recurring charge in the
approximate amount of $137.7 million.
(2) During each of the three and nine months ended September 30, 1998, the
Company recognized $1.7 and $8.2 million, respectively, from a total of
$22.9 million of stock-related expense relating to stock options issued
during nine months ended September 30, 1998. The remaining $14.7 million
will be recognized as follows: $1.7 million in the fourth quarter of 1998,
$6.8 million in 1999, $5.0 million in 2000 and $1.2 million in 2001.
(3) Reflects income taxes on profits earned during the nine months ended
September 30, 1998 attributable to both United States and foreign
jurisdictions. A significant portion of the Company's operating losses
have been incurred in non-taxable jurisdictions and therefore these
operating losses cannot be applied to future taxable earnings of the
Company.
(4) On May 18, 1998, a portion of the proceeds from the issuance of the Notes
was used to repurchase the GTH Senior Notes. The Company recognized an
extraordinary loss of $19.7 million on repurchase comprising a premium of
approximately $9.8 million and a write-off of approximately $9.9 million
of unamortized deferred financing costs.
(5) The holders of GTH Preference Shares were entitled to receive cumulative,
compounding dividends at an initial annual rate of 14%. Preference share
dividends include cumulative 14% dividends and amortization of the
discount and issuance costs. Effective June 17, 1998, the Company used
proceeds from the Senior Notes to redeem all outstanding GTH Preference
Shares. All dividends prior to the redemption had been paid through the
issuance of additional preference shares and charged against additional
paid-in-capital.
(6) As a result of the redemption of the GTH Preference Shares, the Company
incurred a one-time $34.1 million charge against additional paid-in
capital. The charge was comprised of: (i) a $15.9 million charge for the
redemption premium and (ii) a write-off of $18.2 of unamortized discount
and unamortized deferred financing costs.
29
<PAGE>
(7) The majority of Cash and Restricted Cash is comprised of proceeds from the
issuance of the Senior Notes and from the GCL Stock Offerings, contributed
to the Company.
(8) Construction in Progress and Capacity Available for Sale includes direct
and indirect expenditures for construction of AC-1 and other Systems and
is stated at cost. Includes costs incurred under (i) the construction
contracts; (ii) advisory, consulting and legal fees; (iii) interest
(including amortization of debt issuance costs incurred during the
construction phase); and (iv) other costs necessary for developing AC-1.
Additionally, GCL granted the PCG Warrants to PCG, a shareholder of GCL,
for the PC-1, MAC and PAC systems and related rights. The $275.3 million
value of the GCL Common Stock issued under the PCG Warrants was
contributed to the Company and recorded as Construction in Progress in the
amount of $112.2 million and Investment in Pacific Crossing Ltd. in the
amount of $163.1 million.
(9) Includes $163.1 million as of September 30, 1998, as described above,
representing the value of the PCG Warrants applicable to Pacific Crossing
Ltd., less $1.0 million representing the Company's equity share in the
loss of Pacific Crossing Ltd. for the nine months ended September 30,
1998.
(10) Certain contracts to acquire terrestrial capacity and certain capital
leases require payments over a 25-year period. The amount shown reflects
the present value of such payments, net of the $33.3 million ($30.2
million as of December 31, 1997) current portion of such payments, which
is included under "Current Liabilities."
(11) The December 31, 1997 amount is comprised of (i) $100 million of GTH
Preference Shares originally issued, plus (ii) $9.8 million of GTH
Preference Shares issued as dividends thereon, less (iii) $19.2 million
reflecting the unamortized discount and issue costs associated therewith.
The Company has redeemed all of the outstanding GTH Preference Shares
effective as of June 17, 1998.
(12) Assumes full completion of AC-1, PC-1, MAC, PAC, PEC and GAL based upon
current Company estimates, including anticipated financing costs. See
"Risk Factors--Risks Related to Completing our Cable Systems" and "--Risk
of Error in Forward-Looking Statements."
(13) For the purposes of this computation, earnings are defined as income
(loss) before income taxes plus fixed charges. Fixed charges consist of
interest expense (including amortization of deferred debt issuance costs)
and the portion of rental expense that is representative of the interest
factor (deemed to be one-third of minimum operating lease rentals).
(14) For the purposes of this pro forma computation, earnings are defined as
income (loss) before income taxes plus fixed charges. Fixed charges
consist of interest expense (including amortization of deferred debt
issuance costs) and the portion of rental expense that is representative
of the interest factor (deemed to be one-third of minimum operating lease
rentals). This computation gives effect to the November 24, 1998 issuance
of the Preferred Stock assuming that the Preferred Stock had been issued
at the beginning of each of the periods presented.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's audited Consolidated Financial Statements and the notes thereto
contained in this prospectus.
OVERVIEW
The Company is the world's first independent provider of global Internet and
long distance telecommunications facilities and services utilizing a network of
undersea and terrestrial digital fiber optic cable systems. The Company
commenced operations in March 1997, when it entered into a fixed price contract
with Tyco Submarine Systems Ltd. ("TSSL"), formerly AT&T Submarine Systems,
Inc., for the design, development, construction and installation of AC-1, and
obtained commitments for AC-1's initial financing. AC-1, the first of Global
Crossing's planned fiber optic cable systems, is designed to be a four fiber
pair system connecting (i) the United States to the United Kingdom, (ii) the
United Kingdom to The Netherlands and Germany, (iii) The Netherlands to Germany
and (iv) Germany to the United States. The first segment of AC-1, the United
States to United Kingdom route, was completed and commenced operations on May
26, 1998. The Company currently anticipates that the full AC-1 system will be
completed and commence operations by February 1999. See "Risk Factors--Risks
Related to Completing our Cable Systems."
Until May 26, 1998, the Company was a development stage company and since its
inception, has been involved in the planning, financing, marketing,
organization, development, design and construction of the AC-1 system. In
addition, the Company has been engaged in the planning, developing and
financing of the five other planned systems currently under active development
by the Company (PC-1, MAC, PAC, PEC and GAL). The Company has also achieved a
number of significant milestones, including (i) the recruitment of experienced
professionals in undersea cable and telecommunications operations, (ii) the
signing of construction contracts on AC-1, PC-1, MAC and PAC, (iii) the
execution of the AC-1, PC-1 and MAC credit facilities and the execution of a
financing commitment with respect to PAC, (iv) the construction and activation
of the United States to United Kingdom segment of AC-1, (v) the issuance of an
aggregate of $800 million in principal amount of the Company's Senior Notes,
(vi) the initial public offering of GCL Common Stock by the Company's parent,
GCL and (vii) the execution of over $767 million of capacity purchase
agreements ("CPAs") and inland capacity purchase agreements ("ICPAs").
Effective May 26, 1998, the United States--United Kingdom segment of AC-1
achieved "ready-for-service" ("RFS") and the Company began recognizing revenue
from the sale of capacity. Accordingly, the Company is no longer a development
stage company.
In March 1998, Global Crossing Ltd., LDC ("Old GCL"), a limited duration
company formed under the laws of the Cayman Islands, formed a wholly-owned
subsidiary in Bermuda known as Global Crossing Holdings Ltd. and contributed
its investment in Global Telesystems Holdings Ltd. to Global Crossing Holdings
Ltd. In April 1998, Global Crossing Holdings Ltd. changed its name to Global
Crossing Ltd. and formed the Issuer as a wholly-owned subsidiary. Global
Crossing Ltd. then contributed its investment in Global Telesystems Holdings
Ltd. to the Issuer. Prior to the GCL Stock Offerings, substantially all of the
shareholders of Old GCL exchanged their equity interests in Global Crossing
Ltd., LDC for GCL Common Stock of Global Crossing Ltd.
The Company, together with other partners, formed a joint venture company,
PCL, which on April 21, 1998 entered into a contract with TSSL to construct the
PC-1 cable system. The estimated cost of the PC-1 system is approximately $1.2
billion (excluding potential future upgrades and amounts capitalized with
respect to the PCG Warrants) and will be financed through a $400 million equity
contribution by the joint venture partners and through borrowings under the
credit facility discussed below. PC-1 is an undersea fiber optic cable system
connecting California, Washington and two landing sites in Japan. The Company
has approximately a 58% economic interest in PCL, represented by a 50% direct
voting interest in PCL and, through an equity ownership interest in one of the
other joint venture partners, a further 8% economic non-voting interest. The
Company's funding commitment in respect of the $400 million of equity in PCL
totals $231 million, which is
31
<PAGE>
proportional to its economic interest. PCL has obtained an $850 million senior
secured, non-recourse credit facility from certain lenders to finance the
remaining construction costs of the PC-1 system. The Company accounts for its
investment in PCL on an equity basis.
Effective June 2, 1998, the Company, through its wholly-owned subsidiary
Mid-Atlantic Crossing Ltd. ("MACL"), entered into a contract with Alcatel
Submarine Networks ("Alcatel") for the construction of MAC, an undersea fiber
optic cable system connecting New York, the Caribbean and Florida. The
estimated costs of the MAC system is approximately $330 million (excluding
potential future upgrades and amounts capitalized with respect to the PCG
Warrants). This will be financed through a $110 million equity contribution
and through borrowings under a non-recourse credit facility. Effective
November 25, 1998, MACL obtained $220 million in non-recourse course project
financing from certain lenders to finance the initial construction costs of
MAC.
Effective July 21, 1998, the Company, through its wholly-owned subsidiary
Pan American Crossing Ltd. ("PACL"), entered into a contract with TSSL to
construct PAC, an undersea fiber optic cable system connecting California with
two landing sites in Mexico, Panama and the Caribbean. The estimated costs of
the PAC system of approximately $475 million (excluding potential future
upgrades and amounts capitalized with respect to the PCG Warrants) will be
financed through a $175 million equity contribution and through borrowings
under a non-recourse credit facility. On July 21, 1998, PACL entered into a
commitment letter to obtain $300 million of non-recourse indebtedness.
In October 1998, the Company announced its plans to build PEC, which upon
completion, will interconnect AC-1 and 18 European cities including London,
Paris, Amsterdam, Rotterdam, Antwerp, Brussels, Hamburg, Hanover, Dusseldorf,
Cologne, Frankfurt, Strasbourg and Copenhagen. The Company also has future
plans to connect additional European cities to the system. PEC is being
initially planned as a 7,200 km system with 24 to 72 fiber pairs. The Company
is currently negotiating with various parties for the construction of PEC and,
based on those negotiations we believe that the construction cost for the
system will be approximately $700 million.
In December 1998, the Company announced its plans to build GAL, which will
among other things interconnect PC-1 and Tokyo and Osaka. GAL is being
initially planned as a 1,200 km system. The Company is currently negotiating
with various parties for the construction of GAL and, based on those
negotiations, the Company believes that the construction cost for the system
will be approximately $110 million.
Sales of capacity by the Company on its cable systems are effected through
CPAs pursuant to which the Company's customers obtain an indefeasible right of
use ("IRU") for a certain number of circuits. Each IRU entitles the customer
to the use of the related capacity for a period ending 25 years after the RFS
date for the related system. Global Crossing also sells terrestrial capacity
through ICPAs, linking certain of the Company's landing stations with major
cities in order to provide city-to-city connectivity to its customers.
Terrestrial capacity purchased by the Company through Inland Services
Agreements ("ISAs") from the owners of terrestrial cable systems is resold by
the Company to its customers through ICPAs. The CPAs and ICPAs generally
provide for a cash deposit upon execution, followed by full payment upon
activation of the related capacity pursuant to the terms of the agreements.
The Company also offers customers multi-year CPAs for capacity across the
entire Global Crossing Network at tiered pricing.
The Company's basic pricing structure currently provides for volume-based
discounts to its customers as well as discounts for early purchases on a
particular system. Customers are generally provided options in their CPAs to
purchase additional capacity in the future at prices which reflect the
aggregate purchases made by such customers. Consequently, the prices under
such options in the future are often lower than the current price paid by such
customers for their initial capacity.
32
<PAGE>
REVENUES
Revenues from CPAs and ICPAs are recognized in the period during which (i)
the purchaser obtains the right to use the capacity, which can only be
suspended following a failure of the purchaser to pay the full purchase price
or fulfill its contractual obligations, (ii) the purchaser becomes obligated to
pay OA&M costs and (iii) the segment of the system related to the capacity
purchased is ready for service.
CPAs for capacity that do not meet the Company's revenue recognition policy
are not recorded in the Company's consolidated financial statements.
Since the RFS date for the United States--United Kingdom segment of AC-1,
which occurred on May 26, 1998, the Company's revenues have been comprised
principally of revenues from sales of cable capacity on AC-1 and the sale of
associated terrestrial capacity.
Pursuant to the CPAs, the Company bills its customers for operations, direct
administration and maintenance costs incurred, plus 10%, subject to certain
annual maximum amounts.
COST OF CAPACITY SOLD; CONSTRUCTION IN PROGRESS; CAPACITY AVAILABLE FOR SALE
Construction costs incurred with respect to each segment of an undersea cable
system are reflected as "Construction in Progress" in the Company's
consolidated balance sheet until a segment becomes operational, at which time
such costs are reflected as Capacity Available For Sale. Capacity Available For
Sale is recorded at the lower of cost or fair value less cost to sell and is
charged to Cost of Capacity Sold in the period the related revenues are
recognized. Fair value of capacity is derived from a third party consultant's
market study of expected sales of capacity.
The Company capitalizes the cost of acquiring terrestrial capacity and
records in Capacity Available for Sale amounts equal to the present value of
future payments associated with the acquisition of such terrestrial capacity
(excluding from such payments amounts attributable to operations and
maintenance costs).
Construction in Progress includes direct expenditures for construction of
systems, including advisory, consulting and legal fees, interest during
construction and amortized debt issuance costs incurred during the construction
phase.
Amounts charged to Cost of Capacity Sold are calculated based on the ratio of
capacity revenues recognized in a period to total expected capacity revenues
over the life of the system, multiplied by the total cost to construct the
system. Management's forecast of revenues expected over the life of the system
will be supported by an independent consultant's forecast. Changes in
management's estimate of the expected revenues to be derived from sales of a
cable system's capacity will result in adjustments to the calculations of Cost
of Capacity Sold. These adjustments will be recorded on a prospective basis
over future periods commencing with the period when management revises its
estimate. The cost of acquiring terrestrial capacity is charged to Cost of
Capacity Sold in the period during which the related revenues are recognized.
OPERATING EXPENSES
In addition to Cost of Capacity Sold, the Company's operating expenses
principally comprise sales and marketing, operations and maintenance, general
and administrative and network development costs. Costs relating to the
Company's evaluation of possible additional systems are expensed as incurred.
RESULTS OF OPERATIONS FOR THE PERIOD FROM MARCH 19, 1997 (DATE OF INCEPTION) TO
DECEMBER 31, 1997
Interest Income. Pursuant to the purchase agreement relating to the sale of
its outstanding $150 million GTH Senior Notes, the Company was required to
maintain certain amounts in restricted cash and cash equivalents accounts to
fund future semi-annual interest payments on such notes. Interest income earned
on this balance, together with interest income earned on cash raised from
financing and cash on CPA deposits, totalled
33
<PAGE>
approximately $2.9 million for the period from March 19, 1997 to December 31,
1997. The Company utilized a portion of the net proceeds from the Note Offering
to repurchase the GTH Senior Notes. See "--Liquidity and Capital Resources."
Expenses. During the period ended December 31, 1997, the Company incurred
expenses of $3.1 million. Of this amount, approximately $1.4 million was
attributable to sales and marketing expenses, relating principally to AC-1,
$0.1 related to network development and approximately $1.6 million was
attributable to general and administrative expenses.
GTH Preference Share Dividends. The GTH Preference Shares accrued compounding
dividends at an annual rate of 14%. During the period ended December 31, 1997,
the Company recorded preference share dividends of approximately $12.7 million.
This amount is comprised of $11.1 million in paid-in-kind ("PIK") dividends,
$1.0 million in amortization of the discount on issuance and $0.6 million in
amortization of issuance costs. The $11.1 million in PIK dividends includes
$1.3 million accrued but unpaid as of December 31, 1997.
In connection with the issuance of the GTH Preference Shares, the exclusive
placement agent thereof, CIBC Wood Gundy Securities Corp., received a total of
19,852,950 shares of Class A common stock of Global Crossing Ltd., LDC ("Old
GCL") for no additional consideration. The Company has recorded the $13,235,000
estimated fair value of such shares as a discount in the carrying value of the
GTH Preference Shares, which discount is being amortized over the term of such
shares. See "Certain Transactions--Transactions Regarding Class A Shares of Old
GCL."
The Company utilized a portion of the net proceeds from the Note Offering to
redeem the GTH Preference Shares effective June 17, 1998. See "--Liquidity and
Capital Resources."
Net Loss and Net Loss Applicable to Common Shareholder. During the period
ended December 31, 1997, the Company had a net loss applicable to common
shareholder of $12.9 million, resulting primarily from the $12.7 million of
dividends on the GTH Preference Shares described above.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND
SEPTEMBER 30, 1997
Revenues
During the three months ended September 30, 1998, the Company executed CPAs
and ICPAs totaling approximately $211.3 million, bringing the total since
inception to $767.3 million. Of this amount, the Company recognized revenues of
$115.9 million on sales of capacity relating to AC-1 for the three months ended
September 30, 1998, in addition to revenues from operation and maintenance
services of $1.8 million. Of the $767.3 million executed CPAs and ICPAs, $550.6
million has not yet been reflected in the financial statements because the
segment has not reached RFS or the purchaser has not obtained the right to use
the capacity. During the three months ended September 30, 1998, the Company
entered into CPAs and ICPAs with two additional international
telecommunications carriers and sold approximately 10% of the minimum projected
sales capacity of 512 circuits on the AC-1 system.
Expenses
Cost of capacity sold. For the three months ended September 30, 1998, the
Company recognized $49.2 million in cost of capacity sold, resulting in a gross
margin on capacity sales of 58%. The Company calculates cost of capacity sold
for AC-1 based on the ratio of the period's actual revenue to total expected
revenues given a minimum projected sales capacity of 512 circuits times the
construction cost of the system. This calculation of cost of sales matches
costs with the relative value of each sale. Cost of capacity sold also includes
the cost of terrestrial capacity sold of approximately $7.7 million during the
three months ended September 30, 1998. There were no sales or related costs
recognized in the three months ended September 30, 1997, as the Company was in
its development stage.
34
<PAGE>
Operations, administration and maintenance ("OA&M"). The Company incurred
OA&M costs on AC-1 of $8.2 million during the three months ended September 30,
1998. The Company has entered into an agreement with TSSL relating to
operations, administration and maintenance of AC-1 which limits the Company's
total OA&M expense for the system. Following the AC-1 full system RFS date, the
Company anticipates that its OA&M costs will be largely recovered through
charges to its customers under the terms of CPAs. There were no OA&M costs in
the three months ended September 30, 1997, as the Company was in its
development stage.
Sales and marketing. During the three months ended September 30, 1998, the
Company incurred sales and marketing expenses of $6.3 million, including
commissions of $3.4 million incurred on the capacity sales recognized during
this period. During the three months ended September 30, 1997, the Company
incurred sales and marketing costs of approximately $0.1 million. The increase
from 1997 was due to additions in headcount, occupancy costs, plus marketing,
commissions paid and other promotional expenses to support the Company's rapid
growth.
Network development. The Company incurred network development costs during
the three months ended September 30, 1998 of $2.9 million relating to the
development of systems. No such costs were incurred during the three months
ended September 30, 1997.
General and administrative. General and administrative expenses totaled $3.8
million during the three months ended September 30, 1998, and was comprised
principally of salaries, employee benefits and recruiting fees reflecting the
Company's staffing for multiple systems, travel, insurance costs, rent
expenses, plus depreciation and amortization. During the three months ended
September 30, 1997, the Company incurred general and administrative costs of
approximately $0.6 million.
Stock related compensation expense. The Company recognized approximately $1.7
million of compensation expense during the three months ended September 30,
1998 relating to options issued under GCL's Stock Incentive Plan. GCL's Stock
Incentive Plan commenced on January 21, 1998 and therefore no issuances were
made during the three months ended September 30, 1997.
Equity in loss of Pacific Crossing Ltd. During April 1998, the Company
entered into a joint venture to construct an undersea cable system, PC-1. PC-1
is owned and operated by PCL. The Company has an economic interest in PCL
represented by a 50% direct voting interest and, through one of the joint
venture partners, owns a further 8% economic non-voting interest. The $1.0
million loss represents the Company's 58% equity in the loss of this joint
venture for the three months ended September 30, 1998.
Interest Income and Interest Expense
Interest income. The Company earned interest income of $8.3 million and $1.2
million in the three months ended September 30, 1998 and 1997, respectively.
Such interest income represents earnings on cash raised from financings, the
Stock Offerings of GCL which were contributed to the Company and on CPA
deposits.
Interest expense. During the three months ended September 30, 1998, the
Company incurred $30.7 million in interest costs, including the amortization of
finance costs and debt discount. Of this amount, the Company capitalized to
construction in progress interest of $12.7 million, and expensed $18.0 million.
During the three months ended September 30, 1997, the Company incurred interest
costs of $0.3 million, all of which was capitalized to construction in
progress.
Provision for income taxes
The income tax provision of $7.3 million for the three months ended September
30, 1998, provides for taxes on profits earned from capacity sales and OA&M
revenues where subsidiaries of the Company have a presence in taxable
jurisdictions. During the three months ended September 30, 1997, the Company
has
35
<PAGE>
incurred operating losses, which relate to non-taxable jurisdictions and
therefore, such losses cannot be applied against future taxable earnings.
Accordingly, no tax provision or deferred tax benefit was recorded in 1997.
Preference share dividends
During the three months ended September 30, 1998, there were no preference
share dividends since the preference shares were redeemed during June 1998.
Preference share dividends for the three months ended September 30, 1997, were
$4.2 million.
Net income and Net income (loss) applicable to common shareholder
During the three months ended September 30, 1998 the Company reported net
income of $26.3 million compared to net income of $0.5 million in the three
months ended September 30, 1997.
During the three months ended September 30, 1998, the Company reported net
income applicable to common shareholder of $26.3 million. During the three
months ended September 30, 1997, the Company reported a net loss applicable to
the common shareholder of $3.7 million resulting from $4.2 million of dividends
on preference shares.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND THE
PERIOD FROM MARCH 19, 1997 (DATE OF INCEPTION) TO SEPTEMBER 30, 1997
Revenues
During the nine months ended September 30, 1998, the Company executed CPAs
and ICPAs totaling approximately $626.3 million bringing the total since
inception to $767.3 million. Of this amount, the Company recognized revenues of
$216.7 million on sales of capacity relating to AC-1 for the nine months ended
September 30, 1998, in addition to revenues from operations and maintenance
services of $2.2 million. The remaining $550.6 million has not yet been
reflected in the financial statements because the segment has not reached RFS,
or the purchaser has not obtained the right to use the capacity. During the
nine months ended September 30, 1998, the Company entered into CPAs and ICPAs
with 24 international telecommunications carriers and sold approximately 30% of
the minimum projected sales capacity of 512 circuits on the AC-1 system.
Expenses
Cost of capacity sold. For the nine months ended September 30, 1998, the
Company recognized $90.4 million in cost of capacity sold, resulting in a gross
margin on capacity sales of 58%. The Company calculates cost of capacity sold
for AC-1 based on the ratio of the period's actual revenue to total expected
revenues, assuming minimum projected sales capacity of 512 circuits, times the
construction cost of the system. This calculation of cost of sales matches
costs with the relative value of each sale. Cost of capacity sold also includes
the cost of terrestrial capacity sold of approximately $16.6 million during the
nine months ended September 30, 1998. There were no sales or related costs
recognized in the nine months ended September 30, 1997, as the Company was in
its development stage.
Operations, administration and maintenance ("OA&M"). The Company incurred
OA&M costs of $10.7 million during the nine months ended September 30, 1998.
The Company entered into an agreement with TSSL relating to operations,
administration and maintenance of AC-1, which limits the Company's total OA&M
expense for the system. Following the AC-1 full system RFS date, the Company
anticipates that its OA&M costs will be largely recovered through charges to
its customers under the terms of CPAs. There were no OA&M costs during the
period March 19, 1997 (Date of Inception) to September 30, 1997, as the Company
was in its development stage.
Sales and marketing. During the nine months ended September 30, 1998, the
Company incurred sales and marketing expenses of $13.7 million, including
commissions of $7.5 million incurred on the capacity sales
36
<PAGE>
recognized during this period. During the period from March 19, 1997 (Date of
Inception) to September 30, 1997, the Company incurred sales and marketing
costs of approximately $0.1 million. The increase from 1997 was due to
additions in headcount and occupancy costs, plus marketing, commissions paid
and other promotional expenses to support the Company's rapid growth.
Network development. The Company incurred network development costs during
the nine months ended September 30, 1998 of $7.2 million relating to the
development of systems. No such costs were incurred during the period from
March 19, 1997 (Date of Inception) to September 30, 1997.
General and administrative. General and administrative expenses totaled $10.8
million during the nine months ended September 30, 1998, and comprised
principally of salaries, employee benefits and recruiting fees reflecting the
Company's staffing for multiple systems, travel, insurance costs and rent
expenses, plus depreciation and amortization. During the period from March 19,
1997 (Date of Inception) to September 30, 1997, the Company incurred general
and administrative costs of $0.7 million.
Termination of Advisory Services Agreement with PCG Telecom Services LLC. In
connection with the development and construction of AC-1, GCL entered into an
Advisory Services Agreement with PCG Telecom Services LLC, an affiliate of the
Company, providing for the payment by the Company of an advisory fee of 2.0% of
the gross revenues of ACL. GCL's Board of Directors also approved similar
advisory fees and authorized GCL to enter into similar agreements with respect
to other cable systems being developed by the Company. GCL has acquired the
rights of the persons entitled to the fees payable under these agreements in
consideration for the issuance of GCL Common Stock which had at the time of
issuance an aggregate value of $135.0 million, and the cancellation of
approximately $2.7 million owed to GCL under a related advance agreement. This
charge of $137.7 million relating to the termination of the Advisory Services
Agreement was contributed to the Company and is reflected in the statement of
operations for the nine month period ended September 30, 1998. In addition, the
Company recognized approximately $2.0 million of advisory fees incurred prior
to termination of the contract.
Stock related compensation expense. The Company recognized approximately $8.2
million of stock related compensation expense during the nine months ended
September 30, 1998 relating to options issued under GCL's Stock Incentive Plan.
GCL's Stock Incentive Plan commenced on January 21, 1998 and therefore no
issuances were made during the period from March 19, 1997 (Date of Inception)
to September 30, 1997. During the nine months ended September 30, 1998, the
Company also recorded stock-related expense of $2.3 million relating to shares
issued during this period.
Equity in loss of Pacific Crossing Ltd. During April 1998, the Company
entered into a joint venture to construct a cable system project, PC-1. PC-1 is
owned and operated by PCL. The Company has an economic interest in PCL
represented by a 50% direct voting interest and, through one of the joint
venture partners, owns a further 8% economic non-voting interest. The $1.0
million loss represents the Company's 58% equity in the loss of this joint
venture for the nine months ended September 30, 1998.
Interest Income and Interest Expense
Interest income. The Company reported interest income of $12.9 million in the
nine months ended September 30, 1998 and $2.5 million during the period from
March 19, 1997 (Date of Inception) to September 30, 1997. Such interest income
represents earnings on cash raised from financings, the GCL Stock Offerings of
GCL which was contributed to the Company and on CPA deposits.
Interest expense. During the nine months ended September 30, 1998, the
Company incurred $62.6 million in interest costs, including the amortization of
finance costs and debt discount. Of this amount, the Company capitalized to
construction in progress interest of $36.9 million, and expensed $25.7 million.
During the period from March 19, 1997 (Date of Inception) to September 30,
1997, the Company incurred interest expense of $4.6 million, all of which was
capitalized to construction in progress.
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Provision for income taxes
The income tax provision of $16.3 million for the nine months ended September
30, 1998, provides for taxes on profits earned from capacity sales and OA&M
revenues where subsidiaries of the Company have a presence in taxable
jurisdictions. During the period from March 19, 1997 (Date of Inception) to
September 30, 1997, the Company has incurred operating losses, which relate to
non-taxable jurisdictions and therefore, such losses incurred to date cannot be
applied against future taxable earnings. Accordingly, no tax provision or
deferred tax benefit was recorded in 1997.
Extraordinary item
On May 18, 1998, the Company recognized an extraordinary loss of $19.7
million on the repurchase of the Global Telesystems Holding Ltd.'s senior notes
("GTH Senior Notes"), comprised of a premium of $9.8 million and a write-off of
$9.9 million of unamortized deferred financing costs.
Preference share dividends
The former GTH Preference Shares accrued compounding dividends at an annual
rate of 14%. During the nine months ended September 30, 1998, the Company
recorded preference share dividends of approximately $8.3 million. Preference
share dividends for the period from March 19, 1997 (Date of Inception) to
September 30, 1997 were $8.4 million.
Redemption of preference shares
The redemption of the GTH Preference Shares occurred on June 17, 1998 and
resulted in a $34.1 million charge against equity. This amount was comprised of
a $15.9 million redemption premium and a write-off of $18.2 million of
unamortized discount and issuance costs. The redemption premium and write-off
of unamortized discount and issuance costs are treated as a deduction to arrive
at net loss applicable to common shareholders in the consolidated statement of
operations.
Net income (loss) and Net income (loss) applicable to common shareholder
The Company incurred a net loss of $113.7 million for the nine months ended
September 30, 1998, compared to net income of $1.7 million in the period from
March 19, 1997 (Date of Inception) to September 30, 1997. The net loss for the
nine months ended September 30, 1998 reflects an extraordinary loss on
retirement of the GTH Senior Notes of $19.7 million and a non-recurring charge
of $139.7 million relating to the termination of its Advisory Services
Agreement. The Company's net income before these items would have been $45.7
million.
During the nine months ended September 30, 1998, the Company reported a net
loss applicable to common shareholder of $156.2 million. This loss reflects GTH
Preference Share dividends of $8.3 million and the redemption of GTH Preference
Shares of $34.1 million. During the period from March 19, 1997 (Date of
Inception) to September 30, 1997, the Company incurred a net loss applicable to
common shareholder of $6.7 million after GTH Preference Share dividends of $8.4
million.
BALANCE SHEET AS OF SEPTEMBER 30, 1998
Cash and cash equivalents. At September 30, 1998, cash and cash equivalents
of $485.7 million include proceeds of GCL's Stock Offerings of $392.1 million,
which was contributed to the Company.
Restricted cash and cash equivalents. At September 30, 1998, restricted cash
and cash equivalents includes: $231.0 million for the collateralization of the
credit facility used to make initial payments on the PC-1 construction, $74.8
million reserved for funding future interest payable on the Senior Notes, and
$86.0 million received pursuant to CPAs and ICPAs on AC-1 only in accordance
with the terms of the AC-1 credit facility.
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These funds may be used only for purchases of terrestrial capacity relating to
AC-1, interest and principal payments on the AC-1 credit facility and to fund
reserves for future upgrades to AC-1.
Capacity available for sale, Construction in progress and Investment in
PCL. The Company's investment in capacity available for sale, construction in
progress, and investment in PCL totaled approximately $1,033 million as of
September 30, 1998. Upon the GCL Stock Offerings each PCG Warrant then
outstanding was converted into a fraction of a share of GCL Common Stock based
upon the ratio of the per share valuation at the time of conversion less the
per share exercise price of the warrants, divided by the per share valuation at
the time of conversion, together with a new warrant ("New PCG Warrants") to
purchase the remaining fraction of shares at an exercise price equal to $19.00
(the Price to Public per share of the GCL Stock Offerings). These amounts were
contributed to the Company and increased additional paid-in-capital by $275.3
million. This amount was allocated on a pro rata basis to PCL, PAC and MAC
according to the estimated cost of each system. Accordingly, the Company
recorded $163.1 million as an investment in PCL and $64.6 million and $47.6
million as Construction in Progress for PAC and MAC, respectively.
Long term debt and Senior Notes. The long term debt of $337.8 million as of
September 30, 1998 represents the long term portion of the Company's
outstanding balance on the AC-1 Credit Facility. The Senior Notes balance of
$796.4 million represents the net proceeds from the Company's issuance of the
Senior Notes, adjusted for amortization of the original issue discount.
During the nine months ended September 30, 1998, the Company paid fees of
$7.0 million to PCG, a shareholder of GCL, relating to system evaluation costs
incurred by PCG. This amount was treated as a dividend and charged against
additional paid-in-capital.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital expenditure requirements involve the
construction of undersea and terrestrial cable systems. As of September 30,
1998 and September 30, 1997, the Company had incurred approximately $764.2
million and $298.5 million, respectively, of capital expenditures in respect of
AC-1, principally for system construction costs and purchases of terrestrial
capacity. The Company was also committed to a further $44.1 million and $364.5
million, respectively, of capital expenditures under the AC-1 Contract in
connection with the completion of AC-1. Terrestrial capacity purchases are
recorded at the present value of future payments (excluded from such payments
are amounts attributable to OA&M required to be made by the Company for such
capacity).
The total cost of AC-1 is estimated at approximately $750 million, excluding
purchases of terrestrial capacity and potential future upgrades but including
financing costs capitalized during the period AC-1 is under construction. As of
September 30, 1998 and September 30, 1997, the Company had borrowings
outstanding of $365.1 million and $5.0 million, respectively, under the AC-1
Credit Facility.
On May 18, 1998, the Company obtained $796.2 million in proceeds from the
issuance of its Senior Notes. The Company utilized the net proceeds from these
notes (i) to purchase all of the $150 million outstanding GTH Senior Notes,
(ii) to redeem all of the $100 million outstanding GTH Preference Shares, (iii)
to repay in full the $67.2 million outstanding under a bridge credit facility,
(iv) to make approximately $315 million of equity investments in certain of the
Company's systems and (v) for general corporate purposes, including $74 million
to fund a one-year interest reserve on the Senior Notes.
During August 1998, GCL completed its GCL Stock Offerings and received net
proceeds of $392.1 million. This amount was contributed to the Company and the
Company intends to use the proceeds for (i) construction of the Global Crossing
Network, (ii) investment in telecommunications companies and Internet service
providers, (iii) investment in GAL and (iv) general corporate purposes. As of
September 30, 1998, these proceeds were invested in short-term, interest-
bearing U.S. Government securities and certain other short term, investment
grade securities.
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Cash provided by operating activities was approximately $82.6 million for the
nine months ended September 30, 1998, and $2.7 million for the period from
March 19, 1997 (Date of Inception) to September 30, 1997, and principally
represents cash received from deposits and payments for activated capacity
pursuant to signed CPAs, plus interest income received, less sales and
marketing, network development, and general and administrative expenses paid.
Cash provided by financing activities was approximately $689.1 million for
the nine months ended September 30, 1998, and primarily represents borrowings
under the AC-1 Credit Facility, proceeds from the issuance of the Senior Notes
and proceeds from the GCL Stock Offerings, less the redemption of the GTH
Preference Shares and the retirement of the GTH Senior Notes and less the
increase in proceeds on borrowings held in restricted cash and cash
equivalents. Cash provided by financing activities of $296.8 million for the
period from March 19, 1997 (Date of Inception) to September 30, 1997, relates
to net proceeds from the issuance of common stock, GTH Preference Shares and
GTH Senior Notes, and borrowings under the AC-1 Credit Facility, less finance
and organization costs paid, and less costs related to the issuance of common
and preferred stock.
Cash used in investing activities was approximately $287.4 million and $262.5
million for the nine months ended September 30, 1998, and the period from March
19, 1997 (Date of Inception) to September 30, 1997, respectively, and
represents cash paid for Construction in Progress and Capacity Available for
Sale.
The Company is currently actively developing four additional systems, PC-1,
MAC, PAC and PEC. The Company estimates that the costs of constructing these
systems will total approximately $2,725 million, including financing costs but
excluding potential future upgrades and amounts capitalized with respect to the
PCG Warrants. The Company expects to use approximately $315 million of the net
proceeds from the Senior Notes to fund initial investments in PC-1, MAC and
PAC.
Effective July 21, 1998, the Company signed a commitment letter for $300
million non-recourse project debt financing of PAC. Effective July 30, 1998,
the Company entered into a credit agreement for the $850 million non-recourse
project debt financing of PC-1 (including $50 million for the initial upgrade
of the PC-1 system). Effective November 25, 1998, the Company entered into a
credit agreement for the $260 million non-recourse project debt financing of
MAC (including $30 million for the initial upgrade of the MAC system).
Because the Company's cost of developing and constructing its systems, as
well as operating its business, will depend on a variety of factors (including
the Company's ability to successfully negotiate construction supply contracts
at favorable prices, the ability of the Company to generate sufficient sales to
customers, changes in the competitive environment of the markets served by the
Company, the estimated levels of participation by the Company's joint venture
partners and changes in technology), actual costs and revenues may vary from
expected amounts, possibly materially, and such variations will likely impact
the Company's future capital requirements. The development of additional
systems, which may be pursued by the Company, would lead to additional future
capital requirements.
The Company has raised or expects to raise the additional capital required to
finance these cable systems through a combination of commercial bank
borrowings, non-recourse project financings, public and private offerings of
debt and equity securities, vendor financing and sales of dark fiber on PEC. In
this regard, subsequent to the period ending September 30, 1998, the Company
has signed an agreement with Cable & Wireless PLC for the sale of dark fiber on
the PEC network for a purchase price of approximately $100 million. There can
be no assurance that the Company will be successful in raising additional
capital at all or on terms acceptable to the Company. See "Risk Factors--
Substantial Future Capital Requirements" and "Risk Factors--Risks Related to
Completing our Cable Systems."
During April 1998, a supply contract (the "PC-1 Contract") was entered into
with TSSL to construct PC-1. The estimated total cost of PC-1 is $1,200
million, including financing costs which will be capitalized during the period
PC-1 is under construction. Of this amount, the Company will be required to
contribute
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equity in the amount of approximately $231 million. This amount has been placed
in escrow pursuant to the terms of the PC-1 credit facility and is included in
amounts shown as restricted cash. The balance of the $1,200 million will be
funded by the joint venture partners and the PC-1 credit facility. During June
1998, the Company entered into a supply contract (the "MAC Contract") with
Alcatel requiring construction payments of approximately $221 million to
construct MAC. In July 1998, the Company entered into a supply contract (the
"PAC Contract") requiring construction payments of approximately $313 million
with TSSL to construct PAC.
The Company has extended financing to a small number of customers in
connection with certain CPAs. The financing terms provide for installment
payments over a period of up to four years. The Company believes that its
extension of financing to its customers will not have a material effect on the
Company's liquidity.
The Company has entered into commission sharing agreements providing for the
payment to third parties of commissions with respect of marketing of capacity
on the AC-1 and PC-1 systems. Payments by the Company of these commissions is
fully contingent upon the receipt by the Company of cash payment under the
related CPAs and, accordingly, payment by the Company of these commissions has
no material effect on its liquidity.
FOREIGN CURRENCY EXPOSURE
Most of the Company's sales and most of its expenditures are denominated in
U.S. dollars. Monetary assets and liabilities denominated in foreign currencies
at year end are translated into U.S. dollars at the rate of exchange at that
date. Resulting gains or losses on exchange are recorded in the statement of
operations.
INFLATION
Management does not believe that its business is impacted by inflation to a
significantly different extent than the general economy.
YEAR 2000 COMPLIANCE
Global Crossing believes that its computer information systems are or will be
Year 2000 ("Y2K") compliant. The Company has received assurances regarding AC-
1, the Company's only active system at this time, from TSSL and Lucent
Technologies stating Y2K compliance status of their respective systems. The
Company does not currently have such information regarding other suppliers of
the Company's networks under development.
The Company is also subject to external forces that generally affect industry
and commerce, such as utility, transportation or other infrastructure failures
and interruptions. In addition to reviewing its own systems, the Company is
submitting requests to third party service providers to obtain information as
to their compliance efforts. In the event that any of the Company's significant
third parties do not successfully and timely achieve Y2K compliance, the
Company's business or operations could be adversely affected. The Company is
developing contingency plans to address any potential Y2K compliance failure.
Management does not believe that the costs of addressing Y2K issues will have
a material adverse impact on the Company's financial condition or results of
operations. The costs of Y2K compliance and the dates on which the Company
believes it will complete Y2K remediation and modifications are based on
management's best estimates of future events, including the continued
availability of certain resources, third-party modifications, plans, and other
factors. Actual results could differ from those anticipated.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Issuer issued and sold the Old Preferred Stock to the initial purchasers
on November 24, 1998 pursuant to a purchase agreement. The initial purchasers
subsequently resold the Old Preferred Stock in reliance on Rule 144A and other
exemptions from registration under the Securities Act of 1933. The initial
purchasers required as a condition to the purchase of the shares of Old
Preferred Stock that the Issuer grant the purchasers of the shares of Old
Preferred Stock certain registration rights pursuant to a registration rights
agreement (the "Registration Rights Agreement"). The Registration Rights
Agreement required the Issuer to file with the Securities and Exchange
Commission following the closing of the offering of the shares of Old Preferred
Stock on December 2, 1998 (the "Closing Date"), a registration statement
relating to an exchange offer pursuant to which shares which are substantially
identical to the shares of Old Preferred Stock would be offered in exchange for
the then outstanding shares of Old Preferred Stock tendered at the option of
the holders thereof. The form and terms of the shares of Exchange Preferred
Stock will be identical in all material respects to the form and terms of the
shares of Old Preferred Stock except:
. that the shares of Exchange Preferred Stock will have been registered
under the Securities Act,
. that the shares of Exchange Preferred Stock will not be entitled to
certain registration rights which are applicable to the shares of Old
Preferred Stock under the Registration Rights Agreement, and
. certain contingent dividend rate provisions applicable to the shares of
Old Preferred Stock are generally not applicable to the shares of
Exchange Preferred Stock.
New Exchange Notes issuable in exchange for shares of Exchange Preferred
Stock will have the same terms as Exchange Notes issuable in exchange for
shares of Old Preferred Stock. In the event that the applicable interpretations
of the staff of the Securities and Exchange Commission do not permit the Issuer
to effect the Exchange Offer, the Issuer agreed to use its reasonable best
efforts to cause to become effective a shelf registration statement with
respect to the resale of the shares of Old Preferred Stock and to keep such
resale registration statement effective for a period of at least two years. The
Issuer is making the Exchange Offer to satisfy its contractual obligations
under the Registration Rights Agreement.
The holders of any shares of Old Preferred Stock not tendered in the Exchange
Offer will not be entitled to require the Issuer to file a resale registration
statement, and the dividend rate on such shares of Old Preferred Stock will
remain at 10 1/2%. For more information, see "Description of the Exchange
Notes--Exchange Offer; Registration Rights."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus and
in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Issuer will accept for exchange Old Preferred Stock which
are properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. The shares of Exchange Preferred Stock issued pursuant to the
Exchange Offer will be delivered promptly following the Expiration Date. The
Issuer will issue $100 liquidation preference of Exchange Preferred Stock in
exchange for each $100 liquidation preference of outstanding Old Preferred
Stock accepted in the Exchange Offer.
Based on an interpretation by the staff of the Securities and Exchange
Commission set forth in SEC no-action letters issued to unrelated third
parties, the Issuer believes that shares of Exchange Preferred Stock issued
pursuant to the Exchange Offer in exchange for shares of Old Preferred Stock
may be offered for resale, resold and otherwise transferred by the holders
thereof (other than a Restricted Holder) without compliance with the
registration and prospectus delivery provisions of the Securities Act of 1933,
provided that such shares of Exchange Preferred Stock are acquired in the
ordinary course of such holders' business and such holders are
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not participating, do not intend to participate and have no arrangement or
understanding with any person to participate in the distribution of such shares
of Exchange Preferred Stock. See "K-III Communications Corporation," SEC No-
Action Letter (available May 14, 1993); "Mary Kay Cosmetics, Inc.," SEC No-
Action Letter (available June 5, 1991); "Morgan Stanley & Co., Incorporated,"
SEC No-Action Letter (available June 5, 1991); and "Exxon Capital Holdings
Corporation," SEC No-Action Letter (available May 13, 1988). Each broker-dealer
that receives shares of Exchange Preferred Stock for its own account in
exchange for shares of Old Preferred Stock, where such shares of Old Preferred
Stock were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such shares of Exchange Preferred
Stock. For more information, see "Plan of Distribution."
If any person were to participate in the Exchange Offer for the purpose of
distributing securities in a manner not permitted by the Security and Exchange
Commission's interpretation, such person:
. could not rely on the position of the staff of the Security and Exchange
Commission enunciated in "Exxon Capital Holdings Corporation" or similar
interpretive letters, and
. must comply with the registration and prospectus delivery requirements of
the Securities Act of 1933 in connection with a secondary resale
transaction.
Accordingly, each eligible holder wishing to accept the Exchange Offer must
represent to the Issuer in the letter of transmittal that the conditions
described above have been met.
In connection with the issuance of the shares of Old Preferred Stock, the
Issuer arranged for the inclusion of the Old Preferred Stock initially
purchased by qualified institutional buyers on the Private Offerings, Resales
and Trading through Automated Linkages (PORTAL) Market of the National
Association of Securities Dealers, Inc. The Issuer also arranged for the shares
of Old Preferred Stock initially purchased by qualified institutional buyers to
be issued and transferable in book-entry form through the facilities of the
Depository, acting as depository, and in the DTC's Same-Day Funds Settlement
System. The shares of Exchange Preferred Stock will also be issuable and
transferable in book-entry form through the Depository in the Same-Day Funds
Settlement System.
As of the date of this prospectus, $500,000,000 in aggregate liquidation
preference of the Old Preferred Stock is outstanding.
This prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of shares of Old Preferred Stock as of , 1998 (the
"Record Date").
The Issuer shall be deemed to have accepted validly tendered shares of Old
Preferred Stock when, as and if the Issuer has given oral or written notice
thereof to the Exchange Agent. The Exchange Agent will act as agent for the
tendering holders of shares of Old Preferred Stock for the purpose of receiving
shares of Exchange Preferred Stock from the Issuer and delivering shares of
Exchange Preferred Stock to such holders.
If any tendered shares of Old Preferred Stock are not accepted for exchange
because of an invalid tender or the occurrence of certain other events set
forth herein, certificates for any such unaccepted shares of Old Preferred
Stock will be returned, without expense, to the tendering holder thereof as
promptly as practicable after the Expiration Date.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" means 5:00 p.m., New York City time, on , 1999;
provided, however, that if the Issuer, in its sole discretion, has extended the
period of time for which the Exchange Offer is open, the term "Expiration Date"
means the latest time and date to which the Exchange Offer is extended.
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The Issuer expressly reserves the right:
. to delay acceptance of any shares of Old Preferred Stock, to extend the
Exchange Offer or to terminate the Exchange Offer and to refuse to accept
shares of Old Preferred Stock not previously accepted, if any of the
conditions set forth herein under "--Conditions" shall have occurred and
shall not have been waived by the Issuer, by giving oral or written
notice of such delay, extension or termination to the Exchange Agent, and
. to amend the terms of the Exchange Offer in any manner deemed by the
Issuer to be advantageous to the holders of the shares of Old Preferred
Stock.
The Issuer will notify any holder as promptly as practicable either orally or
by written notice of any such delay in acceptance, extension, termination or
amendment. If the Exchange Offer is amended in a manner determined by the
Issuer to constitute a material change, the Issuer will promptly disclose such
amendment in a manner reasonably calculated to inform the holders of shares of
Old Preferred stock of such amendment.
Without limiting the manner in which the Issuer may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of the Exchange Offer, the Issuer shall have no obligation to publish,
advertise, or otherwise communicate any such public announcement, other than by
making a timely release to a financial news service.
ACCRUAL OF DIVIDENDS ON THE EXCHANGE PREFERRED STOCK
The Exchange Preferred Stock will accrue dividends from December 2, 1998,
payable semi-annually in arrears on June 1 and December 1 of each year
commencing on June 1, 1999, at the rate per annum equal to 10 1/2% of the
liquidation preference per share of the Exchange Preferred Stock. Holders of
shares of Old Preferred Stock whose shares of Old Preferred Stock are accepted
for exchange will be deemed to have waived the right to receive any payment in
respect of dividends on such shares of Old Preferred Stock accrued from
December 2, 1998 until the date of the issuance of the Exchange Preferred
Stock.
PROCEDURES FOR TENDERING SHARES OF OLD PREFERRED STOCK
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof and mail or otherwise deliver
such Letter of Transmittal or such facsimile, together with the shares of Old
Preferred Stock (unless such tender is being effected pursuant to the procedure
for book-entry transfer described below) and any other required documents, to
the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date. Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or another eligible institution (an "Eligible Institution")
unless the share of Old Preferred Stock tendered pursuant thereto are tendered
by:
. by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the Letter
of Transmittal, or
.for the account of an Eligible Institution.
Any financial institution that is a participant in DTC's Book-Entry Transfer
Facility system may make book-entry delivery of the shares of Old Preferred
Stock by causing the DTC to transfer such shares of Old Preferred Stock into
the Exchange Agent's account in accordance with the DTC's procedure for such
transfer. Although delivery of shares of Old Preferred Stock may be effected
through book-entry transfer into the Exchange Agent's account at the DTC, the
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received or
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confirmed by the Exchange Agent at its addresses set forth herein prior to 5:00
p.m., New York City time, on the Expiration Date. DELIVERY OF DOCUMENTS TO DTC
IN ACCORDANCE WITH ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE
AGENT.
The tender by a holder of shares of Old Preferred Stock will constitute an
agreement between such holder and the Issuer in accordance with the terms and
subject to the conditions set forth herein and in the Letter of Transmittal.
Holders must deliver all documents to the Exchange Agent at its address set
forth herein. Holders may also request that their respective brokers, dealers,
commercial banks, trust companies or nominees effect such tender for such
holders.
Holders may choose any method of delivery of the shares of Old Preferred
Stock and the Letter of Transmittal and all other required documents to the
Exchange Agent. It is recommended that holders use an overnight or hand
delivery service, instead of delivery by mail. In all cases, sufficient time
should be allowed to assure timely delivery. No Letter of Transmittal or shares
of Old Preferred Stock should be sent to the Issuer.
Only a holder of shares of Old Preferred Stock may tender such shares of Old
Preferred Stock in the Exchange Offer. The term "holder" with respect to the
Exchange Offer means any person in whose name shares of Old Preferred Stock are
registered on the books of the Issuer or any other person who has obtained a
properly completed bond power from the registered holder or any person whose
shares of Old Preferred Stock are held of record by DTC who desires to deliver
such shares of Old Preferred Stock at DTC.
Any beneficial holder whose shares of Old Preferred Stock are registered in
the name of his broker, dealer, commercial bank, trust company or other nominee
and who wishes to tender his shares of Old Preferred Stock should contact the
registered holder promptly and instruct such registered holder to tender on
his/her behalf. If such beneficial holder wishes to tender on his/her own
behalf, such beneficial holder must, prior to completing and executing the
Letter of Transmittal and delivering his/her shares of Old Preferred Stock,
either make appropriate arrangements to register ownership of the shares of Old
Preferred Stock in such holder's name or obtain a properly completed bond power
from the registered holder. The transfer of record ownership may take
considerable time.
If the Letter of Transmittal is signed by a person other than the registered
holder of any shares of Old Preferred Stock listed therein, such shares of Old
Preferred Stock must be endorsed or accompanied by appropriate bond powers
which authorize such person to tender the shares of Old Preferred Stock on
behalf of the registered holder, in either case signed as the name of the
registered holder or holders appears on the shares of Old Preferred Stock.
If the Letter of Transmittal or any shares of Old Preferred Stock or bond
powers are signed by trustees, executors, administrators, guardians, attorneys-
in-fact, officers of a corporation or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing. In
addition, unless waived by the Issuer, evidence satisfactory to the Issuer of
their authority to so act must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered shares of Old Preferred
Stock will be determined by the Issuer in its sole discretion, which
determination will be final and binding. The Issuer reserves the absolute right
to reject any and all shares of Old Preferred Stock not validly tendered or any
shares of Old Preferred Stock the Issuer's acceptance of which would, in the
opinion of counsel for the Issuer, be unlawful. The Issuer also reserves the
absolute right to waive any irregularities or conditions of tender as to
particular shares of Old Preferred Stock. The Issuer's interpretation of the
terms and conditions of the Exchange Offer (including the instructions in the
Letter of Transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of shares of Old
Preferred Stock must be cured within such time as the Issuer shall determine.
Neither the Issuer, the Exchange Agent nor any other person shall be under any
duty to give notification of
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defects or irregularities with respect to tenders of shares of Old Preferred
Stock nor shall any of them incur any liability for failure to give such
notification. Tenders of shares of Old Preferred Stock will not be deemed to
have been made until such irregularities have been cured or waived. Any shares
of Old Preferred Stock received by the Exchange Agent that are not validly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned by the Exchange Agent without cost to the tendering
holder of such shares of Old Preferred Stock unless otherwise provided in the
Letter of Transmittal, as soon as practicable following the Expiration Date.
By tendering, each holder will represent to the Issuer that, among other
things:
. the shares of Exchange Preferred Stock acquired pursuant to the Exchange
Offer are being obtained in the ordinary course of such holder's
business,
. such holder is not participating, does not intend to participate and has
no arrangement or understanding with any person to participate, in a
distribution of such shares of Exchange Preferred Stock,
. such holder is not an "affiliate," as defined under Rule 405 of the
Securities Act of 1933, of the Issuer, and
. such holder is not a broker-dealer who acquired shares of Old Preferred
Stock directly from the Issuer to resell pursuant to Rule 144A or any
other available exemption under the Securities Act of 1933.
TENDER OF OLD PREFERRED STOCK HELD THROUGH DTC
The Exchange Agent and DTC have confirmed that the Exchange Offer is eligible
for the DTC Automated Tender Offer Program ("ATOP"). Accordingly, DTC
participants may, in lieu of physically completing and signing the applicable
Letter of Transmittal and delivering it to the Exchange Agent, electronically
transmit their acceptance of the Exchange Offer by causing DTC to transfer
shares of Old Preferred Stock to the Exchange Agent in accordance with DTC's
ATOP procedures for transfer. DTC will then send an Agent's Message to the
Exchange Agent.
The term "Agent's Message" means a message transmitted by DTC, received by
the Exchange Agent and forming part of the Book-Entry Confirmation, which
states that DTC has received an expressed acknowledgment from a participant in
DTC that is tendering shares of Old Preferred Stock which are the subject of
such Book-Entry Confirmation, that such participant has received and agrees to
be bound by the terms of the applicable Letter of Transmittal (or, in the case
of an Agent's Message relating to guaranteed delivery, that such participant
has received and agrees to be bound by the applicable Notice of Guaranteed
Delivery), and that the Company may enforce such agreement against such
participant.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their shares of Old Preferred Stock and whose
shares of Old Preferred Stock are not immediately available or who cannot
deliver their shares of Old Preferred Stock or any other documents required by
the Letter of Transmittal to the Exchange Agent prior to 5:00 p.m., New York
City time, on the Expiration Date (or complete the procedure for book-entry
transfer on a timely basis), may tender their shares of Old Preferred Stock
according to the guaranteed delivery procedures set forth in the Letter of
Transmittal. Pursuant to such procedures:
. such tender must be made by or through an Eligible Institution and a
Notice of Guaranteed Delivery (as defined in the Letter of Transmittal)
must be signed by such holder,
. on or prior to the Expiration Date, the Exchange Agent must have received
from the holder and the Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by facsimile transmission,
mail or hand delivery) setting forth the name and address of the holder,
the certificate
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<PAGE>
number or numbers of such tendered shares of Old Preferred Stock, and the
principal amount of Old Preferred Stock tendered, stating that the tender
is being made thereby and guaranteeing that, within three business days
after the Expiration Date, the Letter of Transmittal (or facsimile
thereof), together with the certificate(s) representing the shares of Old
Preferred Stock to be tendered in proper form for transfer and any other
documents required by the Letter of Transmittal, will be deposited by the
Eligible Institution with the Exchange Agent, and
. such properly completed and executed Letter of Transmittal and all
documents required by the Letter of Transmittal, together with the
certificate(s) representing all tendered shares of Old Preferred Stock in
proper form for transfer (or confirmation of a book-entry transfer into
the Exchange Agent's account at DTC of shares of Old Preferred Stock
delivered electronically) and all other documents required by the Letter
of Transmittal are received by the Exchange Agent within three New York
Stock Exchange trading days after the Expiration Date.
WITHDRAWAL RIGHTS
Tenders of Old Preferred Stock may be withdrawn at any time prior to the
Expiration Date.
To withdraw a tender of shares of Old Preferred Stock in the Exchange Offer,
a written or facsimile transmission notice of withdrawal must be received by
the Exchange Agent at one of its addresses set forth below under "--Exchange
Agent." Any such notice of withdrawal must:
. specify the name of the person having deposited the shares of Old
Preferred Stock to be withdrawn (the "Depositor"),
. identify the shares of Old Preferred Stock to be withdrawn (including the
certificate number or numbers and principal amount of such shares of Old
Preferred Stock),
. be signed by the Depositor in the same manner as the original signature
on the Letter of Transmittal by which such shares of Old Preferred Stock
were tendered (including required signature guarantees) or be accompanied
by documents of transfer sufficient to permit the transfer agent with
respect to the Old Preferred Stock to register the transfer of such
shares of Old Preferred Stock into the name of the Depositor withdrawing
the tender, and
. specify the name in which any such shares of Old Preferred Stock are to
be registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Issuer, whose
determination shall be final and binding on all parties. Any shares of Old
Preferred Stock so withdrawn will be deemed not to have been validly tendered
for purposes of the Exchange Offer and no shares of Exchange Preferred Stock
will be issued with respect thereto unless the shares of Old Preferred Stock so
withdrawn are validly retendered. Any shares of Old Preferred Stock which have
been tendered but which are not accepted for exchange will be returned by the
Exchange Agent to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn shares of Old Preferred Stock may be
retendered by following one of the procedures described above under "--
Procedures for Tendering Shares of Old Preferred Stock" at any time prior to
the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Issuer will not be
obligated to consummate the Exchange Offer if the shares of Exchange Preferred
Stock to be received will not be tradeable by the holder, other than in the
case of Restricted Holders, without restriction under the Securities Act of
1933 and the Securities Exchange Act of 1934 and without material restrictions
under the blue sky or securities laws of
47
<PAGE>
substantially all of the states of the United States. Such condition will be
deemed to be satisfied unless a holder provides the Issuer with an opinion of
counsel reasonably satisfactory to the Issuer to the effect that the shares of
Exchange Preferred Stock received by such holder will not be tradeable without
restriction under the Securities Act of 1933 and the Securities Exchange Act of
1934 and without material restrictions under the blue sky laws of substantially
all of the states of the United States. The Issuer may waive this condition.
If the condition described above exists, the Issuer will be entitled to
refuse to accept any shares of Old Preferred Stock and, in the case of such
refusal, will return all tendered shares of Old Preferred Stock to exchanging
holders of the shares of Old Preferred Stock. See "Description of Exchange
Notes--Exchange Offer; Registration Rights."
EXCHANGE AGENT
EquiServe--First Chicago Trust Division has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at one of the addresses set forth below.
Questions and requests for assistance, requests for additional copies of this
prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
By Registered or Certified Mail: By Hand Delivery: EquiServe--First
EquiServe--First Chicago Trust Division Chicago Trust Division 100 William
P.O. Box 2569 Jersey City, New Jersey Street New York, New York 10005 Attn:
07303-2569 Attn: Corporate Actions Corporate Actions
By Overnight Delivery: EquiServe--First Chicago Trust Division 14 Wall Street,
8th Floor New York, New York 10005 Attn: Corporate Actions
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF TRANSMITTAL.
FEES AND EXPENSES
The Issuer will not make any payment to brokers, dealers or others soliciting
acceptances of the Exchange Offer.
The Issuer estimates that the cash expenses to be incurred and paid by it in
connection with the Exchange Offer will in the aggregate be approximately
$ .
TRANSFER TAXES
Holders who tender their shares Old Preferred Stock for exchange will not be
obligated to pay any transfer taxes in connection therewith, except that if
holders instruct the Issuer to deliver to, register or issue Exchange Preferred
Stock in the name of, or request that shares of Old Preferred Stock not
tendered or not accepted in
48
<PAGE>
the Exchange Offer be delivered to, registered or issued in the name of, any
person other than the registered holder, or if tendered shares of Old Preferred
Stock are registered in the name of any person other than the person signing
the Letter of Transmittal, or if a transfer tax is imposed for any reason other
than the transfer of shares of Old Preferred Stock to the Issuer or its order
pursuant to the Exchange Offer, the amount of any such transfer taxes (whether
imposed on the registered holder or any other person) will be payable by the
tendering holder.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Issuer upon
the consummation of the Exchange Offer. The expenses of the Exchange Offer will
be recorded as a reduction of the preferred share face value and amortized over
the term of the Exchange Preferred Stock under generally accepted accounting
principles.
49
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BUSINESS
Global Crossing is the world's first independent provider of global Internet
and long distance telecommunications facilities and services utilizing a
network of undersea and terrestrial digital fiber optic cable systems. As such,
the Company believes it is the first to offer "one-stop shopping" for its
customers to multiple destinations worldwide. The Company operates as a
"carriers' carrier", providing tiered pricing and segmented products to
licensed providers of international telecommunications services. Capacity on
the Global Crossing Network is offered to all customers on an open, equal
access basis. The cable systems under development by the Company, together with
associated terrestrial capacity, will form a state-of-the-art interconnected
worldwide high capacity fiber optic network: AC-1, an undersea system
connecting the United States and Europe; PC-1, an undersea system connecting
the United States and Asia; MAC, an undersea system connecting the eastern
United States and the Caribbean; PAC, an undersea system connecting the western
United States, Mexico, Panama and the Caribbean; PEC, a terrestrial system,
connecting 18 European cities to AC-1; and GAL a terrestrial system connecting
certain cities in Japan to PC-1. The undersea component of this initial network
totals 51,300 km and the terrestrial component adds 8,400 km for a combined
total of 59,700 km. The Company is in the process of developing several new
cable systems and evaluating other business development opportunities which
will complement the Global Crossing Network.
Global Crossing's business is designed to meet the varying needs of the
global carrier market. The Company offers customers the ability to purchase
capacity on demand, thereby (i) eliminating their need to commit the
substantial capital which would otherwise be required to build cable capacity
and (ii) decreasing the risks associated with forecasting their future capacity
requirements. Compared with traditional cable systems, the Company offers more
comprehensive, flexible and low-cost purchasing alternatives designed to meet
current market requirements of international carriers and licensed Internet
service providers, including direct international city-to-city connectivity,
the ability to purchase capacity periodically and discounts based upon
aggregate volume purchased on the Global Crossing Network.
The Global Crossing Network is being engineered and constructed to allow
multiple upgrades to its initial circuit capacity at a fraction of the initial
system cost, and the Company is exploring opportunities to expand its undersea
and terrestrial systems, as well as the range of the products it offers. The
Company anticipates that its future revenues, beyond those obtained from the
sale of the initial capacity of its first five cable systems, will derive from
several sources. First, each of the currently-planned systems under development
by the Company is upgradeable to capacities significantly beyond the initial
capacity at a fraction of the original system cost. These upgrades can be used
to meet growth in market demand for telecommunications capacity and to achieve
additional revenues. In addition, the Company is currently evaluating a number
of additional undersea and terrestrial cable projects. These potential projects
will be pursued to the extent that they further the Company's strategy of
developing an integrated global network that serves approximately 100 of the
largest metropolitan communications markets worldwide. As the Company's global
network is developed, additional wholesale revenues may be generated from the
sale of additional products and services. See "Risk Factors--Sales of Capacity;
Realization of Other Revenues."
Global Crossing was formed to capitalize on the accelerating growth of
international voice and data telecommunications traffic. The significant
increase in Internet usage and other bandwidth-intensive applications and the
growing use of corporate networks have substantially increased the demand for
international fiber optic cable capacity. The proliferation of
telecommunications service providers due, in large part, to industry
deregulation has further contributed to increased demand for such international
cable capacity. Additionally, the Company believes that other technological
developments, such as improvements in "last mile" access technology, including
xDSL and cable modems, and the increasing video content of Internet
applications, will result in further capacity demand growth.
The Company commenced operations in March 1997, when it contracted for the
construction of AC-1, a 14,000 km digital fiber optic undersea cable system
that will link the United States, the United Kingdom, The Netherlands and
Germany and will initially offer 40 Gbps of service capacity, which is
upgradeable to a minimum of 80 Gbps, increasing the existing undersea fiber
optic cable capacity along the heavily trafficked
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transatlantic route by approximately 65% prior to upgrades. AC-1 commenced
service on its United States-United Kingdom segment on May 26, 1998 and the
full system, encompassing a four fiber pair self-healing ring, is scheduled for
completion by February 1999. In April 1998, Global Crossing contracted for the
construction of PC-1, a 21,000 km digital undersea cable system that will link
the United States and Japan and will initially offer 80 Gbps of service
capacity, upgradeable to a minimum of 160 Gbps. PC-1, a four fiber pair self
healing ring, is scheduled to commence initial service in March 2000. In June
1998, Global Crossing contracted for the construction of MAC, a 9,300 km
digital subsea cable system that will connect New York, the Caribbean and
Florida and will initially offer 20 Gbps of service capacity, upgradeable to a
minimum of 40 Gbps. In addition, in July 1998, Global Crossing contracted for
the construction of PAC, a 7,000 km two fiber pair digital undersea cable that
will connect California, Mexico, Panama and the Caribbean and will initially
offer 20 Gbps of service capacity, upgradeable to a minimum of 40 Gbps.
In addition to the announced segments of the Global Crossing Network, the
Company has made, and expects to continue to make, acquisitions of fiber
capacity which complement its core cable businesses and which address customer
demands for global city-to-city connectivity. Global Crossing intends to pursue
such connectivity in approximately 100 of the largest metropolitan
communications markets worldwide. In October 1998, Global Crossing announced
PEC, a 7,200 km terrestrial system, with 24 to 72 fiber pairs that will link 18
European cities with the United States, Asia and Latin America. The Company
recently obtained a 49% economic interest in GAL, a 1,200 km fiber optic
terrestrial system being developed by Marubeni that among other things, will
connect PC-1 with Tokyo and Osaka. Once completed, the undersea and terrestrial
segments of the Global Crossing Network will form an integrated worldwide
network with multiple access points offering low-cost wholesale capacity.
MARKET OPPORTUNITY
The Global Crossing Network is being developed to capitalize on certain
trends in the international telecommunications industry:
Rapid Growth of International Internet and Telecommunications Traffic. While
international voice traffic from 1996-2000 is expected to grow at a rate of 13%
annually, international data traffic growth is expected to significantly
outpace voice traffic growth. One of the key factors contributing to the growth
in data traffic is the increasing use of broadband applications dominated by
the Internet, which has grown at a compound annual rate of 86% for the past
five years as measured by the number of Internet hosts. Reflecting this growth,
the number of ISPs is growing explosively on a global basis. ISPs outside the
United States, particularly in Europe, Asia and Latin America, are expected to
require significant subsea optical circuit capacity to provide efficient
service to their customers to popular Internet web sites in the United States.
In addition, improvements in "last mile" technology, such as xDSL and cable
modems, are contributing to the significant increase in the number of
subscribers using such bandwidth-intensive applications. For example, the
number of cable modem subscribers in the United States alone is projected to
increase by approximately 600% in 1998. Several additional key factors are
expected to drive the rapid growth in worldwide telecommunications traffic,
including:
. the worldwide growth in the use of bandwidth-intensive applications,
such as video conferencing and corporate intranets,
. increased globalization of commerce, and
. a general decline in international tariffs.
Impact of Global Deregulation. The continued deregulation of the global
telecommunications industry has resulted in a significant increase in the
number of competitors, including traditional carriers, wireless operators, ISPs
and new local exchange service providers, due in large part to:
. the breadth and volume of privatization activity globally, and
. the ability of new entrants to compete effectively against the formerly
protected incumbent providers. This change in the global competitive
landscape is generating significant demand for broadband communications
capacity as carriers seek to secure sufficient capacity for their
expansion plans. As of
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July 1998, the ITU estimated that there were 1,000 international
carriers, representing a 181% increase since the end of 1996. In
addition, further telecom privatization is expected during 1998 and
1999, which in turn is expected to generate increased global
competition.
Shortage of Available Capacity. The Company believes that additional network
capacity and faster response times will be required to satisfy current and
anticipated growth in telecommunications traffic. While there has been a
significant increase in the demand for global telecommunications capacity,
there has not been a corresponding growth in the number of new transport
facilities, especially in the undersea cable industry. The Company believes
that construction of competing undersea cable systems will be limited in the
near future due to barriers to entry, including:
. the extensive lead time required to engineer and construct cable
systems,
. the limited number of major undersea cable supply and construction
companies,
. the limited number of qualified personnel with extensive experience in
the undersea cable industry, and
. the significant capital required to develop undersea cable systems.
Increasing Challenges for Consortia Systems. Historically, the planning and
ownership of undersea cable systems was conducted through large consortia
typically led by the monopoly telecommunications providers. Global Crossing
believes that the consortium approach to constructing, owning and operating
undersea cable systems is becoming far less effective as:
. carriers increasingly view significant long term capital investments in
capacity to be a suboptimal utilization of resources,
. deregulation of international telecommunications markets leads to direct
competition among consortia members for customers,
. competition from new entrants makes carriers' market share and capacity
requirements increasingly difficult to predict, and
. the rapid pace of technological change creates difficulties in the
ability of carriers to accurately forecast the growth of
telecommunications traffic.
Acceptance of Privately Sponsored Cable Systems. The Company believes that
telecommunications service providers have become increasingly receptive to the
advantages of independent, privately-owned cable systems. In connection with
the marketing of capacity on the Global Crossing Network, carriers have
responded positively to the Company's ability to offer:
. capacity as and when needed without the incurrence of significant
initial capital investments,
. a wide range of purchasing options appealing to both established
carriers and new market entrants,
. state-of-the-art system quality combined with cost-effective high
quality operations, administration and maintenance support, and
. the absence of direct competition with its customers.
BUSINESS STRATEGY
Global Crossing's mission is to create the world's first independent global
fiber optic network designed to offer its customers the highest quality city-
to-city communications connectivity among approximately 100 of the largest
metropolitan communications markets worldwide. The principal elements of the
Company's business strategy are to:
Create a Worldwide Network. Upon completion, the currently announced segments
of the Global Crossing Network will directly connect Asia, North America,
Europe, Central America and the Caribbean utilizing state-of-the-art fiber
optic technology. By developing or acquiring terrestrial capacity, we offer
customers low-cost global city-to-city connectivity. The Company also intends
to actively pursue additional opportunities for the expansion and utilization
of the Global Crossing Network, including complementary businesses and
facilities.
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The Company has entered into contractual arrangements to provide terrestrial
backhaul service between its landing stations in the United States and the
United Kingdom and New York City and London, respectively, as well as other
arrangements to provide terrestrial capacity in Germany and The Netherlands. In
addition, the Company entered into an agreement with Qwest Communications
International Inc. ("Qwest") whereby Global Crossing will receive access to
over 25 U.S. metropolitan communications markets on Qwest's terrestrial network
and is in discussions with other carriers regarding other arrangements for
terrestrial capacity in the U.S.
Additionally, the Company, through PEC plans to provide terrestrial services
to 18 European cities. Furthermore, through GAL, the Company intends to offer
terrestrial services to PC-1 customers from the Company's Japanese landing
stations directly to Tokyo at prices substantially lower than existing
alternatives. The Company has obtained a 49% investment interest in GAL, a
fiber optic terrestrial system being developed by Marubeni which will connect
the PC-1 cable stations with Tokyo and Osaka.
Maintain Position as a Leading Wholesale Service Provider. Global Crossing is
the world's first independent provider of global Internet and long distance
telecommunications facilities and services utilizing a network of undersea and
terrestrial digital fiber optic cable systems. The Company's products are
segmented to meet the varying needs of the global carrier market, with shore-
to-shore capacity offered to major carriers that have their own terrestrial
capacity and city-to-city capacity provided to other customers that require
such service. Global Crossing also offers carriers, through wholesale channels,
a combination of volume-based purchasing flexibility, typically according to a
tiered scale with various incentive levels, and volume discounts for purchases
of capacity on one cable system based upon purchases previously made on the
Company's other systems. See "--Sales and Marketing."
Utilize State-of-the-Art Technology. The Global Crossing Network is being
engineered and constructed using the latest in fiber optic technology, self-
healing ring structures, erbium doped fiber amplifier repeaters, DWDM and
redundancies of capacity to ensure instantaneous restoration. The Company
believes that incorporating such technology in the Global Crossing Network
will:
. provide a cost advantage over existing alternatives,
. make it more reliable than competing systems,
. allow the Company to offer substantially more capacity than existing
cable systems, and
. enable the capacity of each of the Company's cable systems to be
upgraded at the landing stations rapidly and at a fraction of the
initial system cost without physical modification of the submerged
portion of the system.
Maintain Position as Low-Cost Provider. The Company plans to maintain its
position as a low-cost provider of facilities and services to its carrier
customers relative to its competitors. Global Crossing believes that this low-
cost position results from a combination of:
. low sales, marketing and general and administrative costs, reflecting a
commitment to wholesale customers,
. ownership of state-of-the-art facilities, resulting in low unit costs
and low operating and maintenance costs that will be passed on to its
customers, and
. purchasing efficiencies.
Provide "One-Stop" Sales and Service. Through both its marketing and sales
force, as well as its ongoing operations, administrative and maintenance
support, Global Crossing plans to offer one-stop sales and service to customers
worldwide. The Company currently employs 19 marketing professionals located in
the Company's headquarters in Bermuda and in major cities throughout the world
in order to facilitate the sales of
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its telecommunications capacity and increase market awareness and name
recognition. See "--Sales and Marketing." The efforts of the sales force have
resulted in significant contractual arrangements to date with international
telecommunications carriers. In addition, Global Crossing is developing a
centralized operations, administration and maintenance support system to serve
the entire Global Crossing Network, including a customer care center, network
operations center and technical support center. Through such integrated
customer support, in combination with its sales force, the Company intends to
enable customers to have a single point of contact regarding capacity sales and
service on the Global Crossing Network.
Leverage Extensive Management Experience. Global Crossing has assembled and
will continue to build a strong management team comprised of executives with
extensive operating experience in the telecommunications industry and the
undersea cable sector. Prior to joining the Company, Jack Scanlon, GCL's Chief
Executive Officer, was President and General Manager of the Cellular Networks
and Space Sector of Motorola, Inc., responsible for approximately $6 billion in
annual revenues and 16,000 employees. Mr. Scanlon has over 30 years of
experience in the telecommunications industry, including 24 years with AT&T and
Bell Laboratories. In addition, William Carter, the Company's senior executive
in charge of system development, was formerly the President and Chief Executive
Officer of AT&T Submarine Systems International ("SSI"), overseeing the
research and development, engineering, implementation and integration of AT&T's
international cable and satellite facilities. Mr. Carter had been at AT&T for
30 years prior to joining the Company. During Mr. Carter's tenure, SSI had the
leading worldwide market share in the undersea cable industry. Dan J. Cohrs,
GCL's Chief Financial Officer, was formerly Vice President and Chief Planning
and Development Officer at GTE, where he was responsible for corporate
development activities, including mergers and acquisitions and strategic
transactions, as well as strategic planning and competitive analysis. In
addition, the Company's system development team includes several individuals
with extensive experience with major undersea cable and telecommunications
industry participants. See "Management."
THE GLOBAL CROSSING NETWORK
As part of Global Crossing's mission to create an integrated global, high
capacity fiber optic cable network, the Global Crossing Network is being
engineered and constructed to connect the most heavily trafficked international
corridors in the world via AC-1 (United States to Europe) and PC-1 (United
States to Asia). Furthermore, the Company will provide terrestrial services via
PEC (trans-Europe) and GAL (trans-Japan). Global Crossing plans to interconnect
these systems with two north-south systems (MAC and PAC), directly connecting
the Caribbean, Central America and, through unaffiliated cable systems, South
America. Of the fiber optic cable systems currently being constructed by Global
Crossing, AC-1, MAC, PAC and PEC are wholly-owned projects by the Company,
while PC-1 is being constructed through a joint venture with one or more
partners, principally Marubeni. Global Crossing will initially have
approximately a 58% interest in PC-1 and a 49% interest in GAL and, in
conjunction with Marubeni, will manage their development, sales and operation.
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The following table contains information regarding the estimated system cost,
initial RFS date and ownership structure of the Company's currently planned
systems:
<TABLE>
<CAPTION>
ESTIMATED
SYSTEM COST(1) EXPECTED INITIAL OWNERSHIP
SYSTEM (MILLIONS) RFS DATE(2) STRUCTURE
------ -------------- --------------------------- -------------
<S> <C> <C> <C>
AC-1 $ 750 May 1998 (US-UK) Wholly-Owned
February 1999 (Full Ring)
PC-1 1,200 March 2000 Joint Venture
July 2000 (Full Ring)
MAC 330 December 1999 Wholly-Owned
PAC 475 February 2000 Wholly-Owned
PEC 700 December 1999 (First Phase) Wholly-Owned
GAL 110 December 1999 (First Phase) Joint Venture
------
$3,565
======
</TABLE>
- --------
(1) Includes anticipated financing costs. Excludes the costs of potential
future upgrades and any amount capitalized with respect to the PCG
Warrants. The amount indicated under "Estimated System Cost" is based upon
executed supply and financing documents. Certain factors, such as increases
in interest rates and delays in construction, could result in higher actual
costs or later RFS dates than currently estimated. See "Risk Factors--Risks
Related to Completing the Company's Cable Systems" and "Risk Factors--Risk
of Error in Forward-Looking Statements."
(2) Based upon executed supply and financing documents. In the case of PEC,
based upon current negotiations regarding supply arrangements. Certain
factors, such as reliance upon third party suppliers, could result in
timing delays. See "Risk Factors--Dependence on Third Parties."
ATLANTIC CROSSING
AC-1, the Company's first undersea fiber optic cable in the Atlantic region,
is a 14,000 km four fiber pair self-healing ring that, upon completion, will
connect the United States and Europe with landing stations in the United
States, the United Kingdom, The Netherlands and Germany. AC-1 is equipped with
state-of-the-art DWDM and the full ring was initially designed to offer 40 Gbps
of service capacity, increasing the existing undersea fiber optic cable
capacity along the heavily trafficked transatlantic route by approximately 65%
prior to upgrades. AC-1 commenced service on its United States-United Kingdom
segment on May 26, 1998, and the full system, encompassing a self-healing ring,
is scheduled for completion by February 1999.
The aggregate costs of AC-1, which are estimated to be approximately $750
million (excluding potential future upgrades), have been fully financed prior
to the offering of Old Preferred Stock. The Company recently entered into a $50
million contract with TSSL to upgrade the capacity on AC-1 from 40 Gbps to 80
Gbps. In addition to the AC-1 Contract with TSSL for construction of the
system, Global Crossing has entered into other contracts with TSSL pursuant to
which TSSL will provide operations, administration and maintenance services for
the system.
The Company has successfully marketed capacity on AC-1 to licensed
telecommunications providers, including PTTs, Internet service providers and
established and emerging telecommunications companies. Sales of capacity on AC-
1 and related backhaul commenced in October 1997 and, as of September 30, 1998,
the Company had entered into CPAs and ICPAs with customers providing for
payments to the Company of $767 million, and $217 million of payments
(including deposits) had been received in respect thereof. These CPAs represent
approximately 30% of the minimum projected sales capacity of 512 circuits on
the AC-1 system. The balance of these payments is scheduled to be collected
over the next four years. The Company's AC-1 customers now total more than 24
international telecommunications carriers, including Deutsche Telekom AG, GTE
Intelligent Network Services Inc., Qwest, Teleglobe Canada Inc., Swisscom, PTT
Telecom BV, Telia AB, Ultraline (Bermuda) Limited and a number of emerging
telecommunications companies. The Company generally grants customers who have
entered into CPAs options to acquire further capacity on AC-1. The amount of
such capacity depends upon a number of factors, including upgrades to AC-1,
future prices for AC-1
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capacity and the amount of unsold capacity on AC-1 at certain dates after the
AC-1 system RFS date. The timing of payments by purchasers under CPAs generally
depends on when service commences on the segment or segments of AC-1 on which
capacity is acquired. All of the foregoing payment amounts assume the
completion of the related segment prior to specified dates falling after the
scheduled RFS date for that segment.
Based upon its current expectations regarding sales of capacity on AC-1, the
Company believes that it will develop and eventually construct AC-2, an
additional four fiber pair cable connecting the United States to Europe. When
combined with AC-1, AC-2 would double the capacity that Global Crossing would
be able to offer customers on the transatlantic route.
PACIFIC CROSSING
PC-1, the Company's first undersea fiber optic cable in the Pacific region,
is being developed as a 21,000 km four fiber pair self-healing ring that, upon
completion, will connect California, Washington and two landing sites in Japan,
providing connectivity to other points in Asia through interconnection with
other third party cable systems. PC-1 is designed to operate initially at 80
Gbps of service capacity and to be upgradeable to a minimum of 160 Gbps, using
DWDM technology.
In April 1998, the Company executed the PC-1 Contract with TSSL for the
construction of PC-1, which provides for a system completion date of Summer
2000 at an aggregate cost of approximately $1.2 billion. Equity investments in
PC-1 by Global Crossing and its partners are currently estimated at $400
million (of which $231 million will be provided by the Company), with the
remaining $800 million financed through incurrence of non-recourse indebtedness
at the PC-1 level. The credit agreement for the financing of such indebtedness
was executed on July 30, 1998.
MID-ATLANTIC CROSSING
MAC is being developed as a 9,300 km two fiber pair self-healing ring that,
upon completion, will connect New York, the Caribbean and Florida. Global
Crossing intends that MAC will be connected to AC-1 via its cable station in
Brookhaven, New York, providing connectivity between Europe, the eastern United
States and the Caribbean and, through interconnection with other non-Global
Crossing submarine cable systems, South America. MAC is being designed to
operate initially at 20 Gbps of service capacity and to be upgradeable to a
minimum of 40 Gbps using DWDM technology.
In June 1998, the Company executed a contract with Alcatel for the
construction of MAC, which provides for a system completion date of December
1999 at an aggregate cost of approximately $330 million (excluding potential
future upgrades and amounts capitalized with respect to the PCG Warrants), of
which approximately $110 million will be financed by equity contributions by
the Company and $220 million is to be financed through non-recourse
indebtedness at the MAC level. Effective November 25, 1998, MACL obtained $220
million in non-recourse project financing from certain lenders to finance the
initial construction costs of MAC.
PAN AMERICAN CROSSING
PAC is being developed as a 7,000 km two fiber pair cable that, upon
completion, will connect California, Mexico, Panama and the Carribean. PAC is
being designed to interconnect with PC-1 through the Company's landing station
in Grover Beach, California and with MAC through the Company's landing station
in St. Croix. It is anticipated that PAC will transverse Panama via an existing
terrestrial right-of-way. PAC is being designed to operate initially at 20 Gbps
of service capacity and to be upgradeable to a minimum of 40 Gbps using DWDM
technology.
In July 1998, the Company executed a contract with TSSL for the construction
of this system which provides for a system completion date of February 2000 and
will cost approximately $475 million (excluding potential future upgrades and
amounts capitalized with respect to the PCG Warrants), with $175 million
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financed through equity contributions from the Company and $300 million to be
financed through non-recourse indebtedness at the PAC level. The contractual
commitment for the financing of such indebtedness was obtained on July 22,
1998.
TERRESTRIAL CAPACITY
In addition to the undersea segments of the Global Crossing Network, the
Company has made and expects to continue to construct and to make acquisitions
of terrestrial fiber capacity which complement its undersea cable business and
which address customer demands for global city-to-city connectivity. Global
Crossing intends to provide such connectivity to approximately 100 of the
largest metropolitan telecommunication markets worldwide.
Pan European Crossing. The Company recently announced plans to build PEC
which, upon completion, would offer connectivity to AC-1 and 18 European cities
including London, Paris, Frankfurt, Amsterdam, Rotterdam, Antwerp, Brussels,
Hamburg, Hanover, Dusseldorf, Cologne, Strasbourg and Copenhagen. The Company
also has future plans to connect additional European cities to the system. PEC
is being initially planned as a 7,200 km system with 24 to 72 fiber pairs. The
Company is currently negotiating with various parties for the construction of
PEC and, based on those negotiations, the Company believes that the
construction cost for the system will be approximately $700 million. The
Company will develop PEC in several phases, initially providing connectivity
between 13 cities. The initial phase has an anticipated completion date in the
fourth quarter of 1999. The second phase will add 5 cities and has an
anticipated completion date in 2000.
In October 1998, the Company entered into an agreement with VersaTel Telecom
Europe B.V. ("VersaTel") whereby the Company will secure ownership of optical
fiber conduits on VersaTel's routes connecting Amsterdam, Brussels and the
French border by March 31, 1999 in exchange for capacity and dark fiber on PEC.
This agreement is a key step in securing rights of way for the development of
PEC. In addition, in November 1998, the Company executed an agreement with
Cable & Wireless PLC for the sale of dark fibers on PEC for a purchase price of
approximately $100 million. Furthermore, in November, the Company executed an
agreement with Gas Line for the construction of a portion of PEC located in
Germany. The Company is currently negotiating with other suppliers for the
construction of the remaining portions of PEC.
Global Access. The Company recently obtained a 49% economic interest in GAL,
a fiber optic terrestrial system being developed in Japan by Marubeni that,
among other things, will connect the PC-1 cable stations with Tokyo and Osaka.
Through GAL, the Company intends to offer terrestrial services to PC-1
customers at prices substantially lower than currently available alternatives.
GAL is being initially planned as a 1,200 km system. The Company is currently
negotiating with various parties for the construction of GAL and, based on
those negotiations, the Company believes that the construction cost for GAL
will be approximately $110 million.
Purchased Capacity. The Company has acquired terrestrial connectivity between
its landing stations in the United States and the United Kingdom, in New York
City and London, respectively, as well as entered into other agreements to
provide terrestrial service in Germany and The Netherlands. In addition the
Company entered into an agreement with Qwest whereby Global Crossing may, at
its option, receive access to over 25 U.S. metropolitan communication markets
on Qwest's terrestrial network and is in discussions with other carriers
regarding other arrangements for terrestrial capacity in the U.S.
ADDITIONAL NETWORK EXPANSION OPPORTUNITIES
The Company is in the process of planning several new cable systems and
evaluating other business development opportunities which will complement the
Global Crossing Network. There can be no assurance that the Company will
ultimately elect to proceed with such opportunities or, if it elects to do so,
that such opportunities will help the Company achieve and sustain operating
profitability.
Further Undersea Opportunities. The undersea routes served by the Global
Crossing Network and other cable systems are projected to have substantial
growth greatly exceeding all capacity currently in use and under development
(including planned upgrades). To address such demand, the Company plans to
evaluate and, as
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appropriate, build additional systems on such routes. It is anticipated that
such systems, where possible, would be restored on the existing systems and
would achieve further cost efficiencies through the use of existing landing
stations.
Other Development Opportunities. The Company is actively pursuing development
opportunities whereby Global Crossing would provide "fee for service" expertise
in the planning, design, implementation and operation of global undersea cable
systems and associated terrestrial capacity.
OTHER ACTIVITIES
Neptune Acquisition. On November 13, 1998, GCL and the Company's indirect
subsidiary GC Pacific Landing Corp. ("GC Pacific Landing") entered into an
agreement and plan of merger (the "Merger Agreement") with Neptune
Communications, L.L.C. ("Neptune") and its wholly-owned subsidiary, Neptune
Communications Corp. ("NCC"). Under the Merger Agreement, GC Pacific Landing
will merge with and into NCC in exchange for 1,052,632 shares of GCL Common
Stock. Neptune is controlled by the Carlyle Group, an international investment
firm ("Carlyle"), and was formed to pursue opportunities in the undersea cable
business. Carlyle's managing director William Conway also serves on GCL's Board
of Directors.
Possible Investments. The Board of Directors of GCL has approved in principle
the making of minority investments in telecommunications and Internet service
providers that do not compete with the Company in its core business and that
will also be current or prospective purchasers of capacity on the Global
Crossing Network. Such investments may consist of purchases of equity
securities for either cash or contributions of capacity on the Global Crossing
Network. Such investments may be managed either by the Company directly or, if
GCL's Board of Directors deems advisable, by one or more third-party investment
advisers so as to minimize potential conflicts of interest and the amount of
time allocated by the Company's senior management to such investments.
FINANCING PLAN
As of September 30, 1998, the Company has incurred approximately $708.6
million of the $750 million in total estimated costs for AC-1 (excluding
upgrades). All future costs excluding upgrades with respect to AC-1 are fully
financed.
Global Crossing estimates that the total cost of developing and deploying PC-
1, MAC, PAC, PEC and GAL is approximately $2,815 million (excluding costs of
potential future upgrades and the amounts capitalized with respect to the PCG
Warrants, which is comprised of $1,200 million for PC-1, $330 million for MAC,
$475 million for PAC, $700 million for PEC and $110 million for GAL. Equity
investments in PC-1 by Global Crossing and its partners will be $400 million
(we expect to provide $231 million), with the remaining $800 million of
estimated costs to be financed initially through the incurrence of non-recourse
indebtedness at the PC-1 level. With respect to MAC and PAC the Company
currently anticipates making equity investments of approximately $110 million
in MAC and $175 million in PAC. We expect to finance the remaining estimated
costs, $220 million for MAC and $300 million for PAC, through the incurrence of
non-recourse indebtedness at the project level. We anticipate that additional
financing will be required for AC-2 and other network expansion opportunities
currently under evaluation. Global Crossing has historically been able to
secure indebtedness for its systems for at least 65% of system costs and
intends to finance its future expansion opportunities in a similar fashion. The
actual amounts of our future capital requirements will depend on certain
factors including the cost of developing our cable systems, the speed of
developing our systems and the pricing of our services. There can be no
assurance that financing for such systems will be available to us or, if
available, that such financing can be obtained on a timely basis and on
acceptable terms. See "Risk Factors--Substantial Future Capital Requirements"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
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SYSTEM PERFORMANCE
AC-1, PC-1, MAC, PEC and GAL are each designed utilizing self-healing ring
technology to optimize system performance. Two types of protection switching,
span switching and ring switching, are provided. Span switching protects a
system against failures between adjacent landing sites which only affect
service line traffic and not the protection fibers. Ring switching protects a
system against complete failures between adjacent landing sites. Because such
technology will protect any single system failure in less than 500
milliseconds, no outages will result as a consequence of a single system
failure. Accordingly, the estimated system availability on any point-to-point
link on such systems is 99.995%.
As undersea and terrestrial cable systems become more powerful (i.e., carry
more traffic along their transmission paths), it is important to provide a
"self-restoration solution" because other systems do not have the capacity to
provide restoration for these new high performance cable systems. Single span
systems must enter into reciprocal arrangements with either other fiber-optic
operators or satellite carriers to pick up and deliver this traffic if a system
failure should occur. Providing self-restoration through this ring design with
the switching techniques described above is now viewed as offering a
qualitative advantage over single span systems with external restoration.
With respect to PAC, which does not employ self-healing ring technology, the
Company is exploring options to enter into restoration arrangements with
terrestrial fiber optic cable operators to protect against system traffic
interruptions. The Company may also enter into similar arrangements to protect
against catastrophic system malfunction on its other cable systems.
SALES AND MARKETING
The Company markets capacity on its systems to licensed telecommunications
providers, including PTTs, Internet service providers and established and
emerging telecommunications companies. The Company believes its current
customers represent a broad array of telecommunications companies.
The initial sales strategy of the Company emphasizes the sale of capacity on
an IRU basis, whereby the customer purchases a unit of capacity for the
remaining design life of a particular cable system. On AC-1, the Company is
selling capacity at an increment of 155 megabits (Mbps), known as an STM-1, for
the 25-year life of AC-1. For the other Global Crossing cable systems, the
Company also expects to sell capacity to customers at the STM-1 level, and
smaller increments, where warranted based upon the actual demand levels along
certain routes. The Company has instituted a tiered pricing schedule for all of
its systems which provides for volume discounts, thereby allowing customers to
reduce their average circuit cost as more circuits are purchased. In addition,
the Company offers pricing discounts on purchases of capacity prior to a
system's commercial operation date, in order to induce customers to make early
purchase commitments.
To further increase the attractiveness of the Company's network, Global
Crossing intends to make selective wholesale acquisitions of terrestrial
capacity, thereby enabling customers to achieve city-to-city connectivity
through the Global Crossing Network at prices significantly lower than if such
customers had attempted to gain such connectivity by separately purchasing such
terrestrial capacity. For AC-1 customers, the Company entered into contractual
arrangements providing terrestrial capacity between its landing stations in the
United States and the United Kingdom, and New York City and London,
respectively. In addition, Deutsche Telecom and KPN provide terrestrial
capacity directly to the Company's AC-1 customers in Germany and The
Netherlands, respectively. In addition, the Company has entered into an
agreement with Qwest whereby Global Crossing will receive access to over 25
U.S. cities on Qwest's terrestrial network and is in discussions with other
carriers regarding other arrangements for terrestrial capacity in the U.S.
Furthermore, the Company through PEC plans to provide terrestrial connectivity
to 18 European cities.
Global Crossing is exploring the development of other products designed to
take advantage of its ownership of several cable systems in different parts of
the world. For example, the Company has offered its customers volume discounts
for purchases of capacity on one system based upon purchases previously made on
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the Company's other systems and the ability to transfer a portion of unused
capacity purchases from one Global Crossing system to another depending on
customers' individual traffic needs. The Company also offers customers multi-
year CPAs for capacity across the entire Global Crossing Network at tiered
pricing.
The Company's marketing entity, Global Crossing International, was
established to facilitate the sales of communications capacity on the Global
Crossing Network, as well as to increase market awareness and name recognition
of Global Crossing. Global Crossing has been able to recruit and train a full-
service sales and marketing team, including Mr. Jack Finlayson, President of
Global Crossing International, a former senior executive of Motorola who
recently joined the Company, and Mr. Patrick Joggerst, Vice President,
Worldwide Sales and Marketing, who had been at TSSL and AT&T for a total of 17
years prior to joining the Company, most recently as Managing Director of
TSSL's Americas Region. Mr. Joggerst directly oversees the Americas Region and
is responsible for overseeing the duties of the two regional vice presidents,
each being in charge of one of the two other regions of the Company's marketing
organization, Europe/Middle East/Africa and Asia. Each regional vice-president
oversees the performance of regional marketing directors who have direct
account responsibility in certain geographic areas of the region. In total, the
Company employed 19 marketing professionals as of September 30, 1998. While the
Company intends to expand the current size of its marketing organization,
management believes that a moderately-sized sales force is sufficient to
adequately address all customers seeking to acquire undersea cable capacity on
a wholesale basis.
During the pre-operational period for AC-1, in which the Company sought to
generate significant pre-sales of capacity, the Company presented project
information meetings (otherwise known as data gathering meetings) in order to
better educate potential customers about AC-1 and Global Crossing's other
planned cable systems. Attendees of such meetings have been affiliated with
both existing and prospective customers and have represented a variety of
sectors of the telecommunications industry. Ongoing, the Company intends to
organize at least one major international conference per year in order to
provide updated information on the Global Crossing Network. The Company also
intends to host regional project information meetings focusing on a particular
cable system, with such meetings scheduled to precede the anticipated
commercial operation date for such system.
The Company intends to reinforce customer awareness through a variety of
marketing campaigns, including its Global Crossing international conferences
and regional marketing events, participation in key industry and user group
conferences, speaking engagements, press conferences and promotional campaigns.
In addition, Global Crossing expects its marketing team to periodically visit
current and prospective customers to obtain a greater understanding of the
individual needs of such customers.
SUMMARY OF PRINCIPAL TERMS OF STANDARD CONTRACTUAL DOCUMENTATION
Capacity Purchase Agreements (CPAs)
In general, a CPA provides for the sale of capacity by the Company on an IRU
basis, whereby the purchaser owns a unit of capacity for the remaining design
life of a particular system. The term of a CPA is 25 years from the RFS date
for the system on which capacity is being acquired, which is the entire useful
life of the system. Upon execution of a CPA prior to a segment RFS date, the
Company generally receives 10% of the purchase price immediately, with the
balance of the purchase price due to the Company upon the applicable RFS date
for that segment. A limited number of CPAs provide for payment of the purchase
price in installments over two to four year periods. Each purchaser under a CPA
is required to pay its allocated share of the cost of operating, maintaining
and repairing the system. A purchaser's payment obligation under a CPA shall
generally terminate with respect to any purchased capacity on AC-1 other than
the United States-United Kingdom segment (and, in some cases, with respect to
purchased capacity on the United States-United Kingdom segment), if the RFS
date for the AC-1 system has not occurred by June 30, 1999. Performance under
CPAs is also contingent upon the obtaining and continuance of such approvals,
consents, governmental authorizations, licenses and permits as may be required
or reasonably deemed necessary by each party thereto for performance by such
party thereunder and as may be satisfactory to it. The obligations of
purchasers under
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certain CPAs are additionally contingent upon the execution of related ICPAs.
See "Risk Factors--Sales of Capacity; Realization of Other Revenues" and "--
Termination of Capacity Purchase Agreements."
Additionally, each purchaser acquiring capacity on AC-1 prior to the system
RFS date is granted the right to receive additional capacity ("residual
capacity") at no additional cost upon the date which is 12 1/2 years after the
RFS date for the system. Furthermore, neither party is liable to the other for
consequential, incidental, indirect or special damages sustained by reason of
(i) any failure in or breakdown on the system or the facilities associated with
the system, (ii) the failure of any inland carrier to perform the terms and
conditions of any agreement to which it and the purchaser are parties or (iii)
for any interruption of service, whatever the cause and however long it shall
last. Each CPA is subject to an arbitration clause. Some CPAs are supported by
a parent guarantee from the purchaser.
Inland Services Agreements (ISAs)
The Company has entered into agreements with certain terrestrial fiber cable
systems to purchase inland capacity on such systems for resale to its
purchasers. In general, the term of each ISA is 25 years from the RFS date of
the particular system or until the system is retired, whichever occurs first.
In certain cases, the Company has the option to extend the term of each ISA for
an additional five years. Neither party to an ISA is responsible for any loss,
damage, delay or failure of performance resulting from an event of Force
Majeure (as defined therein). If an event of Force Majeure continues for a
period of 30 days, the Company may terminate the ISA. Each ISA is subject to an
arbitration clause.
Inland Capacity Purchase Agreements (ICPAs)
The Company has entered into ICPAs with some of its customers. Under an ICPA,
the Company provides the customer with a portion of the terrestrial capacity it
purchased from owners of terrestrial cable systems under ISAs. The term of each
ICPA is 25 years from the RFS date for the particular system. Upon execution of
an ICPA, the Company generally receives 10% of the purchase price immediately,
with the balance due no later than the RFS date for the particular segment. A
limited number of ICPAs provide for payment of the purchase price in
installments over two to four year periods. A purchaser's payment obligation
under an ICPA generally shall terminate with respect to any purchased capacity
on AC-1 other than the United States-United Kingdom segment (and, in some
cases, with respect to purchased capacity on the United States-United Kingdom
segment), if the RFS Date for the AC-1 system has not occurred by June 30,
1999. Unlike a CPA, the purchaser under an ICPA is generally not required to
make any additional payments for costs associated with operating, maintaining
and repairing the terrestrial capacity in which the IRU is granted. Neither
party is liable to the other for consequential, incidental, indirect or special
damages sustained (i) by reason of any failure of any inland carrier to perform
the terms and conditions of any ISA to which it is a party or (ii) for any
interruption of service, whatever the cause and however long it shall last.
Each ICPA is subject to an arbitration clause. An ICPA may be supported by a
corresponding parent guarantee from the purchaser.
OPERATIONS, ADMINISTRATION AND MAINTENANCE SUPPORT
Pursuant to the AC-1 OA&M Agreement, TSSL will provide operations,
administration and maintenance support on behalf of AC-1 for a term of eight
years following the commencement of commercial operations. As of September 30,
1998, the Company was committed under the AC-1 OA&M Agreement to make payments
totaling approximately $254 million. Such agreement is extendible at the option
of the Company for two additional periods of 8.5 years each. For AC-1, TSSL's
network operations center is designed to ensure the overall ongoing monitoring
of the system's operation, maintenance and control systems. The network
management equipment located at the Brookhaven, New York landing station
provides fault management, security management, configuration management and
performance management, while undersea network management equipment located at
all landing stations provides system level monitoring of the undersea
terminating equipment. The full integration of these control elements allows
the AC-1 cable system to be "self-diagnostic," with such control elements
facilitating localization and repair in the event of the occurrence of a system
fault.
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In addition, Global Crossing is separately developing a worldwide operations,
administration and maintenance support system to serve each of its cable
systems (exclusive of AC-1 for the initial term of the TSSL OA&M Agreement).
Such support will be handled through three work centers: a customer care center
("CCC"), network operations center ("NOC") and technical support center
("TSC"). It is currently anticipated that the CCC will be located in Bermuda
and both the NOC and TSC will be located in Europe.
Customer Care Center. The CCC will provide capacity purchasers with a single
point of contact for service provisioning, interconnect coordination support
and billing inquiries.
Network Operations Center. The NOC will handle operations, administrative and
maintenance activities for each of the Company's cable systems, including
capacity provisioning, network performance, repair and restoration activities.
Capacity provisioning relates to the appropriate allocation of capacity on the
Company's cable systems among capacity purchasers. Management of network
performance entails detection and response to system degradation and other
performance parameters, as well as preventative activities.
Technical Support Center. The TSC will be a 24-hour center managed by highly-
trained experts to handle technical inquiries from purchasers regarding system
performance and interconnection arrangements.
COMPETITION
The international telecommunications industry is highly competitive. The
Company faces competition from existing and planned cable systems along each of
its planned routes and from satellite providers, including existing
geosynchronous satellites and low-earth orbit systems now under construction.
The Company competes primarily on the basis of price, availability,
transmission quality and reliability, customer service and the location of its
systems. Traditionally, carriers have made long term investments in ownership
of cable capacity, making lower price and superior service less determinative
in convincing such carriers to acquire additional capacity on the Company's
systems than is the case in industries without such long-term relationships.
See "Risk Factors--Competition."
Existing and Planned Cable Systems
The routes addressed by Global Crossing's planned systems are currently
served by several cable systems as well as satellites. Currently, there are
several fiber optic transatlantic cable systems, each of which will compete
directly with AC-1. Primary future sources of transatlantic competition for the
Company may result from, among others, (i) TAT-14, a transatlantic cable system
which is being developed by its consortium members, including British Telecom,
AT&T, France Telecom and Deutsche Telekom, and (ii) Gemini, a transatlantic
cable system being operated and marketed by MCI WorldCom, Inc. and Cable &
Wireless PLC. The Company believes that such other cable systems will compete
directly with AC-1 and the commitments of the developers and other carriers on
these systems could substantially reduce demand for capacity on AC-1.
Similarly, there are several cable systems currently operating between the
United States and Asia, the route to be served by PC-1. Competition in the
transpacific market may result from, among others, (i) China-US, a transpacific
system being developed as a "private cable system" by fourteen large carriers,
including SBC, MCI, AT&T and Sprint, most of whom have traditionally sponsored
consortium cables and (ii) Japan-US, a transpacific system being developed by a
consortium of major telecommunications carriers, including MCI WorldCom, AT&T,
KDD, NTT, Cable & Wireless PLC and GTE. Although the Company believes that such
other cable systems will not satisfy the demand for capacity between the United
States and Japan and that there is currently enough demand projected to
accommodate all such systems, such other cable systems will receive commitments
for capacity that PC-1 could have received in their absence.
In addition, the Company will face competition on its planned trans-European
network. There are several carriers, including Viatel, KPN-Qwest, MCI WorldCom,
Inc., a joint venture between Deutsche Telekom and France Telecom, British
Telecom and Hermes, who are currently planning or building trans-European
network assets.
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Other regional and global systems are being considered by developers,
including Project Oxygen, a global system being evaluated by CTR Group, Ltd. In
addition, the Company may face competition from existing and planned regional
systems and satellites on its MAC and PAC routes, where entrants are vying for
purchases from a small but rapidly growing customer base.
Satellite Transmission
When comparing cable transmission against satellite transmission, the Company
believes that cable has a distinct advantage with respect to latency (i.e.,
transmission delay) and voice quality. Cable transmission has a lower cost per
circuit, higher capacity and longer expected equipment life than satellite
transmission. Satellite transmission is generally considered to have a
comparative advantage versus cable transmission for mobile communications only
in the area of point-to-multipoint broadcast and "thin route" transmission, as
opposed to the more common point-to-point, high volume transmission for which
cable usage is considered to be preferable.
In early 1997, the FCC granted Ka-band licenses and orbital locations to 13
companies. The firms developing future satellite technology envision a network
of satellites that will provide broadband data transmission with data rates of
2 Mbps, 20 Mbps, and even 155 Mbps. Potential participants in the field include
Astrolink, Skybridge, Teledesic Corporation, CyberStar and SpaceWay, who are
seeking to provide high bandwidth transmission sublet networks. Due to (i) the
significant initial costs related to these systems, (ii) the risks relating to
satellite launch systems and (iii) the significantly lower transmission
capacity versus current fiber optic systems, the Company believes that the new
satellite systems will not be able to offer competitive cost per unit of
transmission capacity in the dense metropolitan markets the Company is
targeting. Further, the Company believes it will have at least five years lead
time to help it solidify a sustainable competitive market position before true
broadband satellite service commences.
SUPPLIERS
There are currently three major supply companies in the undersea cable
industry: TSSL, Alcatel and KDD SCS. Cable & Wireless PLC and Pirelli also have
a presence in the industry and there are a number of smaller suppliers who have
focused primarily on regional routes or non-repeatered systems. TSSL is
completing construction of AC-1, is responsible for the design and installation
of PAC and, together with KDD SCS (as a subcontractor), is responsible for
design and installation of PC-1. Alcatel is responsible for design and
construction of MAC. See "Risk Factors--Dependence on Third Parties."
PROPERTIES
The Company leases executive and administrative offices at its worldwide
headquarters at Wessex House, 45 Reid Street, Hamilton HM12 Bermuda. The
Company owns a cable station in Brookhaven, New York and a cable station in
White Sands, United Kingdom. The Company leases cable station space in Sylt,
Germany and cable station space in Beverwijk, The Netherlands. Such leases run
for the anticipated 25-year term of AC-1. The Company also leases office space
in Amsterdam, Los Angeles, Morristown, New Jersey, Dallas, London, San
Francisco, New York, Coral Gables, Florida and Buenos Aires, Argentina.
REGULATION
The Company, in the ordinary course of development, construction and
operation of its fiber optic cable systems, will be required to obtain and
maintain various permits, licenses and other authorizations in both the United
States and in foreign jurisdictions where its cables land, and will be subject
to applicable telecommunications regulations in such jurisdictions. In
particular, submarine cable landing or similar licenses will be required in
many of the jurisdictions where Global Crossing's planned systems will land.
With respect to AC-1, an undersea cable landing license (the "AC-1 Landing
License") and a subsequent modification have been obtained from the United
States Federal Communications Commission ("FCC"), which license permits AC-1 to
land in the United States at the Brookhaven, New York landing site and to
operate between the United
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States, the United Kingdom, The Netherlands and Germany. The AC-1 Landing
License authorizes the Company to provide capacity on a private carriage basis,
and AC-1 is not presently regulated by the FCC as a common carrier. Global
Crossing has obtained landing licenses similar to the AC-1 Landing License in
each of the other jurisdictions where the AC-1 cable system will land and where
such licenses are required. With respect to each of the Company's cable systems
other than AC-1, the Company anticipates both filing applications for cable
landing licenses with the FCC (and, where necessary, foreign regulatory
agencies) and seeking private carriage status for these systems as well. These
licenses are typically issued for a term of years (in the case of the FCC-
issued cable landing license, 25 years), and are subject to renewal. United
States law (and the law of several foreign jurisdictions, as well) limits
foreign ownership, direct or indirect, of entities holding cable landing
licenses, although the FCC has progressively relaxed to the rules to examine
only those foreign holders that are affiliated with a foreign
telecommunications carrier that has market power in the destination country.
More recently, in order to implement a multilateral World Trade Organization
agreement, the FCC adopted regulations that presumptively permit unlimited
foreign ownership by nationals of countries that are party to that agreement.
See "Risk Factors--Effect of Government Regulation."
Construction of each of the Company's cable systems also requires the
acquisition and maintenance of various permits and licenses in the ordinary
course of business. Pursuant to its construction contracts for AC-1 and PC-1,
TSSL is contractually obligated to obtain and maintain all such licenses and
permits. Although Global Crossing intends that the construction contracts for
each of the Company's other planned cable systems will impose the burden of
acquiring and maintaining construction licenses and permits on the contractor
for each of such systems, there can be no assurance that such contractor will
successfully obtain such permits and licenses. See "Risk Factors--Risks Related
to Completing our Cable Systems."
EMPLOYEES
As of September 30, 1998, the Company had approximately 125 employees. The
Company considers its relations with its employees to be good.
LEGAL PROCEEDINGS
The Company is not presently subject to any material legal claims or
proceedings.
64
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS--GCL
The following table sets forth the names, ages and positions of the directors
and executive officers of GCL.
GLC's bye-laws provide for a Board of Directors consisting of 17 members
divided into three classes with terms of three years each. Mr. Casey, Mr.
Brown, Mr. Porter, Mr. Phoenix, Mr. Levine and Mr. Conway were elected as Class
A Directors, with a term expiring in 1999; Mr. Cook, Mr. Lee, Mr. Raben, Mr.
Kent and Mr. Scanlon were elected as Class B Directors, with a term expiring in
2000; and Mr. Winnick, Mr. Bloom, Mr. Kehler, Mr. Weinberger, Mr. Steed and
Mr. Ogasawara were elected as Class C Directors, with a term expiring in 2001.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gary Winnick............ 51 Co-Chairman of the Board and Director
Lodwrick M. Cook........ 70 Co-Chairman of the Board and Director
Thomas J. Casey......... 46 Managing Director, Vice Chairman of the Board and Director
Jack M. Scanlon......... 56 Chief Executive Officer and Director
David L. Lee............ 49 President, Chief Operating Officer and Director
Barry Porter............ 41 Senior Vice President and Director
Abbott L. Brown......... 55 Senior Vice President and Director
Dan J. Cohrs............ 45 Senior Vice President and Chief Financial Officer
James C. Gorton......... 36 Senior Vice President, General Counsel and Secretary
K. Eugene Shutler....... 60 Senior Vice President
Hillel Weinberger....... 45 Director
Jay R. Bloom............ 43 Director
Dean C. Kehler.......... 41 Director
Jay R. Levine........... 41 Director
William D. Phoenix...... 41 Director
Bruce Raben............. 45 Director
Michael R. Steed........ 49 Director
William E. Conway....... 48 Director
Toshiaki Ogasawara...... 67 Director
Geoffrey J.W. Kent...... 56 Director
</TABLE>
GARY WINNICK--Mr. Winnick, founder of Global Crossing, has been Co-Chairman
of the Board of GCL since January 1998 and, prior thereto, was Chairman of the
Board since the inception of the Company in March 1997. Mr. Winnick is the
founder and has been the Chairman and Chief Executive Officer of Pacific
Capital Group since its inception, having been in the principal equity
investment and merchant banking business since 1985. Mr. Winnick holds a BA in
Economics and Business Management from C.W. Post College.
LODWRICK M. COOK--Mr. Cook has been Co-Chairman of the Board of GCL since
January 1998 and Vice Chairman, Managing Director of PCG since 1997. Prior to
joining PCG, Mr. Cook spent 39 years at Atlantic Richfield Co., serving as
President and Chief Executive Officer from 1985 to 1995 and as Chairman of the
Board of Directors from 1986 to 1995, when he became Chairman Emeritus. Mr.
Cook is also a member of the Board of Directors of Castle and Cooke, Litex and
Ocean Energy, Inc. Mr. Cook received BS degrees in mathematics and petroleum
engineering from Louisiana State University and holds an MBA degree from
Southern Methodist University.
65
<PAGE>
THOMAS J. CASEY--Mr. Casey was elected Vice Chairman of the Board of GCL in
December 1998 and was appointed Managing Director of GCL in September, 1998.
Mr. Casey also serves as president and director of PCG. Prior to joining GCL,
Mr. Casey was co-head of Merrill Lynch & Co.'s Global Communications Investment
Banking Group for 3 years. From 1990 to 1995, Mr. Casey also was a partner and
co-head of the telecommunications and media group for the law firm of Skadden,
Arps, Slate, Meagher and Flom. Mr. Casey received his BA degree from Boston
College and his JD degree from George Washington University Law School.
JACK M. SCANLON--Mr. Scanlon has been Chief Executive Officer and a director
of GCL since April 1998. Prior to joining the Company, Mr. Scanlon was
President and General Manager of the Cellular Networks and Space Sector of
Motorola Inc. and had been affiliated with Motorola Inc. since 1990. Mr.
Scanlon was Chief Operating Officer of Cambridge Technology Group from 1988 to
1990 and, prior thereto, spent 24 years with AT&T Corp. and Bell Laboratories,
rising to Group Vice President at AT&T Corp. Mr. Scanlon received his BS degree
from the University of Toronto and a MS degree in electrical engineering from
Cornell University.
DAVID L. LEE--Mr. Lee has been President and Chief Operating Officer and a
director of GCL since the inception of the Company in March 1997. He has also
been a managing director of PCG since 1989. Prior to joining PCG, Mr. Lee was
Group Vice President of Finance and Acquisitions at TRW Information Systems
Group. Mr. Lee is a graduate of McGill University and holds a PhD in Physics
and Economics from the California Institute of Technology.
BARRY PORTER--Mr. Porter is Senior Vice President, Corporate Development and
a director of GCL. Mr. Porter has been a director of the Company since 1997 and
has also been a managing director of PCG since 1993. From 1986 to 1993, Mr.
Porter was affiliated with Bear, Stearns & Co. Inc., rising to a Senior
Managing Director in the investment banking department. Mr. Porter received his
JD and MBA degrees from the University of California (Berkeley) and his BS
degree from The Wharton School.
ABBOTT L. BROWN--Mr. Brown is Senior Vice President, Corporate Affairs and a
director of GCL. Mr. Brown has been a director of the Company since 1997 and
has also been a managing director and Chief Financial Officer of PCG since
1994. From 1990 through 1994, Mr. Brown was Executive Vice President, Chief
Financial Officer and a member of the board of directors of Sony Pictures
Entertainment Inc., a wholly-owned subsidiary of Sony Corporation. Prior
thereto, Mr. Brown was a partner in the international accounting firm of Price
Waterhouse LLP. Mr. Brown holds a BS degree from Lehigh University and is a
Certified Public Accountant.
DAN J. COHRS--Mr. Cohrs has been Senior Vice President and Chief Financial
Officer of GCL since May 18, 1998. From 1993 to 1998, Mr. Cohrs was affiliated
with GTE Corporation, rising to the position of Vice President and Chief
Planning and Development Officer in 1997. From 1990 to 1993, he was at
Northwest Airlines and prior to leaving Northwest Airlines served as Vice
President of International Finance (Tokyo, Japan); from 1986 to 1990, he was at
the Marriott Corporation and served in such capacities as Vice President of
Financial Planning and Acquisitions and Vice President of Project Finance; and
from 1983 to 1986, he was a Strategy and Financial Consultant at Marakon
Associates. Mr. Cohrs received his BS degree from Michigan State University in
Engineering and his PhD degree from Cornell University in Economics, Finance
and Public Policy.
JAMES C. GORTON--Mr. Gorton became Senior Vice President and General Counsel
of GCL effective July 15, 1998 and Secretary of GCL effective August 9, 1998.
From 1994 to 1998, Mr. Gorton was a member of the New York law firm Simpson
Thacher & Bartlett and had been associated with the firm since 1986. Mr. Gorton
holds a BA degree from Columbia College and a JD degree from New York
University School of Law.
K. EUGENE SHUTLER--Mr. Shutler is a Senior Vice President of GCL and is also
President of ACL. From 1996 to 1997, Mr. Shutler served as Chairman of the
Board and Chief Executive Officer of Styles On Video, Inc. Prior thereto, Mr.
Shutler was Executive Vice President, General Counsel and a Director of MGM
Grand, Inc. from 1991 to 1995; a member of the Los Angeles law firm of Troy and
Gould from 1983 to 1991; and Vice President/General Counsel of Republic
Corporation, Continental Aircraft Services (Continental Airlines)
66
<PAGE>
and Caesars World, Inc. Mr. Shutler holds a BA degree from the University of
Pennsylvania and an LLB degree from Yale Law School.
HILLEL WEINBERGER--Mr. Weinberger, a director of GCL since June 1997, has
been a Senior Vice President of Loews/CNA Holdings Corp. since 1988. Prior
thereto, Mr. Weinberger was a Senior Vice President of Presidential Life from
1982 to 1988. Mr. Weinberger serves as director to News Communications Inc.
JAY R. BLOOM--Mr. Bloom, a director of GCL since the Company's inception in
March 1997, is a managing director of CIBC Oppenheimer Corp. ("CIBC
Oppenheimer"), co-head of its High Yield Group and co-head of CIBC World
Markets High Yield Merchant Banking Funds. Mr. Bloom also serves on the board
of directors of Heating Oil Partners, L.P., Consolidated Advisers Limited,
L.L.C. and Morris Material Handling, Inc. Prior to joining CIBC Oppenheimer in
August 1995, Mr. Bloom was a founder and managing director of The Argosy Group
L.P. From 1984 to 1990, Mr. Bloom was a managing director in the Mergers and
Acquisitions Group of Drexel Burnham Lambert Incorporated. Mr. Bloom was an
investment banker associated with Lehman Brothers Kuhn Loeb Incorporated from
1982 to 1984 and, from 1981 to 1982, practiced law at Paul Weiss Rifkind
Wharton & Garrison in New York. Mr. Bloom received his BS and MBA degrees from
Cornell University and his JD degree from Columbia University School of Law.
DEAN C. KEHLER--Mr. Kehler, a director of GCL since the Company's inception,
is a managing director of CIBC Oppenheimer and co-head of its High Yield Group.
In addition, he is a member of CIBC's Investment Committee and co-head of CIBC
World Markets High Yield Merchant Banking Funds. Prior to joining CIBC
Oppenheimer in 1995, Mr. Kehler was a founder and managing director of The
Argosy Group. From 1985 to 1990, Mr. Kehler was a managing director in the
Mergers and Acquisitions Group, Co-Head of Merchant Banking and a member of the
Corporate Finance Executive Committee of Drexel Burnham Lambert Incorporated.
Mr. Kehler serves on the board of directors of Booth Creek Group, Inc.,
Telebanc Financial Corporation and Heating Oil Partners, L.P. From 1979 to
1985, Mr. Kehler was an investment banker at Lehman Brothers. Mr. Kehler
received his BS degree from The Wharton School.
JAY R. LEVINE--Mr. Levine, a director of GCL since the Company's inception,
is a managing director of CIBC Oppenheimer, and manages the CIBC World Markets
High Yield Merchant Banking Funds. Prior to joining CIBC Oppenheimer in May,
1997, Mr. Levine was President of PPMJ Inc., a private consulting firm, from
September 1996 to April 1997 that advised its clients on private equity
investments. From August 1990 to June 1996, Mr. Levine was a senior executive
in the Morningside and Springfield Group, Inc., a private investment company.
Mr. Levine serves as a director of Aircraft Service International Group,
Consolidated Advisers Limited, L.L.C., Heating Oil Partners, L.P. and Talton
Holdings, Inc. Mr. Levine received a BS degree from Syracuse University, a JD
degree from Tulane University and an LLM in Taxation from New York University.
WILLIAM P. PHOENIX--Mr. Phoenix, a director of GCL since its inception, is a
managing director of CIBC Oppenheimer and co-head of Credit Capital Markets.
Prior to joining CIBC Oppenheimer in 1995, Mr. Phoenix had been the Managing
Director of the Canadian Imperial Bank of Commerce since 1982. Mr. Phoenix
serves as a director of the Electrolux Corporation. Mr. Phoenix received his BA
degree from the University of Western Ontario and his MBA degree from the
University of Toronto.
BRUCE RABEN--Mr. Raben, a director of GCL since its inception, is a managing
director of CIBC Oppenheimer. Prior to joining CIBC Oppenheimer in January
1996, Mr. Raben was a founder, managing director and co-head of the Corporate
Finance Department of Jefferies & Co., Inc. since 1990. Mr. Raben serves as a
director of Optical Security, Inc., Talton Holdings, Inc., Terex Corporation
and Equity Marketing, Inc. Mr. Raben received his MBA degree from Columbia
Business School and his AB degree from Vassar College.
MICHAEL R. STEED--Mr. Steed, a director of GCL since its inception, is Senior
Vice President of Investments for the Union Labor Life Insurance Company,
ULLICO Inc. ("ULLICO") and its Family of
67
<PAGE>
Companies and President of Trust Fund Advisors, ULLICO's investment management
subsidiary. Mr. Steed joined ULLICO in November 1992 after serving seven years
as President and Founder of A.F.I.C. Group, Ltd., a financial and investment
consulting firm. From 1983 to 1985, Mr. Steed was the Executive Director of the
Democratic National Committee. Mr. Steed serves as a director of The Lewis &
Clark Snake River Beverage Company. He received his JD degree from Loyola
University School of Law in Los Angeles and his BA degree from Loyola Marymount
University in Los Angeles.
WILLIAM E. CONWAY--Mr. Conway became a director of GCL in August 1998. Mr.
Conway has been a managing director of The Carlyle Group since 1987. Mr. Conway
was Senior Vice President and Chief Financial Officer of MCI Communications
Corporation from 1984 until he jointly founded The Carlyle Group in August
1987. Mr. Conway serves as director to GTS Duratek, Inc., Nextel
Communications, Inc. and Hownet International Corporation. Mr. Conway received
his BA degree from Dartmouth College and his MBA in Finance from Chicago
Graduate School of Business.
TOSHIAKI OGASAWARA--Mr. Ogasawara, a director of GCL since August 1998, has
been Chairman and Publisher of The Japan Times, Limited since 1985 and
President and Representative Director of Nifco Inc. since 1967. Mr. Ogasawara
serves as Chairman and Representative Director for FM Inter-Wave, Inc. and
Simmons Co. Ltd.
GEOFFREY J.W. KENT--Mr. Kent, a director of GCL since August 1998, is
Chairman and Chief Executive Officer of the Abercrombie & Kent Group of
companies and has been associated with these companies since 1967.
ADDITIONAL MANAGEMENT
Global Crossing's management team utilizes additional executives with
extensive experience in the telecommunications industry and the undersea cable
sector, including the following individuals:
WILLIAM B. CARTER, JR. is President of Global Crossing Development Co. and
the Company's Senior executive in charge of development. Prior to joining the
Company, Mr. Carter spent 30 years with AT&T, where he headed up the
International Facilities Planning (both cable and satellite) and served as
President and Chief Executive Officer for SSI and as Director of International
Network Operations for AT&T. During Mr. Carter's tenure, SSI had the leading
worldwide market share in the undersea cable industry, with an average market
share of 35-50%. Mr. Carter is a member of the World Telecommunications
Advisory Council to the International Telecommunications Union (ITU) and Senior
Advisory Council to the U.S. government on communications and economic
development. Mr. Carter received a BEE degree from Georgia Institute of
Technology and has completed the advanced program for senior managers at MIT's
Sloan School.
JACK FINLAYSON--Mr. Finlayson has been President of Global Crossing
International, Ltd. since June 1998. Prior to joining the Company, Mr.
Finlayson was corporate vice president and general manager of Motorola Inc.'s
Asia Pacific Cellular Infrastructure group, where he was responsible for
managing the wireless infrastructure business, and had been affiliated with
Motorola Inc. since 1994. Prior to joining Motorola Inc., Mr. Finlayson was
employed by AT&T, where he was sales vice president of Business Network Sales
for the southeastern United States. Mr. Finlayson has more than 17 years
experience in the telecommunications field. Mr. Finlayson received his BS
degree in marketing from LaSalle University and holds an MBA degree in
information management from St. Joseph's University.
S. WALLACE DAWSON, JR., Senior Vice President of Operations of Global
Crossing Development Co., worked at SSI for 29 years, where he had overall
delivery responsibility for the implementation of all submarine cable projects.
Prior thereto, he held various positions at AT&T, where his work centered on
specialized equipment design for military and commercial undersea cable systems
and development of various network services. Mr. Dawson holds a BEE degree from
the University of Virginia, and an MSEE degree from Duke University. He also
completed the Advanced Management Program at INSEAD, Fountainbleu, France.
68
<PAGE>
HAROLD D. GROSSNICKLE, Managing Director of Global Crossing Development Co.,
is responsible for directing the operations, administration and maintenance of
the Global Crossing Network. Mr. Grossnickle has 28 years of experience in the
telecommunications industry, including over 24 years at AT&T and AT&T Paradyne,
where he served as a vice president of network management systems and services.
Mr. Grossnickle received his BS from Iowa State University and his MBA from the
University of Missouri.
PATRICK JOGGERST is Vice President of Global Sales & Marketing of Global
Crossing International Ltd. and the Company's Senior executive in charge of
sales. Prior to joining the Company, Mr. Joggerst served as Managing Director
for the Americas Region at TSSL. His 17-year tenure at AT&T included positions
with several departments, including international services operations,
organizational development/human resources, and communications products and
service sales. Mr. Joggerst graduated from Georgetown University's School of
Foreign Service.
IAN MCLEAN--Mr. McLean is Vice President of GCL and also serves as Chief
Financial Officer of ACL. Prior to joining the Company in September, 1997, Mr.
McLean was Chief Financial Officer and Systems Information Officer at Price
Waterhouse, Bermuda from 1994 to 1997; Chief Financial Officer for Horizons
Limited from 1992 to 1994; Deputy Manager, Corporate Trust at Bank of Bermuda
Limited from 1988 to 1992 and Vice President of Finance for the Baillargeon
Group from 1985 to 1988. Mr. McLean is a Canadian Chartered Accountant and
holds a Bba degree from Bishop's University and a graduate diploma in
accountancy from McGill University.
WILLIAM T. RICHARDS is Vice President of Operations of ACL. Mr. Richards was
employed at British Telecommunications for seven years, most recently as
Manager of Subsea Projects & Consultancies, and served as Independent Engineer
on the FLAG system. Prior to his position at British Telecommunications, he
served as Business Development Manager at Dowty Magnetics. Mr. Richards
received his BFc (Hons.) degree from City University of London.
LISA DADOURIS, Director of Business Development of Global Crossing
Development Co., spent 12 years at AT&T and Lucent Technologies, where she held
a number of positions in business development, marketing and finance, including
Chief Financial Officer for Local Service in the northeast United States and
Director of Manufacturing Planning for Lucent. Ms. Dadouris graduated from Wake
Forest University with a BS in business, and received her MBA in accounting
from Fuqua School of Business at Duke University.
MOOL SINGHI is Director of Network Planning of Global Crossing Development
Co. Prior to joining the Company, Mr. Singhi served as the Director of Market
Planning at TSSL. Mr. Singhi spent 27 years at AT&T, where he held various key
positions in manufacturing, finance, engineering, operations and international
network planning. Mr. Singhi received a bachelor's degree in mechanical
engineering and a master's degree in operations research and industrial
engineering from the University of Buffalo.
CHARLES D. HOGAN, Director of Operations of Asia Systems of Global Crossing
Development Co., spent 42 years at AT&T, serving as Regional Managing Developer
of AT&T's General Departments. Immediately prior to joining the Company, Mr
Hogan was based in Hong Kong where he was responsible for the planning of
international digital lightwave undersea cables for AT&T in the Asia/Pacific
region, including the planned China-United States cable system.
JOHN MERCOGLIANO, Vice President of Sales and Marketing of Global Crossing
International Ltd., has over 19 years of experience in the telecommunications
industry. Prior to joining the Company, Mr. Mercogliano was employed as Vice
President-Europe of Bell Atlantic Network Systems (Bermuda) Ltd., where he was
responsible for developing strategies and directing sales and marketing
opportunities in the FLAG European region. Mr. Mercogliano received his B.A.
degree from New York University and his MBA from Pace University.
69
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS--THE ISSUER
The following table sets forth the names, ages and positions of the directors
and executive officers of the Issuer.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
S. Wallace Dawson, Jr... 52 Chief Executive Officer and Director
K. Eugene Shutler....... 60 President and Director
Ian McLean.............. 41 Senior Vice President, Chief Operating Officer and Director
Robert Klug............. 31 Controller and Director
Douglas Molyneux........ 41 Secretary
</TABLE>
S. WALLACE DAWSON, JR.--Mr. Dawson is the Chief Executive Officer and a
Director of the Issuer. He is also Senior Vice President of Operations of
Global Crossing Development Co. Prior to joining the Company, he worked at SSI
for 29 years, where he had overall responsibility for the implementation of all
submarine cable projects. Prior thereto, he held various positions at AT&T,
where his work centered on specialized equipment design for military and
commercial undersea cable systems and development of various network services.
Mr. Dawson holds a BEE degree from the University of Virginia, and an MSE
degree from Duke University. He also completed the Advanced Management Program
at INSEAD, Fountainbleu, France.
K. EUGENE SHUTLER--Mr. Shutler is the President and a Director of the Issuer.
He is also serves as a Senior Vice President of GCL and President of ACL. From
1996 to 1997, Mr. Shutler served as Chairman of the Board and Chief Executive
Officer of Styles on Video, Inc. From 1991 to 1995, Mr. Shutler was Executive
Vice President, General Counsel and a Director of MGM Grand, Inc and from 1983
to 1991, he was a member of the Los Angeles law firm of Troy and Gould. Mr.
Shutler holds a BA degree from the University of Pennsylvania and an LLB degree
from Yale Law School.
IAN MCLEAN--Mr. McLean is the Senior Vice President, Chief Operating Officer
and a Director of the Issuer. Mr. McLean also serves as Vice President of GCL
and Chief Financial Officer of ACL. Prior to joining the Company in September
1997, Mr. McLean was Chief Financial Officer and Systems Information Officer at
Price Waterhouse in Bermuda from 1984 to 1997; and Chief Financial Officer for
Horizons Limited from 1992 to 1994. Mr. McLean is a Canadian Chartered
Accountant and holds a Bba degree from Bishop's University and a graduate
diploma in accountancy from McGill University.
ROBERT KLUG--Mr. Klug is the Controller and a Director of the Issuer. He also
serves as the Chief Financial Officer of PCL. Prior to joining the Company in
September 1997, Mr. Klug was a manager at Price Waterhouse from 1994 to 1997
and was associated with the firm since 1989.
DOUGLAS MOLYNEUX--Mr. Molyneux is the Secretary and Senior Counsel of the
Issuer. Prior to joining the Company, he was a Senior Associate with Appleby,
Spurling & Kempe for three years. From 1991 to 1992, Mr. Molyneux worked at
Jardine Matheson Ltd. in Hong Kong; from 1986 to 1992 he worked at Citicorp
Investment Bank in London. Mr. Molyneux received an honors degree in law from
the University of Strathelyde (Glasgow) and is currently working to complete
his MBA from the University of Edinburgh.
COMPENSATION--GCL
Total compensation paid or accrued to the executive officers of GCL and its
consolidated subsidiaries as a group during the fiscal year ended December 31,
1997 was $155,409. Directors of GCL and its consolidated subsidiaries do not
receive compensation, except as officers or employees of GCL or its
consolidated subsidiaries.
70
<PAGE>
OPTION GRANTS AND OPTION VALUES
The table below sets forth information as of September 30, 1998 concerning
options granted since January 1, 1998 to principal officers of GCL and its
subsidiaries. Options representing a total of 10,057,500 shares of GCL Common
Stock have been issued to officers or directors of GCL and its subsidiaries at
exercise prices ranging from $1.67 per share to $20.50 per share.
<TABLE>
<CAPTION>
GRANT
DATE
INDIVIDUAL GRANTS VALUE(1)
---------------------------------------------- ----------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS
OPTIONS GRANTED TO EXERCISE OR GRANT DATE
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME (#) FISCAL YEAR ($/SHARE) DATE VALUE($)
---- ---------- ------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Thomas J. Casey......... 1,000,000 (2) 4.00 09/24/08 17,875,000
Managing Director
Jack M. Scanlon......... 1,800,000 14.83% 1.67 04/01/08 31,200,000
Chief Executive Officer
William B. Carter....... 1,500,000 12.36% 1.67 09/02/07 26,000,000
President, Global
Crossing Development
Co.
James C. Gorton......... 750,000 6.18% 6.67 06/12/08 9,250,000
Senior Vice President
and General Counsel
Jack Finlayson.......... 585,000 4.82% 6.67 06/12/08 7,215,000
President, Global
Crossing International,
Ltd. 150,000 1.24% 19.00 06/12/08 --
</TABLE>
- --------
(1) For options granted prior to the date of the GCL Stock Offerings, amounts
are based upon the difference between exercise price and the Price to
Public per Share of the GCL Stock Offerings. For options granted subsequent
to the date of the GCL Stock Offerings, amounts shown are based upon the
difference between exercise price and the closing market price per share of
GCL Common Stock on the grant date.
(2) Thomas J. Casey has been granted economic rights to 1,000,000 shares of GCL
Common Stock at an effective price of $4 per share. GCL granted him rights
to 800,000 shares and an affiliate of PCG granted him rights to the
remaining 200,000 shares.
The table below sets forth information as of September 30, 1998 concerning
exercises of stock options by the individuals named above for the current year
and the value of such individuals' unexercised options as of such date.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS(#) OPTIONS($)
SHARES VALUE ----------------- --------------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($) UNEXERCISABLE UNEXERCISABLE(1)
---- ----------- -------- ----------------- --------------------
<S> <C> <C> <C> <C>
Thomas J. Casey(2)...... -- -- 333,334/666,666 5,958,345/11,916,655
Managing Director
Jack M. Scanlon......... -- -- 450,000/1,350,000 7,800,000/23,400,000
Chief Executive Officer
William B. Carter....... -- -- 500,000/1,000,000 8,666,667/17,333,333
President, Global
Crossing Development
Co.
James C. Gorton......... -- -- 187,500/562,500 2,312,500/6,937,500
Senior Vice President
and General Counsel
Jack Finlayson.......... -- -- 292,500/442,500 3,607,500/3,607,500
President, Global
Crossing International,
Ltd.
</TABLE>
71
<PAGE>
- --------
(1) For options granted prior to the date of the GCL Stock Offerings, amounts
shown are based upon the difference between exercise price and the Price to
Public per Share of the GCL Stock Offerings. For options granted subsequent
to the date of the GCL Stock Offerings, amounts shown are based upon the
difference between exercise price and the closing market price per share of
GCL Common Stock on the grant date.
(2) Amounts indicated are with respect to the economic rights of Mr. Casey to
1,000,000 shares of GCL Common Stock referenced above.
COMPENSATION--THE ISSUER
Total compensation paid or accrued to the executive officers of the Issuer
and its consolidated subsidiaries as a group during the fiscal year ended
December 31, 1997 was $155,409. Directors of the Issuer and its consolidated
subsidiaries do not receive compensation, except as officers or employees of
the Issuer or its consolidated subsidiaries.
OPTION GRANTS AND OPTION VALUES--THE ISSUER
The table below sets forth information as of September 30, 1998 concerning
options granted since January 1, 1998 to principal officers of the Company.
Options representing a total 5,032,500 shares of GCL Common Stock have been
issued to officers and directors of the Company at exercise prices ranging from
$1.67 per share to $20.50 per share.
<TABLE>
<CAPTION>
GRANT
DATE VALUE
INDIVIDUAL GRANTS (1)
--------------------------------------------- --------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS EMPLOYEES IN PRICE EXPIRATION PRESENT
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE VALUE ($)
---- ----------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
S. Wallace Dawson....... 450,000 3.71% 1.67 9/02/07 7,798,500
Chief Executive Officer 75,000 0.62% 19.00 9/15/08 --
K. Eugene Shutler ......
President 300,000 2.47% 1.67 8/16/07 5,199,000
Ian McLean .............
Chief Operating Officer 75,000 0.62% 1.67 9/15/07 1,299,750
Robert Klug.............
Controller 45,000 0.37% 1.67 9/15/07 779,850
Douglas Molyneux........
Secretary 45,000 0.37% 19.00 9/1/07 --
</TABLE>
- --------
(1) For options granted prior to the date of the GCL Stock Offerings, amounts
shown are based upon the difference between exercise price and the Price to
Public per Share of the GCL Stock Offerings. For options granted subsequent
to the date of the GCL Stock Offerings, amounts shown are based upon the
difference between exercise price and the closing market price per share of
GCL Common Stock on the grant date.
72
<PAGE>
The table below sets forth information as of September 30, 1998 concerning
exercises of stock options by the individuals named above for the current year
and the value of such individuals' unexercised options.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS (#) OPTIONS ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE (1)
---- --------------- ------------ --------------- -------------------
<S> <C> <C> <C> <C>
S. Wallace Dawson.......
Chief Executive Officer -- -- 150,000/375,000 2,599,500/5,199,000
K. Eugene Shutler.......
President -- -- 100,000/200,000 1,733,000/3,466,000
Ian McLean..............
Chief Operating Officer -- -- 25,000/50,000 433,250/866,500
Robert Klug.............
Controller -- -- 15,000/30,000 259,950/519,900
Douglas Molyneux........
Secretary -- -- 0/45,000 0/0
</TABLE>
- --------
(1) For options granted prior to the date of the GCL Stock Offerings, amounts
shown are based upon the difference between exercise price and the Price to
Public per Share of the GCL Stock Offerings. For options granted subsequent
to the date of the GCL Stock Offerings, amounts shown are based upon the
difference between exercise price and the closing market price per share of
GCL Common Stock on the grant date.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The 1998 Global Crossing Ltd. Stock Incentive Plan (the "Stock Incentive
Plan") provides that, upon a "change in control," certain of the awards granted
under the Stock Incentive Plan will vest immediately. A "change in control" is
defined under the Stock Incentive Plan as the occurrence of any of the
following: (i) any Person (other than a Person holding securities representing
10% or more of the combined voting power of GCL's outstanding securities as of
July 15, 1998, GCL, any trustee or other fiduciary holding securities under an
employee benefit plan of GCL, or any company owned, directly or indirectly, by
the shareholders of GCL in substantially the same proportions as their
ownership of stock of GCL) becomes the beneficial owner (as defined under Rule
13d-3 under the Exchange Act) of securities of GCL (a) in excess of the
interest held by the existing shareholders of GCL as of July 15, 1998 and (b)
representing 30% or more of the combined voting power of GCL's then outstanding
securities; (ii) during any period of 24 months, individuals who at the
beginning of such period constitute the board of directors and any new director
(other than those directors who meet certain exceptions specified in the Stock
Incentive Plan) whose election was approved in advance by a vote of at least
two-thirds of the directors then still in office, cease for any reason to
constitute at least a majority of the board of directors; (iii) the
shareholders of GCL approve any transaction under which GCL is merged or
consolidated with any other company, other than a merger or consolidation which
would result in shareholders of GCL immediately prior thereto continuing to own
more than 65% of the combined voting power of the voting securities of GCL or
such surviving entity; or (iv) the shareholders of GCL approve a plan of
complete liquidation of the company or an agreement for the sale or disposition
by GCL of all or substantially all of GCL's assets, other than the liquidation
of GCL into a wholly-owned subsidiary.
GCL has entered into an employment agreement, dated as of April 1, 1998, with
Mr. Jack Scanlon, providing for Mr. Scanlon's employment as GCL's Chief
Executive Officer for a term of two years and continuing thereafter for
successive two-year terms unless either GCL or Mr. Scanlon provides at least
three months' notice in advance of the expiration of the current term. In
connection with such agreement, Mr. Scanlon was issued an option to purchase a
total of 1,800,000 shares of GCL Common Stock at an exercise price of $1.67 per
share. Such options vest in 25% increments upon the first day of employment and
at the end of each of the first three years of Mr. Scanlon's employment with
GCL. Upon a "change of control", as defined in the Stock Incentive Plan, or any
other "non-fault" termination as defined in Mr. Scanlon's employment agreement,
vesting of all of
73
<PAGE>
such options shall immediately occur and Mr. Scanlon shall be entitled to
terminate the agreement and receive a lump sum payment equal to the sum of two
times Mr. Scanlon's then annual base salary and bonus.
GCL has entered into an employment arrangement with Mr. Jack Finlayson which
grants Mr. Finlayson the option to sell 150,000 shares of GCL Common Stock to
the Company at $13.33 per share after two years of employment.
GCL has entered into an employment arrangement with Mr. Thomas J. Casey
providing for his services as GCL's managing director. In connection with such
arrangement, Mr. Casey was granted economic rights to 1,000,000 shares of GCL
Common Stock at $4.00 per share. 800,000 shares were granted by GCL and 200,000
shares were granted by an affiliate of PCG. The right to purchase one third of
these shares vested immediately and the balance will vest over two years.
GCL COMMITTEES
Audit Committee. The purpose of the Audit Committee of GCL is to: (i) make
recommendations concerning the engagement of independent public accountants;
(ii) review with GCL management and the independent public accountants the
plans for, and scope of, the audit procedures to be utilized and results of
audits; (iii) approve the professional services provided by the independent
public accountants; (iv) review the adequacy and effectiveness of GCL's
internal accounting controls; (v) review GCL's insurance program; and (vi)
perform any other duties and functions required by any organization under which
GCL's securities may be listed. Messrs. Weinberger, Conway and Kent are the
current members of the Audit Committee.
Compensation Committee. The purpose of the Compensation Committee of GCL is
to establish and submit to the Board of Directors of GCL recommendations with
respect to (i) compensation of officers and other key employees of GCL and (ii)
awards to be made under the Stock Incentive Plan. Messrs. Cook, Steed and
Levine are the current members of the Compensation Committee.
ISSUER COMMITTEES
The Issuer does not have any committees of its Board of Directors.
74
<PAGE>
PRINCIPAL SHAREHOLDERS
The Issuer is wholly owned by GCL. The following table and the accompanying
footnotes set forth, as of September 30, 1998, certain information regarding
the beneficial ownership of the common stock of GCL ("GCL Common Stock") by (i)
each person or entity who is known to GCL to own beneficially five percent or
more voting GCL Common Stock, (ii) each of GCL's directors and executive
officers and (iii) all directors and executive officers of GCL as a group. To
the knowledge of GCL, each such stockholder has sole voting and investment
power with respect to the shares shown, unless otherwise noted. The GCL Common
Stock is traded on the Nasdaq Stock Market's National Market and the Bermuda
Stock Exchange under the symbol "GBLX."
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF GCL COMMON STOCK
----------------------
NUMBER
OF
BENEFICIAL OWNER SHARES (1) PERCENTAGE
---------------- ----------- ----------
<S> <C> <C>
Pacific Capital Group, Inc.(2) ......................... 51,022,471 23.51%
150 El Camino Drive, Suite 204
Beverly Hills, California 90212
Canadian Imperial Bank of Commerce(3)................... 48,588,400 22.39%
161 Bay Street, 8th Floor--BCE Place
P.P. Box 500
M5J258
Toronto, Canada
Continental Casualty Company(4)......................... 20,037,585 9.23%
CNA Plaza, Floor 23 South
Chicago, Illinois 60685
MRCo, Inc.(5)........................................... 16,939,097 7.80%
111 Massachusetts Avenue NW
Washington, DC 20001
Gary Winnick(6)......................................... 51,322,471 23.65%
Lodwrick M. Cook(7)..................................... 2,356,227 1.09%
Jack M. Scanlon(8)...................................... 450,000 *
Thomas J. Casey(9)...................................... 333,334 *
William B. Carter(10)................................... 500,000 *
Dan J. Cohrs(11)........................................ 230,000 *
David L. Lee(12)........................................ 11,496,239 5.30%
Abbott L. Brown(13)..................................... 6,749,504 3.11%
Barry Porter(14)........................................ 10,557,508 4.86%
James C. Gorton(15)..................................... 187,500 *
Jack Finlayson(16)...................................... 292,500 *
S. Wallace Dawson(17)................................... 153,000 *
K. Eugene Shutler(14)(18)............................... 251,986 *
Hillel Weinberger(19)................................... 21,345,900 9.83%
Jay R. Bloom(20)........................................ 48,588,400 22.39%
Dean C. Kehler(20)...................................... 48,588,400 22.39%
Jay R. Levine(20)(21)................................... 48,588,400 22.39%
William P. Phoenix(20)(21).............................. 48,588,400 22.39%
Bruce Raben(20)(21)..................................... 48,588,400 22.39%
Michael R. Steed(22).................................... 16,954,097 7.81%
William E. Conway(23)................................... 15,000 *
Toshiaki Ogasawara(23).................................. 65,000 *
Geoffrey J.W. Kent(23).................................. 15,000 *
All Directors and Executive Officers as a Group......... 171,888,666 79.20%
</TABLE>
- --------
*Percentage of shares beneficially owned does not exceed one percent.
(1) As of September 30, 1998, 205,042,900 shares of GCL Common Stock were
issued and outstanding. An additional 3,194,000 shares of GCL Common Stock
would have been issuable upon the exercise of options within 60 days of
September 30, 1998; an additional 2,554,179 shares of GCL Common Stock
would have been issuable upon the exercise of the GCL Warrants; and an
additional 6,250,006 shares of GCL Common Stock would have been issuable
upon the exercise of the New PCG Warrants. Amounts appearing in the
foregoing table include (i) all shares of GCL Common Stock outstanding as
of September 30, 1998, (ii) all shares of GCL Common Stock issuable upon
the exercise of options within 60 days of September 30, 1998 and (iii) all
shares of GCL Common Stock issuable upon the exercise of the GCL Warrants
and New PCG Warrants.
75
<PAGE>
(2) Includes 38,742,872 shares of GCL Common Stock and 1,257,894 shares of GCL
Common Stock issuable upon the exercise of GCL Warrants which in May 1998
were transferred to GKW Unified Holdings, LLC, a company formed for the
benefit of Gary Winnick and members of his family that is managed by PCG.
Includes 3,025,002 shares of GCL Common Stock issuable upon the exercise
of New PCG Warrants.
(3) Includes 75,000 shares of GCL Common Stock issuable upon the exercise of
options within 60 days of September 30, 1998 granted to the members of
GCL's Board of Directors affiliated with CIBC.
(4) Includes 8,397,750 shares of GCL Common Stock owned by Continental
Casualty Corporation and 933,150 shares of GCL Common Stock held by
Continental Casualty Corp. Designated High Yield, for which Continental
Casualty Corporation holds sole voting and investment power. Includes
10,706,685 shares of GCL Common Stock acquired by Continental Casualty
Corp. Designated High Yield prior to the GCL Stock Offerings.
(5) Includes 348,967 shares of GCL Common Stock issuable upon the exercise of
GCL Warrants.
(6) Includes all shares of GCL Common Stock owned by GKW Unified Holdings,
LLC, of which PCG is manager, and all shares of GCL Common Stock owned by
PCG, of which Mr. Winnick is Chairman and Chief Executive Officer.
Includes 300,000 shares of GCL Common Stock issuable upon the exercise of
options within 60 days of September 30, 1998.
(7) Includes 475,001 shares of GCL Common Stock issuable upon the exercise of
New PCG Warrants. Includes 150,000 shares of GCL Common Stock issuable
upon the exercise of options within 60 days of September 30, 1998.
(8) Includes 450,000 shares of GCL Common Stock issuable upon the exercise of
options within 60 days of September 30, 1998.
(9) Includes 333,334 shares of GCL Common Stock issuable upon the exercise of
options within 60 days of September 30, 1998.
(10) Includes 500,000 shares of GCL Common Stock issuable upon exercise of
options within 60 days of September 30, 1998.
(11) Includes 225,000 shares of GCL Common Stock issuable upon exercise of
options within 60 days of September 30, 1998.
(12) Includes 4,950,411 shares of GCL Common Stock and 256,578 shares of GCL
Common Stock issuable upon the exercise of GCL Warrants owned by San
Pasqual Corp., of which Mr. Lee and his family are the sole shareholders.
Includes 2,716,617 shares of GCL Common Stock and 75,150 shares of GCL
Common Stock issuable upon the exercise of GCL Warrants owned by the David
and Ellen Lee Family Trust of which Mr. Lee and his wife are the sole
shareholders. Includes 150,000 shares of GCL Common Stock issuable upon
the exercise of options within 60 days of September 30, 1998. Includes
912,501 shares of GCL Common Stock issuable upon the exercise of New PCG
Warrants.
(13) Includes all 3,772,709 shares of GCL Common Stock and 183,833 shares of
GCL Common Stock issuable upon the exercise of GCL Warrants owned by
Ridgestone Corp., of which Mr. Brown's family and a related trust are the
sole shareholders. Includes 150,000 shares of GCL Common Stock issuable
upon the exercise of options within 60 days of September 30, 1998.
Includes 725,001 shares of GCL Common Stock issuable upon the exercise of
New PCG Warrants.
(14) Includes all 5,941,984 shares of GCL Common Stock and 282,816 shares of
GCL Common Stock issuable upon the exercise of GCL Warrants owned by
Galenight Corp., of which Mr. Porter is the sole shareholder. Includes
150,000 shares of GCL Common Stock issuable upon the exercise of options
within 60 days of September 30, 1998. Includes 22,317 shares of GCL Common
Stock issuable upon the exercise of GCL Warrants and 912,501 shares of GCL
Common Stock issuable upon the exercise of New PCG Warrants.
(15) Includes 187,500 shares of GCL Common Stock issuable upon exercise of
options within 60 days of September 30, 1998.
(16) Includes 292,500 shares of GCL Common Stock issuable upon exercise of
options within 60 days of September 30, 1998.
(17) Includes 150,000 shares of GCL Common Stock issuable upon exercise of
options within 60 days of September 30, 1998.
(18) Includes 100,000 shares of GCL Common Stock issuable upon exercise of
options within 60 days of September 30, 1998.
(19) Includes all shares of GCL Common Stock owned by Continental Casualty
Company, an affiliate of Loews/CNA Holdings Corp. Mr. Weinberger is an
officer of Loews/CNA Holdings Corp. Includes 1,293,315 shares of GCL
Common Stock, consisting of 1,050,000 shares to be held by Global Crossing
Trust 1998, of which Mr. Weinberger is a trustee and 243,315 shares to be
held by a partnership of which Mr. Weinberger is a managing partner.
Includes 15,000 shares of GCL Common Stock issuable upon the exercise of
options within 60 days of September 30, 1998.
(20) Includes all shares of GCL Common Stock beneficially owned by CIBC.
Messrs. Bloom, Kehler, Levine, Phoenix and Raben are all affiliated with
CIBC Oppenheimer, an affiliate of CIBC.
(21) Beneficial ownership of all shares of GCL Common Stock indicated is
disclaimed.
(22) Includes all shares of GCL Common Stock owned by MRCo, Inc. Mr. Steed is
the Senior Vice President of ULLICO and the President of MRCo, Inc., which
is a wholly-owned subsidiary of ULLICO. Includes 15,000 shares of GCL
Common Stock issuable upon the exercise of options within 60 days of
September 30, 1998. Includes 348,967 shares of GCL Common Stock issuable
upon the exercise of GCL Warrants.
(23) Includes 15,000 shares of GCL Common Stock issuable upon the exercise of
options within 60 days of September 30, 1998.
76
<PAGE>
CERTAIN TRANSACTIONS
GENERAL
GCL and Global Crossing have entered into certain transactions described
below with entities affiliated with GCL and Global Crossing and their officers
and directors.
TRANSACTIONS WITH PACIFIC CAPITAL GROUP (PCG) AND ITS AFFILIATES
GCL and Global Crossing have entered into certain transactions with PCG and
its affiliates, including PCG Telecom Services LLC ("PCG Telecom") and Ocean
Systems International LLC ("OSI"), in connection with the development by PCG
and its affiliates of several of Global Crossing's systems, including AC-1, PC-
1, PAC and MAC. The Board of Directors of GCL decided to assume the ongoing
development of systems (other than AC-1) from OSI. Revenue from GCL comprises
the sole source of revenues for PCG Telecom. PCG and its affiliates are
controlled by Mr. Gary Winnick, the Co-Chairman of the Board of Directors of
GCL, and certain other officers and directors of GCL are affiliated with PCG,
including Messrs. Cook, Lee, Porter and Brown. See "Management" and "Principal
Shareholders."
Advisory Services Agreements. ACL entered into an Advisory Services
Agreement, dated as of March 25, 1997 (as amended, the "AC-1 Advisory
Agreement"), with PCG Telecom with respect to AC-1. Under the AC-1 Advisory
Agreement PCG Telecom was entitled to an advisory fee of 2.0% of the gross
revenues of ACL. The Board of Directors of GCL agreed that each other direct
subsidiary of GCL shall from time to time enter into, or cause each of its
subsidiaries to enter into, similar Advisory Services Agreements (together with
the AC-1 Advisory Agreement, the "Advisory Services Agreements") with PCG
Telecom, providing for an advisory services fee of 2% of such subsidiary's
gross revenues (not double counting any portion of intercompany revenues on
which the advisory services fee has already been calculated). The aggregate
amount of all advisory fees payable under the Advisory Services Agreements was
to be reduced by the amount, if any, by which principals of PCG received cash
compensation (as opposed to reimbursement of expenses) from GCL other than cash
compensation paid to such principals in their capacities as officers or
directors of GCL as approved by the Board of Directors. In addition, until the
earlier of (i) the date GCL had a public equity market value in excess of
$1.5 billion and (ii) March 25, 2002 (such earlier date, the "Deferred Fee
Payment Date"), the aggregate cumulative amount of the fees paid under the
Advisory Services Agreements in respect of the calendar years prior to and
including each calendar year set forth below was not to exceed the amounts set
forth below, with any excess being deferred and paid (together with interest
thereon at a rate per annum equal to LIBOR) on the Deferred Fee Payment Date:
1998--$10 million; 1999--$20 million; 2000--$30 million; and 2001--$40 million.
Amounts payable under the AC-1 Advisory Services Agreement were to be divided
annually in the following manner: 90% of the initial $5 million in advisory
services fees was retained by PCG Telecom, 5% of the initial $5 million in
advisory service fees was payable to ULLICO, Inc. ("ULLICO"), which is the
ultimate parent of MRCo, Inc., and 5% of the initial $5 million in advisory
service fees was payable to PCG. With respect to amounts over the initial $5
million annually in advisory services fees, 15.5% was payable to ULLICO, 15.5%
was payable to PCG, 35% was payable to CIBC and the remaining 34% is retained
by PCG Telecom. Amounts retained by PCG Telecom, after deducting associated
expenses incurred by PCG relating to salaries, bonuses, overhead and an annual
discretionary expense reduction, were divided amongst Messrs. Winnick, Brown,
Lee, and Porter in the following percentages: 40%, 15%, 22.5%, and 22.5%,
respectively.
All amounts payable annually under each of the other Advisory Services
Agreements was to be retained by PCG Telecom and, after deducting associated
expenses incurred by PCG relating to salaries, bonuses, overhead and an annual
discretionary expense reduction, divided amongst Messrs. Winnick, Cook, Brown,
Lee, and Porter in the percentages: 50%, 8%, 12%, 15%, and 15% respectively.
GCL acquired the rights to advisory fees payable under the Advisory Services
Agreements on the behalf of the Company in consideration for the issuance,
through PCG Telecom, to the persons entitled to receive such
77
<PAGE>
fees of shares of GCL Common Stock having an aggregate value of $135 million
(based upon the Price to Public per Share ($19.00) payable in the GCL Stock
Offerings) and the cancellation of approximately $2.7 million owed to the
Company under a related advance agreement (the "Advisory Services Agreement
Termination"). Concurrently with the GCL Stock Offerings, all of the
obligations of GCL and ACL in respect of the Advisory Services Agreements were
terminated. GCL obtained a fairness opinion from an independent financial
advisor in connection with this transaction. As a result of this transaction,
the Company incurred a charge of approximately $137.7 million which has been
reflected in its statement of operations for the period ended June 30, 1998. Of
this amount, $135 million was determined by applying the 2% advisory fee to
projected revenues for the Company's systems. The present value of the
aggregate advisory fees was then calculated at $155.5 million, using a discount
rate of 12% in respect of AC-1 and 15% in respect of systems other than AC-1.
This amount was subsequently reduced to $135 million. Both the discount rates
and the ultimate valuation were determined as a result of a negotiation process
including a disinterested director of GCL and the various persons entitled to
fees under the Advisory Services Agreements. The shares of GCL Common Stock
issued in connection with the Advisory Services Agreement Termination were
issued to the following persons in the following amounts:
<TABLE>
<CAPTION>
SHARES OF GCL
RECIPIENT COMMON STOCK
--------- -------------
<S> <C>
Gary Winnick (including PCG and PCG Telecom)................ 3,257,577
CIBC........................................................ 670,000
ULLICO...................................................... 366,579
Lodwrick M. Cook............................................ 304,974
Abbott L. Brown............................................. 683,711
David L. Lee................................................ 911,211
Barry Porter................................................ 911,211
---------
Total..................................................... 7,105,263
=========
</TABLE>
PCG Warrants. Old GCL and PCG entered into a warrant agreement, dated as of
January 21, 1998 (the "PCG Warrant Agreement"), pursuant to which Old GCL
issued PCG three separate warrants (collectively, the "PCG Warrants") providing
PCG with the right to purchase (i) 9,226,592 of Old GCL's Class B Shares for an
aggregate purchase price of $50,000,000; (ii) an additional 4,613,297 of Old
GCL's Class B Shares for an aggregate purchase price of $31,250,000; and (iii)
an additional 4,613,297 of Old GCL's Class B Shares for an aggregate purchase
price of $37,500,000. Such PCG Warrants would entitle PCG to acquire an
additional 10% of the capital stock of Old GCL (as of the date of issuance of
the PCG Warrants), with the exercise price of each PCG Warrant based upon a
different market valuation of the Company. In connection with issuance of the
PCG Warrants, the PC-1, MAC and PAC systems (then under development) were
acquired by the Company, as was the development team that had been assembled by
Pacific Capital Group (led by William Carter, former President of SSI and Wally
Dawson, former Senior Vice President of SSI). The exercise of each of the PCG
Warrants was conditioned upon (i) an initial public offering of shares of Old
GCL (or any successor thereto), underwritten by an investment banking firm of
national reputation (as determined by a majority of the Board of Directors of
Old GCL) from which Old GCL shall have received at least $50,000,000 in net
proceeds, (ii) the investment by Old GCL in the aggregate of at least
$500,000,000 of Net Attributable Capital (as defined below) in cable systems
other than AC-1 and (iii) the generation in the aggregate by cable systems
other than AC-1 of at least $100,000,000 in Net Attributable Revenues (as
defined below). For purposes of the PCG Warrant Agreement, with respect to any
cable system, (i) "Net Attributable Capital" means the aggregate debt and
equity capitalization of such system multiplied by the percentage ownership of
Old GCL (directly or indirectly) in such system, and (ii) "Net Attributable
Revenues" means the net revenues of such system multiplied by the percentage
ownership interest of Old GCL (directly or indirectly) in such system. Rights
under each of the PCG Warrants were divided amongst Messrs. Winnick, Cook,
Brown, Lee and Porter in the following percentages: 50%, 8%, 12%, 15% and 15%,
respectively.
The Board of Directors of Old GCL determined that upon the successful
completion of the GCL Stock Offerings the conditions precedent to exercising
the PCG Warrants were met and therefore the PCG Warrants were deemed
exercisable. The Board of Directors of Old GCL also amended the terms of the
PCG Warrants to
78
<PAGE>
give each holder the option to convert each share under warrant into a fraction
of a Class B Share based upon the ratio of the current per share valuation at
the time of conversion less the per share exercise price of the warrant divided
by the current per share valuation at the time of conversion multiplied by the
number of warrants to be converted, together with a new warrant ("New PCG
Warrants") to purchase the remaining fraction of such Class B Share at an
exercise price equal to the Price to Public per Share ($19.00) payable in the
GCL Stock Offerings. The New PCG Warrants will terminate on August 13, 2003,
five years from the date of issuance. Prior to the GCL Stock Offerings, PCG
converted the PCG Warrants in such manner into Class B Shares and New PCG
Warrants, utilizing the anticipated price of the GCL Stock Offerings as the
current per share valuation for such purposes, with the Company assuming the
obligations of Old GCL under the New PCG Warrants (the "PCG Warrant
Conversion"). Upon the PCG Warrant Conversion, Messrs. Winnick, Cook, Brown,
Lee and Porter transferred 100,000, 25,000, 25,000, 25,000 and 25,000 New PCG
Warrants, respectively, to Nelson S. Zand, an employee of PCG.
Following such transactions, shares of GCL Common Stock and New PCG Warrants
issued in connection with the conversion of the PCG Warrants were issued to the
following persons in the following amounts:
<TABLE>
<CAPTION>
SHARES OF GCL NEW PCG
NAME COMMON STOCK WARRANTS
---- ------------- ---------
<S> <C> <C>
Gary Winnick....................... 6,101,589 3,025,002
David L. Lee....................... 1,830,475 912,501
Barry Porter....................... 1,830,475 912,501
Abbott L. Brown.................... 1,464,379 725,001
Lodwrick M. Cook................... 976,252 475,001
Nelson S. Zand..................... 0 200,000
---------- ---------
Total............................ 12,203,170 6,250,006
========== =========
</TABLE>
Advance Agreements. GCL entered into an Advance Agreement, dated as of March
24, 1998 (the "AC-1 Advance Agreement"), with PCG Telecom, pursuant to which
GCL agreed to make advances to PCG Telecom within three days of a written
request from PCG in respect of fees owing to PCG Telecom under the AC-1
Advisory Agreement in an amount not to exceed 1% of the amounts payable under
long-form capacity purchase agreements executed by ACL. As security for the
obligation of PCG Telecom to repay such advances, PCG Telecom granted a
security interest to GCL in its rights to receive payments under the
AC-1 Advisory Agreement. The AC-1 Advance Agreement was terminated and the
obligation of PCG Telecom to repay approximately $2.7 million to the Company
thereunder cancelled in connection with the termination of the Advisory Service
Agreements discussed above.
Of the $4,669,340 advanced to PCG Telecom under the AC-1 Advance Agreement,
the following amounts were paid to directors, executive officers and
shareholders of GCL:
<TABLE>
<CAPTION>
NAME AMOUNT
---- ----------
<S> <C>
Gary Winnick............................. $3,191,630(1)
David L. Lee............................. 481,130
Barry Porter............................. 481,130
Abbott L. Brown.......................... 320,754
MRCo, Inc................................ 194,696
----------
Total.................................. $4,669,340
==========
</TABLE>
- --------
(1) Includes amounts received by PCG, including reimbursement of PCG expenses
of $1,987,914.
Assignment of Rights. As part of the consideration for the assumption by the
Company of the rights of OSI to the ongoing development of cable systems, in
the first quarter of 1998 the Company paid PCG $7.0 million for costs incurred
by PCG to such date in connection with such development.
79
<PAGE>
Arrangement Fees. Additionally, during 1997, $7,250,000 in fees were paid to
PCG and certain of its key executives, who are shareholders of GCL, and another
shareholder of GCL for services provided in respect of arranging the AC-1
Credit Facility, the GTH Senior Notes and GTH Preference Shares. Of such fees,
the following amounts were paid to directors, executive officers and
shareholders of the Company:
<TABLE>
<CAPTION>
NAME AMOUNT
---- ----------
<S> <C>
Gary Winnick................................ $3,000,000
David L. Lee................................ 1,250,000
Abbott L. Brown............................. 1,000,000
Barry Porter................................ 1,000,000
MRCo, Inc. ................................. 1,000,000
----------
Total..................................... $7,250,000
==========
</TABLE>
TRANSACTIONS WITH CIBC AND ITS AFFILIATES
CIBC and its affiliates have entered into certain financing transactions with
GCL and Global Crossing in connection with the development and construction of
the Company's systems: (i) CIBC, Inc. was the arranger and initial lender under
a $200 million bridge facility, which was repaid and terminated on May 18,
1998; (ii) CIBC, Inc. is one of the lead agents under the $482 million AC-1
Credit Facility, (iii) CIBC Wood Gundy Securities Corp., an affiliate of CIBC,
acted as exclusive placement agent for the issuance by GTH of its $100 million
outstanding GTH Preference Shares and the issuance by GTH of its $150 million
outstanding GTH Senior Notes; (iv) CIBC Oppenheimer was an Initial Purchaser in
connection with the issuance by the Issuer of its $800 million Senior Notes;
(v) CIBC, Inc. and other banks entered into a credit agreement with Global
Crossing, effective July 30, 1998, for the $850 million non-recourse project
debt financing of PC-1; (vi) CIBC, Inc. and other lenders issued a $104 million
loan to Pacific Crossing Ltd. to make the initial payments with respect to the
PC-1 construction contract, which was repaid and terminated on July 30, 1998,
(vii) CIBC Oppenheimer was an Underwriter in the GCL Stock Offerings; (viii)
CIBC Oppenheimer was an Initial Purchaser in the offering of the Old Preferred
Stock; and (ix) CIBC, Inc. will be a lead agent under the proposed $240 million
MAC bank credit facility. See "Description of Certain Indebtedness." During
1997, GCL and Global Crossing paid CIBC approximately $25 million in fees in
connection with these transactions. CIBC is a substantial shareholder in GCL
and certain members of the Board of Directors of the GCL are affiliated with
CIBC, including Messrs. Bloom, Kehler, Phoenix, Raben and Levine. See
"Management" and "Principal Shareholders." CIBC is also the ultimate parent
company of CIBC Oppenheimer Corp., one of the initial purchasers of the
Preferred Stock. See "Plan of Distribution."
TRANSACTIONS WITH WORLDPORT
On April 7, 1998, the Company entered into a CPA with Worldport
Communications, Inc. ("Worldport"), whereby Worldport acquired a total of five
STM-1s of capacity on AC-1 in a transaction that occurred in the ordinary
course of business of the Company and on terms and conditions no less favorable
to the Company than those contained in its other CPAs. Worldport also executed
an MOU to purchase capacity on PC-1, PAC and MAC. Certain officers and
directors GCL, including Mr. Winnick, Mr. Cook, Mr. Scanlon, Mr. Lee, Mr.
Porter, Mr. Brown, Mr. Raben, Mr. Bloom, Mr. Kehler and Mr. Steed, have direct
or indirect equity ownership positions in Worldport aggregating approximately
10% of the current common stock of Worldport. In addition, Continental Casualty
Corporation, with which Mr. Weinberger is affiliated, holds warrants to
purchase common stock in Worldport aggregating less than 1% of the current
common stock of Worldport and has also engaged in certain debt financing
transactions with Worldport. Campuslink Communications Systems Inc., a private
company which provides telecommunications services to colleges and universities
and which is indirectly majority-owned by Mr. Winnick and Union Labor Life
Insurance Company, an affiliate of MRCo, Inc., has reached an agreement in
principle to be acquired by Worldport. In addition, in connection with the
Company's recent decision to explore the making of minority investments in
telecommunications and Internet service providers that are current or
prospective customers on the Global Crossing Network, the Company is
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considering an investment in Worldport. If the Company chooses to make such
investment, it is currently anticipated that such investment would amount to
approximately $10 million of cash and two STM-1 circuits on AC-1.
TRANSACTIONS WITH TELECOMMUNICATIONS DEVELOPMENT CORPORATION
Prior to the GCL Stock Offerings and after giving effect to the Old GCL
Exchange, Telecommunications Development Corporation, a Cayman Islands
corporation ("TDC"), owned 11,016,879 shares of GCL Common Stock, as well as
291,477 GCL Warrants. TDC was formed in 1996 for the purpose of making
investments in start-up telecommunications companies and one of the companies
in which TDC invested was Old GCL. Mr. Lee was the Chairman and Mr. Winnick was
a director of TDC. Messrs. Lee, Winnick, Brown and Porter beneficially owned a
majority of the outstanding common stock of TDC and approximately 29% of the
outstanding preferred stock of TDC. The balance of such stock was owned by
persons not affiliated with the Company (the "Unaffiliated Shareholders"). TDC
informed GCL that, in connection with the GCL Stock Offerings, it was
undergoing a reorganization to facilitate the ability of Unaffiliated
Shareholders to sell GCL Common Stock in the open market following the GCL
Stock Offerings. In connection with this reorganization, TDC proposed a
transaction (the "TDC Exchange") pursuant to which GCL acquired the 11,016,879
shares of GCL Common Stock owned by TDC in exchange for 10,866,879 newly-issued
shares of GCL Common Stock (based on a Price to Public per Share in the GCL
Stock Offerings of $19.00). The TDC Exchange was intended to enable TDC to
achieve the reorganization without the incurrence of gain for tax purposes.
Following the TDC Exchange, TDC distributed all of the shares of GCL Common
Stock and GCL Warrants owned by it to the holders of its preferred and common
stock and then liquidated (the "TDC Liquidation"). The TDC Exchange was
approved by a committee of disinterested members of the GCL's Board of
Directors. The benefit to GCL from the TDC Exchange was that it effectively
acquired 150,000 shares of GCL Common Stock for no cost. Following the TDC
Exchange and TDC Liquidation, shares of GCL Common Stock and GCL Warrants
originally held by TDC were issued to the following persons in the following
amounts:
<TABLE>
<CAPTION>
SHARES OF GCL GCL
NAME COMMON STOCK WARRANTS
---- ------------- --------
<S> <C> <C>
Gary Winnick....................................... 2,398,540 65,714
David L. Lee....................................... 2,716,617 75,150
Barry Porter....................................... 812,908 22,317
Abbott L. Brown.................................... 270,970 7,439
Non-affiliates..................................... 4,667,844 120,857
---------- -------
Total............................................ 10,866,879 291,477
========== =======
</TABLE>
TRANSACTIONS REGARDING CLASS A SHARES OF OLD GCL
The Class A common stock of Old GCL was issued in connection with the sale by
Old GCL of the GTH Preference Shares and was offered for nominal or no
consideration as an inducement to purchase the GTH Preference Shares. The
holders of Old GCL's Class B and Class C common stock agreed to the dilutive
effects of issuing the Class A stock on the understanding that Class A stock
not ultimately needed in connection with the sale of the GTH Preference Shares
would be transferred to the holders of the Class B and Class C common stock on
a pro rata basis. Of the 31,102,950 shares of Class A common stock issued by
Old GCL, 11,250,000 shares were sold to purchasers of the GTH Preference Shares
at a price of $.67 per Class A share. The remaining 19,852,950 shares were
issued to an affiliate of CIBC Wood Gundy Securities Corporation ("CIBC
Securities"), the placement agent for the offering of the GTH Preference
Shares. This affiliate of CIBC Securities transferred 14,696,150 Class A shares
to purchasers from it of the GTH Preference Shares for no additional
consideration and retained the remaining 5,161,800 Class A shares and CIBC
Securities retained a substantial ownership interest in the GTH Preference
Shares. The holders of the Old GCL Class B and Class C shares took the position
that, consistent with their understanding regarding the disposition of Class A
shares not needed in connection with sales by CIBC Securities of the GTH
Preference Shares, the Class A shares
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retained by its affiliate should be transferred to the holders of Old GCL's
Class B and Class C shares. Accordingly, such affiliate of CIBC Securities
retained 2,580,900 of the Class A shares based upon its ownership of Class C
shares and transferred the remaining 2,580,899 Class A shares as follows:
<TABLE>
<CAPTION>
CLASS A
NAME SHARES
---- ---------
<S> <C>
Gary Winnick(1).............................. 1,122,213
MRCo, Inc. .................................. 611,769
Telecommunications Development Corporation... 382,356
PCG Telecom LDC.............................. 170,148
Barry Porter(2).............................. 130,000
David L. Lee(3).............................. 95,589
Abbott L. Brown(4)........................... 68,824
---------
Total...................................... 2,580,899
=========
</TABLE>
- --------
(1) Shares indicated for Gary Winnick were acquired by GKW Unified Holdings,
LLC, which is managed by PCG.
(2) Shares indicated for Barry Porter were acquired by Galenight Corp., of
which Mr. Porter is sole shareholder.
(3) Shares indicated for David L. Lee were acquired by San Pasqual Corp., of
which Mr. Lee and his family are the sole shareholders.
(4) Shares indicated for Abbott L. Brown were acquired by Ridgestone Corp., of
which Mr. Brown's family and a related trust are the sole shareholders.
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<PAGE>
DESCRIPTION OF PREFERRED STOCK
GENERAL
The Exchange Preferred Stock will be issued pursuant to and the terms are
defined by the Bye-laws. The summary contained herein of certain provisions of
the Exchange Preferred Stock to be issued by the Company in exchange for the
Old Preferred Stock in the Exchange Offer does not purport to be complete and
is qualified in its entirety by reference to the provisions of the Bye-laws,
which are filed as an exhibit to the registration statement of which this
prospectus is a part and a copy of which may be obtained upon request from the
Company. The definitions of certain terms used in the following summary are set
forth below under "--Certain Definitions." For purposes of this summary, the
term "Company" refers only to Global Crossing Holdings Ltd. and not to any of
its Subsidiaries or GCL, and references to the Preferred Stock shall be deemed
to include the Old Preferred Stock and the Exchange Preferred Stock.
The shares of the Exchange Preferred Stock will be issued solely in exchange
for Old Preferred Stock pursuant to the Exchange Offer. The terms of the
Exchange Preferred Stock will be identical in all material respects to those of
the Old Preferred Stock, except that:
. the shares of the Exchange Preferred Stock will have been registered
under the Securities Act of 1933 and will be generally freely tradeable
by holders thereof who are not a Restricted Holder, and
. the registration rights and contingent interest rate provisions
applicable to the shares of the Old Preferred Stock are generally not
applicable to the Exchange Preferred Stock.
The Company is authorized to issue and have outstanding at any time 7,500,000
shares of Preferred Stock. As of the date of this prospectus, 5,000,000 shares
of Old Preferred Stock are outstanding. Up to 2,500,000 shares will be
designated and reserved for issuance to pay dividends on the Preferred Stock if
the Company elects to pay dividends on the Preferred Stock in additional shares
of Preferred Stock prior to June 1, 2002 in accordance with the terms thereof.
All of the shares of Exchange Preferred Stock will be designated as shares of
Preferred Stock and initially will have a liquidation preference of $100.00 per
share (the "Liquidation Preference"). On December 1, 2008 (the "Mandatory
Redemption Date"), the Company will be required to redeem all outstanding
shares of Preferred Stock at a price in cash equal to the Liquidation
Preference thereof, plus all accumulated and unpaid dividends thereon to the
date of redemption. Subject to certain conditions, the Exchange Preferred Stock
will be exchangeable for the New Exchange Notes at the option of the Company on
any Dividend Payment Date. The Exchange Preferred Stock, when issued in
accordance with the terms of the Exchange Offer, will be fully paid and non-
assessable, and the Holders thereof will not have any subscription or
preemptive rights in connection therewith.
The transfer agent and registrar (the "Transfer Agent") for the Preferred
Stock will be EquiServe--First Chicago Trust Division Company of New York
unless and until a successor is selected by the Company.
RANKING
The Preferred Stock will rank junior in right of payment to all indebtedness
and other liabilities of the Company. As of September 30, 1998, after giving
pro forma effect to the offering of the Preferred Stock and the application of
the net proceeds therefrom, the Preferred Stock would have been junior in right
of payment to approximately $1,328 million of total indebtedness and other
liabilities of the Company. The Company will have the ability to issue
additional shares of Preferred Stock to pay dividends thereon, if it so elects,
on any Dividend Payment Date prior to June 1, 2002.
With respect to dividends and rights upon the liquidation, winding-up and
dissolution of the Company, the Preferred Stock will rank (i) senior to each
other class of capital stock of the Company outstanding or
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established after the Issue Date by the Company's Board of Directors the terms
of which do not expressly provide that it ranks senior to, or on a parity with,
the Preferred Stock as to dividends and rights upon the liquidation, winding-up
and dissolution of the Company (collectively referred to herein, together with
the common stock of the Company, as "Junior Securities"); (ii) subject to
certain conditions, on a parity with each other class of preferred stock
established after the Issue Date by the Company's Board of Directors the terms
of which expressly provide that such class or series will rank on a parity with
the Preferred Stock as to dividends and rights upon the liquidation, winding-up
and dissolution of the Company (collectively referred to herein as "Parity
Securities"); and (iii) subject to certain conditions, junior to each class of
preferred stock established after the Issue Date by the Company's Board of
Directors the terms of which expressly provide that such class or series will
rank senior to the Preferred Stock as to dividends and rights upon the
liquidation, winding-up and dissolution of the Company (collectively referred
to herein as "Senior Securities"). The Company may not authorize any new class
of Senior Securities without the approval of the Holders of at least a majority
of the then outstanding shares of Preferred Stock, voting or consenting as a
separate class. The Company may, however, authorize any new class of Parity
Securities or Junior Securities without the approval of any holder of Preferred
Stock.
DIVIDENDS
The Holders of the Preferred Stock will be entitled to receive when, as and
if dividends are declared by the Company's Board of Directors out of funds
legally available therefor, dividends on the Preferred Stock from the Issue
Date at the rate per annum equal to 10 1/2% of the Liquidation Preference per
share of Preferred Stock, payable semi-annually in arrears on each June 1 and
December 1, or, if any such date is not a Business Day, on the next succeeding
Business Day (each, a "Dividend Payment Date"), to the Holders of record as of
the immediately preceding May 15 and November 15 (each, a "Record Date").
Dividends will be payable in cash, except that on each Dividend Payment Date
occurring prior to June 1, 2002, dividends may be paid, at the Company's
option, by the issuance of additional shares of Preferred Stock (including
fractional shares) having an aggregate Liquidation Preference per share of
Preferred Stock equal to the amount of such dividends. The issuance of such
additional shares of Preferred Stock will constitute "payment" of the related
dividend for all purposes. The first dividend payment of Preferred Stock will
be payable on June 1, 1999. Beginning on June 1, 2002 dividends on the
Preferred Stock will be payable only in cash. Dividends payable on the
Preferred Stock will be computed on the basis of a 360-day year consisting of
twelve 30-day months. For a discussion of certain United States federal income
tax considerations relevant to Holders of the Preferred Stock with respect to
the payment of dividends thereon, see "Tax Considerations--Taxation of Holders
of Preferred Stock and Exchange Notes--United States Federal Income Tax
Considerations."
Dividends on the Preferred Stock will accrue whether or not the Company has
earnings or profits, whether or not there are funds legally available for the
payment of such dividends and whether or not dividends are declared. Dividends
will accumulate to the extent they are not paid on the Dividend Payment Date
for the period to which they relate. In the event that dividends on the
Preferred Stock are in arrears and unpaid for three or more semi-annual
Dividend Periods (whether or not consecutive), Holders of the Preferred Stock
will be entitled to certain voting rights. See "--Voting Rights; Amendment."
The terms of the Preferred Stock will provide that the Company will take all
actions required or permitted under Bermuda law to permit the payment of
dividends on the Preferred Stock, including, without limitation, through the
revaluation of its assets in accordance with Bermuda law, and to make or keep
funds legally available for the payment of dividends. Dividends on account of
arrears for any past Dividend Period and dividends in connection with any
optional redemption may be declared and paid at any time, without reference to
any regular Dividend Payment Date, to Holders of record of Preferred Stock on
such date, not more than 45 days prior to the payment thereof, as may be fixed
by the Company's Board of Directors.
No dividend whatsoever shall be declared or paid upon, or any sum set apart
for the payment of dividends upon, any outstanding share of Preferred Stock
with respect to any Dividend Period unless all dividends for all preceding
Dividend Periods have been declared and paid, or declared and a sufficient sum
set apart for the payment of such dividend, upon all outstanding shares of
Preferred Stock. No full dividends may be declared or
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<PAGE>
paid or funds set apart for the payment of dividends on any Parity Securities
for any period unless full cumulative dividends shall have been or
contemporaneously are declared and paid (or are deemed declared and paid) in
full or declared and, if payable in cash, a sum in cash sufficient for such
payment set apart for such payment on the Preferred Stock. If full dividends
are not so paid, the Preferred Stock will share dividends pro rata with the
Parity Securities. So long as any Preferred Stock is outstanding and unless and
until full cumulative dividends have been paid (or are deemed paid) in full on
the Preferred Stock: (i) no dividend shall be declared or paid upon, or any sum
set apart for the payment of dividends upon, any shares of Junior Securities;
(ii) no other distribution shall be declared or made upon, or any sum set apart
for the payment of any distribution upon, any shares of Junior Securities;
(iii) no shares of Parity Securities or Junior Securities shall be purchased,
redeemed or otherwise acquired or retired for value; (iv) no warrants, rights,
calls or options to purchase any Parity Securities or Junior Securities shall
be directly or indirectly issued; and (v) no monies shall be paid into or set
apart or made available for a sinking or other like fund for the purchase,
redemption or other acquisition or retirement for value of any shares of Parity
Securities or Junior Securities.
The Senior Notes Indenture contains, and future credit agreements or other
agreements relating to Indebtedness to which the Company becomes a party may
contain, prohibitions or restrictions on the ability of the Company to pay cash
dividends on the Preferred Stock. See "Risk Factors--Covenant Restrictions" and
"Description of Certain Indebtedness--9 5/8% Senior Notes." All references
herein to dividends shall be deemed to include any special dividends which may
become payable on the Preferred Stock.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Company or a reduction or decrease in its capital stock resulting in a
distribution of assets to the holders of any class or series of the Company's
capital stock, each Holder of the Preferred Stock will be entitled to payment
out of the assets of the Company available for distribution of an amount equal
to the then effective Liquidation Preference per share of Preferred Stock held
by such Holder, plus all accumulated and unpaid dividends thereon to the date
fixed for such liquidation, dissolution, winding-up or reduction or decrease in
capital stock, before any distribution is made on any Junior Securities,
including, without limitation, common stock of the Company. After payment in
full of the then effective Liquidation Preference and all accumulated and
unpaid dividends thereon to which Holders of Preferred Stock are entitled, such
Holders will not be entitled to any further participation in any distribution
of assets of the Company. If, upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company or a reduction or decrease in its
capital stock, the amounts payable with respect to the Preferred Stock and all
other Parity Securities are not paid in full, the Holders of the Preferred
Stock and the Parity Securities will share equally and ratably in any
distribution of assets of the Company in proportion to the full liquidation
preference and all accumulated and unpaid dividends to which each such Holder
is entitled. However, neither the voluntary sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all of the property or assets of the Company nor the
consolidation or merger of the Company with or into one or more corporations
will be deemed to be a voluntary or involuntary liquidation, dissolution or
winding-up of the Company or a reduction or decrease in its capital stock.
The Bye-laws do not contain any provision requiring funds to be set aside to
protect the Liquidation Preference of the Preferred Stock, although such
Liquidation Preference will be substantially in excess of the par value of the
shares of the Preferred Stock and there can be no assurance that, upon any such
voluntary or involuntary liquidation, dissolution or winding-up of the Company
or a reduction or decrease in its capital stock that there will be funds
available in an amount sufficient to pay such Liquidation Preference in full,
in part or at all.
EXCHANGE
The Company may, at its option, on any Dividend Payment Date, exchange, in
whole, but not in part, all then outstanding shares of Preferred Stock for
Exchange Notes with a principal amount equal to the then effective Liquidation
Preference of the Preferred Stock; provided that (i) on the date of such
exchange there are
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no accumulated and unpaid dividends on the Preferred Stock (including the
dividend payable on such date) or other contractual impediments to such
exchange; and (ii) immediately after giving effect to such exchange, no Default
or Event of Default under the Indenture or the Senior Notes Indenture (in each
case as defined therein) would exist or be caused thereby. The exchange of the
Preferred Stock into Exchange Notes would be restricted by the current terms of
the Senior Notes Indenture, including with respect to the incurrence of
Indebtedness. See "Description of Certain Indebtedness--9 5/8% Senior Notes."
Upon any exchange pursuant to the preceding paragraph, Holders of Preferred
Stock will be entitled to receive $1.00 principal amount of Exchange Notes for
each $1.00 of the then effective Liquidation Preference per share of Exchange
Preferred Stock held by such Holders. The Exchange Notes will be issued in
registered form, without coupons and will be issued in principal amounts of
$1,000 and integral multiples thereof (to the extent possible) so that the
Holders of Preferred Stock will receive certificates representing the entire
amount of Exchange Notes to which the Holders of Preferred Stock are entitled;
provided that the Company may pay cash in lieu of issuing Exchange Notes having
a principal amount less than $1,000.
Notice of the intention to exchange the Preferred Stock into Exchange Notes
will be sent by or on behalf of the Company not more than 60 nor less than 30
days prior to the date of exchange (the "Exchange Date"), by first class mail,
postage prepaid, to each Holder of record of Preferred Stock at its registered
address. In addition to any information required by law or by the applicable
rules of any exchange upon which the Preferred Stock may then be listed or
admitted to trading, such notice will state: (i) the Exchange Date; (ii) the
place or places where certificates for such shares are to be surrendered for
exchange, including any procedures applicable to exchanges to be accomplished
through book-entry transfers; and (iii) that dividends on the Preferred Stock
to be exchanged will cease to accumulate on the Exchange Date. If notice of any
exchange has been properly given, and if on or before the Exchange Date the
Exchange Notes have been duly executed and authenticated and deposited with the
Transfer Agent, then on and after the close of business on the Exchange Date,
the Preferred Stock to be exchanged will no longer be deemed to be outstanding
and may thereafter be issued in the same manner as the other authorized but
unissued preferred stock of the Company, but not as Preferred Stock, and all
rights of the Holders thereof as shareholders of the Company will cease, except
the right of such Holders to receive upon surrender of their certificates the
Exchange Notes and all accrued and unpaid interest thereon.
REDEMPTION
Mandatory Redemption
On the Mandatory Redemption Date, the Company will be required to redeem all
outstanding shares of Preferred Stock at a price in cash equal to the then
effective Liquidation Preference thereof, plus all accumulated and unpaid
dividends thereon to the date of redemption. The Company will not be required
to make sinking fund payments with respect to the Preferred Stock. The Bye-laws
will provide that the Company will take all actions required or permitted under
Bermuda law to permit such redemption.
Optional Redemption
Except as set forth below and under "--Optional Tax Redemption," the
Preferred Stock will not be redeemable at the Company's option prior to
December 1, 2003. Thereafter, the Preferred Stock will be subject to redemption
at any time at the option of the Company, in whole or in part, upon not less
than 30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of the then effective Liquidation Preference) set forth below, plus
all accumulated and unpaid dividends thereon to the applicable redemption date,
if redeemed during the twelve-month period beginning on December 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR Percentage
---- ----------
<S> <C>
2003........................................................... 105.250%
2004........................................................... 103.500%
2005........................................................... 101.750%
2006 and thereafter............................................ 100.000%
</TABLE>
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Notwithstanding the foregoing, at any time prior to December 1, 2001, the
Company may, on any one or more occasions, redeem up to 35% of the then
effective aggregate Liquidation Preference of the Preferred Stock then
outstanding at a redemption price equal to 110.500% of the then effective
Liquidation Preference thereof, plus all accumulated and unpaid dividends
thereon to the redemption date, with the net cash proceeds received from one or
more equity offerings made by the Company or GCL (to the extent such net cash
proceeds received by GCL were contributed to the Company as common equity
capital); provided that at least 65% of the then effective aggregate
Liquidation Preference of Preferred Stock then outstanding remains outstanding
immediately after the occurrence of any such redemption. The Company may make
any such redemption upon not less than 30 nor more than 60 days' notice (but in
no event more than 90 days after the closing of the related Equity Offering).
Any such notice may be given prior to the completion of the related Equity
Offering and any such redemption may, at the Company's discretion, be subject
to the satisfaction of one or more conditions precedent, including, but not
limited to, the completion of the related equity offering.
In addition, at any time prior to December 1, 2003, the Preferred Stock may
also be redeemed at the option of the Company, in whole but not in part, upon
the occurrence of a Change of Control, upon not less than 30 nor more than 60
days' prior notice (but in no event may any such redemption occur more than 90
days after the occurrence of such Change of Control) mailed by first-class mail
to each Holder's registered address, at a redemption price equal to 100% of the
then effective Liquidation Preference thereof, plus the Applicable Premium as
of, and all accumulated and unpaid dividends thereon to, the date of redemption
(the "Redemption Date").
"Applicable Premium" means, with respect to any share of Preferred Stock on
any Redemption Date, the greater of (i) 1.0% of the then effective Liquidation
Preference of such share of Preferred Stock or (ii) the excess of (a) the
present value at such Redemption Date of (1) dividends on the Preferred Stock
accumulating until and including December 1, 2003 (assuming payment thereof in
cash on the applicable Dividend Payment Dates) and (2) the Liquidation
Preference and any applicable optional redemption premium therefor payable on
such Redemption Date for such share (assuming payment thereof on December 1,
2003), computed using a discount rate equal to the Treasury Rate plus 50 basis
points over (b) the then effective Liquidation Preference of such share of
Preferred Stock, if greater.
"Treasury Rate" means, as of any Redemption Date, the yield to maturity as of
such Redemption Date of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data))
most nearly equal to the period from the Redemption Date to December 1, 2003;
provided, however, that if the period from the Redemption Date to December 1,
2003 is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used.
Optional Tax Redemption
The Preferred Stock will be subject to redemption at the option of the
Company or a successor corporation at any time, in whole but not in part, upon
not less than 30 nor more than 60 days' notice, at a redemption price equal to
the then effective Liquidation Preference thereof, plus all accumulated and
unpaid dividends thereon to the redemption date if, as a result of any change
in or amendment to the laws or any regulations or ruling promulgated thereunder
of (x) Bermuda or any political subdivision or governmental authority thereof
or therein having the power to tax, (y) any jurisdiction, other than the United
States, from or through which payment on the Preferred Stock is made by the
Company or a successor corporation, or its paying agent in its capacity as such
or any political subdivision or governmental authority thereof or therein
having the power to tax or (z) any other jurisdiction, other than the United
States, in which the Company or a successor corporation is organized, or any
political subdivision or governmental authority thereof or therein having the
power to tax, or any change in the official application or interpretation of
such laws, regulations or rulings, or any change in the official application or
interpretation of, or any execution of or amendment to, any treaty or treaties
affecting
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<PAGE>
taxation to which such jurisdiction (or such political subdivision or taxing
authority) is a party (a "Change in Tax Law"), which becomes effective on or
after the date hereof, the Company or a successor corporation is or would be
required on the next succeeding dividend payment date to pay Additional Amounts
with respect to the Preferred Stock (as described under "--Payment of
Additional Amounts"), and the payment of such Additional Amounts cannot be
avoided by the use of any reasonable measures available to the Company or a
successor corporation.
In addition, the Preferred Stock will be subject to redemption at the option
of the Company at any time, in whole but not in part, upon not less than 30 nor
more than 60 days' notice, at a redemption price equal to the then effective
Liquidation Preference thereof, plus all accumulated and unpaid dividends
thereon to the redemption date, if the Person formed by a consolidation or
amalgamation of the Company or into which the Company is merged or to which the
Company conveys, transfers or leases its properties and assets substantially as
an entirety is required, as a consequence of such consolidation, amalgamation,
merger, conveyance, transfer or lease and as a consequence of a Change in Tax
Law occurring after the date of such consolidation, amalgamation, merger,
conveyance, transfer or lease, to pay Additional Amounts in respect of any tax,
assessment or governmental charge imposed on any Holder of Preferred Stock.
Payment of Additional Amounts
If any deduction or withholding for any present or future taxes, assessments
or other governmental charges of (x) Bermuda or any political subdivision or
governmental authority thereof or therein having power to tax, (y) any
jurisdiction, other than the United States, from or through which payment on
the Preferred Stock is made by the Company or a successor corporation, or its
paying agent in its capacity as such or any political subdivision or
governmental authority thereof or therein having the power to tax or (z) any
other jurisdiction, other than the United States, in which the Company or a
successor corporation is organized, or any political subdivision or
governmental authority thereof or therein having the power to tax shall at any
time be required by such jurisdiction (or any such political subdivision or
taxing authority) in respect of any amounts to be paid by the Company or a
successor corporation with respect to the Preferred Stock, the Company or a
successor corporation will pay to each Holder of Preferred Stock as additional
dividends, such additional amounts ("Additional Amounts") as may be necessary
in order that the net amounts paid to such holder of such Preferred Stock who,
with respect to any such tax, assessment or other governmental charge, is not
resident in, or a citizen of, such jurisdiction, after such deduction or
withholding, shall be not less than the amount specified in such Preferred
Stock to which such Holder is entitled; provided, however, that the Company or
a successor corporation shall not be required to make any payment of Additional
Amounts for or on account of:
(i) Any tax, assessment or other governmental charge that would not have
been imposed but for (a) the existence of any present or former
connection between such Holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of a power over,
such Holder, if such Holder is an estate, trust, partnership, limited
liability company or corporation) and the taxing jurisdiction or any
political subdivision or territory or possession thereof or area subject
to its jurisdiction, including, without limitation, such Holder (or such
fiduciary, settlor, beneficiary, member, shareholder or possessor) being
or having been a citizen or resident thereof or being or having been
present or engaged in a trade or business therein or having or having
had a permanent establishment therein, (b) the presentation of Preferred
Stock (where presentation is required) for payment on a date more than
30 days after (x) the date on which such payment became due and payable
or (y) the date on which payment thereof is duly provided for, whichever
occurs later, or (c) the presentation of Preferred Stock for payment in
Bermuda or any political subdivision thereof or therein, unless such
Preferred Stock could not have been presented for payment elsewhere;
(ii) Any estate, inheritance, gift, sales, transfer, personal property or
similar tax, assessment or other governmental charge;
(iii) Any tax, assessment or other governmental charge that is payable
otherwise than by withholding from payment of the Liquidation
Preference of or any dividends on the Preferred Stock;
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(iv) Any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure by the Holder or the beneficial owner
of the Preferred Stock to comply with a request of the Company addressed
to the Holder (a) to provide information, documents or other evidence
concerning the nationality, residence or identity of the Holder or such
beneficial owner or (b) to make and deliver any declaration or other
similar claim (other than a claim for refund of a tax, assessment or
other governmental charge withheld by the Company) or satisfy any
information or reporting requirements, which, in the case of (a) or (b),
is required or imposed by a statute, treaty, regulation or
administrative practice of the taxing jurisdiction as a precondition to
exemption from all or part of such tax, assessment or other governmental
charge; or
(v) Any combination of items (i), (ii), (iii) and (iv) above;
nor shall Additional Amounts be paid with respect to any payment of the
Liquidation Preference of or dividends on any Preferred Stock to any Holder who
is a fiduciary or partnership or limited liability company or other than the
sole beneficial owner of such payment to the extent such payment would be
required by the laws of (x) Bermuda or any political subdivision or
governmental authority thereof or therein having the power to tax, (y) any
jurisdiction, other than the United States, from or through which payment on
the Preferred Stock is made by the Company or a successor corporation, or its
paying agent in its capacity as such or any political subdivision or
governmental authority thereof or therein having the power to tax or (z) any
other jurisdiction, other than the United States, in which the Company or a
successor corporation is organized, or any political subdivision or
governmental authority thereof or therein having the power to tax to be
included in the income for tax purposes of a beneficiary or settlor with
respect to such fiduciary or a member of such partnership, limited liability
company or beneficial owner who would not have been entitled to such Additional
Amounts had it been the Holder of such Preferred Stock.
The Company shall provide the Transfer Agent with the official acknowledgment
of the relevant taxing authority (or, if such acknowledgment is not available,
a certified copy thereof) evidencing the payment of the withholding taxes, if
any, by the Company. Copies of such documentation shall be made available to
the Holders of the Preferred Stock or the Transfer Agent, as applicable, upon
request therefor.
All references herein to dividends on the Preferred Stock shall include any
Additional Amounts payable by the Company in respect of such Preferred Stock.
VOTING RIGHTS; AMENDMENT
Holders of record of the Preferred Stock will have no voting rights, except
as required by law and as provided in the Bye-laws. The Bye-laws, however, will
provide that upon: (i) the accumulation of unpaid dividends (and, if beginning
on June 1, 2002, such dividends are not paid in cash) on the outstanding
Preferred Stock in an amount equal to three semi-annual dividend payments
(whether or not consecutive); (ii) failure by the Company to satisfy any
repurchase obligation (including, without limitation, pursuant to any required
Change of Control Offer) or mandatory redemption obligation with respect to the
Preferred Stock; (iii) failure by the Company to comply with the provisions
described below under the caption "--Repurchase at the Option of Holders--
Change of Control"; (iv) failure by the Company for 60 days after notice to
comply with any of its other agreements applicable to the Preferred Stock set
forth in the Bye-laws; or (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company
or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee
now exists, or is created after the Issue Date, which default results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness the maturity of which has been
so accelerated, aggregates $25.0 million or more (each of the events described
in the immediately preceding clauses (i)-(v) being referred to herein as a
"Voting Rights Triggering Event"); then the Holders of a majority of the then
outstanding shares of Preferred Stock, voting as a separate single class, will
be entitled to elect two
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members to the Company's Board of Directors and the number of members of the
Company's Board of Directors will immediately and automatically be increased by
two. Voting rights arising as a result of a Voting Rights Triggering Event will
continue until such time as all dividends in arrears on the Preferred Stock
have been paid in full and all other Voting Rights Triggering Events have been
cured or waived by the Holders of at least a majority of the then outstanding
shares of Preferred Stock, at which time the term of office of any such members
of the Company's Board of Directors so elected shall terminate and such
directors shall be deemed to have resigned.
In addition to the provisions described above under the caption "--Ranking,"
the Bye-laws also will provide that the Company will not, without the approval
of the Holders of at least two-thirds of the then outstanding shares of
Preferred Stock, amend, alter or repeal any of the provisions of the Company's
Bye-laws so as to adversely affect the powers, preferences or rights of the
Holders of the Preferred Stock, or reduce the time for any notice to which the
Holders of the Preferred Stock may be entitled. Subject to the provisions
described above under "--Ranking," the Bye-laws will provide that an amendment
thereof solely to authorize or create, or to increase the amount of Junior
Securities, Parity Securities or Senior Securities, shall not be deemed to
adversely affect the powers, preferences or rights of the Holders of the
Preferred Stock.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of Preferred Stock
will have the right to require the Company to purchase all or any part of such
Holder's Preferred Stock pursuant to the offer described below (the "Change of
Control Offer") at a purchase price in cash (the "Change of Control Payment")
equal to 101% of the then effective Liquidation Preference thereof, plus all
accumulated and unpaid dividends thereon to the date of purchase (subject to
the right of Holders of record on the relevant record date to receive dividends
due on the relevant Dividend Payment Date); provided, however, that the Company
shall not be obligated to repurchase Preferred Stock pursuant to this covenant
in the event that it has exercised its rights to redeem all of the Preferred
Stock as described above under "--Optional Redemption." Within 30 days
following any Change of Control, the Company will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of
Control and offering to purchase such Holder's Preferred Stock on the date
specified in such notice, which date shall be no earlier than 30 and no later
than 60 days from the date such notice is mailed (the "Change of Control
Payment Date"), in accordance with the procedures required by the Bye-laws and
described in such notice.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations to the extent such
laws and regulations are applicable in connection with the purchase of
Preferred Stock as a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with any of the
provisions of this covenant, the Company will comply with the applicable
securities laws and regulations and will be deemed not to have breached its
obligations under this covenant by virtue thereof.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Preferred Stock properly tendered pursuant
to the Change of Control Offer, (2) deposit with the Transfer Agent an amount
equal to the Change of Control Payment in respect of the Preferred Stock so
tendered and (3) deliver or cause to be delivered to the Transfer Agent
Preferred Stock so accepted together with an Officers' Certificate stating the
aggregate Liquidation Preference of Preferred Stock being purchased by the
Company. The Transfer Agent will promptly mail or deliver to each Holder of
Preferred Stock so tendered the Change of Control Payment for such Preferred
Stock, and the Transfer Agent will promptly countersign and mail or deliver (or
cause to be transferred by book-entry) to each Holder new Preferred Stock equal
in Liquidation Preference to any unpurchased portion of Preferred Stock
surrendered, if any. The Company will publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
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The Company will not be required to make a Change of Control Offer upon the
occurrence of a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in the Bye-laws applicable to a Change of Control Offer
made by the Company, and purchases all Preferred Stock validly tendered and not
withdrawn under such Change of Control Offer.
Asset Sales
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, consummate any Asset Sale, unless (i) the Company
(or such Restricted Subsidiary, as the case may be) receives consideration at
the time of such Asset Sale at least equal to the fair market value (as
determined in good faith by the Board of Directors (including as to the value
of all noncash consideration) and set forth in an Officer's Certificate
delivered to the Transfer Agent) of the assets or Equity Interests issued or
sold or otherwise disposed of and (ii) at least 75% of the consideration
therefor is in the form of cash and/or Cash Equivalents, and (iii) the Net
Proceeds received by the Company (or such Restricted Subsidiary, as the case
may be) from such Asset Sale are applied within 360 days following the receipt
of such Net Proceeds (a) first, to the extent the Company (or such Restricted
Subsidiary, as the case may be) elects, to the redemption or repurchase of
outstanding Indebtedness and (b) to the extent of the balance of such Net
Proceeds after application as described in (a) above and to the extent the
Company (or such Restricted Subsidiary, as the case may be) elects, to
reinvest, or enter into a legally binding agreement to reinvest, such Net
Proceeds (or any portion thereof) in assets that are used or useful in a
Permitted Business. The balance of such Net Proceeds, after the application of
such Net Proceeds as described in the immediately preceding clauses (a) and
(b), shall constitute "Excess Proceeds."
When the aggregate amount of Excess Proceeds equals or exceeds $15.0 million
(taking into account income earned on such Excess Proceeds), the Company will
be required to make an offer to all Holders of Preferred Stock (an "Asset Sale
Offer") to purchase the maximum Liquidation Preference of Preferred Stock that
may be purchased out of the Excess Proceeds, at a purchase price in cash in an
amount equal to 100% of the effective Liquidation Preference thereof, plus all
accumulated and unpaid dividends thereon to the date of purchase, in accordance
with the procedures set forth in the Bye-laws. To the extent that any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use
such Excess Proceeds at its discretion. If the aggregate Liquidation Preference
of Preferred Stock tendered into such Asset Sale Offer surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Transfer Agent shall select
the Preferred Stock to be purchased on a pro rata basis. Upon completion of
such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero for
purposes of the first sentence of this paragraph.
The amount of (x) any liabilities (as shown on the Company's (or such
Restricted Subsidiary's, as the case may be) most recent balance sheet) of the
Company or any Restricted Subsidiary (other than contingent liabilities) that
are assumed by the transferee of any such assets pursuant to an agreement that
releases the Company or any Restricted Subsidiary from all liability in respect
thereof, (y) Indebtedness of any Restricted Subsidiary that is no longer a
Restricted Subsidiary as a result of such Asset Sale, to the extent that the
Company and each other Restricted Subsidiary are released from any guarantee of
payment of the principal amount of such Indebtedness in connection with such
Asset Sale and (z) any securities, notes or other obligations received by the
Company (or such Restricted Subsidiary, as the case may be) from such
transferee that are contemporaneously (subject to ordinary settlement periods)
converted by the Company (or such Restricted Subsidiary, as the case may be)
into cash and/or Cash Equivalents (to the extent of the cash and/or Cash
Equivalents received), will be deemed to be cash and/or Cash Equivalents for
purposes of this provision.
CERTAIN COVENANTS
Restricted Payments
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly: (i) declare or pay any dividend or make any other
payment or distribution on account of the Company's or any
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of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving the Company or any of its Restricted Subsidiaries) or to the direct
or indirect holders of the Company's or any of its Restricted Subsidiaries'
Equity Interests (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or to the Company or
a Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving the Company) any Equity Interests of the
Company or any direct or indirect parent of the Company (other than any such
Equity Interests owned by the Company or any Wholly Owned Restricted
Subsidiary of the Company); (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any Junior
Securities (other than dividends or distributions payable in Junior Securities
(other than Disqualified Stock) of the Company or to the Company or a
Restricted Subsidiary of the Company); or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv)
above being collectively referred to as "Restricted Payments"), unless:
(a) at the time of and after giving effect to such Restricted Payment, no
Voting Rights Triggering Event shall have occurred and be continuing or
would occur as a consequence thereof;
(b) in the case of clauses (i), (ii) and (iii) above, and, in the case of
any Restricted Investment that is not an Investment in a Permitted
Business, the Company would, at the time of such Restricted Payment
and after giving pro forma effect thereto as if such Restricted Payment
had been made at the beginning of the applicable four-quarter period,
have been permitted to incur at least $1.00 of additional Indebtedness
pursuant to either clause (i) or (ii) of the first paragraph of the
covenant described below under the caption "--Incurrence of Indebtedness
and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
and any Permitted Investments made pursuant to clause (h) of the
definition of Permitted Investments after the date hereof (excluding
Restricted Payments permitted by clauses (iii), (iv), (v), (vii), (viii)
and (ix) (but, in the case of clause (ix), only to the extent that such
Restricted Payments are reflected as an expense on the income statement
of GCL) of the next succeeding paragraph), is less than the sum, without
duplication, of (i) the remainder of (x) 100% of the cumulative
Consolidated Cash Flow (or, in the case Consolidated Cash Flow shall be
negative, less 100% of such deficit) from the Issue Date through the
last day of the last full fiscal quarter immediately preceding such
Restricted Payment minus (y) the product of 1.5 times the cumulative
Consolidated Interest Expense from the Issue Date through the last day
of the last full fiscal quarter immediately preceding such Restricted
Payment, plus (ii) 100% of the aggregate net cash proceeds and the fair
market value (as determined in good faith by the Board of Directors) of
property or assets received by the Company since the Issue Date as a
contribution to its common equity capital or from the issue or sale of
Equity Interests of the Company (other than Disqualified Stock and
including the Preferred Stock) or from the issue or sale of Disqualified
Stock or debt securities of the Company that have been converted into
such Equity Interests (other than Equity Interests (or Disqualified
Stock or convertible debt securities) sold to a Subsidiary of the
Company), plus the amount of cash or the fair market value (as
determined above) of property or assets received by the Company or any
Restricted Subsidiary upon such conversion or exchange, plus (iii) the
aggregate amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (x) dividends, distributions,
interest payments, return of capital, repayments of Investments or other
transfers of assets to the Company or any Restricted Subsidiary from any
Unrestricted Subsidiary, (y) proceeds realized by the Company or any
Restricted Subsidiary upon the sale of such Investment to a Person other
than GCL, the Company or any Subsidiary of the Company, or (z) the
redesignation of any Unrestricted Subsidiary as a Restricted Subsidiary,
not to exceed in the case of any of the immediately preceding clauses
(x), (y) or (z) the aggregate amount of Restricted Investments made by
the Company or any Restricted Subsidiary in such Unrestricted Subsidiary
after the Issue Date, plus (iv) to the extent that any Restricted
Investment that was made after the Issue Date is sold for cash or
otherwise liquidated or repaid for cash, the amount of proceeds (net of
any cost of disposition) equal to the initial amount of such Restricted
Investment.
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The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the foregoing provisions;
(ii) the payment of any dividend on the Preferred Stock; (iii) the redemption,
repurchase, retirement, defeasance or other acquisition of any subordinated
Indebtedness or Equity Interests of the Company in exchange for, or out of the
net cash proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of, other Equity Interests of the Company (other
than any Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (c)(ii) of the
preceding paragraph; (iv) the defeasance, redemption, retirement, repurchase or
other acquisition of Indebtedness with the net cash proceeds from an incurrence
of Permitted Refinancing Indebtedness; (v) the payment of any dividend by a
Restricted Subsidiary of the Company to the holders of its Equity Interests on
a pro rata basis; (vi) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of GCL, the Company or any of its
Restricted Subsidiaries held by any member of GCL's, the Company's or such
Restricted Subsidiary's management; provided that the aggregate price paid for
all such repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $10.0 million in any twelve-month period (with unused amounts being
carried over to succeeding twelve-month periods, subject to a maximum of $15.0
million in any twelve-month period); (vii) Investments in the PC-1 Companies
and Global Access Limited in an aggregate amount not to exceed $275.0 million;
(viii) Investments made with the net cash proceeds received from an equity
offering made by the Company or GCL (but only to the extent such net cash
proceeds received by GCL were contributed to the Company as common equity
capital) (provided that the amount of any such net cash proceeds that are
utilized for any such Investment shall be excluded from clause (c)(ii) of the
preceding paragraph) plus 50% of the net gain realized and not otherwise
included in Consolidated Cash Flow from the sale of Restricted Investments;
(ix) the payment of any dividend or the making of any distribution to GCL by
the Company or any Restricted Subsidiary to pay or permit GCL to pay any GCL
Expenses or any Related Taxes; and (x) other Restricted Payments in an
aggregate amount not to exceed $25.0 million.
The Board of Directors may not designate any Subsidiary of the Company (other
than a newly created Subsidiary in which no Investment has previously been made
(other than the amount required to capitalize such Subsidiary in connection
with its organization)) as an Unrestricted Subsidiary (a "Designation") unless:
(i) no Voting Rights Triggering Event shall have occurred and be continuing at
the time of or after giving effect to such Designation; (ii) the Company would,
immediately after giving effect to such Designation, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to either clause (i)
or (ii) of the first paragraph of the covenant described below under "--
Incurrence of Indebtedness and Issuance of Preferred Stock" and (iii) the
Company would not be prohibited under the terms of the Preferred Stock from
making an Investment at the time of such Designation (assuming the
effectiveness of such Designation for purposes of clauses (a) and (b) of the
first paragraph of this covenant) in an amount equal to the fair market value
of the net Investment of the Company or any other Restricted Subsidiary in such
Subsidiary on such date.
In the event of any such Designation, all outstanding Investments owned by
the Company and its Restricted Subsidiaries in the Subsidiary so designated
will be deemed to be an Investment made as of the time of such Designation and
will reduce the amount available for Restricted Payments under the first
paragraph of this covenant or Permitted Investments, as applicable. All such
outstanding Investments will be deemed to constitute Restricted Payments in an
amount equal to the fair market value of such Investments at the time of such
Designation.
The terms of the Preferred Stock will further provide that a Designation may
be revoked (a "Revocation") by a resolution of the Board of Directors delivered
to the Transfer Agent, provided that the Company will not make any Revocation
unless: (i) no Voting Rights Triggering Event shall have occurred and be
continuing at the time of or after giving effect to such Designation and (ii)
all Indebtedness of such Unrestricted Subsidiary outstanding immediately
following such Revocation would, if incurred at such time, have been permitted
to be incurred at such time for all purposes under the covenant described below
under "--Incurrence of Indebtedness and Issuance of Preferred Stock."
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The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company (or such
Restricted Subsidiary, as the case may be) pursuant to the Restricted Payment.
The fair market value of any asset(s) or securities that are required to be
valued by this covenant shall be determined in good faith by the Board of
Directors (such determination to be based upon an opinion or appraisal issued
by an accounting, appraisal or investment banking firm of national standing if
such fair market value exceeds $15.0 million).
Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable, contingently or otherwise, with
respect to (collectively, "incur") any Indebtedness (including Acquired Debt)
and the Company will not issue any Disqualified Stock and will not permit any
of its Restricted Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock and its Restricted Subsidiaries may
incur Indebtedness or issue Disqualified Stock or preferred stock if either:
(i) the Consolidated Leverage Ratio is less than 5.5 to 1.0 (prior to
December 1, 2001) or 5.0 to 1.0 (subsequent to December 1, 2001); or
(ii) the Consolidated Capital Ratio is less than 2.5 to 1.0.
Notwithstanding the foregoing, the provisions of the paragraph set forth
above will not apply to the incurrence of any of the following items of
Indebtedness (collectively, "Permitted Indebtedness"):
(a) The incurrence by the Company or any of its Restricted Subsidiaries of
Existing Indebtedness;
(b) The incurrence of Indebtedness by the Company to any Restricted
Subsidiary or Indebtedness of any Restricted Subsidiary to the Company
or any other Restricted Subsidiary (but only for so long as such
Indebtedness is held by the Company or such Restricted Subsidiary);
(c) The issuance by the Company of preferred stock to any other Restricted
Subsidiary or the issuance by any Restricted Subsidiary of preferred
stock to the Company or any other Restricted Subsidiary (but only for so
long as such preferred stock is held by the Company or such Restricted
Subsidiary);
(d) The incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness pursuant to acquisitions of capacity made in the ordinary
course of business;
(e) The incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or
hedging interest or foreign currency exchange rate risk with respect to
any floating rate Indebtedness that is permitted to be outstanding;
(f) The incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness of a Restricted Subsidiary incurred and outstanding on the
date on which such Restricted Subsidiary was acquired by the Company;
provided, however, that at the time such Restricted Subsidiary is
acquired by the Company (giving effect to such acquisition), the Company
would have been able to incur $1.00 of additional Indebtedness pursuant
to the immediately preceding paragraph;
(g) The incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other
than intercompany Indebtedness) that was permitted to be incurred
pursuant to the immediately preceding paragraph hereof or clauses (a),
(f), (g), (h), (j), (m) or (n) of this paragraph;
(h) The incurrence by the Company or any of its Restricted Subsidiaries of
additional Indebtedness not otherwise permitted to be incurred pursuant
to this paragraph in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (h), not to exceed $50.0
million;
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(i) The incurrence of Indebtedness by a Receivables Entity in a Qualified
Receivables Transaction, provided that the proceeds thereof are applied
in accordance with the covenant described above under "--Repurchase at
the Option of Holders--Asset Sales."
(j) The incurrence by the Company or any Restricted Subsidiary of Purchase
Money Indebtedness, provided that the amount of such Purchase Money
Indebtedness does not exceed 100% of the cost of construction,
installation, acquisition, lease, development, design, engineering,
financing, testing, start-up, upgrade, completion or improvement of
assets (together with related costs and expenses) used in the business
of the Company or such Restricted Subsidiary;
(k) Letters of Credit that are cash collateralized;
(l) Letters of Credit in an aggregate principal amount equal to $200.0
million less the amount of outstanding Indebtedness under clause (m) of
this paragraph;
(m) The incurrence by the Company or any of its Restricted Subsidiaries of
revolving credit Indebtedness in an aggregate amount not to exceed
$200.0 million at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (m); and
(n) The guarantee by the Company or any Restricted Subsidiary of
Indebtedness of the Company or any Restricted Subsidiary of the Company
that was permitted to be incurred by another provision of this covenant.
Merger, Consolidation, or Sale of Assets
Without the affirmative vote of the holders of a majority of the then
outstanding shares of Preferred Stock, voting or consenting as a separate
class, the Company may not, directly or indirectly, consolidate or merge with
or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, convey or otherwise dispose of all or substantially all of
its properties or assets, in one or more related transactions, to another
Person unless: (i) the Company is the surviving corporation or the Person
formed by or surviving any such consolidation or merger (if other than the
Company) or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia,
or Bermuda; (ii) the Preferred Stock shall be converted into or exchanged for
and shall become shares of such successor, transferee or resulting Person,
having in respect of such successor, transferee or resulting Person the same
powers, preferences and relative participating, optional or other special
rights and qualifications, limitations or restrictions thereon that the
Preferred Stock had immediately prior to such transactions; (iii) immediately
after such transaction, except in the case of a merger of the Company with or
into a Wholly Owned Restricted Subsidiary of the Company, the Company or the
Person formed by or surviving any such consolidation or merger (if other than
the Company), or to which such sale, assignment, transfer, conveyance or other
disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (B) will,
immediately after such transaction and after giving pro forma effect thereto
and any related financing transactions as if the same had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to either clause (i) or (ii) of the
first paragraph of the covenant described above under "--Incurrence of
Indebtedness and Issuance of Preferred Stock." The terms of the Preferred Stock
will also provide that the Company may not, directly or indirectly, lease all
or substantially all of its properties or assets, in one or more related
transactions, to any other Person.
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any
of its properties or assets to, or purchase any property or assets from, or
enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or
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guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms
that are not materially less favorable to the Company or the relevant
Restricted Subsidiary than those that would have been obtained in a comparable
transaction by the Company or such Restricted Subsidiary with an unrelated
Person and (ii) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $25.0
million, the Company delivers to the Transfer Agent a resolution of the Board
of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction is approved by a majority of the disinterested members of the Board
of Directors and an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view is obtained from an accounting,
appraisal or investment banking firm of national standing. Notwithstanding the
foregoing, the following items shall not be deemed to be Affiliate
Transactions: (i) (a) the entering into, maintaining or performance of any
employment contract, collective bargaining agreement, benefit plan, program or
arrangement, related trust agreement or any other similar arrangement for or
with any employee, officer or director heretofore or hereafter entered into in
the ordinary course of business, including vacation, health, insurance,
deferred compensation, retirement, savings or other similar plans, (b) the
payment of compensation, performance of indemnification or contribution
obligations, or an issuance, grant or award of stock, options, or other equity-
related interests or other securities to employees, officers or directors in
the ordinary course of business, (c) any transaction with an officer or
director in the ordinary course of business not involving more than $250,000 in
any one case, or (d) Management Advances and payments in respect thereof, (ii)
transactions between or among the Company and/or its Restricted Subsidiaries or
any Receivables Entity, (iii) payment of reasonable directors fees, (iv) any
sale or other issuance of Equity Interests (other than Disqualified Stock) of
the Company, (v) Affiliate Transactions in effect or approved by the Board of
Directors on the Issue Date, including any amendments thereto (provided that
the terms of such amendments are not materially less favorable to the Company
or the relevant Restricted Subsidiary than the terms of such agreement prior to
such amendment), (vi) transactions with respect to capacity or dark fiber
between the Company or any Restricted Subsidiary and any Unrestricted
Subsidiary or other Affiliate and joint sales and marketing pursuant to an
agreement or agreements between the Company or any Restricted Subsidiary and
any Unrestricted Subsidiary or other Affiliate (provided that in the case of
this clause (vi), such agreements are on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that could have
been obtained at the time of such transaction in an arm's-length transaction
with an unrelated third party or, in the case of a transaction with an
Unrestricted Subsidiary, are either (x) entered into in connection with a
transaction involving the selection by a customer of cable system capacity
entered into in the ordinary course of business or (y) involve the provision by
the Company or a Restricted Subsidiary to an Unrestricted Subsidiary of sales
and marketing services, operations, administration and maintenance services or
development services for which the Company or such Restricted Subsidiary
receives a fair rate of return (as determined by the Board of Directors and set
forth in an Officers' Certificate delivered to the Transfer Agent) above its
expenses of providing such services; (vii) any transaction entered into in the
ordinary course of business between the Company or any Restricted Subsidiary
and any Unrestricted Subsidiary or any Affiliate (provided that in the case of
this clause (vii), such agreements are on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that could have
been obtained at the time of such transaction in an arm's-length transaction
with an unrelated third party) and (viii) Restricted Payments that are
permitted by the covenant described above under "--Restricted Payments."
Business Activities
The Company will not, and will not permit any of its Restricted Subsidiaries
to, engage in any business other than a Permitted Business.
Reports
Whether or not required by the rules and regulations of the Commission, so
long as any Preferred Stock is outstanding, the Company will furnish to the
Holders of the Preferred Stock (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q
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and 10-K if the Company was required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations of
the Company and its consolidated Subsidiaries and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants, and (ii) all current reports that would be required to be filed
with the Commission on Form 8-K if the Company was required to file such
reports, in each case within the time periods specified in the Commission's
rules and regulations. In addition, following the consummation of the Exchange
Offer contemplated by the Registration Rights Agreement, whether or not
required by the rules and regulations of the Commission, the Company will file
a copy of all such information and reports with the Commission for public
availability within the time periods specified in the Commission's rules and
regulations (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. The Company will be deemed to have satisfied such requirements if GCL
files and provides reports, documents and information of the types otherwise so
required by the Commission, in each case within the applicable time periods,
and the Company is not required by the Commission to file such reports,
documents and information separately under the applicable rules and regulations
of the Commission (after giving effect to any exemptive relief) because of the
filings by GCL. Furthermore, the Company will agree that, for so long as any
Preferred Stock remains outstanding (and regardless of the immediately
preceding sentence), it will furnish to the Holders of the Preferred Stock and
to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
GOVERNING LAW
The terms of the Preferred Stock and the Bye-laws will be governed by the
laws of Bermuda. The Company will submit to the jurisdiction of the U.S.
federal and New York state courts located in the Borough of Manhattan, City and
State of New York for purposes of all legal actions and proceedings instituted
in connection with the Preferred Stock and the Bye-laws. The Company has
appointed CT Corporation System as its authorized agent upon which process may
be served in any such action. See "Service of Process and Enforcement of
Liabilities."
CURRENCY INDEMNITY
U.S. dollars are the sole currency of account and payment for all sums
payable by the Company under or in connection with the Preferred Stock (except
for dividends thereon prior to June 1, 2002 which may be paid in additional
shares of Preferred Stock), including damages. Any account received or
recovered in a currency other than dollars (whether as a result of, or the
enforcement of, a judgment or order of a court of any jurisdiction, in the
liquidation, dissolution or other winding-up of the affairs of the Company or
otherwise) by any Holder of Preferred Stock in respect of any sum expressed to
be due to it from the Company shall only constitute a discharge to the Company
to the extent of the dollar amount which the recipient is able to purchase with
the amount so received or recovered in that other currency on the date of that
receipt or recovery (or, if it is not practicable to make that purchase on that
date, on the first date on which it is practicable to do so). If that dollar
amount is less than the dollar amount expressed to be due to the recipient with
respect to the Preferred Stock, the Company shall indemnify it against any loss
sustained by it as a result. In any event, the Company shall indemnify the
recipient against the cost of making any such purchase. For the purposes of
this paragraph, it will be sufficient for the Holder of Preferred Stock to
certify in a satisfactory manner (indicating the sources of information used)
that it would have suffered a loss had an actual purchase of dollars been made
with the amount so received in that other currency on the date of receipt or
recovery (or, if a purchase of dollars on such date had not been practicable,
on the first date on which it would have been practicable, it being required
that the need for a change of date be certified in the manner mentioned above).
These indemnities constitute a separate and independent obligation from the
Company's other obligations, shall give rise to a separate and independent
cause of action, shall apply irrespective of any indulgence granted by any
Holder of Preferred Stock and shall constitute in full force and effect despite
any other judgment, order, claim or proof for a liquidated amount in respect of
any sum due under the Preferred Stock.
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CERTAIN DEFINITIONS
See "Description of Exchange Notes--Certain Definitions" for a description of
certain defined terms used herein.
BOOK-ENTRY, DELIVERY AND FORM
The Exchange Preferred Stock will be represented by one or more permanent
global stock certificates in fully registered form (the "Global Security"),
which will be deposited with the Transfer Agent as custodian for DTC and
registered in the name of DTC or of a nominee of DTC.
DTC has advised the Company that it is (i) a limited purpose company
organized under the laws of the State of New York, (ii) a "banking
organization" within the meaning of the New York Banking Law, (iii) a member of
the Federal Reserve System, (iv) a "clearing corporation" within the meaning of
the Uniform Commercial Code, as amended, and (v) a "clearing agency" registered
pursuant to Section 17A of the Exchange Act. DTC was created to hold securities
for its Participants and to facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
charges to the accounts of its Participants, thereby eliminating the need for
physical transfer and delivery of certificates. DTC's Participants include
securities brokers and dealers (including the initial purchasers), banks and
trust companies, clearing corporations and certain other organizations.
Indirect access to DTC's system is also available to other entities such as
banks, brokers, dealers and trust companies (collectively, the "Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Investors who are not Participants
may beneficially own securities held by or on behalf of DTC only through
Participants or Indirect Participants.
The Company expects that pursuant to procedures established by DTC (i) upon
issuance of a Global Security, DTC will credit, on its internal system, the
aggregate Liquidation Preference of the Exchange Preferred Stock of the
individual beneficial interests represented by such Global Security to the
respective accounts of persons who have accounts with such depository and (ii)
ownership of beneficial interests in such Global Security will be shown on, and
the transfer of such ownership will be effected only though, records maintained
by DTC (with respect to interest of Participants) and the records of
Participants and Indirect Participants (with respect to interests of persons
other than Participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of securities is definitive form.
Accordingly, the ability to transfer interests in the Preferred Stock
represented by a Global Security to such persons may be limited. In addition,
because DTC can act only on behalf of its Participants, who in turn act on
behalf of persons who hold interests through Participants, the ability of a
person having an interest in Preferred Stock represented by a Global Security
to pledge or transfer such interest to persons or entities that do not
participate in DTC's system, or to otherwise take actions in respect of such
interest, may be affected by the lack of a physical definitive security in
respect of such interest.
So long as DTC or its nominee is the registered owner of a Global Security,
DTC or such nominee, as the case may be, will be considered to be the sole
owner or holder of the Preferred Stock represented by the Global Security for
all purposes under the Bye-laws. Except as provided below, owners of beneficial
interests in a Global Security will not be entitled to have Exchange Preferred
Stock represented by such Global Security registered in their names, will not
receive or be entitled to receive physical delivery of Exchange Preferred Stock
certificates, and will not be considered the owners or holders thereof under
the Bye-laws for any purpose. Accordingly, each holder owning a beneficial
interest in a Global Security must rely on the procedures of DTC and, if such
holder is not a Participant or an Indirect Participant, on the procedures of
the Participant through which such holder owns its interest, to exercise any
rights of a holder of Exchange Preferred Stock under the Bye-laws or such
Global Security. The Company understands that under existing industry practice,
in the event that the Company requests any action of holders of Exchange
Preferred Stock, or a holder that is an owner of a beneficial interest in a
Global Security desires to take any action that DTC, as the holder of such
Global
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Security, is entitled to take, DTC would authorize the Participants to take
such action and the Participants would authorize holders owning through such
Participants to take such action or would otherwise act upon the instruction of
such holders. Neither the Company nor the Transfer Agent will have any
responsibility or liability for any aspect of the records relating to, or
payments made on account of, Exchange Preferred Stock by DTC, or for
maintaining, supervising or reviewing any records of DTC relating to such
Exchange Preferred Stock.
Payments with respect to the Liquidation Preference of and dividends on the
Preferred Stock represented by a Global Security registered in the name of DTC
or its nominee on the applicable record date will be payable at the direction
of DTC or its nominee in its capacity as the registered holder of the Global
Security representing the Exchange Preferred Stock. Under the terms of the Bye-
laws, the Company may treat the persons in whose names the Exchange Preferred
Stock, including the Global Security, are registered as the owners thereof for
the purpose of receiving payment thereon and for any and all other purposes
whatsoever. Accordingly, neither the Company nor the Transfer Agent has or will
have any responsibility or liability for the payment of such amounts to owners
of beneficial interests in a Global Security. Payments by the Participants and
the Indirect Participants to the owners of beneficial interests in a Global
Security will be governed by standing instructions and customary industry
practice and will be the responsibility of the Participants or the Indirect
Participants and DTC.
DTC management is aware that some computer applications, systems, and the
like for processing data ("Systems") that are dependent upon calendar dates,
including dates before, on, and after January 1, 2000, may encounter "Year 2000
problems." DTC has informed its Participants and other members of the financial
community (the "Industry") that it has developed and is implementing a program
so that its Systems, as the same relate to the timely payment of distributions
(including principal and income payments) to securityholders, book-entry
deliveries, and settlement of trades within DTC, continue to function
appropriately. This program includes a technical assessment and a remediation
plan, each of which is complete. Additionally, DTC's plan includes a testing
phase, which is expected to be completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the Industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires services to:
(i) impress upon them the importance of such services being Year 2000
compliant; and (ii) determine the extent of their efforts for Year 2000
remediation (and, as appropriate, testing) of their services. In addition, DTC
is in the process of developing such contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended to
serve as a representation, warranty or contract modification of any kind.
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DESCRIPTION OF EXCHANGE NOTES
GENERAL
If and when issued, the New Exchange Notes will be issued pursuant to an
indenture, to be dated as of the date of first issuance (the "Exchange Date")
of the New Exchange Notes (the "Indenture"), between the Company and a trustee.
The terms of the New Exchange Notes will include those stated in the Indenture
and those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). The New Exchange Notes will be
subject to all such terms, and Holders of Exchange Notes are referred to the
Indenture and the Trust Indenture Act for a statement thereof. A copy of a form
of the Indenture is an exhibit to the registration statement of which this
prospectus is a part. The following summary of the material provisions of the
Indenture does not purport to be complete and is qualified in its entirety by
reference to the Indenture, including the definitions therein of certain terms
used below. The definitions of certain terms used in the following summary are
set forth below under "--Certain Definitions." For purposes of this summary,
the term "Company" refers only to Global Crossing Holdings Ltd. and not to any
of its Subsidiaries or GCL, and references to the Notes shall be deemed to
include the Old Exchange Notes and the New Exchange Notes.
TERMS OF NOTES
The Notes will be general unsecured obligations of the Company and will be
subordinated in right of payment to all existing and future Senior Debt. As of
September 30, 1998 the Company would have had Senior Debt outstanding of
approximately $1,213 million. The Indenture will permit the Company to incur
additional Senior Debt in the future.
The Company conducts substantially all of its operations through its
Subsidiaries and, therefore, the Company is dependent on the cash flow of its
Subsidiaries to meet its obligations, including its obligations with respect to
the Notes. The Notes will be effectively subordinated to all Indebtedness and
other liabilities and commitments (including trade payables and lease
obligations) of the Company's Subsidiaries. Any right of the Company to receive
assets of any of its Subsidiaries upon the latter's liquidation or
reorganization (and the consequent right of the Holders of the Notes to
participate in those assets) will be effectively subordinated to the claims of
that Subsidiary's creditors, except to the extent that the Company is itself
recognized as a creditor of such Subsidiary, in which case the claims of the
Company would still be subordinate to any security in the assets of such
Subsidiary and any indebtedness of such Subsidiary that is senior to that held
by the Company. As of September 30, 1998, the Company's Subsidiaries had
approximately $531.4 million of Indebtedness and other liabilities (including
trade payables and lease obligations) outstanding, to which the Notes would
have been effectively subordinated had they been outstanding on September 30,
1998. See "Risk Factors--Covenant Restrictions."
PRINCIPAL, MATURITY AND INTEREST
The Notes will mature on December 1, 2008. Interest on the Notes will accrue
at the rate of 10 1/2% per annum and will be payable semi-annually in arrears
on June 1 and December 1 of each year that the Notes are outstanding to Holders
of record on the immediately preceding May 15 and November 15. Before June 1,
2002, the Company may elect to pay interest in cash or additional Exchange
Notes. On or after June 1, 2002, the Company is required to pay interest only
in cash. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal, premium, if any, and interest on
the Notes will be payable at the office or agency of the Company maintained for
such purpose within the City and State of New York or, at the option of the
Company, payment of interest on the Notes may be made by check mailed to the
Holders of the Notes at their respective addresses set forth in the register of
Holders of Notes; provided that all payments of principal, premium, if any, and
interest on Notes the Holders of which have given wire transfer instructions to
the Company will be required to be made by wire transfer of
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immediately available funds to the accounts specified by the Holders thereof.
Until otherwise designated by the Company, the Company's office or agency in
New York will be the office of the Trustee maintained for such purpose. The
Notes will be issued in denominations of $1,000 and integral multiples thereof.
The Trustee initially will be Paying Agent and Registrar under the Indenture,
and the Company may act as Paying Agent or Registrar under the Indenture.
The interest rate on the Notes is subject to increase under certain
circumstances, as set forth herein under "--Exchange Offer; Registration
Rights." All references herein to interest shall be deemed to include any
special interest which may become payable on the Notes.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the Notes will
be subordinated in right of payment, as set forth in the Indenture, to the
prior payment in full in cash of all Senior Debt, whether outstanding on the
date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Debt will be entitled to receive
payment in full in cash of all Obligations due in respect of such Senior Debt
(including interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before the Holders of the Notes will
be entitled to receive any payment with respect to the Notes, and until all
Obligations with respect to Senior Debt are paid in full, in cash, any
distribution to which the Holders of the Notes would be entitled shall be made
to the holders of Senior Debt (except that Holders of the Notes may receive and
retain Permitted Junior Securities and payments made from the trust described
below under "--Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described below under
"--Legal Defeasance and Covenant Defeasance") if (i) a default in the payment
of the principal of, premium, if any, or interest on Designated Senior Debt
occurs and is continuing beyond any applicable period of grace or (ii) any
other default occurs and is continuing with respect to Designated Senior Debt
that permits holders of the Designated Senior Debt as to which such default
relates to accelerate its maturity and the Trustee receives a notice of such
default (a "Payment Blockage Notice") from the Company or the holders of any
Designated Senior Debt. Payments on the Notes may and shall be resumed (a) in
the case of a payment default, upon the date on which such default is cured or
waived and (b) in case of a nonpayment default, the earlier of the date on
which such nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the maturity
of any Designated Senior Debt has been accelerated. No new period of payment
blockage may be commenced unless and until (i) 360 days have elapsed since the
effectiveness of the immediately prior Payment Blockage Notice and (ii) all
scheduled payments of principal, premium, if any, and interest on the Notes
that have come due have been paid in full in cash. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee shall be, or be made, the basis for a subsequent Payment
Blockage Notice unless such default shall have been waived for a period of not
less than 90 days.
The Indenture will further require that the Company promptly notify holders
of Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of the Notes may recover less ratably than
creditors of the Company who are holders of Senior Debt. See "Risk Factors--
Ranking of Securities; Holding Company Structure; Dividend Payment
Restrictions."
OPTIONAL REDEMPTION
Except as set forth below and under "--Optional Tax Redemption," the Notes
will not be redeemable at the Company's option prior to December 1, 2003.
Thereafter, the Notes will be subject to redemption at any
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time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on December 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003.............................. 105.250%
2004.............................. 103.500%
2005.............................. 101.750%
2006 and thereafter............... 100.000%
=======
</TABLE>
Notwithstanding the foregoing, at any time prior to December 1, 2001, the
Company may, on any one or more occasions, redeem up to 35% of the aggregate
principal amount of Notes originally issued pursuant to the Indenture at a
redemption price equal to 110.500% of the principal amount thereof, plus
accrued and unpaid interest thereon to the redemption date, with the net cash
proceeds received from one or more equity offerings made by the Company or GCL
(to the extent such net cash proceeds received by GCL were contributed to the
Company as common equity capital); provided that at least 65% of the then
effective aggregate principal amount of Notes originally issued pursuant to the
Indenture remains outstanding immediately after the occurrence of any such
redemption. The Company may make any such redemption upon not less than 30 nor
more than 60 days' notice (but in no event more than 90 days after the closing
of the related equity offering). Any such notice may be given prior to the
completion of the related equity offering and any such redemption may, at the
Company's discretion, be subject to the satisfaction of one or more conditions
precedent, including, but not limited to, the completion of the related equity
offering.
In addition, at any time prior to December 1, 2003, the Notes may also be
redeemed at the option of the Company, in whole but not in part, upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice (but in no event may any such redemption occur more than 90 days
after the occurrence of such Change of Control) mailed by first-class mail to
each Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof, plus the Applicable Premium as of, and accrued and
unpaid interest thereon to, the date of redemption (the "Redemption Date).
"Applicable Premium" means, with respect to any Note on any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Note or (ii) the excess
of (A) the present value at such Redemption Date of (1) the redemption price of
such Note at December 1, 2003 (such redemption price being set forth in the
table above) plus (2) all required interest payments due on such Note through
December 1, 2003 (excluding accrued but unpaid interest), computed using a
discount rate equal to the Treasury Rate plus 50 basis points over (B) the
principal amount of such Note, if greater.
"Treasury Rate" means, as of any Redemption Date, the yield to maturity as of
such Redemption Date of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data))
most nearly equal to the period from the Redemption Date to December 1, 2003;
provided, however, that if the period from the Redemption Date to December 1,
2003 is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used.
OPTIONAL TAX REDEMPTION
The Notes will be subject to redemption at the option of the Company or a
successor corporation at any time, in whole but not in part, upon not less than
30 nor more than 60 days' notice, at a redemption price equal to the principal
amount thereof, plus accrued and unpaid interest thereon to the redemption date
if, as a result
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of any change in or amendment to the laws or any regulations or ruling
promulgated thereunder of (x) Bermuda or any political subdivision or
governmental authority thereof or therein having the power to tax, (y) any
jurisdiction, other than the United States, from or through which payment on
the Notes is made by the Company or a successor corporation, or its paying
agent in its capacity as such or any political subdivision or governmental
authority thereof or therein having the power to tax or (z) any other
jurisdiction, other than the United States, in which the Company or a successor
corporation is organized, or any political subdivision or governmental
authority thereof or therein having the power to tax, or any change in the
official application or interpretation of such laws, regulations or rulings, or
any change in the official application or interpretation of, or any execution
of or amendment to, any treaty or treaties affecting taxation to which such
jurisdiction (or such political subdivision or taxing authority) is a party (a
"Change in Tax Law"), which becomes effective on or after the Issue Date, the
Company or a successor corporation is or would be required on the next
succeeding interest payment date to pay Additional Amounts with respect to the
Notes (as described under "--Payment of Additional Amounts"), and the payment
of such Additional Amounts cannot be avoided by the use of any reasonable
measures available to the Company or a successor corporation.
In addition, the Notes will be subject to redemption at the option of the
Company at any time, in whole but not in part, upon not less than 30 nor more
than 60 days' notice, at a redemption price equal to the principal amount
thereof, plus accrued and unpaid interest thereon to the redemption date, if
the Person formed by a consolidation or amalgamation of the Company or into
which the Company is merged or to which the Company conveys, transfers or
leases its properties and assets substantially as an entirety is required, as a
consequence of such consolidation, amalgamation, merger, conveyance, transfer
or lease and as a consequence of a Change in Tax Law occurring after the date
of such consolidation, amalgamation, merger, conveyance, transfer or lease, to
pay Additional Amounts in respect of any tax, assessment or governmental charge
imposed on any Holder of Notes.
PAYMENT OF ADDITIONAL AMOUNTS
If any deduction or withholding for any present or future taxes, assessments
or other governmental charges of (x) Bermuda or any political subdivision or
governmental authority thereof or therein having power to tax, (y) any
jurisdiction, other than the United States, from or through which payment on
the Notes is made by the Company or a successor corporation, or its paying
agent in its capacity as such or any political subdivision or governmental
authority thereof or therein having the power to tax or (z) any other
jurisdiction, other than the United States, in which the Company or a successor
corporation is organized, or any political subdivision or governmental
authority thereof or therein having the power to tax shall at any time be
required by such jurisdiction (or any such political subdivision or taxing
authority) in respect of any amounts to be paid by the Company or a successor
corporation under the Notes, the Company or a successor corporation will pay to
each Holder of Notes as additional interest, such additional amounts
("Additional Amounts") as may be necessary in order that the net amounts paid
to such holder of such Notes who, with respect to any such tax, assessment or
other governmental charge, is not resident in, or a citizen of, such
jurisdiction, after such deduction or withholding, shall be not less than the
amount specified in such Notes to which such Holder is entitled; provided,
however, that the Company or a successor corporation shall not be required to
make any payment of Additional Amounts for or on account of:
(i) Any tax, assessment or other governmental charge that would not have
been imposed but for (a) the existence of any present or former connection
between such Holder (or between a fiduciary, settlor, beneficiary, member
or shareholder of, or possessor of a power over, such Holder, if such
Holder is an estate, trust, partnership, limited liability company or
corporation) and the taxing jurisdiction or any political subdivision or
territory or possession thereof or area subject to its jurisdiction,
including, without limitation, such Holder (or such fiduciary, settlor,
beneficiary, member, shareholder or possessor) being or having been a
citizen or resident thereof or being or having been present or engaged in a
trade or business therein or having or having had a permanent establishment
therein, (b) the presentation of a Note (where presentation is required)
for payment on a date more than 30 days after (x) the date on which such
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payment became due and payable or (y) the date on which payment thereof is
duly provided for, whichever occurs later, or (c) the presentation of a
Note for payment in Bermuda or any political subdivision thereof or
therein, unless such Note could not have been presented for payment
elsewhere;
(ii) Any estate, inheritance, gift, sales, transfer, personal property or
similar tax, assessment or other governmental charge;
(iii) Any tax, assessment or other governmental charge that is payable
otherwise than by withholding from payment of principal of, premium, if
any, or any interest on the Notes;
(iv) Any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure by the Holder or the beneficial owner of
the Note to comply with a request of the Company addressed to the Holder
(a) to provide information, documents or other evidence concerning the
nationality, residence or identity of the Holder or such beneficial owner
or (b) to make and deliver any declaration or other similar claim (other
than a claim for refund of a tax, assessment or other governmental charge
withheld by the Company) or satisfy any information or reporting
requirements, which, in the case of (a) or (b), is required
or imposed by a statute, treaty, regulation or administrative practice of
the taxing jurisdiction as a precondition to exemption from all or part of
such tax, assessment or other governmental charge; or
(v) Any combination of items (i), (ii), (iii) and (iv) above;
nor shall Additional Amounts be paid with respect to any payment of the
principal of, or any premium or interest on, any Note to any Holder who is a
fiduciary or partnership or limited liability company or other than the sole
beneficial owner of such payment to the extent such payment would be required
by the laws of (x) Bermuda or any political subdivision or governmental
authority thereof or therein having the power to tax, (y) any jurisdiction,
other than the United States, from or through which payment on the Notes is
made by the Company or a successor corporation, or its paying agent in its
capacity as such or any political subdivision or governmental authority thereof
or therein having the power to tax or (z) any other jurisdiction, other than
the United States, in which the Company or a successor corporation is
organized, or any political subdivision or governmental authority thereof or
therein having the power to tax to be included in the income for tax purposes
of a beneficiary or settlor with respect to such fiduciary or a member of such
partnership, limited liability company or beneficial owner who would not have
been entitled to such Additional Amounts had it been the Holder of such Note.
The Company shall provide the Trustee with the official acknowledgment of the
relevant taxing authority (or, if such acknowledgment is not available, a
certified copy thereof) evidencing the payment of the withholding taxes, if
any, by the Company. Copies of such documentation shall be made available to
the Holders of the Notes or the Paying Agent, as applicable, upon request
therefor.
All references herein to principal of, premium, if any, and interest on the
Notes shall include any Additional Amounts payable by the Company in respect of
such principal, such premium, if any, and such interest.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the trustee in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are then listed, or, if the Notes are not so then listed, on a pro
rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate; provided that no Notes of $1,000 or less shall be redeemed in
part. Notices of redemption shall be mailed by first class mail at least 30 but
not more than 60 days prior to the redemption date to each Holder of Notes to
be redeemed at its registered address. Notices of redemption may not be
conditional. If any Note is to be redeemed in part only, the notice of
redemption that relates to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in
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principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. Notes called
for redemption will become due on the date fixed for redemption. On and after
the redemption date, interest will cease to accrue on Notes or portions thereof
called for redemption.
MANDATORY REDEMPTION
Except as set forth below under "--Repurchase at the Option of Holders," the
Company will not be required to make mandatory redemption or sinking fund
payments with respect to the Notes.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Company to purchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at a purchase price in cash
(the "Change of Control Payment") equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest thereon to the date of
purchase (subject to the right of Holders of record on the relevant record date
to receive interest due on the relevant interest payment date); provided,
however, that the Company shall not be obligated to repurchase Notes pursuant
to this covenant in the event that it has exercised its rights to redeem all of
the Notes as described above under "--Optional Redemption." Within 30 days
following any Change of Control, the Company will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of
Control and offering to purchase Notes on the date specified in such notice,
which date shall be no earlier than 30 and no later than 60 days from the date
such notice is mailed (the "Change of Control Payment Date"), in accordance
with the procedures required by the Indenture and described in such notice.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations to the extent such
laws and regulations are applicable in connection with the purchase of Notes as
a result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with any of the provisions of this
covenant, the Company will comply with the applicable securities laws and
regulations and will be deemed not to have breached its obligations under this
covenant by virtue thereof.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail or deliver to each Holder of Notes
so tendered the Change of Control Payment for such Notes, and the Trustee will
promptly authenticate and mail or deliver (or cause to be transferred by book
entry) to each Holder a new Note equal in principal amount to any unpurchased
portion of Notes surrendered, if any; provided that each such new Note will be
in a principal amount of $1,000 or an integral multiple thereof. The Indenture
will provide that, prior to complying with the provisions of this covenant, but
in any event within 90 days following a Change of Control, the Company will
either repay all outstanding Senior Debt or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Debt to permit the
repurchase of Notes required by this covenant. The Company will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture will not
contain provisions that permit the Holders of the Notes to require that the
Company purchase or
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redeem the Notes in the event of a takeover, recapitalization or similar
transaction. In addition, due to a Change of Control repayment provision in the
Senior Notes Indenture, the Company may be unable to repurchase all of the
Notes tendered upon the occurrence of a Change of Control. Furthermore, the
Company's ability to purchase Notes upon a Change of Control may be limited by
the Company's then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any such required
purchases. See "Risk Factors--Purchase of Securities Upon a Change of Control."
Any future credit agreements or other agreements relating to Senior Debt to
which the Company becomes a party may contain provisions that prohibit or
restrict the Company from repurchasing Notes. In the event a Change of Control
occurs at a time when the Company is prohibited or restricted from purchasing
Notes, the Company could seek the consent of its lenders to the purchase of
Notes or could attempt to refinance the borrowings that contain such
prohibition or restriction. If the Company does not obtain such a consent or
repay such borrowings, the Company will remain prohibited or restricted from
purchasing Notes. In such case, the Company's failure to purchase tendered
Notes would constitute an Event of Default under the Indenture which would, in
turn, likely constitute a default under any future credit agreement or other
agreements relating to Senior Debt to which the Company becomes a party. In
such circumstances, the subordination provisions in the Indenture would likely
restrict payments to the Holders of Notes.
The Company will not be required to make a Change of Control Offer upon the
occurrence of a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in the Indenture applicable to a
Change of Control Offer made by the Company, and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
Asset Sales
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, consummate any Asset Sale, unless (i) the Company
(or such Restricted Subsidiary, as the case may be) receives consideration at
the time of such Asset Sale at least equal to the fair market value (as
determined in good faith by the Board of Directors (including as to the value
of all noncash consideration) and set forth in an Officer's Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor is in
the form of cash and/or Cash Equivalents, and (iii) the Net Proceeds received
by the Company (or such Restricted Subsidiary, as the case may be) from such
Asset Sale are applied within 360 days following the receipt of such Net
Proceeds (a) first, to the extent the Company (or such Restricted Subsidiary,
as the case may be) elects, to the redemption or repurchase of outstanding
Senior Debt and (b) to the extent of the balance of such Net Proceeds after
application as described in (a) above and to the extent the Company (or such
Restricted Subsidiary, as the case may be) elects, to reinvest, or enter into a
legally binding agreement to reinvest, such Net Proceeds (or any portion
thereof) in assets that are used or useful in a Permitted Business. The balance
of such Net Proceeds, after the application of such Net Proceeds as described
in the immediately preceding clauses (a) and (b), shall constitute "Excess
Proceeds."
When the aggregate amount of Excess Proceeds equals or exceeds $15.0 million
(taking into account income earned on such Excess Proceeds), the Company will
be required to make an offer to all Holders of Notes and pari passu
Indebtedness (an "Asset Sale Offer") to purchase the maximum principal amount
of Notes and pari passu Indebtedness that may be purchased out of the Excess
Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest thereon to the date
of purchase, in accordance with the procedures set forth in the Indenture and
the agreements governing such pari passu Indebtedness. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by the
Indenture. If the aggregate principal amount of Notes and pari passu
Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
pari passu Indebtedness to be purchased on a pro rata basis. Upon completion of
such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero for
purposes of the first sentence of this paragraph.
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The amount of (x) any liabilities (as shown on the Company's (or such
Restricted Subsidiary's, as the case may be) most recent balance sheet) of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to an
agreement that releases the Company or any Restricted Subsidiary from all
liability in respect thereof, (y) Indebtedness of any Restricted Subsidiary
that is no longer a Restricted Subsidiary as a result of such Asset Sale, to
the extent that the Company and each other Restricted Subsidiary are released
from any guarantee of payment of the principal amount of such Indebtedness in
connection with such Asset Sale and (z) any securities, notes or other
obligations received by the Company (or such Restricted Subsidiary, as the case
may be) from such transferee that are contemporaneously (subject to ordinary
settlement periods) converted by the Company (or such Restricted Subsidiary, as
the case may be) into cash and/or Cash Equivalents (to the extent of the cash
and/or Cash Equivalents received), will be deemed to be cash and/or Cash
Equivalents for purposes of this provision.
CERTAIN COVENANTS
Restricted Payments
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly: (i) declare or pay any dividend or make any other
payment or distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Company or any of its
Restricted Subsidiaries) or to the direct or indirect holders of the Company's
or any of its Restricted Subsidiaries' Equity Interests (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or to the Company or a Restricted Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent
of the Company (other than any such Equity Interests owned by the Company or
any Wholly Owned Restricted Subsidiary of the Company); (iii) make any payment
on or with respect to, or purchase, redeem, defease or otherwise acquire or
retire for value any Indebtedness that is subordinated to the Notes, except a
payment of interest or principal at Stated Maturity; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted
Payments"), unless:
(a) at the time of and after giving effect to such Restricted Payment, no
Default or Event of Default shall have occurred and be continuing or would
occur as a consequence thereof;
(b) in the case of clauses (i), (ii) and (iii) above, and, in the case of
any Restricted Investment that is not an Investment in a Permitted
Business, the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
either clause (i) or (ii) of the first paragraph of the covenant described
below under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries and any Permitted Investments made pursuant to clause (h) of
the definition of Permitted Investments after the date hereof (excluding
Restricted Payments permitted by clauses (ii), (iii), (iv), (vi), (vii) and
(viii) (but, in the case of clause (viii), only to the extent that such
Restricted Payments are reflected as an expense on the income statements of
GCL) of the next succeeding paragraph), is less than the sum, without
duplication, of (i) the remainder of (x) 100% of the cumulative
Consolidated Cash Flow (or, in the case Consolidated Cash Flow shall be
negative, less 100% of such deficit) from the date hereof through the last
day of the last full fiscal quarter immediately preceding such Restricted
Payment minus (y) the product of 1.5 times the cumulative Consolidated
Interest Expense from the Issue Date through the last day of the last full
fiscal quarter immediately preceding such Restricted Payment, plus (ii)
100% of the aggregate net cash proceeds and the fair market value (as
determined in good faith by the Board of Directors) of property or assets
received by the
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Company since the Issue Date as a contribution to its common equity capital
or from the issue or sale of Equity Interests of the Company (other than
Disqualified Stock and including the Preferred Stock) or from the issue or
sale of Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of
the Company), plus the amount of cash or the fair market value (as
determined above) of property or assets received by the Company or any
Restricted Subsidiary upon such conversion or exchange, plus (iii) the
aggregate amount equal to the net reduction in Investments in Unrestricted
Subsidiaries resulting from (x) dividends, distributions, interest
payments, return of capital, repayments of Investments or other transfers
of assets to the Company or any Restricted Subsidiary from any Unrestricted
Subsidiary, (y) proceeds realized by the Company or any Restricted
Subsidiary upon the sale of such Investment to a Person other than GCL, the
Company or any Subsidiary of the Company, or (z) the redesignation of any
Unrestricted Subsidiary as a Restricted Subsidiary, not to exceed in the
case of any of the immediately preceding clauses (x), (y) or (z) the
aggregate amount of Restricted Investments made by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary after the Issue Date,
plus (iv) to the extent that any Restricted Investment that was made after
the Issue Date is sold for cash or otherwise liquidated or repaid for cash,
the amount of proceeds (net of any cost of disposition) equal to the
initial amount of such Restricted Investment.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the foregoing provisions;
(ii) the redemption, repurchase, retirement, defeasance or other acquisition of
any subordinated Indebtedness or Equity Interests of the Company in exchange
for, or out of the net cash proceeds of the substantially concurrent sale
(other than to a Subsidiary of the Company) of, other Equity Interests of the
Company (other than any Disqualified Stock); provided that the amount of any
such net cash proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause
(c)(ii) of the preceding paragraph; (iii) the defeasance, redemption,
retirement, repurchase or other acquisition of Indebtedness with the net cash
proceeds from an incurrence of Permitted Refinancing Indebtedness; (iv) the
payment of any dividend by a Restricted Subsidiary of the Company to the
holders of its Equity Interests on a pro rata basis; (v) the repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of GCL, the Company or any of its Restricted Subsidiaries held by any member of
GCL's, the Company's or such Restricted Subsidiary's management; provided that
the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $10.0 million in any twelve-month
period (with unused amounts being carried over to succeeding twelve-month
periods, subject to a maximum of $15.0 million in any twelve-month period);
(vi) Investments in the PC-1 Companies and Global Access Limited in an
aggregate amount not to exceed $275.0 million; (vii) Investments made with the
net cash proceeds received from an equity offering made by the Company or GCL
(but only to the extent such net cash proceeds received by GCL were contributed
to the Company as common equity capital) (provided that the amount of any such
net cash proceeds that are utilized for any such Investment shall be excluded
from clause (c)(ii) of the preceding paragraph) plus 50% of the net gain
realized and not otherwise included in Consolidated Cash Flow from the sale of
Restricted Investments ; (viii) the payment of any dividend or the making of
any distribution to GCL by the Company or any Restricted Subsidiary to pay or
permit GCL to pay any GCL Expenses or any Related Taxes; and (ix) other
Restricted Payments in an aggregate amount not to exceed $25.0 million.
The Board of Directors may not designate any Subsidiary of the Company (other
than a newly created Subsidiary in which no Investment has previously been made
(other than the amount required to capitalize such Subsidiary in connection
with its organization)) as an Unrestricted Subsidiary (a "Designation") unless:
(i) no Default or Event of Default shall have occurred and be continuing at the
time of or after giving effect to such Designation; (ii) the Company would,
immediately after giving effect to such Designation, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to either clause (i)
or (ii) of the first paragraph of the covenant described below under "--
Incurrence of Indebtedness and Issuance of Preferred Stock" and (iii) the
Company would not be prohibited under the Indenture from making an Investment
at the time of such
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Designation (assuming the effectiveness of such Designation for purposes of
clauses (a) and (b) of the first paragraph of this covenant) in an amount equal
to the fair market value of the net Investment of the Company or any other
Restricted Subsidiary in such Subsidiary on such date.
In the event of any such Designation, all outstanding Investments owned by
the Company and its Restricted Subsidiaries in the Subsidiary so designated
will be deemed to be an Investment made as of the time of such Designation and
will reduce the amount available for Restricted Payments under the first
paragraph of this covenant or Permitted Investments, as applicable. All such
outstanding Investments will be deemed to constitute Restricted Payments in an
amount equal to the fair market value of such Investments at the time of such
Designation.
The Indenture will further provide that a Designation may be revoked (a
"Revocation") by a resolution of the Board of Directors delivered to the
Trustee, provided that the Company will not make any Revocation unless: (i) no
Default or Event of Default shall have occurred and be continuing at the time
of or after giving effect to such Designation; and (ii) all Liens and
Indebtedness of such Unrestricted Subsidiary outstanding immediately following
such Revocation would, if incurred at such time, have been permitted to be
incurred at such time for all purposes under the Indenture.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company (or such
Restricted Subsidiary, as the case may be) pursuant to the Restricted Payment.
The fair market value of any asset(s) or securities that are required to be
valued by this covenant shall be determined in good faith by the Board of
Directors (such determination to be based upon an opinion or appraisal issued
by an accounting, appraisal or investment banking firm of national standing if
such fair market value exceeds $15.0 million).
Incurrence of Indebtedness and Issuance of Preferred Stock
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, incur, issue, assume, guarantee or
otherwise become directly or indirectly liable, contingently or otherwise, with
respect to (collectively, "incur") any Indebtedness (including Acquired Debt)
and the Company will not issue any Disqualified Stock and will not permit any
of its Restricted Subsidiaries to issue any shares of preferred stock;
provided, however, that the Company may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock and its Restricted Subsidiaries may
incur Indebtedness or issue Disqualified Stock or preferred stock if either:
(i) the Consolidated Leverage Ratio is less than 5.5 to 1.0 (prior to
December 1, 2001) or 5.0 to 1.0 (subsequent to December 1, 2001); or
(ii) the Consolidated Capital Ratio is less than 2.5 to 1.0.
Notwithstanding the foregoing, the provisions of the paragraph set forth
above will not apply to the incurrence of any of the following items of
Indebtedness (collectively, "Permitted Indebtedness"):
(a) The incurrence by the Company of Indebtedness represented by the
Notes;
(b) The incurrence by the Company or any of its Restricted Subsidiaries
of Existing Indebtedness;
(c) The incurrence of Indebtedness by the Company to any Restricted
Subsidiary or Indebtedness of any Restricted Subsidiary to the Company or
any other Restricted Subsidiary (but only for so long as such Indebtedness
is held by the Company or such Restricted Subsidiary);
(d) The issuance by the Company of Preferred Stock to any Restricted
Subsidiary or the issuance by any Restricted Subsidiary of Preferred Stock
to the Company or any other Restricted Subsidiary (but only for so long as
such preferred stock is held by the Company or such Restricted Subsidiary);
(e) The incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness pursuant to acquisitions of capacity made in the ordinary
course of business;
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(f) The incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest or foreign currency exchange rate risk with respect to any
floating rate Indebtedness that is permitted by the terms of the Indenture
to be outstanding;
(g) The incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness of a Restricted Subsidiary incurred and outstanding on the
date on which such Restricted Subsidiary was acquired by the Company;
provided, however, that at the time such Restricted Subsidiary is acquired
by the Company (giving effect to such acquisition), the Company would have
been able to incur $1.00 of additional Indebtedness pursuant to the
immediately preceding paragraph;
(h) The incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred pursuant to the immediately preceding paragraph hereof or clauses
(a), (b), (g), (h), (i), (k), (n) or (o) of this paragraph;
(i) The incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness not otherwise permitted to be incurred pursuant
to this paragraph in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (i), not to exceed $50.0 million;
(j) The incurrence of Indebtedness by a Receivables Entity in a Qualified
Receivables Transaction, provided that the proceeds thereof are applied in
accordance with the covenant described above under "--Repurchase at the
Option of Holders--Asset Sales."
(k) The incurrence by the Company or any Restricted Subsidiary of
Purchase Money Indebtedness, provided that the amount of such Purchase
Money Indebtedness does not exceed 100% of the cost of construction,
installation, acquisition, lease, development, design, engineering,
financing, testing, start-up, upgrade, completion or improvement of assets
(together with related costs and expenses) used in the business of the
Company or such Restricted Subsidiary;
(l) Letters of Credit that are cash collateralized;
(m) Letters of Credit in an aggregate principal amount equal to $200.0
million less the amount of outstanding Indebtedness under clause (n) of
this paragraph;
(n) The incurrence by the Company or any of its Restricted Subsidiaries
of revolving credit Indebtedness in an aggregate amount not to exceed
$200.0 million at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (n); and
(o) The guarantee by the Company or any Restricted Subsidiary of
Indebtedness of the Company or any Restricted Subsidiary of the Company
that was permitted to be incurred by another provision of this covenant.
No Senior Subordinated Debt
The Company will not, directly or indirectly, incur, create, issue, assume,
guarantee or otherwise become liable for any Indebtedness that is subordinated
or junior in right of payment to any Senior Debt and senior in any respect in
right of payment to the Notes.
Liens
The Company will not, and will not permit any of its Restricted Subsidiaries
to, create, incur, assume or otherwise cause or suffer to exist or become
effective any Lien of any kind securing Indebtedness which is pari passu with
or subordinated to the Notes (other than Permitted Liens) upon any of their
property or assets, now
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owned or hereafter acquired, unless all payments due under the Indenture and
the Notes are secured on an equal and ratable basis with (or prior to, in the
case of Indebtedness which is subordinated to the Notes) the obligations so
secured until such time as such obligations are no longer secured by a Lien.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions
to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock
or (2) with respect to any other interest or participation in, or measured by,
its profits, or (b) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets
to the Company or any of its Restricted Subsidiaries. However, the foregoing
restrictions will not apply to encumbrances or restrictions existing under or
by reason of (a) Existing Indebtedness as in effect on the date hereof, (b)
agreements as in effect as of the date hereof, (c) Indebtedness incurred in
accordance with clause (g), (h), (i), (k) or (n) of the second paragraph of the
covenant set forth above under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock," provided that such encumbrances or restrictions
are customary with respect to such types of Indebtedness (as determined in good
faith by the Chief Financial Officer of the Company) and provided further that
the provisions of such Indebtedness do not prohibit payments by the Company of
principal, premium, interest and Additional Amounts pursuant to the terms of
the Notes and the Indenture, (e) the Indenture and the Notes, (f) applicable
law, (g) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties
or assets of any Person, other than the Person, or the property or assets of
the Person, so acquired, provided, that in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be incurred, (h)
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with past practices, (i) purchase money
obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (j) any agreement for the sale or other disposition of a
Restricted Subsidiary that restricts distributions by that Restricted
Subsidiary pending its sale or other disposition, (k) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive,
taken as a whole, than those contained in the agreements governing the
Indebtedness being refinanced, (l) Liens securing Indebtedness otherwise
permitted to be incurred pursuant to the provisions of the covenant described
above under the caption "--Liens" that limit the right of the Company or any of
its Restricted Subsidiaries to dispose of the assets subject to such Lien, (m)
provisions with respect to the disposition or distribution of assets or
property in joint venture agreements and other similar agreements entered into
in the ordinary course of business and (n) restrictions on cash or other
deposits or net worth imposed by customers under contracts entered into in the
ordinary course of business.
Certain restrictions under credit facilities entered into, or expected to be
entered into, to finance Permitted Businesses will substantially limit the
payment of dividends or distributions to the Company until the Indebtedness
incurred under such facilities is retired. See "Risk Factors--Holding Company
Structure; Effective Subordination of the Securities" and "Description of
Certain Indebtedness--AC-1 Credit Facility."
Merger, Consolidation, or Sale of Assets
The Company may not, directly or indirectly, consolidate or merge with or
into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, convey or otherwise dispose of all or substantially all of
its properties or assets, in one or more related transactions, to another
Person unless: (i) the Company is the surviving corporation or the Person
formed by or surviving any such consolidation or merger
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(if other than the Company) or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made is a corporation organized
or existing under the laws of the United States, any state thereof or the
District of Columbia, or Bermuda; (ii) the Person formed by or surviving any
such consolidation or merger (if other than the Company) or the Person to which
such sale, assignment, transfer, conveyance or other disposition shall have
been made assumes all the obligations of the Company under the Registration
Agreement, the Notes and the Indenture pursuant to a supplemental indenture in
a form reasonably satisfactory to the trustee; (iii) immediately after such
transaction no Default or Event of Default exists; and (iv) except in the case
of a merger of the Company with or into a Wholly Owned Restricted Subsidiary of
the Company, the Company or the Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, conveyance or other disposition shall have been made (A)
will have Consolidated Net Worth immediately after the transaction equal to or
greater than the Consolidated Net Worth of the Company immediately preceding
the transaction and (B) will, immediately after such transaction and after
giving pro forma effect thereto and any related financing transactions as if
the same had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to
either clause (i) or (ii) of the first paragraph of the covenant described
above under "--Incurrence of Indebtedness and Issuance of Preferred Stock." The
Indenture will also provide that the Company may not, directly or indirectly,
lease all or substantially all of its properties or assets, in one or more
related transactions, to any other Person. The provisions of this covenant will
not be applicable to a sale, assignment, transfer, conveyance or other
disposition of assets between or among the Company and its Wholly Owned
Restricted Subsidiaries.
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any
of its properties or assets to, or purchase any property or assets from, or
enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are not materially less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $25.0 million, the Company delivers to the Trustee a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction is approved by a majority of the disinterested
members of the Board of Directors and an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point of view is
obtained from an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be
deemed to be Affiliate Transactions: (i) (a) the entering into, maintaining or
performance of any employment contract, collective bargaining agreement,
benefit plan, program or arrangement, related trust agreement or any other
similar arrangement for or with any employee, officer or director heretofore or
hereafter entered into in the ordinary course of business, including vacation,
health, insurance, deferred compensation, retirement, savings or other similar
plans, (b) the payment of compensation, performance of indemnification or
contribution obligations, or an issuance, grant or award of stock, options, or
other equity-related interests or other securities to employees, officers or
directors in the ordinary course of business, (c) any transaction with an
officer or director in the ordinary course of business not involving more than
$250,000 in any one case, or (d) Management Advances and payments in respect
thereof, (ii) transactions between or among the Company and/or its Restricted
Subsidiaries or any Receivables Entity, (iii) payment of reasonable directors
fees, (iv) any sale or other issuance of Equity Interests (other than
Disqualified Stock) of the Company, (v) Affiliate Transactions in effect or
approved by the Board of Directors on the Issue Date, including any amendments
thereto (provided that the terms of such amendments are not materially less
favorable to the Company or the relevant Restricted Subsidiary than the terms
of such agreement prior to such amendment), (vi) transactions with respect to
capacity or dark fiber between the Company or any Restricted Subsidiary and any
Unrestricted Subsidiary or other Affiliate and joint sales and marketing
pursuant to an agreement or agreements between the
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Company or any Restricted Subsidiary and any Unrestricted Subsidiary or other
Affiliate (provided that in the case of this clause (vi), such agreements are
on terms that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that could have been obtained at the time of such
transaction in an arm's-length transaction with an unrelated third party or, in
the case of a transaction with an Unrestricted Subsidiary, are either (x)
entered into in connection with a transaction involving the selection by a
customer of cable system capacity entered into in the ordinary course of
business or (y) involve the provision by the Company or a Restricted Subsidiary
to an Unrestricted Subsidiary of sales and marketing services, operations,
administration and maintenance services or development services for which the
Company or such Restricted Subsidiary receives a fair rate of return (as
determined by the Board of Directors and set forth in an Officers' Certificate
delivered to the trustee) above its expenses of providing such services; (vii)
any transaction entered into in the ordinary course of business between the
Company or any Restricted Subsidiary and any Unrestricted Subsidiary or any
Affiliate (provided that in the case of this clause (vii), such agreements are
on terms that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that could have been obtained at the time of such
transaction in an arm's-length transaction with an unrelated third party) and
(viii) Restricted Payments that are permitted by the covenant described above
under "--Restricted Payments."
Business Activities
The Company will not, and will not permit any of its Restricted Subsidiaries
to, engage in any business other than a Permitted Business.
Payments for Consent
Neither the Company nor any of its Restricted Subsidiaries will, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders of the Notes that consent, waive or agree to amend such
terms or provisions of the Indenture or the Notes in the time frame set forth
in the solicitation documents relating to such consent, waiver or agreement.
Reports
Whether or not required by the rules and regulations of the Commission, so
long as any Notes are outstanding, the Company will furnish to the trustee and
the Holders of the Notes (i) all quarterly and annual financial information
that would be required to be contained in a filing with the Commission on Forms
10-Q and 10-K if the Company was required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" that describes the financial condition and results of operations of
the Company and its consolidated Subsidiaries and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants, and (ii) all current reports that would be required to be filed
with the Commission on Form 8-K if the Company was required to file such
reports, in each case within the time periods specified in the Commission's
rules and regulations. In addition, following the consummation of the Exchange
Offer contemplated by the Registration Rights Agreement, whether or not
required by the rules and regulations of the Commission, the Company will file
a copy of all such information and reports with the Commission for public
availability within the time periods specified in the Commission's rules and
regulations (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. The Company will be deemed to have satisfied such requirements if GCL
files and provides reports, documents and information of the types otherwise so
required by the Commission, in each case within the applicable time periods,
and the Company is not required by the Commission to file such reports,
documents and information separately under the applicable rules and regulations
of the Commission (after giving effect to any exemptive relief) because of the
filings by GCL. Furthermore, the Company will agree that, for so long as any
Notes remain outstanding (and regardless of the immediately preceding
sentence), it will furnish to the Holders of the Notes and to securities
analysts and prospective investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act
of 1933.
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EVENTS OF DEFAULT AND REMEDIES
The Indenture will provide that each of the following will constitute an
Event of Default: (i) default for 30 days in the payment when due of interest
on the Notes (whether or not prohibited by the subordination provisions of the
Indenture); (ii) default in the payment when due of the principal of, or
premium, if any, on, the Notes (whether or not prohibited by the subordination
provisions of the Indenture); (iii) failure by the Company or any of its
Restricted Subsidiaries to comply with the provisions described above under the
captions "--Repurchase at the Option of Holders--Change of Control," "--
Repurchase at the Option of Holders--Asset Sales," "--Certain Covenants--
Restricted Payments" or "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock"; (iv) failure by the Company or any of its
Restricted Subsidiaries for 60 days after notice to comply with any of its
other agreements in the Indenture or the Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may
be secured or evidenced any Indebtedness for money borrowed by the Company or
any of its Restricted Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the Issue Date, which default results
in the acceleration of such Indebtedness prior to its express maturity and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness the maturity of which has been
so accelerated, aggregates $25.0 million or more; (vi) failure by the Company
or any of its Restricted Subsidiaries to pay final judgments not subject to
appeal aggregating in excess of $25.0 million (net of applicable insurance
coverage which is acknowledged in writing by the insurer), which judgments are
not paid, discharged or stayed for a period of 60 days; and (vii) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Restricted Subsidiary that is a
Significant Subsidiary or any group of Restricted Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Notes will
become due and payable without further action or notice. Holders of the Notes
may not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of
the then outstanding Notes may direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of the Notes notice of any
continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal of, premium, if any, or interest on, the
Notes) if it determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful action
(or inaction) taken (or not taken) by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium also
will become immediately due and payable, to the extent permitted by law, upon
the acceleration of the Notes. If an Event of Default occurs prior to December
1, 2003 by reason of any willful action (or inaction) taken (or not taken) by
or on behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to December 1, 2003, then the premium specified
in the Indenture also will become immediately due and payable, to the extent
permitted by law, upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the then
outstanding Notes by notice to the Trustee may on behalf of the Holders of all
of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture, except a continuing Default or Event of
Default in the payment of principal of, premium, if any, or interest on, the
Notes.
The Company will be required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company will be required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATORS OR
SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of the Company,
as such, will have any liability for any obligations of the Company with
respect to the Notes or the Indenture, or for any claim based on, or in respect
or by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note will waive and release any and all such liability. Such waiver
and release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under federal securities laws
and it is the view of the Commission that such a waiver is against public
policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture will be discharged and canceled upon the delivery by the
Company to the Trustee for cancellation of all the Notes or upon irrevocable
deposit with the Trustee, within not more than one year prior to the redemption
of the Notes, or when the Notes are to be called for redemption within one year
under arrangements satisfactory to the Trustee, of funds sufficient for the
payment or redemption of all the Notes. In addition, the Indenture will provide
that the Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"), except for: (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due from the trust referred to below; (ii)
the Company's obligations with respect to the Notes concerning issuing
temporary Notes, registration of Exchange Notes, mutilated, destroyed, lost or
stolen Notes and the maintenance of an office or agency for payment and money
for security payments held in trust; (iii) the rights, powers, trusts, duties
and immunities of the Trustee, and the Company's obligations in connection
therewith; and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Company may, at its option and at any time, elect to have its
obligations released with respect to certain covenants that are contained in
the Indenture ("Covenant Defeasance") and, thereafter, any omission to comply
with such obligations will not constitute a Default or Event of Default. In the
event Covenant Defeasance occurs, certain events (but not including non-
payment, bankruptcy, receivership, rehabilitation or insolvency events)
described under "--Events of Default and Remedies" will no longer constitute an
Event of Default.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit, or cause to be deposited, with the Trustee,
in trust, for the benefit of the Holders of the Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such amounts
as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest on the outstanding Notes on the stated maturity thereof or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Company must deliver to the
Trustee an opinion of counsel in the United States reasonably acceptable to the
Trustee confirming that the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or since the Issue Date,
there has been a change in the applicable federal income tax law, in either
case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance, and will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Company must deliver to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance, and such Holders will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such deposit) or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date of
deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under,
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any material agreement or instrument (other than the Indenture) to which the
Company or any of its Restricted Subsidiaries is a party or by which the
Company or any of its Restricted Subsidiaries is bound; (vi) the Company must
deliver to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee to the effect that after the 91st day following the
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights and remedies generally; (vii) the Company must deliver to the Trustee an
Officers' Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders of the Notes over other creditors of the
Company, or with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; (viii) the Company must deliver to the
Trustee an opinion of counsel in Bermuda reasonably acceptable to the Trustee
to the effect that the Holders of the outstanding Notes will not be adversely
affected under Bermuda law; and (ix) the Company must deliver to the trustee an
Officers' Certificate and an opinion of counsel in the United States reasonably
acceptable to the Trustee, each stating that all conditions precedent provided
for or relating to Legal Defeasance or Covenant Defeasance, as applicable, have
been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Exchange Notes in accordance with the
procedures set forth in the Indenture. The registrar and the trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents, and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company will not be
required to transfer or exchange any Note selected for redemption. Also, the
Company will not be required to transfer or exchange any Note for a period of
15 days before (i) a selection of Notes to be redeemed, (ii) an interest
payment date or (iii) the mailing of notice of a Change of Control Offer or
Asset Sale Offer. The registered Holder of a Note will be treated as the owner
of it for all purposes under the Indenture.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the then outstanding Notes (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
Without the consent of each Holder affected, such an amendment or waiver may
not (with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment,
supplement or waiver; (ii) reduce the principal or change the fixed maturity of
any Note, or alter the redemption provisions of the Notes (other than
redemption provisions relating to the covenants described above under the
caption "--Repurchase at the Option of Holders"); (iii) reduce the rate of, or
change the time for, payment of interest on any Note; (iv) waive a Default or
Event of Default in the payment of principal of, premium, if any, or interest
on the Notes (except a rescission of acceleration of the Notes by the Holders
of at least a majority in aggregate principal amount thereof and a waiver of
the payment default that resulted from such acceleration); (v) make any Note
payable in money other than that stated in the Notes; (vi) make any change in
the provisions of the Indenture relating to waivers of past Defaults or the
rights of Holders of the Notes to receive payments of principal of, premium, if
any, or interest on the Notes; (vii) waive a redemption payment with respect to
any Note (other than a payment required by one of the covenants described above
under the caption "--Repurchase at the Option of Holders"); or (viii) make any
change in the foregoing amendment and waiver provisions. In addition, any
amendment to the provisions of the Indenture which relate to subordination will
require the consent of the Holders of at least 75% in aggregate principal
amount of the Notes then outstanding if such amendment would adversely affect
the rights of the Holders of the Notes.
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Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation or sale of all or substantially all of the Company's
assets, to make any change that would provide any additional rights or benefits
to the Holders of Notes or that does not adversely affect the legal rights
under the Indenture of any such Holder, or to comply with the requirements of
the Commission in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest, it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue, or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. In case an Event of Default shall occur (which shall not be
cured), the trustee will be required, in the exercise of its power, to use the
degree of care of a prudent person in the conduct of their own affairs. Subject
to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any Holder of Notes,
unless such Holder shall have offered to the trustee security and indemnity
satisfactory to it against any loss, liability or expense.
GOVERNING LAW
The Indenture and the Notes will be governed by and construed in accordance
with the laws of the State of New York.
The Company will submit to the jurisdiction of the U.S. federal and New York
state courts located in the Borough of Manhattan, City and State of New York
for purposes of all legal actions and proceedings instituted in connection with
the Notes and the Indenture. The Company has appointed CT Corporation System as
its authorized agent upon which process may be served in any such action. See
"Service of Process and Enforcement of Liabilities."
CURRENCY INDEMNITY
U.S. dollars are the sole currency of account and payment for all sums
payable by the Company under or in connection with the Notes, including
damages. Any account received or recovered in a currency other than dollars
(whether as a result of, or the enforcement of, a judgment or order of a court
of any jurisdiction, in the liquidation, dissolution or other winding-up of the
affairs of the Company or otherwise) by any Holder of a Note in respect of any
sum expressed to be due to it from the Company shall only constitute a
discharge to the Company to the extent of the dollar amount which the recipient
is able to purchase with the amount so received or recovered in that other
currency on the date of that receipt or recovery (or, if it is not practicable
to make that purchase on that date, on the first date on which it is
practicable to do so). If that dollar amount is less than the dollar amount
expressed to be due to the recipient under any Note, the Company shall
indemnify it against any loss sustained by it as a result. In any event, the
Company shall indemnify the recipient against the cost of making any such
purchase. For the purposes of this paragraph, it will be sufficient for the
Holder of a Note to certify in a satisfactory manner (indicating the sources of
information used) that it would have suffered a loss had an actual purchase of
dollars been made with the amount so received in that other currency on the
date of receipt or recovery (or, if a purchase of dollars on such date had not
been practicable, on the first date on which it would have been practicable, it
being required that the need for a change of date be certified in the manner
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mentioned above). These indemnities constitute a separate and independent
obligation from the Company's other obligations, shall give rise to a separate
and independent cause of action, shall apply irrespective of any indulgence
granted by any Holder of a Note and shall constitute in full force and effect
despite any other judgment, order, claim or proof for a liquidated amount in
respect of any sum due under any Note.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture and in the
Bye-Laws. Reference is made to the Indenture and the Bye-Laws for a full
disclosure of all such terms, as well as any other capitalized terms used
herein for which no definition is provided.
"AC-1 Credit Facility" means that certain Credit Agreement, dated as of June
27, 1997 and amended as of December 15, 1997, between ACL and the lenders named
therein.
"AC" or "Atlantic Crossing" means the four fiber pair, self healing ring,
fiber optic submarine cable system known as "Atlantic Crossing" or "AC-1" which
will provide direct telecommunications service between the United States and
Northern Europe with landing stations in the United States, United Kingdom, The
Netherlands and Germany, and all extensions and upgrades thereto.
"ACL" means Atlantic Crossing Ltd., a Bermuda company.
"AC Subsidiaries" means GTH and all of its direct and indirect Subsidiaries.
"Acquired Debt" means, with respect to any specified Person, (i) Indebtedness
of any other Person existing at the time such other Person is merged with or
into or became a Subsidiary of such specified Person, including, without
limitation, Indebtedness incurred in connection with, or in contemplation of,
such other Person merging with or into or becoming a Subsidiary of such
specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling, controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall
mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Asset Sale" means (i) the sale, lease, transfer, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business and other than any sale, lease, transfer, conveyance or other
disposition of capacity or dark fiber on any cable system owned, controlled or
operated by the Company or any Restricted Subsidiary or of telecommunications
capacity or transmission rights acquired by the Company or any Restricted
Subsidiary for use in a Permitted Business (provided that the sale, lease,
transfer, conveyance or other disposition of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a whole will be
governed by the provisions of the Indenture described above under the caption
"--Repurchase at the Option of Holders--Change of Control" and/or the
provisions described above under the caption "--Certain Covenants--Merger,
Consolidation or Sale of Assets" and not by the provisions of the Asset Sale
covenant), and (ii) the issue or sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of its Subsidiaries, in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transactions (a) that have a fair market value in excess of $25.0 million or
(b) for net proceeds in excess of $25.0 million. Notwithstanding the foregoing,
the following items shall not be deemed to be Asset Sales: (i) a transfer of
assets by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly
Owned Restricted Subsidiary to the Company or to another Wholly Owned
Restricted Subsidiary, (ii) an issuance of Equity Interests by a Wholly
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Owned Restricted Subsidiary to the Company or to another Wholly Owned
Restricted Subsidiary, (iii) a Restricted Payment that is permitted by the
covenant described above under the caption "--Certain Covenants--Restricted
Payments," (iv) a transfer of assets by the Company or a Restricted Subsidiary
in connection with a Qualified Receivables Transaction and (v) a disposition of
obsolete or worn out equipment or equipment that is no longer useful in the
conduct of a Permitted Business and that is disposed of in the ordinary course
of business.
"Board of Directors" means the board of directors or other governing body of
the Company or, if the Company is owned or managed by a single entity, the
board of directors or other governing body of such entity, or, in either case,
any committee thereof duly authorized to act on behalf of such board or
governing body.
"Board Resolution" means a duly authorized resolution of the Board of
Directors.
"Capital Lease Obligation" means, at the time any determination thereof is to
be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance
with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock, (ii)
in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States is pledged in support thereof) having maturities of not more
than six months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Thompson Bank Watch Rating
of "B" or better, (iv) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses (ii) and
(iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having the
highest rating obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date
of acquisition and (vi) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i)-(v) of this
definition.
"Change of Control" means the occurrence of any of the following: (i) any
"person" (as such term is unused in Section 13(d)(3) of the Exchange Act),
other than a Permitted Holder, is or becomes the beneficial owner, directly or
indirectly, of 35% or more of the Voting Stock (measured by voting power rather
than number of shares) of the Company or GCL, and the Permitted Holders own, in
the aggregate, a lesser percentage of the total Voting Stock (measured by
voting power rather than by number of shares) of the Company or GCL than such
person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the board of
directors of the Company or GCL (for the purposes of this clause, such other
person shall be deemed to "beneficially own" any Voting Stock of a specified
corporation held by a parent corporation if such other person beneficially
owns, directly or indirectly, more than 35% of the Voting Stock (measured by
voting power rather than by number of shares) of such parent corporation and
the Permitted Holders beneficially own, directly or indirectly, in the
aggregate a lesser percentage of Voting Stock (measured by voting power rather
than by number of shares) of such parent corporation and do not have the right
or ability by voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of such parent corporation), (ii)
during any period of two consecutive years, Continuing Directors cease for any
reason to constitute a majority of the Board of Directors
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of the Company or GCL, (iii) the Company or GCL consolidates or merges with or
into any other Person, other than a consolidation or merger (a) of the Company
into GCL or GCL into the Company, or the Company or GCL into a Wholly Owned
Restricted Subsidiary of the Company or (b) pursuant to a transaction in which
the outstanding Voting Stock of the Company or GCL is changed into or exchanged
for cash, securities or other property with the effect that the beneficial
owners of the outstanding Voting Stock of the Company or GCL, respectively,
immediately prior to such transaction, beneficially own, directly or
indirectly, more than 35% of the Voting Stock (measured by voting power rather
than number of shares) of the surviving corporation immediately following such
transaction or (iv) the sale, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of GCL or the Company
and its Restricted Subsidiaries taken as a whole to any person other than a
Wholly Owned Restricted Subsidiary of the Company or a Permitted Holder or a
person more than 50% of the Voting Stock (measured by voting power rather than
by number of shares) of which is owned, directly or indirectly, following such
transaction or transactions by the Permitted Holders; provided, however, that
sales, transfers, conveyances or other dispositions in the ordinary course of
business of capacity on cable systems owned, controlled or operated by the
Company or any Restricted Subsidiary or of telecommunications capacity or
transmission rights acquired by the Company or any Restricted Subsidiary for
use in its business, including, without limitation, for sale, lease, transfer,
conveyance or other disposition to any customer of the Company or any
Restricted Subsidiary shall not be deemed a disposition of assets for purposes
of this clause (iv).
The definition of a Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of GCL or the Company and its Restricted Subsidiaries taken as a
whole, as such phrase is used in the Revised Model Business Corporation Act.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of such phrase
under applicable law. Accordingly, the ability of a Holder of Notes to require
the Company to purchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of GCL or the
Company and its Restricted Subsidiaries taken as a whole to another Person or
group may be uncertain.
"Consolidated Capital Ratio" means, with respect to the Company or any of its
Restricted Subsidiaries, as of the date of any incurrence of Indebtedness or
issuance of Disqualified Stock, the ratio of (i) the aggregate consolidated
principal amount of Indebtedness outstanding and the liquidation preference of
Disqualified Stock as of the most recent quarterly or annual balance sheet
date, after giving pro forma effect to the incurrence of such Indebtedness or
the issuance of such Disqualified Stock and any other Indebtedness incurred and
Disqualified Stock issued since such balance sheet date, and the receipt and
application of the proceeds therefrom to (ii) Consolidated Net Worth as of such
balance sheet date after giving pro forma effect to the issuance of Equity
Interests (other than Disqualified Stock) issued since the balance sheet date
and the receipt and application of the proceeds therefrom.
"Consolidated Cash Flow" means, with respect to the Company for any period,
the Consolidated Net Income of the Company and its Restricted Subsidiaries for
such period plus, to the extent that any of the following items were deducted
or added (without duplication) in computing such Consolidated Net Income, (i)
an amount equal to any extraordinary loss (less any gain) plus any net loss
(less any gain) realized in connection with any Asset Sale, plus (ii) provision
for taxes based on income or profits of the Company and its Restricted
Subsidiaries for such period, plus (iii) Consolidated Interest Expense of the
Company and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized, plus (iv) any Preferred Stock dividends
to the extent subtracted in arriving at net income, plus (v) depreciation,
amortization (including amortization of goodwill and other intangibles and the
amount of capacity available for sale charged to cost of sales), but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash expenses (excluding any such non-cash expense to the extent that
it represents an accrual of or reserve for cash expenses in any future period
or amortization of a prepaid cash expense that was paid in a prior period) of
the Company and its Restricted Subsidiaries for such period, minus (vi) non-
cash items increasing such Consolidated Net Income for such period (other than
items that were accrued in the ordinary
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course of business), plus (vii) any change in Deferred Revenue, in each case,
on a consolidated basis and determined in accordance with GAAP. Notwithstanding
the foregoing, the provision for taxes on the income or profits of, and the
depreciation and amortization and other non-cash expenses of, a Restricted
Subsidiary of the Company shall be added to Consolidated Net Income to compute
Consolidated Cash Flow of the Company only to the extent that a corresponding
amount would be permitted at the date of determination to be dividended to the
Company by such Restricted Subsidiary without prior governmental approval (that
has not been obtained), and without direct or indirect restriction pursuant to
the terms of its charter and all agreements (excluding agreements evidencing
Indebtedness incurred in accordance with clause (k) of "--Certain Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock", to which this
provision shall not apply), instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to that Restricted Subsidiary or
its shareholders.
"Consolidated Interest Expense" for any Person means for any period the
consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of such Person and its Consolidated
Subsidiaries for such period, including without limitation or duplication (or,
to the extent not so included, with the addition of), (i) amortization of debt
issuance costs and original issue discount, (ii) non-cash interest payments,
(iii) the interest component of any deferred payment obligations, (iv) the
interest component of all payments associated with Capital Lease Obligations,
(v) commissions, discounts and other fees and charges incurred in respect of
Letter of Credit or bankers' acceptance financings and (vi) net payments (if
any) pursuant to Hedging Obligations).
"Consolidated Leverage Ratio" means, with respect to the Company or any of
its Restricted Subsidiaries, as of the date of any incurrence of Indebtedness
or issuance of Disqualified Stock, the ratio of (i) the aggregate consolidated
principal amount of Indebtedness outstanding and the liquidation preference of
Disqualified Stock as of the most recent quarterly or annual balance sheet
date, after giving pro forma effect to the incurrence of such Indebtedness or
the issuance of such Disqualified Stock and any other Indebtedness incurred and
Disqualified Stock issued since such balance sheet date, and the receipt and
application of the proceeds therefrom to (ii) Consolidated Cash Flow for the
four full fiscal quarters ending on or prior to the date of incurrence of such
Indebtedness or issuance of such Disqualified Stock for which consolidated
financial statements are available.
"Consolidated Net Income" means, with respect to the Company for any period,
the aggregate of the net income of the Company and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP,
plus, to the extent that any of the following items were deducted in computing
such Consolidated Net Income, (a) non-recurring, non-cash charges (other than
charges arising from write-downs of assets) and (b) non-cash compensation
charges arising from stock options or other similar employee benefit or
compensation plans; provided that (i) the net income (but not loss) of any
Restricted Subsidiary that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or
distributions paid in cash to the Company or a Wholly Owned Restricted
Subsidiary thereof by such Restricted Subsidiary, (ii) the net income (or loss)
of any Person that is not a Restricted Subsidiary shall be included only to the
extent of the amount of dividends or other distributions actually paid to the
Company or a Restricted Subsidiary by such Person during such period, (iii) for
purposes of clause (c) of the covenant "--Certain Covenants--Restricted
Payments," the net income of any Restricted Subsidiary shall be excluded to the
extent that the declaration or payment of dividends or similar distributions by
that Restricted Subsidiary of that net income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, (excluding any such restrictions relating to AC-1 to
which this clause (iii) shall not apply), instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its shareholders, except that the Company's equity in the net
income of any such Restricted Subsidiary for such period shall be included in
such Consolidated Net Income up to the aggregate amount of cash that could have
been distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend, (iv) the net income of
any Person acquired in a pooling of interests transaction for
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any period prior to the date of such acquisition shall be excluded, (v) the
equity of the Company or any Restricted Subsidiary in the net income of any
Unrestricted Subsidiary shall be included in such Consolidated Net Income up to
the aggregate amount of cash actually distributed by such Unrestricted
Subsidiary during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (but not in excess of the amount of the net
income of such Unrestricted Subsidiary for such period) and (vi) the cumulative
effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to the Company as of any date,
the sum of (i) the consolidated equity of the common shareholders of the
Company and its consolidated Restricted Subsidiaries as of such date plus (ii)
the respective amounts reported on the Company's balance sheet as of such date
with respect to the Preferred Stock and any series of preferred stock (other
than Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to
the extent of any cash received by the Company upon issuance of such preferred
stock, less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business and other
than write-ups attributable to the PCG Warrants) subsequent to the Issue Date
in the book value of any asset owned by the Company or a consolidated
Restricted Subsidiary of the Company, (y) all investments as of such date in
unconsolidated Restricted Subsidiaries and in Persons that are not Restricted
Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Consolidated Tangible Assets" means the total amount of assets (less
applicable reserves and other properly deductible items) which under generally
accepted accounting principles would be included on a consolidated balance
sheet of the Company and its Restricted Subsidiaries after deducting therefrom
all goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, which in each case under generally accepted
accounting principles would be included on such consolidated balance sheet.
"Continuing Directors" means individuals who at the beginning of the period
of determination constituted the Board of Directors of the Company or GCL, as
the case may be, together with any new directors whose election by such Board
of Directors or whose nomination for election by the shareholders of the
Company or GCL, as the case may be, was approved by a vote of at least a
majority of the directors of the Company or GCL, as the case may be, then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved or is designee
of any one of the Permitted Holders or any combination thereof or was nominated
or elected by any such Permitted Holder(s) or any of their designees.
"Currency Agreement" means, with respect to any Person, any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or beneficiary.
"Default" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.
"Deferred Revenue" means amounts appearing as a liability on the financial
statements of the Company as prepared according to GAAP classified as deferred
revenue to the extent of cash received in connection therewith.
"Designated Senior Debt" means (i) Indebtedness represented by the Senior
Notes, (ii) Indebtedness pursuant to paragraph (n) of the second full paragraph
of "--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock" and (iii) any Senior Debt permitted to be incurred under the Indenture
the principal amount of which is $25.0 million or more and that has been
designated by the Company as "Designated Senior Debt."
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"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature; provided, however, that any Capital Stock which
would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require the Company to repurchase or redeem such
Capital Stock upon the occurrence of a Change of Control occurring prior to the
final Stated Maturity of the Notes shall not constitute Disqualified Stock if
the change of control provisions applicable to such Capital Stock are no more
favorable to the holders of such Capital Stock than the provisions applicable
to the Notes contained in the covenant described under "--Repurchase at the
Option of Holders--Change of Control" and such Capital Stock specifically
provides that the Company will not repurchase or redeem any such stock pursuant
to such provisions prior to the Company's repurchase of such Notes as are
required to be repurchased pursuant to the covenant described under "--
Repurchase at the Option of Holders--Change of Control."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an offering for cash by GCL or the Company of its
common stock, or options, warrants or rights to acquire such common stock.
"Exchange Offer" means the registered exchange offer to be made by the
Company with respect to the Preferred Stock or the Exchange Notes, as
applicable, pursuant to the terms of the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its Restricted
Subsidiaries in existence on the date hereof, until such amounts are paid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"GCL" means Global Crossing Ltd., a Bermuda Company.
"GCL Expenses" means (i) costs (including all professional fees and expenses)
incurred by GCL to comply with its reporting obligations under federal or state
laws or under the Indenture, including any reports filed with respect to the
Securities Act, the Exchange Act or the respective rules and regulations
promulgated thereunder, (ii) indemnification obligations of GCL owing to
directors, officers, employees or other Persons under its charter or by-laws or
pursuant to written agreements with any such Person, (iii) fees and expenses
payable by GCL in connection with the issuance of the Notes, (iv) other
operational expenses of GCL incurred in the ordinary course of business and (v)
expenses incurred by GCL in connection with any public offering of Capital
Stock or Indebtedness (x) where the net proceeds of such offering are intended
to be received by or contributed or loaned to the Company or a Restricted
Subsidiary, or (y) in a prorated amount of such expenses in proportion to the
amount of such net proceeds intended to be so received, contributed or loaned,
or (z) otherwise on an interim basis prior to completion of such offering so
long as GCL shall cause the amount of such expenses to be repaid to the Company
or the relevant Restricted Subsidiary out of the proceeds of such offering
promptly if completed.
"Global Access Limited" means Global Access Limited, a Japanese corporation,
and all of its direct and indirect Subsidiaries.
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"GTH" means Global Telesystems Holdings Ltd., a Bermuda company.
"Government Securities" means securities that are (a) direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentally thereof) of
the payment of which the full faith and credit of the United States of America
is pledged, (b) obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the United States of America the payment of
which is unconditionally guaranteed as a full faith and credit obligation by
the United States of America or (c) obligations of a Person the payment of
which is unconditionally guaranteed as a full faith and credit obligation by
the United States of America, which, in each case, are not callable or
redeemable at the issuer's option.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under any Interest Rate Agreement or Currency Agreement.
"Holder" means, as applicable, a Person in whose name Preferred Stock is, or
Notes are, registered.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable,
if and to the extent any of the foregoing (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all Indebtedness of others
secured by a Lien on any asset of such Person (whether or not such Indebtedness
is assumed by such Person) and, to the extent not otherwise included, the
guarantee by such Person of any indebtedness of any other Person. The amount of
any Indebtedness outstanding as of any date shall be (i) the accreted value
thereof, in the case of any Indebtedness issued with original issue discount,
and (ii) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement to which such Person is a party or beneficiary.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to directors, officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If the Company or any of its Restricted Subsidiaries sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Company or such Restricted Subsidiary, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Subsidiary not sold or disposed of in an amount determined as provided in the
final paragraph of the covenant described above under the caption "--Certain
Covenants--Restricted Payments."
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"Issue Date" means December 2, 1998.
"Letters of Credit" means one or more irrevocable direct pay letters of
credit issued by a bank or other financial institution to support the payment
of equity obligations of the Company to its Project Subsidiaries.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in, and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"MAC Subsidiaries" means Mid-Atlantic Crossing Holdings Ltd., a Bermuda
company, and all of its direct and indirect Subsidiaries.
"Management Advances" means loans or advances made to directors, officers or
employees of GCL, the Company or any Restricted Subsidiary (i) in respect of
travel, entertainment or moving-related expenses incurred in the ordinary
course of business, (ii) in respect of moving-related expenses incurred in
connection with any closing or consolidation of any facility, or (iii) in the
ordinary course of business not exceeding $10.0 million in the aggregate at any
time outstanding.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any Restricted Subsidiary (a) provides any guarantee or credit support of
any kind (including any undertaking, guarantee, indemnity, agreement or
instrument that would constitute Indebtedness) or (b) is directly or indirectly
liable (as a guarantor or otherwise) and (ii) no default with respect to which
(including any rights that the holders thereof may have to take enforcement
action against an Unrestricted Subsidiary) would permit (upon notice, lapse of
time or both) any holder of any other Indebtedness of the Company or any
Restricted Subsidiary to declare a default under such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its Stated
Maturity.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means any Co-Chairman of the Board, the President, the Chief
Executive Officer, the Chief Operating Officer, the Chief Financial Officer,
any Senior Vice President, any Vice President, the Treasurer or the Secretary
of the Company.
"Officers Certificate" means a certificate signed by two Officers.
"PCG Warrants" means the warrants issued pursuant to the Warrant Agreement,
dated as of January 21, 1998, as amended through the date of the Senior Notes
Indenture.
"PC-1 Companies" means Pacific Crossing Ltd., a Bermuda company, and all of
its direct and indirect Subsidiaries.
"Permitted Business" means any business that is the same as or related,
ancillary or complementary to any of the businesses of the Company or any of
its Restricted Subsidiaries on the date of issuance of the Preferred Stock.
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"Permitted Holder" means Pacific Capital Group, Inc. and CIBC Oppenheimer
Corp., and their respective Affiliates.
"Permitted Investments" means (a) any Investment in the Company or in
Restricted Subsidiaries of the Company that are engaged in a Permitted
Business; (b) any Investment in Cash Equivalents; (c) any Investment by the
Company or any of its Restricted Subsidiaries in a Person, if as a result of
such Investment (i) such Person becomes a Restricted Subsidiary of the Company
that is engaged in a Permitted Business or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company that is engaged in a Permitted Business; (d) any
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with the covenant
described above under the caption "--Repurchase at the Option of Holders--Asset
Sales"; (e) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company; (f) other
Investments having an aggregate fair market value (measured on the date each
such Investment was made and without giving effect to subsequent changes in
value), when taken together with all other Investments made pursuant to this
clause (f) that are at the time outstanding, not to exceed $25.0 million; (g)
any Investment made in a Receivables Entity in a Qualified Receivables
Transaction; and (h) any investment by the Company or a Restricted Subsidiary
in any Person engaged in a Permitted Business with the Company or such
Restricted Subsidiary, provided that such investment is necessary or integral
to the Company's or such Restricted Subsidiary's Permitted Business and
provided, further that any such investment is the minimum amount reasonably
necessary for such Permitted Business and to comply with local law.
"Permitted Junior Securities" means Equity Interests in the Company or debt
securities that are subordinated to all Senior Debt (and any debt securities
issued in exchange for Senior Debt) to substantially the same extent as, or to
a greater extent than, the Notes are subordinated to Senior Debt pursuant to
the Indenture.
"Permitted Liens" means (i) Liens to secure Senior Debt permitted to be
incurred under the Indenture; (ii) Liens in favor of the Company or any
Restricted Subsidiary; (iii) Liens on property of a Person existing at the time
such Person is merged with or into or consolidated with the Company or any of
its Restricted Subsidiaries; provided that such Liens were in existence prior
to the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company or such Restricted Subsidiary; (iv) Liens on property existing at the
time of acquisition thereof by the Company or any of its Restricted
Subsidiaries, provided that such Liens were in existence prior to the
contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vi)
Liens existing on the date hereof; (vii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(viii) Liens incurred in the ordinary course of business of the Company or any
of its Restricted Subsidiaries with respect to obligations that do not exceed
$5.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Restricted Subsidiary; (ix) Liens with respect to assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the Company or a Restricted
Subsidiary to secure Indebtedness owing to the Company or such Restricted
Subsidiary; (x) Liens, pledges and deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of statutory obligations; (xi) Liens, pledges or deposits made to
secure the performance of tenders, bids, leases, public or statutory
obligations, sureties, stays appeals, indemnities, performance or other similar
bonds and other obligations of like nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money); (xii)
zoning restrictions, servitudes, easements, rights-of-way, restrictions and
other similar charges or encumbrances incurred in the ordinary course of
business which, in the aggregate, do
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not materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the Company
or its Restricted Subsidiaries; (xiii) Liens arising out of judgments or awards
against or other court proceedings concerning the Company or any Restricted
Subsidiary with respect to which the Company or such Restricted Subsidiary is
prosecuting an appeal or proceeding for review and the Company or such
Restricted Subsidiary is maintaining adequate reserves in accordance with
generally accepted accounting principles; (xiv) any interest or title of a
lessor in the property subject to any lease other than a capital lease. and
(xv) Liens not otherwise permitted by the foregoing clauses (i) through (xiv)
securing Indebtedness in an aggregate amount not to exceed 10% of the Company's
Consolidated Tangible Assets.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company or
any of its Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Restricted Subsidiaries (other than
intercompany Indebtedness); provided that: (i) the principal amount (or
accreted value, if applicable) of such Permitted Refinancing Indebtedness does
not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is expressly subordinated in right
of payment to, the Notes on terms at least as favorable to the Holders of the
Notes as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or the Restricted Subsidiary who
is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, incorporated or unincorporated association, joint-
stock company, trust, unincorporated organization or government or other agency
or political subdivision thereof or other entity of any kind.
"Preferred Stock" means the Company's 10 1/2% Senior Exchangeable Preferred
Stock due 2008.
"Purchase Money Indebtedness" means Indebtedness (including Acquired Debt and
Capital Lease Obligations, mortgage financings and purchase money obligations)
incurred for the purpose of financing all or any part of the cost of
construction, financing, installation, acquisition, lease, development, design,
engineering, financing, testing, start-up, upgrade, completion or improvement
of any assets used or useful in a Permitted Business, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, as the same may be amended, supplemented, modified or
restated from time to time.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any of its Subsidiaries may sell, convey or
otherwise transfer to (a) a Receivables Entity (in the case of a transfer by
the Company or any of its Subsidiaries) and (b) any other Person (in the case
of a transfer by a Receivables Entity), or may grant a security interest in,
any receivables (whether now existing or arising in the future) of the Company
or any of its Subsidiaries, and any assets related thereto including, without
limitation, all collateral securing such receivables, all contracts and all
guarantees or other obligations in respect of such receivables, and the
proceeds of such receivables.
"Receivables Entity" means a Wholly Owned Subsidiary of the Company (or
another Person in which the Company or any Subsidiary of the Company may make
an Investment and to which the Company or any Subsidiary of the Company
transfers receivables and related assets) which engages in no activities other
than in connection with the financing of receivables and which is designated by
the Board of Directors (as provided
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below) as a Receivables Entity, (a) no portion of the Indebtedness or any other
Obligations (contingent or otherwise) of which (i) is guaranteed by the Company
or any Subsidiary of the Company (excluding guarantees of Obligations (other
than the principal of, and interest on, Indebtedness) pursuant to Standard
Securitization Undertakings), (ii) is recourse to or obligates the Company or
any Subsidiary of the Company in any way other than pursuant to Standard
Securitization Undertakings or (iii) subjects any property or asset of the
Company or any Subsidiary of the Company, directly or indirectly, contingently
or otherwise, to the satisfaction thereof, other than pursuant to Standard
Securitization Undertakings, (b) with which neither the Company nor any
Subsidiary of the Company has any material contract, agreement, arrangement or
understanding other than on terms no less favorable to the Company or such
Subsidiary than those that might be obtained at the time from Persons that are
not Affiliates of the Company, other than fees payable in the ordinary course
of business in connection with servicing receivables, and (c) to which neither
the Company nor any Subsidiary of the Company has any obligation to maintain or
preserve such entity's financial condition or cause such entity to achieve
certain levels of operating results. Any such designation by the Board of
Directors shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the resolution of the Board of Directors giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of December 2, 1998, by and among the Company and the other parties
named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"Related Taxes" means any taxes, charges or assessments, including, but not
limited to, sales, use, transfer, rental, ad valorem, value-added, stamp,
property, consumption, franchise, license, capital, net worth, gross receipts,
excise, occupancy, intangibles or similar taxes, charges or assessments (other
than taxes measured by income and withholding imposed on payments made by GCL
required to be paid by GCL by virtue of its being incorporated or having
Capital Stock outstanding (but not by virtue of owning stock or other equity
interests of any corporation or other entity other than the Company or any of
its Subsidiaries), or being a holding company parent of the Company of
receiving dividends from or other distributions in respect of the Capital Stock
of the Company, or having guaranteed any obligations of the Company of any
Subsidiary thereof, or having made any payment in respect of any of the items
for which the Company is permitted to make payments to GCL pursuant to the
covenant described above under "--Certain Covenants--Restricted Payments."
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary and, with respect to the PC-1
Companies, upon designation thereof by the Board of Directors as "Restricted
Subsidiaries," whether or not the PC-1 Companies meet the 50% test specified in
the definition of "Subsidiary."
"Senior Debt" means (i) all Indebtedness represented by the Senior Notes,
(ii) any other Indebtedness permitted to be incurred by the Company under the
terms of the Indenture, unless the instrument under which such Indebtedness is
incurred expressly provides that it is on a parity with or subordinated in
right of payment to the Notes and (iii) all Obligations with respect to the
foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Debt will not include (w) any liability for federal, state, local or other
taxes owed or owing by the Company, (x) any Indebtedness of the Company to any
of its Subsidiaries or other Affiliates, (y) any trade payables or (z) any
Indebtedness that is incurred in violation of the Senior Notes Indenture.
"Senior Notes" means the Company's 9 5/8% Senior Notes due 2008.
"Senior Notes Indenture" means the indenture pursuant to which the Senior
Notes were issued.
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"Significant Subsidiary" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Subsidiary of the
Company which are reasonably customary in securitization of receivables
transactions.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations
to repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (ii) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to
a Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation to maintain or preserve such Person's financial
condition or to cause such Person to achieve any specified levels of operating
results; and (c) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Company or any of its
Restricted Subsidiaries. Any such designation by the Board of Directors shall
be evidenced by filing with the Trustee a certified copy of the Board
Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions and was
permitted by the covenant described above under the caption "--Certain
Covenants--Restricted Payments." If, at any time, any Unrestricted Subsidiary
would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it
shall thereafter cease to be an Unrestricted Subsidiary for purposes of the
Indenture and any Indebtedness of such Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary of the Company as of such date (and, if
such Indebtedness is not permitted to be incurred as of such date under the
covenant described under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," the Company shall be in default
of such covenant). The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (i)
such Indebtedness is permitted under the covenant described under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period, and (ii) no Default or
Event of Default would be in existence following such designation. As of the
Issue Date, all of the Company's Subsidiaries will be Restricted Subsidiaries,
except for the PC-1 Companies, and the AC Subsidiaries may not be designated as
Unrestricted Subsidiaries unless and until the PC-1 Companies are designated as
Restricted Subsidiaries.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then
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remaining installment, sinking fund, serial maturity or other required payments
of principal, including payment at final maturity, in respect thereof, by (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
BOOK-ENTRY, DELIVERY AND FORM
All Notes, if and when issued, will be represented by permanent Global Notes
in fully registered from without coupons (the "Global Notes"), which will be
deposited with the Trustee as custodian for DTC and registered in the name of
DTC or of a nominee of DTC.
DTC has advised the Company that it is (i) a limited purpose company
organized under the laws of the State of New York, (ii) a "banking
organization" within the meaning of the New York Banking Law, (iii) a member of
the Federal Reserve System, (iv) a "clearing corporation" within the meaning of
the Uniform Commercial Code, as amended, and (v) a "clearing agency" registered
pursuant to Section 17A of the Exchange Act. DTC was created to hold securities
for its Participants and to facilitate the clearance and settlement of
securities transactions between Participants through electronic book-entry
charges to the accounts of its Participants, thereby eliminating the need for
physical transfer and delivery of certificates. DTC's Participants include
securities brokers and dealers (including the initial purchasers), banks and
trust companies, clearing corporations and certain other organizations.
Indirect access to DTC's system is also available to other entities such as
banks, brokers, dealers and trust companies (collectively, the "Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Investors who are not Participants
may beneficially own securities held by or on behalf of DTC only through
Participants or Indirect Participants.
The Company expects that pursuant to procedures established by DTC (i) upon
issuance of a Global Note, DTC will credit, on its internal system, the
principal amount of Notes of the individual beneficial interests represented by
such Global Note to the respective accounts of persons who have accounts with
such depository and (ii) ownership of beneficial interests in such Global Notes
will be shown on, and the transfer of such ownership will be effected only
though, records maintained by DTC (with respect to interest of Participants)
and the records of Participants and Indirect Participants (with respect to
interests of persons other than Participants).
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of securities is definitive form.
Accordingly, the ability to transfer interests in the Notes represented by a
Global Note to such persons may be limited. In addition, because DTC can act
only on behalf of its Participants, who in turn act on behalf of persons who
hold interests through Participants, the ability of a person having an interest
in Notes represented by a Global Note to pledge or transfer such interest to
persons or entities that do not participate in DTC's system, or to otherwise
take actions in respect of such interest, may be affected by the lack of a
physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or such nominee, as the case may be, will be considered to be the sole owner or
holder of the Notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interest in a Global
Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Notes, and will not be considered the owners or
holders thereof under the Indenture for any purpose, including with respect to
the giving of any direction, instruction or
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approval to the Trustee thereunder. Accordingly, each holder owning a
beneficial interest in a Global Note must rely on the procedures of DTC and, if
such holder is not a Participant or an Indirect Participant, on the procedures
of the Participant through which such holder owns its interest, to exercise any
rights of a holder of Notes under the Indenture or such Global Note. The
Company understands that under existing industry practice, in the event that
the Company requests any action of holders of Notes, or a holder that is an
owner of a beneficial interest in a Global Note desires to take any action that
DTC, as the holder of such Global Note, is entitled to take, DTC would
authorize the Participants to take such action and the Participants would
authorize holders owning through such Participants to take such action or would
otherwise act upon the instruction of such holders. Neither the Company nor the
Trustee will have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, Notes by DTC, or for maintaining,
supervising or reviewing any records of DTC relating to such Notes.
Payments with respect to the principal of, and premium, if any, and interest
on, any Notes represented by a Global Note registered in the name of DTC or its
nominee on the applicable record date will be payable by the Trustee to or at
the direction of DTC or its nominee in its capacity as the registered holder of
the Global Note representing such Notes under the Indenture. Under the terms of
the Indenture, the Company and the Trustee may treat the persons in whose names
the Notes, including the Global Notes, are registered as the owners thereof for
the purpose of receiving payment thereon and for any and all other purposes
whatsoever. Accordingly, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to owners of
beneficial interests in a Global Note (including principal, premium, if any,
and interest). Payments by the Participants and the Indirect Participants to
the owners of beneficial interests in a Global Note will be governed by
standing instructions and customary industry practice and will be the
responsibility of the Participants or the Indirect Participants and DTC.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the one hand, and
Euroclear or Cedel participants, on the other hand, will be effected through
DTC in accordance with DTC's rules on behalf of Euroclear or Cedel, as the case
may be, by its respective depositary; however, such cross-market transactions
will require delivery of instructions to Euroclear or Cedel, as the case may
be, by the counterparty in such system in accordance with the rules and
procedures and within the established deadlines (Brussels time) of such system.
Euroclear or Cedel, as the case may be, will, if the transaction meets its
settlement requirements, deliver instructions to its respective depositary to
take action to effect final settlement on its behalf by delivering or receiving
interests in the relevant Global Notes in DTC, and making or receiving payment
in accordance with normal procedures for same-day funds settlement applicable
to DTC. Euroclear participants and Cedel participants may not deliver
instructions directly to the depositaries for Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant in
DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day
(which must be a business day for Euroclear and Cedel) immediately following
the settlement date of DTC. Cash received in
Euroclear or Cedel as a result of sales of interest in a Global Note by or
through a Euroclear or Cedel participant to a Participant in DTC will be
received for value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Notes among participants in
DTC, Euroclear and Cedel, they are under no obligation to perform or to
continue to perform such procedures, and such procedures may be discontinued at
any time. Neither the Company nor the Trustee will have any responsibility for
the performance by DTC, Euroclear or
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Cedel or their respective participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
DTC management is aware that some Systems that are dependent upon calendar
dates, including dates before, on, and after January 1, 2000, may encounter
"Year 2000 problems." DTC has informed its Participants and the Industry that
it has developed and is implementing a program so that its Systems, as the same
relate to the timely payment of distributions (including principal and income
payments) to securityholders, book-entry deliveries, and settlement of trades
within DTC, continue to function appropriately. This program includes a
technical assessment and a remediation plan, each of which is complete.
Additionally, DTC's plan includes a testing phase, which is expected to be
completed within appropriate time frames.
However, DTC's ability to perform properly its services is also dependent
upon other parties, including but not limited to issuers and their agents, as
well as third party vendors from whom DTC licenses software and hardware, and
third party vendors on whom DTC relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others. DTC has informed the Industry that it is contacting (and will
continue to contact) third party vendors from whom DTC acquires services to:
(i) impress upon them the importance of such services being Year 2000
compliant; and (ii) determine the extent of their efforts for Year 2000
remediation (and, as appropriate, testing) of their services. In addition, DTC
is in the process of developing such contingency plans as it deems appropriate.
According to DTC, the foregoing information with respect to DTC has been
provided to the Industry for informational purposes only and is not intended to
serve as a representation, warranty or contract modification of any kind.
CERTIFICATED NOTES
If (i) the Company notifies the trustee in writing that DTC is no longer
willing or able to act as a depositary or DTC ceases to be registered as a
clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days of such notice or cessation, (ii) the Company, at its
option, notifies the trustee in writing that it elects to cause the issuance of
Notes in definitive form under the Indenture or (iii) upon the occurrence of
certain other events as provided in the Indenture, then, upon surrender by DTC
of the Global Notes, certificated Notes will be issued to each person that DTC
identifies as the beneficial owner of the Notes represented by the Global
Notes. Upon any such issuance, the trustee is required to register such
certificated Notes in the name of such person or persons (or the nominee of any
thereof) and cause the same to be delivered thereto.
Neither the Company nor the trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners of
the related Notes and each such person may conclusively rely on, and shall be
protected in relying on, instructions from DTC for all purposes (including with
respect to the registration and delivery, and the respective principal amounts,
of the Notes to be issued).
EXCHANGE OFFER; REGISTRATION RIGHTS
The Company and the Initial Purchasers entered into the Registration Rights
Agreement pursuant to which the Company agreed, for the benefit of the holders
of the Old Preferred Stock or the Old Exchange Notes, as applicable, that the
Company will, at its cost:
. to file the registration statement of which this prospectus is a part
with the Securities and Exchange Commission under the Securities Act of
1933, to exchange the Old Preferred Stock for the Exchange Preferred
Stock by March 2, 1999,
. to use its reasonable best efforts to cause the registration statement
to be declared effective under the Securities Act by May 28, 1999, and
. to keep the Exchange Offer open for the minimum period required by
applicable federal law and state securities laws, provided, however that
it shall remain open for no less than 20 Business Days.
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For each share of Preferred Stock or each Exchange Note surrendered to the
Company and accepted for exchange pursuant to the Exchange Offer, the holder of
such security will receive a registered security having a liquidation
preference or principal amount equal to that of the surrendered restricted
security.
If (i) the Exchange Offer is not permitted by applicable law or Securities
and Exchange Commission policy or (ii) if any Holder shall notify the Company
within 20 Business Days following the consummation of the Exchange Offer that
(A) such holder was prohibited by law or Securities and Exchange Commission
policy from participating in the Exchange Offer or (B) such holder may not
resell the securities acquired by it in the Exchange Offer to the public
without delivering a prospectus and the prospectus contained in the exchange
offer registration statement is not appropriate or available for such resales
by such holders or (C) such holder is a broker-dealer and holds Securities
acquired directly from the Company or any of its affiliates, then the Company
will, at its cost, (a) use its reasonable best efforts to cause to be filed a
shelf registration statement (the "Shelf Registration Statement") covering
resales of the restricted securities, (b) use its reasonable best efforts to
cause the Shelf Registration Statement to be declared effective under the
Securities Act of 1933 and (c) use its reasonable best efforts to keep the
Shelf Registration Statement effective until two years after its effective date
or such shorter period ending when all resales of the securities covered by
such Shelf Registration Statement have been made. A holder selling such
securities pursuant to the Shelf Registration Statement generally would be
required to be named as a selling security holder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act of 1933 in connection with such
sales and will be bound by the provisions of the Registration Rights Agreement
which are applicable to such holder (including certain indemnification
obligations).
If (a) the Company fails to file any of the registration statements required
by the Registration Rights Agreement on or before the date specified for such
filing, (b) any of such registration statements is not declared effective by
the Commission on or prior to the date specified for such effectiveness, or (c)
the Company fails to consummate the Exchange Offer within 210 days of the
Closing Date with respect to the exchange offer registration statement, or (d)
any registration statement required by the Registration Rights Agreement is
declared effective but thereafter ceases to be effective or usable in
connection with its intended purpose (each such event referred to in clause (a)
through (d) above a "Registration Default"), then the Company will pay to each
holder of the securities affected thereby special interest which will
accumulate or accrue and be payable semi-annually thereon (in addition to the
stated dividends or stated interest) from and including the date such
Registration Default occurs to, but excluding the date on which the applicable
registration statement is filed or is declared effective, the Exchange Offer is
consummated, or the applicable registration statement is again declared
effective or made usable. During the time that special dividends or special
interest is accumulating or accruing continuously, the rate of such special
dividends or special interest shall be 0.50% per annum during the first 90-day
period and shall increase by 0.25% per annum for each subsequent 90-day period,
but in no event shall such rate exceed 1.0% per annum in the aggregate
regardless of the number of Registration Defaults. If, after the cure of all
Registration Defaults then in effect, there is a subsequent Registration
Default, the rate of special dividends or special interest for such subsequent
Registration Default shall initially be 0.50% regardless of the special
dividends or special interest rate in effect with respect to any prior
Registration Default at the time of the cure of such Registration Default.
The summary herein of certain provisions of the Registration Rights Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Registration Rights
Agreement, which is an exhibit to the registration statement of which this
prospectus is a part.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
9 5/8% SENIOR NOTES
On May 18, 1998, we consummated the Senior Notes Offering pursuant to which
we issued an aggregate of $800 million in principal amount of 9 5/8% Senior
Notes. The Senior Notes are guaranteed by GCL and certain of our subsidiaries.
The Senior Notes mature on May 15, 2008. Interest on the Senior Notes is
payable in U.S. dollars on May 15 and November 15 of each year. The Senior
Notes were issued under an indenture with the United States Trust Company of
New York, dated as of May 18, 1998. This indenture restricts our ability and
the ability of certain of our subsidiaries to: borrow money, pay dividends on
stock or purchase stock, make investments, use assets as security in other
transactions and sell certain assets or merge with or into other companies. See
"Summary--Financing Plan."
AC-1 CREDIT FACILITY
ACL is the borrower under the $482.0 million senior secured AC-1 Credit
Facility, comprised of a $472.0 million term loan facility and a $10.0 million
working capital facility, with certain commercial lending institutions and CIBC
and Deutsche Bank AG, New York Branch, an affiliate of Deutsche Bank Securities
Inc., as lead agents for the lenders. The AC-1 Credit Facility is secured by
pledges of the stock of ACL and its subsidiaries (and other entities holding
landing licenses or AC-1 assets) and security interests in the assets and
revenues of ACL and its subsidiaries and is being used to provide financing for
a portion of AC-1. A portion of the AC-1 Credit Facility is available only to
pay interest on the loans prior to the AC-1 RFS date, and a portion is
available to issue letters of credit to the contractor of AC-1. The loans under
the AC-1 Credit Facility will amortize in eight semi-annual installments,
commencing on the first initial principal payment date (which shall be May 31
or November 30) to occur more than two months after the commercial operation
date (anticipated to occur in February 1999), with 15% of the principal amount
to be amortized in the first year, 25% in the second year, 30% in the third
year and 30% in the fourth year. Borrowings bear interest at an adjustable rate
based on the adjusted base rate or LIBOR plus an applicable margin. The
facility also requires mandatory prepayments to be made from, among other
things, 50% of excess cash flow, 50% of net cash proceeds of any equity
offering of ACL and 100% of net cash proceeds of any permitted debt offerings
of ACL or its immediate parent, permitted asset sales or insurance proceeds. As
of September 30, 1998, a total of $365.1 million in indebtedness (to which the
Securities would be effectively subordinated) was outstanding under the AC-1
Credit Facility.
The AC-1 Credit Facility contains covenants that, among other things,
restrict ACL's use of the term loan proceeds to the financing of AC-1 and the
payment of fees and expenses directly thereto and the use of the working
capital facility proceeds to AC-1 costs and for working capital purposes and
limit ACL's ability to make certain dividends, distributions or investments and
mergers. The facility generally only permits dividends or distributions with
respect to a portion of ACL's excess cash flow, but severely restricts the
payment of other dividends or distributions to GCL. The AC-1 Credit Facility
contains certain financial covenants relating to minimum sales of capacity on
AC-1 and ratio of EBITDA to interest expense, the failure to comply with which
would cause all excess cash flow to be applied to the lenders under the AC-1
Credit Facility for such period. The AC-1 Credit Facility contains certain
events of default including, among other things, failure to pay amounts when
due, failure to comply with covenants and insolvency. An event of default shall
also occur upon the occurrence of certain failures in connection with AC-1.
Upon the occurrence of an event of default, the AC-1 Credit Facility permits
the lenders to declare all outstanding borrowings to be immediately due and
payable and to proceed against the collateral. In addition, the AC-1 Credit
Facility prescribes the order by which proceeds from the sale of AC-1 capacity
shall be applied, both prior to and after the commencement of commercial
operations, and requires ACL to maintain certain reserve accounts. As a result
of the foregoing, the ability of ACL to use and distribute revenue is severely
restricted so long as the AC-1 Credit Facility remains in existence.
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PC-1 CREDIT FACILITY
PCL is the borrower under the $850.0 million senior secured PC-1 Credit
Facility, comprised of a $840.0 million term loan and a $10.0 million working
capital facility, with certain commercial lending institutions and Deutsche
Bank AG, New York Branch, an affiliate of Deutsche Bank Securities, CIBC Inc.
and Goldman, Sachs Credit Partners L.P., as Lead Agents for the lenders. The
PC-1 Credit Facility is secured by pledges of the stock of PCL and its
subsidiaries and security interests in certain of the assets and revenues of
PCL and its subsidiaries and is being used to provide financing for a portion
of PC-1. The subsidiaries of PCL also guaranteed PCL's obligations under the
PC-1 Credit Facility. A portion of the PC-1 Credit Facility is available only
to pay interest on the loans prior to the PC-1 RFS date. The term loans under
the PC-1 Credit Facility will amortize over ten semi-annual installments,
scheduled to commence approximately 165 days after the commercial operation
date. Borrowings bear interest at an adjustable rate based on the adjusted base
rate or LIBOR plus an applicable margin. The facility also requires mandatory
prepayments to be made from, among other things, 50% of excess cash flow, 50%
of the net cash proceeds of any equity offering of PCL and 100% of net cash
proceeds of any permitted debt offering of PCL, permitted asset sale and
insurance proceeds. As of September 30, 1998, a total of $200 million was
outstanding.
The PC-1 Credit Facility contains covenants that, among other things,
restrict PCL's ability to incur indebtedness, make investments, guarantees or
acquisitions and make dividends or distributions. The facility generally only
permits dividends or distributions by PCL out of a portion of excess cash flow,
and securely restricts the payment of other dividends or distributions. The PC-
1 Credit Facility contains certain financial covenants relating to minimum
sales of capacity on PC-1 and the ratio of system revenues to interest expense,
the failure to comply with which would cause all excess cash flow to be applied
to the lenders under the PC-1 Credit Facility. The PC-1 Credit Facility
contains events of default including, among other things, failure to pay
amounts when due, failure to comply with certain covenants and insolvency. An
event of default shall also occur upon the occurrence of certain failures in
connection with PC-1. Upon the occurrence of an event of default, the PC-1
Credit Facility permits the lenders to (1) declare the loans then outstanding
to be immediately due and payable, (2) demand that any equity commitments not
theretofore funded to be immediately funded, and (3) proceed against the
collateral. In addition, the PC-1 Credit Facility prescribes the order by which
proceeds from the sale of PC-1 capacity shall be applied, both prior to and
after the commencement of commercial operation, and requires PCL to maintain
certain reserve warrants. As a result of the foregoing, the ability of PCL to
use and distribute revenue is severely restricted so long as the PC-1 Credit
Facility remains in existence.
MAC CREDIT FACILITY
MACL is the borrower under the $260.0 million senior secured MAC Credit
Facility, comprised of a $220.0 million term loan to fund the construction of
MAC, a $30.0 million term loan to fund future upgrades of MAC and a $10.0
million working capital facility, with certain commercial lending institutions
and CIBC Inc. and Deutsche Bank AG, New York Branch, an affiliate of Deutsche
Bank Securities Inc., as lead agents for the lenders. The MAC Credit Facility
is secured by pledges of the stock of MACL and its subsidiaries and security
interests in certain of the assets and revenues of MACL and its subsidiaries
and is being used to provide financing for a portion of MAC. A portion of the
MAC Credit Facility is available only to pay interest on the loans prior to the
MAC RFS date. The term loans under the MAC Credit Facility will amortize over
ten semi-annual installments, scheduled to commence approximately in August
2000. Borrowings bear interest at an adjustable rate based on the adjusted base
rate or LIBOR plus an applicable margin. The facility also requires mandatory
prepayments to be made from, among other things, 50% of excess cash flow, 50%
of net cash proceeds of any equity offering of MACL and 100% of net cash
proceeds of any permitted debt offerings of MACL, permitted asset sale or
insurance proceeds.
The MAC Credit Facility contains covenants that, among other things, restrict
MACL's ability, and any subsidiary's ability, to incur indebtedness, make
investments, loans, advances, guarantees and acquisitions, and make dividends
and distributions. The facility generally only permits dividends or
distributions with respect to a portion of MACL's excess cash flow, and
securely restricts the payments of other dividends and payments.
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The MAC Credit Facility contains certain financial covenants relating to
minimum sales of capacity on MAC, minimum interest coverage ratio and minimum
remaining asset value to debt, the failure to comply with which would cause all
excess cash flow to be applied to the lenders under the MAC Credit Facility.
The MAC Credit Facility contains events of default including, among other
things, failure to pay amounts when due, failure to comply with covenants and
insolvency. An event of default shall also occur upon the occurrence of certain
failures in connection with MAC. Upon the occurrence of an event of default,
the MAC Credit Facility permits the lenders to (1) declare the loans then
outstanding to be immediately due and payable and (2) to proceed against the
collateral. In addition, the MAC Credit Facility prescribes the order by which
proceeds from the sale of MAC capacity shall be applied, both prior to and
after the commencement of commercial operations, and requires MACL to maintain
certain reserve accounts. As a result of the foregoing, the ability of MACL to
use and distribute revenue is severely restricted so long as the MAC Credit
Facility remains in existence.
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TAX CONSIDERATIONS
TAXATION OF THE COMPANY
The Company believes that a significant portion of the income derived from
its subsea systems will not be subject to tax in Bermuda, which currently has
no corporate income tax, or other countries in which the Issuer or its
affiliates conduct activities or in which customers of the Company are located,
including the United States. However, this belief is based upon the anticipated
nature and conduct of the business of the Company, which may change, and upon
the Company's understanding of its position under the tax laws of the various
countries in which the Company has assets or conducts activities, which
position is subject to review and possible challenge by taxing authorities and
to possible changes in law (which may have retroactive effect). The extent to
which certain taxing jurisdictions may require the Company to pay tax or to
make payments in lieu of tax cannot be determined in advance. In addition, the
operations of and payments due to the Company may be affected by changes in
taxation, including retroactive tax claims or assessments of withholding on
amounts payable to the Company or other taxes assessed at the source, in excess
of the taxation anticipated by the Company based on business contacts and
practices of the Company and the current tax regimes. There can be no assurance
that these factors will not have a material adverse effect on the Company.
United States Federal Income Tax Considerations
The Issuer and its non-United States subsidiaries will be subject to United
States federal income tax at regular corporate rates (and to United States
branch profits tax) on their income that is effectively connected with the
conduct of a trade or business within the United States, and will be required
to file federal income tax returns reflecting that income. The Company intends
to conduct its operations so as to reduce the amount of its effectively
connected income. However, no assurance can be given that the Internal Revenue
Service ("IRS") will agree with the positions taken by the Company in this
regard. Moreover, the United States subsidiaries of the Issuer will be subject
to United States federal income tax on their worldwide income regardless of its
source (subject to reduction by allowable foreign tax credits), and
distributions by such United States subsidiaries to the Issuer or its foreign
subsidiaries generally will be subject to United States withholding tax.
Bermuda Tax Considerations
Under current Bermuda law, the Company is not subject to tax on income or
capital gains. Furthermore, the Company has obtained from the Minister of
Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 (as
amended), an undertaking that, in the event that Bermuda enacts any legislation
imposing tax computed on profits, income, any capital asset, gain or
appreciation, or any tax in the nature of estate duty or inheritance tax, then
the imposition of such tax will not be applicable to the Company or to any of
its operations, or the Preferred Stock or Exchange Notes of the Company, until
March 28, 2016. This undertaking does not, however, prevent the imposition of
property taxes on any company owning real property or leasehold interests in
Bermuda.
TAXATION OF HOLDERS OF PREFERRED STOCK AND EXCHANGE NOTES
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 Preferred
Stock or the Exchange Notes or on any payments thereunder. See "Taxation of the
Issuer--Bermuda Tax Considerations" for a description of the undertaking on
taxes obtained by the Company from the Minister of Finance of Bermuda.
United States Federal Income Tax Considerations
The following summary describes certain United States federal income tax
consequences of the purchase, ownership and disposition of Preferred Stock and
Exchange Notes by initial holders who acquired the Preferred Stock pursuant to
the offering of the Old Preferred Stock. Except where noted, this summary
assumes that
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investors will hold their Preferred Stock and Exchange Notes as capital assets
and does not discuss special situations, such as those of dealers in securities
or currencies, financial institutions, tax-exempt entities, life insurance
companies, persons holding Preferred Stock and Exchange Notes as a part of a
hedging, short-sale, "integrated" or conversion transaction or a straddle or
holders of Preferred Stock or Exchange Notes whose "functional currency" is not
the United States dollar all of whom may be subject to rules that differ
significantly from those summarized below. In addition, the summary generally
does not address the tax consequences to United States Holders (as defined
below) 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 the voting stock of the Issuer or any of its non-United States
subsidiaries ("10% Shareholders"). 10% Shareholders are advised to consult
their own tax advisors regarding the federal, state, local and foreign income
and other tax considerations incident to an investment in the Preferred Stock
and Exchange Notes.
The discussion below is based upon the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), and regulations, rulings and judicial
decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified so as to result in United States federal income
tax consequences different from those discussed below.
As used herein, a "United States Holder" of Preferred Stock or Exchange Notes
means a holder that is (i) a citizen or resident of the United States, (ii) a
corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof, (iii) an estate the income
of which is subject to United States federal income taxation regardless of its
source or (iv) a trust which is subject to the supervision of a court within
the United States and the control of one or more United States persons as
described in section 7701(a)(30) of the Code. A Non-United States Holder means
a holder other than a United States Holder.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF PREFERRED STOCK
OR EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED
STATES FEDERAL, STATE AND LOCAL INCOME AND OTHER TAX CONSEQUENCES IN LIGHT OF
THEIR PARTICULAR CIRCUMSTANCES AS WELL AS ANY CONSEQUENCES ARISING UNDER THE
LAWS OF ANY OTHER TAXING JURISDICTION.
TAX CONSEQUENCES OF THE EXCHANGE OFFER
The exchange of Old Preferred Stock for Exchange Preferred Stock in the
Exchange Offer will not constitute a taxable event to holders. Consequently, no
gain or loss will be recognized by a holder upon receipt of the Exchange
Preferred Stock. The holding period of the Exchange Preferred Stock will
include the holding period the Old Preferred Stock and the basis of the
Exchange Preferred Stock will be the same as the basis of the Old Preferred
Stock immediately before the exchange.
In any event, persons considering the exchange of Old Preferred Stock for
Exchange Preferred Stock should consult their own tax advisors concerning the
United States federal income tax consequences in light of their particular
situations as well as any consequences arising under the laws of any other
taxing jurisdiction.
UNITED STATES HOLDERS
CLASSIFICATION OF PREFERRED STOCK AND EXCHANGE NOTES
Although the characterization of an instrument as debt or equity is a factual
determination that cannot be predicted with certainty, the Issuer intends to
treat the Preferred Stock as stock and the Exchange Notes as debt for United
States federal income tax purposes. The remainder of this discussion assumes
that such treatment will be respected, but no opinion is either expressed or
implied on this issue. Any change in these assumptions would alter the tax
consequences described below.
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PREFERRED STOCK
Dividends
Subject to the PFIC rules described below, distributions on the Preferred
Stock will constitute dividend income for United States federal income tax
purposes, subject to tax as ordinary income, to the extent paid from current or
accumulated earnings and profits of the Issuer (as determined under United
States federal income tax principles) ("earnings and profits"). Such dividends
will not be eligible for the dividends received deduction allowed to
corporations under the Code. Dividends "paid in kind" through the issuance of
additional Preferred Stock will be treated as distributions in an amount equal
to the fair market value of such additional Preferred Stock as of the date of
distribution. Such amount will also be the initial issue price and tax basis of
the newly distributed Preferred Stock for United States federal income tax
purposes. The holding period for such newly distributed Preferred Stock will
commence with its distribution, and will not include the United States Holder's
holding period for outstanding shares of Preferred Stock with respect to which
such newly distributed Preferred Stock was distributed.
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The Issuer believes that it currently has no current or accumulated earnings
and profits. The existence of current and accumulated earnings and profits in
subsequent years will depend on future levels of profits and losses which the
Issuer cannot accurately predict at this time. To the extent that the amount of
any distribution on the Preferred Stock, exceeds the Issuer's current and
accumulated earnings and profits, the distribution will first be treated as a
tax-free return of capital, causing a reduction in the adjusted basis of the
Preferred Stock (thereby increasing the amount of gain, or decreasing the
amount of loss, to be recognized by the United States Holder on a subsequent
disposition of the Preferred Stock), and the balance in excess of the adjusted
basis will be subject to tax as capital gain.
For so long as the Issuer is a "United States-owned foreign corporation,"
distributions with respect to the Preferred Stock that are taxable as dividends
generally will be treated for United States foreign tax credit purposes as (i)
foreign source "passive income" (or, in the case of certain United States
Holders, foreign source "financial services income") and (ii) United States
source income, in proportion to the earnings and profits of the Issuer in the
year of such distribution allocable to foreign and United States sources,
respectively. For this purpose, the Issuer 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 the Issuer is owned, directly or indirectly, by United
States Holders. The Issuer believes that it currently is characterized as a
United States-owned foreign corporation for United States federal income tax
purposes.
Redemption Premium
Under Section 305(c) of the 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 ("redemption
premium") will be taxable as a constructive distribution of additional
Preferred Stock to the United States Holder under a constant interest rate
method similar to that described below for accruing original issue discount
("OID") (see "Exchange Notes--Original Issue Discount"). Because the Preferred
Stock provides for optional rights of redemption by the Issuer at prices in
excess of the issue price, stockholders 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 (i) the Issuer and the United States Holder are not
related within the meaning of the regulations; (ii) there are no plans,
arrangements, or agreements that effectively require or are intended to compel
the Issuer to redeem the stock (disregarding, for this purpose, a separate
mandatory redemption), and (iii) 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. The Issuer intends to take the position that the existence of the
Issuer's optional redemption rights does not result in a constructive
distribution to United States Holders.
Any additional shares of Preferred Stock distributed by the Issuer in lieu of
cash dividend payments on the Preferred Stock will bear redemption premium if
the issue price of such shares (i.e., the fair market value of such shares on
the date of issuance) is less than their redemption price. This may give rise
to constructive distributions as described above. If such shares bear
redemption premium, such shares generally will have different tax
characteristics than other shares of Preferred Stock. This difference in tax
characteristics could adversely affect the liquidity of the shares.
Disposition of Preferred Stock
A United States Holder's adjusted tax basis in the Preferred Stock will, in
general, be the United States Holder's initial tax basis of such Preferred
Stock increased by any redemption premium previously included in income by the
United States Holder, and reduced by any previous distributions that are not
characterized as dividends. Subject to the PFIC rules described below, upon the
sale or other disposition of Preferred Stock (other than by redemption,
discussed below) a United States Holder will generally recognize capital gain
or loss
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equal to the difference between the amount realized upon the disposition and
the adjusted tax basis of the Preferred Stock. Such gain or loss will be
capital gain or loss and will be long-term capital gain or loss if at the time
of sale, exchange, redemption or other disposition the Preferred Stock has been
held for more than one year. Net capital gain 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. Any
gain recognized by a United States Holder generally will be treated as United
States source income. It is presently unclear whether any loss realized by a
United States Holder will be treated as United States or foreign source.
A redemption of the Preferred Stock by the Issuer would be treated, under
Section 302 of the Code, either as a sale or exchange giving rise to capital
gain or loss or as described below as a dividend. In the case of a redemption
of Preferred Stock for Exchange Notes, the amount realized on the exchange
would be equal to the "issue price" of the Exchange Note plus any cash received
on the exchange. The issue price of an Exchange Note would be equal to (i) its
fair market value as of the exchange date if the Exchange Notes are traded on
an established securities market on or at any time during a specified period or
(ii) the fair market value at the exchange date of the Preferred Stock if such
Preferred Stock is traded on an established securities market during a
specified period but the Exchange Notes are not. If neither the Preferred Stock
nor the Exchange Notes are so traded, the issue price of the Exchange Notes
would be determined under Section 1274 of the Code, in which case the issue
price would be the stated principal amount of the Exchange Notes provided that
the yield on the Exchange Notes is equal to or greater than the "applicable
federal rate" in effect at the time the Exchange Notes are issued. If the yield
on the Exchange Notes is less than such applicable federal rate, its issue
price under section 1274 of the Code would be equal to the present value as of
the issue date of all payments to be made on the Exchange Notes discounted at
the applicable federal rate. It cannot be determined at the present time
whether the Preferred Stock or the Exchange Notes will be, at the relevant
time, traded on an established securities market or whether the yield on the
Exchange Notes will equal or exceed the applicable federal rate, as discussed
above.
If a redemption of shares of the Preferred Stock for cash or an exchange of
the Preferred Stock for Exchange Notes is treated as a dividend with respect to
a particular exchanging United States Holder under Section 302 of the Code,
such United States Holder (i) will not recognize any loss on the exchange, (ii)
will recognize dividend income (rather than capital gain) in an amount equal to
the issue price of the Exchange Notes received, without regard to the United
States Holder's basis in the shares of Preferred Stock surrendered in the
exchange, to the extent of its proportionate share of the Issuer's current or
accumulated earnings and profits and (iii) the holding period for the Exchange
Notes will begin on the day after the day on which the Exchange Notes are
acquired by the exchanging United States Holder. Pursuant to Section 302 of the
Code, the redemption or exchange will not be treated as a dividend provided
that, after giving effect to the constructive ownership rules of Section 318 of
the Code, the redemption or exchange (i) represents a "complete termination" of
the exchanging United States Holder's stock interest in the Issuer, (ii) is
"substantially disproportionate" with respect to the exchanging United States
Holder or (iii) is "not essentially equivalent to a dividend" with respect to
the exchanging United States Holder, all within the meaning of Section 302(b)
of the Code. An exchange will be "not essentially equivalent to a dividend" as
to a particular United States Holder if it results in a "meaningful reduction"
in such United States Holder's interest in the Issuer (after application of the
constructive ownership rules of Section 318 of the Code). In general, there are
no fixed rules for determining whether a "meaningful reduction" has occurred.
Each United States Holder should consult its own tax advisor as to its ability
in light of its own particular circumstances to satisfy any of the foregoing
tests.
Depending upon a United States Holder's particular circumstances, the tax
consequences of holding Exchange Notes may be less advantageous than the tax
consequences of holding Preferred
Stock, for example, as discussed at "Exchange Notes--Original Issue Discount,"
Exchange Notes may be issued with OID.
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Passive Foreign Investment Company
The Issuer believes that it is not a PFIC and does not expect to become a
PFIC in the future for United States federal income tax purposes, although
there can be no assurance in this regard. This conclusion is a factual
determination made annually and thus is subject to change. In addition, it is
based, in part, on interpretations of existing law that the Issuer believes
are reasonable, but which have not been approved by any taxing authority.
In general, the Issuer will be a PFIC with respect to a United States Holder
if, for any taxable year in which the United States Holder held Preferred
Stock, either (i) at least 75% of the gross income of the Issuer for the
taxable year is passive income or (ii) at least 50% of the value (determined
on the basis of a quarterly average) of the Issuer's assets is attributable to
assets that produce or are held for the production of passive income. For this
purpose, passive income generally includes dividends, interest, royalties,
rents (other than rents and royalties derived in the active conduct of a trade
or business and not derived from a related person), annuities and gains from
assets that produce passive income. If the Issuer owns (directly or
indirectly) at least 25% by value of the stock of another corporation, the
Issuer will be treated for purposes of the PFIC tests as owning its
proportionate share of the assets of the other corporation, and as receiving
directly its proportionate share of the other corporation's income. If the
Issuer is classified as a PFIC in any year with respect to which a United
States person is a shareholder, the Issuer generally will continue to be
treated as a PFIC with respect to such shareholder in all succeeding years,
regardless of whether it continues to meet the income or asset test described
above, subject to certain possible shareholder elections that may apply in
certain circumstances.
If the Issuer is treated as a PFIC, unless a United States Holder makes a
"QEF election" or a "mark to market election," each as described below:
1. Distributions made by the Issuer during a taxable year to a United
States Holder with respect to Preferred Stock that are "excess
distributions" (defined generally as the excess of the amount received
with respect to the Preferred Stock in any taxable year over 125% of the
average received in the shorter of either the three previous years or
the United States Holder's holding period before the taxable year) must
be allocated ratably to each day of the United States Holder's holding
period. The amounts allocated to the current taxable year and to taxable
years prior to the first year in which the Issuer was classified as a
PFIC are included as ordinary income in the United States Holder's gross
income for that current year. The amount allocated to each other prior
taxable year is taxed as ordinary income at the highest rate in effect
for the United States Holder in that prior year and the tax is subject
to an interest charge at the rate applicable to deficiencies in income
taxes.
2. The entire amount of any gain realized upon the sale or other
disposition (including for these purposes a pledge) of Preferred Stock
will be treated as an excess distribution made in the year of sale or
other disposition and as a consequence will be treated as ordinary
income and, to the extent allocated to years prior to the year of sale
or disposition, will be subject to the interest charge described above.
In addition, United States Holders who acquire their Preferred Stock
from decedents generally will not receive a "stepped-up" basis in such
Preferred Stock. Instead, such United States Holder will have a tax
basis equal to the lower of the fair market value of such Preferred
Stock or the decedent's basis.
The special PFIC tax rules described above will not apply to a United States
Holder if the United States Holder elects to have the Issuer treated as a
"qualified electing fund" (a "QEF election") and the Issuer provides certain
information to United States Holders. If the Issuer is treated as a PFIC, it
intends to notify United States Holders and to provide to United States
Holders such information as may be required to make such QEF election
effective.
A United States Holder that makes a QEF election will be taxable currently
on its pro rata share of the Issuer's ordinary earnings and net capital gain
(at ordinary income and capital gain rates, respectively) for each taxable
year of the Issuer during which it is treated as a PFIC, regardless of whether
or not distributions were received. The United States Holder's basis in the
Preferred Stock will be increased to reflect taxed but
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undistributed income. Distributions of income that had previously been taxed
will result in a corresponding reduction of basis in the Preferred Stock and
will not be taxed again as a distribution to the United States Holder.
Alternatively, a United States Holder of stock in a PFIC that is treated as
"marketable stock" may make a mark to market election. A United States Holder
that makes such an election will not be subject to the PFIC rules described
above. Instead, in general, an electing United States Holder will include in
income each year as ordinary income the excess, if any, of the fair market
value of such 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). The electing United States
Holder's basis in the stock will be adjusted to reflect any such income or loss
amounts. Any gain or loss on the sale of the Preferred Stock will be ordinary
income or loss (except that such 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 designated by the United
States Treasury. The Company does not expect that the Preferred Stock will meet
such requirements.
A United States Holder who owns Preferred Stock during any year that the
Issuer is a PFIC must file IRS Form 8621. United States Holders are urged to
consult their tax advisors concerning the United States federal income tax
consequences of holding Preferred Stock of the Issuer if it is considered a
PFIC, including the advisability and availability of making any of the
foregoing elections.
Foreign Personal Holding Company
If the Issuer or one of its non-United States subsidiaries were classified as
an FPHC, all United States Holders (including certain indirect holders),
regardless of their percentage ownership, would be required to include in
income, as a dividend, their pro rata share of the Issuer's (or its relevant
non-United States subsidiary's) undistributed FPHC income (generally, taxable
income with certain adjustments) if they were holders on the last day of the
Issuer's taxable year (or if earlier, the last day on which the Issuer
satisfied the shareholder test). In addition, if the Issuer were classified as
an FPHC, United States Holders who acquire their Preferred Stock from decedents
would not receive a "stepped-up" basis in such Preferred Stock. Instead, such
United States Holders would have a tax basis equal to the lower of the fair
market value of such Preferred Stock or the decedent's basis.
A foreign corporation will be classified as an FPHC if (i) 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) (the "shareholder test")
and (ii) the corporation receives at least 60% of its gross income (50% after
the initial year of qualification), as adjusted, for the taxable year from
certain passive sources (the "income test"). It is possible that the Issuer and
its subsidiaries could meet the shareholder test in a given taxable year. It is
also possible that the Issuer or one of its non-United States subsidiaries
would meet the income test in a given year and would be treated as an FPHC. The
Company intends to manage its affairs so as to attempt to avoid or minimize
having income imputed to its United States Holders under these rules, to the
extent such management of its affairs is consistent with its business goals,
although there can be no assurance in this regard.
Personal Holding Company
A corporation classified as a PHC is subject to a 39.6% tax on its
undistributed PHC income. Foreign corporations (such as the Issuer) determine
their liability for PHC tax by considering only (i) gross income derived from
United States sources and (ii) gross income that is effectively connected with
a United States trade or business. A corporation will be classified as a PHC if
(i) 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)
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directly or indirectly and (ii) the corporation receives at least 60% of its
gross income, as adjusted, from certain passive sources. However, if a
corporation is an FPHC or a PFIC, it cannot be a PHC. It is possible that the
Issuer and its subsidiaries could meet the PHC shareholder test in a given
taxable year. It is also possible that the Issuer or one of its subsidiaries
would meet the income test in a given year and would be treated as a PHC. The
Company intends to manage its affairs so as to attempt to avoid or minimize the
imposition of the PHC tax, to the extent such management of its affairs is
consistent with its business goals, although there can be no assurance in this
regard.
Controlled Foreign Corporations
If 10% Shareholders (as defined above) own, in the aggregate, more than 50%
(measured by voting power or value) of the shares of the Issuer or any of its
non-United States subsidiaries (directly, indirectly, or by attribution), the
Issuer or any such non-United States subsidiary would be a CFC. If
characterized as CFCs, then a portion of the undistributed income of the Issuer
and its non-United States subsidiaries may be includible in the taxable income
of 10% Shareholders of those entities, and a portion of the gain recognized by
such 10% Shareholders on the disposition of their shares in the Issuer (which
could otherwise qualify for capital gains treatment) may be converted into
ordinary dividend income. It is possible that the Issuer and its non-United
States corporate subsidiaries may be CFCs or may become CFCs in the future.
However, as discussed above, CFC status generally only has potentially adverse
consequences to 10% Shareholders.
EXCHANGE NOTES
Interest and OID on the Exchange Notes
The tax treatment of the Exchange Notes will depend upon whether they are
issued with OID. Exchange Notes issued on or before June 1, 2002 will be issued
with OID. Exchange Notes issued after June 1, 2002 may be issued with OID, but
only if their principal amount exceeds their issue price, as defined above. The
interest (including OID) generally will be treated as foreign source passive
income (or, in the case of certain United States Holders, foreign source
financial services income) for foreign tax credit purposes. Exchange Notes
issued with OID will be referred to as "OID Notes."
Stated Interest
Payments of interest on Exchange Notes issued after June 1, 2002 generally
will be includible in a United States Holder's income as ordinary income under
the United States Holder's method of accounting for United States federal
income tax purposes. However, because the Issuer has the option through June 1,
2002 to pay interest on the Exchange Notes by issuing additional Exchange
Notes, Exchange Notes issued prior to that date will be treated as issued with
OID, and stated interest on such Exchange Notes would not be treated as
interest for United States federal income tax purposes, but instead will be
subject to the OID rules described below.
Original Issue Discount
An Exchange Note will be issued with OID to the extent that its "stated
redemption price at maturity" exceeds its "issue price" by more than a de
minimis amount (i.e., .25% of the stated redemption price at maturity
multiplied by the number of complete years to maturity.) United States Holders
of OID Notes will be subject to special tax accounting rules, as described in
greater detail below. United States Holders of OID Notes should be aware that
they generally must include OID in gross income for United States federal
income tax purposes on an annual basis under a constant yield accrual method.
As a result, such United States Holders will include OID in income in advance
of the receipt of cash attributable to that income. However, United States
Holders of OID Notes generally will not be required to include separately in
income cash payments received on such OID Notes, even if denominated as
interest, to the extent such payments do not constitute qualified stated
interest (as defined below). The Issuer will report to United States Holders of
any Exchange Notes with OID on a timely basis the reportable amount of OID and
interest income based on its understanding of applicable law.
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The "stated redemption price at maturity" of a debt instrument is the sum of
its principal amount plus all other payments required thereunder, other than
payments of "qualified stated interest." For this purpose, "qualified stated
interest" means stated interest that is unconditionally payable in cash or in
property (other than the debt instruments of the company), at least annually at
a single fixed rate during the entire term of the debt instrument that
appropriately takes into account the length of the intervals between payments.
If the Exchange Notes are issued at a time when the Issuer has the option to
pay interest on the Exchange Notes by issuing additional Exchange Notes, none
of the stated interest on such Exchange Notes will be treated as qualified
stated interest so that all of such payments will be included in the "stated
redemption price at maturity" and the Exchange Notes will be issued with OID.
If Exchange Notes are issued when the Issuer does not have such an option, then
the stated interest on the Exchange Notes will be qualified stated interest,
includible in income in accordance with the United States Holder's method of
accounting, but Exchange Notes may still be issued with OID to the extent that
the issue price is less than the principal amount. The "issue price" of an
Exchange Note will be determined as described under "--Disposition of Preferred
Stock."
The amount of OID includible in income by the initial United States Holder of
an OID Note is the sum of the "daily portions" of OID with respect to the OID
Note for each day during the taxable year or portion of the taxable year in
which such United States Holder held such OID Note ("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 OID Note may be of any length and may vary in length over the term of
the OID Note, 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 (a) the product of the OID
Note adjusted issue price at the beginning of such accrual period and 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
(b) the sum of any 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. Special
rules will apply for calculating OID for an initial short accrual period. The
"adjusted issue price" of an OID Note 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 such OID
Note (other than qualified stated interest) on or before the first day of the
accrual period. Under these rules, a United States Holder will have to include
in income increasingly greater amounts of OID in successive accrual periods.
Amortizable Bond Premium
If at the time the Preferred Stock is exchanged for the Exchange Notes, the
United States Holder's tax basis in any such Exchange Notes exceeds its stated
redemption price at maturity, the Exchange Notes will be considered to have
been issued at a premium. A United States Holder generally may elect to
amortize the premium over the term of the Exchange Notes on a constant yield
method as an offset to interest when includible in income under the United
States Holder's regular accounting method. The election to amortize premium on
a constant yield method once made applies to all debt obligations held or
subsequently acquired by the electing United States Holder on or after the
first day of the first taxable year to which the election applies and may not
be revoked without the consent of the IRS.
Redemption, Sale or Exchange of Exchange Notes
The adjusted tax basis of a United States Holder who receives Exchange Notes
in exchange for Preferred Stock will, in general, be equal to the initial tax
basis of such Exchange Notes, increased by any OID previously included in
income by the United States Holder and reduced by any cash payments on the
Exchange Notes other than qualified stated interest. Upon the redemption, sale,
exchange or retirement of an Exchange Note, a United States Holder will
recognize gain or loss equal to the difference between the amount realized upon
the redemption, sale, exchange or retirement (less any amount attributable to
accrued qualified stated
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interest that has not previously been included in income, which will be taxable
as such) and the adjusted tax basis of the Exchange Notes. Such gain or loss
will be capital gain or loss. Net 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. Any gain recognized by a United States Holder generally will be
treated as United States source income. It is presently unclear whether any
loss realized by a United States Holder will be treated as United States or
foreign source.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
CONSEQUENCES OF OWNING EXCHANGE NOTES.
TAXATION OF NON-UNITED STATES HOLDERS
For United States federal income tax purposes, a non-United States Holder
should not be subject to tax on distributions made with respect to, and gains
realized from the disposition of, Preferred Stock or Exchange Notes unless such
distributions and gains are attributable to an office or fixed place of
business maintained by such non-United States Holder in the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING
United States Holders. In general, information reporting requirements will
apply to dividends in respect of the Preferred Stock, certain payments of
principal, interest, OID and premium on the Exchange Notes, and the proceeds
received on the sale, exchange, or redemption of the Preferred Stock and
Exchange Notes paid within the United States (and in certain cases, outside of
the United States) to United States Holders other than certain exempt
recipients (such as corporations). A 31% backup withholding may apply to such
amounts if the United States Holder fails to provide an accurate taxpayer
identification number or to report dividends required to be shown on its United
States federal income tax returns. The amount of any backup withholding from a
payment to a United States Holder will be allowable as a credit against the
United States Holder's United States federal income tax liability.
Non-United States Holders. Under current law, United States information
reporting requirements and backup withholding generally will not apply to
dividends paid on the Preferred Stock to a non-United States Holder at an
address outside the United States (unless the payer has knowledge that the
payee is a United States person). However, under recently finalized United
States Treasury regulations (the "Final Regulations") effective for payments
made after December 31, 1999, a non-US Holder will generally be subject to
back-up withholding unless applicable certification requirements are met.
With respect to payment of interest on the Exchange Notes, no information
reporting or backup withholding will be required with respect to payments made
to non-United States Holders if the beneficial owner of such Note, or financial
institution holding the Note on behalf of such owner, provides, in accordance
with specified procedures, a paying agent of the Issuer with a statement to the
effect that the beneficial owner is not a United States Holder (or the holder
otherwise establishes an exemption). Under current law, such requirement may be
met if the beneficial owner certifies under penalty of perjury that it is a
non-United States Holder (which certification may be made on IRS Form W-8 (or
successor form)) and the payor does not have actual knowledge that the
beneficial owner is a United States person. Under the Final Regulations, the
requirement may also be satisfied with other documentary evidence for interest
paid after December 31, 1999 with respect to an offshore account or through
certain foreign intermediaries.
As a general matter, information reporting and backup withholding will not
apply to a payment of the proceeds of a sale of Preferred Stock and Exchange
Notes effected outside the United States by a foreign office of a non-United
States Holder. However, payment of the proceeds of a sale of Preferred Stock
and Exchange
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Notes within the United States or conducted through certain United States
related financial intermediaries is subject to both backup withholding and
information reporting unless the certification provided for above is provided
or the holder otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules from a payment to a
non-United States Holder will be allowed as a refund or a credit against such
non-United States Holder's United States Federal income tax, provided that the
required information or appropriate claim for refund is furnished to the IRS.
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PLAN OF DISTRIBUTION
Until , 1999 (40 days after the date of this prospectus), all dealers
effecting transactions in the Exchange Preferred Stock (or any New Exchange
Notes issued in exchange therefor), whether or not participating in this
distribution, may be required to deliver a prospectus. This is in addition to
the obligation of dealers to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
Each broker-dealer that receives shares of Exchange Preferred Stock (or any
New Exchange Notes issued in exchange therefor) for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such shares of Exchange Preferred Stock (or any
New Exchange Notes issued in exchange therefor). This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of shares of Exchange Preferred Stock (or any New
Exchange Notes issued in exchange therefor) received in exchange for shares of
Old Preferred Stock only where such shares of Old Preferred Stock were acquired
as a result of market-making activities or other trading activities. The
Company has agreed that it will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
such resale for a period of one year from the date on which the Exchange Offer
is consummated, or such shorter period as will terminate when all shares of Old
Preferred Stock acquired by broker-dealers for their own accounts as a result
of market-making activities or other trading activities have been exchanged for
shares of Exchange Preferred Stock and such shares of Exchange Preferred Stock
(or any New Exchange Notes issued in exchange therefor) have been resold by
such broker-dealers.
The Company will not receive any proceeds from any sale of Exchange Preferred
Stock (or any New Exchange Notes issued in exchange therefor) by broker-
dealers. Shares of Exchange Preferred Stock received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the shares of Exchange
Preferred Stock (or any New Exchange Notes issued in exchange therefor) or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any shares of
Exchange Preferred Stock (or any New Exchange Notes issued in exchange
therefor). Any broker-dealer that resells shares of Exchange Preferred Stock
(or any New Exchange Notes issued in exchange therefor) that were received by
it for its own account pursuant to the Exchange Offer and any broker or dealer
that participates in a distribution of such shares of Exchange Preferred Stock
(or any New Exchange Notes issued in exchange therefor) may be deemed to be an
"underwriter" within the meaning of the Securities Act of 1933 and any profit
on any such resale of shares of Exchange Preferred Stock (or any New Exchange
Notes issued in exchange therefor) and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act of 1933. The Letter of Transmittal states that by acknowledging
that it will deliver and by delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act of 1933.
For a period of one year from the date on which the Exchange Offer is
consummated, or such shorter period as will terminate when all shares of Old
Preferred Stock acquired by broker-dealers for their own accounts as a result
of market-making activities or other trading activities have been exchanged for
shares of Exchange Preferred Stock and such shares of Exchange Preferred Stock
(or any New Exchange Notes issued in exchange therefor) have been resold by
such broker-dealers, the Company will promptly send additional copies of this
prospectus and any amendment or supplement to this prospectus to any broker-
dealer that requests such documents in the Letter of Transmittal. The Company
has agreed to pay all expenses incident to the Exchange Offer other than
commissions or concessions of any brokers or dealers and the fees of any
counsel or other advisors or experts retained by the holders of Preferred
Stock, except as expressly set forth in the Registration Rights Agreement, and
will indemnify the holders of Preferred Stock (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act of
1933.
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AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-4 under the Securities Act of 1933 with respect to the
Exchange Preferred Stock and the New Exchange Notes being offered hereby. This
prospectus, which forms a part of the registration statement, does not contain
all of the information set forth in the registration statement. You should
refer to the registration statement for further information. Statements
contained in this prospectus as to the contents of any contract or other
document are not necessarily complete, and, where such contract or other
document is an exhibit to the registration statement, each such statement is
qualified by the provision in such exhibit to which reference is hereby made.
Global Crossing Ltd., our parent, is subject to the informational
requirements of the Securities Exchange Act of 1934. Accordingly, it is
required to file reports and other information with the Securities and Exchange
Commission. We are not currently subject to the informational requirements of
the Securities Exchange Act of 1934. As a result of this offering of these
securities, we will become subject to the informational requirements of the
Securities Act of 1934. Accordingly, we will file reports and such other
information with the Securities and Exchange Commission unless and until we
obtain an exemption from such requirement. The registration statement, such
other reports and other information can be inspected and copied at the Public
Reference Section of the Securities and Exchange Commission located at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W. Washington D.C. 20549 and at
regional public reference facilities maintained by the Securities and Exchange
Commission located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material, including copies of all or any portion of
the registration statement, can be obtained from the Public Reference Section
of the Securities and Exchange Commission at prescribed rates. Such material
may be accessed electronically by means of the Securities and Exchange
Commission's home page on the Internet (http://www.sec.gov).
Furthermore, we agree that, even if we are not required to file periodic
reports and information with the Securities and Exchange Commission, for so
long as any Exchange Preferred Stock or New Exchange Notes remain outstanding
we will furnish to you the information that would be required to be furnished
by us under Section 13 of the Securities Exchange Act of 1934. We will be
deemed to have satisfied such requirements if the Securities and Exchange
Commission grants us an exemption from filing reports, documents and
information separately with the Securities and Exchange Commission because
Global Crossing Ltd. files such reports and information with them. However, we
will be deemed to have satisfied such requirements only if Global Crossing Ltd.
files and provides such reports, documents and information of the types
otherwise so required by the Securities and Exchange Commission, in each case
within the applicable time periods.
LEGAL MATTERS
Certain legal matters with respect to the legality of the Exchange Preferred
Stock have been passed upon by Appleby, Spurling & Kempe, Hamilton, Bermuda.
Certain legal matters with respect to the legality of the New Exchange Notes
have been passed upon for the Issuer by Simpson Thacher & Bartlett, New York,
New York. Simpson Thacher & Bartlett will rely, as to matters of Bermuda law,
on the opinion of Appleby, Spurling & Kempe, Hamilton, Bermuda. Certain
partners of Simpson Thacher & Bartlett purchased certain shares of GCL Common
Stock in the GCL Stock Offerings in an aggregate amount equal to less than 1%
of the total shares offered in the GCL Stock Offerings.
EXPERTS
The financial statements and schedules included in this prospectus and
elsewhere in the registration statement to the extent and for the periods
indicated in their reports have been audited by Arthur Andersen & Co.,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Public Accountants.............................. F-2
Consolidated Balance Sheets as of September 30, 1998 (unaudited) and
December 31, 1997.................................................... F-3
Consolidated Statements of Operations for the three months ended
September 30, 1998 (unaudited) and September 30, 1997 (unaudited),
for the nine months ended September 30, 1998 (unaudited), for the
period from March 19, 1997 (Date of Inception) to September 30,
1997 (unaudited) and for the period from March 19, 1997 (Date of
Inception) to December 31, 1997.................................... F-4
Consolidated Statements of Shareholder's Equity for the nine months
ended September 30, 1998 (unaudited) and for the period from March
19, 1997 (Date of Inception) to December 31, 1997.................. F-5
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1998 (unaudited), for the period from March 19, 1997
(Date of Inception) to September 30, 1997 (unaudited) and for the
period from March 19, 1997 (Date of Inception) to December 31,
1997............................................................... F-6, F-7
Notes to Consolidated Financial Statements............................ F-8
</TABLE>
NOTE:
The consolidated financial statements of Global Crossing Holdings Ltd. ("GCH")
and subsidiaries have been presented as if GCH was in existence on March 19,
1997 (Date of Inception).
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholder of
Global Crossing Holdings Ltd.:
We have audited the accompanying consolidated balance sheet of Global
Crossing Holdings Ltd. (a Bermuda company in its development stage) and
subsidiaries as of December 31, 1997, and the related consolidated statements
of operations, shareholder's equity and cash flows for the period from March
19, 1997 (Date of Inception) to December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Global Crossing Holdings Ltd.
and subsidiaries as of December 31, 1997, and the results of their operations
and their cash flows for the period from March 19, 1997 (Date of Inception) to
December 31, 1997, in conformity with accounting principles generally accepted
in the United States.
Arthur Andersen & Co.
Hamilton, Bermuda
April 21, 1998
F-2
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents............. $ 485,686,750 $ 1,452,684
Restricted cash and cash equivalents.. 391,813,047 25,275,196
Accounts receivable, net of allowance
for doubtful accounts of $2,210,995.. 29,110,516 --
Other assets and prepaid costs........ 34,160,267 1,015,958
-------------- ------------
940,770,580 27,743,838
Long term accounts receivable........... 33,639,685 --
Capacity available for sale............. 213,834,977 21,200,000
Construction in progress................ 657,141,879 497,318,509
Deferred finance and organization
costs, net of accumulated amortization
of $8,853,393 ($2,246,857 as of
December 31, 1997)..................... 41,599,923 25,934,021
Investment in Pacific Crossing Ltd. .... 162,109,023 --
-------------- ------------
$2,049,096,067 $572,196,368
============== ============
LIABILITIES:
Current liabilities:
Accrued construction costs............ $ 17,353,599 $ 52,003,875
Accounts payable and accrued
liabilities.......................... 9,164,558 2,939,753
Accrued interest...................... 28,661,112 1,640,500
Deferred revenue...................... 38,253,242 5,325,000
Current portion of long term debt..... 27,385,522 --
Current portion of obligations under
inland services agreement and capital
leases............................... 33,344,398 30,188,645
-------------- ------------
154,162,431 92,097,773
Long term debt.......................... 337,754,772 162,325,000
Senior notes............................ 796,370,623 150,000,000
Long term deferred revenue.............. 12,406,592 --
Obligations under inland services
agreements and capital leases.......... 17,723,485 3,009,000
Deferred income taxes................... 9,318,500 --
-------------- ------------
Total liabilities..................... 1,327,736,403 407,431,773
-------------- ------------
MANDATORILY REDEEMABLE PREFERENCE SHARES
(109,830 shares as of December 31, 1997,
$1,000 liquidation per share (net of
unamortized discount and issuance costs
of $12,223,993 and $6,962,407,
respectively)).......................... -- 90,643,919
-------------- ------------
SHAREHOLDER'S EQUITY:
Common stock, 1,200,000 shares
authorized, par value $.01,
1,200,000 issued and outstanding as of
September 30, 1998 and
December 31, 1997...................... 12,000 12,000
Other shareholder's equity.............. 835,226,100 74,269,032
Accumulated deficit..................... (113,878,436) (160,356)
-------------- ------------
721,359,664 74,120,676
-------------- ------------
$2,049,096,067 $572,196,368
============== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
MARCH 19, 1997 MARCH 19, 1997
THREE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED (DATE OF INCEPTION) (DATE OF INCEPTION)
SEPTEMBER 30, 1998 SEPTEMBER 30, 1997 SEPTEMBER 30, 1998 TO SEPTEMBER 30, 1997 TO DECEMBER 31, 1997
------------------ ------------------ ------------------ --------------------- --------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
SALES AND OPERATING
REVENUES.............. $117,692,925 $ -- $ 218,948,792 $ -- $ --
------------ ----------- ------------- ----------- ------------
EXPENSES:
Cost of capacity
sold................. 49,237,947 -- 90,438,176 -- --
Operations,
administration and
maintenance.......... 8,182,206 -- 10,652,206 -- --
Sales and marketing... 6,342,016 101,915 13,655,010 142,150 1,366,724
Network development... 2,912,062 -- 7,233,645 -- 78,000
General and
administrative....... 3,773,808 567,673 10,760,377 669,500 1,656,984
Termination of
Advisory Services
Agreement............ -- -- 139,669,340 -- --
Stock related
expense.............. 1,654,932 -- 8,248,795 -- --
Provision for doubtful
accounts............. 1,198,878 -- 2,210,995 -- --
------------ ----------- ------------- ----------- ------------
73,301,849 669,588 282,868,544 811,650 3,101,708
------------ ----------- ------------- ----------- ------------
OPERATING INCOME
(LOSS)................ 44,391,076 (669,588) (63,919,752) (811,650) (3,101,708)
EQUITY IN LOSS OF
PACIFIC CROSSING
LTD.................. (1,036,536) -- (1,036,536) -- --
INTEREST INCOME
(EXPENSE):
Interest income....... 8,265,769 1,154,273 12,939,207 2,501,785 2,941,352
Interest expense...... (17,983,947) -- (25,659,937) -- --
------------ ----------- ------------- ----------- ------------
INCOME (LOSS) BEFORE
INCOME TAXES AND
EXTRAORDINARY ITEM.... 33,636,362 484,685 (77,677,018) 1,690,135 (160,356)
Provision for income
taxes................ (7,331,590) -- (16,331,590) -- --
------------ ----------- ------------- ----------- ------------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM.... 26,304,772 484,685 (94,008,608) 1,690,135 (160,356)
Extraordinary loss on
retirement of senior
notes................ -- -- (19,709,472) -- --
------------ ----------- ------------- ----------- ------------
NET INCOME (LOSS)...... 26,304,772 484,685 (113,718,080) 1,690,135 (160,356)
Preference share
dividends............ -- (4,177,095) (8,306,433) (8,413,203) (12,689,923)
Redemption of
preference shares.... -- -- (34,140,067) -- --
------------ ----------- ------------- ----------- ------------
NET INCOME (LOSS)
APPLICABLE TO COMMON
SHAREHOLDER........... $ 26,304,772 $(3,692,410) $(156,164,580) $(6,723,068) $(12,850,279)
============ =========== ============= =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
GCL OTHER SHAREHOLDER'S
COMMON STOCK EQUITY
----------------- --------------------------
ADDITIONAL TOTAL
PAID-IN UNEARNED ACCUMULATED SHAREHOLDER'S
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT EQUITY
--------- ------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock
for cash............... 1,200,000 $12,000 $ -- $ -- $ -- $ 12,000
Preference share
dividends.............. -- -- (12,689,923) -- -- (12,689,923)
Contribution of
investment in
subsidiary originally
held by Global Crossing
Ltd. .................. -- -- 86,958,955 -- -- 86,958,955
Net loss for the
period................. -- -- -- -- (160,356) (160,356)
--------- ------- ------------ ------------ ------------- -------------
Balance, December 31,
1997................... 1,200,000 12,000 74,269,032 -- (160,356) 74,120,676
--------- ------- ------------ ------------ ------------- -------------
Assumption of debt of
Global Crossing Ltd. .. -- -- (15,055,170) -- -- (15,055,170)
Contribution of related
party receivable from
Global Crossing Ltd. .. -- -- 2,795,170 -- -- 2,795,170
Contribution of
investment in
subsidiary originally
held by Global Crossing
Ltd. .................. -- -- 11,493,210 -- -- 11,493,210
Cash reimbursement to
Global Crossing Ltd. .. -- -- (7,047,044) -- -- (7,047,044)
Global Crossing Ltd.
common stock issued in
exchange for
termination of Advisory
Services Agreement..... -- -- 135,000,000 -- -- 135,000,000
Preference share
dividends.............. -- -- (8,306,433) -- -- (8,306,433)
Redemption of preference
shares................. -- -- (34,140,067) -- -- (34,140,067)
Contribution of Initial
Public Offering net
proceeds............... -- -- 392,073,261 -- -- 392,073,261
Cash contribution from
Global Crossing Ltd. .. -- -- 597,339 -- -- 597,339
Global Crossing Ltd.
common stock and PCG
Warrants issued in
exchange for project
rights................. -- -- 275,298,007 -- -- 275,298,007
Unearned compensation... -- -- 22,938,700 (22,938,700) -- --
Compensation expense.... -- -- -- 8,248,795 -- 8,248,795
Net loss for the nine
months ended September
30, 1998............... -- -- -- -- (113,718,080) (113,718,080)
--------- ------- ------------ ------------ ------------- -------------
Balance, September 30,
1998 (unaudited)....... 1,200,000 $12,000 $849,916,005 $(14,689,905) $(113,878,436) $ 721,359,664
========= ======= ============ ============ ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
NINE MONTHS MARCH 19, 1997 MARCH 19, 1997
ENDED (DATE OF INCEPTION) (DATE OF INCEPTION)
SEPTEMBER 30, TO SEPTEMBER 30, TO DECEMBER 31,
1998 1997 1997
------------- ------------------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss applicable to
common shareholder... $(156,164,580) $ (6,723,068) $ (12,850,279)
Adjustments to
reconcile net loss to
net cash provided by
operating activities:
Equity in the loss of
Pacific Crossing
Ltd. ................ 1,036,536 -- --
Depreciation and
amortization......... 336,044 116,818 39,214
Provision for doubtful
accounts............. 2,210,995 -- --
Termination of
Advisory Services
Agreement ........... 137,795,170 -- --
Stock related
compensation
expenses............. 8,248,795 -- --
Preference share
dividends............ 8,306,433 8,413,203 12,689,923
Redemption of
preference shares.... 34,140,067 -- --
Extraordinary loss on
retirement of debt... 19,709,472 -- --
Increase in accounts
receivable........... (64,961,196) -- --
Increase in other
assets and prepaid
costs................ (32,946,889) (2,386,777) (1,032,015)
Increase in capacity
available for sale... (192,634,977) -- (21,200,000)
Capacity available for
sale transferred from
construction in
progress............. 238,554,078 -- --
Increase in deferred
revenue.............. 45,334,834 -- 5,325,000
Increase in accounts
payable and accrued
liabilities.......... 6,224,805 3,275,052 1,248,133
Increase in
obligations under
inland service
agreements........... 18,048,765 -- 20,900,000
Increase in deferred
income taxes......... 9,318,500 -- --
------------- ------------- -------------
Net cash provided by
operating
activities.......... 82,556,852 2,695,228 5,119,976
------------- ------------- -------------
CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES:
Finance and
organization costs
incurred............. (32,231,908) (24,432,478) (28,180,878)
Preference share
issuance costs....... -- (7,529,652) (7,529,651)
Costs related to
issuance of common
stock................ -- (1,264,045) (1,264,045)
Cash reimbursement to
Global Crossing Ltd.
..................... (7,047,044) -- --
Proceeds from issuance
of common stock and
contribution of
capital from Global
Crossing Ltd. ....... 405,050,323 75,000,000 75,000,000
Proceeds from issuance
of preference
shares............... -- 100,000,000 100,000,000
Redemption of
preference shares.... (134,371,773) -- --
Proceeds from long
term debt............ 202,815,294 5,000,000 162,325,000
Proceeds from issuance
of senior notes...... 796,232,000 150,000,000 150,000,000
Retirement of senior
notes................ (159,750,000) -- --
Increase in restricted
cash and cash
equivalents.......... (366,537,851) -- (25,275,196)
Repayment of debt..... (15,055,170) -- --
------------- ------------- -------------
Net cash provided by
financing
activities.......... 689,103,871 296,773,825 425,075,230
------------- ------------- -------------
CASH FLOWS USED IN
INVESTING ACTIVITIES:
Cash paid for
construction in
progress and capacity
available for sale... (287,420,657) (262,501,023) (428,742,522)
Investment in Pacific
Crossing Ltd......... (6,000) -- --
------------- ------------- -------------
Net cash used in
investing
activities.......... (287,426,657) (262,501,023) (428,742,522)
------------- ------------- -------------
NET INCREASE IN CASH... 484,234,066 36,968,030 1,452,684
CASH, beginning of
period................ 1,452,684 -- --
------------- ------------- -------------
CASH, end of period.... $ 485,686,750 $ 36,968,030 $ 1,452,684
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
NINE MONTHS MARCH 19, 1997 MARCH 19, 1997
ENDED (DATE OF INCEPTION) (DATE OF INCEPTION)
SEPTEMBER 30, TO SEPTEMBER 30, TO DECEMBER 31,
1998 1997 1997
------------- ------------------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
SUPPLEMENTAL INFORMATION
ON NON-CASH INVESTING
ACTIVITIES:
Costs incurred for
construction in
progress and capacity
available for sale.... $ 398,377,448 $305,904,883 $497,318,509
Decrease (increase) in
accrued construction
costs................. 34,650,276 (42,079,489) (52,003,875)
Increase in accrued
interest on senior
notes................. (27,020,612) -- (2,050,767)
Amortization of
deferred finance and
organization costs.... (6,606,536) (1,324,371) (2,223,700)
Increase in obligations
under capital leases.. 178,527 -- (12,297,645)
PCG Warrants........... (112,158,446) -- --
------------- ------------ ------------
Cash paid for
construction in
progress and capacity
available for sale.... $ 287,420,657 $262,501,023 $428,742,522
============= ============ ============
SUPPLEMENTAL INFORMATION
ON NON-CASH FINANCING
ACTIVITIES:
Common stock
distributed to holders
of preference shares.. $ -- $ 13,235,000 $ 13,235,000
============= ============ ============
SUPPLEMENTAL INFORMATION
ON NON-CASH INVESTING
ACTIVITIES:
Investment in Pacific
Crossing Ltd. ........ $(163,145,559) $ -- $ --
PCG Warrants........... 163,139,559 -- --
------------- ------------ ------------
$ (6,000) $ -- $ --
============= ============ ============
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Interest paid and
capitalized........... $ 28,632,021 $ 4,563,000 $ 8,136,267
============= ============ ============
Interest paid (net of
capitalized
interest)............. $ 23,234 $ -- $ --
============= ============ ============
Cash paid for taxes.... $ 4,903,521 $ -- $ --
============= ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
1. BACKGROUND
On April 30, 1998, Global Crossings Holdings Ltd. ("GCH" and together with
its subsidiaries, the "Company"), a Bermuda company, was formed as a wholly-
owned subsidiary of Global Crossing Ltd. (together with its subsidiaries,
"GCL"), a Bermuda company which was a wholly-owned subsidiary of Global
Crossing Ltd., LDC ("OLD GCL"). Because Old GCL, GCL and GCH are entities under
common control, GCH's financial statements are presented as if it was in
existence on March 19, 1997 (Date of Inception) of OLD GCL similar to a pooling
of interest. (See Note 11 for a summary of GCL's consolidated financial
information.)
On March 19, 1997, Old GCL, (formerly GT Parent Holdings LDC), was
incorporated as an exempted limited duration company in the Cayman Islands.
When GCL was formed on March 18, 1998, Old GCL contributed its investment in
Global Telesystems Holdings Ltd. ("GTH") to GCL which contributed it to GCH
upon its formation. GCL is an independent developer, owner and operator of
undersea and terrestrial digital fiber optic cable systems. Atlantic Crossing
Ltd. ("ACL"), formerly Global Telesystems Ltd., a Bermuda company which is an
indirect wholly-owned subsidiary of GCL, was incorporated to construct and
operate an undersea fiber optic cable ring with landing stations in the United
States, the United Kingdom, Germany and the Netherlands. ACL has incorporated
wholly-owned subsidiaries in each of these countries in order to own the
portion of the cable system located in each country and the related territorial
waters.
Prior to GCL's Initial Public Offering, which took place on August 13, 1998,
GCL declared a stock dividend to Old GCL resulting in Old GCL holding 1.5
shares of common stock of GCL for each share of common stock of Old GCL
outstanding. Pursuant to the terms of the Article of Association of Old GCL and
prior to the Initial Public Offering, each holder of Class D shares converted
such shares into a fraction of a Class E share based upon a valuation at the
time of such conversion, together with a warrant to purchase the remaining
fraction of such Class E share at an exercise price based upon such market
valuation. In addition, each holder of Class E shares of Old GCL had such Class
E shares converted into Class B shares of Old GCL. Accordingly, each holder of
Class D and Class E shares ultimately received Class B shares, with the
warrants to purchase Class E shares received by former Class D shareholders
then cancelled in exchange for warrants ("GCL Warrants") to purchase shares of
GCL Common Stock at an exercise price equal to the price to Public Per Share
payable in the Initial Public Offering.
After the above transaction and prior to the Initial Public Offering, each
shareholder of Old GCL (other than CIBC) agreed with GCL to exchange their
interests in Old GCL for shares of GCL Common Stock held by Old GCL at a rate
of 1.5 shares of GCL Common Stock per share of common stock of Old GCL ("Old
GCL Exchange"). CIBC did not participate in the above transaction and continues
to maintain its beneficial ownership position in GCL through Old GCL.
Subsequent to this exchange, each previous shareholder of Old GCL holds an
equal proportionate interest in GCL, with Old GCL becoming wholly-owned by
CIBC.
Because Old GCL, GCL and GCH are entities under common control, the transfers
by Old GCL to GCL and GCL to GCH and the Old GCL Exchange were accounted for
similar to a pooling of interests. The financial statements presented have been
restated to reflect these transactions as if they had occurred as of March 19,
1997 (date of inception) (see Note 11.)
F-8
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
GCL entered into a joint venture, Pacific Crossing Ltd., ("PCL") for purposes
of constructing and operating PC-1, an undersea fiber optic cable ring system
connecting California, Washington and two landing sites in Japan (see Note 3).
Mid-Atlantic Crossing Ltd., a wholly-owned subsidiary of GCH, entered into a
contract with Alcatel Submarine Networks on June 2, 1998 for the construction
of MAC, an undersea fiber optic cable ring connecting New York, the Caribbean
and Florida at a total cost of $350 million. Mid-Atlantic Crossing Ltd. is in
the process of incorporating companies in each country in which the cable will
land in order to own the portion of the cable system located in each country
and the related territorial waters. To finance, in part, the construction of
MAC, the Company signed a commitment letter to obtain $240 million of senior
secured non-recourse indebtedness.
During July, 1998, the Company through its wholly-owned subsidiary Pan
American Crossing Ltd., entered into a contract with Tyco Submarine Systems
Ltd. ("TSSL"), for the construction of PAC, an undersea fiber optic cable
system connecting California, Mexico, and Panama at a total cost of
approximately $475 million. To finance, in part, the construction of PAC, Pan
American Crossing Ltd. signed a commitment letter to obtain $300 million of
non-recourse indebtedness on July 21, 1998.
During October 1998, the Company announced the development of Pan European
Crossing (PEC), a 7,200 kilometer terrestrial system connecting 18 European
cities to each other and to the undersea systems. The construction costs of PEC
are approximately $700 million. The Company signed an agreement, during
November 1998, valued at approximately $100 million with Cable & Wireless PLC
for the sale of dark fiber on its PEC network. Together, AC-1, MAC, PAC, PC-1
and PEC are defined as Systems.
To finance construction of ACL's undersea fiber optic cable ring, GCL issued
$75 million of GCL Common Stock and GTH, an indirect wholly-owned subsidiary of
GCL, and the parent of ACL, issued $100 million of preference shares and sold
$150 million of senior notes, as described in Note 6. These proceeds, together
with a $482 million Credit Facility, as described in Note 5, are being used to
pay for construction costs, financing fees and other related costs.
ACL has entered into a fixed price contract (the "Contract") with TSSL for
the development, design, construction and installation of a four fiber pair,
fiber optic cable system connecting (i) the United States to the United
Kingdom, (ii) the United Kingdom to the Netherlands and Germany, (iii) The
Netherlands to Germany and (iv) Germany to the United States (collectively,
"AC-1" and "System"). AT&T Corp. has provided ACL with a guarantee in respect
of TSSL's obligations under the Contract. Assuming that construction of AC-1
progresses according to the Contract schedule, AC-1 will be accepted by ACL and
made available for commercial service on February 22, 1999 (the "System RFS
date"). Certain segments of AC-1 are expected to be completed in advance of the
System RFS date. The United States to the United Kingdom segment was ready for
service on May 26, 1998 and the Germany to the United States segment is
expected to be ready for service on November 30, 1998. Once ACL formally
accepts each segment of AC-1, the segment becomes ready for service and the
ownership of the segment assets transfers to ACL and its subsidiaries. The only
exception to this transfer of ownership is in respect of certain of the segment
assets located in United States territory to which TSSL retains title until
such time as GT Landing Corp., a United States wholly-owned subsidiary of ACL,
exercises its $10,000 bargain purchase option to purchase title. Pursuant to
the Contract, TSSL granted
F-9
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
GT Landing Corp. an indefeasible right of use ("IRU"), for the estimated life
of AC-1 of 25 years from the System RFS date. GT Landing Corp. has accounted
for the IRU as a capital lease, since the IRU transfers the risks and rewards
of ownership to GT Landing Corp. The United States assets governed by this IRU
includes all landing stations assets (with the exception of the building and
land, to which GT Landing Corp. has title), fiber optic cable located in the
United States and the landing license.
Customers of the Company enter into Capacity Purchase Agreements ("CPA") to
obtain an IRU in units of transatlantic and European capacity ("AC-1
Capacity"). The purchase price for AC-1 Capacity is non-refundable once the
segment of AC-1 specified in the CPA is ready for service and the IRU entitles
the customer to all rights and obligations of ownership of the AC-1 capacity
for a period ending 25 years after the System RFS date. The Company's CPAs
provide that AC-1 will have self-healing ring capability, whether or not a CPA
relates only to a segment of AC-1. Self-healing capability enables capacity on
the segment of AC-1 to be instantaneously restored either on AC-1 other
segments or within the same segment in the event of interruption so that the
same point-to-point connectivity is maintained.
Customers who purchase AC-1 capacity prior to the System RFS date will be
granted 80% of the capacity that remains unsold, if any, 12 1/2 years after the
System RFS date. However, based on sales projections provided by a third party
consultant, it is highly unlikely that there will be a material amount of
unsold capacity on AC-1 at the end of 12 1/2 years after the System RFS date.
The Company has no constraints on the pricing or structure of sales of residual
capacity and the Company would expect that if such capacity had any remaining
value, it would enter into one or more transactions to dispose of such capacity
prior to such date to realize such remaining value. As a result, the right to
residual capacity is not a substantive right.
ACL subsidiaries have entered into contracts, called Inland Services
Agreements, to obtain IRUs of capacity on terrestrial telecommunications
systems for terms of 25 years from the System RFS date. Under the IRU, the
Company is required to pay an up-front non-recurring charge plus, in certain
cases, monthly recurring charges over a 25 year period and in exchange obtains
all rights and obligations of ownership. The Company has accounted for the IRUs
as capital leases since these IRUs represent leases as defined under Statement
of Financial Accounting Standards No. 13, "Accounting for Leases" ("SFAS 13").
The Company sells this terrestrial capacity under separate CPAs ("Terrestrial
CPA") to certain customers that have purchased capacity on AC-1 for the purpose
of extending capacity from AC-1 landing stations to major telecommunication
centers in the United States and the United Kingdom. The purchase price for
terrestrial capacity is non-refundable and grants the customer an IRU which
entitles the customer to all rights and obligations of ownership of the
terrestrial capacity for a period ending 25 years after the System RFS date.
ACL has entered into an Operations, Administration and Maintenance ("OA&M")
agreement with TSSL whereby TSSL is obligated to provide operating,
administration and maintenance functions to AC-1. The administration functions
include but are not limited to the provision of billing information and annual
expense budgets. The operations and maintenance functions include but are not
limited to the management and maintenance of a Network Operating Center,
assumption of ship costs and any related ship repair costs, obtaining and
renewing all operating permits, providing repair equipment, providing cable
protection and ordering and restocking spares. The OA&M Agreement is for an
initial term of eight years with two renewal periods of eight and one half
years each. Quarterly payments under the OA&M Agreement to TSSL will commence
as ACL accepts ownership to the various segments.
F-10
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
Pursuant to the terms of CPAs, ACL is obliged to use commercially reasonable
efforts to cause AC-1 to be maintained in efficient working order and in
accordance with industry standards. In exchange for the operating,
administration and maintenance services provided by ACL through the OA&M
agreement with TSSL, customers are obligated for the term of the IRU to pay for
their allocable share of the costs for operating and maintaining the AC-1. In
accordance with the CPA, customers appoint members to a System Advisory
Committee which is charged with the responsibility of directing the operations
and maintenance of the System. Customers pay for 110% of ACL's cost to operate
and maintain the system based on their pro-rata share of total capacity subject
to annual maximum amounts per circuit purchased of $250,000 per transatlantic
circuit and $50,000 per European circuit. Their pro-rata share is effectively
calculated by taking the weighted average of purchased capacity over total
capacity multiplied by 110% of actual costs incurred. These OA&M costs are
billed to customers quarterly in advance based on the prior year's actual
costs, are non-refundable, and should a customer fail to make an OA&M payment,
ACL may suspend all rights to capacity granted under the IRU.
ACL originally entered into a Sales Agency Agreement with TSSL whereby TSSL
was responsible for the marketing and sale of capacity of the System and
received commissions on sales proceeds received at rates that varied as certain
cumulative revenue levels were reached. Effective March 5, 1998, the Company
entered into a commissions sharing agreement with TSSL whereby GCH assumed
primary responsibility for the marketing and sale of capacity of the System and
will share a percentage of commissions payable to TSSL under the Sales Agency
Agreement as consideration for assuming primary responsibility for the sales
effort and marketing of the Company's projects. The Sales Agency Agreement with
TSSL will terminate on March 25, 2002 with an option to extend it until March
25, 2005.
On January 21, 1998, Old GCL effected a 100-for-1 stock split of each of the
Class A, B, C and D common stock and undesignated stock and amended the par
value of each share of common stock from $.0001 per share to $.000001 per
share. All share information presented in the consolidated financial
statements, including these notes, gives effect to the stock split.
2. SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. The significant accounting policies
are summarized as follows:
a) Principles of Consolidation
The consolidated financial statements include the accounts of GCH and its
wholly owned subsidiaries. All significant intercompany transactions have been
eliminated. Investment in PCL, in which GCH does not exercise control, has been
accounted for using the equity method.
b) Development Stage Company
The Company was in its development stage until May 26, 1998 when the United
States to United Kingdom segment of the AC-1 system was placed into service and
the Company began generating significant
F-11
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
revenues. All segments of AC-1 are scheduled to be ready for commercial service
by February 1999. Currently, construction of the Company's other undersea and
terrestrial fiber optic cable systems are underway.
Successful future operations are subject to several risks, including the
ability of the Company to ensure the successful, timely and cost-effective
completion of AC-1 and other cable systems as well as to successfully market
and generate significant revenue from the sale of capacity of the system. GCH
may encounter problems, delays and expenses, many of which may be beyond its
control. There can be no assurance that the cable systems will be completed
within the time frame and that capacity sales will meet expectations, or that
substantial delays would not adversely affect GCH's achievement of profitable
operations.
c) Cash and Cash Equivalents
The Company considers short-term highly liquid investments with an original
maturity of three months or less at the date of purchase to be cash
equivalents. Cash and cash equivalents include cash in banks and short-term
money market deposits with a maturity of one month.
d) Sales, Cost of Sales and Deferred Revenue
The Company enters into CPAs to sell capacity on its undersea and terrestrial
fiber optic systems. These CPAs grant the customer an IRU of capacity for the
life of the cable which is 25 years from the ready for service date. Sales of
capacity under CPAs are accounted for as sales type leases as they represent
leases of property and meet the criteria for sales-type lease accounting under
SFAS 13.
Revenues from the sale of capacity are recognized in the period that the
rights and obligations of ownership transfer to the purchaser, which occurs
when (1) the purchaser obtains the right to use the capacity, which can only be
suspended if the purchaser fails to pay the full purchase price or fulfill its
contractual obligations, (2) the purchaser is obligated to pay OA&M costs and
(3) the segment of the system related to the capacity purchased is available
for service. Customers who have entered into CPAs for AC-1 capacity have paid
deposits toward the purchase price and such amounts have been included as
deferred revenue in the accompanying consolidated balance sheet. Certain CPAs
require a refund of these deposits should the System RFS date occur after June
30, 1999. The Company's CPAs provide that the AC-1 system will have self-
healing ring capability, whether or not a customer purchases capacity on a
single segment of the system. Substantially all of the Company's customers to
date for AC-1 have assumed the risk of full ring completion. In some CPAs,
customers who have purchased capacity on the United States to United Kingdom
segment prior to the date the full AC-1 ring is operational have contractually
required full self-healing ring capability as a legal condition which, if not
satisfied, would enable them to terminate the CPA and require the Company to
refund capacity payments. Payments received relating to these CPAs are included
in deferred revenue on the consolidated balance sheet until the full self-
healing ring is operative.
Costs incurred on each segment of the System, currently reflected as
construction in progress in the accompanying consolidated balance sheet, is
recorded as capacity available for sale at the date each segment of the system
becomes operational. AC-1 capacity available for sale is recorded at the lower
of cost or fair value less costs to sell and will be charged to costs of sales
in the period the related revenues are recognized. Fair value of AC-1 capacity
will be derived from a third party consultant's market study of expected sales
of capacity.
F-12
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
Cost of sales in any period relating to capacity is calculated based on the
ratio of capacity revenues recognized in the period to total expected capacity
revenues over the life of the system multiplied by the total costs incurred to
construct the system. This calculation of the cost of sales amount matches
costs with the value of each sale relative to total expected revenues. Until
the entire System is completed, for purposes of calculating cost of sales, the
total System costs incurred will include an estimate of remaining costs to be
incurred to complete the entire System. When needed, terrestrial capacity is
purchased from third party capacity providers, to fulfill the Company's
commitments under Terrestrial CPA agreements. The cost of acquiring third party
capacity will be charged to cost of sales in the period that the related
revenue is recognized.
The calculation of cost of underseas sales is based on a total system cost
and revenue forecast that includes both the initial system cost and the cost of
system upgrades that management has the intent and ability to complete,
provided the need for such upgrades is supported by a consultant's independent
revenue forecast.
The AC-1 System is designed to enable the Company to upgrade the System in
future years so as to increase the initial design capacity of 256 circuits
available for sale. The business plan for the investment in AC-1 indicated a
minimum capacity sales level of 512 circuits and management currently has both
the intent and ability to upgrade the system to that level. This is
demonstrated by the fact that (i) the Board of Directors has authorized the
purchase of the upgrade, (ii) the Company has the financial ability to purchase
the upgrade and (iii) there are no regulatory or technology issues preventing
the completion of the upgrade. In the period the Company purchases any further
upgrades, the total expected System capacity revenues and cost of the System
used in the cost of sales calculation will change to take into account the
further increase in System cost and in System capacity. The total expected
System capacity revenues used by the Company in its cost of sales calculation
will always be limited by total sales forecasted by a third party consultant
which will be updated on an annual basis. Based on the current third party
consultant's sales forecast, the Company expects to sell all 512 circuits
available for sale, which includes the initial upgrade.
In addition to capacity upgrades, management's estimate of future expected
capacity revenues may change due to a number of factors including possible
variances in actual sales prices and volume from management's estimates.
Management will continually evaluate these factors in conjunction with the
updated third party consultant's sales forecast and, as necessary, revise its
estimate of the total expected revenues to be derived over the life of AC-1.
Changes in management's estimate of the total expected revenues to be derived
from sales of capacity will result in adjustments to the calculations of cost
of sales. These adjustments will be recorded on a prospective basis over future
periods commencing with the period management revises its estimate.
Under their respective CPAs, certain customers have been provided options to
purchase additional capacity at specified prices for specified future periods
as well as the option to purchase additional capacity should the Company
upgrade the AC-1 capacity in the future. In many cases, prices under the
options to purchase capacity during these specified periods are lower than the
current price for capacity charged to the customer. Management's estimate of
future revenues for purposes of calculating cost of sales takes into
consideration prices under these options.
Undersea and terrestrial OA&M revenues are recognized in the period the
services are provided. On an annual basis the actual OA&M costs incurred by the
Company will be accumulated and an adjustment will be made to true up actual
OA&M revenues so that they equal 110% of actual costs incurred, provided
specified
F-13
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
contractual limits have not been reached. This adjustment will be recorded in
the period in which the adjustment is made.
e) Commissions and Advisory Services Fees
The Company's policy is to record the commission and advisory fee expense and
related payable upon the recognition of revenue so as to appropriately match
these costs with the related revenue. Under the Advisory Services Agreement
("ASA"), the Company pays PCG Telecom Services LLC ("PCG Telecom") and its
affiliates 2% of revenues for advisory services performed and under the Sales
Agency Agreement pays TSSL a commission based on a percentage of capacity
revenues. See Note 12 for discussion of the termination of the ASA.
f) Capacity Available For Sale
The cost of acquiring terrestrial capacity under Inland Service Agreements
has been capitalized to capacity available for sale. Under these agreements the
Company is required to pay an up-front non-recurring charge plus, in certain
cases, recurring charges over the period the capacity is provided. The Company
has capitalized the present value of total future payments (excluding OA&M
costs) in capacity available for sale and has recorded an equal amount as an
obligation under Inland Services Agreements in the accompanying consolidated
balance sheets (see Note 5). The related OA&M costs will be expensed in the
period the services are provided.
g) Construction in Progress
Construction in progress includes direct expenditures for construction of AC-
1 and is stated at cost. Capitalized costs include costs incurred under the
Contract; advisory, consulting and legal fees; interest; and amortized finance
costs incurred during the construction phase. Once it is probable that a cable
system will be constructed, costs directly identifiable with the cable system
under development are capitalized. Costs relating to the evaluation of new
projects incurred prior to the date development of the cable system becomes
probable are expensed as incurred.
Additionally, the Company has included in construction in progress the
minimum lease payments related to the IRU held by GT Landing Corp. on AC-1
assets in the United States and minimum lease payments related to leases of
buildings and conduits in Germany and The Netherlands described further in Note
5.
Interest incurred which includes the amortization of deferred finance fees
and the issuance discount, ("interest cost") are capitalized to construction in
progress in accordance with Statement of Financial Accounting Standards No. 34,
"Capitalization of Interest Costs" ("SFAS 34"). Total interest cost incurred
and interest capitalized to construction in progress during the periods were:
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
THREE MONTHS THREE MONTHS NINE MONTHS MARCH 19, 1997 MARCH 19, 1997
ENDED ENDED ENDED (DATE OF (DATE OF
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, INCEPTION) TO INCEPTION) TO
1998 1997 1998 SEPTEMBER 30, 1997 DECEMBER 31, 1997
------------- ------------- ------------- ------------------ -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest cost incurred.. $30,666,588 $349,656 $62,494,736 $4,586,338 $9,776,767
=========== ======== =========== ========== ==========
Interest cost
capitalized to
construction in
progress............... $12,682,641 $349,656 $36,834,799 $4,586,338 $9,776,767
=========== ======== =========== ========== ==========
</TABLE>
F-14
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
h) Deferred Finance and Organization Costs
Costs incurred to obtain financing through the issuance of senior notes and
long term debt have been reflected as an asset in the accompanying
consolidated balance sheets. Costs incurred to obtain financing through the
issuance of GCL Common Stock and preference shares, respectively, have been
reflected as a reduction in the carrying value of the issued common and
preference shares. The financing costs relating to the debt are amortized over
the term of the related debt agreements. Offering costs of $7,529,651 related
to the issuance of preference shares were being amortized on a straight line
basis through the mandatory redemption date of April 1, 2007. The issuance
discount, as explained in Note 7, was also being amortized through the
mandatory redemption date. On June 17, 1998 the preference shares were
redeemed at which time the remaining balance of unamortized discount and
offering costs was charged against additional paid-in-capital. During the
construction period, the amortized portion of deferred financing costs
relating to the senior notes and the long term debt are included in
construction in progress as a component of interest capitalized or recorded as
interest expense in accordance with SFAS 34. The amortized portion of the
deferred financing costs relating to the preference shares is included as a
component of preference share dividends.
i) Translation of Foreign Currencies
Transactions in foreign currencies are translated into United States dollars
at the rate of exchange prevailing at the date of each transaction. Monetary
assets and liabilities denominated in foreign currencies at year end are
translated into United States dollars at the rate of exchange at that date.
Resulting gains or losses on exchange are recorded as other income or loss in
the statement of operations.
j) Stock Option Plan
Employees of GCH and its subsidiaries participate in the stock option plan
of GCL and GCH is therefore allocated its applicable share of stock related
compensation expense.
k) Interest Rate Derivatives
The Company uses derivative financial instruments for the purpose of
reducing its exposure to adverse fluctuations in interest rates. The Company
does not utilize derivative financial instruments for trading or other
speculative purposes. The counterparty to these instruments is CIBC. The
Company is exposed to credit loss in the event of nonperformance by this
counterparty.
As discussed in Note 5, effective December 31, 1997, the Company entered
into an interest rate swap agreement to hedge its exposure to interest rates
on its long term debt. The net cash amounts paid or received on the agreement
are accrued and recognized as an adjustment to interest expense on the related
debt.
For interest rate derivatives to qualify for hedge accounting, the debt
instrument being hedged must expose the Company to interest rate risk and, at
the inception of the derivative instrument and throughout the period the
derivative is held, there must be a high correlation of changes in the market
value of the derivative and interest expense of the hedged item. Gains and
losses on interest rate derivatives and other derivative instruments which do
not meet this criteria would be recorded in the statement of operations.
F-15
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
Interest rate derivative instruments terminated or replaced by another
instrument and no longer qualifying as a hedge instrument are marked to market
and carried on the balance sheet at fair value.
l) Interim Financial Information
The unaudited financial statements as of September 30, 1998, and for the
three months and nine months ended September 30, 1998, for the three months
ended September 30, 1997 and for the period from March 19, 1997 (Date of
Inception) to September 30, 1997 include, in the opinion of management, all
adjustments considered necessary for the fair presentation of such financial
statements.
m) Net Income (Loss) Per Share
GCL's basic net income (loss) per share is computed using the weighted
average number of shares of GCL Common Stock outstanding. GCL's diluted net
income (loss) per share is computed using the weighted average number of shares
of GCL Common Stock outstanding and GCL Common Stock equivalents including
shares issuable under options and warrants that are dilutive using the treasury
stock method.
Since the Company is a wholly-owned subsidiary of GCL, per share information
is not presented.
n) Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). The Company recognizes current and deferred income tax assets and
liabilities based upon all events that have been recognized in the consolidated
financial statements. Deferred tax assets and liabilities are determined based
on differences between the financial reporting and tax bases of assets and
liabilities. A deferred tax liability or asset is recorded using the enacted
tax rates expected to apply to taxable income in the period in which the
deferred tax liability or asset is expected to be settled or realized. Future
tax benefits attributable to these differences, if any, are recognized to the
extent that realization of such benefits is more likely than not.
o) Pending and New Accounting Standards
The Financial Accounting Standards Board has recently issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130") and Statement of Financial Accounting Standards No. 131, "Disclosures
About Segments of an Enterprise and Related Information" ("SFAS 131"). SFAS 130
and SFAS 131 are effective for periods beginning after December 15, 1997. There
was no impact to the financial statements due to the adoption of SFAS 130 in
the first nine months of 1998. Management does not expect the impact of the
adoption of SFAS 131 on the Company's financial position or results of
operations to be material.
The Financial Accounting Standards Board has also recently issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," ("SFAS 133") which is effective for
periods beginning after June 15, 1999. Management does not expect the impact of
the adoption of SFAS 133 on the Company's financial position or results of
operations to be material.
F-16
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
The American Institute of Certified Public Accountants recently issued
Statement of Position 98-5, "Reporting on the Cost of Start-Up Activities"
("SOP 98-5"). SOP 98-5 is effective for periods beginning after December 15,
1998. Management has not quantified the impact of the adoption of SOP 98-5 on
the Company's financial position or results of operations.
p) Reclassifications
Certain reclassifications have been made to the December 31, 1997
consolidated financial statements to conform with the presentation as of
September 30, 1998.
3. INVESTMENT IN PACIFIC CROSSING LTD.
On April 9, 1998, a wholly-owned subsidiary of GCH entered into a joint
venture to construct a cable system, PC-1. PC-1 is owned and operated by PCL.
The Company has an economic interest in PCL represented by a 50% direct voting
interest and, through one of the joint venture partners, owns a further 8%
economic non-voting interest. PCL entered into a contract on April 21, 1998
with TSSL to construct PC-1 for a total price of approximately $1.2 billion,
which will be financed through a $400 million equity contribution by the joint
venture partners and an $850 million credit facility. On July 30, 1998, an $850
million aggregate senior secured non-recourse loan facility ("the PCL Credit
Facility") was executed, for the construction and financing costs of PC-1. The
PCL Credit Facility is comprised of an $840 million multiple drawdown term loan
facility and a $10 million working capital facility. On July 30, 1998, an
initial drawdown was made on the term loan facility to repay the $104 million
promissory note used for initial construction costs on PC-1 as well as fees
incurred to secure the credit facility. The Company also placed $231 million
into a restricted cash collateral account on July 30, 1998 to satisfy its
equity funding commitment for its 58% joint venture economic interest in PCL.
This amount was accounted for as an equity investment in the joint venture.
The investment in Pacific Crossing Ltd. consists of the following items:
<TABLE>
<S> <C>
Equity investment in PCL................................... $ 6,000
PC-1 development costs..................................... 163,139,559
Equity in loss of PCL...................................... (1,036,536)
------------
Investment in Pacific Crossing Ltd. ....................... $162,109,023
============
</TABLE>
The PC-1 development costs represents the estimated value of the PCG Warrants
as of September 30, 1998 which were granted to PCG in exchange for the PC-1
system and related rights. In connection with the formation of PCL, the Company
agreed to make available to PCL the consideration received by the Company in
connection with the grant of the PCG Warrants, in addition to the $231 million
cash investment made by the Company. See Note 11.
4. RESTRICTED CASH AND CASH EQUIVALENTS
At September 30, 1998, restricted cash and cash equivalents includes $231
million ($nil as of December 31, 1997) for the cash investment made by the
Company in connection with the PC-1 construction, $75 million as of September
30, 1998 ($20 million as of December 31, 1997) reserved for purposes of funding
future
F-17
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
interest payable on senior notes, $74 million as of September 30, 1998 ($5
million as of December 31, 1997) in funds received pursuant to CPAs that may be
used only in accordance with the terms of the long term debt agreement and $12
million as of September 30, 1998 ($nil as of December 31, 1997) restricted for
purchases of terrestrial capacity.
5. LONG TERM DEBT AND OBLIGATIONS UNDER INLAND SERVICES AGREEMENTS AND CAPITAL
LEASES
On June 27, 1997, ACL entered into a $410 million aggregate senior secured
non-recourse loan facility (the "Credit Facility") with a group of banks led by
CIBC and Deutsche Bank AG, for the construction and financing costs of AC-1. On
December 15, 1997, the Credit Facility was amended to increase it to $482
million comprised of a $472 million multiple draw down term loan facility (the
"Term Facility") and a $10 million working capital facility (the "Working
Capital Facility") for the purpose of extending AC-1 to include, among other
things, a Netherlands landing site. The Credit Facility is secured by pledges
of the stock of ACL and its subsidiaries and security interests in its assets
and revenues. As of September 30, 1998, ACL had outstanding $365,140,294
($162,325,000 as of December 31, 1997) under the Credit Facility. As of
September 30, 1998, $59,260,959 of the Credit Facility had been repaid to the
lenders ($nil as of December 31, 1997). Any amounts repaid to the lenders
cannot be re-borrowed, and are effectively permanent reductions in the Credit
Facility.
Under the Credit Facility, ACL may select loan arrangements as either a
Eurodollar loan or an Alternative Base Rate ("ABR") Loan. The Eurodollar
interest rate is LIBOR plus 2.5% and the ABR interest rate is the greatest of
(a) the Prime Rate (b) the Base CD Rate plus 1% and (c) the Federal Funds
Effective Rate plus 0.5%, plus 1.5%. ACL pays a commitment fee of 0.5% per
annum on the unused portion of the Credit Facility. The Credit Facility
contains various covenants that, (i) limit further indebtedness by ACL and its
subsidiaries, (ii) limit the ability of ACL to pay dividends, (iii) require ACL
to meet certain minimum capacity sales levels and (iv) require ACL to meet a
minimum interest coverage ratio for the years 1999 through to maturity of the
Credit Facility. The Credit Facility will be repaid in eight semi-annual
installments ("Mandatory Repayments"), commencing on the first May 31 or
November 30 occurring two months after the AC-1 RFS date, with $72.3 million of
the principal amount due in the initial year and $120.5 million, $144.6
million, and $144.6 million due in the second, third and fourth years,
respectively. If at any semi-annual installment date the outstanding loan
balance is lower than the installment amounts noted in the previous sentence,
then the outstanding loan balance amount will be repaid. In addition, on each
semi-annual installment date, ACL will apply an amount equal to 50% of Excess
Cash Flow to the mandatory prepayment of the remaining outstanding balance
under the Credit Facility. Excess Cash Flow is defined under the terms of the
Credit Facility as all cash received from revenues during the period reduced by
the payment of OA&M expenses, commissions under the Sales Agency Agreement, and
transfers to certain reserve accounts. The Credit Facility also requires
mandatory prepayments to be made from 50% of net cash proceeds of any equity
offering of ACL and 100% of net cash proceeds from permitted debt offerings by
ACL or GTH. Optional prepayments may be made at any time without premium or
penalty. All revenues received prior to the RFS date are used to fund certain
reserve accounts, as defined by the Credit Facility, and thereafter applied
against the borrowings under the Credit Facility. However, any amounts repaid
to the lenders prior to the System RFS date can be used to reduce the Mandatory
Repayments.
F-18
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
On September 30, 1997, pursuant to the Contract with TSSL and the Credit
Facility agreement, ACL put in place a $50 million letter of credit in favor
of TSSL which will expire at such time as ACL has paid all costs under the
contract. ACL pays a commitment fee of 2.5% per annum on the full amount of
the letter of credit. As of September 30, 1998, the letter of credit had been
reduced to $45.2 million.
As of September 30, 1998, approximately $5 million was borrowed under the
working capital facility ($500,000 as of December 31, 1997), and approximately
$360 million was borrowed under the Term Facility ($162 million as of December
31, 1997). Effective December 31, 1997, ACL entered into an interest rate swap
transaction based on one month LIBOR to minimize its exposure to increases in
interest rates on its borrowings. The swap transaction was amended on February
2, 1998 and currently fixes ACL's floating interest rate at 5.7825% on a
notional amount of borrowings ranging between $200 million and $310 million
until January 31, 1999.
As described in Note 1, the Company has capitalized the minimum lease
payments of the IRU held by GT Landing Corp. on AC-1 assets held in the United
States. The Company has been granted a bargain purchase option to purchase for
$10,000 all rights and title to these assets at any time during the term of
this contract which is 25 years from the System RFS date. As of September 30,
1998, the present value of the payments under the IRU recorded as an
obligation under capital leases is $4,107,615 ($12,297,645 as of December 31,
1997).
The Company has capitalized building and conduit leases in The Netherlands
and Germany. The leases are for a period of 25 years which represents more
than 75 percent of the economic life of the asset being purchased. The Company
has the option to extend the Netherlands lease for an additional 5 year term.
As of September 30, 1998, the present value of the obligation has been
recorded as an obligation under capital leases in the accompanying
consolidated balance sheet in the amount of $8,011,503 ($ nil as of December
31, 1997.)
Contracts to purchase terrestrial capacity have a duration of 25 years from
System RFS which represents more than 75 percent of the economic life of the
asset being purchased. Certain of these contracts require payments over the 25
year period. As of September 30, 1998, the present value of the payments under
these contracts (excluding amounts attributable to operations and maintenance)
has been recorded as obligations under Inland Services Agreements in the
accompanying consolidated balance sheets in the amount of $38,948,765
($20,900,000 as of December 31, 1997).
F-19
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
At September 30, 1998 future minimum payments, in the aggregate for the three
months ending December 31, 1998 and for the four succeeding years, under these
Inland Services Agreements and capital leases are as follows:
<TABLE>
<S> <C>
For the three months ending December 31, 1998.................. $ 20,053,331
1999........................................................... 29,147,983
2000........................................................... 5,294,206
2001........................................................... 5,433,701
2002........................................................... 5,586,261
Thereafter until 2024.......................................... 169,537,132
------------
Total minimum lease payments................................... 235,052,614
Less: Amount representing maintenance payments................. 147,109,091
------------
87,943,523
Less: Amount representing interest............................. 36,875,640
------------
Present value of net minimum lease payments.................... $ 51,067,883
============
</TABLE>
6. SENIOR NOTES
New Senior Notes
The 9 5/8% senior notes due May 15, 2008 with a face value of $800 million
("New Senior Notes") are general unsecured obligations of GCH and will rank
senior to any future subordinated indebtedness of GCH and pari passu in right
of payment with any future unsecured senior indebtedness of GCH. GCH has set
aside $74 million to fund the first two interest payments and is included in
the restricted cash balance. Interest is payable semi-annually in arrears on
each May 15 and November 15 commencing on November 15, 1998. The New Senior
Notes are redeemable at the option of GCH on May 15, 2003 at 104.813%, May 15,
2004 at 103.208%, on May 15, 2005 at 101.604% and on May 15, 2006 and on May 15
thereafter at par. The New Senior Notes are redeemable at the option of the
Holder only upon the occurrence of a change in control in GCL. The New Senior
Notes agreement imposes certain limitations on the ability of GCH and its
subsidiaries to, among other things, (i) incur additional indebtedness
including senior indebtedness and (ii) pay certain dividends and make certain
other restricted payments and investments.
Old Senior Notes
The 12% senior notes due March 31, 2004 with a face value of $150 million
("Old Senior Notes") are general unsecured obligations of GTH and will rank
senior to any future subordinated indebtedness of GTH and pari passu in right
of payment with any future unsecured senior indebtedness of GTH. The Old Senior
Notes bear an initial interest rate of 12% per annum. Interest is payable semi-
annually in arrears on each June 1 and December 1. If the Old Senior Notes are
not repaid by April 1, 2000, the interest rate will increase by 0.5% on April
1, 2000 and by an additional 0.5% on each subsequent April 1, until repaid. If
the interest rate exceeds 15% per annum (the interest rate payable increases by
2% upon any event of default) GTH may, at its option, cause such interest in
excess of 15% to be paid in additional senior notes.
F-20
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
As described in Note 5, revenues received prior to the System RFS date are
used to fund certain reserve accounts which are then applied against borrowings
under the Credit Facility and the Old Senior Notes as determined by the Credit
Facility agreement. Additionally, GTH will on each June 1 and December 1,
commencing on the first such date to occur more than 90 days after the System
RFS date, apply an amount equal to 50% of ACL's Excess Cash Flow (as defined in
Note 5), to redeem the Old Senior Notes at face value, plus accrued interest to
the date of repurchase. The Old Senior Notes are redeemable at the option of
GTH, at redemption prices starting at 106% of the face value beginning April 1,
2000, declining to 103% in 2001, and 100% in 2002 and 2003, plus accrued
interest.
On May 18, 1998, a portion of the proceeds from the issuance of the New
Senior Notes was used to repurchase the Old Senior Notes. The Company
recognized an extraordinary loss of $19.7 million on repurchase comprising a
premium of $9.8 million and a write-off of $9.9 million of unamortized deferred
financing costs.
7. MANDATORILY REDEEMABLE PREFERENCE SHARES
The authorized preference shares consist of 500,000 shares at a liquidation
preference of $1,000 per share. Effective March 25, 1997, 100,000 shares were
issued for $100 million in cash and as of September 30, 1998, nil shares
(109,830 shares as of December 31, 1997) were issued and outstanding.
The holders of preference shares are entitled to receive cumulative,
compounding dividends at an initial annual rate of 14% of the $1,000
liquidation preference per share. If the preference shares are not redeemed on
or prior to April 1, 2001, the annual dividend rate will increase by 0.5% per
annum (the dividend rate payable increases by 2% upon any event of default)
thereafter, subject to a maximum annual dividend rate of 20%. At the option of
GTH, accrued dividends may be paid in cash or paid by issuing additional
preference shares (i.e. pay-in-kind) until April 1, 2002, at which time they
must be paid in cash. However, if the dividend rate exceeds 15% per annum, GTH
may cause dividends in excess of 15% to be paid in additional preference
shares. Dividends paid in additional preference shares are payable on a
quarterly basis and cash dividends are payable on a semi-annual basis. All
dividends declared to date have been paid in additional preference shares. The
preference shares rank senior to all common stock with respect to dividend
rights, rights of redemption or rights on liquidation and senior to any future
preferred stock. The preference shares are non-voting unless GTH fails to pay a
dividend, fails to make a mandatory redemption or upon a change in control,
fails to make an offer to purchase the preference shares at 101%, at which time
the holders of a majority of the preference shares will be entitled to elect
one to two directors. In the event that any preference shares are still
outstanding on April 1, 2001, the holders thereof will receive warrants to
purchase shares of Class A common stock of Old GCL at an exercise price of $.01
per share, up to a maximum of 46,440 shares of Old GCL common stock.
The preference shares have a mandatory redemption on April 1, 2007 at their
liquidation preference. In addition, the preference shares will be redeemed out
of ACL's Excess Cash Flows (as described in Note 5) after repayment of the
Credit Facility and Senior Notes at redemption prices starting at 114% for both
1997 and 1998, declining to 112% in 1999 and 2000, 107% in 2001 and 100%
thereafter. The preference shares can be redeemed, in whole or in part, at the
option of GTH at redemption prices starting at 114% of the liquidation
preference through 2001, declining to 111% in 2002, 108% in 2003, 105% in 2004,
102% in 2005 and 100% thereafter. The outstanding preference shares are
exchangeable, in whole, at the option of GTH for Senior
F-21
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
Subordinated Exchange Notes ("Exchange Notes") issued by ACL at a rate of
$1,000 principal amount of Exchange Notes for each $1,000 of liquidation
preference of preference shares. These Exchange Notes will bear an interest
rate equal to the dividend rate of the preference shares and will have
repayment terms similar to the preference shares described above.
In connection with the issuance of the preference shares, the holders of
preference shares purchased an aggregate of 11,250,000 shares of Old GCL's
Class A common stock for total proceeds of $7.5 million. Additionally, in
connection with the issuance of the preference shares, the initial purchaser of
the preference shares received 19,852,950 shares of Old GCL's Class A common
stock for no additional consideration representing 15% of the aggregate number
of Old GCL's Class A, B and C shares outstanding, after giving effect to the
issuance. The initial purchaser had the right to distribute these Class A
shares to purchasers of the preference shares. The Company has reflected the
$13,235,000 estimated fair value of the Old GCL's Class A common stock as a
discount in the carrying value of the preference shares.
The fair value of the 19,852,950 shares of Old GCL's Class A common stock
distributed to preference shareholders was based on the $.67 per share paid by
the holders of preference shares for the 11,250,000 Old GCL's Class A shares
purchased for cash.
On June 17, 1998, proceeds from the issuance of the New Senior Notes were
used to redeem the preference shares. The redemption of the preference shares
resulted in a charge against additional paid-in-capital comprised of a $15.9
million redemption premium and $18.2 million of unamortized discount and
issuance cost on the preference shares on the date of the redemption. The
redemption premium and write-off of unamortized discount and issuance costs on
the preference shares were treated as a deduction to arrive at the net loss
applicable to common shareholders in the consolidated statement of operations.
Furthermore, upon the redemption of the preference shares, the warrants
attached to the preference shares expired.
Preference share dividends included the following:
<TABLE>
<CAPTION>
FOR THE FOR THE
PERIOD PERIOD
THREE FROM FROM
THREE MONTHS NINE MARCH 19, MARCH 19,
MONTHS ENDED MONTHS 1997 (DATE OF 1997 (DATE OF
ENDED SEPTEMBER ENDED INCEPTION TO INCEPTION) TO
SEPTEMBER 30, 30, SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1998 1997 1998 1997 1997
------------- ----------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Preference share
dividends.............. $ -- $3,659,827 $7,337,031 $7,354,272 $11,111,672
Amortization of discount
on preference shares... -- 330,876 617,634 680,133 1,011,007
Amortization of
preference share
issuance costs......... -- 186,392 351,768 378,798 567,244
-------- ---------- ---------- ---------- -----------
$ -- $4,177,095 $8,306,433 $8,413,203 $12,689,923
======== ========== ========== ========== ===========
</TABLE>
F-22
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
8. FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and fair values of the
Company's financial instruments:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DECEMBER 31, 1997
---------------------------- ----------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------- ------------- ------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Cash, restricted cash
and cash equivalents... $ 877,499,797 $ 877,499,797 $ 26,727,880 $ 26,727,880
Current portion of long
term debt, obligations
under Inland Services
Agreements and capital
leases................. (60,729,920) (60,729,920) (30,188,645) (30,188,645)
Long term debt, obliga-
tions under Inland
Services Agreements
and capital leases..... (355,478,257) (355,478,257) (165,334,000) (165,334,000)
Preference shares....... -- -- (90,643,919) (90,643,919)
Senior notes............ (796,370,623) (796,370,623) (150,000,000) (150,000,000)
Interest rate swap
transaction............ -- (372,688) -- (115,115)
</TABLE>
Cash, restricted cash and cash The carrying amount of restricted cash and
equivalents................... cash equivalents is a reasonable estimate of
fair value as the balances include amounts
held in banks and money market deposits with
a short-term maturity.
Long term debt, obligations
under Inland Services
Agreements and capital The Credit Facility is a special financing
leases........................ for the construction of the System, and the
interest rates provided under the existing
Credit Facility are the best estimate of
current market rates available to ACL for
financing with similar terms. Obligations
under Inland Services Agreements and capital
leases are recorded at their present value
using a weighted average interest rate of the
Credit Facility, preference shares, and
Senior Notes.
Preference shares.............. Since the preference shares are a special
financing for the construction of the System,
the dividend rates provided under the
existing preference share agreement are the
best estimate of current market rates
available for financing with similar terms
and redemption provisions.
Senior notes................... Since the senior notes are a special
financing for the construction of the
Systems, the interest rates provided under
the existing senior notes arrangement are the
best estimate of current market rates
available for financing with similar terms.
Interest rate swap The interest rate swap transaction is "zero
transaction................... cost" meaning that the cost of acquiring the
transaction is embedded in the fixed interest
rate paid. As the transaction is accounted
for as a hedge against interest rate
fluctuations on the long term debt there is
no carrying value. The fair value is a mid-
market valuation provided by CIBC.
F-23
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
9. TAXES
The Company accounts for income taxes in accordance with SFAS 109. The
components of income tax expense are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------ ------------------
(UNAUDITED)
<S> <C> <C>
U.S. .................................. $6,831,590 $14,831,590
Other foreign.......................... 500,000 1,500,000
---------- -----------
Total income tax expense............... $7,331,590 $16,331,590
========== ===========
</TABLE>
Bermuda does not impose a statutory income tax and consequently the provision
for income taxes recorded relates to income earned where subsidiaries of the
Company have a presence in taxable jurisdictions. There are no significant
temporary differences between accounting and taxable income.
Since the Company has not recognized any income in periods prior to April 1,
1998, no tax provision has been reflected in those periods. Operating losses
incurred in those periods relate almost entirely to non-taxable jurisdictions
and therefore these operating losses cannot be applied to future taxable
earnings of the Company. Therefore the Company has not recorded any deferred
tax asset as a result of such losses in accordance with SFAS 109.
10. COMMITMENTS
As of September 30, 1998, ACL was committed under its contract with TSSL for
future construction costs totaling approximately $44 million ($195 million as
of December 31, 1997) and is committed under the OA&M contract with TSSL to
quarterly payments, over the next eight years, totaling approximately $254
million ($263 million as of December 31, 1997).
ACL is committed to paying TSSL commissions ranging from 4% to 7% on revenues
received until 2002, subject to certain reductions. As of September 30, 1998,
Mid Atlantic Crossing Ltd. was committed under its contract with Alcatel
Submarine Networks for future construction costs totaling approximately $221
million and as of September 30, 1998 Pan American Crossing Ltd. was committed
under its contract with TSSL for future construction costs totaling
approximately $262 million.
GCH and its subsidiaries have commitments under various operating leases
primarily relating to its office facility in Bermuda. Estimated future minimum
lease payments on all operating leases are approximately as follows:
<TABLE>
<S> <C>
For the three months ended December 31, 1998................. $ 219,000
1999......................................................... 953,000
2000......................................................... 963,000
2001......................................................... 971,000
2002......................................................... 652,000
Thereafter................................................... 1,910,000
</TABLE>
F-24
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
11. FINANCIAL INFORMATION OF GCL CONSOLIDATED, GCH, GUARANTORS AND NON-
GUARANTORS
Old GCL, GCL and certain subsidiaries each provide a guarantee of the New
Senior Notes described in Note 6. Additionally, Global Crossing International,
Inc. ("GCI"), a wholly-owned subsidiary of GCH that provides marketing and
development services to GCL, along with its wholly-owned subsidiaries, also
provide guarantees of the New Senior Notes. All guarantees are full,
unconditional, joint and several. To the extent companies providing a guarantee
have excess cash, dividends or loans of this cash can be made to GCH without
restriction. One of the Non-Guarantors is restricted under its long term debt
agreement from making any dividends or loans to GCH effectively for the
duration of such long term debt agreement. Separate financial statements of
each subsidiary guarantor have not been provided because they would not be
meaningful to investors.
We have presented the Balance Sheets, Statements of Operations and Statements
of Cash Flows for GCL consolidated, GCH, Guarantors and Non-Guarantors as of
and for the nine months ended September 30, 1998 and as of and for the period
from March 19, 1997 (Date of Inception) to December 31, 1997. We have also
included the GCL Consolidated Statements of Changes in Shareholders' Equity for
the periods from March 19, 1997 (Date of Inception) to December 31, 1997 and
for the nine months ended September 30, 1998. In addition, the reconciliation
of the numerator and denominator for the basic and diluted net income (loss)
per share has been presented along with notes to the GCL consolidated financial
statements, which are not applicable to GCH.
F-25
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
FINANCIAL INFORMATION OF GCL CONSOLIDATED, GCH, GUARANTORS AND
NON-GUARANTORS (CONTINUED)
($ AMOUNTS IN '000S)
(UNAUDITED)
<TABLE>
<CAPTION>
CONSOLIDATION
AND
ELIMINATION GCL
GCL GCH GUARANTORS NON-GUARANTORS ENTRIES CONSOLIDATED
AS OF SEPTEMBER 30, 1998 --------- ---------- ---------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents............ $ 5,408 $ 465,787 $ 16,416 $ 3,483 $ -- $ 491,094
Other current assets.... 409 80,997 2,786 377,301 (6,000) 455,493
Senior notes............ -- 150,000 -- -- (150,000) --
Long term accounts
receivable............. -- -- -- 33,640 -- 33,640
Capacity available for
sale................... -- 287 3,671 209,877 -- 213,835
Construction in
progress............... -- 4,630 11,742 641,598 (828) 657,142
Deferred finance costs,
net.................... -- 30,714 9,386 10,886 (9,386) 41,600
Investments in
subsidiaries........... 721,360 816,720 370,759 474,197 (2,383,036) --
Investments in Pacific
Crossing Ltd. ......... -- -- -- 162,109 -- 162,109
--------- ---------- -------- ---------- ----------- ----------
Total assets............ $ 727,177 $1,549,135 $414,760 $1,913,091 $(2,549,250) $2,054,913
========= ========== ======== ========== =========== ==========
Current liabilities..... $ 10,523 $ 31,405 $ 10,359 $ 116,875 $ (4,478) $ 164,684
Long term debt.......... -- -- 150,000 337,755 (150,000) 337,755
Senior notes............ -- 796,370 -- -- -- 796,370
Long term deferred
revenue................ -- -- -- 12,407 -- 12,407
Obligations under inland
services agreements and
capital leases......... -- -- -- 17,724 -- 17,724
Deferred income taxes... -- -- -- 9,319 -- 9,319
GCL Common Stock........ 2,050 12 24 96 (132) 2,050
Treasury stock.......... (209,415) -- -- -- -- (209,415)
Other Shareholders'
equity................. 1,068,106 835,226 235,622 1,385,722 (2,456,570) 1,068,106
Accumulated deficit..... (144,087) (113,878) 18,755 33,193 61,930 (144,087)
--------- ---------- -------- ---------- ----------- ----------
Total liabilities and
shareholders' equity... $ 727,177 $1,549,135 $414,760 $1,913,091 $(2,549,250) $2,054,913
========= ========== ======== ========== =========== ==========
- ------------------------------------------------------------------------------------------------------
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998
<S> <C> <C> <C> <C> <C> <C>
Sales and operating
revenues............... $ -- $ -- $ 8,909 $ 218,676 $ (8,636) $ 218,949
--------- ---------- -------- ---------- ----------- ----------
Cost of capacity sold... -- 128 1,632 88,678 -- 90,438
Operations,
administration and
maintenance............ -- -- -- 10,652 -- 10,652
Termination of Advisory
Services Agreement..... 82,194 -- 57,475 -- 139,669
Stock related
compensation expense... 24,809 8,249 -- -- -- 33,058
Selling, general and
administrative
expenses............... 6,721 3,215 14,745 15,467 433 40,581
--------- ---------- -------- ---------- ----------- ----------
Operating income
(loss)................. (31,530) (93,786) (7,468) 46,404 (9,069) (95,449)
Other income (expense),
net.................... 1,321 (11,483) (5,284) 3,264 (255) (12,437)
Provision for income
taxes.................. -- -- (332) (16,000) -- (16,332)
Extraordinary loss...... -- (9,750) -- -- (9,959) (19,709)
--------- ---------- -------- ---------- ----------- ----------
Net income (loss) before
equity income.......... (30,209) (115,019) (13,084) 33,668 (19,283) (143,927)
Equity in income (loss)
of subsidiaries........ (113,718) 1,301 31,957 -- 80,460 --
--------- ---------- -------- ---------- ----------- ----------
Net income (loss)....... $(143,927) $ (113,718) $ 18,873 $ 33,668 $ 61,177 $ (143,927)
========= ========== ======== ========== =========== ==========
</TABLE>
F-26
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
FINANCIAL INFORMATION OF GCL CONSOLIDATED, GCH, GUARANTORS AND
NON-GUARANTORS (CONTINUED)
($ AMOUNTS IN '000S)
(UNAUDITED)
<TABLE>
<CAPTION>
NON- ELIMINATION GCL
FOR THE NINE MONTHS ENDED GCL GCH GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
SEPTEMBER 30, 1998 --------- --------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by
(used in) operating
activities............. $ 2,804 $ (48,551) $ (7,563) $ 138,671 $ -- $ 85,361
--------- --------- --------- --------- -------- --------
Cash flows from
financing activities:
Finance and
organization costs
incurred.............. -- (32,232) -- -- -- (32,232)
Investment in and
advances from (to)
affiliates............ (382,948) (31) 144,382 253,520 (14,923) --
Proceeds from issuance
of common stock....... 397,196 12 24 96 (132) 307,198
Costs related to
issuance of common
stock................. (4,597) -- -- -- -- (4,597)
Cash reimbursement to
certain shareholders.. (7,047) -- -- -- -- (7,047)
Redemption of
preference shares..... -- -- (134,372) -- -- (134,372)
Proceeds from long term
debt ................. -- -- -- 202,815 -- 202,815
Proceeds from issuance
of senior notes....... -- 796,232 -- -- -- 796,232
Repurchase of senior
notes................. -- (159,750) -- -- -- (159,750)
Repayment of debt...... -- (15,055) -- -- 15,055 --
(Increase) decrease in
restricted cash and
cash equivalents...... -- (74,838) 19,851 (311,551) -- (366,538)
--------- --------- --------- --------- -------- --------
Net cash provided by
financing activities.. 2,604 514,338 29,885 144,880 -- 691,707
========= ========= ========= ========= ======== ========
Cash flows from
investing activities:
Cash paid for
construction in
progress and capacity
available for sale.... -- -- (7,205) (280,216) -- (287,421)
Investment in Pacific
Crossing Ltd.......... -- -- -- (6) -- (6)
--------- --------- --------- --------- -------- --------
Net cash provided by
(used in) investing
activities............ -- -- (7,205) (280,222) -- (287,427)
--------- --------- --------- --------- -------- --------
Net increase in cash and
cash equivalents....... 5,408 465,787 15,117 3,329 -- 489,641
Cash and cash
equivalents, beginning
of period.............. -- -- 1,299 154 -- 1,453
--------- --------- --------- --------- -------- --------
Cash and cash
equivalents, end of
period................. $ 5,408 $ 465,787 $ 16,416 $ 3,483 $ -- $491,094
========= ========= ========= ========= ======== ========
</TABLE>
F-27
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
FINANCIAL INFORMATION OF GCL CONSOLIDATED, GCH, GUARANTORS AND
NON-GUARANTORS (CONTINUED)
($ AMOUNTS IN '000S)
<TABLE>
<CAPTION>
CONSOLIDATION
AND
OLD ELIMINATION GCL
GCL GCL GCH GUARANTORS NON-GUARANTORS ENTRIES CONSOLIDATED
-------- -------- -------- ---------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997
Cash and cash
equivalents............ $ -- $ -- $ -- $ 1,299 $ 154 $ -- $ 1,453
Other current assets.... 33 12 12 19,996 6,443 (205) 26,291
Capacity available for
sale................... -- -- -- -- 21,200 -- 21,200
Construction in
progress............... -- -- -- 9,014 488,305 -- 497,319
Investments in
subsidiaries........... 73,952 73,952 73,940 276,897 -- (498,741) --
Deferred finance costs,
net.................... 208 -- -- 10,619 15,107 -- 25,934
-------- -------- -------- -------- -------- --------- --------
Total assets............ $ 74,193 $ 73,964 $ 73,952 $317,825 $531,209 $(498,946) $572,197
======== ======== ======== ======== ======== ========= ========
Current liabilities..... $ 72 $ -- $ -- $ 3,253 $ 88,978 $ (205) $ 92,098
Long term debt.......... -- -- -- -- 162,325 -- 162,325
Senior notes............ -- -- -- 150,000 -- -- 150,000
Obligations under inland
service agreements and
capital leases......... -- -- -- -- 3,009 -- 3,009
Mandatorily redeemable
preference shares...... -- -- -- 90,644 -- -- 90,644
Common Stock............ -- * 1,629 12 12 12 (36) 1,629
Other shareholders'
equity................. 74,281 72,453 74,058 74,034 277,359 (499,533) 72,652
Accumulated deficit..... (160) (118) (118) (118) (474) 828 (160)
-------- -------- -------- -------- -------- --------- --------
Total liabilities and
shareholders' equity... $ 74,193 $ 73,964 $ 73,952 $317,825 $531,209 $(498,946) $572,197
======== ======== ======== ======== ======== ========= ========
- ------------------------------------------------------------------------------------------------------------
FOR THE PERIOD FROM
MARCH 19, 1997 (DATE OF
INCEPTION) TO DECEMBER
31, 1997
Interest income......... $ -- $ -- $ -- $ 556 $ 2,385 $ -- $ 2,941
Selling, general and
administrative
expenses............... 42 -- -- 200 2,859 -- 3,101
-------- -------- -------- -------- -------- --------- --------
Net income (loss)....... (42) -- -- 356 (474) -- (160)
Equity in income (loss)
of subsidiaries........ (12,808) (12,808) (12,808) (474) -- 38,898 --
-------- -------- -------- -------- -------- --------- --------
Net income (loss) ...... $(12,850) $(12,808) $(12,808) $ (118) $ (474) $ 38,898 $ (160)
======== ======== ======== ======== ======== ========= ========
</TABLE>
* Amount less than $1,000.
F-28
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
SUMMARIZED FINANCIAL INFORMATION OF GCH, GUARANTORS AND
NON-GUARANTORS (CONTINUED)
($ AMOUNTS IN '000S)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
MARCH 19, 1997
(DATE OF INCEPTION) TO NON- ELIMINATION GCL
DECEMBER 31, 1997 OLD GCL GCL GCH GUARANTORS GUARANTORS ENTRIES CONSOLIDATED
---------------------- ------- ------- ------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Cash flows provided by
operating activities.. $ -- $ -- $ -- $ 528 $ 4,592 $ -- $ 5,120
------- ------- ------- -------- -------- -------- --------
Cash flows from
financing activities:
Finance and
organization costs
incurred............. -- -- -- (16,456) (11,725) -- (28,181)
Investment in and
advances to
affiliates........... (75,000) (75,000) (75,000) (272,468) -- 497,468 --
Preference share
issuance costs....... -- -- -- (7,530) -- -- (7,530)
Costs related to
issuance of common
stock................ -- -- -- (1,264) -- -- (1,264)
Proceeds from issuance
of common stock and
additional paid-in
capital.............. 75,000 75,000 75,000 75,000 272,468 (497,468) 75,000
Proceeds from issuance
of preference
shares............... -- -- -- 100,000 -- -- 100,000
Proceeds from long
term debt............ -- -- -- -- 162,325 -- 162,325
Proceeds from issuance
of senior notes...... -- -- -- 150,000 -- -- 150,000
Increase in restricted
cash and cash
equivalents.......... -- -- -- (19,851) (5,424) -- (25,275)
------- ------- ------- -------- -------- -------- --------
Net cash provided by
financing
activities.......... -- -- -- 7,431 417,644 -- 425,075
------- ------- ------- -------- -------- -------- --------
Cash flows from
investing activities:
Cash paid for
construction in
progress and capacity
available for sale... -- -- -- (6,660) (422,082) -- (428,742)
------- ------- ------- -------- -------- -------- --------
Net cash used in
investing
activities.......... -- -- -- (6,660) (422,082) -- (428,742)
------- ------- ------- -------- -------- -------- --------
Net increase in cash
and cash equivalents.. -- -- -- 1,299 154 -- $ 1,453
Cash and cash
equivalents, beginning
of period............. -- -- -- -- -- -- --
------- ------- ------- -------- -------- -------- --------
Cash and cash
equivalents, end of
period................ $ -- $ -- $ -- $ 1,299 $ 154 $ -- $ 1,453
------- ------- ------- -------- -------- -------- --------
</TABLE>
F-29
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
FINANCIAL INFORMATION OF GCL CONSOLIDATED (CONTINUED)
<TABLE>
<CAPTION>
COMMON STOCK OTHER SHAREHOLDERS' EQUITY
-------------------------------------- -----------------------------
TOTAL
TREASURY ADDITIONAL PAID- UNEARNED ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT STOCK IN CAPITAL COMPENSATION DEFICIT EQUITY
----------- ---------- ------------- ---------------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of Class A
common stock for cash
on March 25, 1997.... 11,250,000 $ 7 $ -- $ 7,499,993 $ -- $ -- $ 7,500,000
Class A common stock
distributed for nil
consideration to the
initial purchaser of
preference shares on
March 25, 1997....... 19,852,950 13 -- 13,234,987 -- -- 13,235,000
Issuance of Class B
common stock for cash
on March 25, 1997.... 50,625,000 34 -- 31,249,966 -- -- 31,250,000
Issuance of Class C
common stock for cash
on March 25, 1997.... 50,625,000 34 -- 33,749,966 -- -- 33,750,000
Issuance of Class D
common stock for cash
to certain Class B
shareholders on March
25, 1997............. 33,088,200 22 -- 2,499,978 -- -- 2,500,000
Costs incurred related
to the issuance of
common stock......... -- -- -- (1,264,045) -- -- (1,264,045)
Preference share
dividends............ -- -- -- (12,689,923) -- -- (12,689,923)
Class D Conversion and
Old GCL Exchange..... (2,554,183) 1,628,760 -- (1,628,760) -- -- --
Net loss for the
period............... -- -- -- -- -- (160,356) (160,356)
----------- ---------- ------------- -------------- ------------ ------------- -------------
Balance, December 31,
1997................. 162,886,967 $1,628,870 $ -- $ 72,652,162 $ -- $ (160,356) $ 74,120,676
----------- ---------- ------------- -------------- ------------ ------------- -------------
Issuance of common
stock for cash on
January 21 and April
22, 1998............. 787,500 7,875 -- 2,779,804 -- -- 2,787,679
Cash reimbursement to
certain
shareholders......... -- -- -- (7,047,044) -- -- (7,047,044)
Unearned
compensation......... -- -- -- 81,730,700 (81,730,700) -- --
Compensation expense.. -- -- -- -- 30,795,215 -- 30,795,215
PCG Warrants.......... 12,203,170 122,032 -- 275,175,974 -- -- 275,298,006
Common stock issued in
exchange for
termination of
Advisory Services
Agreement............ 7,105,263 71,053 -- 134,928,947 -- -- 135,000,000
Preference share
dividends............ -- -- -- (8,306,433) -- -- (8,306,433)
Premium on redemption
of preference
shares............... -- -- -- (34,140,067) -- -- (34,140,067)
Repurchase of issued
common stock from
certain
shareholders......... (150,000) (1,500) (209,414,620) 209,416,120 -- -- --
Initial Public
Offering............. 22,210,000 222,100 -- 391,851,161 -- -- 392,073,261
Net loss for period
for nine months ended
September 30, 1998... -- -- -- -- -- (143,926,710) (143,926,710)
----------- ---------- ------------- -------------- ------------ ------------- -------------
Balance, September 30,
1998 (unaudited)..... 205,042,900 $2,050,430 $(209,414,620) $1,119,041,324 $(50,935,485) $(144,087,066) $ 716,654,583
=========== ========== ============= ============== ============ ============= =============
</TABLE>
- --------
The 1997 amounts presented above reflect the historical equity transactions of
Old GCL that occurred on March 19, 1997 and the Old GCL Exchange as if it had
occurred immediately after the historical equity transactions on March 19,
1997.
F-30
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
FINANCIAL INFORMATION OF GCL CONSOLIDATED (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 19, 1997
NINE MONTHS ENDED (DATE OF INCEPTION)
SEPTEMBER 30, 1998 TO DECEMBER 31, 1997
------------------ --------------------
(UNAUDITED)
<S> <C> <C>
NET LOSS PER COMMON SHARE
Net loss before extraordinary item
Basic................................. $(0.97) $(0.08)
Diluted............................... $(0.97) $(0.08)
Extraordinary item
Basic................................. $(0.12) --
Diluted............................... $(0.12) --
Net loss to common shareholders
Basic................................. $(1.09) $(0.08)
Diluted............................... $(1.09) $(0.08)
Shares for computing basic income
(loss) per share...................... 170,685,928 162,886,967
Shares for computing diluted income
(loss) per share...................... 170,685,928 162,886,967
The following is a reconciliation of the numerator and the denominator of the
basic and diluted net loss per share:
<CAPTION>
FOR THE PERIOD
MARCH 19, 1997
NINE MONTHS ENDED (DATE OF INCEPTION)
SEPTEMBER 30, 1998 TO DECEMBER 31, 1997
------------------ --------------------
(UNAUDITED)
<S> <C> <C>
Basic and Diluted
Net loss before extraordinary item.... $(124,217,240) $ (160,356)
Preference share dividends............ (8,306,433) (12,689,923)
Redemption of preference shares....... (34,140,067) --
------------- ------------
Net loss applicable to common
shareholders before extraordinary
item................................. $(166,663,740) $(12,850,279)
============= ============
Weighted average shares outstanding:
Basic................................. 170,685,928 162,886,967
============= ============
Diluted............................... 170,685,928 162,886,967
============= ============
</TABLE>
F-31
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
FINANCIAL INFORMATION OF GCL CONSOLIDATED, GCH, GUARANTORS AND
NON-GUARANTORS (CONTINUED)
All footnotes in these GCH consolidated financial statements are applicable
to both GCH and GCL. The footnotes below are applicable to GCL only:
(I) OLD GCL COMMON STOCK AND ADDITIONAL PAID-IN-CAPITAL
As discussed in Note 1, on January 21, 1998, Old GCL effected a 100 for 1
stock split of each of the Class A, B, C and D common stock and undesignated
stock and amended the par value of each share of common stock from $.0001 per
share to $.000001 per share. Shares of common stock of Old GCL outstanding have
been restated to reflect the equivalent number of shares of GCL that were
issued in the Old GCL Exchange as discussed in "Note 1". Class A shares, Class
B shares and Class C shares all have voting rights. On March 25, 1997, Old GCL
issued 11,250,000 Class A shares, 50,625,000 Class B shares, 50,625,000 Class C
shares for $.67 per share, resulting in aggregate proceeds of $75 million. As
discussed in Note 7, in addition to the 11,250,000 Class A shares issued to the
preference shareholders for cash, in connection with the issuance of the
preference shares, a total of 19,852,950 Class A shares were distributed to the
initial preference shareholder representing 15% of the aggregate number of
Class A, B and C shares outstanding. In addition, warrants to acquire a maximum
of 46,440 shares of common stock of Old GCL were issued into escrow for the
benefit of the holders of preference shares. All or a portion of the warrants
may be exercised at a price of $.01 per share if the preference shares are
outstanding on April 1, 2001. Effective January 21, 1998, Old GCL authorized
1,000,000,000 of new Class E non-voting shares.
Certain of the Class B shareholders were issued a total of 33,088,200 Class D
shares. Of the $33,750,000 of proceeds received from the issuance of Class B
shares, $2,500,000 was allocated to the Class D shares representing the
estimated fair value of the Class D shares based on an independent valuation.
Class D shares are non-voting shares which carry special preference rights on
the cash distributions made by Old GCL. Class D shareholders will receive 10%
of cash distributions to common shareholders once the internal rate of return
to Class C shareholders exceeds 10%, and then increasing to 20% of cash
distributions to common shareholders once the internal rate of return to Class
C shareholders exceeds 30%. Effective January 21, 1998, Class D share rights
were amended such that Class D shareholders now have the option to convert each
Class D share into one Class E share upon payment to Old GCL of $1.47 per share
or are entitled to a fraction of a Class E share based upon a valuation at the
time of such conversion, together with a warrant to purchase the remaining
fraction of such Class E share at an exercise price based upon such market
valuation. By granting to holders of the Class D shares an option to convert
such shares into Class E shares, the GCL obtained effective assurance that it
could effect a change to a corporate structure in the event of a major equity
event, such as a merger or other business combination or in the event of an IPO
by GCL of its common stock, since the holders of the Class D shares would need
to exercise their options in order to participate directly in benefits of a
merger or acquisition of the GCL or in order to obtain the benefits of any
trading market for the common stock of the GCL; no trading market was expected
to develop for the Class D shares. The grant of the options to Class D
shareholders represents an equity transaction since the GCL granted these
shareholders amended share rights in the form of options with new warrants. As
an equity transaction, the fair value of the option would be recorded as an
increase in additional paid-in-capital and a corresponding charge against
retained earnings, but since the GCL has an accumulated deficit, the charge
would be made against additional paid-in-capital which would have no impact on
the consolidated financial statements. The GCL will account for the new
warrants as an equity transaction on the date the warrants are issued, which is
expected to be the IPO date. The accounting would increase additional paid-in-
capital and a charge to retained earnings to the extent the GCL has retained
earnings on that date, or against additional paid-in-capital if the GCL does
not have retained earnings.
F-32
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
FINANCIAL INFORMATION OF GCL CONSOLIDATED, GCH, GUARANTORS AND
NON-GUARANTORS (CONTINUED)
During the nine months ended September 30, 1998, GCL issued, at a price of
$.67 per share, 450,000 Class B shares and 337,500 Class E shares. Since the
estimated fair value of shares exceeded the issue price, GCL increased stock
related expense and shareholders' equity by $nil and $2,262,679 in the three
and nine months ended September 30, 1998, respectively.
(II) STOCK OPTION PLAN AND STOCK RELATED EXPENSE
GCL accounts for stock option grants in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"),
and, recognizes compensation expense for stock option grants to the extent that
the estimated fair value of the stock exceeds the exercise price of the option
at the measurement date. The compensation expense is charged against operations
ratably over the vesting period of the options. Disclosures will be made in the
consolidated financial statements of future periods in accordance with
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation" ("SFAS 123").
On January 21, 1998, GCL adopted the 1998 Stock Incentive Plan ("the Plan")
which grants non-qualified stock options to key officers and employees of the
GCL at the discretion of the Board of Directors. As of September 30, 1998, the
maximum number of options which may be issued under the Plan was 16,607,865 for
the rights to purchase an equivalent number of shares of common stock.
Generally, options vest equally over a period of three years and expire ten
years from the date of grant.
The following table summarizes the transaction of GCL's stock option plans
for the nine months ended September 30, 1998.
<TABLE>
<CAPTION>
WEIGHTED
NUMBER OF AVERAGE NUMBER EXERCISABLE
OPTIONS EXERCISE AS OF
OUTSTANDING PRICE SEPTEMBER 30, 1998
----------- -------- ------------------
<S> <C> <C> <C>
Options outstanding as of December
31, 1997......................... -- -- --
Options granted on January 21,
1998............................. 4,231,500 $ 1.67 895,250
Options granted on April 3, 1998.. 5,557,500 1.67 1,467,500
Options granted on June 12, 1998.. 3,352,950 6.67 831,250
Options granted on August 9,
1998............................. 507,750 19.00 --
Options granted on September 18,
1998............................. 99,500 20.50 --
Options forfeited................. (1,608,500) 1.67 --
---------- ------ ---------
Options outstanding as of
September 30, 1998............... 12,140,700 $ 4.41 3,194,000
========== ====== =========
</TABLE>
The weighted average remaining life of the options outstanding as of
September 30, 1998 is 9.5 years. During the three month and nine month periods
ended September 30, 1998, no options had expired or were exercised.
During the nine months ended September 30, 1998 the Company entered into an
employment arrangement with a key executive, hired during the third quarter,
and granted him the economic rights to purchase 800,000 shares of common stock
at $4.00 per share. The right to purchase one third of these shares vested
immediately and the balance will vest over two years. The Company recorded the
excess of the fair market value of these rights over the purchase price as
unearned stock compensation in the amount of $14.6 million during the nine
months ended September 30, 1998. The unearned compensation is being recognized
as an expense over the vesting period of the rights.
F-33
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
FINANCIAL INFORMATION OF GCL CONSOLIDATED, GCH, GUARANTORS AND
NON-GUARANTORS (CONTINUED)
As of September 30, 1998, GCL recorded $81.7 million of unearned
compensation, relating to the stock option plan plus the economic rights to
purchase common stock granted to a key executive. The unearned compensation is
being recognized as an expense over the vesting period of these options and
economic rights to purchase common stock. GCL recognized $9.7 million of
compensation expense during the three months ended September 30, 1998. During
the nine months ended September 30, 1998, the Company also recorded stock-
related expense of $2.3 million relating to shares issued during this period.
For the nine months ended September 30, 1998, GCL recognized $25.9 million of
stock related compensation relating to its Stock Incentive Plan and $4.9
million for the vested economic rights to purchase common stock. The remaining
$50.9 million of unearned compensation will be recognized as follows: $6.0
million in the fourth quarter of 1998, $24.1 million in 1999, $17.1 million in
2000 and $3.7 million in 2001.
No compensation expense was recognized for the options granted on January 21,
1998, August 9, 1998 and September 18, 1998 since the estimated fair value of
the stock, on that date did not exceed the exercise price.
As permitted by SFAS 123, the GCL has chosen to account for employee stock
options under APB 25 and is recognizing compensation expense over the vesting
period to the extent that the estimated fair value of the stock on the date the
options were granted exceeded the exercise price on the dates of grant. Had
compensation cost for the GCL's stock-based compensation plans been determined
consistent with the SFAS 123 fair value approach, the impact on the GCL's loss
applicable to common shareholders and loss per share would be as follows:
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, 1998 SEPTEMBER 30, 1998
------------------ ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net income (loss) applicable to com-
mon shareholders:
As reported....................... $15,289 $(186,373)
Pro forma......................... $14,665 $(188,892)
Basic and diluted net (loss) per
share:
As reported....................... $ 0.08 $ (1.09)
Pro forma......................... $ 0.08 $ (1.11)
</TABLE>
The fair value of options for purposes of the SFAS 123 disclosure is
estimated on the date of grant using the Black-Scholes method with the
following average assumptions: no dividend yield, risk-free interest rates of
5.45%, an average expected life of 4 years and a 32% volatility factor. The
estimated fair value of the options granted on January 21, April 3, June 12,
1998, August 9, 1998 and September 18, 1998 were $0.49, $11.40, $15.90, $6.38
and $6.88, respectively.
12. RELATED PARTY TRANSACTIONS
Advisory Services Agreement ("ASA")
GCL has entered into the ASA with PCG Telecom, an affiliate of Pacific
Capital Group, Inc. ("PCG") which is a shareholder of GCL. Under the ASA, PCG
Telecom provides ACL with advice in respect of the development and maintenance
of AC-1, development and implementation of marketing and pricing strategies and
the preparation of business plans and budgets. As compensation for its advisory
services, PCG Telecom
F-34
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
receives a 2% fee on the gross revenues of the Company, subject to certain
restrictions, with the first such payment occurring at the System RFS date.
Advances on fees payable under the ASA are being paid to PCG Telecom at a rate
of 1% on signed CPAs and Backhaul CPAs until the System RFS date and are
secured by amounts payable under the ASA. Fees paid under the ASA to PCG
Telecom are shared amongst ULLICO, Inc., PCG, CIBC, and Messrs. Winnick, Cook,
Brown, Lee and Porter, all of whom are shareholders of GCL. The Advisory
Service Agreements ("ASA") which were terminated effective on June 30, 1998 had
terms of 25 years subject to termination, however, the ASA did not contain
provisions regarding cancellation fees or liquidated damages in the event of
termination or breach. GCL acquired the rights under the ASA on behalf of the
Company and contributed such rights to the Company. This transaction was
recorded in the consolidated financial statements as an increase in additional
paid-in-capital and a charge against the statement of operations in the amount
of $137.7 million. The $137.7 million is comprised of a $135 million settlement
of the fees that would have been payable and the cancellation of approximately
$2.7 million owed to the Company under a related advance agreement. The $135
million amount was calculated by applying the 2% advisory services fee to
projected future revenues and discounting the amount relating to AC-1 revenues
by 12% and the amount relating to all other system's revenues by 15%. The
result of this calculation was $155.5 million, which amount was subsequently
reduced to $135 million. Both the discount rates and the ultimate valuation
were determined as a result of a negotiation process including a disinterested
director of the Company and the various persons entitled to fees under the ASA.
The Company has obtained a fairness opinion from an independent financial
advisor in connection with this transaction.
PCG Warrants
Prior to January 21, 1998, PCG and its affiliates had commenced development
of systems other than AC-1, namely PC-1, MAC and PAC. Through January 21, 1998,
such development included assembling a management team, negotiating with
potential suppliers, partners, financing sources, obtaining preliminary market
and feasibility studies and developing technical requirements. On January 21,
1998, the Board determined that it was in the Company's best interests to
pursue these new systems, obtain the results of the work and the employees then
within the scope of activity of PCG and broaden the goals, objectives and
business plan of the Company. In consideration of PCG transferring the results
of its activities and becoming
F-35
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
limited in its future activities in fiber optic telecommunications other than
through GCL, the Board approved and the shareholders subsequently approved the
transaction whereby PCG received approximately $7 million representing PCG's
costs related thereto and Old GCL entered into a warrant agreement ("PCG
Warrants") under which PCG was issued three separate warrants permitting PCG to
purchase (i) 9,226,592 of Old GCL's Class B shares for an aggregate price of
$50,000,000; (ii) an additional 4,613,297 of Old GCL's Class B shares for an
aggregate price of $31,250,000; and (iii) an additional 4,613,297 of Old GCL's
Class B shares for an aggregate price of $37,500,000. The PCG Warrants were
granted in exchange for the rights to commence the development of the new
projects that previously had been under development by an affiliate of PCG.
These warrants are intended to entitle PCG to acquire, in addition to their
existing ownership, 10% of the capital stock of GCL, as of the date these
warrants were issued. Exercise of these warrants is contingent upon (i) an IPO
of shares of Old GCL (or any successor thereto), underwritten by an investment
banking firm of national reputation (as determined by a majority of the Board
of Directors of Old GCL) from which Old GCL shall have received at least
$50,000,000 in net proceeds, (ii) the investment by Old GCL in the aggregate of
at least $500,000,000 of Net Attributable Capital (as defined below) in cable
systems other than AC-1 and (iii) the generation in the aggregate by cable
systems other than AC-1 of at least $100,000,000 in Net Attributable Revenues
(as defined below). For purposes of the PCG Warrant Agreement, with respect to
any cable system, "Net Attributable Capital" means the aggregate debt and
equity capitalization of such system multiplied by the percentage ownership of
Old GCL (directly or indirectly) in such system, and "Net Attributable
Revenues" means the net revenues of such system multiplied by the percentage
ownership interest of Old GCL (directly or indirectly) in such system. No
accounting was made for the PCG Warrants at the time of issuance on the basis
that it was indeterminable when the conditions described above would be met.
In June, 1998, the Board of Directors amended the terms of the PCG Warrants
so that the PCG Warrants will become exercisable upon the successful completion
of the IPO and eliminated conditions (ii) and (iii) above. Further to this
amendment, the Board of Directors also amended the terms of the PCG Warrants to
give each holder the option to convert each share under warrant into a fraction
of a Class B share based upon the ratio of the current per share valuation at
the time of conversion less the per share exercise price of the warrant divided
by the current per share valuation at the time of conversion multiplied by the
18,453,185 shares available under the PCG Warrants, together with a new warrant
("New PCG Warrants") to purchase the remaining fraction of such Class B share
at an exercise price equal to the current per share valuation. Prior to the
IPO, it is expected that the holders of the PCG Warrants will exercise their
warrants to acquire Class B shares by way of the cashless conversion and the
New PCG Warrants will be issued with an exercise price based on the per share
valuation at the conversion date.
The Company had accounted for the PCG Warrants by assuming the cashless
conversion took place as of June 30, 1998 using the current estimated per share
valuation at the expected conversion date, multiplied by the number of Class B
shares estimated to be converted in exchange for the PCG Warrants. The value
attributed to the PCG Warrants as described below was contributed to the
Company by the Company's parent GCL. The resulting value under this calculation
is approximately $213.3 million which has been allocated to the new systems
acquired in exchange for the PCG Warrants. In connection with the formation of
PCL, the Company agreed to make available to PCL the consideration received by
the Company in connection with the grant of the PCG Warrants, in addition to
the $231 million cash investment made by the Company. See Note 3.
F-36
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
Therefore, the Company recorded an increase in its investment in PCL in the
amount of approximately $126.5 million and an increase in construction in
progress for PAC and MAC in the amounts of approximately $49.9 million and
$36.9 million, respectively, with a corresponding increase of $213.3 million in
additional paid in capital. The $213.3 million was allocated on a pro rata
basis to the three projects according to the estimated cost of each system. The
Company's accounting for the PCG Warrants is pursuant to Emerging Issues Task
Force 96-18, "Accounting for Equity Instruments with Variable Terms that are
Issued for Consideration other than Employee Services under FASB Statement No.
123" ("EITF 96-18"). Under EITF 96-18, the fair value of equity instruments
issued for consideration other than employee services should be measured using
the stock price or other measurement assumptions as of the date at which a firm
commitment for performance level has been reached. The Company has recorded the
estimated value of the PCG Warrants as of June 30, 1998, since the IPO was
probable at that date. The $213.3 million value attributed to the PCG Warrants
as of June 30, 1998 was adjusted to the actual value of $275.3 million on the
date of the IPO based upon the $19 price per share.
The Company gave accounting recognition for the New PCG Warrants on the date
these warrants were issued, which was the date of the IPO. The Company valued
of each of the New PCG Warrants at $6.95 based on an independent valuation
based on the IPO price of $19 per share. The New PCG Warrants had a total value
of approximately $43 million. The Company recorded the actual value of the New
PCG Warrants in a manner similar to that described above whereby the total
value was allocated to the investment in PCL, MAC and PAC based on their
relative total contract costs.
Other transactions
$7,250,000 in fees were paid to PCG and certain of its key executives, who
are shareholders of GCL, and another shareholder for services provided in
respect of obtaining the Credit Facility, Senior Notes and preference share
financing. Of the fees paid, $5,523,775 was allocated to the Credit Facility
and Senior Notes and recorded as deferred finance costs, $986,725 was allocated
to the preference shares and recorded as a reduction in the carrying value of
the preference shares and $739,500 was recorded as common stock issuance costs
and is included in the approximately $1.3 million which is reflected as a
reduction in additional paid-in-capital.
GCL has paid CIBC approximately $25 million in fees related to the financing
obtained under the Old Senior Notes, Credit Facility, and the issuance of
preference shares. Of the fees incurred, approximately $6.2 million related to
underwriting and commitment fees pertaining to the issuance of the preference
shares and were recorded as a reduction in the carrying value of the preference
shares, approximately $9.2 million related to underwriting, commitment and
advisory fees in connection with the issuance of the Senior Notes and
approximately $9.6 million related to fees associated with obtaining the Credit
Facility which were recorded as deferred finance costs. CIBC is a member of the
syndicate funding the Credit Facility under which the Company has borrowings of
$365,140,294 ($162,325,000 as of December 31, 1997), as of September 30, 1998
and has been paid interest and other related fees in the amount of
approximately $21 million as of September 30, 1998 ($4.2 million as of December
31, 1997). CIBC is also one of the initial purchasers of the New Senior Notes
and received a $5,817,425 commitment and structuring fee as well as portion of
the $24,750,000 underwriting fee paid to the initial purchasers. CIBC was also
one of the underwriters of the Company's IPO and received a portion of the
approximate $25 million underwriting fee paid to the underwriters.
F-37
<PAGE>
GLOBAL CROSSING HOLDINGS LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
AS OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(INFORMATION FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998,
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997, AND FOR THE PERIOD FROM MARCH
19, 1997
(DATE OF INCEPTION) TO SEPTEMBER 30, 1997 IS UNAUDITED)
(EXPRESSED IN U.S. DOLLARS)
On April 7, 1998, the Company signed a CPA with Worldport Communications,
Inc. ("Worldport"), to acquire capacity on AC-1. This transaction occurred in
the ordinary course of business of the Company and on terms and conditions no
less favorable to the Company than in its other CPAs. Certain officers and
directors of the Company, have direct or indirect equity ownership positions in
Worldport, aggregating approximately 10% of the current common stock of
Worldport.
GCL purchased all common shares owned by Telecommunications Development
Corporation ("TDC") in the Company in exchange for 150,000 fewer shares of
newly issued common shares based upon the per share value at the repurchase
date. The transaction benefited GCL since 150,000 fewer shares were outstanding
after the repurchase without any cost to GCL. The transaction was accounted for
as the acquisition of treasury stock and will be recorded at the fair value of
the consideration given.
F-38
<PAGE>
GLOSSARY OF CERTAIN DEFINED TERMS
Unless the context otherwise requires, any reference in this prospectus to
any agreement shall mean such agreement and all schedules, exhibits and
attachments thereto, as amended, supplemented or otherwise modified as of the
date of this prospectus. All terms defined herein used or the singular shall
have the same meanings when used in the plural and vice versa.
<TABLE>
<C> <S>
Amplifier: A device used to boost the strength of an
electronic or optical signal, which is
weakened (attenuated) as it passes through
the transport network. Amplifiers add gain
to the signal by an amount equal to the
loss in the previous section of the
network since last amplification.
Band: A range of frequencies between two defined
limits.
Bandwidth: A measure of capacity of information-
carrying capacity on a communications
channel. 1) The difference between the
high and low frequencies of a transmission
band, expressed in cycles per second
(Hertz) or in wavelengths (nanometers). It
is a measure of raw capacity without
compression or coding of the information
signal. A voice transmission requires
about 3 KHz and a TV channel about 6 MHz.
2) Transmission capacity is expressed in
bits per second. For example megabits per
second (Mbps) is a bit rate expressed in
millions of bits per second while gigabits
per second (Gbps) is a bit rate expressed
in billions.
. Narrowband: Less than or equal to 64-
kbps
. Wideband: Digital rates between 64-kbps
and 1.544-Mbps (DS1) or 2.048-Mbps
(E1)-- LANs, bulk files transfer, video
conferencing, and multimedia.
. Broadband: Greater than 44.736-Mbps
(D3) or 34.368-Mbps (E3)
Bit: A binary unit of information that can have
either of two values, 0 or 1. Contraction
of binary digit:
. KILOBIT = 1,000 bits
. MEGABIT = 1 million bits
. GIGABIT = 1 billion bits
. TERABIT = 1 trillion bits
Broadband: A transmission channel usually carrying a
tremendous amount of information at
transmission speeds of 45 Mbps (45,000,000
bits per second) or greater. Some
facilities have transmission speeds in the
billion of bits (gigabits per second or
Gbps).
1. A communications channel with bandwidth
sufficiently large to carry voice, data
and video on a single channel.
2. Any voice communications channel having a
bandwidth greater than a voice grade
channel.
. A bandwidth of 45 Mbps can carry 672
voice connections.
. In theory up to 64 telephone grade
communication channels can be carried
on one 6 MHz broadband channel.
</TABLE>
GL-1
<PAGE>
<TABLE>
<C> <S>
Capacity: The information-carrying ability of a
telecommunications system, as defined by
its design (number of fibers, system
length, and opto/electronic equipment)
and its deployed equipment (amount of
opto/electronics in the station) and
measured in bits per second. Capacity is
sold in discrete units, usually system
interface levels such as DS-3's and STM-
1's, that in the aggregate are the
equivalent of total system capacity.
Carrier: 1. A third party provider of communications
services by wire, fiber or radio.
. Common Carrier: A private company
offering facilities or services to the
general public on a non-discriminatory
basis and regulated as to market entry,
practices, and rates by various Federal
and State authorities.
. Private Carrier: Services provided for
internal use and free of most common
carrier regulations to allow
discrimination in service provision or
pricing.
2. A signal that is modulated in order to
transmit information.
Common Carrier: A business authorized by the FCC to provide
communications services by wire or radio
from place to place without influence of
content. Services are provided to the
public on a non-discriminatory basis, and
are regulated by Title II of the
Communications Act of 1934. Regulatory
agencies are the FCC and state public
utility commissions.
. Non-dominant carrier is one which has
insufficient market power to practice
anti-competitive pricing.
. Private carriers are not regulated by
government agencies and may charge
whatever the market will bear.
Compression: Algorithm that minimizes the redundancy in
the signal to be transmitted.
Digital: Describes a method of storing, processing
and transmitting information through the
use of distinct electronic or optic pulses
representing the binary digits 0 and 1. In
communications they will modify a carrier
at a selected frequency. The precise
signal transitions preclude any distortion
such as graininess or snow in the case of
video transmission, or static or other
background distortion in the case of audio
transmission.
Digital Transmission: Method of storing, processing and
transmitting information through the use
of distinct electronic or optical pulses
that represent the binary digits 0 and 1.
Digital transmission and switching
technologies employ a sequence of these
pulses to represent information as opposed
to a continuously variable analog signal.
The precise digital numbers preclude any
distortion such as graininess or snow in
the case of video transmission, or static
or other background distortion in the case
of audio transmission.
Doped Fibers: Various impurities may be added to silica-
based fiber-optic strands as they are
constructed to achieve specifically
desired transmission or physical
properties.
</TABLE>
GL-2
<PAGE>
<TABLE>
<C> <S>
. Erbium-Doped Optical Fiber Amplifier
(EDFA) optical amplifiers use a section
of optical fiber doped with the rare
earth erbium and optically pumped with
a laser diode. It can amplify a range
of wavelengths at the same time
surrounding a base wavelength of 1550
nm.
. Praseodymium-doped fibers produce a
signal gain of 30 dB in 1310 nm fibers.
DS1: A digital transmission hierarchy supporting
1.544 million bits per second that may be
used for "near full-motion" or compressed
video, data or voice circuits (24, 48 or
96).
DWDM (Dense Wavelength Division
Multiplexing): A technique which employs more than one
light source and detector operating at
different wavelengths and simultaneously
transmits optical signals through the
same fiber while message integrity of
each signal is preserved.
EDFA (Erbium Doped Fiber A purely optical (as opposed to
Amplifier): electronic) device used to boost an
optical signal. It contains several
meters of glass fiber doped with erbium
ions. When the erbium ions are excited to
a higher energy state, the doped fiber
changes from a passive medium to an
active amplifying medium.
Fiber Kilometers: The number of route kilometers installed
multiplied by the number of fiber strands
along the path.
Gbps (Gigabit per second): A data rate of 1 Gbps corresponds to 1,000
million bits per second.
Internet: A fabric of interconnected computer
networks, originally known as the DARPA
network (Defense Advanced Research
Projects Agency) connecting government
and academic sites. It currently links
about 50 million people world-wide who
use it for everything from scientific
research to simple E-Mail.
Indefeasible Right of Use (IRU): A measure of currency in the undersea
cable business. The owner of an IRU has
the right to use the capacity for the
time and bandwidth to which the IRU
applies.
ISP: Independent service provider.
ITU (International
Telecommunications
Union): The ITU is an intergovernmental agency of
the United Nations within which the
public and private sectors cooperate for
the development of telecommunications.
The ITU adopts international regulations
governing the use of the radio spectrum
and develops standards to facilitate the
interconnection of telecommunications
systems on a worldwide basis. It is
headquartered in Geneva, Switzerland. In
1996, the ITU comprised 185 Member States
and 363 members (scientific and
industrial companies, public and private
operators, broadcasters, regional and
international organizations active in
three sectors: Radio communications,
Standardization and Development).
Mbps (Megabit per second): One Mbps corresponds to a data rate of
1,000,000 bite per second.
</TABLE>
GL-3
<PAGE>
<TABLE>
<C> <S>
Multimedia: The electronic conversation between two or
more people or groups of people in
different places using two or more types
of digitally integrated communication for
voice, sound, text, data, graphics,
video, image or presence at the same
time. Applications include conferencing,
presentations, training, referencing,
games, etc.
Multiplexing: An electronic or optical process that
combines two or more lower bandwidth
transmissions into one higher bandwidth
signal by splitting the total available
bandwidth into narrower bands (frequency
division) or by allotting a common
channel to several transmitting sources
one at a time in sequence (time
division).
Multipoint: Pertaining or referring to a
communications line to which three or
more stations are connected. It implies
that the line physically extends from one
station to another until all are
connected.
Optical Fibers: Thin filaments of glass through which
light beams are transmitted. Enormous
capacity, low-cost, low-power
consumption, small space, lite-weight,
insensitivity to electromagnetic
interference characterize this transport
media.
PTTs (Post, Telephone and
Telegraph
companies): International telecommunications carriers
which are generally under the control of
the government in a country that has not
yet privatized its telecommunications
markets.
Repeater: 1. Equipment that receives a low-power
signal, possibly converting it from
light to electrical form, amplifying it
or retiming and reconstructing it for
transmission. It may need to be
reconverted to light for retransmission.
2. An optoelectrical device used at each
end and occasionally at intermediate
points of exceptionally long fiber-optic
span. Optical input is converted to
electrical form to restore a clean
signal, which drives lasers that fully
restores the optical signal at the
original signal strength.
Route Kilometers: The number of route kilometers installed.
RFS (Ready for Service): The data of provisional acceptance or
commercial service of a cable system.
STM (Synchronous Transfer Mode): New term for traditional TDM switching to
distinguish it from ATM.
STM-1: The largest standard circuit unit of
capacity, which consists of 155,500 Kbps
(equal to 155 Mbps). Thus, each Gbps
contains enough capacity for 6.4 STM-1
circuits. While capacity is sold to the
largest telecommunications companies in
minimum investment units equal to one
STM-1 unit, most telecommunications
companies buy smaller units at a price
higher than the equivalent STM-1 price.
</TABLE>
GL-4
<PAGE>
<TABLE>
<C> <S>
Wavelength: The distance between two crests of a signal
or a carrier and is measured in terms of
meters, millimeters, nanometers, etc. In
lightwave applications, because of the
extremely high frequencies, wavelength is
measured in nanometers.
xDSL: A term referring to a variety of new
Digital Subscriber Line technologies. Some
of these varieties are asymmetric with
different data rates in the downstream and
upstream directions. Others are symmetric.
Downstream speeds range from 384 Kbps (or
"SDSL") to 1.5-8 Mbps (or "ADSL").
</TABLE>
GL-5
<PAGE>
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EXCHANGE OFFER
[LOGO OF GLOBAL CROSSING HOLDINGS LTD. APPEARS HERE]
GLOBAL CROSSING HOLDINGS LTD.
10 1/2% SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2008
--------
PROSPECTUS
DATED , 1998
--------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
No provision is made in Bermuda statutory law for indemnification of officers
and directors.
The Bye-laws of the registrant provide for indemnification of the
registrant's officers and directors against all liabilities, loss, damage or
expense incurred or suffered by such party as an officer or director of the
registrant; provided that such indemnification shall not extend to any matter
which would render it void pursuant to the Companies Acts as in effect from
time to time in Bermuda.
The directors and officers of the Company are covered by directors' and
officers' insurance policies maintained by the Company.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT PAGE
------- ------- ----
<C> <S> <C>
3.1b Certificate of Incorporation of Global Crossing Holdings Ltd.
3.2 Bye-laws of Global Crossing Holdings Ltd.
3.3 Memorandum of Increase of Share Capital for Global Crossing
Holdings Ltd.
3.4a Certificate of Incorporation of Global Crossing Ltd.
3.5b Amended and Restated Bye-Laws of Global Crossing Ltd.
3.6a Certificate of Incorporation of Change of Name of Global
Crossing Ltd.
3.7a Memorandum of Increase of Share Capital for Global Crossing
Ltd.
4.1 Form of Certificate for Preferred Stock
4.2 Form of Indenture relating to Exchange Notes
4.3 Registration Rights Agreement, dated as of December 2, 1998,
among Global Crossing Holdings Ltd. and the other parties
named therein
4.4b Indenture, dated as of May 18, 1998, between Global Crossing
Holdings Ltd. and United States Trust Company of New York, as
Trustee
4.5a Credit Agreement, dated as of June 27, 1997 (the "Credit
Agreement"), among Global Telesystems Ltd., various financial
institutions named therein, Deutsche Bank AG, New York Branch
and Canadian Imperial Bank of Commerce, as Lead Agents,
Deutsche Bank AG, New York Branch, as Administrative Agent,
Canadian Imperial Bank of Commerce, as Syndication Agent,
Documentation Agent and the Issuing Bank and Deutsche Morgan
Grenfell Inc. and CIBC Gundy Securities Corp., as Arrangers
4.6a First Amendment and Consent, dated as of December 15, 1997, to
the Credit Agreement, among Global Telesystems Ltd., the
lenders named therein, Deutsche Bank AG, New York Branch and
Canadian Imperial Bank of Commerce, as Lead Agents, Deutsche
Bank AG, New York Branch, as Administrative Agent, Canadian
Imperial Bank of Commerce, as Syndication Agent, Documentation
Agent and the Issuing Bank and Deutsche Morgan Grenfell Inc.
and CIBC Gundy Securities Corp., as Arrangers
4.7a Second Amendment and Consent, dated as of June 12, 1998, to the
Credit Agreement, among Atlantic Crossing Ltd. (f/k/a Global
Telesystems Ltd.), the lenders named therein, Deutsche Bank AG,
New York Branch and Canadian Imperial Bank of Commerce, as Lead
Agents,
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT PAGE
------- ------- ----
<C> <S> <C>
Deutsche Bank AG, New York Branch, as Administrative Agent,
Canadian Imperial Bank of Commerce, as Syndication Agent,
Documentation Agent and the Issuing Bank and Deutsche Morgan
Grenfell Inc. and CIBC Gundy Securities Corp., as Arrangers
4.8 Credit Agreement, dated as of November 25, 1998, among Mid-
Atlantic Crossing Ltd., various financial institutions named
therein, Deutsche Bank AG, New York Branch and CIBC Inc., as
lead agents, Deutsche Bank AG, New York Branch, as
administrative agent, Canadian Imperial Bank of Commerce, as
syndication agent and CIBC Inc., as documentation agent
5.1 Opinion of Appleby, Spurling & Kempe as to the legality of the
securities being registered
5.2 Opinion of Simpson, Thacher & Bartlett as to the legality of
the securities being registered
10.1c 1998 Global Crossing Ltd. Stock Incentive Plan
10.2a Project Development and Construction Contract, dated as of
March 18, 1997, among AT&T Submarine Systems, Inc. and Global
Telesystems Ltd.
10.3a Project Development and Construction Contract, dated as of
April 21, 1998, among Tyco Submarine Systems, Ltd. and Pacific
Crossing Ltd.
10.4a Project Development and Construction Contract, dated as of June
2, 1998, among Alcatel Submarine Networks and Mid-Atlantic
Crossing Ltd.
10.5d Project Development and Construction Contract, dated as of July
21, 1998, among Tyco Submarine Systems, Ltd. and Pan American
Crossing Ltd.
12.1 Statement regarding Computation of Ratio of Earnings to Fixed
Charges
21.1 Subsidiaries of the Registrant
23.1 Consent of Appleby Spurling & Kempe (included in the opinion
filed as Exhibit 5.1)
23.2 Consent of Simpson Thacher & Bartlett (included in the opinion
filed as Exhibit 5.2)
23.3 Consent of Arthur Andersen & Co.
24.1 Power of Attorney of Global Crossing Holdings Ltd. (included on
signature page)
25.1 Form T-1 Statement of Eligibility under Trust Indenture Act of
1939 of United States Trust Company of New York, as trustee
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
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a Incorporated by reference to Global Crossing Ltd. Registration Statement on
Form S-1 (File No. 333-53393)
b Incorporated by reference to Global Crossing Holdings Ltd. Registration
Statement on Form S-4 (File No. 333-61457)
c Incorporated by reference to Global Crossing Ltd. Registration Statement on
Form S-8 filed on December 11, 1998
d Incorporated by reference to Global Crossing Ltd. Quarterly Report on Form
10-Q filed for the quarter ended September 30, 1998
(b) Financial Statement Schedules
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director,
II-2
<PAGE>
officer or controlling person of the registrant in the successful defense of
any action, suit or proceedings) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
(c) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective Amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering; and
(4) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of an included in the registration statement when
it became effective.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF HAMILTON,
COUNTRY OF BERMUDA, ON DECEMBER 22, 1998.
Global Crossing Holdings Ltd.
/s/ S. Wallace Dawson, Jr.
By: _________________________________
NAME: S. WALLACE DAWSON,
JR.
TITLE: CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, being an
officer or director, or both, of GLOBAL CROSSING HOLDINGS LTD. (the "Issuer"),
in his capacity as set forth below, hereby constitutes and appoints S. WALLACE
DAWSON, JR., K. EUGENE SHUTLER, ROB KLUG, and IAN MCLEAN and each of them, his
true and lawful attorney and agent, to do any and all acts and all things and
to execute any and all instruments which said attorney and agent may deem
necessary or desirable to enable the Issuer to comply with the Securities Act
of 1933, as amended (the "Act"), and any rules, regulations and requirements of
the Securities and Exchange Commission thereunder, in connection with the
registration under the Act of the Exchange Preferred Stock or the New Exchange
Notes (the "Securities"), including, without limitation, the power and
authority to sign the name of each of the undersigned in the capacities
indicated below to the Registration Statement on Form S-4 to be filed with the
Securities and Exchange Commission with respect to such Securities, to any and
all amendments or supplements to such Registration Statement, whether such
amendments or supplements are filed before or after the effective date of such
Registration Statement, to any related Registration Statement filed pursuant to
Rule 462 under the Act, and to any and all instruments or documents filed as
part of or in connection with such Registration Statement or any and all
amendments thereto, whether such amendments are filed before or after the
effective date of such Registration Statement; and each of the undersigned
hereby ratifies and confirms all that such attorney and agent shall do or cause
to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED ON DECEMBER 22, 1998 BY OR BEHALF OF THE
FOLLOWING PERSONS IN THE CAPACITIES INDICATED WITH THE REGISTRANT.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ S. Wallace Dawson, Jr. Chief Executive Officer and Director
______________________________________
S. WALLACE DAWSON, JR.
/s/ K. Eugene Shutler President and Director
______________________________________
K. EUGENE SHUTLER
/s/ Rob Klug Controller and Director
______________________________________
ROB KLUG
/s/ Ian McLean Senior Vice President, Chief Operating
______________________________________ Officer
IAN MCLEAN and Director
</TABLE>
II-4
<PAGE>
AUTHORIZED REPRESENTATIVE
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below in the City of Los Angeles, State
of California on December 22, 1998 by the undersigned as the duly authorized
representative of the registrant in the United States.
/s/ John M. Scanlon
_____________________________________
JOHN M. SCANLON
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT PAGE
------- ------- ----
<C> <S> <C>
3.1b Certificate of Incorporation of Global Crossing Holdings Ltd.
3.2 Bye-laws of Global Crossing Holdings Ltd.
3.3 Memorandum of Increase of Share Capital for Global Crossing
Holdings Ltd.
3.4a Certificate of Incorporation of Global Crossing Ltd.
3.5b Amended and Restated Bye-Laws of Global Crossing Ltd.
3.6a Certificate of Incorporation of Change of Name of Global
Crossing Ltd.
3.7a Memorandum of Increase of Share Capital for Global Crossing
Ltd.
4.1 Form of Certificate for Preferred Stock
4.2 Form of Indenture relating to Exchange Notes
4.3 Registration Rights Agreement, dated as of December 2, 1998,
among Global Crossing Holdings Ltd. and the other parties named
therein
4.4b Indenture, dated as of May 18, 1998, between Global Crossing
Holdings Ltd. and United States Trust Company of New York, as
Trustee
4.5a Credit Agreement, dated as of June 27, 1997 (the "Credit
Agreement"), among Global Telesystems Ltd., various financial
institutions named therein, Deutsche Bank AG, New York Branch
and Canadian Imperial Bank of Commerce, as Lead Agents,
Deutsche Bank AG, New York Branch, as Administrative Agent,
Canadian Imperial Bank of Commerce, as Syndication Agent,
Documentation Agent and the Issuing Bank and Deutsche Morgan
Grenfell Inc. and CIBC Gundy Securities Corp., as Arrangers
4.6a First Amendment and Consent, dated as of December 15, 1997, to
the Credit Agreement, among Global Telesystems Ltd., the
lenders named therein, Deutsche Bank AG, New York Branch and
Canadian Imperial Bank of Commerce, as Lead Agents, Deutsche
Bank AG, New York Branch, as Administrative Agent, Canadian
Imperial Bank of Commerce, as Syndication Agent, Documentation
Agent and the Issuing Bank and Deutsche Morgan Grenfell Inc.
and CIBC Gundy Securities Corp., as Arrangers
4.7a Second Amendment and Consent, dated as of June 12, 1998, to the
Credit Agreement, among Atlantic Crossing Ltd. (f/k/a Global
Telesystems Ltd.), the lenders named therein, Deutsche Bank AG,
New York Branch and Canadian Imperial Bank of Commerce, as Lead
Agents, Deutsche Bank AG, New York Branch, as Administrative
Agent, Canadian Imperial Bank of Commerce, as Syndication
Agent, Documentation Agent and the Issuing Bank and Deutsche
Morgan Grenfell Inc. and CIBC Gundy Securities Corp., as
Arrangers
4.8 Credit Agreement, dated as of November 25, 1998, among Mid-
Atlantic Crossing Ltd., various financial institutions named
therein, Deutsche Bank AG, New York Branch and CIBC Inc., as
lead agents, Deutsche Bank AG, New York Branch, as
administrative agent, Canadian Imperial Bank of Commerce, as
syndication agent and CIBC Inc., as documentation agent
5.1 Opinion of Appleby, Spurling & Kempe as to the legality of the
securities being registered
5.2 Opinion of Simpson, Thacher & Bartlett as to the legality of
the securities being registered
10.1c 1998 Global Crossing Ltd. Stock Incentive Plan
10.2a Project Development and Construction Contract, dated as of
March 18, 1997, among AT&T Submarine Systems, Inc. and Global
Telesystems Ltd.
10.3a Project Development and Construction Contract, dated as of
April 21, 1998, among Tyco Submarine Systems, Ltd. and Pacific
Crossing Ltd.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT PAGE
------- ------- ----
<C> <S> <C>
10.4a Project Development and Construction Contract, dated as of June
2, 1998, among Alcatel Submarine Networks and Mid-Atlantic
Crossing Ltd.
10.5d Project Development and Construction Contract, dated as of July
21, 1998, among Tyco Submarine Systems, Ltd. and Pan American
Crossing Ltd.
12.1 Statement regarding Computation of Ratio of Earnings to Fixed
Charges
21.1 Subsidiaries of the Registrant
23.1 Consent of Appleby Spurling & Kempe (included in the opinion
filed as Exhibit 5.1)
23.2 Consent of Simpson Thacher & Bartlett (included in the opinion
filed as Exhibit 5.2)
23.3 Consent of Arthur Andersen & Co.
24.1 Power of Attorney of Global Crossing Holdings Ltd. (included on
signature page)
25.1 Form T-1 Statement of Eligibility under Trust Indenture Act of
1939 of United States Trust Company of New York, as trustee
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
</TABLE>
- --------
a Incorporated by reference to Global Crossing Ltd. Registration Statement on
Form S-1 (File No. 333-53393)
b Incorporated by reference to Global Crossing Holdings Ltd. Registration
Statement on Form S-4 (File No. 333-61457)
c Incorporated by reference to Global Crossing Ltd. Registration Statement on
Form S-8 filed on December 11, 1998
d Incorporated by reference to Global Crossing Ltd. Quarterly Report on Form
10-Q filed for the quarter ended September 30, 1998
<PAGE>
EXHIBIT 3.2
B Y E - L A W S
of
GLOBAL CROSSING HOLDINGS LTD.
I HEREBY CERTIFY that the within written Bye-Laws are a true copy of the Bye-
Laws of
GLOBAL CROSSING HOLDINGS LTD.
as subscribed by the subscribers to the Memorandum of Association and approved
at the Statutory meeting of the above Company on the 30th April, 1998.
/s/ Lorraine Dean
Assistant Secretary
[SEAL]
Prepared by
Messrs Appleby Spurling & Kempe
Cedar House
41 Cedar Avenue
Hamilton, Bermuda
<PAGE>
I N D E X
---------
BYE-LAW SUBJECT PAGE
- ------- ------- ----
1 Interpretation 1,2
2 Registered Office 3
3,4 Share Rights 3,4
5,6 Modification of Rights 4
7-9 Shares 5
10-12 Certificates 5,6
13-15 Lien 6,7
16-21 Calls on Shares 7,8
22-28 Forfeiture of Shares 9,10
29 Register of Shareholders 11
30 Register of Directors and Officers 11
31-34 Transfer of Shares 11,12
35-38 Transmission of Shares 13,14
39-41 Increase of Capital 14,15
42,43 Alteration of Capital 15,16
44,45 Reduction of Capital 16
46 General Meetings and Written Resolutions 16,17
47,48 Notice of General Meetings 18
49-55 Proceedings at General Meetings 19,20
56-67 Voting 21-23
68-73 Proxies and Corporate Representatives 24-26
74-76 Appointment and Removal of Directors 26,27
i
<PAGE>
BYE-LAW SUBJECT PAGE
- ------- ------- -----
77 Resignation and Disqualification of Directors 27
78-80 Alternate Directors 27,28
81 Directors' Fees and Additional
Remuneration and Expenses 28,29
82 Directors' Interests 29,30
83-87 Powers and Duties of the Board 30-32
88-90 Delegation of the Board's Powers 32,33
91-99 Proceedings of the Board 33-36
100 Officers 36
101 Minutes 36,37
102,103 Secretary and Resident Representative 37
104 The Seal 37,38
105-111 Dividends and Other Payments 38-40
112 Reserves 41
113,114 Capitalization of Profits 41,42
115 Record Dates 42
116-118 Accounting Records 42,43
119 Audit 43
120-122 Service of Notices and Other Documents 43,44
123 Winding Up 45
124-128 Indemnity 45-47
129 Amalgamation 47
130 Continuation 48
131 Alteration of Bye-Laws 48
ii
<PAGE>
B Y E - L A W S
of
GLOBAL CROSSING HOLDINGS LTD.
INTERPRETATION
1. (1) In these Bye-Laws unless the context otherwise requires -
"BERMUDA" means the Islands of Bermuda;
"BOARD" means the Board of Directors of the Company or the Directors
present at a meeting of Directors at which there is a quorum;
"THE COMPANIES ACTS" means every Bermuda statute from time to time in
force concerning companies insofar as the same applies to the Company;
"COMPANY" means the company incorporated in Bermuda under the name of
GLOBAL CROSSING HOLDINGS LTD. on the 30th day of April, 1998;
"OFFICER" means a person appointed by the Board pursuant to Bye-Law
100 of these Bye-Laws and shall not include an auditor of the Company;
"PAID UP" means paid up or credited as paid up;
"REGISTER" means the Register of Shareholders of the Company;
"REGISTERED OFFICE" means the registered office for the time being of
the Company;
"RESIDENT REPRESENTATIVE" means the person (or, if permitted in
accordance with the Companies Acts, the company) appointed to perform
the duties of resident representative set out in the
1
<PAGE>
Companies Acts and includes any assistant or deputy Resident
Representative appointed by the Board to perform any of the duties of
the Resident Representative;
"RESOLUTION" means a resolution of the Shareholders or, where
required, of a separate class or separate classes of Shareholders,
adopted either in general meeting or by written resolution, in
accordance with the provisions of these Bye-Laws;
"SEAL" means the common seal of the Company and includes any duplicate
thereof;
"SECRETARY" includes a temporary or assistant or deputy Secretary and
any person appointed by the Board to perform any of the duties of the
Secretary;
"SHAREHOLDER" means a shareholder or member of the Company;
"THESE BYE-LAWS" means these Bye-Laws in their present form or as from
time to time amended;
(2) For the purposes of these Bye-Laws a corporation shall be deemed to be
present in person if its representative duly authorised pursuant to
the Companies Acts is present;
(3) Words importing only the singular number include the plural number and
vice versa;
(4) Words importing only the masculine gender include the feminine and
neuter genders respectively;
(5) Words importing persons include companies or associations or bodies of
persons, whether corporate or un-incorporate;
(6) Reference to writing shall include typewriting, printing, lithography,
photography and other modes of representing or reproducing words in a
legible and non-transitory form;
(7) Any words or expressions defined in the Companies Acts in force at the
date when these Bye-Laws or any part thereof are adopted
2
<PAGE>
shall bear the same meaning in these Bye-Laws or such part (as the
case may be).
REGISTERED OFFICE
2. The Registered Office shall be at such place in Bermuda as the Board shall
from time to time appoint.
SHARE RIGHTS
3. Subject to any special rights conferred on the holders of any share or
class of shares, any share in the Company may be issued with or have
attached thereto such preferred, deferred, qualified or other special
rights or such restrictions, whether in regard to dividend, voting, return
of capital or otherwise, as the Company may by Resolution determine or, if
there has not been any such determination or so far as the same shall not
make specific provision, as the Board may determine.
4. (1) Subject to the Companies Acts, any preference shares may, with
the sanction of a resolution of the Board, be issued on terms:
(a) that they are to be redeemed on the happening of a specified
event or on a given date; and/or,
(b) that they are liable to be redeemed at the option of the Company;
and/or,
(c) if authorised by the memorandum/Incorporating act of the Company,
that they are liable to be redeemed at the option of the holder.
The terms and manner of redemption shall be provided for in such
resolution of the Board and shall be attached to but shall not form
part of these Bye-Laws.
3
<PAGE>
(2) The Board may, at its discretion and without the sanction of a
Resolution authorise the purchase by the Company of its own shares
upon such terms as the Board may in its discretion determine PROVIDED
ALWAYS that such purchase is effected in accordance with the
provisions of the Companies Acts.
MODIFICATION OF RIGHTS
5. Subject to the Companies Acts, all or any of the special rights for the
time being attached to any class of shares for the time being issued may
from time to time (whether or not the Company is being wound up) be altered
or abrogated with the consent in writing of the holders of not less than
seventy five percent of the issued shares of that class or with the
sanction of a resolution passed at a separate general meeting of the
holders of such shares voting in person or by proxy. To any such separate
general meeting, all the provisions of these Bye-Laws as to general
meetings of the Company shall mutatis mutandis apply, but so that the
necessary quorum shall be two or more persons holding or representing by
proxy any of the shares of the relevant class, that every holder of shares
of the relevant class shall be entitled on a poll to one vote for every
such share held by him and that any holder of shares of the relevant class
present in person or by proxy may demand a poll; provided, however, that if
the Company or a class of Shareholders shall have only one Shareholder, one
Shareholder present in person or by proxy shall constitute the necessary
quorum.
6. The special rights conferred upon the holders of any shares or class of
shares shall not, unless otherwise expressly provided in the rights
attaching to or the terms of issue of such shares, be deemed to be altered
by the creation or issue of further shares ranking pari passu therewith.
4
<PAGE>
SHARES
7. Subject to the provisions of these Bye-Laws, the unissued shares of the
Company (whether forming part of the original capital or any increased
capital) shall be at the disposal of the Board, which may offer, allot,
grant options over or otherwise dispose of them to such persons, at such
times and for such consideration and upon such terms and conditions as the
Board may determine.
8. The Board may in connection with the issue of any shares exercise all
powers of paying commission and brokerage conferred or permitted by law.
9. Except as ordered by a court of competent jurisdiction or as required by
law, no person shall be recognised by the Company as holding any share upon
trust and the Company shall not be bound by or required in any way to
recognise (even when having notice thereof) any equitable, contingent,
future or partial interest in any share or any interest in any fractional
part of a share or (except only as otherwise provided in these Bye-Laws, or
by law) any other right in respect of any share except an absolute right to
the entirety thereof in the registered holder.
CERTIFICATES
10. The preparation, issue and delivery of certificates shall be governed by
the Companies Acts. In the case of a share held jointly by several
persons, delivery of a certificate to one of several joint holders shall be
sufficient delivery to all.
11. If a share certificate is defaced, lost or destroyed it may be replaced
without fee
5
<PAGE>
but on such terms (if any) as to evidence and indemnity and to payment
of the costs and out of pocket expenses of the Company in investigating
such evidence and preparing such indemnity as the Board may think fit and,
in case of defacement, on delivery of the old certificate to the Company.
12. All certificates for share or loan capital or other securities of the
Company (other than letters of allotment, scrip certificates and other like
documents) shall, except to the extent that the terms and conditions for
the time being relating thereto otherwise provide, be issued under the
Seal. The Board may by resolution determine, either generally or in any
particular case, that any signatures on any such certificates need not be
autographic but may be affixed to such certificates by some mechanical
means or may be printed thereon or that such certificates need not be
signed by any persons.
LIEN
13. The Company shall have a first and paramount lien on every share (not being
a fully paid share) for all moneys, whether presently payable or not,
called or payable, at a date fixed by or in accordance with the terms of
issue of such share in respect of such share, and the Company shall also
have a first and paramount lien on every share (other than a fully paid
share) standing registered in the name of a Shareholder, whether singly or
jointly with any other person, for all the debts and liabilities of such
Shareholder or his estate to the Company, whether the same shall have been
incurred before or after notice to the Company of any interest of any
person other than such Shareholder, and whether the time for the payment or
discharge of the same shall have actually arrived or not, and
notwithstanding that the same are joint debts or liabilities of such
6
<PAGE>
Shareholder or his estate and any other person, whether a Shareholder or
not. The Company's lien on a share shall extend to all dividends payable
thereon. The Board may at any time, either generally or in any particular
case, waive any lien that has arisen or declare any share to be wholly or
in part exempt from the provisions of this Bye-Law.
14. The Company may sell, in such manner as the Board may think fit, any share
on which the Company has a lien but no sale shall be made unless some sum
in respect of which the lien exists is presently payable nor until the
expiration of fourteen days after a notice in writing, stating and
demanding payment of the sum presently payable and giving notice of the
intention to sell in default of such payment, has been served on the holder
for the time being of the share.
15. The net proceeds of sale by the Company of any shares on which it has a
lien shall be applied in or towards payment or discharge of the debt or
liability in respect of which the lien exists so far as the same is
presently payable, and any residue shall (subject to a like lien for debts
or liabilities not presently payable as existed upon the share prior to the
sale) be paid to the person who was the holder of the share immediately
before such sale. For giving effect to any such sale the Board may
authorise some person to transfer the share sold to the purchaser thereof.
The purchaser shall be registered as the holder of the share and he shall
not be bound to see to the application of the purchase money, nor shall his
title to the share be affected by any irregularity or invalidity in the
proceedings relating to the sale.
CALLS ON SHARES
7
<PAGE>
16. The Board may from time to time make calls upon the Shareholders in respect
of any moneys unpaid on their shares (whether on account of the par value
of the shares or by way of premium) and not by the terms of issue thereof
made payable at a date fixed by or in accordance with such terms of issue,
and each Shareholder shall (subject to the Company serving upon him at
least fourteen days notice specifying the time or times and place of
payment) pay to the Company at the time or times and place so specified the
amount called on his shares. A call may be revoked or postponed as the
Board may determine.
17. A call may be made payable by instalments and shall be deemed to have been
made at the time when the resolution of the Board authorising the call was
passed.
18. The joint holders of a share shall be jointly and severally liable to pay
all calls in respect thereof.
19. If a sum called in respect of the share shall not be paid before or on the
day appointed for payment thereof the person from whom the sum is due shall
pay interest on the sum from the day appointed for the payment thereof to
the time of actual payment at such rate as the Board may determine, but the
Board shall be at liberty to waive payment of such interest wholly or in
part.
20. Any sum which, by the terms of issue of a share, becomes payable on
allotment or at any date fixed by or in accordance with such terms of
issue, whether on account of the nominal amount of the share or by way of
premium, shall for all the purposes of these Bye-Laws be deemed to be a
call duly made, notified and payable on the date on which, by the terms of
issue, the same becomes payable and, in case of non-payment, all the
8
<PAGE>
relevant provisions of these Bye-Laws as to payment of interest, forfeiture
or otherwise shall apply as if such sum had become payable by virtue of a
call duly made and notified.
21. The Board may on the issue of shares differentiate between the allottees or
holders as to the amount of calls to be paid and the times of payment.
FORFEITURE OF SHARES
22. If a Shareholder fails to pay any call or instalment of a call on the day
appointed for payment thereof, the Board may at any time thereafter during
such time as any part of such call or instalment remains unpaid serve a
notice on him requiring payment of so much of the call or instalment as is
unpaid, together with any interest which may have accrued.
23. The notice shall name a further day (not being less than 14 days from the
date of the notice) on or before which, and the place where, the payment
required by the notice is to be made and shall state that, in the event of
non-payment on or before the day and at the place appointed, the shares in
respect of which such call is made or instalment is payable will be liable
to be forfeited. The Board may accept the surrender of any share liable to
be forfeited hereunder and, in such case, references in these Bye-Laws to
forfeiture shall include surrender.
24. If the requirements of any such notice as aforesaid are not complied with,
any share in respect of which such notice has been given may at any time
thereafter, before payment of all calls or instalments and interest due in
respect thereof has been made, be forfeited by a resolution of the Board to
that effect. Such forfeiture shall include all dividends declared in
respect of the forfeited shares and not actually paid before the
forfeiture.
9
<PAGE>
25. When any share has been forfeited, notice of the forfeiture shall be served
upon the person who was before forfeiture the holder of the share; but no
forfeiture shall be in any manner invalidated by any omission or neglect to
give such notice as aforesaid.
26. A forfeited share shall be deemed to be the property of the Company and may
be sold, re-offered or otherwise disposed of either to the person who was,
before forfeiture, the holder thereof or entitled thereto or to any other
person upon such terms and in such manner as the Board shall think fit, and
at any time before a sale, re-allotment or disposition the forfeiture may
be cancelled on such terms as the Board may think fit.
27. A person whose shares have been forfeited shall thereupon cease to be a
Shareholder in respect of the forfeited shares but shall, notwithstanding
the forfeiture, remain liable to pay to the Company all moneys which at the
date of forfeiture were presently payable by him to the Company in respect
of the shares with interest thereon at such rate as the Board may determine
from the date of forfeiture until payment, and the Company may enforce
payment without being under any obligation to make any allowance for the
value of the shares forfeited.
28. An affidavit in writing that the deponent is a Director of the Company or
the Secretary and that a share has been duly forfeited on the date stated
in the affidavit shall be conclusive evidence of the facts therein stated
as against all persons claiming to be entitled to the share. The Company
may receive the consideration (if any) given for the share on the sale, re-
allotment or disposition thereof and the Board may authorise some person
10
<PAGE>
to transfer the share to the person to whom the same is sold, re-allotted
or disposed of, and he shall thereupon be registered as the holder of the
share and shall not be bound to see to the application of the purchase
money (if any) nor shall his title to the share be affected by any
irregularity or invalidity in the proceedings relating to the forfeiture,
sale, re-allotment or disposal of the share.
REGISTER OF SHAREHOLDERS
29. The Secretary shall establish and maintain the Register at the Registered
Office in the manner prescribed by the Companies Acts. Unless the Board
otherwise determines, the Register shall be open to inspection in the
manner prescribed by the Companies Acts between 10.00 a.m. and 12.00 noon
on every working day. Unless the Board so determines, no Shareholder or
intending Shareholder shall be entitled to have entered in the Register any
indication of any trust or any equitable, contingent, future or partial
interest in any share or any interest in any fractional part of a share and
if any such entry exists or is permitted by the Board it shall not be
deemed to abrogate any of the provisions of Bye-Law 9.
REGISTER OF DIRECTORS AND OFFICERS
30. The Secretary shall establish and maintain a register of the Directors and
Officers of the Company as required by the Companies Acts. The register of
Directors and Officers shall be open to inspection in the manner prescribed
by the Companies Acts between 10:00 a.m. and 12:00 noon on every working
day.
TRANSFER OF SHARES
11
<PAGE>
31. Subject to the Companies Acts and to such of the restrictions contained in
these Bye-Laws as may be applicable, any Shareholder may transfer all or
any of his shares by an instrument of transfer in the usual common form or
in any other form which the Board may approve.
32. The instrument of transfer of a share shall be signed by or on behalf of
the transferor and where any share is not fully-paid, the transferee and
the transferor shall be deemed to remain the holder of the share until the
name of the transferee is entered in the Register in respect thereof. All
instruments of transfer when registered may be retained by the Company. The
Board may, in its absolute discretion and without assigning any reason
therefor, decline to register any transfer of any share which is not a
fully-paid share. The Board may also decline to register any transfer
unless:-
(1) the instrument of transfer is duly stamped and lodged with the
Company, accompanied by the certificate for the shares to which it
relates, and such other evidence as the Board may reasonably require
to show the right of the transferor to make the transfer,
(2) the instrument of transfer is in respect of only one class of share,
(3) where applicable, the permission of the Bermuda Monetary Authority
with respect thereto has been obtained.
Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under this
Bye-Law and Bye-Laws 31 and 33.
33. If the Board declines to register a transfer it shall, within three months
after the date on which the instrument of transfer was lodged, send to the
transferee notice of such refusal.
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34. No fee shall be charged by the Company for registering any transfer,
probate, letters of administration, certificate of death or marriage, power
of attorney, distringas or stop notice, order of court or other instrument
relating to or affecting the title to any share, or otherwise making an
entry in the Register relating to any share.
TRANSMISSION OF SHARES
35. In the case of the death of a Shareholder, the survivor or survivors, where
the deceased was a joint holder, and the estate representative, where he
was sole holder, shall be the only person recognised by the Company as
having any title to his shares; but nothing herein contained shall release
the estate of a deceased holder (whether the sole or joint) from any
liability in respect of any share held by him solely or jointly with other
persons. For the purpose of this Bye-Law, estate representative means the
person to whom probate or letters of administration has or have been
granted in Bermuda or, failing any such person, such other person as the
Board may in its absolute discretion determine to be the person recognised
by the Company for the purpose of this Bye-Law.
36. Any person becoming entitled to a share in consequence of the death of a
Shareholder or otherwise by operation of applicable law may, subject as
hereafter provided and upon such evidence being produced as may from time
to time be required by the Board as to his entitlement, either be
registered himself as the holder of the share or elect to have some person
nominated by him registered as the transferee thereof. If the person so
becoming entitled elects to be registered himself, he shall deliver or send
to the Company a notice in writing signed by him stating that he so elects.
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If he shall elect to have his nominee registered, he shall signify his
election by signing an instrument of transfer of such share in favour of
his nominee. All the limitations, restrictions and provisions of these
Bye-Laws relating to the right to transfer and the registration of transfer
of shares shall be applicable to any such notice or instrument of transfer
as aforesaid as if the death of the Shareholder or other event giving rise
to the transmission had not occurred and the notice or instrument of
transfer was an instrument of transfer signed by such Shareholder.
37. A person becoming entitled to a share in consequence of the death of a
Shareholder or otherwise by operation of applicable law shall (upon such
evidence being produced as may from time to time be required by the Board
as to his entitlement) be entitled to receive and may give a discharge for
any dividends or other moneys payable in respect of the share, but he shall
not be entitled in respect of the share to receive notices of or to attend
or vote at general meetings of the Company or, save as aforesaid, to
exercise in respect of the share any of the rights or privileges of a
Shareholder until he shall have become registered as the holder thereof.
The Board may at any time give notice requiring such person to elect either
to be registered himself or to transfer the share and, if the notice is not
complied with within sixty days, the Board may thereafter withhold payment
of all dividends and other moneys payable in respect of the shares until
the requirements of the notice have been complied with.
38. Subject to any directions of the Board from time to time in force, the
Secretary may exercise the powers and discretions of the Board under Bye-
Laws 35, 36 and 37.
INCREASE OF CAPITAL
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39. The Company may from time to time increase its capital by such sum to be
divided into shares of such par value as the Company by Resolution shall
prescribe.
40. The Company may, by the Resolution increasing the capital, direct that the
new shares or any of them shall be offered in the first instance either at
par or at a premium or (subject to the provisions of the Companies Acts) at
a discount to all the holders for the time being of shares of any class or
classes
in proportion to the number of such shares held by them respectively or
make any other provision as to the issue of the new shares.
41. The new shares shall be subject to all the provisions of these Bye-Laws
with reference to lien, the payment of calls, forfeiture, transfer,
transmission and otherwise.
ALTERATION OF CAPITAL
42. The Company may from time to time by Resolution:-
(1) divide its shares into several classes and attach thereto respectively
any preferential, deferred, qualified or special rights, privileges or
conditions;
(2) consolidate and divide all or any of its share capital into shares of
larger par value than its existing shares;
(3) sub-divide its shares or any of them into shares of smaller par value
than is fixed by its memorandum, so, however, that in the sub-division
the proportion between the amount paid and the amount, if any, unpaid
on each reduced share shall be the same as it was in the
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case of the share from which the reduced share is derived;
(4) make provision for the issue and allotment of shares which do not
carry any voting rights;
(5) cancel shares which, at the date of the passing of the resolution in
that behalf, have not been taken or agreed to be taken by any person,
and diminish the amount of its share capital by the amount of the
shares so cancelled; and
(6) change the currency denomination of its share capital.
Where any difficulty arises in regard to any division, consolidation, or
sub-division under this Bye-Law, the Board may settle the same as it thinks
expedient and, in particular, may arrange for the sale of the shares
representing fractions and the distribution of the net proceeds of sale in
due proportion amongst the Shareholders who would have been entitled to the
fractions, and for this purpose the Board may authorise some person to
transfer the shares representing fractions to the purchaser thereof, who
shall not be bound to see to the application of the purchase money nor
shall his title to the shares be affected by any irregularity or invalidity
in the proceedings relating to the sale.
43. Subject to the Companies Acts and to any confirmation or consent required
by law or these Bye-Laws, the Company may by Resolution from time to time
convert any preference shares into redeemable preference shares.
REDUCTION OF CAPITAL
44. Subject to the Companies Acts, its memorandum and any confirmation or
consent required by law or these Bye-Laws, the Company may from time
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to time by Resolution authorise the reduction of its issued share capital
or any share premium or contributed surplus account in any manner.
45. In relation to any such reduction, the Company may by Resolution determine
the terms upon which such reduction is to be effected including in the case
of a reduction of part only of a class of shares, those shares to be
affected.
GENERAL MEETINGS AND WRITTEN RESOLUTIONS
46. (1) The Board shall convene and the Company shall hold general meetings as
Annual General Meetings in accordance with the requirements of the
Companies Acts at such times and places as the Board shall appoint.
The Board may, whenever it thinks fit, and shall, when required by the
Companies Acts, convene general meetings other than Annual General
Meetings which shall be called Special General Meetings.
(2) Except in the case of the removal of auditors and Directors, anything
which may be done by resolution of the Company in general meeting or
by resolution of a meeting of any class of the Shareholders of the
Company may, without a meeting and without any previous notice being
required, be done by resolution in writing, signed by all of the
Shareholders or their proxies, or in the case of a Shareholder that is
a corporation (whether or not a company within the meaning of the
Companies Acts), on behalf of, all the Shareholders of the Company,
or any class thereof, in as many counterparts as may be necessary.
(3) For the purposes of this Bye-Law, the date of the resolution in
writing is the date when the resolution is signed by, or in the case
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of a Shareholder that is a corporation (whether or not a company
within the meaning of the Companies Acts), on behalf of, the last
Shareholder to sign and any reference in any enactment to the date of
passing of a Resolution is, in relation to a resolution in writing
made in accordance with this section, a reference to such date.
(4) A resolution in writing made in accordance with this Bye-Law is as
valid as if it had been passed by the Company in general meeting or,
if applicable, by a meeting of the relevant class of Shareholders of
the Company, as the case may be. A resolution in writing made in
accordance with this section shall constitute minutes for the purposes
of the Companies Acts and these Bye-Laws.
NOTICE OF GENERAL MEETINGS
47. An Annual General Meeting shall be called by not less than 5 days
notice in writing and a Special General Meeting shall be called by not less
than 5 days notice in writing. The notice shall be exclusive of the
day on which it is served or deemed to be served and of the day for which
it is given, and shall specify the place, day and time of the meeting, and,
the nature of the business to be considered. Notice of every general
meeting shall be given in any manner permitted by Bye-Laws 120 and 121 to
all Shareholders other than such as, under the provisions of these Bye-Laws
or the terms of issue of the shares they hold, are not entitled to receive
such notice from the Company and to any Director or Resident
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Representative who or which has delivered a written notice upon the
Registered Office requiring that such notice be sent to him or it.
Notwithstanding that a meeting of the Company is called by shorter notice
than that specified in this Bye-Law, it shall be deemed to have been duly
called if it is so agreed:-
(1) in the case of a meeting called as an Annual General Meeting, by all
the Shareholders entitled to attend and vote thereat;
(2) in the case of any other meeting, by a majority in number of the
Shareholders having the right to attend and vote at the meeting, being
a majority together holding not less than 95 percent in nominal value
of the shares giving that right.
48. The accidental omission to give notice of a meeting or (in cases where
instruments of proxy are sent out with the notice) the accidental omission
to send such instrument of proxy to, or the non-receipt of notice of a
meeting or such instrument of proxy by, any person entitled to receive such
notice shall not invalidate the proceedings at that meeting.
PROCEEDINGS AT GENERAL MEETINGS
49. No business shall be transacted at any general meeting unless a quorum is
present when the meeting proceeds to business, but the absence of a quorum
shall not preclude the appointment, choice or election of a chairman which
shall not be treated as part of the business of the meeting. Save as
otherwise provided by these Bye-Laws, at least two Shareholders present in
person or by proxy and entitled to vote shall be a quorum for all purposes;
provided, however, that if the Company or a class of Shareholders shall
have only one Shareholder, one Shareholder present in
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person or by proxy shall constitute the necessary quorum.
50. If within five minutes (or such longer time as the chairman of the meeting
may determine to wait) after the time appointed for the meeting, a quorum
is not present, the meeting, if convened on the requisition of
Shareholders, shall be dissolved. In any other case, it shall stand
adjourned to such other day and such other time and place as the chairman
of the meeting may determine and at such adjourned meeting two Shareholders
present in person or by proxy shall be a quorum provided that if the
Company or a class of Shareholders shall have only one Shareholder, one
Shareholder present in person or by proxy shall constitute the necessary
quorum. The Company shall give not less than 5 days notice of any
meeting adjourned through want of a quorum and such notice shall state that
the sole Shareholder or, if more than one, two Shareholders present in
person or by proxy (whatever the number of shares held by them) shall be a
quorum.
51. A meeting of the Shareholders or any class thereof may be held by means of
such telephone, electronic or other communication facilities as permit all
persons participating in the meeting to communicate with each other
simultaneously and instantaneously and participation in such a meeting
shall constitute presence in person at such meeting.
52. Each Director upon giving the notice referred to in Bye-Law 47 above, and
the Resident Representative, if any, shall be entitled to attend and speak
at any general meeting of the Company.
53. The Chairman (if any) of the Board or, in his absence, the President shall
preside as chairman at every general meeting. If there is no such
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Chairman or President, or if at any meeting neither the Chairman nor the
President is present within five minutes after the time appointed for
holding the meeting, or if neither of them is willing to act as chairman,
the Directors present shall choose one of their number to act or if one
Director only is present he shall preside as chairman if willing to act. If
no Director is present, or if each of the Directors present declines to
take the chair, the persons present and entitled to vote on a poll shall
elect one of their number to be chairman.
54. The chairman of the meeting may, with the consent of any meeting at which a
quorum is present (and shall if so directed by the meeting), adjourn the
meeting from time to time and from place to place but no business shall be
transacted at any adjourned meeting except business which might lawfully
have been transacted at the meeting from which the adjournment took place.
When a meeting is adjourned for three months or more, notice of the
adjourned meeting shall be given as in the case of an original meeting.
55. Save as expressly provided by these Bye-Laws, it shall not be necessary to
give any notice of an adjournment or of the business to be transacted at an
adjourned meeting.
VOTING
56. Save where a greater majority is required by the Companies Acts or these
Bye-Laws, any question proposed for consideration at any general meeting
shall be decided on by a simple majority of votes cast.
57. At any general meeting, a resolution put to the vote of the meeting shall
be decided on a show of hands unless (before or on the declaration of the
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result of the show of hands or on the withdrawal of any other demand for a
poll) a poll is demanded by:-
(1) the chairman of the meeting; or
(2) at least three Shareholders present in person or represented by proxy;
or
(3) any Shareholder or Shareholders present in person or represented by
proxy and holding between them not less than one tenth of the total
voting rights of all the Shareholders having the right to vote at such
meeting; or
(4) a Shareholder or Shareholders present in person or represented by
proxy holding shares conferring the right to vote at such meeting,
being shares on which an aggregate sum has been paid up equal to not
less than one tenth of the total sum paid up on all such shares
conferring such right.
The demand for a poll may be withdrawn by the person or any of the persons
making it at any time prior to the declaration of the result. Unless a
poll is so demanded and the demand is not withdrawn, a declaration by the
chairman that a resolution has, on a show of hands, been carried or carried
unanimously or by a particular majority or not carried by a particular
majority or lost shall be final and conclusive, and an entry to that effect
in the minute book of the Company shall be conclusive evidence of the fact
without proof of the number or proportion of votes recorded for or against
such resolution.
58. If a poll is duly demanded, the result of the poll shall be deemed to be
the resolution of the meeting at which the poll is demanded.
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59. A poll demanded on the election of a chairman, or on a question of
adjournment, shall be taken forthwith. A poll demanded on any other
question shall be taken in such manner and either forthwith or at such time
(being not later than three months after the date of the demand) and place
as the chairman shall direct. It shall not be necessary (unless the
chairman otherwise directs) for notice to be given of a poll.
60. The demand for a poll shall not prevent the continuance of a meeting for
the transaction of any business other than the question on which the poll
has been demanded and it may be withdrawn at any time before the close of
the meeting or the taking of the poll, whichever is the earlier.
61. On a poll, votes may be cast either personally or by proxy.
62. A person entitled to more than one vote on a poll need not use all his
votes or cast all the votes he uses in the same way.
63. In the case of an equality of votes at a general meeting, whether on a show
of hands or on a poll, the chairman of such meeting shall not be entitled
to a second or casting vote and the resolution shall fail.
64. In the case of joint holders of a share, the vote of the senior who tenders
a vote, whether in person or by proxy, shall be accepted to the exclusion
of the votes of the other joint holders, and for this purpose seniority
shall be determined by the order in which the names stand in the Register
in respect of the joint holding.
65. A Shareholder who is a patient for any purpose of any statute or applicable
law relating to mental health or in respect of whom an order has been made
by any Court having jurisdiction for the protection or management
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of the affairs of persons incapable of managing their own affairs may vote,
whether on a show of hands or on a poll, by his receiver, committee,
curator bonis or other person in the nature of a receiver, committee or
curator bonis appointed by such Court and such receiver, committee, curator
bonis or other person may vote on a poll by proxy, and may otherwise act
and be treated as such Shareholder for the purpose of general meetings.
66. No Shareholder shall, unless the Board otherwise determines, be entitled to
vote at any general meeting unless all calls or other sums presently
payable by him in respect of shares in the Company have been paid.
67. If;
(1) any objection shall be raised to the qualification of any voter; or,
(2) any votes have been counted which ought not to have been counted or
which might have been rejected; or,
(3) any votes are not counted which ought to have been counted,
the objection or error shall not vitiate the decision of the meeting or
adjourned meeting on any resolution unless the same is raised or pointed
out at the meeting or, as the case may be, the adjourned meeting at which
the vote objected to is given or tendered or at which the error occurs.
Any objection or error shall be referred to the chairman of the meeting and
shall only vitiate the decision of the meeting on any resolution if the
chairman decides that the same may have affected the decision of the
meeting. The decision of the chairman on such matters shall be final and
conclusive.
PROXIES AND CORPORATE REPRESENTATIVES
68. The instrument appointing a proxy shall be in writing under the hand of the
appointor or of his attorney authorised by him in writing or, if the
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appointor is a corporation, either under its seal or under the hand of an
officer, attorney or other person authorised to sign the same.
69. Any Shareholder may appoint a standing proxy or (if a corporation)
representative by depositing at the Registered Office a proxy or (if a
corporation) an authorisation and such proxy or authorisation shall be
valid for all general meetings and adjournments thereof or, resolutions in
writing, as the case may be, until notice of revocation is received at the
Registered Office. Where a standing proxy or authorisation exists, its
operation shall be deemed to have been suspended at any general meeting or
adjournment thereof at which the Shareholder is present or in respect to
which the Shareholder has specially appointed a proxy or representative.
The Board may from time to time require such evidence as it shall deem
necessary as to the due execution and continuing validity of any such
standing proxy or authorisation and the operation of any such standing
proxy or authorisation shall be deemed to be suspended until such time as
the Board determines that it has received the requested evidence or other
evidence satisfactory to it.
70. Subject to Bye-Law 69, the instrument appointing a proxy together with such
other evidence as to its due execution as the Board may from time to time
require, shall be delivered at the Registered Office (or at such place as
may be specified in the notice convening the meeting or in any notice of
any adjournment or, in either case or the case of a written resolution, in
any document sent therewith) prior to the holding of the relevant meeting
or adjourned meeting at which the person named in the instrument proposes
to vote or, in the case of a poll taken subsequently to the date of a
meeting
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or adjourned meeting, before the time appointed for the taking of the poll,
or, in the case of a written resolution, prior to the effective date of the
written resolution and in default the instrument of proxy shall not be
treated as valid.
71. Instruments of proxy shall be in any common form or in such other form as
the Board may approve and the Board may, if it thinks fit, send out with
the notice of any meeting or any written resolution forms of instruments of
proxy for use at that meeting or in connection with that written
resolution. The instrument of proxy shall be deemed to confer authority to
demand or join in demanding a poll and to vote on any amendment of a
written resolution or amendment of a resolution put to the meeting for
which it is given as the proxy thinks fit. The instrument of proxy shall
unless the contrary is stated therein be valid as well for any adjournment
of the meeting as for the meeting to which it relates.
72. A vote given in accordance with the terms of an instrument of proxy shall
be valid notwithstanding the previous death or unsoundness of mind of the
principal, or revocation of the instrument of proxy or of the authority
under which it was executed, provided that no intimation in writing of such
death, insanity or revocation shall have been received by the Company at
the Registered Office (or such other place as may be specified for the
delivery of instruments of proxy in the notice convening the meeting or
other documents sent therewith) one hour at least before the commencement
of the meeting or adjourned meeting, or the taking of the poll, or the day
before the effective date of any written resolution at which the instrument
of proxy is used.
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73. Subject to the Companies Acts, the Board may at its discretion waive any of
the provisions of these Bye-Laws related to proxies or authorisations and,
in particular, may accept such verbal or other assurances as it thinks fit
as to the right of any person to attend and vote on behalf of any
Shareholder at general meetings or to sign written resolutions.
APPOINTMENT AND REMOVAL OF DIRECTORS
74. The number of Directors shall be such number not less than two as the
Company by Resolution may from time to time determine and, subject to the
Companies Acts and these Bye-Laws, the Directors shall serve until re-
elected or their successors are appointed at the next Annual General
Meeting. All Directors, upon election or appointment, must provide written
acceptance of their appointment, in such form as the Board may think fit,
by notice in writing to the Registered Office within thirty days of their
appointment.
75. The Company shall at the Annual General Meeting and may by Resolution
determine the minimum and the maximum number of Directors and may by
Resolution determine that one or more vacancies in the Board shall be
deemed casual vacancies for the purposes of these Bye-Laws. Without
prejudice to the power of the Company by Resolution in pursuance of any of
the provisions of these Bye-Laws to appoint any person to be a Director,
the Board, so long as a quorum of Directors remains in office, shall have
power at any time and from time to time to appoint any individual to be a
Director so as to fill a casual vacancy.
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76. The Company may in a Special General Meeting called for that purpose remove
a Director provided notice of any such meeting shall be served upon the
Director concerned not less than 14 days before the meeting and he shall
be entitled to be heard at that meeting. Any vacancy created by the removal of
a Director at a Special General Meeting may be filled at the Meeting by the
election of another Director in his place or, in the absence of any such
election, by the Board.
RESIGNATION AND DISQUALIFICATION OF DIRECTORS
77. The office of a Director shall be vacated upon the happening of any of the
following events:
(1) if he resigns his office by notice in writing delivered to the
Registered Office or tendered at a meeting of the Board;
(2) if he becomes of unsound mind or a patient for any purpose of any
statute or applicable law relating to mental health and the Board
resolves that his office is vacated;
(3) if he becomes bankrupt under the laws of any country or compounds with
his creditors;
(4) if he is prohibited by law from being a Director;
(5) if he ceases to be a Director by virtue of the Companies Acts or is
removed from office pursuant to these Bye-Laws.
ALTERNATE DIRECTORS
77. A Director may appoint and remove his own Alternate Director. Any
appointment or removal of an Alternate Director by a Director shall be
effected by depositing a notice of appointment or removal with the
Secretary at the Registered Office, signed by such Director, and such
appointment or removal shall become effective on the date of receipt by
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the Secretary. Any Alternate Director may be removed by resolution of the
Board. Subject as aforesaid, the office of Alternate Director shall
continue until the next annual election of Directors or, if earlier, the
date on which the relevant
Director ceases to be a Director. An Alternate Director may also be a
Director in his own right and may act as alternate to more than one
Director.
79. An Alternate Director shall be entitled to receive notices of all meetings
of Directors, to attend, be counted in the quorum and vote at any such
meeting at which any Director to whom he is alternate is not personally
present, and generally to perform all the functions of any Director to whom
he is alternate in his absence.
80. Every person acting as an Alternate Director shall (except as regards
powers to appoint an alternate and remuneration) be subject in all respects
to the provisions of these Bye-Laws relating to Directors and shall alone
be responsible to the Company for his acts and defaults and shall not be
deemed to be the agent of or for any Director for whom he is alternate. An
Alternate Director may be paid expenses and shall be entitled to be
indemnified by the Company to the same extent mutatis mutandis as if he
were a Director. Every person acting as an Alternate Director shall have
one vote for each Director for whom he acts as alternate (in addition to
his own vote if he is also a Director). The signature of an Alternate
Director to any resolution in writing of the Board or a committee of the
Board shall, unless the terms of his appointment provides to the contrary,
be as effective as the signature of the Director or Directors to whom he is
alternate.
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DIRECTORS' FEES AND ADDITIONAL REMUNERATION AND
EXPENSES
81. The amount, if any, of Directors' fees shall from time to time be
determined by the Company by Resolution and in the absence of a
determination to the contrary such fees shall be deemed to accrue from day
to day. Each Director may be paid his reasonable travel, hotel and
incidental expenses in attending
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and returning from meetings of the Board or committees constituted pursuant
to these Bye-Laws or general meetings and shall be paid all expenses
properly and reasonably incurred by him in the conduct of the Company's
business or in the discharge of his duties as a Director. Any Director
who, by request, goes or resides abroad for any purposes of the Company or
who performs services which in the opinion of the Board go beyond the
ordinary duties of a Director may be paid such extra remuneration (whether
by way of salary, commission, participation in profits or otherwise) as the
Board may determine, and such extra remuneration shall be in addition to
any remuneration provided for by or pursuant to any other Bye-Law.
DIRECTORS' INTERESTS
82. (1) A Director may hold any other office or place of profit with the
Company (except that of auditor) in conjunction with his office of
Director for such period and upon such terms as the Board may
determine, and may be paid such extra remuneration therefor (whether
by way of salary, commission, participation in profits or otherwise)
as the Board may determine, and such extra remuneration shall be in
addition to any remuneration provided for by or pursuant to any other
Bye-Law.
(2) A Director may act by himself or his firm in a professional capacity
for the Company (otherwise than as auditor) and he or his firm shall
be entitled to remuneration for professional services as if he were
not a Director.
(3) Subject to the provisions of the Companies Acts, a Director may
notwithstanding his office be a party to, or otherwise interested in,
any transaction or arrangement with the Company or in which the
Company is otherwise interested; and be a director or other officer
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of, or employed by, or a party to any transaction or arrangement with,
or otherwise interested in, any body corporate promoted by the Company
or in which the Company is interested. The Board may also cause the
voting power conferred by the shares in any other company held or
owned by the Company to be exercised in such manner in all respects as
it thinks fit, including the exercise thereof in favour of any
resolution appointing the Directors or any of them to be directors or
officers of such other company, or voting or providing for the payment
of remuneration to the directors or officers of such other company.
(4) So long as, where it is necessary, he declares the nature of his
interest at the first opportunity at a meeting of the Board or by
writing to the Directors as required by the Companies Acts, a Director
shall not by reason of his office be accountable to the Company for
any benefit which he derives from any office or employment to which
these Bye-Laws allow him to be appointed or from any transaction or
arrangement in which these Bye-Laws allow him to be interested, and no
such transaction or arrangement shall be liable to be avoided on the
ground of any interest or benefit.
(5) Subject to the Companies Acts and any further disclosure required
thereby, a general notice to the Directors by a Director or Officer
declaring that he is a director or officer or has an interest in a
person and is to be regarded as interested in any transaction or
arrangement made with that person, shall be a sufficient declaration
of interest in relation to any transaction or arrangement so made.
POWERS AND DUTIES OF THE BOARD
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83. Subject to the provisions of the Companies Acts and these Bye-Laws and to
any directions given by the Company by Resolution, the Board shall manage
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the business of the Company and may pay all expenses incurred in promoting
and incorporating the Company and may exercise all the powers of the
Company. No alteration of these Bye-Laws and no such direction shall
invalidate any prior act of the Board which would have been valid if that
alteration had not been made or that direction had not been given. The
powers given by this Bye-Law shall not be limited by any special power
given to the Board by these Bye-Laws and a meeting of the Board at which a
quorum is present shall be competent to exercise all the powers,
authorities and discretions for the time being vested in or exercisable by
the Board.
84. The Board may exercise all the powers of the Company to borrow money and to
mortgage or charge all or any part of the undertaking, property and assets
(present and future) and uncalled capital of the Company and to issue
debentures and other securities, whether outright or as collateral security
for any debt, liability or obligation of the Company or of any other
persons.
85. All cheques, promissory notes, drafts, bills of exchange and other
instruments, whether negotiable or transferable or not, and all receipts
for money paid to the Company shall be signed, drawn, accepted, endorsed or
otherwise executed, as the case may be, in such manner as the Board shall
from time to time by resolution determine.
86. The Board on behalf of the Company may provide benefits, whether by the
payment of gratuities or pensions or otherwise, for any person including
any Director or former Director who has held any executive office or
employment with the Company or with any body corporate which is or has been
a subsidiary or affiliate of the Company or a predecessor in the business
of the Company or of any such subsidiary or affiliate, and to any
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member of his family or any person who is or was dependent on him, and may
contribute to any fund and pay premiums for the purchase or provision
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of any such gratuity, pension or other benefit, or for the insurance of any
such person.
87. The Board may from time to time appoint one or more of its body to be a
managing director, joint managing director or an assistant managing
director or to hold any other employment or executive office with the
Company for such period and upon such terms as the Board may determine and
may revoke or terminate any such appointments. Any such revocation or
termination as aforesaid shall be without prejudice to any claim for
damages that such Director may have against the Company or the Company may
have against such Director for any breach of any contract of service
between him and the Company which may be involved in such revocation or
termination. Any person so appointed shall receive such remuneration (if
any) (whether by way of salary, commission, participation in profits or
otherwise) as the Board may determine, and either in addition to or in lieu
of his remuneration as a Director.
DELEGATION OF THE BOARD'S POWERS
88. The Board may by power of attorney appoint any company, firm or person or
any fluctuating body of persons, whether nominated directly or indirectly
by the Board, to be the attorney or attorneys of the Company for such
purposes and with such powers, authorities and discretions (not exceeding
those vested in or exercisable by the Board under these Bye-Laws) and for
such period and subject to such conditions as it may think fit, and any
such power of attorney may contain such provisions for the protection and
convenience of persons dealing with any such attorney and of such attorney
as the Board may think fit, and may also authorise any such attorney to
sub-delegate all or any of the powers, authorities and discretions vested
in him.
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89. The Board may entrust to and confer upon any Director, Officer or, without
prejudice to the provisions of Bye-Law 90, other individual any of the
powers exercisable by it upon such terms and conditions with such
restrictions as it thinks fit, and either collaterally with, or to the
exclusion of, its own powers, and may from time to time revoke or vary all
or any of such powers but no person dealing in good faith and without
notice of such revocation or variation shall be affected thereby.
90. The Board may delegate any of its powers, authorities and discretions to
committees, consisting of such person or persons (whether a member or
members of its body or not) as it thinks fit. Any committee so formed
shall, in the exercise of the powers, authorities and discretions so
delegated, and in conducting its proceedings conform to any regulations
which may be imposed upon it by the Board. If no regulations are imposed
by the Board the proceedings of a committee with two or more members shall
be, as far as is practicable, governed by the Bye-Laws regulating the
proceedings of the Board.
PROCEEDINGS OF THE BOARD
91. The Board may meet for the despatch of business, adjourn and otherwise
regulate its meetings as it thinks fit. Questions arising at any meeting
shall be determined by a majority of votes. In the case of an equality of
votes the motion shall be deemed to have been lost. A Director may, and
the Secretary on the requisition of a Director shall, at any time summon a
meeting of the Board.
92. Notice of a meeting of the Board shall be deemed to be duly given to a
Director if it is given to him personally or by word of mouth or sent to
him
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by post, cable, telex, telecopier or other mode of representing or
reproducing
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words in a legible and non-transitory form at his last known address or any
other address given by him to the Company for this purpose. A Director may
retrospectively waive the requirement for notice of any meeting by
consenting in writing to the business conducted at the meeting.
93. (1) The quorum necessary for the transaction of the business of the Board
may be fixed by the Board and, unless so fixed at any other number,
shall be two individuals. Any Director who ceases to be a Director at
a meeting of the Board may continue to be present and to act as a
Director and be counted in the quorum until the termination of the
meeting if no other Director objects and if otherwise a quorum of
Directors would not be present.
(2) A Director who to his knowledge is in any way, whether directly or
indirectly, interested in a contract or proposed contract, transaction
or arrangement with the Company and has complied with the provisions
of the Companies Acts and these Bye-Laws with regard to disclosure of
his interest shall be entitled to vote in respect of any contract,
transaction or arrangement in which he is so interested and if he
shall do so his vote shall be counted, and he shall be taken into
account in ascertaining whether a quorum is present.
(3) The Resident Representative shall, upon delivering written notice of
an address for the purposes of receipt of notice, to the Registered
Office, be entitled to receive notice of, attend and be heard at, and
to receive minutes of all meetings of the Board.
94. So long as a quorum of Directors remains in office, the continuing
Directors may act notwithstanding any vacancy in the Board but, if no such
quorum remains, the continuing
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Directors or a sole continuing Director may act only for the purpose of calling
a general meeting.
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95. The Chairman (or President) or, in his absence, the Deputy Chairman (or
Vice-President), shall preside as chairman at every meeting of the Board.
If at any meeting the Chairman or Deputy Chairman (or the President or
Vice-President) is not present within five minutes after the time appointed
for holding the meeting, or is not willing to act as chairman, the
Directors present may choose one of their number to be chairman of the
meeting.
96. The meetings and proceedings of any committee consisting of two or more
members shall be governed by the provisions contained in these Bye-Laws for
regulating the meetings and proceedings of the Board so far as the same are
applicable and are not superseded by any regulations imposed by the Board.
97. A resolution in writing signed by all the Directors for the time being
entitled to receive notice of a meeting of the Board or by all the members
of a committee for the time being shall be as valid and effectual as a
resolution passed at a meeting of the Board or, as the case may be, of such
committee duly called and constituted. Such resolution may be contained in
one document or in several documents in the like form each signed by one or
more of the Directors or members of the committee concerned.
98. A meeting of the Board or a committee appointed by the Board may be held by
means of such telephone, electronic or other communication facilities as
permit all persons participating in the meeting to communicate with each
other simultaneously and instantaneously and participation in such a
meeting shall constitute presence in person at such meeting.
99. All acts done by the Board or by any committee or by any person acting as
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a Director or member of a committee or any person duly authorised by the
Board or any committee, shall, notwithstanding that it is afterwards
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discovered that there was some defect in the appointment of any member of
the Board or such committee or person acting as aforesaid or that they or
any of them were disqualified or had vacated their office, be as valid as
if every such person had been duly appointed and was qualified and had
continued to be a Director, member of such committee or person so
authorised.
OFFICERS
100. The Officers of the Company shall include a President and a Vice-President
or a Chairman and a Deputy Chairman who shall be Directors and shall be
elected by the Board as soon as possible after the statutory meeting and
each Annual General Meeting. In addition, the Board may appoint any person
whether or not he is a Director to hold such office as the Board may from
time to time determine. Any person elected or appointed pursuant to this
Bye-Law shall hold office for such period and upon such terms as the Board
may determine and the Board may revoke or terminate any such election or
appointment. Any such revocation or termination shall be without prejudice
to any claim for damages that such Officer may have against the Company or
the Company may have against such Officer for any breach of any contract of
service between him and the Company which may be involved in such
revocation or termination. Save as provided in the Companies Acts or these
Bye-Laws, the powers and duties of the Officers of the Company shall be
such (if any) as are determined from time to time by the Board.
MINUTES
101. The Board shall cause minutes to be made and books kept for the purpose
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of recording -
(1) all appointments of Officers made by the Board;
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(2) the names of the Directors and other persons (if any) present at each
meeting of the Board and of any committee;
(3) of all proceedings at meetings of the Company, of the holders of any
class of shares in the Company, of the Board and of committees
appointed by the Board or the Shareholders;
(4) of all proceedings of its managers (if any).
Shareholders shall only be entitled to see the Register of Directors and
Officers, the Register, the financial information provided for in Bye-Law
118 and the minutes of meetings of the Shareholders of the Company.
SECRETARY AND RESIDENT REPRESENTATIVE
102. The Secretary (including one or more deputy or assistant secretaries) and,
if required, the Resident Representative, shall be appointed by the Board
at such remuneration (if any) and upon such terms as it may think fit and
any Secretary and Resident Representative so appointed may be removed by
the Board. The duties of the Secretary and the duties of the Resident
Representative shall be those prescribed by the Companies Acts together
with such other duties as shall from time to time be prescribed by the
Board.
103. A provision of the Companies Acts or these Bye-Laws requiring or
authorising a thing to be done by or to a Director and the Secretary shall
not be satisfied by its being done by or to the same person acting both as
Director and as, or in the place of, the Secretary.
THE SEAL
104. (1) The Seal shall consist of a circular metal device with the name of
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the Company around the outer margin thereof and the country and year
of incorporation across the centre thereof. Should the Seal not have
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been received at the Registered Office in such form at the date of
adoption of this Bye-Law then, pending such receipt, any document
requiring to be sealed with the Seal shall be sealed by affixing a red
wafer seal to the document with the name of the Company, and the
country and year of incorporation type written across the centre
thereof.
(2) The Board shall provide for the custody of every Seal. A Seal shall
only be used by authority of the Board or of a committee constituted
by the Board. Subject to these Bye-laws, any instrument to which a
Seal is affixed shall be signed by either two Directors, or by the
Secretary and one Director, or by the Secretary or by any one person
whether or not a Director or Officer, who has been authorised either
generally or specifically to affirm the use of a Seal; provided that
the Secretary or a Director may affix a Seal over his signature alone
to authenticate copies of these Bye-Laws, the minutes of any meeting
or any other documents requiring authentication
DIVIDENDS AND OTHER PAYMENTS
105. The Board may from time to time declare dividends or distributions out of
contributed surplus to be paid to the Shareholders according to their
rights and interests including such interim dividends as appear to the
Board to be justified by the position of the Company. The Board, in its
discretion, may determine that any dividend shall be paid in cash or shall
be satisfied, subject to Bye-Law 113, in paying up in full shares in the
Company to be issued to the Shareholders credited as fully paid or partly
paid or partly in one way and partly the other. The Board may also pay any
fixed cash dividend which is payable on any shares of the Company half
yearly or on such other dates, whenever the position of the Company, in the
opinion of
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the Board, justifies such payment.
106. Except insofar as the rights attaching to, or the terms of issue of, any
share otherwise provide:-
(1) all dividends or distributions out of contributed surplus may be
declared and paid according to the amounts paid up on the shares in
respect of which the dividend or distribution is paid, and an amount
paid up on a share in advance of calls may be treated for the purpose
of this Bye-Law as paid-up on the share;
(2) dividends or distributions out of contributed surplus may be
apportioned and paid pro rata according to the amounts paid-up on the
shares during any portion or portions of the period in respect of
which the dividend or distribution is paid.
107. The Board may deduct from any dividend, distribution or other moneys
payable to a Shareholder by the Company on or in respect of any shares all
sums of money (if any) presently payable by him to the Company on account
of calls or otherwise in respect of shares of the Company.
108. No dividend, distribution or other moneys payable by the Company on or in
respect of any share shall bear interest against the Company.
109. Any dividend, distribution or interest, or part thereof payable in cash,
or any other sum payable in cash to the holder of shares may be paid by
cheque or warrant sent through the post addressed to the holder at his
address in the Register or, in the case of joint holders, addressed to the
holder whose name stands first in the Register in respect of the shares at
his registered address as appearing in the Register or addressed to such
person at such address as the holder or joint holders may in writing
direct. Every such cheque or warrant shall, unless the holder or joint
holders
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otherwise direct, be made payable to the order of the holder or, in
the case of joint holders, to the order of the
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holder whose name stands first in the Register in respect of such shares,
and shall be sent at his or their risk and payment of the cheque or warrant
by the bank on which it is drawn shall constitute a good discharge to the
Company. Any one of two or more joint holders may give effectual receipts
for any dividends, distributions or other moneys payable or property
distributable in respect of the shares held by such joint holders.
110. Any dividend or distribution out of contributed surplus unclaimed for a
period of six years from the date of declaration of such dividend or
distribution shall be forfeited and shall revert to the Company and the
payment by the Board of any unclaimed dividend, distribution, interest or
other sum payable on or in respect of the share into a separate account
shall not constitute the Company a trustee in respect thereof.
111. The Board may also, in addition to its other powers, direct payment or
satisfaction of any dividend or distribution out of contributed surplus
wholly or in part by the distribution of specific assets, and in particular
of paid-up shares or debentures of any other company, and where any
difficulty arises in regard to such distribution or dividend the Board may
settle it as it thinks expedient, and in particular, may authorise any
person to sell and transfer any fractions or may ignore fractions
altogether, and may fix the value for distribution or dividend purposes of
any such specific assets and may determine that cash payments shall be made
to any Shareholders upon the footing of the values so fixed in order to
secure equality of distribution and may vest any such specific assets in
trustees as may seem expedient to the Board provided that such dividend or
distribution may not be satisfied by the distribution of any partly paid
shares or debentures of any company without the sanction of a Resolution.
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RESERVES
112. The Board may, before recommending or declaring any dividend or
distribution out of contributed surplus, set aside such sums as it thinks
proper as reserves which shall, at the discretion of the Board, be
applicable for any purpose of the Company and pending such application may,
also at such discretion, either be employed in the business of the Company
or be invested in such investments as the Board may from time to time think
fit. The Board may also without placing the same to reserve carry forward
any sums which it may think it prudent not to distribute.
CAPITALIZATION OF PROFITS
113. The Board may, from time to time resolve to capitalise all or any part of
any amount for the time being standing to the credit of any reserve or fund
which is available for distribution or to the credit of any share premium
account and accordingly that such amount be set free for distribution
amongst the Shareholders or any class of Shareholders who would be entitled
thereto if distributed by way of dividend and in the same proportions, on
the footing that the same be not paid in cash but be applied either in or
towards paying up amounts for the time being unpaid on any shares in the
Company held by such Shareholders respectively or in payment up in full of
unissued shares, debentures or other obligations of the Company, to be
allotted and distributed credited as fully paid amongst such Shareholders,
or partly in one way and partly in the other, provided that for the purpose
of this Bye-Law, a share premium account may be applied only in paying up
of unissued shares to be issued to such Shareholders credited as fully paid
and provided further that any sum standing to the credit of a share premium
account may only be applied in crediting as fully paid shares of the same
class as that from which the
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relevant share premium was derived.
114. Where any difficulty arises in regard to any distribution under the last
preceding Bye-Law, the Board may settle the same as it thinks expedient
and, in particular, may authorise any person to sell and transfer any
fractions or may resolve that the distribution should be as nearly as may
be practicable in the correct proportion but not exactly so or may ignore
fractions altogether, and may determine that cash payments should be made
to any Shareholders in order to adjust the rights of all parties, as may
seem expedient to the Board. The Board may appoint any person to sign on
behalf of the persons entitled to participate in the distribution any
contract necessary or desirable for giving effect thereto and such
appointment shall be effective and binding upon the Shareholders.
RECORD DATES
115. Notwithstanding any other provisions of these Bye-Laws, the Company may by
Resolution or the Board may fix any date as the record date for any
dividend, distribution, allotment or issue and for the purpose of
identifying the persons entitled to receive notices of general meetings.
Any such record date may be on or at any time before or after any date on
which such dividend, distribution, allotment or issue is declared, paid or
made or such notice is despatched.
ACCOUNTING RECORDS
116. The Board shall cause to be kept accounting records sufficient to give a
true and fair view of the state of the Company's affairs and to show and
explain its transactions, in accordance with the Companies Acts.
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117. The records of account shall be kept at the Registered Office or at such
other place or places as the Board thinks fit, and shall at all times be
open to inspection by the Directors: PROVIDED that if the records of
account are kept at some place outside Bermuda, there shall be kept at an
office of the Company in Bermuda such records as will enable the Directors
to ascertain with reasonable accuracy the financial position of the Company
at the end of each three month period. No Shareholder (other than an
Officer of the Company) shall have any right to inspect any accounting
record or book or document of the Company except as conferred by law or
authorised by the Board or by Resolution.
118. A copy of every balance sheet and statement of income and expenditure,
including every document required by law to be annexed thereto, which is to
be laid before the Company in general meeting, together with a copy of the
auditors' report, shall be sent to each person entitled thereto in
accordance with the requirements of the Companies Acts.
AUDIT
119. Save and to the extent that an audit is waived in the manner permitted by
the Companies Acts, auditors shall be appointed and their duties regulated
in accordance with the Companies Acts, any other applicable law and such
requirements not inconsistent with the Companies Acts as the Board may from
time to time determine.
SERVICE OF NOTICES AND OTHER DOCUMENTS
120. Any notice or other document (including a share certificate) may be served
on or delivered to any Shareholder by the Company either personally or by
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sending it through the post (by airmail where applicable) in a pre-paid
letter addressed to such Shareholder at his address as appearing in the
Register or by delivering it to or leaving it at such registered address.
In the case of joint holders of a share, service or delivery of any notice
or other document on or to one of the joint holders shall for all purposes
be deemed as sufficient service on or delivery to all the joint holders.
Any notice or other document if sent by post shall be deemed to have been
served or delivered seven days after it was put in the post, and in proving
such service or delivery, it shall be sufficient to prove that the notice
or document was properly addressed, stamped and put in the post.
121. Any notice of a general meeting of the Company shall be deemed to be duly
given to a Shareholder, or other person entitled to it, if it is sent to
him by cable, telex, telecopier or other mode of representing or
reproducing words in a legible and non-transitory form at his address as
appearing in the Register or any other address given by him to the Company
for this purpose. Any such notice shall be deemed to have been served
twenty-four hours after its despatch.
122. Any notice or other document delivered, sent or given to a Shareholder in
any manner permitted by these Bye-Laws shall, notwithstanding that such
Shareholder is then dead or bankrupt or that any other event has occurred,
and whether or not the Company has notice of the death or bankruptcy or
other event, be deemed to have been duly served or delivered in respect of
any share registered in the name of such Shareholder as sole or joint
holder unless his name shall, at the time of the service or delivery of the
notice or document, have been removed from the Register as the holder of
the share, and such service or delivery shall for all purposes be deemed as
sufficient
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service or delivery of such notice or document on all persons interested
(whether jointly with or as claiming through or under him) in the share.
WINDING UP
123. If the Company shall be wound up, the liquidator may, with the sanction of
a Resolution of the Company and any other sanction required by the
Companies Acts, divide amongst the Shareholders in specie or kind the whole
or any part of the assets of the Company (whether they shall consist of
property of the same kind or not) and may for such purposes set such values
as he deems fair upon any property to be divided as aforesaid and may
determine how such division shall be carried out as between the
Shareholders or different classes of Shareholders. The liquidator may,
with the like sanction, vest the whole or any part of such assets in
trustees upon such trust for the benefit of the contributories as the
liquidator, with the like sanction, shall think fit, but so that no
Shareholder shall be compelled to accept any shares or other assets upon
which there is any liability.
INDEMNITY
124. Subject to the proviso below, every Director, Officer of the Company and
member of a committee constituted under Bye-Law 90 and any Resident
Representative shall be indemnified out of the funds of the Company against
all liabilities, loss, damage or expense (including but not limited to
liabilities under contract, tort and statute or any applicable foreign law
or regulation and all reasonable legal and other costs and expenses
properly payable) incurred or suffered by him as such Director, Officer,
committee
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member or Resident Representative and the indemnity contained in this Bye-
Law shall extend to any person acting as a Director, Officer, committee
member or Resident Representative in the reasonable belief that he has been
so appointed or elected notwithstanding any defect in such appointment or
election PROVIDED ALWAYS that the indemnity contained in this Bye-
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Law shall not extend to any matter which would render it void pursuant to
the Companies Acts.
125. Every Director, Officer, member of a committee duly constituted under Bye-
Law 90 or Resident Representative of the Company shall be indemnified out
of the funds of the Company against all liabilities incurred by him as such
Director, Officer, committee member or Resident Representative in defending
any proceedings, whether civil or criminal, in which judgement is given in
his favour, or in which he is acquitted, or in connection with any
application under the Companies Acts in which relief from liability is
granted to him by the court.
126. To the extent that any Director, Officer, member of a committee duly
constituted under Bye-Law 90 or Resident Representative is entitled to
claim an indemnity pursuant to these Bye-Laws in respect of amounts paid or
discharged by him, the relative indemnity shall take effect as an
obligation of the Company to reimburse the person making such payment or
effecting such discharge.
127. Each Shareholder and the Company agree to waive any claim or right of
action he or it may at any time have, whether individually or by or in the
right of the Company, against any Director, Officer, or member of a
committee duly constituted under Bye-Law 90 on account of any action taken
by such Director, Officer, or member of a committee or the failure of such
Director, Officer, or member of a committee to take any action in the
performance of his duties with or for the Company PROVIDED HOWEVER that
such waiver shall not apply to any claims or rights of action arising out
of the fraud of such Director, Officer, or member of a committee duly
constituted under Bye-Law 90 or to recover any gain,
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personal profit or advantage to which such Director, Officer, or member of
a committee duly constituted under Bye-Law 90 is not legally entitled.
128. Subject to the Companies Acts, expenses incurred in defending any civil or
criminal action or proceeding for which indemnification is required
pursuant to Bye-Laws 124 and 125 shall be paid by the Company in advance of
the final disposition of such action or proceeding upon receipt of an
undertaking by or on behalf of the indemnified party to repay such amount
if it shall ultimately be determined that the indemnified party is not
entitled to be indemnified pursuant to Bye-Laws 124 and 125.
Each Shareholder of the Company, by virtue of its acquisition and continued
holding of a share, shall be deemed to have acknowledged and agreed that
the advances of funds may be made by the Company as aforesaid, and when
made by the Company under this Bye-Law 128 are made to meet expenditures
incurred for the purpose of enabling such Director, Officer, or member of a
committee duly constituted under Bye-Law 90 to properly perform his or her
duties as an officer of the Company.
AMALGAMATION
129. Any resolution proposed for consideration at any general meeting to approve
the amalgamation of the Company with any other company, wherever
incorporated, shall require the approval of a simple majority of votes cast
at such meeting and the quorum for such meeting shall be that required in
Bye-Law 49 and a poll may be demanded in respect of such resolution in
accordance with the provisions of Bye-Law 57.
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CONTINUATION
130. Subject to the Companies Act, the Board may approve the discontinuation of
the Company in Bermuda and the continuation of the Company in a
jurisdiction outside Bermuda. The Board, having resolved to approve the
discontinuation of the Company, may further resolve not to proceed with any
application to discontinue the Company in Bermuda or may vary such
application as it sees fit.
ALTERATION OF BYE-LAWS
131. These Bye-Laws may be amended from time to time in the manner provided for
in the Companies Acts.
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BYE-LAWS
OF
Global Crossing Holdings Ltd.
We, being the subscribers to the Memorandum of Association of the above company
hereby subscribe to the above written Bye-Laws pursuant to section 13(4) of the
Companies Act 1981.
NAME SIGNATURE
---- ---------
Jill M. Virgil-Smith /s/ Jill M. Virgil-Smith
-------------------- -------------------------
Stacy L. Robinson /s/ Stacy L. Robinson
-------------------- -------------------------
Rachael M. Lathan /s/ Rachael M. Lathan
-------------------- -------------------------
Andresa L. Tucker /s/ Andresa L. Tucker
-------------------- -------------------------
Dated this 30th day of April 1998
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Form of Certificate of Designation
of Terms of Global Crossing
Holdings Ltd. Preferred Stock
SCHEDULE A
----------
SENIOR EXCHANGEABLE PREFERRED STOCK
The terms of the Company's authorized Senior Exchangeable Preferred
Stock shall be as set forth below in this Schedule A.
(a) DESIGNATION. There is hereby authorized 7,500,000 shares of
-----------
preferred stock as designated by the Company's Board of Directors, of which
5,000,000 shares initially will be authorized, issued and outstanding pursuant
to the Offering, and up to 2,500,000 shares will be designated and reserved for
issuance to pay dividends on the Preferred Stock if the Company elects to pay
dividends on the Preferred Stock in additional shares of Preferred Stock prior
to June 1, 2002 in accordance with the terms of the Preferred Stock. All of such
shares will be designated as shares of Preferred Stock and will have a
liquidation preference of $100.00 per share.
(b) CURRENCY. The Preferred Stock shall be denominated in United
--------
States currency and all payments and distributions thereon or with respect
thereto shall be made in United States currency. All references to "$" or
"dollars" refer to United States currency.
(c) RANKING.
-------
(1) The Preferred Stock will rank junior in right of payment to
all indebtedness and other liabilities of the Company. The Company will have the
ability to issue additional shares of Preferred Stock to pay dividends thereon,
if it so elects, on any Dividend Payment Date prior to June 1, 2002.
(2) With respect to dividends and rights upon the liquidation,
winding-up and dissolution of the Company, the Preferred Stock will rank (i)
senior to each class of capital stock of the Company outstanding or established
after the Issue Date by the Company's Board of Directors the terms of which do
not expressly provide that it ranks senior to, or on a parity with, the
Preferred Stock as to dividends and rights upon the liquidation, winding-up and
dissolution of the Company (collectively referred to herein, together with the
common stock of the Company, as "Junior Securities"); (ii) subject to certain
conditions, on a parity with each other class of preferred stock established
after the Issue Date by the Company's Board of Directors the terms of which
expressly provide that such class or series will rank on a parity with the
Preferred Stock as to dividends and rights upon the liquidation, winding-up and
dissolution of the Company (collectively referred to herein as the "Parity
Securities"); and (iii) subject to certain conditions, junior to each class of
preferred stock established after the Issue Date by the Company's Board of
Directors the terms of which expressly provide that such class or series will
rank senior to the
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Preferred Stock as to dividends and rights upon the liquidation, winding-up and
dissolution of the Company (collectively referred to herein as the "Senior
Securities"). The Company may not authorize any new class of Senior Securities
without the approval of the Holders of at least a majority of the then
outstanding shares of Preferred Stock, voting or consenting as a separate class.
The Company may, however, authorize any new class of Parity Securities or Junior
Securities without the approval of any Holder of Preferred Stock.
(d) DIVIDENDS.
---------
(1) The Holders of the Preferred Stock will be entitled to
receive when, as and if dividends are declared by the Company's Board of
Directors out of funds legally available therefor, dividends on the Preferred
Stock from the Issue Date at the rate per annum equal to 10.5% of the
Liquidation Preference per share of Preferred Stock, payable semi-annually in
arrears on each June 1 and December 1, or, if any such date is not a Business
Day, on the next succeeding Business Day (each, a "Dividend Payment Date"), to
the Holders of record as of the immediately preceding May 15 and November 15
(each, a "Record Date"). Dividends will be payable in cash, except that on each
Dividend Payment Date occurring prior to June 1, 2002, dividends may be paid, at
the Company's option, by the issuance of additional shares of Preferred Stock
(including fractional shares) having an aggregate Liquidation Preference per
share of Preferred Stock equal to the amount of such dividends. The issuance of
such additional shares of Preferred Stock will constitute "payment" of the
related dividend for all purposes. The first dividend payment of Preferred Stock
will be payable on June 1, 1999. Beginning on June 1, 2002 dividends on the
Preferred Stock will be payable only in cash. Dividends payable on the Preferred
Stock will be computed on the basis of a 360-day year consisting of twelve 30-
day months.
(2) Dividends on the Preferred Stock will accrue whether or not
the Company has earnings or profits, whether or not there are funds legally
available for the payment of such dividends and whether or not dividends are
declared. Dividends will accumulate to the extent they are not paid on the
Dividend Payment Date for the period to which they relate. In the event that
dividends on the Preferred Stock are in arrears and unpaid for three or more
semi-annual Dividend Periods (whether or not consecutive), Holders of the
Preferred Stock will be entitled to certain voting rights. See paragraph (g).
The Company will take all actions required or permitted under Bermuda law to
permit the payment of dividends on the Preferred Stock, including, without
limitation, through the revaluation of its assets in accordance with Bermuda
law, and to make or keep funds legally available for the payment of dividends.
Dividends on account of arrears for any past Dividend Period and dividends in
connection with any optional redemption may be declared and paid at any time,
without reference to any regular Dividend Payment Date, to Holders of record of
Preferred Stock on such date, not more than 45 days prior to the payment
thereof, as may be fixed by the Company's Board of Directors.
(3) No dividend whatsoever shall be declared or paid upon, or
any sum set apart for the payment of dividends upon, any outstanding share of
Preferred Stock with respect to any Dividend Period unless all dividends for all
preceding Dividend Periods have been declared and paid, or declared and a
sufficient sum set apart for the payment of such dividend, upon all
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outstanding shares of Preferred Stock. No full dividends may be declared or paid
or funds set apart for the payment of dividends on any Parity Securities for any
period unless full cumulative dividends shall have been or contemporaneously are
declared and paid (or are deemed declared and paid) in full or declared and, if
payable in cash, a sum in cash sufficient for such payment set apart for such
payment on the Preferred Stock. If full dividends are not so paid, the Preferred
Stock will share dividends pro rata with the Parity Securities. So long as any
Preferred Stock is outstanding and unless and until full cumulative dividends
have been paid (or are deemed paid) in full on the Preferred Stock: (i) no
dividend shall be declared or paid upon, or any sum set apart for the payment of
dividends upon, any shares of Junior Securities; (ii) no other distribution
shall be declared or made upon, or any sum set apart for the payment of any
distribution upon, any shares of Junior Securities; (iii) no shares of Parity
Securities or Junior Securities shall be purchased, redeemed or otherwise
acquired or retired for value; (iv) no warrants, rights, calls or options to
purchase any Parity Securities or Junior Securities shall be directly or
indirectly issued; and (v) no monies shall be paid into or set apart or made
available for a sinking or other like fund for the purchase, redemption or other
acquisition or retirement for value of any shares of Parity Securities or Junior
Securities.
(e) LIQUIDATION PREFERENCE.
----------------------
(1) Upon any voluntary or involuntary liquidation, dissolution
or winding-up of the Company or a reduction or decrease in its capital stock
resulting in a distribution of assets to the holders of any class or series of
the Company's capital stock, each Holder of the Preferred Stock will be entitled
to payment out of the assets of the Company available for distribution of an
amount equal to the then effective Liquidation Preference per share of Preferred
Stock held by such holder, plus all accumulated and unpaid dividends thereon to
the date such liquidation, dissolution, winding-up or reduction or decrease in
capital stock, before any distribution is made on any Junior Securities,
including, without limitation, common stock of the Company. After payment in
full of the then effective Liquidation Preference and all accumulated and unpaid
dividends to which Holders of Preferred Stock are entitled, such Holders will
not be entitled to any further participation in any distribution of assets of
the Company. If, upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Company or a reduction or decrease in its capital stock, the
amounts payable with respect to the Preferred Stock and all other Parity
Securities are not paid in full, the Holders of the Preferred Stock and the
Parity Securities will share equally and ratably in any distribution of assets
of the Company in proportion to the full liquidation preference and all
accumulated and unpaid dividends to which each such Holder is entitled. However,
neither the voluntary sale, conveyance, exchange or transfer (for cash, shares
of stock, securities or other consideration) of all or substantially all of the
property or assets of the Company nor the consolidation or merger of the Company
with or into one or more corporations will be deemed to be a voluntary or
involuntary liquidation, dissolution or winding-up of the Company or reduction
or decrease in capital stock.
(2) No funds are required to be set aside to protect the
Liquidation Preference of the Preferred Stock, although such Liquidation
Preference will be substantially in excess of the par value of the shares of the
Preferred Stock and there can be no assurance that, upon any such
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voluntary or involuntary liquidation, dissolution or winding-up of the Company,
or a reduction or decrease in its capital stock, that there will be funds
available in an amount sufficient to pay such Liquidation Preference in full, in
part or at all.
(f) REDEMPTION.
----------
(1) Optional Redemption.
-------------------
(i) Except as set forth below and under paragraph
(f)(3), the Preferred Stock will not be redeemable at the Company's option prior
to December 1, 2003. Thereafter, the Preferred Stock will be subject to
redemption at any time at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, in accordance with the terms of
a redemption notice mailed by the Company, or at the direction of the Company,
by first class mail to each Holder whose Preferred Stock is to be redeemed at
its registered address, at the redemption prices (expressed as percentages of
the then effective Liquidation Preference) set forth below, plus all accumulated
and unpaid dividends thereon to the applicable redemption date, if redeemed
during the twelve-month period beginning on December 1 of the years indicated
below:
Year Percentage
---- ----------
2003.......................... 105.250%
2004.......................... 103.500%
2005.......................... 101.750%
2006 and thereafter........... 100.000%
(ii) Notwithstanding the foregoing, at any time prior to
December 1, 2001, the Company may, on any one or more occasions, redeem up to
35% of the then effective aggregate Liquidation Preference of the Preferred
Stock then outstanding at a redemption price equal to 110.500% of the then
effective Liquidation Preference thereof, plus all accumulated and unpaid
dividends thereon to the redemption date, with the net cash proceeds received
from one or more Equity Offerings made by the Company or GCL (to the extent such
net cash proceeds received by GCL were contributed to the Company as common
equity capital); provided that at least 65% of the then effective aggregate
Liquidation Preference of Preferred Stock then outstanding remains outstanding
immediately after the occurrence of any such redemption. The Company may make
any such redemption upon not less than 30 nor more than 60 days' notice (but in
no event more than 90 days after the closing of the related Equity Offering).
Any such notice may be given prior to the completion of the related Equity
Offering and any such redemption may, at the Company's discretion, be subject to
the satisfaction of one or more conditions precedent, including, but not limited
to, the completion of the related Equity Offering.
(iii) In addition, at any time prior to December 1, 2003, the
Preferred Stock may also be redeemed at the option of the Company, in whole but
not in part, upon the occurrence of a Change of Control, upon not less than 30
nor more than 60 days' prior notice (but in no event may any such redemption
occur more than 90 days after the occurrence of such Change of Control) mailed
by first-class mail to each Holder's registered address, at a redemption
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price equal to 100% of the then effective Liquidation Preference thereof, plus
the Applicable Premium as of, and all accumulated and unpaid dividends thereon
to, the date of redemption (the "Redemption Date").
(iv) "Applicable Premium" means, with respect to any
share of Preferred Stock on any Redemption Date (a) the present value of (i)
dividends on the Preferred Stock accumulating until and including December 1,
2003 (assuming payment thereof in cash on the applicable Dividend Payment Dates)
and (ii) the Liquidation Preference and any applicable optional redemption
premium therefor payable on such date for such share (assuming payment thereof
on December 1, 2003), computed using a discount rate equal to the Treasury Rate
plus 50 basis points less (b) the Liquidation Preference of $100.00 per share..
(v) "Treasury Rate" means, as of any Redemption Date,
the yield to maturity as of such Redemption Date of United States Treasury
securities with a constant maturity (as compiled and published in the most
recent Federal Reserve Statistical Release H.15 (519) that has become publicly
available at least two Business Days prior to the Redemption Date (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal to the period from the Redemption Date
to December 1, 2003; provided, however, that if the period from the Redemption
Date to December 1, 2003 is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
(2) Mandatory Redemption. On the Mandatory Redemption Date,
--------------------
the Company will be required to redeem all outstanding shares of Preferred Stock
at a price in cash equal to the then effective Liquidation Preference thereof,
plus all accumulated and unpaid dividends thereon to the date of redemption. The
Company will not be required to make sinking fund payments with respect to the
Preferred Stock. The Company will take all actions required or permitted under
Bermuda law to permit such redemption.
(3) Optional Tax Redemption
-----------------------
(i) The Preferred Stock will be subject to redemption at
the option of the Company or a successor corporation at any time, in whole but
not in part, upon not less than 30 nor more than 60 days' notice, at a
redemption price equal to the then effective Liquidation Preference thereof,
plus all accumulated and unpaid dividends thereon to the redemption date if, as
a result of any change in or amendment to the laws or any regulations or ruling
promulgated thereunder of (x) Bermuda or any political subdivision or
governmental authority thereof or therein having the power to tax, (y) any
jurisdiction, other than the United States, from or through which payment on the
Preferred Stock is made by the Company or a successor corporation, or its paying
agent in its capacity as such or any political subdivision or governmental
authority thereof or therein having the power to tax or (z) any other
jurisdiction, other than the United States, in which the Company or a successor
corporation is organized, or any political subdivision or governmental authority
thereof or therein having the power to tax, or any change in the official
application or interpretation of such laws, regulations or rulings, or any
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change in the official application or interpretation of, or any execution of or
amendment to, any treaty or treaties affecting taxation to which such
jurisdiction (or such political subdivision or taxing authority) is a party (a
"Change in Tax Law"), which becomes effective on or after the date hereof, the
Company or a successor corporation is or would be required on the next
succeeding dividend payment date to pay Additional Amounts with respect to the
Preferred Stock, as described paragraph (f)(4), and the payment of such
Additional Amounts cannot be avoided by the use of any reasonable measures
available to the Company or a successor corporation.
(ii) In addition, the Preferred Stock will be subject to
redemption at the option of the Company at any time, in whole but not in part,
upon not less than 30 nor more than 60 days' notice, at a redemption price equal
to the then effective Liquidation Preference thereof, plus all accumulated and
unpaid dividends thereon to the redemption date, if the Person formed by a
consolidation or amalgamation of the Company or into which the Company is merged
or to which the Company conveys, transfers or leases its properties and assets
substantially as an entirety is required, as a consequence of such
consolidation, amalgamation, merger, conveyance, transfer or lease and as a
consequence of a Change in Tax Law occurring after the date of such
consolidation, amalgamation, merger, conveyance, transfer or lease, to pay
Additional Amounts in respect of any tax, assessment or governmental charge
imposed on any Holder of Preferred Stock.
(4) Payment of Additional Amounts. If any deduction or withholding
-----------------------------
for any present or future taxes, assessments or other governmental charges of
(x) Bermuda or any political subdivision or governmental authority thereof or
therein having power to tax, (y) any jurisdiction, other than the United States,
from or through which payment on the Preferred Stock is made by the Company or a
successor corporation, or its paying agent in its capacity as such or any
political subdivision or governmental authority thereof or therein having the
power to tax or (z) any other jurisdiction, other than the United States, in
which the Company or a successor corporation is organized, or any political
subdivision or governmental authority thereof or therein having the power to tax
shall at any time be required by such jurisdiction (or any such political
subdivision or taxing authority) in respect of any amounts to be paid by the
Company or a successor corporation with respect to the Preferred Stock, the
Company or a successor corporation will pay to each Holder of Preferred Stock as
additional dividends, such additional amounts ("Additional Amounts") as may be
necessary in order that the net amounts paid to such holder of such Preferred
Stock who, with respect to any such tax, assessment or other governmental
charge, is not resident in, or a citizen of, such jurisdiction, after such
deduction or withholding, shall be not less than the amount specified in such
Preferred Stock to which such Holder is entitled; provided, however, that the
Company or a successor corporation shall not be required to make any payment of
Additional Amounts for or on account of:
(i) Any tax, assessment or other governmental charge that would not
have been imposed but for (a) the existence of any present or former
connection between such Holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of a power over,
such Holder, if such Holder is an estate, trust, partnership, limited
liability company or corporation) and the taxing jurisdiction
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or any political subdivision or territory or possession thereof or
area subject to its jurisdiction, including, without limitation, such
Holder (or such fiduciary, settlor, beneficiary, member, shareholder
or possessor) being or having been a citizen or resident thereof or
being or having been present or engaged in a trade or business therein
or having or having had a permanent establishment therein, (b) the
presentation of Preferred Stock (where presentation is required) for
payment on a date more than 30 days after (x) the date on which such
payment became due and payable or (y) the date on which payment
thereof is duly provided for, whichever occurs later, or (c) the
presentation of Preferred Stock for payment in Bermuda or any
political subdivision thereof or therein, unless such Preferred Stock
could not have been presented for payment elsewhere;
(ii) Any estate, inheritance, gift, sales, transfer, personal
property or similar tax, assessment or other governmental charge;
(iii) Any tax, assessment or other governmental charge that is
payable otherwise than by withholding from payment of the Liquidation
Preference of or any dividends on the Preferred Stock;
(iv) Any tax, assessment or other governmental charge that is
imposed or withheld by reason of the failure by the Holder or the
beneficial owner of the Preferred Stock to comply with a request of
the Company addressed to the Holder (a) to provide information,
documents or other evidence concerning the nationality, residence or
identity of the Holder or such beneficial owner or (b) to make and
deliver any declaration or other similar claim (other than a claim for
refund of a tax, assessment or other governmental charge withheld by
the Company) or satisfy any information or reporting requirements,
which, in the case of (a) or (b), is required or imposed by a statute,
treaty, regulation or administrative practice of the taxing
jurisdiction as a precondition to exemption from all or part of such
tax, assessment or other governmental charge; or
(v) Any combination of items (i), (ii), (iii) and (iv) above;
nor shall Additional Amounts be paid with respect to any payment of the
Liquidation Preference of or dividends on any Preferred Stock to any Holder who
is a fiduciary or partnership or limited liability company or other than the
sole beneficial owner of such payment to the extent such payment would be
required by the laws of (x) Bermuda or any political subdivision or governmental
authority thereof or therein having the power to tax, (y) any jurisdiction,
other than the United States, from or through which payment on the Preferred
Stock is made by the Company or a successor corporation, or its paying agent in
its capacity as such or any political subdivision or governmental authority
thereof or therein having the power to tax or (z) any other jurisdiction, other
than the United States, in which the Company or a successor corporation is
organized, or any political subdivision or governmental authority thereof or
therein having the power to tax to be included in the income for tax purposes of
a beneficiary or settlor with respect to such fiduciary or a member of such
partnership, limited liability company or beneficial owner
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who would not have been entitled to such Additional Amounts had it been the
Holder of such Preferred Stock.
The Company shall provide the Transfer Agent with the official
acknowledgment of the relevant taxing authority (or, if such acknowledgment is
not available, a certified copy thereof) evidencing the payment of the
withholding taxes, if any, by the Company. Copies of such documentation shall be
made available to the Holders of the Preferred Stock or the Transfer Agent, as
applicable, upon request therefor.
All references herein to dividends on the Preferred Stock shall
include any Additional Amounts payable by the Company in respect of such
Preferred Stock.
(g) VOTING RIGHTS.
-------------
(1) Holders of record of the Preferred Stock will have no voting
rights, except as required by law and as provided herein. Upon: (i) the
accumulation of unpaid dividends (and, if beginning on June 1, 2002 such
dividends are not paid in cash) on the outstanding Preferred Stock in an amount
equal to three semi-annual dividend payments (whether or not consecutive); (ii)
failure by the Company to satisfy any repurchase obligation (including, without
limitation, pursuant to any required Change of Control Offer) or mandatory
redemption obligation with respect to the Preferred Stock; (iii) failure by the
Company to comply with the provisions described under paragraph (i)(1); (iv)
failure by the Company for 60 days after notice by any Holder to comply with any
of its other agreements applicable to the Preferred Stock set forth herein; or
(v) default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Restricted Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Restricted Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after the Issue
Date, which default results in the acceleration of such Indebtedness prior to
its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
the maturity of which has been so accelerated, aggregates $25.0 million or more
(each of the events described in the immediately preceding clauses (i) - (v)
being referred to herein as a "Voting Rights Triggering Event"); then the
Holders of a majority of the then outstanding shares of Preferred Stock, voting
as a separate single class, will be entitled to elect two members to the
Company's Board of Directors and the number of members of the Company's Board of
Directors will immediately and automatically be increased by two. Voting rights
arising as a result of a Voting Rights Triggering Event will continue until such
time as all dividends in arrears on the Preferred Stock are paid in full and all
other Voting Rights Triggering Events have been cured or waived by the Holders
of at least a majority of the then outstanding shares of Preferred Stock, at
which time the term of office of any such members of the Company's Board of
Directors so elected shall terminate and such directors shall be deemed to have
resigned.
(2) In addition to the provisions described above under paragraph
(c), the Company will not, without the approval of the Holders of at least two-
thirds of the then outstanding shares of Preferred Stock, amend, alter or repeal
any of the provisions of the
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Company's Bye-laws (or the Memorandum of Increase) so as to adversely affect the
powers, preferences or rights of the Holders of the Preferred Stock, or reduce
the time for any notice to which the Holders of the Preferred Stock may be
entitled. Subject to the provisions described above under paragraph (c), an
amendment thereof (or of the Memorandum of Increase) solely to authorize or
create, or to increase the amount of Junior Securities, Parity Securities or
Senior Securities, shall not be deemed to adversely affect the powers,
preferences or rights of the Holders of the Preferred Stock.
(h) EXCHANGE.
--------
(1) The Company may, at its option, on any Dividend Payment
Date, exchange, in whole, but not in part, all then outstanding shares of
Preferred Stock for Exchange Notes with a principal amount equal to the then
effective Liquidation Preference of the Preferred Stock; provided that (i) on
the date of such exchange there are no accumulated and unpaid dividends on the
Preferred Stock (including the dividend payable on such date) or other
contractual impediments to such exchange; and (ii) immediately after giving
effect to such exchange, no Default or Event of Default under the Indenture or
the Senior Notes Indenture (in each case as defined therein) would exist or be
caused thereby.
(2) Upon any exchange pursuant to the preceding paragraph,
Holders of Preferred Stock will be entitled to receive $1.00 principal amount of
Exchange Notes for each $1.00 of the then effective Liquidation Preference per
share of Preferred Stock held by such Holders. The Exchange Notes will be issued
in registered form, without coupons and will be issued in principal amounts of
$1,000 and integral multiples thereof (to the extent possible) so that the
Holders of Preferred Stock will receive certificates representing the entire
amount of Exchange Notes to which the Holders of Preferred Stock are entitled;
provided that the Company may pay cash in lieu of issuing Exchange Notes having
a principal amount less than $1,000.
(3) Notice of the intention to exchange the Preferred Stock into
Exchange Notes will be sent by or on behalf of the Company not more than 60 nor
less than 30 days prior to the date of exchange (the "Exchange Date"), by first
class mail, postage prepaid, to each holder of record of Preferred Stock at its
registered address. In addition to any information required by law or by the
applicable rules of any exchange upon which the Preferred Stock may then be
listed or admitted to trading, such notice will state: (i) the Exchange Date;
(ii) the place or places where certificates for such shares are to be
surrendered for exchange, including any procedures applicable to exchanges to be
accomplished through book-entry transfers; and (iii) that dividends on the
Preferred Stock to be exchanged will cease to accumulate on the Exchange Date.
If notice of any exchange has been properly given, and if on or before the
Exchange Date the Exchange Notes have been duly executed and authenticated and
deposited with the Transfer Agent, then on and after the close of business on
the Exchange Date, the Preferred Stock to be exchanged will no longer be deemed
to be outstanding and may thereafter be issued in the same manner as the other
authorized but unissued preferred stock of the Company, but not as Preferred
Stock, and all rights of the Holders thereof as shareholders of the Company will
cease, except the right of such Holders to receive upon surrender of their
certificates the Exchange Notes and all accrued and unpaid interest thereon.
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(i) REPURCHASE AT THE OPTION OF HOLDERS.
-----------------------------------
(1) Change of Control.
-----------------
(i) Upon the occurrence of a Change of Control, each Holder of
Preferred Stock will have the right to require the Company to purchase all or
any part of such Holder's Preferred Stock pursuant to the offer described below
(the "Change of Control Offer") at a purchase price in cash (the "Change of
Control Payment") equal to 101% of the then effective Liquidation Preference
thereof, plus all accumulated and unpaid dividends thereon to the date of
purchase (subject to the right of Holders of record on the relevant record date
to receive dividends due on the relevant Dividend Payment Date); provided,
however, that the Company shall not be obligated to repurchase Preferred Stock
pursuant to this covenant in the event that it has exercised its rights to
redeem all of the Preferred Stock as described under paragraph (f)(1). Within 30
days following any Change of Control, the Company will mail a notice to each
Holder describing the transaction or transactions that constitute the Change of
Control and offering to purchase such Holder's Preferred Stock on the date
specified in such notice, which date shall be no earlier than 30 and no later
than 60 days from the date such notice is mailed (the "Change of Control Payment
Date"), in accordance with the procedures required herein and described in such
notice.
(ii) The Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations to the
extent such laws and regulations are applicable in connection with the purchase
of Preferred Stock as a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with any of the
provisions of this covenant, the Company will comply with the applicable
securities laws and regulations and will be deemed not to have breached its
obligations under this covenant by virtue thereof.
(iii) On the Change of Control Payment Date, the Company will, to
the extent lawful, (A) accept for payment all Preferred Stock properly tendered
pursuant to the Change of Control Offer, (B) deposit with the Transfer Agent an
amount equal to the Change of Control Payment in respect of the Preferred Stock
so tendered and (C) deliver or cause to be delivered to the Transfer Agent
Preferred Stock so accepted together with an Officers' Certificate stating the
aggregate Liquidation Preference of Preferred Stock being purchased by the
Company. The Transfer Agent will promptly mail or deliver to each Holder of
Preferred Stock so tendered the Change of Control Payment for such Preferred
Stock, and the Transfer Agent will promptly countersign and mail or deliver (or
cause to be transferred by book-entry) to each Holder new Preferred Stock equal
in Liquidation Preference to any unpurchased portion of Preferred Stock
surrendered, if any. The Company will publicly announce the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
(iv) The Company will not be required to make a Change of Control
Offer upon the occurrence of a Change of Control if a third party makes the
Change of Control Offer in the manner, at the times and otherwise in compliance
with the requirements set forth herein
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applicable to a Change of Control Offer made by the Company, and purchases all
Preferred Stock validly tendered and not withdrawn under such Change of Control
Offer.
(2) Asset Sales.
-----------
(i) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, consummate any Asset Sale,
unless (A) the Company (or such Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the fair
market value (as determined in good faith by the Board of Directors (including
as to the value of all noncash consideration) and set forth in an Officer's
Certificate delivered to the Transfer Agent) of the assets or Equity Interests
issued or sold or otherwise disposed of and (B) at least 75% of the
consideration therefor is in the form of cash and/or Cash Equivalents and (C)
the Net Proceeds received by the Company (or such Restricted Subsidiary, as the
case may be) from such Asset Sale are applied within 360 days following the
receipt of such Net Proceeds (1) first, to the extent the Company (or such
Restricted Subsidiary, as the case may be) elects, to the redemption or
repurchase of outstanding Indebtedness and (2) to the extent of the balance of
such Net Proceeds after application as described in (1) above and to the extent
the Company (or such Restricted Subsidiary, as the case may be) elects, to
reinvest, or enter into a legally binding agreement to reinvest, such Net
Proceeds (or any portion thereof) in assets that are used or useful in a
Permitted Business. The balance of such Net Proceeds, after the application of
such Net Proceeds as described in the immediately preceding clauses (1) and (2),
shall constitute "Excess Proceeds."
(ii) When the aggregate amount of Excess Proceeds equals or
exceeds $15.0 million (taking into account income earned on such Excess
Proceeds), the Company will be required to make an offer to all Holders of
Preferred Stock (an "Asset Sale Offer") to purchase the maximum Liquidation
Preference of Preferred Stock that may be purchased out of the Excess Proceeds,
at a purchase price in cash in an amount equal to 100% of the effective
Liquidation Preference thereof, plus all accumulated and unpaid dividends
thereon to the date of purchase, in accordance with the procedures set forth
herein. To the extent that any Excess Proceeds remain after consummation of an
Asset Sale Offer, the Company may use such Excess Proceeds at its discretion. If
the aggregate Liquidation Preference of Preferred Stock tendered into such Asset
Sale Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds,
the Transfer Agent shall select the Preferred Stock to be purchased on a pro
rata basis. Upon completion of such Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero for purposes of the first sentence of this
paragraph.
(iii) The amount of (x) any liabilities (as shown on the
Company's (or such Restricted Subsidiary's, as the case may be) most recent
balance sheet) of the Company or any Restricted Subsidiary (other than
contingent liabilities) that are assumed by the transferee of any such assets
pursuant to an agreement that releases the Company or any Restricted Subsidiary
from all liability in respect thereof, (y) Indebtedness of any Restricted
Subsidiary that is no longer a Restricted Subsidiary as a result of such Asset
Sale, to the extent that the Company and each other Restricted Subsidiary are
released from any guarantee of payment of the principal amount of such
Indebtedness in connection with such Asset Sale and (z) any securities, notes or
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other obligations received by the Company (or such Restricted Subsidiary, as the
case may be) from such transferee that are contemporaneously (subject to
ordinary settlement periods) converted by the Company (or such Restricted
Subsidiary, as the case may be) into cash and/or Cash Equivalents (to the extent
of the cash and/or Cash Equivalents received), will be deemed to be cash and/or
Cash Equivalents for purposes of this
provision.
(j) COVENANTS.
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(1) Restricted Payments
(i) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly: (A) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
the Company or any of its Restricted Subsidiaries) or to the direct or indirect
Holders of the Company's or any of its Restricted Subsidiaries' Equity Interests
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or to the Company or a Restricted Subsidiary
of the Company); (B) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company (other than any such Equity Interests owned by
the Company or any Wholly Owned Restricted Subsidiary of the Company); (C) make
any payment on or with respect to, or purchase, redeem, defease or otherwise
acquire or retire for value any Junior Securities (other than dividends or
distributions payable in Junior Securities (other than Disqualified Stock) of
the Company or to the Company or a Restricted Subsidiary of the Company); or (D)
make any Restricted Investment (all such payments and other actions set forth in
clauses (A) through (D) above being collectively referred to as "Restricted
Payments"), unless:
(1) at the time of and after giving effect to such
Restricted Payment, no Voting Rights Triggering Event shall have
occurred and be continuing or would occur as a consequence thereof;
(2) in the case of paragraph (j)(1)(i)(A), (B) or
(C), and, in the case of any Restricted Investment that is not an
Investment in a Permitted Business, the Company would, at the time
of such Restricted Payment and after giving pro forma effect thereto
as if such Restricted Payment had been made at the beginning of the
applicable four-quarter period, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to either paragraphs
(j)(2)(A)(1) or (2); and
(3) such Restricted Payment, together with the
aggregate amount of all other Restricted Payments made by the
Company and its Restricted Subsidiaries and any Permitted
Investments made pursuant to clause (h) of the definition of
Permitted Investments after the date hereof (excluding Restricted
Payments permitted by paragraphs (j)(1)(ii)(C), (D), (E), (G), (H)
and (I) but, in
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the case of clause (H), only to the extent that such Restricted
Payments are reflected as an expense on the income statement of
GCL), is less than the sum, without duplication, of (i) the
remainder of (x) 100% of the cumulative Consolidated Cash Flow (or,
in the case Consolidated Cash Flow shall be negative, less 100% of
such deficit) from the Issue Date through the last day of the last
full fiscal quarter immediately preceding such Restricted Payment
minus (y) the product of 1.5 times the cumulative Consolidated
Interest Expense from the date hereof through the last day of the
last full fiscal quarter immediately preceding such Restricted
Payment, plus (ii) 100% of the aggregate net cash proceeds and the
fair market value (as determined in good faith by the Board of
Directors) of property or assets received by the Company since the
Issue Date as a contribution to its common equity capital or from
the issue or sale of Equity Interests of the Company (other than
Disqualified Stock and including the Preferred Stock) or from the
issue or sale of Disqualified Stock or debt securities of the
Company that have been converted into such Equity Interests (other
than Equity Interests (or Disqualified Stock or convertible debt
securities) sold to a Subsidiary of the Company), plus the amount of
cash or the fair market value (as determined above) of property or
assets received by the Company or any Restricted Subsidiary upon
such conversion or exchange, plus (iii) the aggregate amount equal
to the net reduction in Investments in Unrestricted Subsidiaries
resulting from (x) dividends, distributions, interest payments,
return of capital, repayments of Investments or other transfers of
assets to the Company or any Restricted Subsidiary from any
Unrestricted Subsidiary, (y) proceeds realized by the Company or any
Restricted Subsidiary upon the sale of such Investment to a Person
other than GCL, the Company or any Subsidiary of the Company, or (z)
the redesignation of any Unrestricted Subsidiary as a Restricted
Subsidiary, not to exceed in the case of any of the immediately
preceding clauses (x), (y) or (z) the aggregate amount of Restricted
Investments made by the Company or any Restricted Subsidiary in such
Unrestricted Subsidiary after the Issue Date, plus (iv) to the
extent that any Restricted Investment that was made after the Issue
Date is sold for cash or otherwise liquidated or repaid for cash,
the amount of proceeds (net of any cost of disposition) equal to the
initial amount of such Restricted Investment.
(ii) The foregoing provisions will not prohibit (A) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the foregoing provisions;
(B) the payment of any dividend on the Preferred Stock; (C) the redemption,
repurchase, retirement, defeasance or other acquisition of any subordinated
Indebtedness or Equity Interests of the Company in exchange for, or out of the
net cash proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of, other Equity Interests of the Company (other than
any Disqualified Stock); provided that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from paragraph (j)(3)(ii); (D) the
defeasance, redemption, retirement, repurchase or other acquisition of
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing
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Indebtedness; (E) the payment of any dividend by a Restricted
Subsidiary of the Company to the Holders of its Equity Interests on a pro rata
basis; (F) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of GCL, the Company or any of its Restricted
Subsidiaries held by any member of GCL's, the Company's or such Restricted
Subsidiary's management; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$10.0 million in any twelve-month period (with unused amounts being carried over
to succeeding twelve-month periods, subject to a maximum of $15.0 million in any
twelve-month period); (G) Investments in the PC-1 Companies and Global Access
Limited in an aggregate amount not to exceed $275.0 million; (H) Investments
made with the net cash proceeds received from an Equity Offering made by the
Company or GCL (but only to the extent such net cash proceeds received by GCL
were contributed to the Company as common equity capital); (provided that the
amount of any such net cash proceeds that are utilized for any such Investment
shall be excluded from paragraph (j)(3)(ii)) plus 50% of the net gain realized
and not otherwise included in Consolidated Cash Flow from the sale of Restricted
Ivestments; (I) the payment of any dividend or the making of any distribution to
GCL by the Company or any Restricted Subsidiary to pay or permit GCL to pay any
GCL Expenses or any Related Taxes; and (J) other Restricted Payments in an
aggregate amount not to exceed $25.0 million.
(iii) The Board of Directors may not designate any Subsidiary of the
Company (other than a newly created Subsidiary in which no Investment has
previously been made (other than the amount required to capitalize such
Subsidiary in connection with its organization)) as an Unrestricted Subsidiary
(a "Designation") unless: (A) no Voting Rights Triggering Event shall have
occurred and be continuing at the time of or after giving effect to such
Designation; (B) the Company would, immediately after giving effect to such
Designation, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to either clause (A) or (B) of paragraph (j)(2)(i); and
(C) the Company would not be prohibited under the terms of the Preferred Stock
from making an Investment at the time of such Designation (assuming the
effectiveness of such Designation for purposes of paragraphs (j)(1)(i)(1) and
(2)) in an amount equal to the fair market value of the net Investment of the
Company or any other Restricted Subsidiary in such Subsidiary on such date.
(iv) In the event of any such Designation, all outstanding Investments
owned by the Company and its Restricted Subsidiaries in the Subsidiary so
designated will be deemed to be an Investment made as of the time of such
Designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant or Permitted Investments, as applicable.
All such outstanding Investments will be deemed to constitute Restricted
Payments in an amount equal to the fair market value of such Investments at the
time of such Designation.
(v) A Designation may be revoked (a "Revocation") by a resolution of
the Board of Directors delivered to the Transfer Agent, provided that the
Company will not make any Revocation unless: (A) no Voting Rights Triggering
Event shall have occurred and be continuing at the time of or after giving
effect to such Designation and (B) all Indebtedness of such Unrestricted
Subsidiary outstanding immediately following such Revocation would, if
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incurred at such time, have been permitted to be incurred at such time for all
purposes under paragraph (j)(2).
(vi) The amount of all Restricted Payments (other than cash) shall be
the fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company (or such
Restricted Subsidiary, as the case may be) pursuant to the Restricted Payment.
The fair market value of any asset(s) or securities that are required to be
valued by this covenant shall be determined in good faith by the Board of
Directors (such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $15.0 million).
(2) Incurrence of Indebtedness and Issuance of Preferred Stock.
----------------------------------------------------------
(i) The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and the Company will not issue any
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that the Company may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock and its Restricted Subsidiaries may incur Indebtedness or issue
Disqualified Stock or Preferred Stock if either:
(A) the Consolidated Leverage Ratio is less than 5.5 to 1.0
(prior to December 1, 2001), or 5.0 to 1.0 (subsequent to December 1,
2001); or
(B) the Consolidated Capital Ratio is less than 2.5 to 1.0.
(ii) Notwithstanding the foregoing, the provisions of the
paragraph set forth above will not apply to the incurrence of any of the
following items of Indebtedness (collectively, "Permitted Indebtedness"):
(A) The incurrence by the Company or any of its Restricted
Subsidiaries of Existing Indebtedness;
(B) The incurrence of Indebtedness by the Company to any
Restricted Subsidiary or Indebtedness of any Restricted Subsidiary to
the Company or any other Restricted Subsidiary (but only for so long
as such Indebtedness is held by the Company or such Restricted
Subsidiary);
(C) The issuance by the Company of preferred stock to any
other Restricted Subsidiary or the issuance by any Restricted
Subsidiary of preferred stock to the Company or any other Restricted
Subsidiary (but only for so long as such preferred stock is held by
the Company or such Restricted Subsidiary);
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(D) The incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness pursuant to acquisitions of capacity made
in the ordinary course of business;
(E) The incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose
of fixing or hedging interest or foreign currency exchange rate risk
with respect to any floating rate Indebtedness that is permitted to be
outstanding;
(F) The incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness of a Restricted Subsidiary incurred and
outstanding on the date on which such Restricted Subsidiary was
acquired by the Company; provided, however, that at the time such
Restricted Subsidiary is acquired by the Company (giving effect to
such acquisition), the Company would have been able to incur $1.00 of
additional Indebtedness pursuant to the immediately preceding
paragraph;
(G) The incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or
the net proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was permitted
to be incurred under paragraph (j)(2)(i) or clauses (A), (F), (G),
(H), (J), (M) or (N) of this paragraph;
(H) The incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness not otherwise permitted to be
incurred pursuant to this paragraph in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including
all Permitted Refinancing Indebtedness incurred to refund, refinance
or replace any Indebtedness incurred pursuant to this clause (H), not
to exceed $50.0 million;
(I) The incurrence of Indebtedness by a Receivables Entity
in a Qualified Receivables Transaction, provided that the proceeds
thereof are applied in accordance with paragraph (i)(2).
(J) The incurrence by the Company or any Restricted
Subsidiary of Purchase Money Indebtedness, provided that the amount of
such Purchase Money Indebtedness does not exceed 100% of the cost of
construction, installation, acquisition, lease, development, design,
engineering, financing, testing, start-up, upgrade, completion or
improvement of assets (together with related soft costs) used in the
business of the Company or such Restricted Subsidiary;
(K) Letters of Credit that are cash collateralized;
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(L) Letters of Credit in an aggregate principal amount
equal to $200.0 million less the amount of outstanding Indebtedness
under clause (M) of this paragraph;
(M) The incurrence by the Company or any of its Restricted
Subsidiaries of revolving credit Indebtedness in an aggregate amount
not to exceed $200.0 million at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any Indebtedness incurred pursuant to this clause (M); and
(N) The guarantee by the Company or any Restricted
Subsidiary of Indebtedness of the Company or any Restricted Subsidiary
of the Company that was permitted to be incurred by another provision
of this covenant.
(3) Merger, Consolidation, or Sale of Assets Without the
----------------------------------------
affirmative vote of the Holders of a majority of the then outstanding shares of
Preferred Stock, voting or consenting, as a separate class, the Company may not,
directly or indirectly, consolidate or merge with or into (whether or not the
Company is the surviving corporation), or sell, assign, transfer, convey or
otherwise dispose of all or substantially all of its properties or assets, in
one or more related transactions, to another Person unless: (i) the Company is
the surviving corporation or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, conveyance or other disposition shall have been made is a
corporation organized or existing under the laws of the United States, any state
thereof or the District of Columbia, or Bermuda; (ii) the Preferred Stock shall
be converted into or exchanged for and shall become shares of such successor,
transferee or resulting Person, having in respect of such successor, transferee
or resulting Person the same powers, preferences and relative participating,
optional or other special rights and qualifications, limitations or restrictions
thereon that the Preferred Stock had immediately prior to such transactions;
(iii) immediately after such transaction, except in the case of a merger of the
Company with or into a Wholly Owned Restricted Subsidiary of the Company, the
Company or the Person formed by or surviving any such consolidation or merger
(if other than the Company), or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made (A) will have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) will, immediately after such transaction and after giving pro forma effect
thereto and any related financing transactions as if the same had occurred at
the beginning of the applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to either paragraph (j)(2)(i)(A)
or (B). The Company also may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person.
(4) Transactions with Affiliates.
----------------------------
(i) The Company will not, and will not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend
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any transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (A) such Affiliate Transaction is on terms that are not
materially less favorable to the Company or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable transaction by the
Company or such Restricted Subsidiary with an unrelated Person and (B) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $25.0 million, the Company
delivers to theTransfer Agent a resolution of the Board of Directors set forth
in an Officers' Certificate certifying that such Affiliate Transaction complies
with clause (A) above and that such Affiliate Transaction is approved by a
majority of the disinterested members of the Board of Directors and an opinion
as to the fairness to the Holders of such Affiliate Transaction from a financial
point of view is obtained from an accounting, appraisal or investment banking
firm of national standing.
(ii) Notwithstanding the foregoing, the following items shall
not be deemed to be Affiliate Transactions: (A) (1) the entering into,
maintaining or performance of any employment contract, collective bargaining
agreement, benefit plan, program or arrangement, related trust agreement or any
other similar arrangement for or with any employee, officer or director
heretofore or hereafter entered into in the ordinary course of business,
including vacation, health, insurance, deferred compensation, retirement,
savings or other similar plans, (2) the payment of compensation, performance of
indemnification or contribution obligations, or an issuance, grant or award of
stock, options, or other equity-related interests or other securities, to
employees, officers or directors in the ordinary course of business, (3) any
transaction with an officer or director in the ordinary course of business not
involving more than $250,000 in any one case, or (4) Management Advances and
payments in respect thereof, (B) transactions between or among the Company
and/or its Restricted Subsidiaries or any Receivables Entity, (C) payment of
reasonable directors fees, (D) any sale or other issuance of Equity Interests
(other than Disqualified Stock) of the Company, (E) Affiliate Transactions in
effect or approved by the Board of Directors on the Issue Date, including any
amendments thereto (provided that the terms of such amendments are not
materially less favorable to the Company or the relevant Restricted Subsidiary
than the terms of such agreement prior to such amendment), (F) transactions with
respect to capacity or dark fiber between the Company or any Restricted
Subsidiary and any Unrestricted Subsidiary or other Affiliate and joint sales
and marketing pursuant to an agreement or agreements between the Company or any
Restricted Subsidiary and any Unrestricted Subsidiary or other Affiliate
(provided that in the case of this clause (G), such agreements are on terms that
are no less favorable to the Company or the relevant Restricted Subsidiary than
those that could have been obtained at the time of such transaction in an arm's-
length transaction with an unrelated third party or, in the case of a
transaction with an Unrestricted Subsidiary, are either (x) entered into in
connection with a transaction involving the selection by a customer of cable
system capacity entered into in the ordinary course of business or (y) involve
the provision by the Company or a Restricted Subsidiary to an Unrestricted
Subsidiary of sales and marketing services, operations, administration and
maintenance services or development services for which the Company or such
Restricted Subsidiary receives a fair rate of return (as determined by the Board
of Directors and set forth in an Officers' Certificate delivered to the Transfer
Agent) above its expenses of providing such services; (H) any transaction
entered into in the ordinary course of business between the Company or any
Restricted Subsidiary and any Unrestricted Subsidiary or
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any Affiliate (provided that in the case of this clause (H), such agreements are
on terms that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that could have been obtained at the time of such
transaction in an arm's-length transaction with an unrelated third party) and
(I) Restricted Payments that are permitted by the covenant described above under
paragraph (j)(1).
(5) Business Activities The Company will not, and will not permit
-------------------
any of its Restricted Subsidiaries to, engage in any business other than a
Permitted Business.
(6) Reports Whether or not required by the rules and regulations
-------
of the Commission, so long as any Preferred Stock is outstanding, the Company
will furnish to the Holders of the Preferred Stock (A) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company was required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Company and its consolidated Subsidiaries and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants, and (B) all current reports that would be required to
be filed with the Commission on Form 8-K if the Company was required to file
such reports, in each case within the time periods specified in the Commission's
rules and regulations. In addition, the Company will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company will be
deemed to have satisfied such requirements if GCL files and provides reports,
documents and information of the types otherwise so required by the Commission,
in each case within the applicable time periods, and the Company is not required
by the Commission to file such reports, documents and information separately
under the applicable rules and regulations of the Commission (after giving
effect to any exemptive relief) because of the filings by GCL. Furthermore, the
Company will agree that, for so long as any Preferred Stock remains outstanding
(and regardless of the immediately preceding sentence), it will furnish to the
Holders of the Preferred Stock and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.
DEFINITIONS
As used in this Certificate of Designation, the following terms shall have the
following meanings, unless the context otherwise requires:
"AC" or "Atlantic Crossing" means the four fiber pair, self healing
ring, fiber optic submarine cable system known as "Atlantic Crossing" or "AC-1"
which will provide direct telecommunications service between the United States
and Northern Europe with landing stations in the United States, United Kingdom,
The Netherlands and Germany, and all extensions and upgrades thereto.
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"AC Subsidiaries" means GTH and all of its direct and indirect
Subsidiaries.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Asset Sale" means (i) the sale, lease, transfer, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business and other than any sale, lease, transfer, conveyance or other
disposition of capacity or dark fiber on any cable system owned, controlled or
operated by the Company or any Restricted Subsidiary or of telecommunications
capacity or transmission rights acquired by the Company or any Restricted
Subsidiary for use in a Permitted Business (provided that the sale, lease,
transfer, conveyance or other disposition of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a whole will be
governed by the provisions of the Indenture described above under paragraph
(i)(1) and/or the provisions described above under paragraph (j)(3) and not by
the provisions of the Asset Sale covenant), and (ii) the issue or sale by the
Company or any of its Restricted Subsidiaries of Equity Interests of its
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $25.0 million or (b) for net proceeds in excess of $25.0
million. Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (i) a transfer of assets by the Company to a Wholly Owned
Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company
or to another Wholly Owned Restricted Subsidiary; (ii) an issuance of Equity
Interests by a Wholly Owned Restricted Subsidiary to the Company or to another
Wholly Owned Restricted Subsidiary; (iii) a Restricted Payment that is permitted
by the covenant described above under paragraph (j)(1); (iv) a transfer of
assets by the Company or a Restricted Subsidiary in connection with a Qualified
Receivables Transaction; and (v) a disposition of obsolete or worn out equipment
or equipment that is no longer useful in the conduct of a Permitted Business and
that is disposed of in the ordinary course of business.
"Board of Directors" means the board of directors or other governing
body of the Company.
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"Board Resolution" means a duly authorized resolution of the Board of
Directors.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within six months after the date of acquisition and (vi) money market
funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i)-(v) of this definition.
"Change of Control" means the occurrence of any of the following: (i)
any "person" (as such term is unused in Section 13(d)(3) of the Exchange Act),
other than a Permitted Holder, is or becomes the beneficial owner, directly or
indirectly, of 35% or more of the Voting Stock (measured by voting power rather
than number of shares) of the Company or GCL, and the Permitted Holders own, in
the aggregate, a lesser percentage of the total Voting Stock (measured by voting
power rather than by number of shares) of the Company or GCL than such person
and do not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the board of directors of the
Company or GCL (for the purposes of this clause, such other person shall be
deemed to "beneficially own" any Voting Stock of a specified corporation held by
a parent corporation if such other person beneficially owns, directly or
indirectly, more than 35% of the Voting Stock (measured by voting power rather
than by number of shares) of such parent corporation and the Permitted Holders
beneficially own, directly or indirectly, in the aggregate a lesser percentage
of Voting Stock (measured by voting power rather than by number of shares) of
such parent corporation and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the board
of directors of such parent corporation), (ii) during any period of two
consecutive years, Continuing Directors cease for any reason to constitute a
majority of the Board of Directors of the Company or GCL, (iii) the Company or
GCL consolidates or merges with or into any other Person, other than a
consolidation or merger (a) of the Company into GCL
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or GCL into the Company, or the Company or GCL into a Wholly Owned Restricted
Subsidiary of the Company or (b) pursuant to a transaction in which the
outstanding Voting Stock of the Company or GCL is changed into or exchanged for
cash, securities or other property with the effect that the beneficial owners of
the outstanding Voting Stock of the Company or GCL, respectively, immediately
prior to such transaction, beneficially own, directly or indirectly, more than
35% of the Voting Stock (measured by voting power rather than number of shares)
of the surviving corporation immediately following such transaction or (iv) the
sale, transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the assets of GCL or the Company and its Restricted
Subsidiaries taken as a whole to any person other than a Wholly Owned Restricted
Subsidiary of the Company or a Permitted Holder or a person more than 50% of the
Voting Stock (measured by voting power rather than by number of shares) of which
is owned, directly or indirectly, following such transaction or transactions by
the Permitted Holders; provided, however, that sales, transfers, conveyances or
other dispositions in the ordinary course of business of capacity on cable
systems owned, controlled or operated by the Company or any Restricted
Subsidiary or of telecommunications capacity or transmission rights acquired by
the Company or any Restricted Subsidiary for use in its business, including,
without limitation, for sale, lease, transfer, conveyance or other disposition
to any customer of the Company or any Restricted Subsidiary shall not be deemed
a disposition of assets for purposes of this clause (iv).
"Consolidated Capital Ratio" means, with respect to the Company or any
of its Restricted Subsidiaries, as of the date of any incurrence of Indebtedness
or issuance of Disqualified Stock, the ratio of (i) the aggregate consolidated
principal amount of Indebtedness outstanding and the Liquidation Preference of
Disqualified Stock as of the most recent quarterly or annual balance sheet,
after giving pro forma effect to the incurrance of such Indebtedness or the
issuance of such Disqualified Stock and any other Indebtedness incurred and
Disqualified Stock issued since such balance sheet date, and the receipt and
application of the proceeds therefrom to (ii) Consolidated Net Worth as of such
balance sheet date after giving pro forma effect to the issuance of Equity
Interests (other than Disqualified Stock) issued since the balance sheet date
and the receipt and application of the proceeds therefrom).
"Consolidated Cash Flow" means, with respect to the Company for any
period, the Consolidated Net Income of the Company and its Restricted
Subsidiaries for such period plus, to the extent that any of the following items
were deducted or added (without duplication) in computing such Consolidated Net
Income, (i) an amount equal to any extraordinary loss (less any gain) plus any
net loss (less any gain) realized in connection with any Asset Sale, plus (ii)
provision for taxes based on income or profits of the Company and its Restricted
Subsidiaries for such period, plus (iii) Consolidated Interest Expense of the
Company and its Restricted Subsidiaries for such period, whether paid or accrued
and whether or not capitalized, plus (iv) any Preferred Stock dividends to the
extent subtracted in arriving at net income, plus (v) depreciation, amortization
(including amortization of goodwill and other intangibles and the amount of
capacity available for sale charged to cost of sales), but excluding
amortization of prepaid cash expenses that were paid in a prior period) and
other non-cash expenses (excluding any such non-cash expense to the extent that
it represents an accrual of or reserve for cash expenses in any future period or
amortization of a prepaid cash expense that was paid in a prior
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period) of the Company and its Restricted Subsidiaries for such period, minus
(vi) non-cash items increasing such Consolidated Net Income for such period
(other than items that were accrued in the ordinary course of business), plus
(vii) any change in Deferred Revenue, in each case, on a consolidated basis and
determined in accordance with GAAP. Notwithstanding the foregoing, the provision
for taxes on the income or profits of, and the depreciation and amortization and
other non-cash expenses of, a Restricted Subsidiary of the Company shall be
added to Consolidated Net Income to compute Consolidated Cash Flow of the
Company only to the extent that a corresponding amount would be permitted at the
date of determination to be dividended to the Company by such Restricted
Subsidiary without prior governmental approval (that has not been obtained), and
without direct or indirect restriction pursuant to the terms of its charter and
all agreements (excluding agreements evidencing Indebtedness incurred in
accordance with paragraph (j)(2)(ii)(K), to which this provision shall not
apply), instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Restricted Subsidiary or its
shareholders.
"Consolidated Interest Expense" for any Person means for any period
the consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of such Person and its Consolidated
Subsidiaries for such period, including without limitation or duplication (or,
to the extent not so included, with the addition of), (i) amortization of debt
issuance costs and original issue discount, (ii) non-cash interest payments,
(iii) the interest component of any deferred payment obligations, (iv) the
interest component of all payments associated with Capital Lease Obligations,
(v) commissions, discounts and other fees and charges incurred in respect of
Letter of Credit or bankers' acceptance financings and (vi) net payments (if
any) pursuant to Hedging Obligations).
"Consolidated Leverage Ratio" means, with respect to the Company or
any of its Restricted Subsidiaries, as of the date of any incurrence of
Indebtedness or issuance of Disqualified Stock, the ratio of (i) the aggregate
consolidated principal amount of Indebtedness outstanding and the Liquidation
Preference of Disqualified Stock as of the most recent quarterly or annual
balance sheet, after giving pro forma effect to the incurrance of such
Indebtedness or the issuance of such Disqualified Stock and any other
Indebtedness incurred and Disqualified Stock issued since such balance sheet
date, and the receipt and application of the proceeds therefrom to (ii)
Consolidated Cash Flow for the four full fiscal quarters ending on or prior to
the date of incurrence of such Indebtedness or issuance of such Disqualified
Stock for which consolidated financial statements are available.
"Consolidated Net Income" means, with respect to the Company for any
period, the aggregate of the net income of the Company and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP, plus, to the extent that any of the following items were deducted in
computing such Consolidated Net Income, (a) non-recurring, non-cash charges
(other than charges arising from write-downs of assets) and (b) non-cash
compensation charges arising from stock options or other similar employee
benefit or compensation plans; provided that (i) the net income (but not loss)
of any Restricted Subsidiary that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the Company or a Wholly Owned
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Restricted Subsidiary thereof by such Restricted Subsidiary, (ii) the net income
(or loss) of any Person that is not a Restricted Subsidiary shall be included
only to the extent of the amount of dividends or other distributions actually
paid to the Company or a Restricted Subsidiary by such Person during such
period, (iii) for purposes of clause (c) in paragraph (j)(1), the net income of
any Restricted Subsidiary shall be excluded to the extent that the declaration
or payment of dividends or similar distributions by that Restricted Subsidiary
of that net income is not at the date of determination permitted without any
prior governmental approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any agreement,
(excluding any such restrictions relating to AC-1 to which this clause (iii)
shall not apply), instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
shareholders, except that the Company's equity in the net income of any such
Restricted Subsidiary for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash that could have been distributed by
such Restricted Subsidiary during such period to the Company or another
Restricted Subsidiary as a dividend, (iv) the net income of any Person acquired
in a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (v) the equity of the Company or any Restricted
Subsidiary in the net income of any Unrestricted Subsidiary shall be included in
such Consolidated Net Income up to the aggregate amount of cash actually
distributed by such Unrestricted Subsidiary during such period to the Company or
a Restricted Subsidiary as a dividend or other distribution (but not in excess
of the amount of the net income of such Unrestricted Subsidiary for such period)
and (vi) the cumulative effect of a change in accounting principles shall be
excluded.
"Consolidated Net Worth" means, with respect to the Company as of any
date, the sum of (i) the consolidated equity of the common shareholders of the
Company and its consolidated Restricted Subsidiaries as of such date plus (ii)
the respective amounts reported on the Company's balance sheet as of such date
with respect to the Preferred Stock and any series of preferred stock (other
than Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to the
extent of any cash received by the Company upon issuance of such preferred
stock, less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business and other
than write-ups attributable to the PCG Warrants) subsequent to the date of the
Indenture in the book value of any asset owned by the Company or a consolidated
Restricted Subsidiary of the Company, (y) all investments as of such date in
unconsolidated Restricted Subsidiaries and in Persons that are not Restricted
Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Consolidated Tangible Assets" means the total amount of assets (less
applicable reserves and other properly deductible items) which under generally
accepted accounting principles would be included on a consolidated balance sheet
of the Company and its Restricted Subsidiaries after deducting therefrom all
goodwill, trade names, trademarks, patents,
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unamortized debt discount and expense and other like intangibles, which in each
case under generally accepted accounting principles would be included on such
consolidated balance sheet.
"Continuing Directors" means individuals who at the beginning of the
period of determination constituted the Board of Directors of the Company or
GCL, as the case may be, together with any new directors whose election by such
Board of Directors or whose nomination for election by the shareholders of the
Company or GCL, as the case may be, was approved by a vote of at least a
majority of the directors of the Company or GCL, as the case may be, then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved or is designee of
any one of the Permitted Holders or any combination thereof or was nominated or
elected by any such Permitted Holder(s) or any of their designees.
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party or beneficiary.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Deferred Revenue" means amounts appearing as a liability on the
financial statements of the Company as prepared according to GAAP classified as
deferred revenue to the extent of cash received in connection therewith.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature; provided, however, that any Capital Stock which
would not constitute Disqualified Stock but for provisions thereof giving
Holders thereof the right to require the Company to repurchase or redeem such
Capital Stock upon the occurrence of a Change of Control occurring prior to the
final Stated Maturity of the Notes shall not constitute Disqualified Stock if
the change of control provisions applicable to such Capital Stock are no more
favorable to the Holders of such Capital Stock than the provisions applicable to
the Notes contained in the covenant described under paragraph (i)(1) and such
Capital Stock specifically provides that the Company will not repurchase or
redeem any such stock pursuant to such provisions prior to the Company's
repurchase of such Notes as are required to be repurchased pursuant to the
covenant described under paragraph (i)(1).
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
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"Equity Offering" means an offering for cash by GCL or the Company of
its common stock, or options, warrants or rights to acquire such common stock.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means the Company's 10 1/2 % Senior Subordinated
Exchange Notes due 2008.
"Exchange Offer" means the registered exchange offer to be made by the
Company with respect to the Preferred Stock or the Exchange Notes, as
applicable, pursuant to the terms of the Registration Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries in existence on the date hereof, until such amounts are
paid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"GCL" means Global Crossing Ltd., a Bermuda Company.
"GCL Expenses" means (i) costs (including all professional fees and
expenses) incurred by GCL to comply with its reporting obligations under federal
or state laws or under the Indenture, including any reports filed with respect
to the Securities Act, the Exchange Act or the respective rules and regulations
promulgated thereunder, (ii) indemnification obligations of GCL owing to
directors, officers, employees or other Persons under its charter or by-laws or
pursuant to written agreements with any such Person, (iii) fees and expenses
payable by GCL in connection with the issuance of the Notes, (iv) other
operational expenses of GCL incurred in the ordinary course of business and (v)
expenses incurred by GCL in connection with any public offering of Capital Stock
or Indebtedness (x) where the net proceeds of such offering are intended to be
received by or contributed or loaned to the Company or a Restricted Subsidiary,
or (y) in a prorated amount of such expenses in proportion to the amount of such
net proceeds intended to be so received, contributed or loaned, or (z) otherwise
on an interim basis prior to completion of such offering so long as GCL shall
cause the amount of such expenses to be repaid to the Company or the relevant
Restricted Subsidiary out of the proceeds of such offering promptly if
completed.
"Global Access Limited" means Global Access Limited, a Japanese
corporation, and all of its direct and indirect Subsidiaries.
"GTH" means Global Telesystems Holdings Ltd., a Bermuda company.
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"Government Securities" means securities that are (a) direct
obligations (or certificates representing an ownership interest in such
obligations) of the United States of America (including any agency or
instrumentally thereof) of the payment of which the full faith and credit of the
United States of America is pledged, (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America or (c) obligations of a Person
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in each case, are not
callable or redeemable at the issuer's option.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under any Interest Rate Agreement or Currency
Agreement.
"Holder" means, as applicable, a Person in whose name Preferred Stock
is, or Notes are, registered.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
"Interest Rate Agreement" means, with respect to any Person, any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement to which such Person is a party or
beneficiary.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding
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commission, travel and similar advances to directors, officers and employees
made in the ordinary course of business), purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP. If the Company or any of its Restricted
Subsidiaries sells or otherwise disposes of any Equity Interests of any direct
or indirect Subsidiary such that, after giving effect to any such sale or
disposition, such Person is no longer a Subsidiary of the Company or such
Restricted Subsidiary, the Company shall be deemed to have made an Investment on
the date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Subsidiary not sold or disposed of in an amount
determined as provided in the final paragraph of the covenant described above
under paragraph (j)(1).
"Issue Date" means December 2, 1998.
"Letters of Credit" means one or more irrevocable direct pay letters
of credit issued by a bank or other financial institution to support the payment
of equity obligations of the Company to its Project Subsidiaries.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in, and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"MAC Subsidiaries" means Mid-Atlantic Crossing Holdings Ltd., a
Bermuda company, and all of its direct and indirect Subsidiaries.
"Management Advances" means loans or advances made to directors,
officers or employees of GCL, the Company or any Restricted Subsidiary (i) in
respect of travel, entertainment or moving-related expenses incurred in the
ordinary course of business, (ii) in respect of moving-related expenses incurred
in connection with any closing or consolidation of any facility, or (iii) in the
ordinary course of business not exceeding $10.0 million in the aggregate at any
time outstanding.
"Mandatory Redemption Date" means December 1, 2008.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP.
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"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any Restricted Subsidiary (a) provides any guarantee or credit
support of any kind (including any undertaking, guarantee, indemnity, agreement
or instrument that would constitute Indebtedness) or (b) is directly or
indirectly liable (as a guarantor or otherwise) and (ii) no default with respect
to which (including any rights that the Holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default under such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means any Co-Chairman of the Board, the President, the Chief
Executive Officer, the Chief Operating Officer, the Chief Financial Officer, any
Senior Vice President, any Vice President, the Treasurer or the Secretary of the
Company.
"Officers Certificate" means a certificate signed by two Officers.
"PCG Warrants" means the warrants issued pursuant to the Warrant
Agreement, dated as of January 21, 1998, as amended through the date of the
Senior Notes Indenture.
"PC-1 Companies" means Pacific Crossing Ltd., a Bermuda company, and
all of its direct and indirect Subsidiaries.
"Permitted Business" means any business that is the same as or
related, ancillary or complementary to any of the businesses of the Company or
any of its Restricted Subsidiaries on the date of issuance of the Preferred
Stock.
"Permitted Holder" means Pacific Capital Group, Inc. and CIBC
Oppenheimer Corp., and their respective Affiliates.
"Permitted Investments" means (a) any Investment in the Company or in
Restricted Subsidiaries of the Company that are engaged in a Permitted Business;
(b) any Investment in Cash Equivalents; (c) any Investment by the Company or any
of its Restricted Subsidiaries in a Person, if as a result of such Investment
(i) such Person becomes a Restricted Subsidiary of the Company that is engaged
in a Permitted Business or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company that is engaged in a Permitted Business; (d) any Investment made as a
result of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with the covenant described above under paragraph
(i)(2); (e) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company; (f) other
Investments having an aggregate fair market value (measured on the date each
such Investment was made and without
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giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (f) that are at the time
outstanding, not to exceed $25.0 million; (g) any Investment made in a
Receivables Entity in a Qualified Receivables Transaction; and (h) any
investment by the Company or a Restricted Subsidiary in any Person engaged in a
Permitted Business with the Company or such Restricted Subsidiary, provided that
such investment is necessary or integral to the Company's or such Restricted
Subsidiary's Permitted Business and provided, further that any such investment
is the minimum amount reasonably necessary for such Permitted Business and to
comply with local law.
"Permitted Liens" means (i) Liens to secure Senior Debt permitted to
be incurred under the Indenture; (ii) Liens in favor of the Company or any
Restricted Subsidiary; (iii) Liens on property of a Person existing at the time
such Person is merged with or into or consolidated with the Company or any of
its Restricted Subsidiaries; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company or such Restricted Subsidiary; (iv) Liens on property existing at the
time of acquisition thereof by the Company or any of its Restricted
Subsidiaries, provided that such Liens were in existence prior to the
contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vi)
Liens existing on the date hereof; (vii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(viii) Liens incurred in the ordinary course of business of the Company or any
of its Restricted Subsidiaries with respect to obligations that do not exceed
$5.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Restricted Subsidiary; (ix) Liens with respect to assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the Company or a Restricted
Subsidiary to secure Indebtedness owing to the Company or such Restricted
Subsidiary; (x) Liens, pledges and deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of statutory obligations; (xi) Liens, pledges or deposits made to
secure the performance of tenders, bids, leases, public or statutory
obligations, sureties, stays appeals, indemnities, performance or other similar
bonds and other obligations of like nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money); (xii)
zoning restrictions, servitudes, easements, rights-of-way, restrictions and
other similar charges or encumbrances incurred in the ordinary course of
business which, in the aggregate, do not materially detract from the value of
the property subject thereto or materially interfere with the ordinary conduct
of the business of the Company or its Restricted Subsidiaries; (xiii) Liens
arising out of judgments or awards against or other court proceedings concerning
the Company or any Restricted Subsidiary with respect to which the Company or
such Restricted Subsidiary is prosecuting an appeal or proceeding for review and
the Company or such Restricted Subsidiary is maintaining adequate reserves in
accordance with generally accepted accounting principles; (xiv)
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any interest or title of a lessor in the property subject to any lease other
than a capital lease. and (xv) Liens not otherwise permitted by the foregoing
clauses (i) through (xiv) securing Indebtedness in an aggregate amount not to
exceed 10% of the Company's Consolidated Tangible Assets.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is expressly subordinated in right of
payment to, the Notes on terms at least as favorable to the Holders of the Notes
as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or the Restricted Subsidiary who
is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, incorporated or unincorporated association,
joint-stock company, trust, unincorporated organization or government or other
agency or political subdivision thereof or other entity of any kind.
"Preferred Stock" means the 10.5% Senior Exchangeable Preferred Stock
due 2008.
"Purchase Money Indebtedness" means Indebtedness (including Acquired
Debt and Capital Lease Obligations, mortgage financings and purchase money
obligations) incurred for the purpose of financing all or any part of the cost
of construction, financing, installation, acquisition, lease, development,
design, engineering, financing, testing, start-up, upgrade, completion or
improvement of any assets used or useful in a Permitted Business, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, as the same may be amended, supplemented,
modified or restated from time to time.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any of its Subsidiaries may sell, convey or
otherwise transfer to (a) a
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Receivables Entity (in the case of a transfer by the Company or any of its
Subsidiaries) and (b) any other Person (in the case of a transfer by a
Receivables Entity), or may grant a security interest in, any receivables
(whether now existing or arising in the future) of the Company or any of its
Subsidiaries, and any assets related thereto including, without limitation, all
collateral securing such receivables, all contracts and all guarantees or other
obligations in respect of such receivables, and the proceeds of such
receivables.
"Receivables Entity" means a Wholly Owned Subsidiary of the Company
(or another Person in which the Company or any Subsidiary of the Company may
make an Investment and to which the Company or any Subsidiary of the Company
transfers receivables and related assets) which engages in no activities other
than in connection with the financing of receivables and which is designated by
the Board of Directors (as provided below) as a Receivables Entity, (a) no
portion of the Indebtedness or any other Obligations (contingent or otherwise)
of which (i) is guaranteed by the Company or any Subsidiary of the Company
(excluding guarantees of Obligations (other than the principal of, and interest
on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is
recourse to or obligates the Company or any Subsidiary of the Company in any way
other than pursuant to Standard Securitization Undertakings or (iii) subjects
any property or asset of the Company or any Subsidiary of the Company, directly
or indirectly, contingently or otherwise, to the satisfaction thereof, other
than pursuant to Standard Securitization Undertakings, (b) with which neither
the Company nor any Subsidiary of the Company has any material contract,
agreement, arrangement or understanding other than on terms no less favorable to
the Company or such Subsidiary than those that might be obtained at the time
from Persons that are not Affiliates of the Company, other than fees payable in
the ordinary course of business in connection with servicing receivables, and
(c) to which neither the Company nor any Subsidiary of the Company has any
obligation to maintain or preserve such entity's financial condition or cause
such entity to achieve certain levels of operating results. Any such designation
by the Board of Directors shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the resolution of the Board of Directors giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions.
"Registration Agreement" means the Registration Rights Agreement,
dated as of December 2, 1998, by and among the Company and the other parties
named on the signature pages thereof, as such agreement may be amended, modified
or supplemented from time to time.
"Related Taxes" means any taxes, charges or assessments, including,
but not limited to, sales, use, transfer, rental, ad valorem, value-added,
stamp, property, consumption, franchise, license, capital, net worth, gross
receipts, excise, occupancy, intangibles or similar taxes, charges or
assessments (other than taxes measured by income and withholding imposed on
payments made by GCL required to be paid by GCL by virtue of its being
incorporated or having Capital Stock outstanding (but not by virtue of owning
stock or other equity interests of any corporation or other entity other than
the Company or any of its Subsidiaries), or being a holding company parent of
the Company of receiving dividends from or other distributions in respect of the
Capital Stock of the Company, or having guaranteed any obligations of the
Company of any Subsidiary thereof, or having made any payment in respect of any
of the items for which the
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Company is permitted to make payments to GCL pursuant to the covenant described
above under paragraph (j)(1).
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary and, with respect to the
PC-1 Companies, upon designation thereof by the Board of Directors as
"Restricted Subsidiaries," whether or not the PC-1 Companies meet the 50% test
specified in the definition of "Subsidiary."
"Senior Debt" means (i) all Indebtedness represented by the Senior
Notes, (ii) any other Indebtedness permitted to be incurred by the Company under
the terms of the Indenture, unless the instrument under which such Indebtedness
is incurred expressly provides that it is on a parity with or subordinated in
right of payment to the Notes and (iii) all Obligations with respect to the
foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Debt will not include (w) any liability for federal, state, local or other taxes
owed or owing by the Company, (x) any Indebtedness of the Company to any of its
Subsidiaries or other Affiliates, (y) any trade payables or (z) any Indebtedness
that is incurred in violation of the Indenture.
"Senior Notes" means the Company's 9 5/8% Senior Notes due 2008.
"Senior Notes Indenture" means the indenture pursuant to which the
Senior Notes were issued.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or any
Subsidiary of the Company which are reasonably customary in securitization of
receivables transactions.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such
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Person or a Subsidiary of such Person or (b) the only general partners of which
are such Person or of one or more Subsidiaries of such Person (or any
combination thereof).
"Transfer Agent" means First Chicago Trust Company of New York.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
is designated by the Board of Directors as an Unrestricted Subsidiary pursuant
to a Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation to maintain or preserve such Person's financial condition or
to cause such Person to achieve any specified levels of operating results; and
(c) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of the Company or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors shall be evidenced
by filing with the Trustee a certified copy of the Board Resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by the
covenant described above under paragraph (j)(1). If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under paragraph (j)(2), the Company shall be
in default of such covenant). The Board of Directors of the Company may at any
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under the covenant described
under paragraph (j)(2), calculated on a pro forma basis as if such designation
had occurred at the beginning of the four-quarter reference period, and (ii) no
Default or Event of Default would be in existence following such designation. As
of the Issue Date, all of the Company's Subsidiaries will be Restricted
Subsidiaries, except for the PC-1 Companies, and the AC Subsidiaries may not be
designated as Unrestricted Subsidiaries unless and until the PC-1 Companies are
designated as Restricted Subsidiaries.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
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<PAGE>
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
This schedule will be attached to the Bye-Laws and become part of the Bye-Laws.
IN WITNESS WHEREOF, the Company has caused this Certificate to be
signed by [ ], its [ ], this 1st day of December 1998.
GLOBAL CROSSING HOLDINGS LTD.
By: /s/ K. Eugene Shutler
--------------------------------------
Name: K. Eugene Shutler
Title: President
95
<PAGE>
EXHIBIT 3.3
FORM NO. 7a REGISTRATION NO. 24871
[SEAL]
BERMUDA
CERTIFICATE OF DEPOSIT OF
MEMORANDUM OF INCREASE OF SHARE CAPITAL
THIS IS TO CERTIFY that a Memorandum of Increase of Share Capital
of
GLOBAL CROSSING HOLDINGS LTD.
----------------------------
was delivered to the Registrar of Companies on the 1ST day of DECEMBER, 1998 in
accordance with section 45(3) of THE COMPANIES ACT 1981 ("the Act").
Given under my hand this 8TH
day of DECEMBER, 1998.
/s/ Pamela Adams
for ACTING REGISTRAR OF COMPANIES
Capital prior to increase: US$ 12,000.00
Amount of increase: US$750,000,000.00
Present Capital: US$750,012,000.00
<PAGE>
FORM No. 7
[SEAL]
BERMUDA
THE COMPANIES ACT OF 1981
MEMORANDUM OF INCREASE OF SHARE CAPITAL
OF
Global Crossing Holdings Ltd.
- --------------------------------------------------------------------------------
(hereinafter referred to as "the Company")
DEPOSITED in the office of the Registrar of Companies on the December 1, 1998
in accordance with the provisions of section 45(3) of the Companies Act 1981.
Minimum Share Capital of the Company US$ 12,000.00
Authorized Share Capital of the Company US$ 12,000.00
Increase of Share Capital as authorized
by a resolution passed at a general
meeting of the Company on the
1 day of December, 1998 US$750,000,000.00
-----------------
AUTHORIZED SHARE CAPITAL AS INCREASE US$750,012,000.00
-----------------
DULY STAMPED in the amount of BD$0.00 being the stamp duty payable on the
amount of increase of share capital of the Company in accordance with the
provisions of the Stamp Duties Act, 1976.
/s/ Douglas Molyneux
-------------------------------
Secretary
DATED THIS 1 day of December 1998
NOTE: This memorandum must be filed in the office of the Registrar of
Companied within thirty days after the date on which the resolution
increasing the share capital has effect and must be accompanied by a
copy of the resolution and the prescribed fee.
<PAGE>
EXHIBIT 4.1
[FRONT SIDE OF STOCK CERTIFICATE]
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE RESTRICTIONS SET
FORTH ON THE OPPOSITE SIDE HEREOF.
PREFERRED STOCK Incorporated under the laws of Bermuda. See reverse for certain
definitions.
CUSIP 37931K 309
[LOGO] GLOBAL CROSSING HOLDINGS LTD.
NUMBER This certifies that
SHARES
is the owner of
[GLOBAL CROSSING
HOLDINGS LTD. CORPORATE FULLY PAID AND NON-ASSESSABLE SHARES OF THE 10 1/2%
SEAL] SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2008,
LIQUIDATION PREFERENCE $100.00 PER SHARE OF GLOBAL
CROSSING HOLDINGS LTD. (the "Company") transferable
on the books of the Company by the holder hereof in
person or by duly authorized attorney upon surrender
of this certificate properly endorsed. The rights,
preferences, restrictions and limitations of the
Senior Exchangeable Preferred Stock represented by
this certificate are determined by the Bye-laws and
amendments thereto establishing the rights,
preferences, restrictions and limitations of the
class of share, which was approved by the Board of
Directors of the Company and by its shareholder. A
copy of the Bye-laws is available from the Company
without charge to shareholders upon written request.
This certificate is not valid until countersigned by
the Transfer Agent and registered by the Registrar.
WITNESS THE FACSIMILE SIGNATURE OF THE DULY
AUTHORIZED OFFICERS OF THE COMPANY.
COUNTERSIGNED AND REGISTERED:
EQUIFAX-FIRST CHICAGO TRUST DIVISION (New York,
New York) TRANSFER AGENT AND REGISTRAR, BY:
Dated: Authorized Signature
/s/ S. Wallace Dawson, Jr. /s/ K. Eugene Shutler
Chief Executive Officer President
<PAGE>
[REVERSE SIDE OF STOCK CERTIFICATE]
GLOBAL CROSSING HOLDINGS LTD.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR PREFERRED
STOCK IN DEFINITIVE FORM, THIS PREFERRED STOCK MAY NOT BE TRANSFERRED EXCEPT AS
A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
UNIF GIFT MIN ACT - ___________ Custodian ________
(Cust) (Minor)
under Uniform gifts to Minors Act_________________________
(State)
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
Additional abbreviations may also be used though not in the above list.
For Value Received, _______________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
<PAGE>
IDENTIFYING NUMBER OF ASSIGNEE
- ----------------------------------
- ----------------------------------
- -----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- ----------------------------------------------
- ----------------------------------------------
- ----------------------------------------------
Shares of the Senior Exchangeable Preferred Stock represented by the within
Certificate, and do hereby irrevocably constitute and appoint
__________________________ Attorney to transfer the said stock on the books of
the within named Company with full power of substitution in the premises.
Dated
------------------------
- --------------------------------------------------------------------------------
NOTICE: THE SIGNATURES TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAMES AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
------------------------
SIGNATURE(S) GUARANTEED:
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 4.2
================================================================================
Global Crossing Holdings Ltd.
$500,000,000
SERIES A AND SERIES B
10 1/2% SENIOR SUBORDINATED NOTES DUE 2008
INDENTURE
---------------------------------
Dated as of [ ]
---------------------------------
[ ]
Trustee
______________
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section
310 (a)(1).........................................................7.10
(a)(2).............................................................7.10
(a)(3).............................................................N.A.
(a)(4).............................................................N.A.
(a)(5).............................................................7.10
(b)................................................................7.10
(c)................................................................N.A.
311(a).............................................................7.11
(b)................................................................7.11
(i)(c).............................................................N.A.
312 (a)............................................................2.05
(b)................................................................12.03
(c)................................................................12.03
313(a).............................................................7.06
(b)(2).............................................................7.07
(c)................................................................7.06; 12.02
(d)................................................................7.06
314(a).............................................................4.03; 12.02
(c)(1).............................................................12.04
(c)(2).............................................................12.04
(c)(3).............................................................N.A.
(e)................................................................12.05
(f)................................................................N.A.
315 (a)............................................................7.01
(b)................................................................7.05; 12.02
(c)................................................................7.01
(d)................................................................7.01
(e)................................................................6.11
316 (a)(last sentence).............................................2.09
(a)(1)(A)..........................................................6.05
(a)(1)(B)..........................................................6.04
(a)(2).............................................................N.A.
(b)................................................................6.07
(c)................................................................2.12
317 (a)(1).........................................................6.08
(a)(2).............................................................6.09
(b)................................................................2.04
318 (a)............................................................12.01
(b)................................................................N.A.
(c)................................................................12.01
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE...............................1
SECTION 1.01. DEFINITIONS..........................................................1
SECTION 1.02. OTHER DEFINITIONS...................................................18
SECTION 1.03. TRUST INDENTURE ACT DEFINITIONS.....................................18
SECTION 1.04. RULES OF CONSTRUCTION...............................................19
ARTICLE 2. THE NOTES...............................................................20
SECTION 2.01. FORM AND DATING.....................................................20
SECTION 2.02. EXECUTION AND AUTHENTICATION........................................21
SECTION 2.03. REGISTRAR AND PAYING AGENT..........................................21
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.................................22
SECTION 2.05. HOLDER LISTS........................................................22
SECTION 2.06. TRANSFER AND EXCHANGE...............................................22
SECTION 2.07. REPLACEMENT NOTES...................................................34
SECTION 2.08. OUTSTANDING NOTES...................................................34
SECTION 2.09. TREASURY NOTES......................................................35
SECTION 2.10. TEMPORARY NOTES.....................................................35
SECTION 2.11. CANCELLATION........................................................35
SECTION 2.12. DEFAULTED INTEREST..................................................35
SECTION 2.13. CUSIP NUMBERS.......................................................36
ARTICLE 3. REDEMPTION AND PREPAYMENT...............................................36
SECTION 3.01. NOTICES TO TRUSTEE..................................................36
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED...................................36
</TABLE>
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SECTION 3.03. NOTICE OF REDEMPTION................................................36
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION......................................37
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.........................................37
SECTION 3.06. NOTES REDEEMED IN PART..............................................38
SECTION 3.07. OPTIONAL REDEMPTION.................................................38
SECTION 3.08. OPTIONAL TAX REDEMPTION.............................................39
SECTION 3.09. PAYMENT OF ADDITIONAL AMOUNTS.......................................39
SECTION 3.10. MANDATORY REDEMPTION................................................41
SECTION 3.11. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.................41
ARTICLE 4. COVENANTS...............................................................43
SECTION 4.01. PAYMENT OF NOTES....................................................43
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.....................................43
SECTION 4.03. REPORTS.............................................................44
SECTION 4.04. COMPLIANCE CERTIFICATE..............................................44
SECTION 4.05. TAXES...............................................................45
SECTION 4.06. STAY, EXTENSION AND USURY LAWS......................................45
SECTION 4.07. RESTRICTED PAYMENTS.................................................45
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.......................................................48
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK..........48
SECTION 4.10. ASSET SALES.........................................................50
SECTION 4.11. TRANSACTIONS WITH AFFILIATES........................................51
SECTION 4.12. LIENS...............................................................52
SECTION 4.13. BUSINESS ACTIVITIES.................................................52
SECTION 4.14. PAYMENTS FOR CONSENT................................................53
</TABLE>
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SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL..........................53
SECTION 4.16. MONEY FOR PAYMENTS TO BE HELD IN TRUST..............................54
SECTION 4.17. NO SENIOR SUBORDINATED DEBT.........................................55
ARTICLE 5. SUCCESSORS..............................................................55
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS............................55
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED...................................56
ARTICLE 6. DEFAULTS AND REMEDIES...................................................56
SECTION 6.01. EVENTS OF DEFAULT...................................................56
SECTION 6.02. ACCELERATION........................................................57
SECTION 6.03. OTHER REMEDIES......................................................58
SECTION 6.04. WAIVER OF PAST DEFAULTS.............................................58
SECTION 6.05. CONTROL BY MAJORITY.................................................58
SECTION 6.06. LIMITATION ON SUITS.................................................59
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.......................59
SECTION 6.08. COLLECTION SUIT BY TRUSTEE..........................................59
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM....................................59
SECTION 6.10. PRIORITIES..........................................................60
SECTION 6.11. UNDERTAKING FOR COSTS...............................................60
ARTICLE 7. TRUSTEE.................................................................60
SECTION 7.01. DUTIES OF TRUSTEE...................................................60
SECTION 7.02. RIGHTS OF TRUSTEE...................................................61
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE........................................62
SECTION 7.04. TRUSTEE'S DISCLAIMER................................................62
SECTION 7.05. NOTICE OF DEFAULTS..................................................62
</TABLE>
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SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES..........................63
SECTION 7.07. COMPENSATION AND INDEMNITY..........................................63
SECTION 7.08. REPLACEMENT OF TRUSTEE..............................................64
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC....................................65
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.......................................65
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY...................65
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE................................65
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE............65
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE......................................65
SECTION 8.03. COVENANT DEFEASANCE.................................................66
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE..........................66
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.....................................67
SECTION 8.06. REPAYMENT TO COMPANY................................................68
SECTION 8.07. REINSTATEMENT.......................................................68
SECTION 8.08. SURVIVAL............................................................69
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER........................................69
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.................................69
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES....................................69
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.................................71
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS...................................71
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES....................................71
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.....................................71
ARTICLE 10. SUBORDINATION..........................................................71
SECTION 10.01. AGREEMENT TO SUBORDINATE...........................................72
</TABLE>
iv
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<TABLE>
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SECTION 10.02. CERTAIN DEFINITIONS................................................72
SECTION 10.03. LIQUIDATION; DISSOLUTION; BANKRUPTCY...............................72
SECTION 10.04. DEFAULT ON DESIGNATED SENIOR DEBT..................................73
SECTION 10.05. ACCELERATION OF NOTES..............................................73
SECTION 10.06. WHEN DISTRIBUTION MUST BE PAID OVER................................74
SECTION 10.07. NOTICE BY COMPANY..................................................74
SECTION 10.08. SUBROGATION........................................................74
SECTION 10.09. RELATIVE RIGHTS....................................................74
SECTION 10.10. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.......................75
SECTION 10.11. DISTRIBUTION OR NOTICE TO REPRESENTATIVE...........................75
SECTION 10.12. RIGHTS OF TRUSTEE AND PAYING AGENT.................................75
SECTION 10.13. AUTHORIZATION TO EFFECT SUBORDINATION..............................75
SECTION 10.14. AMENDMENTS.........................................................76
ARTICLE 11. SATISFACTION AND DISCHARGE.............................................76
SECTION 11.01. SATISFACTION AND DISCHARGE OF INDENTURE............................76
SECTION 11.02. APPLICATION OF TRUST MONEY.........................................76
ARTICLE 12. MISCELLANEOUS..........................................................77
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.......................................77
SECTION 12.02. NOTICES............................................................77
SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES......78
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.................79
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION......................79
SECTION 12.06. RULES BY TRUSTEE AND AGENTS........................................79
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
SHAREHOLDERS.......................................................79
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C>
SECTION 12.08. GOVERNING LAW......................................................79
SECTION 12.09. CURRENCY INDEMNITY.................................................80
SECTION 12.10. CONSENT TO JURISDICTION AND SERVICE................................80
SECTION 12.11. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS......................81
SECTION 12.12. SUCCESSORS.........................................................81
SECTION 12.13. SEVERABILITY.......................................................81
SECTION 12.14. COUNTERPART ORIGINALS..............................................81
SECTION 12.15. TABLE OF CONTENTS, HEADINGS, ETC...................................81
EXHIBITS
Exhibit A-1 FORM OF NOTE
Exhibit A-2 FORM OF REGULATION S NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL
ACCREDITED INVESTOR
</TABLE>
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INDENTURE dated as of [ ] by and among Global Crossing
Holdings Ltd., a Bermuda company (the "Company") and [Trustee], as trustee (the
"Trustee").
The Company and the Trustee agree as follows for the benefit of each
other and for the equal and ratable benefit of the Holders of the 10 1/2% Series
A Senior Subordinated Notes due 2008 (the "Series A Notes") and the 10 1/2%
Series B Senior Subordinated Notes due 2008 (the "Series B Notes" and, together
with the Series A Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"AC-1 Credit Facility" means that certain Credit Agreement, dated as
of June 27, 1997 and amended as of December 15, 1997, between ACL and the
lenders named therein.
"AC" or "Atlantic Crossing" means the four fiber pair, self healing
ring, fiber optic submarine cable system known as "Atlantic Crossing" or "AC-1"
which will provide direct telecommunications service between the United States
and Northern Europe with landing stations in the United States, United Kingdom,
The Netherlands and Germany, and all extensions and upgrades thereto.
"ACL" means Atlantic Crossing Ltd., a Bermuda company.
"AC Subsidiaries" means GTH and all of its direct and indirect
Subsidiaries.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Agent" means any Registrar, Paying Agent or Co-registrar.
"all or substantially all" shall have the meaning given such phrase in
the Revised Model Business Corporation Act.
<PAGE>
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and CEDEL that apply to such transfer or
exchange.
"Asset Sale" means (i) the sale, lease, transfer, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business and other than any sale, lease, transfer, conveyance or other
disposition of capacity or dark fiber on any cable system owned, controlled or
operated by the Company or any Restricted Subsidiary or of telecommunications
capacity or transmission rights acquired by the Company or any Restricted
Subsidiary for use in a Permitted Business (provided that the sale, lease,
transfer, conveyance or other disposition of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a whole shall be
governed by the provisions of Section 4.15 and Section 5.01 hereof and not by
the provisions of Section 4.10 hereof and (ii) the issue or sale by the Company
or any of its Restricted Subsidiaries of Equity Interests of its Subsidiaries,
in the case of either clause (i) or (ii), whether in a single transaction or a
series of related transactions (a) that have a fair market value in excess of
$25.0 million or (b) for net proceeds in excess of $25.0 million.
Notwithstanding the foregoing, the following items shall not be deemed to be
Asset Sales: (i) a transfer of assets by the Company to a Wholly Owned
Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company
or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of Equity
Interests by a Wholly Owned Restricted Subsidiary to the Company or to another
Wholly Owned Restricted Subsidiary, (iii) a Restricted Payment that is permitted
by Section 4.07 hereof, (iv) a transfer of assets by the Company or a Restricted
Subsidiary in connection with a Qualified Receivables Transaction and (v) a
disposition of obsolete or worn out equipment or equipment that is no longer
useful in the conduct of a Permitted Business and that is disposed of in the
ordinary course of business.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law or any similar provisions of Bermuda law for the relief of debtors.
"Board of Directors" means the board of directors or other governing
body of the Company or, if the Company is owned or managed by a single entity,
the board of directors or other governing body of such entity, or, in either
case, any committee thereof duly authorized to act on behalf of such board or
governing body.
"Board Resolution" means a duly authorized resolution of the Board of
Directors.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
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"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within six months after the date of acquisition and (vi) money market
funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i)-(v) of this definition.
"CEDEL" means CEDEL Bank, SA.
"Change of Control" means the occurrence of any of the following: (i)
any "person" (as such term is unused in Section 13(d)(3) of the Exchange Act),
other than a Permitted Holder, is or becomes the beneficial owner, directly or
indirectly, of 35% or more of the Voting Stock (measured by voting power rather
than number of shares) of the Company or GCL, and the Permitted Holders own, in
the aggregate, a lesser percentage of the total Voting Stock (measured by voting
power rather than by number of shares) of the Company or GCL than such person
and do not have the right or ability by voting power, contract or otherwise to
elect or designate for election a majority of the board of directors of the
Company or GCL (for the purposes of this clause, such other person shall be
deemed to "beneficially own" any Voting Stock of a specified corporation held by
a parent corporation if such other person beneficially owns, directly or
indirectly, more than 35% of the Voting Stock (measured by voting power rather
than by number of shares) of such parent corporation and the Permitted Holders
beneficially own, directly or indirectly, in the aggregate a lesser percentage
of Voting Stock (measured by voting power rather than by number of shares) of
such parent corporation and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the board
of directors of such parent corporation), (ii) during any period of two
consecutive years, Continuing Directors cease for any reason to constitute a
majority of the Board of Directors of the Company or GCL, (iii) the Company or
GCL consolidates or merges with or into any other Person, other than a
consolidation or merger (a) of the Company into GCL or GCL into the Company, or
the Company or GCL into a Wholly Owned Restricted Subsidiary of the Company or
(b) pursuant to a transaction in which the outstanding Voting Stock of the
Company or GCL is changed into or exchanged for cash, securities or other
property with the effect that the beneficial owners of the outstanding Voting
Stock of the Company or GCL, respectively, immediately prior to such
transaction, beneficially own, directly or indirectly, more than 35% of the
Voting Stock (measured by voting power rather than number of shares) of the
surviving corporation immediately following such transaction or (iv) the sale,
transfer, conveyance or other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the assets of GCL or the Company and its Restricted
Subsidiaries taken as a whole to any person other than a Wholly Owned Restricted
Subsidiary of the Company or a Permitted Holder or a person more than 50% of the
Voting Stock (measured by voting power rather than by number of shares) of which
is owned, directly or indirectly, following such transaction or transactions by
the Permitted Holders; provided, however, that sales, transfers, conveyances or
other dispositions in the ordinary course of business of capacity on cable
systems owned, controlled or operated by the Company or any
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<PAGE>
Restricted Subsidiary or of telecommunications capacity or transmission rights
acquired by the Company or any Restricted Subsidiary for use in its business,
including, without limitation, for sale, lease, transfer, conveyance or other
disposition to any customer of the Company or any Restricted Subsidiary shall
not be deemed a disposition of assets for purposes of this clause (iv).
The definition of a Change of Control includes a phrase relating to
the sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the assets of GCL or the Company and its Restricted
Subsidiaries taken as a whole, as such phrase is used in the Revised Model
Business Corporation Act. Although there is a developing body of case law
interpreting the phrase "substantially all," there is no precise established
definition of such phrase under applicable law. Accordingly, the ability of a
Holder of Notes to require the Company to purchase such Notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of GCL or the Company and its Restricted Subsidiaries taken as a whole to
another Person or group may be uncertain.
"Company" means Global Crossing Holdings Ltd., and any and all
successors thereto.
"Consolidated Capital Ratio" means, with respect to the Company or any
of its Restricted Subsidiaries, as of the date of any incurrence of Indebtedness
or issuance of Disqualified Stock, the ratio of (i) the aggregate consolidated
principal amount of Indebtedness outstanding and the liquidation preference of
Disqualified Stock as of the most recent quarterly or annual balance sheet date,
after giving pro forma effect to the incurrence of such Indebtedness or the
issuance of such Disqualified Stock and any other Indebtedness incurred and
Disqualified Stock issued since such balance sheet date, and the receipt and
application of the proceeds therefrom to (ii) Consolidated Net Worth as of such
balance sheet date after giving pro forma effect to the issuance of Equity
Interests (other than Disqualified Stock) issued since the balance sheet date
and the receipt and application of the proceeds therefrom.
"Consolidated Cash Flow" means, with respect to the Company for any
period, the Consolidated Net Income of the Company and its Restricted
Subsidiaries for such period plus, to the extent that any of the following items
were deducted or added (without duplication) in computing such Consolidated Net
Income, (i) an amount equal to any extraordinary loss (less any gain) plus any
net loss (less any gain) realized in connection with any Asset Sale, plus (ii)
provision for taxes based on income or profits of the Company and its Restricted
Subsidiaries for such period, plus (iii) Consolidated Interest Expense of the
Company and its Restricted Subsidiaries for such period, whether paid or accrued
and whether or not capitalized, plus (iv) any Preferred Stock dividends to the
extent subtracted in arriving at net income, plus (v) depreciation, amortization
(including amortization of goodwill and other intangibles and the amount of
capacity available for sale charged to cost of sales, but excluding amortization
of prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of the Company and
its Restricted Subsidiaries for such period, minus (vi) non-cash items
increasing such Consolidated Net Income for such period (other than items that
were accrued in the ordinary course of business), plus (vii) any change in
Deferred Revenue, in each case, on a consolidated basis and determined in
accordance with GAAP. Notwithstanding the foregoing, the provision for taxes on
the income or profits of, and the depreciation and amortization and other non-
cash expenses of, a Restricted Subsidiary of the Company shall be added to
Consolidated Net Income to compute Consolidated Cash Flow of the Company only to
the extent that a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted Subsidiary
without prior governmental approval (that has not been
4
<PAGE>
obtained), and without direct or indirect restriction pursuant to the terms of
its charter and all agreements (excluding agreements evidencing Indebtedness
incurred in accordance with clause (k) of Section 4.09 hereof, to which this
provision shall not apply), instruments, judgments, decrees, orders, statutes,
rules and governmental regulations applicable to that Restricted Subsidiary or
its shareholders.
"Consolidated Interest Expense" for any Person means for any period
the consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of such Person and its Consolidated
Subsidiaries for such period, including without limitation or duplication (or,
to the extent not so included, with the addition of), (i) amortization of debt
issuance costs and original issue discount, (ii) non-cash interest payments,
(iii) the interest component of any deferred payment obligations, (iv) the
interest component of all payments associated with Capital Lease Obligations,
(v) commissions, discounts and other fees and charges incurred in respect of
Letter of Credit or bankers' acceptance financings and (vi) net payments (if
any) pursuant to Hedging Obligations.
"Consolidated Leverage Ratio" means, with respect to the Company or
any of its Restricted Subsidiaries, as of the date of any incurrence of
Indebtedness or issuance of Disqualified Stock, the ratio of (i) the aggregate
consolidated principal amount of Indebtedness outstanding and the liquidation
preference of Disqualified Stock as of the most recent quarterly or annual
balance sheet date, after giving pro forma effect to the incurrence of such
Indebtedness or the issuance of such Disqualified Stock and any other
Indebtedness incurred and Disqualified Stock issued since such balance sheet
date, and the receipt and application of the proceeds therefrom to (ii)
Consolidated Cash Flow for the four full fiscal quarters ending on or prior to
the date of incurrence of such Indebtedness or issuance of such Disqualified
Stock for which consolidated financial statements are available.
"Consolidated Net Income" means, with respect to the Company for any
period, the aggregate of the net income of the Company and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP, plus, to the extent that any of the following items were deducted in
computing such Consolidated Net Income, (a) non-recurring, non-cash charges
(other than charges arising from write-downs of assets) and (b) non-cash
compensation charges arising from stock options or other similar employee
benefit or compensation plans; provided that (i) the net income (but not loss)
of any Restricted Subsidiary that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the Company or a Wholly Owned Restricted
Subsidiary thereof by such Restricted Subsidiary, (ii) the net income (or loss)
of any Person that is not a Restricted Subsidiary shall be included only to the
extent of the amount of dividends or other distributions actually paid to the
Company or a Restricted Subsidiary by such Person during such period, (iii) for
purposes of clause (c) of Section 4.07 hereof, the net income of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of that net
income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, (excluding any such
restrictions relating to AC-1 to which this clause (iii) shall not apply),
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its shareholders, except that the
Company's equity in the net income of any such Restricted Subsidiary for such
period shall be included in such Consolidated Net Income up to the aggregate
amount of cash that could have been distributed by such Restricted Subsidiary
during such period to the Company or another Restricted Subsidiary as a
dividend, (iv) the net income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded, (v) the equity of the Company or any Restricted Subsidiary in the net
income of any Unrestricted Subsidiary shall be included in such Consolidated Net
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Income up to the aggregate amount of cash actually distributed by such
Unrestricted Subsidiary during such period to the Company or a Restricted
Subsidiary as a dividend or other distribution (but not in excess of the amount
of the net income of such Unrestricted Subsidiary for such period) and (vi) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to the Company as of any
date, the sum of (i) the consolidated equity of the common shareholders of the
Company and its consolidated Restricted Subsidiaries as of such date plus (ii)
the respective amounts reported on the Company's balance sheet as of such date
with respect to the Preferred Stock and any series of preferred stock (other
than Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to the
extent of any cash received by the Company upon issuance of such preferred
stock, less (x) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going concern
business made within 12 months after the acquisition of such business and other
than write-ups attributable to the PCG Warrants) subsequent to the Issue Date in
the book value of any asset owned by the Company or a consolidated Restricted
Subsidiary of the Company, (y) all investments as of such date in unconsolidated
Restricted Subsidiaries and in Persons that are not Restricted Subsidiaries
(except, in each case, Permitted Investments), and (z) all unamortized debt
discount and expense and unamortized deferred charges as of such date, all of
the foregoing determined in accordance with GAAP.
"Consolidated Tangible Assets" means the total amount of assets (less
applicable reserves and other properly deductible items) which under generally
accepted accounting principles would be included on a consolidated balance sheet
of the Company and its Restricted Subsidiaries after deducting therefrom all
goodwill, trade names, trademarks, patents, unamortized debt discount and
expense and other like intangibles, which in each case under generally accepted
accounting principles would be included on such consolidated balance sheet.
"Continuing Directors" means individuals who at the beginning of the
period of determination constituted the Board of Directors of the Company or
GCL, as the case may be, together with any new directors whose election by such
Board of Directors or whose nomination for election by the shareholders of the
Company or GCL, as the case may be, was approved by a vote of at least a
majority of the directors of the Company or GCL, as the case may be, then still
in office who were either directors at the beginning of such period or whose
election or nomination for election was previously so approved or is designee of
any one of the Permitted Holders or any combination thereof or was nominated or
elected by any such Permitted Holder(s) or any of their designees.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 hereof or such other address as to which the
Trustee may give notice to the Company.
"Currency Agreement" means, with respect to any Person, any foreign
exchange contract, currency swap agreement or other similar agreement as to
which such Person is a party or beneficiary.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
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<PAGE>
"Deferred Revenue" means amounts appearing as a liability on the
financial statements of the Company as prepared according to GAAP classified as
deferred revenue to the extent of cash received in connection therewith.
"Definitive Note" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A-1 hereto except that such Note shall not bear the Global Note
-----------
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature; provided, however, that any Capital Stock which
would not constitute Disqualified Stock but for provisions thereof giving
holders thereof the right to require the Company to repurchase or redeem such
Capital Stock upon the occurrence of a Change of Control occurring prior to the
final Stated Maturity of the Notes shall not constitute Disqualified Stock if
the change of control provisions applicable to such Capital Stock are no more
favorable to the holders of such Capital Stock than the provisions applicable to
the Notes contained in Section 4.15 hereof and such Capital Stock specifically
provides that the Company will not repurchase or redeem any such stock pursuant
to such provisions prior to the Company's repurchase of such Notes as are
required to be repurchased pursuant to the provisions of Section 4.15 hereof.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an offering for cash by GCL or the Company of
its common stock, or options, warrants or rights to acquire such common stock.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Series B Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"Exchange Offer" means the registered exchange offer to be made by the
Company with respect to the Notes pursuant to the terms of the Registration
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Agreement.
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"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries in existence on the date hereof, until such amounts are
paid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"GCL" means Global Crossing Ltd., a Bermuda Company.
"GCL Expenses" means (i) costs (including all professional fees and
expenses) incurred by GCL to comply with its reporting obligations under federal
or state laws or under the Indenture, including any reports filed with respect
to the Securities Act, the Exchange Act or the respective rules and regulations
promulgated thereunder, (ii) indemnification obligations of GCL owing to
directors, officers, employees or other Persons under its charter or by-laws or
pursuant to written agreements with any such Person, (iii) fees and expenses
payable by GCL in connection with the issuance of the Notes, (iv) other
operational expenses of GCL incurred in the ordinary course of business and (v)
expenses incurred by GCL in connection with any public offering of Capital Stock
or Indebtedness (x) where the net proceeds of such offering are intended to be
received by or contributed or loaned to the Company or a Restricted Subsidiary,
or (y) in a prorated amount of such expenses in proportion to the amount of such
net proceeds intended to be so received, contributed or loaned, or (z) otherwise
on an interim basis prior to completion of such offering so long as GCL shall
cause the amount of such expenses to be repaid to the Company or the relevant
Restricted Subsidiary out of the proceeds of such offering promptly if
completed.
"Global Access Limited" means Global Access Limited, a Japanese
corporation, and all of its direct and indirect Subsidiaries.
"GTH" means Global Telesystems Holdings Ltd., a Bermuda company.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Global Notes" means individually and collectively each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A-1 or A-2 hereto issued in accordance with Section 2.01, 2.06(b)(iv),
- ----------- ---
2.06(d)(ii) or 2.06(f) hereof.
"Government Securities" means securities that are (a) direct
obligations (or certificates representing an ownership interest in such
obligations) of the United States of America (including any agency or
instrumentally thereof) of the payment of which the full faith and credit of the
United States of America is pledged, (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America or (c) obligations of a Person
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in each case, are not
callable or redeemable at the issuer's option.
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<PAGE>
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under any Interest Rate Agreement or Currency
Agreement.
"Holder" means a Person in whose name Notes are registered.
"IAI Global Note" means the global Note in the form of Exhibit A-1
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hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold to Institutional Accredited Investors.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time
to time.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"Initial Purchaser" shall have the meaning assigned to such term in
the Offering Memorandum.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Interest Rate Agreement" means, with respect to any Person, any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement to which such Person is a party or
beneficiary.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and
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similar advances to directors, officers and employees made in the ordinary
course of business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, together with all items that
are or would be classified as investments on a balance sheet prepared in
accordance with GAAP. If the Company or any of its Restricted Subsidiaries sells
or otherwise disposes of any Equity Interests of any direct or indirect
Subsidiary such that, after giving effect to any such sale or disposition, such
Person is no longer a Subsidiary of the Company or such Restricted Subsidiary,
the Company shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Equity Interests of
such Subsidiary not sold or disposed of in an amount determined as provided in
the final paragraph of Section 4.07 hereof.
"Issue Date" means December 2, 1998.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Letters of Credit" means one or more irrevocable direct pay letters
of credit issued by a bank or other financial institution to support the payment
of equity obligations of the Company to its Project Subsidiaries.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in, and any filing of or agreement to give any financing statement
under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"MAC Subsidiaries" means Mid-Atlantic Crossing Holdings Ltd., a
Bermuda company, and all of its direct and indirect Subsidiaries.
"Management Advances" means loans or advances made to directors,
officers or employees of GCL, the Company or any Restricted Subsidiary (i) in
respect of travel, entertainment or moving-related expenses incurred in the
ordinary course of business, (ii) in respect of moving-related expenses incurred
in connection with any closing or consolidation of any facility, or (iii) in the
ordinary course of business not exceeding $10.0 million in the aggregate at any
time outstanding.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any
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tax sharing arrangements), and any reserve for adjustment in respect of the sale
price of such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any Restricted Subsidiary (a) provides any guarantee or credit
support of any kind (including any undertaking, guarantee, indemnity, agreement
or instrument that would constitute Indebtedness) or (b) is directly or
indirectly liable (as a guarantor or otherwise) and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default under such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its Stated Maturity.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering Memorandum" means the Offering Memorandum, dated November
24, 1998, pursuant to which the Preferred Stock was offered and sold.
"Officer" means any Co-Chairman of the Board, the President, the Chief
Executive Officer, the Chief Operating Officer, the Chief Financial Officer, any
Senior Vice President, any Vice President, the Treasurer or the Secretary of the
Company.
"Officers Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
12.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"PCG Warrants" means the warrants issued pursuant to the Warrant
Agreement, dated as of January 21, 1998, as amended through the date of the
Senior Notes Indenture.
"PC-1 Companies" means Pacific Crossing Ltd., a Bermuda company, and
all of its direct and indirect Subsidiaries.
"Participant" means, with respect to the Depositary, Euroclear or
CEDEL, a Person who has an account with the Depositary, Euroclear or CEDEL,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and CEDEL).
"Permitted Business" means any business that is the same as or
related, ancillary or complementary to any of the businesses of the Company or
any of its Restricted Subsidiaries on Issue Date.
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"Permitted Holder" means Pacific Capital Group, Inc. and CIBC
Oppenheimer Corp., and their respective Affiliates.
"Permitted Investments" means (a) any Investment in the Company or in
Restricted Subsidiaries of the Company that are engaged in a Permitted Business;
(b) any Investment in Cash Equivalents; (c) any Investment by the Company or any
of its Restricted Subsidiaries in a Person, if as a result of such Investment
(i) such Person becomes a Restricted Subsidiary of the Company that is engaged
in a Permitted Business or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company that is engaged in a Permitted Business; (d) any Investment made as a
result of the receipt of non-cash consideration from an Asset Sale that was made
pursuant to and in compliance with Section 4.10 hereof; (e) any acquisition of
assets solely in exchange for the issuance of Equity Interests (other than
Disqualified Stock) of the Company; (f) other Investments having an aggregate
fair market value (measured on the date each such Investment was made and
without giving effect to subsequent changes in value), when taken together with
all other Investments made pursuant to this clause (f) that are at the time
outstanding, not to exceed $25.0 million; (g) any Investment made in a
Receivables Entity in a Qualified Receivables Transaction; and (h) any
investment by the Company or a Restricted Subsidiary in any Person engaged in a
Permitted Business with the Company or such Restricted Subsidiary, provided that
such investment is necessary or integral to the Company's or such Restricted
Subsidiary's Permitted Business and provided, further that any such investment
is the minimum amount reasonably necessary for such Permitted Business and to
comply with local law.
"Permitted Liens" means (i) Liens to secure Senior Debt permitted to
be incurred under this Indenture; (ii) Liens in favor of the Company or any
Restricted Subsidiary; (iii) Liens on property of a Person existing at the time
such Person is merged with or into or consolidated with the Company or any of
its Restricted Subsidiaries; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company or such Restricted Subsidiary; (iv) Liens on property existing at the
time of acquisition thereof by the Company or any of its Restricted
Subsidiaries, provided that such Liens were in existence prior to the
contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vi)
Liens existing on the date hereof; (vii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor;
(viii) Liens incurred in the ordinary course of business of the Company or any
of its Restricted Subsidiaries with respect to obligations that do not exceed
$5.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Restricted Subsidiary; (ix) Liens with respect to assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the Company or a Restricted
Subsidiary to secure Indebtedness owing to the Company or such Restricted
Subsidiary; (x) Liens, pledges and deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of statutory obligations; (xi) Liens, pledges or deposits made to
secure the performance of tenders, bids, leases, public or statutory
obligations, sureties, stays appeals, indemnities, performance or other similar
bonds and other obligations of like nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money); (xii)
zoning
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restrictions, servitudes, easements, rights-of-way, restrictions and other
similar charges or encumbrances incurred in the ordinary course of business
which, in the aggregate, do not materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct of
the business of the Company or its Restricted Subsidiaries; (xiii) Liens arising
out of judgments or awards against or other court proceedings concerning the
Company or any Restricted Subsidiary with respect to which the Company or such
Restricted Subsidiary is prosecuting an appeal or proceeding for review and the
Company or such Restricted Subsidiary is maintaining adequate reserves in
accordance with generally accepted accounting principles; (xiv) any interest or
title of a lessor in the property subject to any lease other than a capital
lease; and (xv) Liens not otherwise permitted by the foregoing clauses (i)
through (xiv) securing Indebtedness in an aggregate amount not to exceed 10% of
the Company's Consolidated Tangible Assets.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is expressly subordinated in right of
payment to, the Notes on terms at least as favorable to the Holders of the Notes
as those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such
Indebtedness is incurred either by the Company or the Restricted Subsidiary who
is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, limited liability company, incorporated or unincorporated association,
joint-stock company, trust, unincorporated organization or government or other
agency or political subdivision thereof or other entity of any kind.
"Preferred Stock" means the Company's 10-1/2% Senior Exchangeable
Preferred Stock due 2008.
"Purchase Money Indebtedness" means Indebtedness (including Acquired
Debt and Capital Lease Obligations, mortgage financings and purchase money
obligations) incurred for the purpose of financing all or any part of the cost
of construction, financing, installation, acquisition, lease, development,
design, engineering, financing, testing, start-up, upgrade, completion or
improvement of any assets used or useful in a Permitted Business, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, as the same may be amended, supplemented,
modified or restated from time to time.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
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"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any of its Subsidiaries
pursuant to which the Company or any of its Subsidiaries may sell, convey or
otherwise transfer to (a) a Receivables Entity (in the case of a transfer by the
Company or any of its Subsidiaries) and (b) any other Person (in the case of a
transfer by a Receivables Entity), or may grant a security interest in, any
receivables (whether now existing or arising in the future) of the Company or
any of its Subsidiaries, and any assets related thereto including, without
limitation, all collateral securing such receivables, all contracts and all
guarantees or other obligations in respect of such receivables, and the proceeds
of such receivables.
"Receivables Entity" means a Wholly Owned Subsidiary of the Company
(or another Person in which the Company or any Subsidiary of the Company may
make an Investment and to which the Company or any Subsidiary of the Company
transfers receivables and related assets) which engages in no activities other
than in connection with the financing of receivables and which is designated by
the Board of Directors (as provided below) as a Receivables Entity, (a) no
portion of the Indebtedness or any other Obligations (contingent or otherwise)
of which (i) is guaranteed by the Company or any Subsidiary of the Company
(excluding guarantees of Obligations (other than the principal of, and interest
on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is
recourse to or obligates the Company or any Subsidiary of the Company in any way
other than pursuant to Standard Securitization Undertakings or (iii) subjects
any property or asset of the Company or any Subsidiary of the Company, directly
or indirectly, contingently or otherwise, to the satisfaction thereof, other
than pursuant to Standard Securitization Undertakings, (b) with which neither
the Company nor any Subsidiary of the Company has any material contract,
agreement, arrangement or understanding other than on terms no less favorable to
the Company or such Subsidiary than those that might be obtained at the time
from Persons that are not Affiliates of the Company, other than fees payable in
the ordinary course of business in connection with servicing receivables, and
(c) to which neither the Company nor any Subsidiary of the Company has any
obligation to maintain or preserve such entity's financial condition or cause
such entity to achieve certain levels of operating results. Any such designation
by the Board of Directors shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the resolution of the Board of Directors giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions.
"Registration Agreement" means the Registration Rights Agreement,
dated as of December 2, 1998, by and among the Company and the other parties
named on the signature pages thereof, as such agreement may be amended, modified
or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a Regulation S Temporary Global Note
or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note in
the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
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Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
"Regulation S Temporary Global Note" means a temporary global Note in
the form of Exhibit A-2 hereto bearing the Private Placement Legend and
-----------
deposited with or on behalf of and
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registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Notes initially
sold in reliance on Rule 903 of Regulation S.
"Related Taxes" means any taxes, charges or assessments, including,
but not limited to, sales, use, transfer, rental, ad valorem, value-added,
stamp, property, consumption, franchise, license, capital, net worth, gross
receipts, excise, occupancy, intangibles or similar taxes, charges or
assessments (other than taxes measured by income and withholding imposed on
payments made by GCL required to be paid by GCL by virtue of its being
incorporated or having Capital Stock outstanding (but not by virtue of owning
stock or other equity interests of any corporation or other entity other than
the Company or any of its Subsidiaries), or being a holding company parent of
the Company of receiving dividends from or other distributions in respect of the
Capital Stock of the Company, or having guaranteed any obligations of the
Company of any Subsidiary thereof, or having made any payment in respect of any
of the items for which the Company is permitted to make payments to GCL pursuant
to Section 4.07 hereof.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Broker Dealer" has the meaning set forth in the
Registration Agreement.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary and, with respect to the
PC-1 Companies, upon designation thereof by the Board of Directors as
"Restricted Subsidiaries," whether or not the PC-1 Companies meet the 50% test
specified in the definition of "Subsidiary".
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Notes" means the Company's 9 5/8% Senior Notes due 2008.
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"Senior Notes Indenture" means the indenture pursuant to which the
Senior Notes were issued.
"Shelf Registration Statement" means the Shelf Registration Statement
as defined in the Registration Agreement.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Special Interest" means all special interest then owing pursuant to
Section 5 of the Registration Agreement.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or any
Subsidiary of the Company which are reasonably customary in securitization of
receivables transactions.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
77bbbb) as in effect on the date on which this Indenture is qualified under the
TIA.
"Treasury Rate" means, as of any Redemption Date, the yield to
maturity as of such Redemption Date of United States Treasury securities with a
constant maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the Redemption Date to December 1, 2003;
provided, however, that if the period from the Redemption Date to December 1,
2003 is less than one year, the weekly average yield on actually traded United
States Treasury securities adjusted to a constant maturity of one year shall be
used.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
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"U.S. Person" means a U.S. person as defined in Rule 902(a) under the
Securities Act.
"Unrestricted Definitive Note" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent Global Note in the form
of Exhibit A-1 attached hereto that bears the Global Note Legend and that has
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the "Schedule of Exchanges of Interests in the Global Note" attached thereto,
and that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
is designated by the Board of Directors as an Unrestricted Subsidiary pursuant
to a Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non- Recourse Debt; (b) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation to maintain or preserve such Person's financial condition
or to cause such Person to achieve any specified levels of operating results;
and (c) has not guaranteed or otherwise directly or indirectly provided credit
support for any Indebtedness of the Company or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors shall be evidenced
by filing with the Trustee a certified copy of the Board Resolution giving
effect to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by Section
4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet
the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter
cease to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under Section 4.09 hereof, the Company
shall be in default of Section 4.09 hereof). The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under Section 4.09 hereof,
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period, and (ii) no Default or Event of
Default would be in existence following such designation. As of the Issue Date,
all of the Company's Subsidiaries will be Restricted Subsidiaries, except for
the PC-1 Companies, and the AC Subsidiaries may not be designated as
Unrestricted Subsidiaries unless and until the PC-1 Companies are designated as
Restricted Subsidiaries.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned
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Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
Section 1.02. Other Definitions.
Defined in
Term Section
---- ----------
"Additional Amounts" 3.09
"Affiliate Transaction" 4.11
"Asset Sale Offer" 4.10
"Authentication Order" 2.02
"Change in Tax Law" 3.08
"Change of Control Offer" 4.15
"Change of Control Payment" 4.15
"Change of Control Payment Date" 4.15
"Covenant Defeasance" 8.03
"Designated Senior Debt" 10.02
"Designation" 4.07
"Event of Default" 6.01
"Excess Proceeds" 4.10
"incur" 4.09
"Legal Defeasance" 8.02
"Offer Amount" 3.11
"Offer Period" 3.11
"Paying Agent" 2.03
"Permitted Indebtedness" 4.09
"Permitted Junior Securities" 10.02
"Process Agent" 12.10
"Purchase Date" 3.11
"Redemption Date" 3.07
"Registrar" 2.03
"Representative" 10.02
"Restricted Payments" 4.07
"Revocation" 4.07
"Senior Debt" 10.02
Section 1.03. Trust Indenture Act Definitions
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
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"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes means the Company and any successor obligor
upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections or
rules adopted by the SEC from time to time.
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ARTICLE 2.
THE NOTES
Section 2.01. Form and Dating.
(a) General.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibits A-1 and A-2 hereto. The Notes may have
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notations, legends or endorsements required by law, stock exchange rule or usage
or agreements to which the Company is subject. Each Note shall be dated the
date of its authentication. The Notes shall be in denominations of $1,000 and
integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby. However, to the extent any
provision of any Note conflicts with the express provisions of this Indenture,
the provisions of this Indenture shall govern and be controlling.
(b) Global Notes.
Notes issued in global form shall be substantially in the form of
Exhibits A-1 or A-2 attached hereto (including the Global Note Legend thereon
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and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A-1 attached hereto (but without the Global Note Legend thereon and
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without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the Note
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes.
Notes offered and sold in reliance on Regulation S shall be issued
initially in the form of the Regulation S Temporary Global Note, which shall be
deposited on behalf of the purchasers of the Notes, presented thereby with the
Trustee, at its New York office, as custodian for the Depository, and registered
in the name of the Depositary or the nominee of the Depositary for the accounts
of the designated agents holding on behalf of Euroclear or CEDEL Bank, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The Restricted Period shall be terminated upon the receipt by the
Trustee of (i) a written certificate from the Depositary, together with copies
of certificates from Euroclear and CEDEL Bank certifying that they have received
certification of non United States beneficial ownership of 100% of the aggregate
principal amount of the Regulation S Temporary Global Note (except to the extent
of any beneficial owners thereof who acquired an interest therein during the
Restricted Period pursuant to another exemption from registration under the
Securities Act and who will
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take delivery of a beneficial ownership interest in a 144A Global Note or an IAI
Global Note bearing a Private Placement Legend, all as contemplated by Section
2.06(a)(ii) hereof), and (ii) an Officer's Certificate from the Company.
Following the termination of the Restricted Period, beneficial interests in the
Regulation S Temporary Global Note shall be exchanged for beneficial interests
in Regulation S Permanent Global Notes pursuant to the Applicable Procedures.
Simultaneously with the authentication of Regulation S Permanent Global Notes,
the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate
principal amount of the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
(d) Euroclear and CEDEL Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of CEDEL Bank"
and "Customer Handbook" of CEDEL Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or CEDEL Bank.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount stated in paragraph 4 of the Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall
notify the Trustee in writing of the name and address of any Agent not a party
to this Indenture. If the Company fails to appoint or maintain another entity
as Registrar or Paying
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Agent, the Trustee shall act as such. The Company or any of its Subsidiaries may
act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
The Trustee is authorized to enter into a letter of representations
with DTC in the form provided to the Trustee by the Company and to act in
accordance with such letter.
Section 2.04. Paying Agent to Hold Money in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Special Interest, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA (S) 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes.
A Global Note may not be transferred as a whole except by the
Depositary to a nominee of the Depositary, by a nominee of the Depositary to the
Depositary or to another nominee of the Depositary, the Depositary or any such
nominee to a successor Depositary or a nominee of such successor Depositary.
All Global Notes will be exchanged by the Company for Definitive Notes if (i)
the Company delivers to the Trustee notice from the Depositary that it is
unwilling or unable to continue to act as Depositary or that it is no longer a
clearing agency registered under the Exchange Act and, in either case, a
successor Depositary is not appointed by the Company within 120 days after the
date of such notice from the Depositary or (ii) the Company in its sole
discretion determines that the Global Notes (in whole but not in part) should be
exchanged for Definitive Notes and delivers a written notice to
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such effect to the Trustee; provided that in no event shall the Regulation S
Temporary Global Note be exchanged by the Company for Definitive Notes prior to
(x) the expiration of the Restricted Period and (y) the receipt by the Registrar
of any certificates determined by the Company to be required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in lieu
of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b),(c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the provisions of
this Indenture and the Applicable Procedures. Beneficial interests in the
Restricted Global Notes shall be subject to restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial
interests in any Restricted Global Note may be transferred to Persons who take
delivery thereof in the form of a beneficial interest in the same Restricted
Global Note in accordance with the transfer restrictions set forth in the
Private Placement Legend; provided, however, that prior to the expiration of
the Restricted Period, transfers of beneficial interests in the Temporary
Regulation S Global Note may not be made to a U.S. Person or for the account
or benefit of a U.S. Person (other than an Initial Purchaser). Beneficial
interests in any Unrestricted Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note. No written orders or instructions shall be required to be
delivered to the Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global
Notes. In connection with all transfers and exchanges of beneficial interests
that are not subject to Section 2.06(b)(i) above, the transferor of such
beneficial interest must deliver to the Depositary either (A) (1) a written
order from a Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to credit
or cause to be credited a beneficial interest in another Global Note in an
amount equal to the beneficial interest to be transferred or exchanged and (2)
instructions given in accordance with the Applicable Procedures containing
information regarding the Participant account to be credited with such
increase or (B) (1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to cause to be issued a Definitive Note in
an amount equal to the beneficial interest to be transferred or exchanged and
(2) instructions given by the Depositary to the Registrar containing
information regarding the Person in whose name such Definitive Note shall be
registered to effect the transfer or exchange referred to in (1) above,
provided that, in no event shall Definitive Notes be issued upon the transfer
or exchange of beneficial interests in the Regulation S Temporary Global Note
prior to (x) the expiration of the Restricted Period and (y) the receipt by
the Registrar of any certificates determined by the Company to be
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required pursuant to Rule 903 under the Securities Act. Upon consummation of
an Exchange Offer by the Company in accordance with Section 2.06(f) hereof,
the requirements of this Section 2.06(b)(ii) shall be deemed to have been
satisfied upon receipt by the Registrar of the instructions contained in the
Letter of Transmittal delivered by the Holder of such beneficial interests in
the Restricted Global Notes. Upon satisfaction of all of the requirements for
transfer or exchange of beneficial interests in Global Notes contained in this
Indenture and the Notes or otherwise applicable under the Securities Act, the
Trustee shall adjust the principal amount of the relevant Global Note(s)
pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global Note.
A beneficial interest in any Restricted Global Note may be transferred to a
Person who takes delivery thereof in the form of a beneficial interest in
another Restricted Global Note if the transfer complies with the requirements
of Section 2.06(b)(ii) above and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a beneficial
interest in the 144A Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications
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in item (1) thereof; and
(B) if the transferee will take delivery in the form of a beneficial
interest in the Regulation S Temporary Global Note or the Regulation S
Global Note, then the transferor must deliver a certificate in the form
of Exhibit B hereto, including the certifications in item (2) thereof;
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and
(C) if the transferee will take delivery in the form of a beneficial
interest in the IAI Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the certifications
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and certificates and Opinion of Counsel required by item (3) thereof, if
applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global
Note for Beneficial Interests in the Unrestricted Global Note. A beneficial
interest in any Restricted Global Note may be exchanged by any holder thereof
for a beneficial interest in an Unrestricted Global Note or transferred to a
Person who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note if the exchange or transfer complies with the
requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Agreement and the holder of the
beneficial interest to be transferred, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable Letter
of Transmittal or via the Depositary's book-entry system that it is not
(1) a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Agreement;
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(C) such transfer is effected by a Restricted Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with the
Registration Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a beneficial
interest in an Unrestricted Global Note, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item (1)(a)
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thereof; or
(2) if the holder of such beneficial interest in a Restricted Global
Note proposes to transfer such beneficial interest to a Person who shall
take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof;
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and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who takes
delivery thereof in the form of a Restricted Definitive Note, then, upon
receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Restricted
Definitive Note, a certificate from such holder in the form of Exhibit C
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hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1) thereof;
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(C) if such beneficial interest is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule
904, a certificate to the effect set forth in Exhibit B hereto, including
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the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in
accordance with Rule 144, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to the effect set
forth in Exhibit B hereto, including the certifications, certificates and
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Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the Company or
any of its Subsidiaries, a certificate to the effect set forth in Exhibit
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B hereto, including the certifications in item (3)(b) thereof; or
-
(G) if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the certifications
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in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
make available for delivery such Definitive Notes to the Persons in whose
names such Notes are so registered. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c)(i) shall bear the Private Placement Legend and shall be
subject to all restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.06(i)(A) and (C) hereof, a beneficial
interest in the Regulation S Temporary Global Note may not be exchanged for a
Definitive Note or transferred to a person who takes delivery thereof in the
form of a Definitive Note prior to (x) the expiration of the Restricted Period
and (y) the receipt by the Registrar of any certificates determined by the
Company to be required pursuant to Rule 903(c)(3)(ii)(B) under the Securities
Act, except in the case of a transfer pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 903 or Rule
904.
(iii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive Note
or may transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note only if:
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(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Agreement and the holder of
such beneficial interest, in the case of an exchange, or the transferee,
in the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Agreement;
(C) such transfer is effected by a Restricted Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with the
Registration Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a Definitive Note
that does not bear the Private Placement Legend, a certificate from such
holder in the form of Exhibit C hereto, including the certifications in
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item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted Global
Note proposes to transfer such beneficial interest to a Person who shall
take delivery thereof in the form of a Definitive Note that does not bear
the Private Placement Legend, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof;
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and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
(iv) Beneficial Interests in Unrestricted Global Notes to Unrestricted
Definitive Notes. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause
the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall execute
and the Trustee shall authenticate and make available for delivery to the
Person designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall be registered in such
name or names and in such authorized denomination or denominations as the
holder of such beneficial interest shall instruct the Registrar through
instructions from the Depositary and the Participant or Indirect Participant.
The Trustee shall make available for delivery such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Definitive Note
issued in exchange for a beneficial interest pursuant to this Section
2.06(c)(iii) shall not bear the Private Placement Legend.
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(d) Transfer and Exchange of Definitive Notes for Beneficial Interests.
(i) Restricted Definitive Notes to Beneficial Interests in Restricted
Global Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or to
transfer such Restricted Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note,
a certificate from such Holder in the form of Exhibit C hereto, including
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the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to a QIB
in accordance with Rule 144A, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (1) thereof;
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(C) if such Restricted Definitive Note is being transferred to a Non-
U.S. Person in an offshore transaction in accordance with Rule 903 or
Rule 904, a certificate to the effect set forth in Exhibit B hereto,
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including the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred pursuant
to an exemption from the registration requirements of the Securities Act
in accordance with Rule 144, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a) thereof;
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(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to the effect set
forth in Exhibit B hereto, including the certifications, certificates and
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Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (3)(b) thereof;
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or
(G) if such Restricted Definitive Note is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
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certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note, in the case of clause (c) above, the
Regulation S Global Note, and in all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted
Global Notes. A Holder of a Restricted Definitive Note may exchange such Note
for a beneficial interest in an
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Unrestricted Global Note or transfer such Restricted Definitive Note to a
Person who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Agreement and the Holder, in
the case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Agreement;
(C) such transfer is effected by a Restricted Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance with the
Registration Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to exchange such
Notes for a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit C hereto, including the
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certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to transfer such
Notes to a Person who shall take delivery thereof in the form of a
beneficial interest in the Unrestricted Global Note, a certificate from
such Holder in the form of Exhibit B hereto, including the certifications
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in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests or if the Applicable Procedures so require, an Opinion of
Counsel in form reasonably acceptable to the Registrar to the effect that
such exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note or
transfer such Definitive Notes to a Person who takes delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note at any time.
Upon receipt of a request for such an exchange or transfer, the Trustee shall
cancel the applicable Unrestricted Definitive Note and increase or cause to be
increased the aggregate principal amount of one of the Unrestricted Global
Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest in a Global Note is effected pursuant to subparagraphs
(ii)(B), (ii)(D) or (iii) above at a time when an
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Unrestricted Global Note has not yet been issued, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02 hereof,
the Trustee shall authenticate one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of Definitive Notes so
transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance
with the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of
transfer or exchange, the requesting Holder shall present or surrender to the
Registrar the Definitive Notes duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing. In addition, the
requesting Holder shall provide any additional certifications, documents and
information, as applicable, required pursuant to the following provisions of
this Section 2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the name of
Persons who take delivery thereof in the form of a Restricted Definitive Note
if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
---------
including the certifications in item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904,
then the transferor must deliver a certificate in the form of Exhibit B
---------
hereto, including the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other exemption from
the registration requirements of the Securities Act, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including the
---------
certifications, certificates and Opinion of Counsel required by item (3)
thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Agreement and the Holder, in
the case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Company;
(B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Agreement;
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(C) any such transfer is effected by a Restricted Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance with
the Registration Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes proposes to
exchange such Notes for an Unrestricted Definitive Note, a certificate from
such Holder in the form of Exhibit C hereto, including the certifications
---------
in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the form
of an Unrestricted Definitive Note, a certificate from such Holder in the
form of Exhibit B hereto, including the certifications in item (4) thereof;
---------
and, in each such case set forth in this subparagraph (D), if the Registrar
so requests, an Opinion of Counsel in form reasonably acceptable to the
Company to the effect that such exchange or transfer is in compliance with
the Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A
Holder of Unrestricted Definitive Notes may transfer such Notes to a Person
who takes delivery thereof in the form of an Unrestricted Definitive Note.
Upon receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions from
the Holder thereof.
(f) Exchange Offer.
Upon the occurrence of the Exchange Offer in accordance with the
Registration Agreement, the Company shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.02 hereof, the Trustee shall
authenticate (i) one or more Unrestricted Global Notes in an aggregate principal
amount equal to the principal amount of the beneficial interests in the
Restricted Global Notes tendered for acceptance by Persons that certify in the
applicable Letters of Transmittal or via the Depositary's book-entry system that
(x) they are not broker-dealers, (y) they are not participating in a
distribution of the Exchange Notes and (z) they are not affiliates (as defined
in Rule 144) of the Company, and accepted for exchange in the Exchange Offer and
(ii) Definitive Notes in an aggregate principal amount equal to the principal
amount of the Restricted Definitive Notes accepted for exchange in the Exchange
Offer. Concurrently with the issuance of such Notes, the Trustee shall cause
the aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and make available for delivery to the Persons designated by the
Holders of Definitive Notes so accepted Definitive Notes in the appropriate
principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
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(A) Except as permitted by subparagraph (B) below, each Global Note
and each Definitive Note (and all Notes issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the
following form:
"THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT, (3) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE
144 THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS."
(B) Notwithstanding the foregoing, any Global Note or Definitive Note
issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii), (d)(ii),
(d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and all Notes
issued in exchange therefor or substitution thereof) shall not bear the
Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL
NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a)
OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE
FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS
GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES,
ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER
NOR THE BENEFICIAL OWNERS OF THIS
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<PAGE>
REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF
INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes.
At such time as all beneficial interests in a particular Global Note
have been exchanged for Definitive Notes or a particular Global Note has been
redeemed, repurchased or canceled in whole and not in part, each such Global
Note shall be returned to or retained and canceled by the Trustee in accordance
with Section 2.11 hereof. At any time prior to such cancellation, if any
beneficial interest in a Global Note is exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Note or for Definitive Notes, the principal amount of Notes represented
by such Global Note shall be reduced accordingly and an endorsement shall be
made on such Global Note by the Trustee or by the Depositary at the direction of
the Trustee to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note, such other Global Note
shall be increased accordingly and an endorsement shall be made on such Global
Note by the Trustee or by the Depositary at the direction of the Trustee to
reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Global Notes and Definitive Notes
upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial interest
in a Global Note or to a Holder of a Definitive Note for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or similar governmental charge
payable upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.11, 4.10,
4.15 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of or
exchange any Note selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any registration of
transfer or exchange of Global Notes or Definitive Notes shall be the valid
obligations of the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Global Notes or Definitive Notes
surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the opening
of business 15 days before the day of the mailing of notice of redemption
under Section 3.02 hereof and ending at the close of business on such day, (B)
to register the transfer of or to exchange any Note so selected for redemption
in whole or in part, except the unredeemed portion of any Note being redeemed
in part or (c) to register the transfer of or to exchange a Note between a
record date and the next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Note, the Trustee, any Agent and the Company may deem and treat the Person in
whose name any Note is registered as the
33
<PAGE>
absolute owner of such Note for the purpose of receiving payment of principal
of and interest on such Notes and for all other purposes, and none of the
Trustee, any Agent or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes in
accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel required
to be submitted to the Registrar pursuant to this Section 2.06 to effect a
registration of transfer or exchange may be submitted by facsimile.
(ix) Each Holder of a Note agrees to indemnify the Trustee and the
Registrar against any liability that may result from the transfer, exchange or
assignment of such Holder's Note in violation of any provision of this
Indenture and/or applicable United States federal or state securities law.
(x) Neither the Trustee nor the Registrar shall have any obligation or duty
to monitor, determine or inquire as to compliance with any restrictions on
transfer imposed under this Indenture or under applicable law with respect to
any transfer of any interest in any Note (including any transfers between or
among Participants or beneficial owners of interests in any Global Note) other
than to require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when expressly
required by the terms of, this Indenture, and to examine the same to determine
substantial compliance as to form with the express requirements hereof.
Section 2.07. Replacement Notes
If any mutilated Note is surrendered to the Trustee or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
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If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser or protected purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that the Trustee knows are so owned shall be so disregarded.
Section 2.10. Temporary Notes
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes (subject to the record retention requirements of the Exchange
Act). Certification of the destruction of all canceled Notes shall be delivered
to the Company. The Company may not issue new Notes to replace Notes that it
has paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee
in writing of the amount of defaulted interest proposed to be paid on each Note
and the date of the proposed payment. The Company
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shall fix or cause to be fixed each such special record date and payment date,
provided that no such special record date shall be less than 10 days prior to
the related payment date for such defaulted interest. At least 15 days before
the special record date, the Company (or, upon the written request of the
Company, the Trustee in the name and at the expense of the Company) shall mail
or cause to be mailed to Holders a notice that states the special record date,
the related payment date and the amount of such interest to be paid.
Section 2.13. CUSIP Numbers.
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of
redemption as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such numbers either as
printed on the Notes or as contained in any notice of a redemption and that
reliance may be placed only on the other identification numbers printed on the
Notes, and any such redemption shall not be affected by any defect in or the
omission of such numbers. The Company will promptly notify the Trustee of any
change in the CUSIP numbers.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed, (iv) the redemption price and (v) the CUSIP
numbers of the Notes to be redeemed.
Section 3.02. Selection of Notes to Be Redeemed
If less than all of the Notes are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Notes to be redeemed
or purchased among the Holders of the Notes in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption
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Subject to the provisions of Section 3.11 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant to
which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of the
CUSIP number, if any, listed in such notice or printed on the Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
Section 3.05. Deposit of Redemption Price
Prior to 10 a.m. on the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the redemption
price of and accrued interest on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Notes to be redeemed.
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If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in Sections 3.07(b) and (c) below and in
Section 3.08 hereof, the Notes shall not be redeemable at the Company's option
prior to December 1, 2003. Thereafter, the Notes shall be subject to redemption
at any time or from time to time at the option of the Company, in whole or in
part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest and Special Interest, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on December 1 of the years indicated below:
PERCENTAGE OF
PRINCIPAL
YEAR AMOUNT
---- -------------
2003...................................... 105.250%
2004...................................... 103.500%
2005...................................... 101.750%
2006 and thereafter....................... 100.000%
(b) Notwithstanding the foregoing, at any time prior to December 1,
2001, the Company may, on any one or more occasions, redeem up to 35% of the
aggregate principal amount of Notes originally issued pursuant to this Indenture
at a redemption price of 110.500% of the principal amount thereof, plus accrued
and unpaid interest and Special Interest, if any, thereon to the redemption
date, with the net cash proceeds received from one or more Equity Offerings made
by the Company or GCL (to the extent such net cash proceeds received by GCL were
contributed to the Company as common equity capital); provided that at least 65%
of the aggregate principal amount of Notes originally issued pursuant to this
Indenture remain outstanding immediately after the occurrence of any such
redemption. The Company may make any such redemption upon not less than 30 nor
more than 60 days' notice (but in no event more than 90 days after the closing
of the related Equity Offering). Any such notice may be given prior to the
completion of the related Equity Offering and any such redemption may,
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at the Company's discretion, be subject to the satisfaction of one or more
conditions precedent, including, but not limited to, the completion of the
related Equity Offering.
(c) In addition, at any time prior to December 1, 2003, the Notes may
also be redeemed at the option of the Company, in whole but not in part, upon
the occurrence of a Change of Control, upon not less than 30 nor more than 60
days' prior notice (but in no event may any such redemption occur more than 90
days after the occurrence of such Change of Control) mailed by first-class mail
to each Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest thereon to the date of redemption (the "Redemption Date").
(d) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
Section 3.08. Optional Tax Redemption
The Notes will be subject to redemption at the option of the Company
or a successor corporation at any time, in whole but not in part, upon not less
than 30 nor more than 60 days' notice, at a redemption price equal to the
principal amount thereof, plus accrued and unpaid interest thereon to the
redemption date if, as a result of any change in or amendment to the laws or any
regulations or ruling promulgated thereunder of (x) Bermuda or any political
subdivision or governmental authority thereof or therein having the power to
tax, (y) any jurisdiction, other than the United States, from or through which
payment on the Notes is made by the Company or a successor corporation, or its
paying agent in its capacity as such or any political subdivision or
governmental authority thereof or therein having the power to tax or (z) any
other jurisdiction, other than the United States, in which the Company or a
successor corporation is organized, or any political subdivision or governmental
authority thereof or therein having the power to tax, or any change in the
official application or interpretation of such laws, regulations or rulings, or
any change in the official application or interpretation of, or any execution of
or amendment to, any treaty or treaties affecting taxation to which such
jurisdiction (or such political subdivision or taxing authority) is a party (a
"Change in Tax Law"), which becomes effective on or after the Issue Date, the
Company or a successor corporation is or would be required on the next
succeeding interest payment date to pay Additional Amounts with respect to the
Notes (as described under Section 3.09 hereof), and the payment of such
Additional Amounts cannot be avoided by the use of any reasonable measures
available to the Company or a successor corporation.
In addition, the Notes will be subject to redemption at the option of
the Company at any time, in whole but not in part, upon not less than 30 nor
more than 60 days' notice, at a redemption price equal to the principal amount
thereof, plus accrued and unpaid interest thereon to the redemption date, if the
Person formed by a consolidation or amalgamation of the Company or into which
the Company is merged or to which the Company conveys, transfers or leases its
properties and assets substantially as an entirety is required, as a consequence
of such consolidation, amalgamation, merger, conveyance, transfer or lease and
as a consequence of a Change in Tax Law occurring after the date of such
consolidation, amalgamation, merger, conveyance, transfer or lease, to pay
Additional Amounts in respect of any tax, assessment or governmental charge
imposed on any Holder of Notes.
Section 3.09. Payment of Additional Amounts.
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If any deduction or withholding for any present or future taxes,
assessments or other governmental charges of (x) Bermuda or any political
subdivision or governmental authority thereof or therein having power to tax,
(y) any jurisdiction, other than the United States, from or through which
payment on the Notes is made by the Company or a successor corporation, or its
paying agent in its capacity as such or any political subdivision or
governmental authority thereof or therein having the power to tax or (z) any
other jurisdiction, other than the United States, in which the Company or a
successor corporation is organized, or any political subdivision or governmental
authority thereof or therein having the power to tax shall at any time be
required by such jurisdiction (or any such political subdivision or taxing
authority) in respect of any amounts to be paid by the Company or a successor
corporation under the Notes, the Company or a successor corporation will pay to
each Holder of Notes as additional interest, such additional amounts
("Additional Amounts") as may be necessary in order that the net amounts paid to
such holder of such Notes who, with respect to any such tax, assessment or other
governmental charge, is not resident in, or a citizen of, such jurisdiction,
after such deduction or withholding, shall be not less than the amount specified
in such Notes to which such Holder is entitled; provided, however, that the
Company or a successor corporation shall not be required to make any payment of
Additional Amounts for or on account of:
(a) Any tax, assessment or other governmental charge that would not have
been imposed but for (i) the existence of any present or former connection
between such Holder (or between a fiduciary, settlor, beneficiary, member or
shareholder of, or possessor of a power over, such Holder, if such Holder is an
estate, trust, partnership, limited liability company or corporation) and the
taxing jurisdiction or any political subdivision or territory or possession
thereof or area subject to its jurisdiction, including, without limitation, such
Holder (or such fiduciary, settlor, beneficiary, member, shareholder or
possessor) being or having been a citizen or resident thereof or being or having
been present or engaged in a trade or business therein or having or having had a
permanent establishment therein, (ii) the presentation of a Note (where
presentation is required) for payment on a date more than 30 days after (x) the
date on which such payment became due and payable or (y) the date on which
payment thereof is duly provided for, whichever occurs later, or (iii) the
presentation of a Note for payment in Bermuda or any political subdivision
thereof or therein, unless such Note could not have been presented for payment
elsewhere;
(b) Any estate, inheritance, gift, sales, transfer, personal property or
similar tax, assessment or other governmental charge;
(c) Any tax, assessment or other governmental charge that is payable
otherwise than by withholding from payment of principal of, premium, if any, or
any interest on the Notes;
(d) Any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure by the Holder or the beneficial owner of the
Note to comply with a request of the Company addressed to the Holder (i) to
provide information, documents or other evidence concerning the nationality,
residence or identity of the Holder or such beneficial owner or (ii) to make and
deliver any declaration or other similar claim (other than a claim for refund of
a tax, assessment or other governmental charge withheld by the Company) or
satisfy any information or reporting requirements, which, in the case of (i) or
(ii), is required or imposed by a statute, treaty, regulation or administrative
practice of the taxing jurisdiction as a precondition to exemption from all or
part of such tax, assessment or other governmental charge; or
(e) Any combination of items (a), (b), (c) and (d) above;
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nor shall Additional Amounts be paid with respect to any payment of
the principal of, or any premium or interest on, any Note to any Holder who is a
fiduciary or partnership or limited liability company or other than the sole
beneficial owner of such payment to the extent such payment would be required by
the laws of (x) Bermuda or any political subdivision or governmental authority
thereof or therein having the power to tax, (y) any jurisdiction, other than the
United States, from or through which payment on the Notes is made by the Company
or a successor corporation, or its paying agent in its capacity as such or any
political subdivision or governmental authority thereof or therein having the
power to tax or (z) any other jurisdiction, other than the United States, in
which the Company or a successor corporation is organized, or any political
subdivision or governmental authority thereof or therein having the power to tax
to be included in the income for tax purposes of a beneficiary or settlor with
respect to such fiduciary or a member of such partnership, limited liability
company or beneficial owner who would not have been entitled to such Additional
Amounts had it been the Holder of such Note.
The Company shall provide the Trustee with the official acknowledgment
of the relevant taxing authority (or, if such acknowledgment is not available, a
certified copy thereof) evidencing the payment of the withholding taxes, if any,
by the Company. Copies of such documentation shall be made available to the
Holders of the Notes or the Paying Agent, as applicable, upon request therefor.
All references in this Indenture to principal of, premium, if any, and
interest on the Notes shall include any Additional Amounts payable by the
Company in respect of such principal, such premium, if any, and such interest.
Section 3.10. Mandatory Redemption.
The Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Notes.
Section 3.11. Offer to Purchase by Application of Excess Proceeds.
In the event that, pursuant to Section 4.10 hereof, the Company shall
be required to commence an Asset Sale Offer, it shall follow the procedures
specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain
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all instructions and materials necessary to enable such Holders to tender Notes
pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all
Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall
state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.11
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may only elect to have all of such Note purchased and may not elect
to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by Holders
exceeds the Offer Amount, the Company shall select the Notes to be purchased on
a pro rata basis (with such adjustments as may be deemed appropriate by the
Company so that only Notes in denominations of $1,000, or integral multiples
thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before 10:00 a.m. on the Purchase Date, the Company shall, to
the extent lawful, accept for payment, on a pro rata basis to the extent
necessary, the Offer Amount or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating that
such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.11. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering Holder
an amount equal to the purchase price of the Notes tendered by such Holder and
accepted by the Company for purchase, and the Company shall promptly issue a new
Note, and the Trustee, upon written request from the Company shall authenticate
and mail or deliver such new Note to such Holder, in a principal amount
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equal to any unpurchased portion of the Note surrendered. Any Note not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Asset Sale Offer
on the Purchase Date.
Other than as specifically provided in this Section 3.11, any purchase
pursuant to this Section 3.11 shall be made pursuant to the provisions of
Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest and Special Interest, if any, on the Notes on the dates and
in the manner provided in the Notes. Principal, premium, if any, and interest
and Special Interest, if any, shall be considered paid on the date due if the
Paying Agent, if other than the Company or a Subsidiary thereof, holds as of
10:00 a.m. Eastern Time on the due date money deposited by the Company in
immediately available funds and designated for and sufficient to pay all
principal, premium, if any, and interest and Special Interest, if any, then due.
The Company shall pay all Special Interest, if any, in the same manner on the
dates and in the amounts set forth in the Registration Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Special Interest (without regard to any applicable grace period) at the same
rate to the extent lawful.
Section 4.02. Maintenance of Office or Agency.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03 hereof.
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Section 4.03. Reports.
(a) Whether or not required by the rules and regulations of the SEC, so
long as any Notes are outstanding, the Company will furnish to the Trustee and
the Holders of the Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the SEC on Forms 10-Q and 10-
K if the Company was required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" that
describes the financial condition and results of operations of the Company and
its consolidated Subsidiaries and, with respect to the annual information only,
a report thereon by the Company's certified independent accountants, and (ii)
all current reports that would be required to be filed with the SEC on Form 8-K
if the Company was required to file such reports, in each case within the time
periods specified in the SEC's rules and regulations. In addition, following the
consummation of the Exchange Offer contemplated by the Registration Agreement,
whether or not required by the rules and regulations of the SEC, the Company
will file a copy of all such information and reports with the SEC for public
availability within the time periods specified in the SEC's rules and
regulations (unless the SEC will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. The Company shall be deemed to have satisfied such requirements if GCL
files and provides reports, documents and information of the types otherwise so
required by the SEC, in each case within the applicable time periods, and the
Company is not required by the SEC to file such reports, documents and
information separately under the applicable rules and regulations of the SEC
(after giving effect to any exemptive relief) because of the filings by GCL. The
Company shall at all times comply with TIA (S) 314(a).
(b) For so long as any Series A Notes remain outstanding (and regardless of
the penultimate sentence of paragraph (a) above), the Company shall furnish to
the Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 90 days after the end
of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto. For
purposes of this paragraph, such compliance shall be determined without regard
to any period of grace or requirement of notice provided under this Indenture.
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(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) hereof shall be accompanied by
a written statement of the Company's independent public accountants (who shall
be a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding, deliver
to the Trustee, forthwith upon any Officer becoming aware of any Default or
Event of Default, an Officers' Certificate specifying such Default or Event of
Default and what action the Company is taking or proposes to take with respect
thereto.
Section 4.05. Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or
make any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company or
any of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or to the Company or a Restricted Subsidiary of the
Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company (other than any such Equity Interests owned by
the Company or any Wholly Owned Restricted Subsidiary of the Company); (iii)
make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated to
the Notes, except a payment of interest or principal at Stated Maturity; or (iv)
make any
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Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted Payments"),
unless:
(a) at the time of and after giving effect to such Restricted Payment, no
Default or Event of Default shall have occurred and be continuing or would occur
as a consequence thereof;
(b) in the case of clauses (i), (ii) and (iii) above, and, in the case of
any Restricted Investment that is not an Investment in a Permitted Business, the
Company would, at the time of such Restricted Payment and after giving pro forma
effect thereto as if such Restricted Payment had been made at the beginning of
the applicable four-quarter period, have been permitted to incur at least $1.00
of additional Indebtedness pursuant to either clause (i) or (ii) of the first
paragraph of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
and any Permitted Investments made pursuant to clause (h) of the definition of
Permitted Investments after the date hereof (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (vi), (vii) and (viii) (but, in the case
of clause (viii), only to the extent that such Restricted Payments are reflected
as an expense on the income statements of GCL) of the next succeeding
paragraph), is less than the sum, without duplication, of (i) the remainder of
(x) 100% of the cumulative Consolidated Cash Flow (or, in the case Consolidated
Cash Flow shall be negative, less 100% of such deficit) from the date hereof
through the last day of the last full fiscal quarter immediately preceding such
Restricted Payment minus (y) the product of 1.5 times the cumulative
Consolidated Interest Expense from the Issue Date through the last day of the
last full fiscal quarter immediately preceding such Restricted Payment, plus
(ii) 100% of the aggregate net cash proceeds and the fair market value (as
determined in good faith by the Board of Directors) of property or assets
received by the Company since the Issue Date as a contribution to its common
equity capital or from the issue or sale of Equity Interests of the Company
(other than Disqualified Stock and including the Preferred Stock) or from the
issue or sale of Disqualified Stock or debt securities of the Company that have
been converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of the
Company), plus the amount of cash or the fair market value (as determined above)
of property or assets received by the Company or any Restricted Subsidiary upon
such conversion or exchange, plus (iii) the aggregate amount equal to the net
reduction in Investments in Unrestricted Subsidiaries resulting from (x)
dividends, distributions, interest payments, return of capital, repayments of
Investments or other transfers of assets to the Company or any Restricted
Subsidiary from any Unrestricted Subsidiary, (y) proceeds realized by the
Company or any Restricted Subsidiary upon the sale of such Investment to a
Person other than GCL, the Company or any Subsidiary of the Company, or (z) the
redesignation of any Unrestricted Subsidiary as a Restricted Subsidiary, not to
exceed in the case of any of the immediately preceding clauses (x), (y) or (z)
the aggregate amount of Restricted Investments made by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary after the Issue Date, plus
(iv) to the extent that any Restricted Investment that was made after the Issue
Date is sold for cash or otherwise liquidated or repaid for cash, the amount of
proceeds (net of any cost of disposition) equal to the initial amount of such
Restricted Investment.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the foregoing provisions;
(ii) the redemption, repurchase, retirement, defeasance or other acquisition of
any subordinated Indebtedness or Equity Interests of the Company in exchange
for, or out of the net cash proceeds of the substantially concurrent sale (other
than to a Subsidiary of the Company)
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of, other Equity Interests of the Company (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for any
such redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (c)(ii) of the preceding paragraph; (iii) the
defeasance, redemption, retirement, repurchase or other acquisition of
Indebtedness with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness; (iv) the payment of any dividend by a Restricted
Subsidiary of the Company to the holders of its Equity Interests on a pro rata
basis; (v) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of GCL, the Company or any of its Restricted
Subsidiaries held by any member of GCL's, the Company's or such Restricted
Subsidiary's management; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$10.0 million in any twelve-month period (with unused amounts being carried over
to succeeding twelve-month periods, subject to a maximum of $15.0 million in any
twelve-month period); (vi) Investments in the PC-1 Companies and Global Access
Limited in an aggregate amount not to exceed $275.0 million; (vii) Investments
made with the net cash proceeds received from an Equity Offering made by the
Company or GCL (but only to the extent such net cash proceeds received by GCL
were contributed to the Company as common equity capital) (provided that the
amount of any such net cash proceeds that are utilized for any such Investment
shall be excluded from clause (c)(ii) of the preceding paragraph ) plus 50% of
the net gain realized and not otherwise included in Consolidated Cash Flow from
the sale of Restricted Investments; (viii) the payment of any dividend or the
making of any distribution to GCL by the Company or any Restricted Subsidiary to
pay or permit GCL to pay any GCL Expenses or any Related Taxes; and (ix) other
Restricted Payments in an aggregate amount not to exceed $25.0 million.
The Board of Directors may not designate any Subsidiary of the Company
(other than a newly created Subsidiary in which no Investment has previously
been made (other than the amount required to capitalize such Subsidiary in
connection with its organization) as an Unrestricted Subsidiary (a
"Designation") unless: (i) no Default or Event of Default shall have occurred
and be continuing at the time of or after giving effect to such Designation;
(ii) the Company would, immediately after giving effect to such Designation,
have been permitted to incur at least $1.00 of additional Indebtedness pursuant
to either clause (i) or (ii) of the first paragraph of Section 4.09 hereof and
(iii) the Company would not be prohibited under this Indenture from making an
Investment at the time of such Designation (assuming the effectiveness of such
Designation for purposes of clauses (a) and (b) of the first paragraph of this
Section 4.07) in an amount equal to the fair market value of the net Investment
of the Company or any other Restricted Subsidiary in such Subsidiary on such
date.
In the event of any such Designation, all outstanding Investments
owned by the Company and its Restricted Subsidiaries in the Subsidiary so
designated will be deemed to be an Investment made as of the time of such
Designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant or Permitted Investments, as applicable.
All such outstanding Investments will be deemed to constitute Restricted
Payments in an amount equal to the fair market value of such Investments at the
time of such Designation.
A Designation may be revoked (a "Revocation") by a resolution of the
Board of Directors delivered to the Trustee, provided that the Company will not
make any Revocation unless: (i) no Default or Event of Default shall have
occurred and be continuing at the time of or after giving effect to such
Designation; and (ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at such
time, have been permitted to be incurred at such time for all purposes under
this Indenture.
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The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or (such
Restricted Subsidiary, as the case may be) pursuant to the Restricted Payment.
The fair market value of any asset(s) or securities that are required to be
valued by this covenant shall be determined in good faith by the Board of
Directors (such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $15.0 million).
Section 4.08. Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries. However, the foregoing
restrictions shall not apply to encumbrances or restrictions existing under or
by reason of (a) Existing Indebtedness as in effect on the date hereof, (b)
agreements as in effect as of the date hereof, (c) Indebtedness incurred in
accordance with clause (g), (h), (i), (k) or (n) of clause (ii) of Section 4.09
hereof, provided that such encumbrances or restrictions are customary with
respect to such types of Indebtedness (as determined in good faith by the Chief
Financial Officer of the Company) and provided further that the provisions of
such Indebtedness do not prohibit payments by the Company of principal, premium,
interest and Additional Amounts pursuant to the terms of the Notes and this
Indenture, (e) this Indenture and the Notes, (f) applicable law, (g) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided, that in the case of Indebtedness, such Indebtedness was permitted by
the terms of this Indenture to be incurred, (h) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (i) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (j) any
agreement for the sale or other disposition of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale or other
disposition, (k) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those contained in
the agreements governing the Indebtedness being refinanced, (l) Liens securing
Indebtedness otherwise permitted to be incurred pursuant to the provisions of
Section 4.12 hereof that limit the right of the Company or any of its Restricted
Subsidiaries to dispose of the assets subject to such Lien, (m) provisions with
respect to the disposition or distribution of assets or property in joint
venture agreements and other similar agreements entered into in the ordinary
course of business and (n) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business.
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock.
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The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and the Company shall not issue any Disqualified Stock and shall not
permit any of its Restricted Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company may incur Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock and its Restricted
Subsidiaries may incur Indebtedness or issue Disqualified Stock or preferred
stock if either:
(i) the Consolidated Leverage Ratio is less than 5.5 to 1 (prior to
December 1, 2001), or 5.0 to 1.0 (subsequent to December 1, 2001); or
(ii) the Consolidated Capital Ratio is less than 2.5 to 1.0.
Notwithstanding the foregoing, the provisions of the paragraph set forth
above will not apply to the incurrence of any of the following items of
Indebtedness (collectively, "Permitted Indebtedness"):
(a) The incurrence by the Company of Indebtedness represented by the Notes;
(b) The incurrence by the Company or any of its Restricted Subsidiaries of
Existing Indebtedness;
(c) The incurrence of Indebtedness by the Company to any Restricted
Subsidiary or Indebtedness of any Restricted Subsidiary to the Company or any
other Restricted Subsidiary (but only for so long as such Indebtedness is held
by the Company or such Restricted Subsidiary);
(d) The issuance by the Company of preferred stock to any Restricted
Subsidiary or the issuance by any Restricted Subsidiary of preferred stock to
the Company or any other Restricted Subsidiary (but only for so long as such
preferred stock is held by the Company or such Restricted Subsidiary);
(e) The incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness pursuant to acquisitions of capacity made in the ordinary course of
business;
(f) The incurrence by the Company or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest or foreign currency exchange rate risk with respect to any floating
rate Indebtedness that is permitted by the terms of this Indenture to be
outstanding;
(g) The incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness of a Restricted Subsidiary incurred and outstanding on the date on
which such Restricted Subsidiary was acquired by the Company; provided, however,
that at the time such Restricted Subsidiary is acquired by the Company (giving
effect to such acquisition), the Company would have been able to incur $1.00 of
additional Indebtedness pursuant to the immediately preceding paragraph;
(h) The incurrence by the Company or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace Indebtedness (other than intercompany
Indebtedness) that was permitted by this Indenture to be incurred under the
first paragraph hereof or clauses (a), (b), (g), (h), (i), (k), (n) or (o) of
this paragraph;
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(i) The incurrence by the Company or any of its Restricted Subsidiaries of
additional Indebtedness not otherwise permitted to be incurred pursuant to this
paragraph in an aggregate principal amount (or accreted value, as applicable) at
any time outstanding, including all Permitted Refinancing Indebtedness incurred
to refund, refinance or replace any Indebtedness incurred pursuant to this
clause (i), not to exceed $50.0 million;
(j) The incurrence of Indebtedness by a Receivables Entity in a Qualified
Receivables Transaction, provided that the proceeds thereof are applied in
accordance with Section 4.10 hereof.
(k) The incurrence by the Company or any Restricted Subsidiary of Purchase
Money Indebtedness, provided that the amount of such Purchase Money Indebtedness
does not exceed 100% of the cost of construction, installation, acquisition,
lease, development, design, engineering, financing, testing, start-up, upgrade,
completion or improvement of assets (together with related costs and expenses)
used in the business of the Company or such Restricted Subsidiary;
(l) Letters of Credit that are cash collateralized;
(m) Letters of Credit in an aggregate principal amount equal to $200.0
million less the amount of outstanding Indebtedness under clause (n) of this
paragraph;
(n) The incurrence by the Company or any of its Restricted Subsidiaries of
revolving credit Indebtedness in an aggregate amount not to exceed $200.0
million at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (n); and
(o) The guarantee by the Company or any Restricted Subsidiary of
Indebtedness of the Company or any Restricted Subsidiary of the Company that was
permitted to be incurred by another clause of this Section 4.09.
Section 4.10. Asset Sales
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, consummate any Asset Sale, unless (i)
the Company (or such Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined in good faith by the Board of Directors (including as to
the value of all noncash consideration) and set forth in an Officer's
Certificate delivered to the Trustee) of the assets or Equity Interests issued
or sold or otherwise disposed of and (ii) at least 75% of the consideration
therefor is in the form of cash and/or Cash Equivalents, and (iii) the Net
Proceeds received by the Company (or such Restricted Subsidiary, as the case may
be) from such Asset Sale are applied within 360 days following the receipt of
such Net Proceeds (a) first, to the extent the Company (or such Restricted
Subsidiary, as the case may be) elects, to the redemption or repurchase of
outstanding Senior Debt and (b) to the extent of the balance of such Net
Proceeds after application as described in (a) above and to the extent the
Company (or such Restricted Subsidiary, as the case may be) elects, to reinvest,
or enter into a legally binding agreement to reinvest, such Net Proceeds (or any
portion thereof) in assets that are used or useful in a Permitted Business. The
balance of such Net Proceeds, after the application of such Net Proceeds as
described in the immediately preceding clauses (a) and (b), shall constitute
"Excess Proceeds."
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When the aggregate amount of Excess Proceeds equals or exceeds $15.0
million (taking into account income earned on such Excess Proceeds), the Company
will be required to make an offer to all Holders of Notes and pari passu
Indebtedness (an "Asset Sale Offer") to purchase the maximum principal amount of
Notes and pari passu Indebtedness that may be purchased out of the Excess
Proceeds, at a purchase price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest and Special Interest,
if any, thereon to the date of purchase, in accordance with the procedures set
forth in Article 3 of this Indenture and the agreements governing such pari
passu Indebtedness. To the extent that any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by this Indenture. If the aggregate
principal amount of Notes and pari passu Indebtedness tendered into such Asset
Sale Offer surrendered by Holders thereof exceeds the amount of Excess Proceeds,
the Trustee shall select the Notes and pari passu Indebtedness to be purchased
on a pro rata basis. Upon completion of such Asset Sale Offer, the amount of
Excess Proceeds shall be reset at zero for purposes of the first sentence of
this paragraph.
The amount of (x) any liabilities (as shown on the Company's (or such
Restricted Subsidiary's, as the case may be) most recent balance sheet) of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to an
agreement that releases the Company or any Restricted Subsidiary from all
liability in respect thereof, (y) Indebtedness of any Restricted Subsidiary that
is no longer a Restricted Subsidiary as a result of such Asset Sale, to the
extent that the Company and each other Restricted Subsidiary are released from
any guarantee of payment of the principal amount of such Indebtedness in
connection with such Asset Sale and (z) any securities, notes or other
obligations received by the Company (or such Restricted Subsidiary, as the case
may be) from such transferee that are contemporaneously (subject to ordinary
settlement periods) converted by the Company (or such Restricted Subsidiary, as
the case may be) into cash and/or Cash Equivalents (to the extent of the cash
and/or Cash Equivalents received), will be deemed to be cash and/or Cash
Equivalents for purposes of this provision.
Section 4.11. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are not materially less
favorable to the Company or the relevant Restricted Subsidiary than those that
would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $25.0 million, the Company delivers to the
Trustee a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction is approved by a majority of the
disinterested members of the Board of Directors and an opinion as to the
fairness to the Holders of such Affiliate Transaction from a financial point of
view is obtained from an accounting, appraisal or investment banking firm of
national standing. Notwithstanding the foregoing, the following items shall not
be deemed to be Affiliate Transactions: (i) (a) the entering into, maintaining
or performance of any employment contract, collective bargaining agreement,
benefit plan, program or arrangement, related trust agreement or any other
similar arrangement for or with any employee, officer
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or director heretofore or hereafter entered into in the ordinary course of
business, including vacation, health, insurance, deferred compensation,
retirement, savings or other similar plans, (b) the payment of compensation,
performance of indemnification or contribution obligations, or an issuance,
grant or award of stock, options, or other equity-related interests or other
securities, to employees, officers or directors in the ordinary course of
business, (c) any transaction with an officer or director in the ordinary course
of business not involving more than $250,000 in any one case, or (d) Management
Advances and payments in respect thereof, (ii) transactions between or among the
Company and/or its Restricted Subsidiaries or any Receivables Entity, (iii)
payment of reasonable directors fees, (iv) any sale or other issuance of Equity
Interests (other than Disqualified Stock) of the Company, (v) Affiliate
Transactions in effect or approved by the Board of Directors on the Issue Date,
including any amendments thereto (provided that the terms of such amendments are
not materially less favorable to the Company or the relevant Restricted
Subsidiary than the terms of such agreement prior to such amendment), (vi)
transactions with respect to capacity or dark fiber between the Company or any
Restricted Subsidiary and any Unrestricted Subsidiary or other Affiliate and
joint sales and marketing pursuant to an agreement or agreements between the
Company or any Restricted Subsidiary and any Unrestricted Subsidiary or other
Affiliate (provided that in the case of this clause (vi), such agreements are on
terms that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that could have been obtained at the time of such
transaction in an arm's-length transaction with an unrelated third party or, in
the case of a transaction with an Unrestricted Subsidiary, are either (x)
entered into in connection with a transaction involving the selection by a
customer of cable system capacity entered into in the ordinary course of
business or (y) involve the provision by the Company or a Restricted Subsidiary
to an Unrestricted Subsidiary of sales and marketing services, operations,
administration and maintenance services or development services for which the
Company or such Restricted Subsidiary receives a fair rate of return (as
determined by the Board of Directors and set forth in an Officers' Certificate
delivered to the Trustee) above its expenses of providing such services; (vii)
any transaction entered into in the ordinary course of business between the
Company or any Restricted Subsidiary and any Unrestricted Subsidiary or any
Affiliate (provided that in the case of this clause (vii), such agreements are
on terms that are no less favorable to the Company or the relevant Restricted
Subsidiary than those that could have been obtained at the time of such
transaction in an arm's-length transaction with an unrelated third party) and
(viii) Restricted Payments that are permitted by Section 4.07 hereof.
Section 4.12. Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien of any kind securing Indebtedness which is pari passu
with or subordinated to the Notes (other than Permitted Liens) upon any of their
property or assets, now owned or hereafter acquired, unless all payments due
under this Indenture and the Notes are secured on an equal and ratable basis
with (or prior to, in the case of Indebtedness which is subordinated to the
Notes) the obligations so secured until such time as such obligations are no
longer secured by a Lien.
Section 4.13. Business Activities.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in any business other than a Permitted Business.
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Section 4.14. Payments For Consent.
Neither the Company nor any of its Restricted Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
or is paid to all Holders of the Notes that consent, waive or agree to amend
such terms or provisions of this Indenture or the Notes in the time frame set
forth in the solicitation documents relating to such consent, waiver or
agreement.
Section 4.15. Offer to Repurchase Upon Change of Control.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
shall have the right to require the Company to purchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at a purchase price in
cash (the "Change of Control Payment") equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest and Special Interest, if any,
thereon to the date of purchase (subject to the right of Holders of record on
the relevant record date to receive interest due on the relevant interest
payment date); provided, however, that the Company shall not be obligated to
repurchase Notes pursuant to this covenant in the event that it has exercised
its rights to redeem all of the Notes as described in Section 3.07 hereof.
Within 30 days following any Change of Control, the Company shall mail a notice
to each Holder describing the transaction or transactions that constitute the
Change of Control and offering to purchase Notes on the date specified in such
notice, which date shall be no earlier than 30 and no later than 60 days from
the date such notice is mailed (the "Change of Control Payment Date"), in
accordance with the procedures required by Section 3.07 hereof and described in
such notice.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations to the extent such
laws and regulations are applicable in connection with the purchase of Notes as
a result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with any of the provisions of this
Section 4.15, the Company shall comply with the applicable securities laws and
regulations and will be deemed not to have breached its obligations under this
Section 4.15 by virtue thereof.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee Notes so accepted together with an Officer's Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail or deliver to each Holder of
Notes so tendered the Change of Control Payment for such Notes, and the Trustee
shall promptly authenticate and mail or deliver (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of Notes surrendered, if any; provided that each such new
Note will be in a principal amount of $1,000 or an integral multiple thereof.
Prior to complying with the provisions of this Section 4.15, but in any event
within 90 days following a Change of Control the Company will either repay all
outstanding Senior Debt or obtain the requisite consents, if any under all
agreements governing outstanding Senior Debt to permit the repurchase of Notes
required by this Section 4.15. The Company will publicly announce the result of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
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(c) Notwithstanding anything in the contrary to this Section 4.15, the
Company shall not be required to make a Change of Control Offer upon the
occurrence of Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in Section 3.07 hereof applicable to a Change of Control
Offer made by the Company, and purchases all Notes validly tendered and not
withdrawn under such Change of Control Offer.
To the extent that the provisions of any securities laws or
regulations conflict with the Asset Sale provisions of this Indenture, the
Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the Asset Sale
provisions of this Indenture.
Section 4.16. Money for Payments to Be Held In Trust.
If the Company shall at any time act as its own Paying Agent, it will,
on or before each due date of the principal, premium, interest or Special
Interest, if any, with respect to the Notes, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal,
premium, interest or Special Interest, if any, so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein provided, and
will promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Notes, it will, on or before each due date of the principal, premium, interest
or Special Interest, if any, with respect to the Notes, deposit with a Paying
Agent a sum in same day funds (or New York Clearing House funds if such deposit
is made prior to the date on which such deposit is required to be made)
sufficient to pay the principal, premium, interest or Special Interest, if any,
so becoming due (or at the option of the Company, payment of interest may be
mailed by check to the Holders of the Notes at their respective addresses set
forth in the register of Holders of Notes; provided that all payments with
respect to Notes represented by one or more permanent global Notes will be paid
by wire transfer of immediately available funds to the account of the Depository
Trust Company or any successor thereto) such sum to be held in trust for the
benefit of the Persons entitled to such principal, premium, interest or Special
Interest, if any, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of such action or any failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(a) hold all sums held by it for the payment of the principal of, premium,
if any, or interest on Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed of
as herein provided;
(b) give the Trustee notice of any default by the Company (or any other
obligor upon the Notes) in the making of any payment of principal, premium,
interest or Special Interest, if any;
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held in
trust by such Paying Agent; and
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(d) acknowledge, accept and agree to comply in all respects with the
provisions of this Indenture relating to the duties, rights and obligations of
such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
direct any Paying Agent to pay, to the Trustee all sums held in trust by the
Company or such Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal, premium, interest or
Special Interest, if any, with respect to a Note and remaining unclaimed for two
years after such principal, premium, if any, or interest has become due and
payable shall be paid to the Company at the request of the Company or (if then
held by the Company) shall be discharged from such trust; and the Holder of such
Note shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, shall at
the expense of the Company cause notice to be promptly sent to each Holder that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such notification any unclaimed
balance of such money then remaining will be repaid to the Company.
Section 4.17. No Senior Subordinated Debt
The Company shall not, directly or indirectly, incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinated or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes.
ARTICLE 5.
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
The Company shall not, directly or indirectly, consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, convey or otherwise dispose of all or substantially all of its
properties or assets, in one or more related transactions, to another Person
unless: (i) the Company is the surviving corporation or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, conveyance or other disposition shall
have been made is a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia, or Bermuda; (ii)
the Person formed by or surviving any such consolidation or merger (if other
than the Company) or the Person to which such sale, assignment, transfer,
conveyance or other disposition shall have been made assumes all the obligations
of the Company under the Registration Agreement, the Notes and this Indenture
pursuant to a supplemental indenture in a form and substance reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no Default
or Event of Default exists; and (iv) except in the case of a merger of the
Company with or into a Wholly Owned Restricted Subsidiary of the Company, the
Company or the Person formed by or surviving any such consolidation or merger
(if other than the Company), or to which such sale, assignment, transfer,
conveyance or other disposition shall have been
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made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, immediately after such transaction and
after giving pro forma effect thereto and any related financing transactions as
if the same had occurred at the beginning of the applicable four-quarter period,
be permitted to incur at least $1.00 of additional Indebtedness pursuant to
either clause (i) or (ii) of the first paragraph Section 4.09 hereof. The
Company shall not, directly or indirectly, lease all or substantially all of its
properties or assets, in one or more related transactions, to any other Person.
The provisions of this Section 5.01 will not be applicable to a sale,
assignment, transfer, conveyance or other disposition of assets between or among
the Company and its Wholly Owned Restricted Subsidiaries.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
"Event of Defaults" are:
(i) default for 30 days in the payment when due of interest on, or
Special Interest, if any, with respect to, the Notes (whether or not prohibited
by Article 10 hereof);
(ii) default in the payment when due of the principal of, or premium,
if any, on, the Notes (whether or not prohibited by Article 10 hereof);
(iii) failure by the Company or any of its Restricted Subsidiaries to
comply with Sections 4.07, 4.09, 4.10 or 4.15 hereof;
(iv) failure by the Company or any of its Restricted Subsidiaries for
60 days after notice to comply with any of its other agreements in this
Indenture or the Notes;
(v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the Issue Date, which default results in the acceleration of
such Indebtedness prior to its express maturity and, in
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each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness the maturity of which has been
so accelerated, aggregates $25.0 million or more;
(vi) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments not subject to appeal aggregating in excess of $25.0 million
(net of applicable insurance coverage which is acknowledged in writing by the
insurer), which judgments are not paid, discharged or stayed for a period of 60
days;
(vii) the Company or any of its Restricted Subsidiaries:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an
involuntary case,
(c) consents to the appointment of a custodian of it or for all or
substantially all of its property,
(d) makes a general assignment for the benefit of its creditors, or
(e) generally is not paying its debts as they become due; and
(viii) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(a) is for relief against the Company or any of its Restricted
Subsidiaries;
(b) appoints a custodian of the Company or any of its Restricted
Subsidiaries or for all or substantially all of the property of the Company or
any of its Restricted Subsidiaries; or
(c) orders the liquidation of the Company or any of its Restricted
Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
Section 6.02. Acceleration.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, if an Event of Default specified in clause (vii) or (viii) of Section
6.01 hereof occurs with respect to the Company, any of its Restricted
Subsidiaries that constitutes a Significant Subsidiary or any group of
Restricted Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary, all outstanding Notes shall be due and payable immediately without
further action or notice. The Holders of a majority in aggregate principal
amount of the then outstanding Notes by written notice to the Trustee may on
behalf of all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium that has
become due solely because of the acceleration) have been cured or waived.
If an Event of Default occurs by reason of any willful action (or
inaction) taken (or not taken) by or on behalf of the Company with the intention
of avoiding payment of the premium that the
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Company would have had to pay if the Company then had elected to redeem the
Notes pursuant to Section 3.07 hereof, then, upon acceleration of the Notes, an
equivalent premium shall also become and be immediately due and payable, to the
extent permitted by law, anything in this Indenture or in the Notes to the
contrary notwithstanding. If an Event of Default occurs prior to December 1,
2003 by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then, upon acceleration of the
Notes, an additional premium shall also become and be immediately due and
payable in an amount, for each of the years beginning on December 1 of the years
set forth below, as set forth below (expressed as a percentage of the aggregate
principal amount to the date of payment that would otherwise be due but for the
provisions of this sentence):
YEAR PERCENTAGE
---- ----------
1998................................ 114.000%
1999................................ 112.250%
2000................................ 110.500%
2001................................ 108.750%
2002................................ 107.000%
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest and Special Interest, if any, on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Special Interest, if any, or interest
on, the Notes (including in connection with an offer to purchase). Upon any
such waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability.
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Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights
of another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Special
Interest, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(i) or (ii) hereof
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium and Special Interest, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Company
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to participate as a member, voting or otherwise, of
any official committee of creditors appointed in such matter and shall be
entitled and empowered to collect, receive and distribute any money or other
property payable or
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deliverable on any such claims and any custodian in any such judicial proceeding
is hereby authorized by each Holder to make such payments to the Trustee, and in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof. To
the extent that the payment of any such compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.07 hereof out of the estate in any such proceeding,
shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties that the Holders may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Special Interest, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Special Interest, if any, and
interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder of
a Note pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee.
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(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only those duties
that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may conclusively
rely, as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However, the Trustee shall
examine the certificates and opinions to determine whether or not they conform
to the requirements of this Indenture (but need not confirm or investigate the
accuracy of mathematical calculations or other facts stated therein or
otherwise verify the contents thereof).
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section 7.01;
(ii) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or expense
including reasonable attorneys' fees that might be incurred by it in compliance
with such request or direction.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document. The
Trustee shall receive and retain financial reports and statements of
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the Company as provided herein, but it shall have no duty to review or analyze
such reports or statements to determine compliance with covenants or other
obligations of the Company.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel of its selection and the advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
(a) The Trustee shall not be deemed to have notice of any Default or Event
of Default unless a Responsible Officer of the Trustee has actual knowledge
thereof or unless written notice of any event which is in fact such a default is
received by the Trustee at the Corporate Trust Office of the Trustee, and such
notice references the Notes and this Indenture.
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(b) If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest on any Note, the Trustee may withhold the notice if and so long as a
committee of its Responsible Officers in good faith determines that withholding
the notice is in the interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each December 15 beginning with the December 15
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA (S) 313(a) (but if no
event described in TIA (S) 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA (S) 313(b)(2). The Trustee shall also transmit by mail
all reports as required by TIA (S) 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA (S) 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation for its acceptance of this Indenture and services hereunder as the
parties shall agree from time to time. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Company (including
this Section 7.07) and defending itself against any claim (whether asserted by
the Company or any Holder or any other person) or liability in connection with
the exercise or performance of any of its powers or duties hereunder, except to
the extent any such loss, liability or expense may be attributable to its
negligence or bad faith. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. Failure by the Trustee to so notify the
Company shall not relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld or
delayed.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
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To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(viii) or (ix) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to
the extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10 hereof, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become
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effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. The successor Trustee shall mail a
notice of its succession to Holders of the Notes. The retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee,
provided all sums owing to the Trustee hereunder have been paid and subject to
the Lien provided for in Section 7.07 hereof. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Company's obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the successor corporation without any further act shall be the successor
Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100.0
million as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA
(S) 310(b).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and
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(b) below, and to have satisfied all of its obligations under such Notes and
this Indenture (and the Trustee, on demand of and at the expense of the Company,
shall execute proper instruments acknowledging the same), except for the
following provisions which shall survive until otherwise terminated or
discharged hereunder: (a) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due from the trust referred to below; (b) the
Company's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust; (c) the rights, powers, trusts, duties and immunities of the
Trustee, and the Company's obligations in connection therewith; and (d) the
Legal Defeasance provisions of this Indenture. Subject to compliance with this
Article 8, the Company may exercise its option under this Section 8.02
notwithstanding the prior exercise of its option under Section 8.03 hereof.
Section 8.03. Covenant Defeasance.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Article 5 and in Sections 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, and 4.17 hereof with
respect to the outstanding Notes on and after the date the conditions set forth
in Section 8.04 are satisfied (hereinafter, "Covenant Defeasance"), and the
Notes shall thereafter be deemed not "outstanding" for the purposes of any
direction, waiver, consent or declaration or act of Holders (and the
consequences of any thereof) in connection with such covenants, but shall
continue to be deemed "outstanding" for all other purposes hereunder (it being
understood that such Notes shall not be deemed outstanding for accounting
purposes). For this purpose, Covenant Defeasance means that, with respect to
the outstanding Notes, the Company may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01
hereof, but, except as specified above, the remainder of this Indenture and such
Notes shall be unaffected thereby. In addition, upon the Company's exercise
under Section 8.01 hereof of the option applicable to this Section 8.03, subject
to the satisfaction of the conditions set forth in Section 8.04 hereof, Sections
6.01(iii) through 6.01(vi) hereof shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit, or cause to be deposited, with
the Trustee, in trust, for the benefit of the Holders of the Notes, cash in U.S.
dollars, non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, and Special
Interest, if any, and interest on the outstanding Notes on the stated maturity
thereof or on the applicable redemption date, as the case may be, and the
Company must specify whether the Notes are being defeased to maturity or to a
particular redemption date;
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(b) in the case of Legal Defeasance, the Company must deliver to the
Trustee an Opinion of Counsel in the United States reasonably acceptable to the
Trustee confirming that the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or since the Issue Date,
there has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the outstanding Notes will not recognize income, gain or
loss for federal income tax purposes as a result of such Legal Defeasance, and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal Defeasance had
not occurred;
(c) in the case of Covenant Defeasance, the Company must deliver to the
Trustee an Opinion of Counsel in the United States reasonably acceptable to the
Trustee confirming that the Holders of the outstanding Notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
Covenant Defeasance, and such Holders will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default resulting
from the borrowing of funds to be applied to such deposit) or insofar as Events
of Default from bankruptcy or insolvency events are concerned, at any time in
the period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound;
(f) the Company must deliver to the Trustee an opinion of counsel in the
United States reasonably acceptable to the Trustee to the effect that after the
91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights and remedies generally;
(g) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of the Notes over other creditors of the Company, or with
the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others;
(h) the Company must deliver to the Trustee an Opinion of Counsel in
Bermuda reasonably acceptable to the Trustee to the effect that the Holders of
the outstanding Notes will not be adversely affected under Bermuda law; and
(i) the Company must deliver to the Trustee an Officers' Certificate and an
Opinion of Counsel in the United States reasonably acceptable to the Trustee,
each stating that all conditions precedent provided for or relating to Legal
Defeasance or Covenant Defeasance, as applicable, have been complied with.
Section 8.05. Deposited Money and Government Securities to be Held in Trust;
Other Miscellaneous Provisions.
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Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 8.06. Repayment to Company.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, interest
or Special Interest, if any, on any Note and remaining unclaimed for two years
after such principal, and premium, if any, or interest has become due and
payable shall be paid to the Company on its request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as a secured creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in the New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its
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obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the money held by the Trustee or Paying
Agent.
Section 8.08. Survival.
The Trustee's rights under this Article 8 shall survive termination of
this Indenture.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 hereof, the Company and the Trustee may
amend or supplement this Indenture or the Notes without the consent of any
Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Notes by a successor to the Company pursuant to Article 5 hereof;
(d) to make any change that would provide any additional rights or benefits
to the Holders of the Notes or that does not adversely affect the legal rights
hereunder of any Holder of the Note; or
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company in the execution of any
amended or supplemental indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Section 3.11, 4.10 and
4.15 hereof) and the Notes with the consent of the Holders of at least a
majority in principal amount of the then outstanding Notes then outstanding
voting as a single class (including consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Notes), and, subject to
Sections 6.04 and 6.07 hereof, any existing Default or Event of Default (other
than a Default or Event of Default in the payment of the principal of, premium,
if any, or interest on the Notes, except a payment default resulting from an
acceleration that has been rescinded) or compliance with any provision of this
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes voting as a single
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class (including consents obtained in connection with a tender offer or exchange
offer for, or purchase of, the Notes).
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental indenture
unless such amended or supplemental indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes then
outstanding voting as a single class may waive compliance in a particular
instance by the Company with any provision of this Indenture or the Notes.
However, without the consent of each Holder affected, an amendment or waiver
under this Section 9.02 may not (with respect to any Notes held by a non-
consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the
Notes, other than redemption provisions relating to Sections 3.11, 4.10 or 4.15
hereof;
(c) reduce the rate of, or change the time for, payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of, or
premium or Special Interest, if any, or interest on the Notes (except a
rescission of acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the then outstanding Notes and a waiver of the
payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to waivers
of past Defaults or the rights of Holders of Notes to receive payments of
principal of or premium, if any, or interest or Special Interest, if any, on the
Notes;
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(g) waive a redemption payment with respect to any Note, other than a
payment required by Section 3.11, 4.10 or 4.15 hereof;
(h) make any change in the foregoing amendment and waiver provisions.
In addition, any amendment to Article 10 hereof shall require the
consent of the Holders of at least 75% in aggregate principal amount of the
Notes then outstanding if such amendment would adversely affect the rights of
the Holders of the Notes.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental indenture that complies with the TIA as
then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon an Officer's Certificate and an Opinion
of Counsel stating that the execution of such amended or supplemental indenture
is authorized or permitted by this Indenture and that such amendment is the
legal, valid and binding obligation of the Company, enforceable against them in
accordance with their terms, subject to customary exceptions, and complies with
the provisions hereof (including Section 9.03).
ARTICLE 10.
SUBORDINATION
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Section 10.01. Agreement to Subordinate.
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by the Note is subordinated in right of payment, to
the extent and in the manner provided in this Article, to the prior payment in
full of all Senior Debt (whether outstanding on the date hereof or hereafter
created, incurred, assumed or guaranteed), and that the subordination is for the
benefit of the holders of Senior Debt.
Section 10.02. Certain Definitions.
"Designated Senior Debt" means (i) Indebtedness represented by the
Senior Notes, (ii) Indebtedness pursuant to paragraph (n) of the second full
paragraph of Section 4.09 hereof and (iii) any Senior Debt permitted to be
incurred under the Indenture the principal amount of which is $25.0 million or
more and that has been designated by the Company as "Designated Senior Debt."
"Permitted Junior Securities" means Equity Interests in the Company or
debt securities that are subordinated to all Senior Debt (and any debt
securities issued in exchange for Senior Debt) to substantially the same extent
as, or to a greater extent than, the Notes are subordinated to Senior Debt
pursuant to this Indenture.
"Representative" means the indenture trustee or other trustee, agent
or representative for any Senior Debt.
"Senior Debt" means (i) all Indebtedness represented by the Senior
Notes, (ii) any other Indebtedness permitted to be incurred by the Company under
the terms of this Indenture, unless the instrument under which such Indebtedness
is incurred expressly provides that it is on a parity with or subordinated in
right of payment to the Notes and (iii) all Obligations with respect to the
foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Debt will not include (w) any liability for federal, state, local or other taxes
owed or owing by the company, (x) any Indebtedness of the Company to any of its
Subsidiaries or other Affiliates, (y) any trade payables or (z) any Indebtedness
that is incurred in violation of the Senior Notes Indenture.
A distribution may consist of cash, securities or other property, by
set off or otherwise.
Section 10.03. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities:
(A) (1) holders of Senior Debt shall be entitled to receive payment
in full of all Obligations due in respect of such Senior Debt (including
interest after the commencement of any such proceeding at the rate
specified in the applicable Senior Debt) before Holders shall be entitled
to receive any payment with respect to the Notes (except that Holders may
receive and retain (i) Permitted Junior Securities and (ii) payments and
other distributions made from any defeasance trust created pursuant to
Section 8.01 hereof); and
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(B) (2) until all Obligations with respect to Senior Debt (as
provided in subsection (1) above) are paid in full, in cash any
distribution to which Holders would be entitled but for this Article
shall be made to holders of Senior Debt (except that Holders, in cash may
receive and retain (i) Permitted Junior Securities and (ii) payments and
other distributions made from any defeasance trust created pursuant to
Section 8.01 hereof), as their interests may appear.
Section 10.04. Default on Designated Senior Debt.
The Company may not make any payment or distribution to the Trustee or
any Holder in respect of Obligations with respect to the Notes and may not
acquire from the Trustee or any Holder for cash or property (other than (i)
Permitted Junior Securities and (ii) payments and other distributions made from
any defeasance trust created pursuant to Section 8.01 hereof):
(i) a default in the payment of any principal of, premium if any, or
interest or Designated Senior Debt occurs and is continuing beyond any
applicable grace period in the agreement, indenture or other document
governing such Designated Senior Debt; or
(ii) a default, other than a payment default, on Designated Senior Debt
occurs and is continuing that then permits holders of the Designated Senior
Debt to accelerate its maturity and the Trustee receives a notice of the
default (a "Payment Blockage Notice") from a Person who may give it pursuant
to Section 10.12 hereof. If the Trustee receives any such Payment Blockage
Notice, no subsequent Payment Blockage Notice shall be effective for purposes
of this Section unless and until (i) at least 360 days shall have elapsed
since the effectiveness of the immediately prior Payment Blockage Notice and
(ii) all scheduled payments of principal, premium and Special Interest, if
any, and interest on the Notes that have come due have been paid in full in
cash. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made,
the basis for a subsequent Payment Blockage Notice unless such default shall
have been waived for a period of not less than 90 days.
The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(C) (1) in the case of a payment default, the date upon which the
default is cured or waived, or
(D) (2) in the case of a default referred to in Section 10.04(ii)
hereof, the easier of the date on which such default is cured or waived
or 179 days after the date on which the applicable Payment Blockage
Notice is received if the maturity of such Designated Senior Debt has not
been accelerated,
if this Article otherwise permits the payment, distribution or acquisition at
the time of such payment or acquisition.
Section 10.05. Acceleration of Notes.
If payment of the Notes is accelerated because of an Event of Default,
the Company shall promptly notify holders of Senior Debt of the acceleration.
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Section 10.06. When Distribution Must Be Paid Over.
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Notes at a time when the Trustee or such
Holder, as applicable, has actual knowledge that such payment is prohibited by
Section 10.04 hereof, such payment shall be held by the Trustee or such Holder,
in trust for the benefit of, and shall be paid forthwith over and delivered,
upon written request, to, the holders of Senior Debt as their interests may
appear or their Representative under the indenture or other agreement (if any)
pursuant to which Senior Debt may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Senior Debt remaining unpaid to the extent necessary to pay such
Obligations in full in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article 10, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or the Company
or any other Person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article 10, except if such payment is made as a
result of the willful misconduct or gross negligence of the Trustee.
Section 10.07. Notice by Company.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article, but failure to give such
notice shall not affect the subordination of the Notes to the Senior Debt as
provided in this Article.
Section 10.08. Subrogation.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to the Holders have been applied to the payment
of Senior Debt. A distribution made under this Article to holders of Senior
Debt that otherwise would have been made to Holders is not, as between the
Company and Holders, a payment by the Company on the Notes.
Section 10.09. Relative Rights.
This Article defines the relative rights of Holders and holders of
Senior Debt. Nothing in this Indenture shall:
(E) (1) impair, as between the Company and Holders, the obligation
of the Company, which is absolute and unconditional, to pay principal of
and interest and Special Interest, if any, on the Notes in accordance
with their terms;
(F) (2) affect the relative rights of Holders and creditors of the
Company other than their rights in relation to holders of Senior Debt; or
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(G) (3) prevent the Trustee or any Holders from exercising its
available remedies upon a Default or Event of Default, subject to the
rights of holders and owners of Senior Debt to receive distributions and
payments otherwise payable to Holders.
If the Company fails because of this Article to pay principal of or
interest on a Note on the due date, the failure is still a Default or Event of
Default.
Section 10.10. Subordination May Not Be Impaired by Company.
No right of any holder of Senior Debt to enforce the subordination of
the Indebtedness evidenced by the Notes shall be impaired by any act or failure
to act by the Company or any Holder or by the failure of the Company or any
Holder to comply with this Indenture.
Section 10.11. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Trustee and the Holders shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other Person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article 10.
Section 10.12. Rights of Trustee and Paying Agent.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article. Only the Company or a
Representative may give the notice. Nothing in this Article 10 shall impair the
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Debt with the same rights it would have if it were not Trustee. Any Agent may
do the same with like rights.
Section 10.13. Authorization to Effect Subordination.
Each Holder of a Note by the Holder's acceptance thereof authorizes
and directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as the Holder's attorney in fact for
any and all such purposes. If the Trustee does not file a proper proof of claim
or proof of debt in the form required in any proceeding referred to in Section
6.09 hereof at least 30 days before the
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expiration of the time to file such claim, the Representatives are hereby
authorized to file an appropriate claim for and on behalf of the Holders of the
Securities.
Section 10.14. Amendments.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Debt.
ARTICLE 11.
SATISFACTION AND DISCHARGE
Section 11.01. Satisfaction and Discharge of Indenture.
This Indenture shall be discharged and will cease to be of further
effect as to all Notes issued hereunder, when either
(a) all such Notes theretofore authenticated and delivered (except lost,
stolen or destroyed Notes which have been replaced or paid and Notes for whose
payment money has theretofore been deposited in trust and thereafter repaid to
the Company) have been delivered to the Trustee for cancellation; or
(b) (i) all such Notes not theretofore delivered to such Trustee for
cancellation have become due and payable by reason of the making
of a notice of redemption or otherwise or will become due and
payable within one year and the Company has irrevocably deposited
or caused to be deposited with such Trustee as trust funds in
trust an amount of money sufficient to pay and discharge the
entire Indebtedness on such Notes not theretofore delivered to
the Trustee for cancellation for principal, premium, accrued
interest and Special Interest, if any, to the date of maturity or
redemption;
(ii) no Default or Event of Default with respect to this Indenture or
the Notes shall have occurred and be continuing on the date of
such deposit or shall occur as a result of such deposit and such
deposit will not result in a breach or violation of, or
constitute a default under, any other instrument to which the
Company is a party or by which the Company is bound;
(iii) the Company has paid or caused to be paid all sums payable by
it under this Indenture; and
(iv) the Company has delivered irrevocable instructions to the Trustee
under this Indenture to apply the deposited money toward the
payment of such Notes at maturity or the redemption date, as the
case may be.
In addition, the Company must deliver an Officers' Certificate and an
Opinion of Counsel to the Trustee stating that all conditions precedent to
satisfaction and discharge have been satisfied.
Section 11.02. Application of Trust Money
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Subject to the provisions of the last paragraph of Section 4.19
hereof, all money deposited with the Trustee pursuant to Section 11.01 hereof
shall be held in trust and applied by it, in accordance with the provisions of
the Notes and this Indenture, to the payment, either directly or through any
Paying Agent (including the Company acting as Paying Agent) as the Trustee may
determine, to Persons entitled thereto, of the principal (and premium, if any),
interest and Special Interest, if any, for whose payment such money has been
deposited with the Trustee.
If the Trustee or Paying Agent is unable to apply any money or
Government Securities in accordance with Section 11.01 hereof by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Notes shall
be revived and reinstated as though such deposit had occurred pursuant to
Section 11.01 hereof; provided that if the Company has made any payment of
principal of, premium, if any, or interest on any Notes because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or
Government Securities held by the Trustee or Paying Agent.
ARTICLE 12.
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA (S) 318(c), the imposed duties shall control.
Section 12.02. Notices.
Any notice or communication by the Company or the Trustee to the
others is duly given if in writing and delivered in Person or mailed by first
class mail (registered or certified, return receipt requested), telecopier or
overnight air courier guaranteeing next day delivery, to the others' address:
If to the Company:
Global Crossing Holdings Ltd.
Wessex House
45 Reid Street
Hamilton HM 12
Telecopier No.: (441) 296-8606
Attention: Secretary of the Company
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Telecopier No.: (212) 455-2502
Attention: D. Rhett Brandon, Esq.
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If to the Trustee:
[Trustee]
[ ]
New York, New York [ ]
Telecopier No.:(212) [ ]
Attention: [ ]
With a copy to:
[Trustee's Counsel]
[ ]
New York, NY [ ]
Telecopier No.: (212) [ ]
Attention: [ ]
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA (S) 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it except that any notice or communication to the Trustee shall be
deemed to have been duly given to the Trustee when received at the Corporate
Trust Office of the Trustee.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 12.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
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Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, except with respect to the initial
authentication of Notes on the date of this Indenture, the Company shall furnish
to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA
(S) 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has or
they have made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.07. No Personal Liability of Directors, Officers, Employees and
Shareholders.
No past, present or future director, officer, employee, incorporator
or shareholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes, this Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder by accepting a Note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Notes.
Section 12.08. Governing Law.
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THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 12.09. Currency Indemnity.
U.S. dollars are the sole currency of account and payment for all sums
payable by the Company under or in connection with the Notes, including damages.
Any account received or recovered in a currency other than dollars (whether as a
result of, or the enforcement of, a judgment or order of a court of any
jurisdiction, in the liquidation, dissolution or other winding-up of the affairs
of the Company or otherwise) by any Holder of a Note in respect of any sum
expressed to be due to it from the Company shall only constitute a discharge to
the Company to the extent of the dollar amount which the recipient is able to
purchase with the amount so received or recovered in that other currency on the
date of that receipt or recovery (or, if it is not practicable to make that
purchase on that date, on the first date on which it is practicable to do so).
If that dollar amount is less than the dollar amount expressed to be due to the
recipient under any Note, the Company shall indemnify it against any loss
sustained by it as a result. In any event, the Company shall indemnify the
recipient against the cost of making any such purchase. For the purposes of this
paragraph, it will be sufficient for the Holder of a Note to certify in a
satisfactory manner (indicating the sources of information used) that it would
have suffered a loss had an actual purchase of dollars been made with the amount
so received in that other currency on the date of receipt or recovery (or, if a
purchase of dollars on such date had not been practicable, on the first date on
which it would have been practicable, it being required that the need for a
change of date be certified in the manner mentioned above). These indemnities
constitute a separate and independent obligation from the Company's other
obligations, shall give rise to a separate and independent cause of action,
shall apply irrespective of any indulgence granted by any Holder of a Note and
shall constitute in full force and effect despite any other judgment, order,
claim or proof for a liquidated amount in respect of any sum due under any Note.
Section 12.10. Consent to Jurisdiction and Service.
To the fullest extent permitted by applicable law, the Company hereby
irrevocably submits to the jurisdiction of any Federal or State court located in
the Borough of Manhattan in The City of New York, New York in any suit, action
or proceeding based on or arising out of or relating to this Agreement or any
Notes or Exchange Notes, and irrevocably agree that all claims in respect of
such suit or proceeding may be determined in any such court. The Company
irrevocably waives, to the fullest extent permitted by law, any objection which
they may have to the laying of the venue of any such suit, action or proceeding
brought in such a court and any claim that any suit, action or proceeding
brought in such a court has been brought in an inconvenient forum. The Company
agrees that final judgment in any such suit, action or proceeding brought in
such a court shall be conclusive and binding upon the Company and may be
enforced in the courts of Bermuda (or any other courts to the jurisdiction of
which the Company is subject) by a suit upon such judgment, provided that
--------
service of process is effected upon the Company in the manner specified herein
or as otherwise permitted by law. The Company hereby irrevocably designates and
appoints CT Corporation System, 1633 Broadway - 23rd Floor, New York, New York
(the "Process Agent"), as the authorized agent of the Company upon whom process
may be served in any such suit or proceeding, it being understood that the
designation and appointment of the Process Agent as such authorized agent shall
become effective immediately without any further action on the part of the
Company. The Company hereby represents to each Initial Purchaser that it has
notified the Process Agent of such designation and appointment and that the
Process Agent has accepted the same in writing. The Company hereby irrevocably
authorizes and directs the Process Agent to accept such
80
<PAGE>
service. The Company further agrees that service of process upon the Process
Agent and written notice of said service to the Company mailed by prepaid
registered first class mail or delivered to the Process Agent at its principal
office, shall be deemed in every respect effective service of process upon the
Company in any such suit or proceeding. Nothing herein shall affect the right of
any Initial Purchaser or any person controlling any Initial Purchaser to serve
process in any other matter permitted by law. The Company further agrees to take
any and all action, including the execution and filing of any and all such
documents and instruments as may be necessary to continue such designation and
appointment of the Process Agent in full force and effect so long as the Company
has any outstanding obligations under this Agreement, the Notes, the Exchange
Notes or this Indenture. To the extent that the Company has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service of note, attachment prior to judgment, attachment in
aid of execution, executor or otherwise) with respect to itself or its property,
the Company hereby irrevocably waives such immunity in respect of their
respective obligations under this Agreement, to the extent permitted by law.
Section 12.11. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Company or its Subsidiaries or of any other Person.
Any such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 12.12. Successors.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
Section 12.13. Severability.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 12.14. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 12.15. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Indenture signature pages(s) follow]
81
<PAGE>
[Indenture signature pages(s)]
Dated as of [ ]
Global Crossing Holdings Ltd.
By:
________________________
Name:
Title:
[TRUSTEE],
as Trustee
By:
________________________
Name:
Title:
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<PAGE>
EXHIBIT A-1
(Face of Note)
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" AS DEFINED IN RULE 501(A) (1), (2), (3) or (7) UNDER THE
SECURITIES ACT IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND THAT DELIVERS THE CERTIFICATE IN THE FORM OF EXHIBIT D TO THE
INDENTURE, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE
WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS.
A-1-1
<PAGE>
CUSIP ____________
10 1/2% [SERIES A] [SERIES B] SENIOR SUBORDINATED NOTES DUE 2008
No. $
GLOBAL CROSSING HOLDINGS LTD.
promises to pay to Cede & Co.
or registered assigns, the principal sum of
Dollars on December 1, 2008.
Interest Payment Dates: June 1 and December 1.
Record Dates: May 15 and November 15.
Global Crossing Holdings Ltd.
By:_____________________________
Name:
Title:
By:_____________________________
Name:
Title:
This is one of the
Notes referred to in the
within-mentioned Indenture:
[TRUSTEE],
as Trustee
By:_______________ Dated: [ ]
Name:
Title:
A-1-2
<PAGE>
(Back of Note)
10 1/2% [Series A] [Series B] Senior Subordinated Notes due 2008
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Global Crossing Holdings Ltd., a Bermuda company (the
"Company"), promises to pay interest on the principal amount of this Note at
10 1/2% per annum from [ ] until maturity and shall pay the Special Interest
payable pursuant to Section 5 of the Registration Agreement referred to below.
The Company shall pay interest and Special Interest semi-annually on June 1 and
December 1 of each year, or if any such day is not a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date"). Interest on the Notes
shall accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of issuance; provided that if there is no
existing Default or Event of Default relating to the payment of interest, and if
this Note is authenticated between a record date referred to on the face hereof
and the next succeeding Interest Payment Date, interest shall accrue from such
next succeeding Interest Payment Date; provided, further, that the first
Interest Payment Date shall be [ ]. The Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy Law) on overdue
principal and premium, if any, from time to time on demand at a rate that is
1.0% per annum in excess of the rate then in effect; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Special Interest (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest shall be computed on the basis of a 360-day year of
twelve 30-day months.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) and Special Interest to the Persons who are
registered Holders of Notes at the close of business on the May 15 or November
15 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes shall be payable as to principal, premium and Special Interest, if
any, and interest at the office or agency of the Company maintained for such
purpose within or outside of the City and State of New York, or, at the option
of the Company, payment of interest and Special Interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds shall
be required with respect to principal of and interest, premium and Special
Interest on, all Global Notes and all other Notes the Holders of which shall
have provided wire transfer instructions to the Company or the Paying Agent.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. Paying Agent and Registrar. Initially, United States Trust
Company of New York, the Trustee under the Indenture, shall act as Paying Agent
and Registrar. The Company may change any Paying Agent or Registrar without
notice to any Holder. The Company or any of its Restricted Subsidiaries may act
in any such capacity.
4. Indenture. The Company issued the Notes under an Indenture
dated as of [ ] ("Indenture") between the Company and the Trustee.
The terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust
A-1-3
<PAGE>
Indenture Act of 1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb) (the
"TIA"). The Notes are subject to all such terms, and Holders are referred to the
Indenture and the TIA for a statement of such terms. To the extent any provision
of this Note conflicts with the express provisions of the Indenture, the
provisions of the Indenture shall govern and be controlling. The Notes are
obligations of the Company limited to $500.0 million in aggregate principal
amount plus amounts, if any, issued to pay Special Interest on outstanding Notes
as set forth in paragraph 2 hereof.
5. Optional Redemption.
(a) Except as set forth in subparagraphs (b) and (c) below and in
Section 6 hereof, the Notes shall not be redeemable at the Company's option
prior to December 1, 2003. Thereafter, the Notes shall be subject to redemption
at any time or from time to time at the option of the Company, in whole or in
part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest and Special Interest, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on December 1 of the years indicated below:
Percentage of
PRINCIPAL
Year Amount
---- ------
2003........................................... 105.250%
2004........................................... 103.500%
2005........................................... 101.750%
2006 and thereafter............................ 100.000%
(b) Notwithstanding the foregoing, at any time prior to December 1,
2001, the Company may, on any one or more occasions, redeem up to 35% of the
aggregate principal amount of Notes originally issued pursuant to the Indenture
at a redemption price of 110.500% of the principal amount thereof, plus accrued
and unpaid interest thereon and Special Interest, if any, to the redemption
date, with the net cash proceeds received from one or more Equity Offerings made
by the Company or GCL or (to the extent such net cash proceeds received by GCL
were contributed to the Company as common equity capital); provided that at
least 65% of the aggregate principal amount of Notes originally issued pursuant
to the Indenture remain outstanding immediately after the occurrence of any such
redemption. The Company may make any such redemption upon not less than 30 nor
more than 60 days' notice (but in no event more than 90 days after the closing
of the related Equity Offering). Any such notice may be given prior to the
completion of the related Equity Offering and any such redemption may, at the
Company's discretion, be subject to the satisfaction of one or more conditions
precedent, including, but not limited to, the completion of the related Equity
Offering.
(c) In addition, at any time prior to December 1, 2003, the Notes may
also be redeemed at the option of the Company, in whole but not in part, upon
the occurrence of a Change of Control, upon not less than 30 nor more than 60
days' prior notice (but in no event may any such redemption occur more than 90
days after the occurrence of such Change of Control) mailed by first-class mail
to each Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest, if any, to, the date of redemption.
A-1-4
<PAGE>
(d) Any redemption pursuant to this Section 5 shall be made pursuant
to the provisions of Sections 3.01 through 3.06 of the Indenture.
6. Optional Tax Redemption
The Notes shall be subject to redemption at the option of the Company
or a successor corporation at any time, in whole but not in part, upon not less
than 30 nor more than 60 days' notice, at a redemption price equal to the
principal amount thereof, plus accrued and unpaid interest thereon to the
redemption date if, as a result of any change in or amendment to the laws or any
regulations or ruling promulgated thereunder of (x) Bermuda or any political
subdivision or governmental authority thereof or therein having the power to
tax, (y) any jurisdiction, other than the United States, from or through which
payment on the Notes is made by the Company or a successor corporation, or its
paying agent in its capacity as such or any political subdivision or
governmental authority thereof or therein having the power to tax or (z) any
other jurisdiction, other than the United States, in which the Company or a
successor corporation is organized, or any political subdivision or governmental
authority thereof or therein having the power to tax, or any change in the
official application or interpretation of such laws, regulations or rulings, or
any change in the official application or interpretation of, or any execution of
or amendment to, any treaty or treaties affecting taxation to which such
jurisdiction (or such political subdivision or taxing authority) is a party (a
"Change in Tax Law"), which becomes effective on or after the Issue Date, the
Company or a successor corporation is or would be required on the next
succeeding interest payment date to pay Additional Amounts with respect to the
Notes (as described under Section 7 hereof), and the payment of such Additional
Amounts cannot be avoided by the use of any reasonable measures available to the
Company or a successor corporation.
In addition, the Notes shall be subject to redemption at the option of
the Company at any time, in whole but not in part, upon not less than 30 nor
more than 60 days' notice, at a redemption price equal to the principal amount
thereof, plus accrued and unpaid interest thereon to the redemption date, if the
Person formed by a consolidation or amalgamation of the Company or into which
the Company is merged or to which the Company conveys, transfers or leases its
properties and assets substantially as an entirety is required, as a consequence
of such consolidation, amalgamation, merger, conveyance, transfer or lease and
as a consequence of a Change in Tax Law occurring after the date of such
consolidation, amalgamation, merger, conveyance, transfer or lease, to pay
Additional Amounts in respect of any tax, assessment or governmental charge
imposed on any Holder of Notes.
7. Payment of Additional Amounts.
If any deduction or withholding for any present or future taxes,
assessments or other governmental charges of (x) Bermuda or any political
subdivision or governmental authority thereof or therein having power to tax,
(y) any jurisdiction, other than the United States, from or through which
payment on the Notes is made by the Company or a successor corporation, or its
paying agent in its capacity as such or any political subdivision or
governmental authority thereof or therein having the power to tax or (z) any
other jurisdiction, other than the United States, in which the Company or a
successor corporation is organized, or any political subdivision or governmental
authority thereof or therein having the power to tax shall at any time be
required by such jurisdiction (or any such political subdivision or taxing
authority) in respect of any amounts to be paid by the Company or a successor
corporation under the Notes, the Company or a successor corporation shall pay to
each Holder of Notes as additional interest, such additional amounts
("Additional Amounts") as may be necessary in order that the net amounts paid to
such Holder of such Notes who, with respect to any such tax, assessment or other
governmental charge, is not resident in, or a citizen of, such jurisdiction,
after such deduction or
A-1-5
<PAGE>
withholding, shall be not less than the amount specified in such Notes to which
such Holder is entitled; provided, however, that the Company or a successor
corporation shall not be required to make any payment of Additional Amounts for
or on account of:
(a) Any tax, assessment or other governmental charge that would not have
been imposed but for (i) the existence of any present or former connection
between such Holder (or between a fiduciary, settlor, beneficiary, member or
shareholder of, or possessor of a power over, such Holder, if such Holder is an
estate, trust, partnership, limited liability company or corporation) and the
taxing jurisdiction or any political subdivision or territory or possession
thereof or area subject to its jurisdiction, including, without limitation, such
Holder (or such fiduciary, settlor, beneficiary, member, shareholder or
possessor) being or having been a citizen or resident thereof or being or having
been present or engaged in a trade or business therein or having or having had a
permanent establishment therein, (ii) the presentation of a Note (where
presentation is required) for payment on a date more than 30 days after (x) the
date on which such payment became due and payable or (y) the date on which
payment thereof is duly provided for, whichever occurs later, or (iii) the
presentation of a Note for payment in Bermuda or any political subdivision
thereof or therein, unless such Note could not have been presented for payment
elsewhere;
(b) Any estate, inheritance, gift, sales, transfer, personal property or
similar tax, assessment or other governmental charge;
(c) Any tax, assessment or other governmental charge that is payable
otherwise than by withholding from payment of principal of, premium, if any, or
any interest on the Notes;
(d) Any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure by the Holder or the beneficial owner of the
Note to comply with a request of the Company addressed to the Holder (i) to
provide information, documents or other evidence concerning the nationality,
residence or identity of the Holder or such beneficial owner or (ii) to make and
deliver any declaration or other similar claim or satisfy any information or
reporting requirements, which, in the case of (i) or (ii), is required or
imposed by a statute, treaty, regulation or administrative practice of the
taxing jurisdiction as a precondition to exemption from all or part of such tax,
assessment or other governmental charge; or
(e) Any combination of items (a), (b), (c) and (d) above;
nor shall Additional Amounts be paid with respect to any payment of the
principal of, or any premium or interest on, any Note to any Holder who is a
fiduciary or partnership or limited liability company or other than the sole
beneficial owner of such payment to the extent such payment would be required by
the laws of (x) Bermuda or any political subdivision or governmental authority
thereof or therein having the power to tax, (y) any jurisdiction, other than the
United States, from or through which payment on the Notes is made by the Company
or a successor corporation, or its paying agent in its capacity as such or any
political subdivision or governmental authority thereof or therein having the
power to tax or (z) any other jurisdiction, other than the United States, in
which the Company or a successor corporation is organized, or any political
subdivision or governmental authority thereof or therein having the power to tax
to be included in the income for tax purposes of a beneficiary or settlor with
respect to such fiduciary or a member of such partnership, limited liability
company or beneficial owner who would not have been entitled to such Additional
Amounts had it been the Holder of such Note.
A-1-6
<PAGE>
The Company shall provide the Trustee with the official acknowledgment
of the relevant taxing authority (or, if such acknowledgment is not available, a
certified copy thereof) evidencing the payment of the withholding taxes, if any,
by the Company. Copies of such documentation shall be made available to the
Holders of the Notes or the Paying Agent, as applicable, upon request therefor.
All references herein and in the Indenture to principal of, premium,
if any, and interest on the Notes shall include any Additional Amounts payable
by the Company in respect of such principal, such premium, if any, and such
interest.
8. Mandatory Redemption.
The Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Notes.
9. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, the Company shall make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest and Special Interest thereon, if any, to the date of repurchase
(the "Change of Control Payment"); provided, however, that the Company shall not
be obligated to repurchase Notes pursuant to this subparagraph in the event that
it has exercised its rights to redeem all of the Notes as described in Section
5(c) hereof. Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder setting forth the procedures governing the Change
of Control Offer as required by the Indenture.
(b) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, consummate any Asset Sale unless, (i)
the Company (or such Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined in good faith by the Board of Directors (including as to
the value of all noncash consideration) and set forth in an Officers'
Certificate delivered to the Trustee) of the assets or Equity Interests issued
or sold or otherwise disposed of and (ii) at least 75% of the consideration
therefor is in the form of cash and/or Cash Equivalents, and (iii) the Net
Proceeds received by the Company (or such Restricted Subsidiary, as the case may
be) from such Asset Sale are applied within 360 days following the receipt of
such Net Proceeds (a) first, to the extent the Company (or such Restricted
Subsidiary, as the case may be) elects, to the redemption or repurchase of
outstanding Senior Debt and (b) second, to the extent of the balance of such Net
Proceeds after application as described in (a) above and to the extent the
Company (or such Restricted Subsidiary, as the case may be) elects, to reinvest,
or enter into a legally binding agreement to reinvest, such Net Proceeds (or any
portion thereof) in assets that are used or useful in a Permitted Business. The
balance of such Net Proceeds, after the application of such Net Proceeds as
described in the immediately preceding clauses (a) and (b), shall constitute
"Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals or exceeds
$15.0 million (taking into account income earned on such Excess Proceeds), the
Company shall make an offer to all Holders of Notes and pari passu Indebtedness
(an "Asset Sale Offer") to purchase the maximum principal amount of Notes and
pari passu Indebtedness that may be purchased out of the Excess Proceeds, at a
purchase price in cash in an amount equal to 100% of the principal amount
thereof, plus accrued and unpaid interest and Special Interest, if any, thereon
to the date of purchase, in accordance with the
A-1-7
<PAGE>
procedures set forth in Article 3 of the Indenture and the agreements governing
such pari passu Indebtedness. To the extent that any Excess Proceeds remain
after consummation of an Asset Sale Offer, the Company may use such Excess
Proceeds for any purpose not otherwise prohibited by the Indenture. If the
aggregate principal amount of Notes and pari passu Indebtedness tendered into
such Asset Sale Offer surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes and pari passu Indebtedness
to be purchased on a pro rata basis. Upon completion of such Asset Sale Offer,
the amount of Excess Proceeds shall be reset at zero for purposes of the first
sentence of this paragraph.
10. Notice of Redemption. Notice of redemption shall be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest shall cease to accrue on
Notes or portions thereof called for redemption.
11. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
12. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes under the Indenture.
13. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes voting as a single class, and any existing default or compliance with any
provision of the Indenture or the Notes may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes voting
as a single class. Without the consent of any Holder of a Note, the Indenture
or the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's obligations
to Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the TIA.
14. Defaults and Remedies.
(a) Events of Default under the Indenture include: (i) the failure to
pay interest on, or Special Interest, if any, with respect to the Notes, when
the same becomes due and payable if such default continues for a period of 30
days (whether or not prohibited by Article 10 of the Indenture), (ii) the
failure to pay principal of any Notes when such principal becomes due and
payable, at maturity, upon redemption or otherwise (whether or not prohibited by
Article 10 of the Indenture); (iii) failure by the
A-1-8
<PAGE>
Company or any Restricted Subsidiary for 60 days to comply with Sections 4.07,
4.09, 4.10 or 4.15 of the Indenture; (iv) failure by the Company or any
Restricted Subsidiary to comply with any of its other agreements in the
Indenture or this Note; (v) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness prior to its express maturity
and, in each case, the principal amount of any such Indebtedness together with
the principal amount of any other such Indebtedness the maturity of which has
been so accelerated, aggregates $25.0 million or more; (vi) failure by the
Company or any of its Restricted Subsidiaries to pay final judgments not subject
to appeal aggregating in excess of $25.0 million (net of applicable insurance
coverage which is acknowledged in writing by the insurer), which judgments are
not paid, discharged or stayed for a period of 60 days; and (vii) certain events
of bankruptcy or insolvency with respect to the Company or any of the Company's
Restricted Subsidiaries.
(b) If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, all outstanding Notes shall become due and payable
without further action or notice. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or, premium, if any, or interest on the Notes) if it determines that
withholding notice is in their interest. The Holders of a majority in principal
amount of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive any existing Default or Event of Default
and its consequences under the Indenture, except a continuing Default or Event
of Default in the payment of interest on, premium, if any, or principal of, the
Notes. The Company shall deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company, upon becoming aware of any
Default or Event of Default, deliver to the Trustee a statement specifying such
Default or Event of Default.
15. Subordination. The Company agrees, and each Holder by accepting
this Note agrees, that the principal of and premium, interest and Special
Interest, if any, with respect to the Notes are subordinated in right of
payment, to the extent and in the manner provided in Article 10 of the
Indenture, to the prior payment in full in cash of all Senior Debt of the
Company (whether outstanding on the date hereof or hereafter created, incurred,
assumed or guaranteed), and that the subordination is for the benefit of the
holders of Senior Debt.
16. No Recourse Against Others. A director, officer, employee,
incorporator or shareholder, of the Company, as such, shall not have any
liability for any obligations of the under the Notes or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
17. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
18. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entirety), JT
A-1-9
<PAGE>
TEN (= joint tenants with right of survivorship and not as tenants in common),
CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
19. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Notes shall have all the rights set forth
in the Registration Agreement.
20. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
A-1-10
<PAGE>
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Agreement.
Requests may be made to:
Global Crossing Holdings Ltd.
Wessex House
45 Reid Street
Hamilton HM 12, Bermuda
Attention: Secretary of the Company
A-1-11
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
_______________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date:___________
Your Signature:__________________________________
(Sign exactly as your name appears on the face of
this Note)
Tax Identification No:___________________________
SIGNATURE GUARANTEE:
_________________________________
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Registrar, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-1-12
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $________
Date:__________
Your Signature:__________________________________
(Sign exactly as your name appears on the face of
this Note)
Tax Identification No:___________________________
SIGNATURE GUARANTEE:
_________________________________
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Registrar, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-1-13
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an interest
in another Global Note or for a Definitive Note, or exchanges of a part of
another Global Note or Definitive Note for an interest in this Global Note, have
been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Principal Amount
Amount of decrease Amount of increase of this Global Note Signature of
in Principal in Principal following such authorized officer of
Amount of this Amount of this decrease Trustee or
Date of Exchange Global Note Global Note (or increase) Note Custodian
- ----------------- ------------------- ------------------- -------------------- -----------------
</TABLE>
A-1-14
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) ("DTC") TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT (A)(1) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2)
IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (3) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(A) (1), (2), (3) or (7) UNDER THE SECURITIES
ACT IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND THAT DELIVERS THE CERTIFICATE IN THE FORM OF EXHIBIT D TO THE INDENTURE,
(4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED
BY RULE 144 THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL
APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED STATES AND OTHER
JURISDICTIONS.
A-2-1
<PAGE>
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
A-2-2
<PAGE>
CUSIP _________
10 1/2% [SERIES A] [SERIES B] SENIOR SUBORDINATED NOTES DUE 2008
No. $
GLOBAL CROSSING HOLDINGS LTD.
promises to pay to Cede & Co.
or registered assigns, the principal sum of
Dollars on December 1, 2008.
Interest Payment Dates: June 1 and December 1.
Record Dates: May 15 and November 15.
Global Crossing holdings Ltd.
By:_________________________
Name:
Title:
By:_________________________
Name:
Title:
This is one of the
Notes referred to in the
within-mentioned Indenture:
[TRUSTEE],
as Trustee
By:_________________________ Dated: [ ]
Name:
Title:
A-2-3
<PAGE>
(Back of Regulation S Temporary Global Note)
10 1/2 % Series A Senior Subordinated Notes due 2008
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. Global Crossing Holdings Ltd., a Bermuda company (the
"Company"), promises to pay interest on the principal amount of this Note at 10-
1/2% per annum from [ ] until maturity and shall pay the Special Interest
payable pursuant to Section 5 of the Registration Agreement referred to below.
The Company shall pay interest and Special Interest semi-annually on June 1 and
December 1 of each year, or if any such day is not a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date"). Interest on the
Notes shall accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from the date of issuance; provided that if there
is no existing Default or Event of Default relating to the payment of interest,
and if this Note is authenticated between a record date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such next succeeding Interest Payment Date; provided, further, that the first
Interest Payment Date shall be [ ]. The Company shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue principal and premium, if any, from time to time on demand at a rate
that is 1.0% per annum in excess of the rate then in effect; it shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Special Interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest shall be computed on the basis of
a 360-day year of twelve 30-day months.
Until this Regulation S Temporary Global Note is exchanged for one or
more Regulation S Permanent Global Notes, the Holder hereof shall not be
entitled to receive payments of interest hereon; until so exchanged in full,
this Regulation S Temporary Global Note shall in all other respects be entitled
to the same benefits as other Notes under the Indenture.
2. Method of Payment. The Company shall pay interest on the Notes
(except defaulted interest) and Special Interest to the Persons who are
registered Holders of Notes at the close of business on the May 15 or November
15 next preceding the Interest Payment Date, even if such Notes are canceled
after such record date and on or before such Interest Payment Date, except as
provided in Section 2.12 of the Indenture with respect to defaulted interest.
The Notes shall be payable as to principal, premium and Special Interest, if
any, and interest at the office or agency of the Company maintained for such
purpose within or outside of the City and State of New York, or, at the option
of the Company, payment of interest and Special Interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds shall
be required with respect to principal of and interest, premium and Special
Interest on, all Global Notes and all other Notes the Holders of which shall
have provided wire transfer instructions to the Company or the Paying Agent.
Such payment shall be in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts.
3. Paying Agent and Registrar. Initially, [ ], the Trustee under
the Indenture, shall act as Paying Agent and Registrar. The Company may change
any Paying Agent or Registrar without notice to any Holder. The Company or any
of its Restricted Subsidiaries may act in any such capacity.
A-2-4
<PAGE>
4. Indenture. The Company issued the Notes under an Indenture dated
as of [ ] ("Indenture") between the Company and the Trustee. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code (S)(S)
77aaa-77bbbb) (the "TIA"). The Notes are subject to all such terms, and Holders
are referred to the Indenture and the TIA for a statement of such terms. To the
extent any provision of this Note conflicts with the express provisions of the
Indenture, the provisions of the Indenture shall govern and be controlling. The
Notes are obligations of the Company limited to $500.0 million in aggregate
principal amount plus amounts, if any, issued to pay Special Interest on
outstanding Notes set forth in Paragraph 2 hereof.
5. Optional Redemption.
(a) Except as set forth in subparagraphs (b) and (c) below and in
Section 6 hereof, the Notes shall not be redeemable at the Company's option
prior to December, 2003. Thereafter, the Notes shall be subject to redemption at
any time or from time to time at the option of the Company, in whole or in part,
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
unpaid interest and Special Interest, if any, thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
December 1 of the years indicated below:
Percentage of
PRINCIPAL
Year Amount
---- -----------
2003................................ 105.250%
2004................................ 103.500%
2005................................ 101.750%
2006 and thereafter................. 100.000%
(b) Notwithstanding the foregoing, at any time prior to December 1,
2001, the Company may, on any one or more occasions, redeem up to 35% of the
aggregate principal amount of Notes originally issued pursuant to the Indenture
at a redemption price of 110.50% of the principal amount thereof, plus accrued
and unpaid interest thereon and Special Interest, if any, to the redemption
date, with the net cash proceeds received from one or more Equity Offerings made
by the Company, GCL (to the extent such net cash proceeds received by GCL were
contributed to the Company as common equity capital); provided that at least 65%
of the aggregate principal amount of Notes originally issued pursuant to the
Indenture remain outstanding immediately after the occurrence of any such
redemption. The Company may make any such redemption upon not less than 30 nor
more than 60 days' notice (but in no event more than 90 days after the closing
of the related Equity Offering). Any such notice may be given prior to the
completion of the related Equity Offering and any such redemption may, at the
Company's discretion, be subject to the satisfaction of one or more conditions
precedent, including, but not limited to, the completion of the related Equity
Offering.
(c) In addition, at any time prior to December 1, 2003, the Notes may
also be redeemed at the option of the Company, in whole but not in part, upon
the occurrence of a Change of Control, upon not less than 30 nor more than 60
days' prior notice (but in no event may any such redemption occur more than 90
days after the occurrence of such Change of Control) mailed by first-
A-2-5
<PAGE>
class mail to each Holder's registered address, at a redemption price equal to
100% of the principal amount thereof plus the Applicable Premium as of, and
accrued and unpaid interest, if any, to, the date of redemption.
(d) Any redemption pursuant to this Section 5 shall be made pursuant
to the provisions of Sections 3.01 through 3.06 of the Indenture.
6. Optional Tax Redemption
The Notes shall be subject to redemption at the option of the Company
or a successor corporation at any time, in whole but not in part, upon not less
than 30 nor more than 60 days' notice, at a redemption price equal to the
principal amount thereof, plus accrued and unpaid interest thereon to the
redemption date if, as a result of any change in or amendment to the laws or any
regulations or ruling promulgated thereunder of (x) Bermuda or any political
subdivision or governmental authority thereof or therein having the power to
tax, (y) any jurisdiction, other than the United States, from or through which
payment on the Notes is made by the Company or a successor corporation, or its
paying agent in its capacity as such or any political subdivision or
governmental authority thereof or therein having the power to tax or (z) any
other jurisdiction, other than the United States, in which the Company or a
successor corporation is organized, or any political subdivision or governmental
authority thereof or therein having the power to tax, or any change in the
official application or interpretation of such laws, regulations or rulings, or
any change in the official application or interpretation of, or any execution of
or amendment to, any treaty or treaties affecting taxation to which such
jurisdiction (or such political subdivision or taxing authority) is a party (a
"Change in Tax Law"), which becomes effective on or after the Issue Date, the
Company or a successor corporation is or would be required on the next
succeeding interest payment date to pay Additional Amounts with respect to the
Notes (as described under Section 7 hereof), and the payment of such Additional
Amounts cannot be avoided by the use of any reasonable measures available to the
Company or a successor corporation.
In addition, the Notes shall be subject to redemption at the option of
the Company at any time, in whole but not in part, upon not less than 30 nor
more than 60 days' notice, at a redemption price equal to the principal amount
thereof, plus accrued and unpaid interest thereon to the redemption date, if the
Person formed by a consolidation or amalgamation of the Company or into which
the Company is merged or to which the Company conveys, transfers or leases its
properties and assets substantially as an entirety is required, as a consequence
of such consolidation, amalgamation, merger, conveyance, transfer or lease and
as a consequence of a Change in Tax Law occurring after the date of such
consolidation, amalgamation, merger, conveyance, transfer or lease, to pay
Additional Amounts in respect of any tax, assessment or governmental charge
imposed on any Holder of Notes.
7. Payment of Additional Amounts.
If any deduction or withholding for any present or future taxes,
assessments or other governmental charges of (x) Bermuda or any political
subdivision or governmental authority thereof or therein having power to tax,
(y) any jurisdiction, other than the United States, from or through which
payment on the Notes is made by the Company or a successor corporation, or its
paying agent in its capacity as such or any political subdivision or
governmental authority thereof or therein having the power to tax or (z) any
other jurisdiction, other than the United States, in which the Company or a
successor corporation is organized, or any political subdivision or governmental
authority thereof or therein having the power to tax shall at any time be
required by such jurisdiction (or any such political subdivision or taxing
authority) in respect of any amounts to be paid by the Company or a successor
A-2-6
<PAGE>
corporation under the Notes, the Company or a successor corporation shall pay to
each Holder of Notes as additional interest, such additional amounts
("Additional Amounts") as may be necessary in order that the net amounts paid to
such Holder of such Notes who, with respect to any such tax, assessment or other
governmental charge, is not resident in, or a citizen of, such jurisdiction,
after such deduction or withholding, shall be not less than the amount specified
in such Notes to which such Holder is entitled; provided, however, that the
Company or a successor corporation shall not be required to make any payment of
Additional Amounts for or on account of:
(a) Any tax, assessment or other governmental charge that would not have
been imposed but for (i) the existence of any present or former connection
between such Holder (or between a fiduciary, settlor, beneficiary, member or
shareholder of, or possessor of a power over, such Holder, if such Holder is an
estate, trust, partnership, limited liability company or corporation) and the
taxing jurisdiction or any political subdivision or territory or possession
thereof or area subject to its jurisdiction, including, without limitation, such
Holder (or such fiduciary, settlor, beneficiary, member, shareholder or
possessor) being or having been a citizen or resident thereof or being or having
been present or engaged in a trade or business therein or having or having had a
permanent establishment therein, (ii) the presentation of a Note (where
presentation is required) for payment on a date more than 30 days after (x) the
date on which such payment became due and payable or (y) the date on which
payment thereof is duly provided for, whichever occurs later, or (iii) the
presentation of a Note for payment in Bermuda or any political subdivision
thereof or therein, unless such Note could not have been presented for payment
elsewhere;
(b) Any estate, inheritance, gift, sales, transfer, personal property or
similar tax, assessment or other governmental charge;
(c) Any tax, assessment or other governmental charge that is payable
otherwise than by withholding from payment of principal of, premium, if any, or
any interest on the Notes;
(d) Any tax, assessment or other governmental charge that is imposed or
withheld by reason of the failure by the Holder or the beneficial owner of the
Note to comply with a request of the Company addressed to the Holder (i) to
provide information, documents or other evidence concerning the nationality,
residence or identity of the Holder or such beneficial owner or (ii) to make and
deliver any declaration or other similar claim (other than a claim for refund of
a tax, assessment or other governmental charge withheld by the Company) or
satisfy any information or reporting requirements, which, in the case of (i) or
(ii), is required or imposed by a statute, treaty, regulation or administrative
practice of the taxing jurisdiction as a precondition to exemption from all or
part of such tax, assessment or other governmental charge; or
(e) Any combination of items (a), (b), (c) and (d) above;
nor shall Additional Amounts be paid with respect to any payment of
the principal of, or any premium or interest on, any Note to any Holder who is a
fiduciary or partnership or limited liability company or other than the sole
beneficial owner of such payment to the extent such payment would be required by
the laws of (x) Bermuda or any political subdivision or governmental authority
thereof or
A-2-7
<PAGE>
therein having the power to tax, (y) any jurisdiction, other than the United
States, from or through which payment on the Notes is made by the Company or a
successor corporation, or its paying agent in its capacity as such or any
political subdivision or governmental authority thereof or therein having the
power to tax or (z) any other jurisdiction, other than the United States, in
which the Company or a successor corporation is organized, or any political
subdivision or governmental authority thereof or therein having the power to tax
to be included in the income for tax purposes of a beneficiary or settlor with
respect to such fiduciary or a member of such partnership, limited liability
company or beneficial owner who would not have been entitled to such Additional
Amounts had it been the Holder of such Note.
The Company shall provide the Trustee with the official acknowledgment
of the relevant taxing authority (or, if such acknowledgment is not available, a
certified copy thereof) evidencing the payment of the withholding taxes, if any,
by the Company. Copies of such documentation shall be made available to the
Holders of the Notes or the Paying Agent, as applicable, upon request therefor.
All references herein and in the Indenture to principal of, premium,
if any, and interest on the Notes shall include any Additional Amounts payable
by the Company in respect of such principal, such premium, if any, and such
interest.
8. Mandatory Redemption.
The Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Notes.
9. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, the Company shall make
an offer (a "Change of Control Offer") to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof, plus accrued and
unpaid interest and Special Interest thereon, if any, to the date of repurchase
(the "Change of Control Payment"); provided, however, that the Company shall not
be obligated to repurchase Notes pursuant to this subparagraph in the event that
it has exercised its rights to redeem all of the Notes as described in Section
5(c) hereof. Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder setting forth the procedures governing the Change
of Control Offer as required by the Indenture.
(b) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, consummate any Asset Sale unless, (i)
the Company (or such Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (as determined in good faith by the Board of Directors (including as to
the value of all noncash consideration) and set forth in an Officer's
Certificate delivered to the Trustee) of the assets or Equity Interests issued
or sold or otherwise disposed of and (ii) at least 75% of the consideration
therefor is in the form of cash and/or Cash Equivalents, and (iii) the Net
Proceeds received by the Company (or such Restricted Subsidiary, as the case may
be) from such Asset Sale are applied within 360 days following the receipt of
such Net Proceeds (a) first, to the extent the Company (or such Restricted
Subsidiary, as the case may be) elects, to the redemption or repurchase of
outstanding Senior Debt and (b) second, to the extent of the balance of such Net
Proceeds after application as described in (a) above and to the extent the
Company (or such Restricted Subsidiary, as the case may be) elects, to reinvest,
or enter into a legally binding agreement to reinvest, such Net Proceeds (or any
portion thereof) in assets that are used or useful in a Permitted Business. The
balance of such Net Proceeds, after the application of such Net Proceeds as
described in the immediately preceding clauses (a) and (b), shall constitute
"Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds equals or exceeds
$15.0 million
A-2-8
<PAGE>
(taking into account income earned on such Excess Proceeds), the Company shall
make an offer to all Holders of Notes and pari passu Indebtedness (an "Asset
Sale Offer") to purchase the maximum principal amount of Notes and pari passu
Indebtedness that may be purchased out of the Excess Proceeds, at a purchase
price in cash in an amount equal to 100% of the principal amount thereof, plus
accrued and unpaid interest and Special Interest, if any, thereon to the date of
purchase, in accordance with the procedures set forth in Article 3 of the
Indenture and the agreements governing such pari passu Indebtedness. To the
extent that any Excess Proceeds remain after consummation of an Asset Sale
Offer, the Company may use such Excess Proceeds for any purpose not otherwise
prohibited by the Indenture. If the aggregate principal amount of Notes and pari
passu Indebtedness tendered into such Asset Sale Offer surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes and pari passu Indebtedness to be purchased on a pro rata basis. Upon
completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero for purposes of the first sentence of this paragraph.
10. Notice of Redemption. Notice of redemption shall be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest shall cease to accrue on
Notes or portions thereof called for redemption.
11. Denominations, Transfer, Exchange. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date. This Regulation S Temporary
Global Note is exchangeable in whole or in part for one or more Global Notes
only (i) on or after the termination of the 40-day restricted period (as defined
in Regulation S) and (ii) upon presentation of certificates (accompanied by an
Opinion of Counsel, if applicable) required by Article 2 of the Indenture. Upon
exchange of this Regulation S Temporary Global Note for one or more Global
Notes, the Trustee shall cancel this Regulation S Temporary Global Note.
12. Persons Deemed Owners. The registered Holder of a Note may be
treated as its owner for all purposes under the Indenture.
13. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes voting as a single class, and any existing default or compliance with any
provision of the Indenture or the Notes may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes voting
as a single class. Without the consent of any Holder of a Note, the Indenture or
the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's obligations
to Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights
A-2-9
<PAGE>
under the Indenture of any such Holder, to comply with the requirements
of the SEC in order to effect or maintain the qualification of the Indenture
under the TIA.
14. Defaults and Remedies.
(a) Events of Default under the Indenture include: (i) the failure to
pay interest on or Special Interest, if any, with respect to the Notes, when the
same becomes due and payable if such default continues for a period of 30 days
(whether or not prohibited by Article 10 of the Indenture), (ii) the failure to
pay principal of any Notes when such principal becomes due and payable, at
maturity, upon redemption or otherwise (whether or not prohibited by Article 10
of the Indenture); (iii) failure by the Company or any Restricted Subsidiary for
60 days to comply with Sections 4.07, 4.09, 4.10 or 4.15 of the Indenture; (iv)
failure by the Company or any Restricted Subsidiary to comply with any of its
other agreements in the Indenture or this Note; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries) whether such Indebtedness prior
to its express maturity and in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness,
the maturity of which has been so accelerated, aggregates $25.0 million or more;
(vi) failure by the Company or any of its Restricted Subsidiaries to pay final
judgments not subject to appeal aggregating in excess of $25.0 million (net of
applicable insurance coverage which is acknowledged in writing by the insurer),
which judgments are not paid, discharged or stayed for a period of 60 days; and
(vii) certain events of bankruptcy or insolvency with respect to the Company or
any of the Company's Restricted Subsidiaries.
(b) If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately. Notwithstanding
the foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, all outstanding Notes shall become due and payable
without further action or notice. Holders may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal of, premium, if any, or interest on the Notes) if it determines that
withholding notice is in their interest. The Holders of a majority in principal
amount of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive any existing Default or Event of Default
and its consequences under the Indenture, except a continuing Default or Event
of Default in the payment of interest on, premium, if any, or principal of, the
Notes. The Company shall deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company, upon becoming aware of any
Default or Event of Default, deliver to the Trustee a statement specifying such
Default or Event of Default.
15. Subordination. The Company agrees, and each Holder by accepting
this Note agrees, that the principal of and premium, interest and Special
Interest, if any, with respect to the Notes are subordinated in right of
payment, to the extent and in the manner provided in Article 10 of the
Indenture, to the prior payment in full in cash of all Senior Debt of the
Company (whether outstanding on the date hereof or hereafter created, incurred,
assumed or guaranteed), and that the subordination is for the benefit of the
holders of Senior Debt.
A-2-10
<PAGE>
16. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
17. No Recourse Against Others. A director, officer, employee,
incorporator or shareholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
18. Authentication. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
19. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entirety), JT TEN (= joint tenants with right of survivorship and
not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to
Minors Act).
20. Additional Rights of Holders of Restricted Global Notes and
Restricted Definitive Notes. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Notes shall have all the rights set forth
in the Registration Agreement.
21. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
A-2-11
<PAGE>
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Agreement.
Requests may be made to:
Global Crossing Holdings Ltd.
Wessex House
45 Reid Street
Hamilton HM 12, Bermuda
Attention: Secretary of the Company
A-2-12
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
________________________________________________________________________________
Date:_________
Your Signature:___________________________________
(Sign exactly as your name appears on the face of
this Note)
Tax Identification No:____________________________
SIGNATURE GUARANTEE:
_________________________________
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Registrar, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-2-13
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the appropriate box
below:
[ ] Section 4.10 [ ] Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $___________
_______________________________________________________________________________
Date:
Your Signature:__________________________________
(Sign exactly as your name appears on the face of
this Note)
Tax Identification No:___________________________
SIGNATURE GUARANTEE:
_________________________________
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Registrar, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
A-2-14
<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note, have
been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Principal Amount
Amount of decrease Amount of increase of this Global Note Signature of
in Principal in Principal following such authorized officer of
Amount of this Amount of this decrease Trustee or
Date of Exchange Global Note Global Note (or increase) Note Custodian
- ----------------- ------------------- ------------------- -------------------- -----------------
</TABLE>
A-2-15
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Global Crossing Holdings Ltd.
45 Reid Street
Hamilton HM 12, Bermuda
Attention: Secretary of the Company
[Trustee]
[Address]
New York, NY [Zip Code]
Attention: [ ]
Re: 10 1/2% Senior Subordinated Notes due 2008
------------------------------------------
Reference is hereby made to the Indenture, dated as of [ ]
(the "Indenture"), among Global Crossing Holdings Ltd., as issuer (the
"Company"), and [Trustee], as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Series A Note[s] or interest in such Series A Note[s] specified in Annex A
hereto, in the principal amount of $___________ in such Series A Note[s] or
interests (the "Transfer"), to __________ (the "Transferee"), as further
specified in Annex A hereto. In connection with the Transfer, the Transferor
hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
----------------------------------------------------------------------
144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
- -----------------------------------------------------------
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
-------------------------------------------------------------------
INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION
- ------------------------------------------------------------------------------
OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is
- ----------------------------------------------------------
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant
B-1
<PAGE>
to and in accordance with the Securities Act and any applicable blue sky
securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) [ ]such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) [ ]such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) [ ]such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that it has not engaged in any general solicitation
within the meaning of Regulation D under the Securities Act and the Transfer
complies with the transfer restrictions applicable to beneficial interests in a
Restricted Global Note or Restricted Definitive Notes and the requirements of
the exemption claimed, which certification is supported by (1) a certificate
executed by the Transferee in the form of Exhibit D to the Indenture and (2) if
---------
such Transfer is in respect of a principal amount of Notes at the time of
transfer of less than $250,000, an Opinion of Counsel provided by the Transferor
or the Transferee (a copy of which the Transferor has attached to this
certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the IAI Global Note and/or the Definitive Notes and
in the Indenture and the Securities Act.
3. [ ] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in
B-2
<PAGE>
compliance with the transfer restrictions contained in the Indenture and any
applicable blue sky securities laws of any state of the United States and (ii)
the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
____________________________
[Insert Name of Transferor]
By:________________________
Name:
Title:
Dated:______,_______
B-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ________), or
(ii)[ ] IAI Global Note (CUSIP _______); or
(b) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP _______), or
(ii) [ ] IAI Global Note (CUSIP _______); or
(iii)[ ] Unrestricted Global Note (CUSIP_______); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Global Crossing Holdings Ltd.
45 Reid Street
Hamilton HM 12, Bermuda
Attention: Secretary of the Company
[Trustee]
[Address]
New York, NY [Zip Code]
Attention: [ ]
Re: 10 1/2% Senior Subordinated Notes due 2008
------------------------------------------
(CUSIP ______________)
Reference is hereby made to the Indenture, dated as of [ ]
(the "Indenture"), among Global Crossing Holdings Ltd., as issuer (the
"Company"), and [Trustee], as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the Note[s]
or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
-------------------------------------------------------------
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In
- -----------------------------------------------------------------
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
-------------------------------------------------------------
GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
- -------------------------------------------
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and
C-1
<PAGE>
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Definitive Note is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
-------------------------------------------------------
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
- --------------------------------------------------
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
-------------------------------------------------------
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
- ----------------------------
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
-------------------------------------------------------------
GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
- -----------------------------------------
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b)[ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
-------------------------------------------------------
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange
- -----------------------------------------------
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] [ ] 144A Global Note, [ ] IAI Global Note with an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer and (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, and in compliance with any applicable blue sky securities laws of any state
of the United States. Upon consummation of the proposed Exchange in accordance
with the terms of the Indenture, thebeneficial interest issued will be subject
to the restrictions on transfer enumerated in the Private Placement Legend
printed on the relevant Restricted Global Note and in the Indenture and the
Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
___________________________________
[Insert Name of Owner]
By:___________________________________
Name:
Title:
Dated: __________, ____
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM ACQUIRING
INSTITUTIONAL ACCREDITED INVESTOR
Global Crossing Holdings Ltd.
45 Reid Street
Hamilton HM 12, Bermuda
Attention: Secretary of the Company
[Trustee]
[Address]
New York, NY [Zip Code]
Attention: [ ]
Re: 10 1/2% Senior Subordinated Notes due 2008
------------------------------------------
Reference is hereby made to the Indenture, dated as of [ ]
(the "Indenture"), among Global Crossing Holdings Ltd., as issuer (the
"Company") and [Trustee], as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
In connection with
our proposed purchase of $____________ aggregate principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Series A Notes
or any interest therein is subject to certain restrictions and conditions set
forth in the Indenture and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Series A Notes have
not been registered under the Securities Act, and that the Series A Notes and
any interest therein may not be offered or sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any accounts
for which we are acting as hereinafter stated, that if we should sell the Series
A Notes or any interest therein, we will do so only (A) to the Company or any
subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to
a "qualified institutional buyer" (as defined therein), (c) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter and, if such
transfer is in respect of a principal amount of Series A Notes, at the time of
transfer of less than $250,000, an Opinion of Counsel in form reasonably
acceptable to the
D-1
<PAGE>
Company to the effect that such transfer is in compliance with the
Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the provisions of Rule
144(k) under the Securities Act or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing the Definitive Note or beneficial interest in a Global Note
from us in a transaction meeting the requirements of clauses (A) through (E) of
this paragraph a notice advising such purchaser that resales thereof are
restricted as stated herein.
3. We understand that, on any proposed resale of the Series A Notes
or beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Series A Notes
purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Series A Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Series A Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
__________________________________________
[Insert Name of Accredited Investor]
By: _______________________________
Name:
Title:
Dated: __________________, ____
D-2
<PAGE>
EXHIBIT 4.3
================================================================================
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
Dated as of December 2, 1998
by and among
Global Crossing Holdings Ltd.
and
Salomon Smith Barney Inc.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
CIBC Oppenheimer Corp.
Deutsche Bank Securities, Inc.
Morgan Stanley & Co. Incorporated
Goldman, Sachs & Co.
Chase Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
---------
into as of December 2, 1998, by and among Global Crossing Holdings Ltd., a
Bermuda company (the "Company"), and Salomon Smith Barney Inc., Merrill Lynch,
-------
Pierce, Fenner & Smith Incorporated, CIBC Oppenheimer Corp., Deutsche Bank
Securities, Inc., Morgan Stanley & Co. Incorporated, Goldman, Sachs & Co., Chase
Securities Inc., and Donaldson, Lufkin and Jenrette Securities Corporation
(each, an "Initial Purchaser" and, collectively, the "Initial Purchasers"), each
----------------- ------------------
of whom has agreed to purchase, severally and not jointly, an aggregate of
5,000,000 shares of the Company's 10 1/2% Senior Exchangeable Preferred Stock
(Mandatorily Redeemable on December 1, 2008) (the "Preferred Stock") pursuant to
---------------
the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated as of
November 24, 1998, (the "Purchase Agreement"), by and among the Company and the
------------------
Initial Purchasers. In order to induce the Initial Purchasers to purchase the
Preferred Stock, the Company has agreed to provide the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers to purchase the Preferred
Stock as set forth in the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
---
Affiliate: As defined in Rule 144 of the Act.
---------
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
-------------
Bye-laws: The Bye-laws of the company to be amended by the Company on or
--------
prior to the Closing Date, which will contain the terms of the Securities.
Certificated Securities: As defined in the Bye-laws and the Indenture.
-----------------------
Closing Date: The date hereof.
------------
Commission: The Securities and Exchange Commission.
----------
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
----------
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the New
Preferred Stock or, if the Preferred Stock has been exchanged for the Exchange
Notes, the New Exchange Notes, in each case to be issued in the Exchange Offer,
(b) the maintenance of such Exchange Offer Registration Statement continuously
effective and the keeping of the Exchange Offer open for a period not less than
the
1
<PAGE>
period required pursuant to Section 3(b) hereof and (c) the delivery by the
Company to the Transfer Agent of shares of New Preferred Stock having the same
aggregate Liquidation Preference as the Liquidation Preference of Preferred
Stock tendered by Holders thereof pursuant to the Exchange Offer, or, if the
Preferred Stock has been exchanged for the Exchange Notes, the delivery by the
Company to the Trustee of New Exchange Notes in the same aggregate principal
amount as the aggregate principal amount of Exchange Notes tendered by Holders
thereof pursuant to the Exchange Offer.
Dividend Payment Date: As defined in the Memorandum of Increase.
---------------------
Effectiveness Deadline: As defined in Sections 3(a) and 4(a) hereof.
----------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exchange Notes: The Company's 10 1/2% Senior Subordinated Notes due
--------------
December 1, 2008 (including, without limitation, all such Exchange Notes, if
any, issued in lieu of payment of cash interest thereon) which may, at the
Company's option, be issued pursuant to the Indenture in exchange for the
Preferred Stock.
Exchange Offer: The registration by the Company under the Act of the New
--------------
Preferred Stock or, if the Preferred Stock has been exchanged for Exchange
Notes, the New Exchange Notes, in each case pursuant to the Exchange Offer
Registration Statement pursuant to which the Company shall offer the Holders of
all outstanding Transfer Restricted Securities held by such Holders the
opportunity to exchange all such outstanding Transfer Restricted Securities for
New Preferred Stock having the same aggregate Liquidation Preference as the
Liquidation Preference of Preferred Stock tendered by Holders thereof pursuant
to such exchange offer, or, if the Preferred Stock has been exchanged for the
Exchange Notes, New Exchange Notes in an aggregate principal amount equal to the
aggregate principal amount of the Exchange Notes tendered by Holders thereof
pursuant to such exchange offer.
Exchange Offer Registration Statement: The Registration Statement relating
-------------------------------------
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
--------------
to sell the Preferred Stock to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
---------------
Global Security Holder: As defined in the Bye-laws and the Indenture.
----------------------
Holders: As defined in Section 2 hereof.
-------
Indemnified Holder: As defined in Section 8(a) hereof.
------------------
2
<PAGE>
Indenture: The Indenture, to be entered into between the Company and the
---------
Trustee, governing the Notes and pursuant to which the Exchange Notes will be
issued upon the exchange of the Preferred Stock in accordance with the Bye-laws,
as such Indenture is amended, modified or supplemented from time to time in
accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture.
---------------------
Liquidation Preference: As defined in the Bye-laws.
----------------------
New Preferred Stock: The Company's 10 1/2% Senior Exchangeable Preferred
-------------------
Stock (Mandatorily Redeemable on December 1, 2008) (including, without
limitation, all such Preferred Stock issued in lieu of the payment of cash
dividends thereon) to be issued pursuant to the Memorandum of Increase (i) in
the Exchange Offer or (ii) upon the request of any Holder of Preferred Stock
covered by a Shelf Registration Statement, in each case in exchange for such
Preferred Stock.
Notes: Collectively, the Exchange Notes and the New Exchange Notes.
-----
Preferred Stock: As defined in the preamble hereof.
---------------
Prospectus: The prospectus included in a Registration Statement at the
----------
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
-------------------
Registration Default: As defined in Section 5 hereof.
--------------------
Registration Statement: Any registration statement of the Company relating
----------------------
to (a) an offering of Transfer Restricted Securities pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, in each case, (i) that is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including post-
effective amendments) and all exhibits and material incorporated by reference
therein.
Restricted Broker-Dealer: Any Broker-Dealer that holds New Preferred Stock
------------------------
or, if the Preferred Stock has been exchanged for the Exchange Notes, New
Exchange Notes, in each case that was acquired in the Exchange Offer in exchange
for Preferred Stock or Exchange Notes, as the case may be, that such Broker-
Dealer acquired for its own account as a result of market-making activities or
other trading activities (other than Securities or Notes acquired directly from
the Company or any of its Affiliates).
Rule 144: Rule 144 promulgated under the Act.
--------
Securities: Collectively, the Preferred Stock and the New Preferred Stock.
----------
3
<PAGE>
Shelf Registration Statement: As defined in Section 4 hereof.
----------------------------
Special Dividends: As defined in Section 5 hereof.
-----------------
Special Interest: As defined in Section 5 hereof.
----------------
Suspension Notice: As defined in Section 6(d) hereof.
-----------------
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb), as
---
in effect on the date of the Indenture.
Transfer Agent: First Chicago Trust Company of New York.
--------------
Transfer Restricted Securities: The Preferred Stock or, if the Preferred
------------------------------
Stock has been exchanged for the Exchange Notes, the Exchange Notes, in each
case until the earliest to occur of (a) the date on which such Preferred Stock
or Exchange Notes, as the case may be, is exchanged in the Exchange Offer by a
person other than a Broker-Dealer for New Preferred Stock or New Exchange Notes,
as the case may be, (b) the date on which such Preferred Stock or Exchange
Notes, as the case may be, is effectively registered under the Act and disposed
of in accordance with a Shelf Registration Statement, (c) the date, following
the date on which such Preferred Stock or Exchange Notes, as the case may be, is
exchanged for New Preferred Stock or New Exchange Notes, as the case may be, by
a Broker-Dealer in the Exchange Offer, on which such New Preferred Stock or New
Exchange Notes, as the case may be, is sold to a purchaser who receives from
such Broker-Dealer on or prior to the date of such sale a copy of the Prospectus
contained in the Exchange Offer Registration Statement, (d) the date on which
such Preferred Stock or Exchange Notes, as the case may be, is distributed to
the public pursuant to Rule 144 under the Act or (e) the date on which such
Preferred Stock or Exchange Notes, as the case may be, is eligible for resale
pursuant to Rule 144 without volume restrictions.
Trustee: To be designated by the Company upon the issuance of the Exchange
-------
Notes.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted Securities.
------
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law or Commission policy (after the procedures set forth in Section 6(a)(i)
below have been complied with), the Company shall (i) cause the Exchange Offer
Registration Statement to be filed with the Commission as soon as practicable
after the Closing Date (the "Exchange Offer Filing Date"), but in no event later
--------------------------
than 90 days after the Closing Date (such 90th day being referred to herein as
the "Filing Deadline"), (ii) use its best efforts to cause such Exchange Offer
---------------
Registration Statement to become effective at the earliest practicable time, but
in no event later than 180 days
4
<PAGE>
after the Closing Date (such 180th day being referred to herein as the
"Effectiveness Deadline"), (iii) in connection with the foregoing, (A) file all
----------------------
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause it to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the New Preferred Stock or
the New Exchange Notes, as the case may be, to be made under the Blue Sky laws
of such jurisdictions as are necessary to permit Consummation of the Exchange
Offer, and (iv) upon the effectiveness of such Exchange Offer Registration
Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall
be on the appropriate form permitting registration of the New Preferred Stock or
the New Exchange Notes, as the case may be, to be offered in exchange for the
Preferred Stock or the Exchange Notes, as the case may be, that are Transfer
Restricted Securities and to permit resales of New Preferred Stock and New
Exchange Notes, as the case may be, by Broker-Dealers as contemplated by
Section 3(c) below.
(b) The Company shall use its reasonable best efforts to cause the
Exchange Offer Registration Statement to be effective continuously, and shall
keep the Exchange Offer open for a period of not less than the minimum period
required under applicable federal and state securities laws to Consummate the
Exchange Offer; provided, however, that in no event shall such period be less
than 20 Business Days. The Company shall cause the Exchange Offer to comply
with all applicable federal and state securities laws. No securities other than
the Preferred Stock or the Exchange Notes, as the case may be, shall be included
in the Exchange Offer Registration Statement. The Company shall use its
reasonable best efforts to cause the Exchange Offer to be Consummated on the
earliest practicable date after the Exchange Offer Registration Statement has
become effective, but in no event later than 210 days after the Closing Date.
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Transfer Restricted
Securities acquired directly from the Company or any Affiliate of the Company),
may exchange such Transfer Restricted Securities pursuant to the Exchange Offer;
however, such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with any resales of any New Preferred
Stock or any New Exchange Notes, as the case may be, received by such Broker-
Dealer in the Exchange Offer and that the Prospectus contained in the Exchange
Offer Registration Statement may be used to satisfy such prospectus delivery
requirement. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales by such Broker-Dealers that the
Commission may require in order to permit such sales pursuant thereto, but such
"Plan of Distribution" shall not name any such Broker-Dealer or disclose the
amount of Transfer Restricted Securities held by any such Broker-Dealer, except
to the extent required by the Commission.
5
<PAGE>
To the extent necessary to ensure that the Exchange Offer Registration
Statement is available for resales of Transfer Restricted Securities by Broker-
Dealers that were acquired for the account of such Broker-Dealers as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company or any Affiliate of the
Company), the Company agrees to use its best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) hereof and in conformity with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of one year from
the date on which the Exchange Offer is Consummated, or such shorter period as
will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold pursuant thereto. The Company shall
promptly provide sufficient copies of the latest version of such Prospectus to
such Broker-Dealers promptly upon request at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
------------------
applicable law or Commission policy (after the Company has complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 Business Days following
the Consummation of the Exchange Offer that (A) such Holder was prohibited by
law or Commission policy from participating in the Exchange Offer or (B) such
Holder may not resell the New Preferred Stock or the New Exchange Notes, as the
case may be, acquired by it in the Exchange Offer to the public without
delivering a prospectus and the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder or (C) such Holder is a Broker-Dealer and holds Transfer Restricted
Securities acquired directly from the Company or any of its Affiliates, then the
Company shall:
(x) use its reasonable best efforts to cause to be filed, on or prior to 30
days after the earlier of (i) the date on which the Company determines that the
Exchange Offer Registration Statement cannot be filed as a result of clause
(a)(i) above and (ii) the date on which the Company receives the notice
specified in clause (a) (ii) above (such earlier date being referred to herein
as the "Filing Deadline"), a shelf registration statement pursuant to Rule 415
---------------
under the Act (which may be an amendment to the Exchange Offer Registration
Statement (the "Shelf Registration Statement")), relating to all Transfer
----------------------------
Restricted Securities, and
(y) use its reasonable best efforts to cause such Shelf Registration
Statement to become effective on or prior to 180 days after the Filing Deadline
(such 180th day being referred to herein the "Effectiveness Deadline").
----------------------
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law, then the filing of
the Exchange Offer Registration Statement shall be deemed to
6
<PAGE>
satisfy the requirements of clause (x) above; provided that, in such event, the
Company shall remain obligated to meet the Effectiveness Deadline set forth in
clause (y).
The Company shall use its best efforts to keep any Shelf Registration
Statement required by this Section 4(a) continuously effective, supplemented and
amended as required by, and subject to the provisions of, Sections 6(b) and (c)
hereof to the extent necessary to ensure that it is available for sales of
Transfer Restricted Securities by the Holders thereof entitled to the benefit of
this Section 4(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years (as extended
pursuant to Section 6(c)(i)) following the date on which such Shelf Registration
Statement first becomes effective under the Act, or such shorter period as will
terminate when all Transfer Restricted Securities covered by such Registration
Statement have been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
------------------------------------------------------------------
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
- ----------------------------
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. Each selling Holder
agrees to promptly furnish additional information required to be disclosed in
order to make the information previously furnished to the Company by such Holder
not materially misleading.
SECTION 5. SPECIAL DIVIDENDS AND SPECIAL INTEREST
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated within 210 days after the Closing Date or (iv) any Registration
Statement required by this Agreement is filed and declared effective but shall
thereafter cease to be effective or fail to be usable for its intended purpose
without being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective immediately (each such event referred to in clauses (i) through (iv),
a "Registration Default"), then the Company hereby agrees to pay to each Holder
--------------------
of Transfer Restricted Securities affected thereby special dividends ("Special
-------
Dividends") or special interest ("Special Interest"), as the case may be, which
- --------- ----------------
will accrue and be payable semi-annually on the Securities or the Notes (in
addition to the stated dividends on the Securities or the stated interest on the
Notes, as the case may be), as the case may be, from and including the date such
Registration Default occurs to, but excluding, the date on which (1) the
Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement) is filed, in the case of (i) above, (2) the Exchange
Offer Registration Statement (and/or, if applicable, the Shelf Registration
Statement) is declared effective, in the case of (ii) above, (3) the Exchange
Offer is Consummated, in the case of (iii) above, or (4) a post-effective
amendment to the
7
<PAGE>
Registration Statement or an additional Registration Statement is filed that
causes the Exchange Offer Registration Statement (and/or, if applicable, the
Shelf Registration Statement) to again be declared effective or made usable, in
the case of (iv) above. During the time that Special Dividends or Special
Interest, as the case may be, are accruing continuously, the rate of such
Special Dividends or Special Interest, as the case may be, shall be 0.50% per
annum during the first 90-day period and shall increase by 0.25% per annum for
each subsequent 90-day period, but in no event shall such rate exceed 1.00% per
annum in the aggregate regardless of the number of Registration Defaults. If,
after the cure of all Registration Defaults then in effect, there is a
subsequent Registration Default, the Special Dividend rate or Special Interest
rate, as the case may be, for such subsequent Registration Default shall
initially be 0.25%, regardless of the Special Dividend rate or Special Interest
rate, as the case may be, in effect with respect to any prior Registration
Default at the time of the cure of such Registration Default. All accrued
Special Dividends or Special Interest, as the case may be, shall be paid to the
Holders entitled thereto, in the manner provided for the payment of dividends as
set forth in the Memorandum of Increase or in the manner provided for the
payment of interest as set forth in the Indenture, as the case may be. All
obligations of the Company set forth in this paragraph that are outstanding with
respect to any Transfer Restricted Security at the time such security ceases to
be a Transfer Restricted Security shall survive until such time as all such
obligations with respect to such Transfer Restricted Security shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
-------------------------------------
Exchange Offer, the Company shall comply with all applicable provisions of
Section 6(c) below, shall use its best efforts to effect such exchange and to
permit the resale of New Preferred Stock or New Exchange Notes, as the case may
be, by Broker-Dealers that tendered in the Exchange Offer Preferred Stock or
Exchange Notes, as the case may be, that such Broker-Dealer acquired for its own
account as a result of its market-making activities or other trading activities
(other than Preferred Stock or Exchange Notes acquired directly from the Company
of any of its Affiliates) being sold in accordance with the intended method or
methods of distribution thereof, and shall comply with all of the following
provisions:
(i) If, following the date hereof there has been announced a change in
Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company hereby agrees to seek a no-action
letter or other favorable decision from the Commission, including oral
advice from the staff of the Commission, allowing the Company to Consummate
an Exchange Offer for such Transfer Restricted Securities. The Company
hereby agrees to pursue the issuance of such a decision to the Commission
staff level but shall not be required to take commercially unreasonable
action to effect a change of Commission policy. In connection with the
foregoing, the Company hereby agrees to take all such other actions as may
be requested by the Commission or otherwise required in connection with the
issuance of such decision, including, without limitation, (A)
8
<PAGE>
participating in telephonic conferences with the Commission, (B) delivering
to the Commission staff an analysis prepared by counsel to the Company
setting forth the legal bases, if any, upon which such counsel has
concluded that such an Exchange Offer should be permitted and (C)
diligently pursuing a resolution (which need not be favorable) by the
Commission staff.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker-Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to
the effect that (A) it is not an Affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the New
Preferred Stock or New Exchange Notes, as the case may be, to be issued in
the Exchange Offer and (C) it is acquiring the New Preferred Stock or the
New Exchange Notes, as the case may be, in its ordinary course of business.
Each Holder using the Exchange Offer to participate in a distribution of
the New Preferred Stock or New Exchange Notes, as the case may be, hereby
acknowledges and agrees that, if the resales thereof are of securities
obtained by such Holder in exchange for securities acquired directly from
the Company or an Affiliate thereof, it (1) could not, under Commission
policy as in effect on the date of this Agreement, rely on the position of
the Commission enunciated in Morgan Stanley and Co., Inc. (available
----------------------------
June 5, 1991) and Exxon Capital Holdings Corporation (available May 13,
----------------------------------
1988), as interpreted in the Commission's letter to Shearman & Sterling
-------------------
dated July 2, 1993, and similar no-action letters (including, if
applicable, any no-action letter obtained pursuant to clause (i) above),
and (2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction
and that such a secondary resale transaction must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that the Company is registering the Exchange Offer
in reliance on the position of the Commission enunciated in Exxon Capital
-------------
Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
-------------------- ----------------------------
(available June 5, 1991) as interpreted in the Commission's letter to
Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action
-------------------
letter obtained pursuant to clause (i) above, (B) including a
representation that the Company has not entered into any arrangement or
understanding with any Person to distribute the New Preferred Stock or New
Exchange Notes, as the case may be, to be received in the Exchange Offer
and that, to the best of the Company's information and belief, each Holder
participating in the Exchange Offer is acquiring the New Preferred Stock or
the New Exchange Notes, as the case may be, in its ordinary course of
business and has no arrangement or understanding with any Person to
participate in the distribution of the
9
<PAGE>
New Preferred Stock or the New Exchange Notes, as the case may be, received
in the Exchange Offer and (C) any other undertaking or representation
required by the Commission as set forth in any no-action letter obtained
pursuant to clause (i) above, if applicable.
(b) Shelf Registration Statement. In connection with the Shelf
----------------------------
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) below and shall use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof.
(c) General Provisions. In connection with any Registration Statement
------------------
and any related Prospectus required by this Agreement, the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for
the period specified in Section 3 or 4 of this Agreement, as applicable.
Upon the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a material
misstatement or omission or (B) not to be effective and usable for resale
of Transfer Restricted Securities during the period required by this
Agreement, the Company shall file promptly an appropriate amendment to such
Registration Statement curing such defect, and, if Commission review is
required, use its best efforts to cause such amendment to be declared
effective as soon as reasonably practicable thereafter.
(ii) prepare and file with the Commission such amendments and post-
effective amendments to the applicable Registration Statement as may be
necessary to keep such Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as the case may be, or such
shorter period as will terminate when all Transfer Restricted Securities
covered by such Registration Statement have been exchanged or sold or until
such Transfer Restricted Securities no longer constitute Transfer
Restricted Securities or are no longer outstanding; cause the Prospectus to
be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Act, and to comply
fully with Rules 424, 430A and 462, as applicable, under the Act in a
timely manner; and comply with the provisions of the Act with respect to
the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
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<PAGE>
(iii) advise the selling Holders promptly and, if requested by such
Persons, confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to any applicable Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) of any request
by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information
relating thereto, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement under the Act or
of the suspension by any state securities commission of the qualification
of the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the preceding
purposes, or (D) of the existence of any fact or the happening of any event
that makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Registration Statement in
order to make the statements therein not misleading, or that requires the
making of any additions to or changes in the Prospectus in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. If at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration Statement, or
any state securities commission or other regulatory authority shall issue
an order suspending the qualification or exemption from qualification of
the Transfer Restricted Securities under state securities or Blue Sky laws,
the Company shall use its best efforts to obtain the withdrawal or lifting
of such order at the earliest practicable time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated by
Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(v) furnish to the Initial Purchasers and each selling Holder named in
any Registration Statement or Prospectus in connection with such sale, if
any, before filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or any amendments or
supplements to any such Registration Statement or Prospectus (including all
documents incorporated by reference, if requested by such person), which
documents will be subject to the review and comment of such Holders in
connection with such sale, if any, for a period of at least five Business
Days, and the Company will not file any such Registration Statement or
Prospectus or any amendment or supplement to any such Registration
Statement or Prospectus (including all such documents incorporated by
reference, if requested by such person) to which the selling Holders of the
Transfer Restricted Securities covered by such Registration Statement in
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<PAGE>
connection with such sale, if any, shall reasonably object within five
Business Days after the receipt thereof. A selling Holder shall be deemed
to have reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains a material misstatement or omission or fails to comply with
the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus, if
requested by any selling Holders within five Business Days after receipt of
notification thereof from the Company, provide copies of such document to
such selling Holders in connection with such sale, if any, make the
Company's' representatives available for discussion of such document and
other customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders may reasonably
request;
(vii) make available at reasonable times for inspection by the selling
Holders participating in any disposition pursuant to such Registration
Statement and any attorney or accountant retained by such selling Holders,
all financial and other records, pertinent corporate documents of the
Company and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such selling Holder, attorney
or accountant in connection with such Registration Statement or any post-
effective amendment thereto subsequent to the filing thereof and prior to
its effectiveness;
(viii) if requested by any selling Holders in connection with such
sale, if any, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities; and make all
required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after the Company is notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
(ix) furnish to each selling Holder in connection with such sale, if
any, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
all documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) deliver to each selling Holder, without charge, as many copies of
the Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company
hereby consents to the use (in accordance with law) of the Prospectus and
any amendment or supplement thereto by each of the selling Holders in
connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement
thereto;
(xi) upon the request of any selling Holder, enter into such
agreements (including underwriting agreements) and make such
representations and warranties and
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<PAGE>
take all such other actions in connection therewith in order to expedite or
facilitate the disposition of the Transfer Restricted Securities pursuant
to any applicable Registration Statement contemplated by this Agreement,
all to such extent as may be reasonably acceptable to the Company and as
may be reasonably requested by any Holder of Transfer Restricted Securities
in connection with any sale or resale pursuant to any applicable
Registration Statement contemplated by this Agreement and in such
connection, the Company shall:
(A) upon request of any selling Holder, furnish (or in the case of
paragraphs (2) and (3), use its best efforts to cause to be furnished) to
each selling Holder, upon the effectiveness of the Shelf Registration
Statement or upon Consummation of the Exchange Offer, as the case may be:
(1) a certificate, dated such date, signed on behalf of the
Company by (x) the Chief Executive Officer, President or any Vice
President and (y) a principal financial or accounting officer of the
Company, confirming, as of the date thereof, the matters set forth in
paragraph (f) of Section 6 of the Purchase Agreement and such other
similar matters as the selling Holders may reasonably request;
(2) opinions, dated such date, of counsel for the Company
covering matters similar to those set forth in paragraphs (a), (b),
(c) and (d) of Section 6 of the Purchase Agreement and such other
matters as the selling Holders may reasonably request, and in any
event including a statement to the effect that certain such counsel
has participated in conferences with officers and other
representatives of the Company and representatives of the independent
public accountants for the Company at which the contents of such
Registration Statement and the related Prospectus were discussed,
although such counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that such counsel
advises that, on the basis of the foregoing, no facts came to such
counsel's attention that caused such counsel to believe that the
applicable Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became effective
and, in the case of the Exchange Offer Registration Statement, as of
the date of Consummation of the Exchange Offer, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that the Prospectus contained in such
Registration Statement as of its date and, in the case of the opinion
dated the date of Consummation of the Exchange Offer, as of the date
of Consummation, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading. Without limiting the foregoing, such
counsel may state further that such counsel assumes no responsibility
for, and has not independently verified, the accuracy, completeness or
fairness of the
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<PAGE>
financial statements, notes and schedules and other financial data
included in any Registration Statement contemplated by this Agreement
or the related Prospectus; and
(3) a customary comfort letter, dated such date, from the
Company's independent accountants, in the customary form and covering
matters of the type customarily covered in comfort letters to
underwriters in connection with underwritten offerings, and affirming
the matters set forth in the comfort letters delivered pursuant to
Section 6(g) of the Purchase Agreement; and
(B) deliver such other documents and certificates as may be reasonably
requested by the selling Holders to evidence compliance with clause (A)
above and with any customary conditions contained in the any agreement
entered into by the Company pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders and their counsel in connection with the
registration and qualification of the Transfer Restricted Securities under
the securities or Blue Sky laws of such jurisdictions as the selling
Holders may reasonably request and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions of
the Transfer Restricted Securities covered by the applicable Registration
Statement; provided, however, that the Company shall not be required to
register or qualify as a foreign corporation where it is not now so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it is not
now so subject;
(xiii) issue, upon the request of any Holder of Preferred Stock or
Exchange Notes, as the case may be, covered by any Shelf Registration
Statement contemplated by this Agreement, New Preferred Stock or New
Exchange Notes, as the case may be, having the same aggregate Liquidation
Preference as the aggregate Liquidation Preference of Preferred Stock, or
an aggregate principal amount equal to the aggregate principal amount of
Exchange Notes, as applicable, in each case surrendered to the Company by
such Holder in exchange therefor or being sold by such Holder; such New
Preferred Stock or New Exchange Notes, as the case may be, to be registered
in the name of such Holder or in the name of the purchaser(s) of such New
Preferred Stock or New Exchange Notes, as the case may be; in return, the
Preferred Stock or the Exchange Notes, as the case may be, held by such
Holder shall be surrendered to the Company for cancellation;
(xiv) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the selling Holders to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and to
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<PAGE>
register such Transfer Restricted Securities in such denominations and such
names as the selling Holders may request at least two Business Days prior
to such sale of Transfer Restricted Securities;
(xv) use its best efforts to cause the disposition of the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof to
consummate the disposition of such Transfer Restricted Securities, subject
to the proviso contained in clause (xii) above;
(xvi) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Transfer Agent or the
Trustee, as the case may be, with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depository Trust Company;
(xvii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
Holders with regard to any applicable Registration Statement, as soon as
practicable, a consolidated earnings statement meeting the requirements of
Rule 158 under the Act (which need not be audited) covering a twelve-month
period beginning after the effective date of the Registration Statement (as
such term is defined in paragraph (c) of Rule 158 under the Act);
(xviii) make appropriate officers of the Company available to the
selling Holders for meetings with prospective purchasers of the Transfer
Restricted Securities; and
(xix) if Notes are being included in any Registration Statement,
cause the Indenture to be qualified under the TIA not later than the
effective date of the first Registration Statement required by this
Agreement and, in connection therewith, cooperate with the Trustee and the
Holders to effect such changes to the Indenture as may be required for the
Indenture to be so qualified in accordance with the terms of the TIA; and
execute and use its best efforts to cause the Trustee to execute all
documents that may be required to effect such changes and all other forms
and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xx) provide promptly to each Holder upon request each document filed
with the Commission pursuant to the requirements of Section 13 or Section
15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
-----------------------
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof (in each case, a "Suspension
----------
Notice"), such Holder will forthwith discontinue disposition of Transfer
- ------
Restricted Securities pursuant to the applicable Registration Statement until
(i) such
15
<PAGE>
Holder has received copies of the supplemented or amended Prospectus
contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is advised in
writing by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus (in each case, the "Recommencement Date"). Each
-------------------
Holder receiving a Suspension Notice hereby agrees that it will either (i)
destroy any Prospectuses, other than permanent file copies, then in such
Holder's possession which have been replaced by the Company with more recently
dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the Prospectus covering such Transfer Restricted Securities that was current at
the time of receipt of the Suspension Notice. In the event the Company shall
deliver a Suspension Notice, the time period regarding the effectiveness of such
Registration Statement set forth in Section 3 or 4 hereof, as applicable, shall
be extended by a number of days equal to the number of days in the period from
and including the date of delivery of the Suspension Notice to the date of
delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement shall be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state securities or Blue Sky laws; (iii)
all expenses of printing (including printing certificates for the New Preferred
Stock or New Exchange Notes, as the case may be, to be issued in the Exchange
Offer and printing of Prospectuses), messenger and delivery services and
telephone; (iv) all fees and disbursements of counsel for the Company and, in
accordance with Section 7(b) below, the Holders of Transfer Restricted
Securities; (v) all fees and disbursements of independent certified public
accountants of the Company (including the expenses of any special audit and
comfort letters required by or incident to such performance); and (vi) fees and
expenses of the Transfer Agent or the Trustee, as the case may be, and any
exchange agent in the Exchange Offer, including the fees and expenses of their
counsel.
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities being
tendered in the Exchange Offer and/or resold pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or
registered pursuant to the Shelf Registration Statement, as applicable, for the
reasonable fees and disbursements of not more than one counsel, who shall be
Latham & Watkins, unless another
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<PAGE>
firm shall be chosen by the Holders of a majority in principal amount of the
Transfer Restricted Securities for whose benefit such Registration Statement is
being prepared.
SECTION 8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless (i) each Holder,
(ii) the directors, officers, employees and agents of each Holder and (iii) each
person who controls any Holder within the meaning of either the Act or the
Exchange Act (any person referred to in clause (i), (ii) or (iii) may
hereinafter be referred to as an "Indemnified Holder") against any and all
------------------
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement, preliminary prospectus or
Prospectus or any information provided by the Company to any Holder or
prospective purchaser of New Preferred Stock or New Exchange Notes, as the case
may be, or in any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, and agree to
reimburse each such indemnified party, as incurred, for any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
-------- -------
that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission (i) made
in any Registration Statement, preliminary prospectus or Prospectus, or in any
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company by any Holder specifically for inclusion
therein or (ii) made in any preliminary prospectus, if such untrue statement or
omission or alleged omission made in such preliminary prospectus is eliminated
or remedied in the Prospectus relating to it (as amended or supplemented, as
applicable) and a copy of such Prospectus shall not have been furnished to the
person alleging such loss, claim, damage or liability as required under
applicable law. This indemnity agreement will be in addition to any liability
which the Company may otherwise have.
(b) Each Holder of Transfer Restricted Securities severally agrees to
indemnify and hold harmless the Company, its directors, officers, employees and
agents and each person who controls the Company within the meaning of either the
Act or the Exchange Act, to the same extent as the foregoing indemnity from the
Company to each of the Indemnified Holders, but only with reference to written
information relating to such Indemnified Holder furnished to the Company by such
Indemnified Holder specifically for inclusion in any Registration Statement,
preliminary prospectus or Prospectus (or in any amendment or supplement
thereto). This indemnity agreement will be in addition to any liability which
any Indemnified Holder may otherwise have.
17
<PAGE>
(c) Promptly after receipt by an indemnified party under this Section 8 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which indemnification is sought (in which
case the indemnifying party shall not thereafter be responsible for the fees and
expenses of any separate counsel retained by the indemnified party or parties
except as set forth below); provided, however, that such counsel shall be
satisfactory to the indemnified party. Notwithstanding the indemnifying party's
election to appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees, costs
and expenses of such separate counsel if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of more
than one separate firm (in addition to any local counsel) for all indemnified
parties, and that all such fees and expenses shall be reimbursed as they are
incurred. Any such separate firm for the Indemnified Holder and such control
persons shall be designated in writing by a majority of the Indemnified Holders
and any such separate firm of the Company, its directors, its officers and such
control persons of the Company shall be designated in writing by the Company. An
indemnifying party will not, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b) of
this Section 8 is unavailable to hold harmless an indemnified party for any
reason, the Company, and the Holders agree to contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending same)
18
<PAGE>
(collectively "Losses") to which the Company and one or more of the Holders may
------
be subject in such proportion as is appropriate to reflect the relative benefits
received by the Company, on the one hand, and by the Indemnified Holders, on the
other hand, from the sale of Transfer Restricted Securities; provided, however,
that in no case shall any Holder (except as may be provided in any agreement
among the Holders relating to the sale of its Transfer Restricted Securities) be
responsible for any amount in excess of the amount by which the total received
by such Holder with respect to its sale of Transfer Restricted Securities
pursuant to a Registration Statement exceeds the sum of (A) the amount paid to
such Holder for such Transfer Restricted Securities plus (B) the amount of any
damages which such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. If the
allocation provided by the immediately preceding sentence is unavailable for any
reason, the Company and the Indemnified Holder shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company, on the one hand, and of the Indemnified
Holder, on the other hand, in connection with the statements or omissions which
resulted in such Losses as well as any other relevant equitable considerations.
Relative fault shall be determined by reference to whether any alleged untrue
statement or omission relates to information provided by either the Company or
the Holders and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and each Holder agree that it would not be just and equitable if contribution
were determined by pro rata allocation or any other method of allocation which
does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8, each person who
controls a Holder within the meaning of either the Act or the Exchange Act and
each director, officer, employee and agent of a Holder shall have the same
rights to contribution as such Holder, and each person who controls the Company
within the meaning of either the Act or the Exchange Act and each officer and
director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this
paragraph (d). The remedies provided in this Section 8 are not exclusive and
shall not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder of Transfer Restricted Securities, to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.
SECTION 10. MISCELLANEOUS
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(a) Remedies. The Company acknowledges and agrees that any failure
--------
by the Company to comply with its obligations under Sections 3 and 4 hereof may
result in material irreparable injury to the Initial Purchasers or the Holders
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, any Initial Purchaser or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 3 and
4 hereof. The Company further agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company shall not, on or after
--------------------------
the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities
under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section10 (c)(i), the Company has obtained the written consent
of the Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities (excluding Transfer Restricted Securities held by
the Company of its Affiliates). Notwithstanding the foregoing, a waiver or
consent to departure from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer or registered pursuant to the Shelf Registration Statement and that does
not affect, directly or indirectly, the rights of other Holders whose securities
are not being tendered pursuant to such Exchange Offer or registered pursuant to
the Shelf Registration Statement may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer or such Shelf Registration Statement, as applicable.
(d) Third Party Beneficiary. The Holders shall be third party
-----------------------
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect their rights or the rights of Holders
hereunder.
(e) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telecopier or air courier
guaranteeing overnight delivery:
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<PAGE>
(i) if to a Holder, at the address set forth on the records of the
Transfer Agent or Registrar under the Indenture (in such case, along with a
copy to the Trustee), as the case may be; and
(ii) if to the Company:
Global Crossing Holdings Ltd.
Wessex House
45 Reid Street
Hamilton HM12 Bermuda
Telecopier No.: (441) 296-8606
Attention: Secretary of the Company
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Telecopier No.: (212) 455-2502
Attention: D. Rhett Brandon, Esq.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.
(f) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the parties
hereto, including, without limitation, and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided, that
nothing herein shall be deemed to permit any assignment, transfer or other
disposition of Transfer Restricted Securities in violation of the terms hereof
or of the Purchase Agreement, the Memorandum of Increase, Bye-laws or the
Indenture. If any transferee of any Holder shall acquire Transfer Restricted
Securities in any manner, whether by operation of law or otherwise, such
Transfer Restricted Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Transfer Restricted Securities, such
Person shall be conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement, including the restrictions on
resale set forth in this Agreement and, if applicable, the Purchase Agreement,
and such Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
21
<PAGE>
(h) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(l) Consent to Jurisdiction and Service. To the fullest extent
------------------------------------
permitted by applicable law, the Company hereby irrevocably submits to the
jurisdiction of any Federal or State court located in the Borough of Manhattan
in The City of New York, New York in any suit, action or proceeding based on or
arising out of or relating to this Agreement or any Securities or Notes, and
irrevocably agrees that all claims in respect of such suit or proceeding may be
determined in any such court. The Company irrevocably waives, to the fullest
extent permitted by law, any objection which it may have to the laying of the
venue of any such suit, action or proceeding brought in such a court and any
claim that any suit, action or proceeding brought in such a court has been
brought in an inconvenient forum. The Company agrees that final judgment in any
such suit, action or proceeding brought in such a court shall be conclusive and
binding upon the Company and may be enforced in the courts of Bermuda (or any
other courts to the jurisdiction of which the Company is subject) by a suit upon
such judgment, provided that service of process is effected upon the Company in
--------
the manner specified herein or as otherwise permitted by law. The Company hereby
irrevocably designates and appoints CT Corporation System, 1633 Broadway - 23rd
Floor, New York, New York (the "Process Agent"), as the authorized agent of the
-------------
Company upon whom process may be served in any such suit or proceeding, it being
understood that the designation and appointment of the Process Agent as such
authorized agent shall become effective immediately without any further action
on the part of the Company. The Company hereby represents to each Initial
Purchaser that it has notified the Process Agent of such designation and
appointment and that the Process Agent has accepted the same in writing. The
Company hereby irrevocably authorizes and directs the Process Agent to accept
such service. The Company further agrees that service of process upon the
Process Agent and written notice of said service to the Company mailed by
prepaid registered first class mail or delivered to the Process Agent at its
principal office, shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. Nothing herein shall affect the
right of any
22
<PAGE>
Initial Purchaser or any person controlling any Initial Purchaser to serve
process in any other matter permitted by law. The Company further agrees to take
any and all action, including the execution and filing of any and all such
documents and instruments as may be necessary to continue such designation and
appointment of the Process Agent in full force and effect so long as the Company
has any outstanding obligations under this Agreement, the Securities, the Notes,
the Memorandum of Increase, Bye-laws or the Indenture. To the extent that the
Company has or hereafter may acquire any immunity from jurisdiction of any court
or from any legal process (whether through service of note, attachment prior to
judgment, attachment in aid of execution, executor or otherwise) with respect to
itself or its property, the Company hereby irrevocably waives such immunity in
respect of its obligations under this Agreement, to the extent permitted by law.
[Registration Rights Agreement Signature Pages Follow]
23
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
Global Crossing Holdings Ltd.
By /s/ S. Wallace Dawson Jr.
---------------------------------------
Name: S. Wallace Dawson Jr.
Title: Chief Executive Officer
<PAGE>
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.
Salomon Smith Barney Inc.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
CIBC Oppenheimer Corp.
Morgan Stanley & Co. Incorporated
Deutsche Bank Securities, Inc.
Goldman, Sachs & Co.
Chase Securities Inc.
Donaldson, Lufkin and Jenrette Securities Corporation
By: Salomon Smith Barney Inc.
By: /s/ John F. Otto
--------------------------
Name: John F. Otto
Title: Managing Director
For themselves and the other Initial Purchasers
<PAGE>
EXHIBIT 4.8
================================================================================
CREDIT AGREEMENT,
dated as of
November 25, 1998
among
MID-ATLANTIC CROSSING LTD.,
as the Borrower,
VARIOUS FINANCIAL INSTITUTIONS,
as the Lenders,
DEUTSCHE BANK AG, NEW YORK BRANCH
and
CIBC INC.,
as the Lead Agents,
DEUTSCHE BANK AG, NEW YORK BRANCH,
as the Administrative Agent,
CANADIAN IMPERIAL BANK OF COMMERCE,
as the Syndication Agent,
and
CIBC INC.
as the Documentation Agent.
__________________________________________
DEUTSCHE BANK SECURITIES INC.
and
CIBC OPPENHEIMER CORP.
as the Co-Arrangers
Construction, Working Capital and Term Financing of the
Mid-Atlantic Crossing Fiber Optic Submarine Cable System
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. DEFINITIONS...................................................................................2
SECTION 1.01. Defined Terms...................................................................2
SECTION 1.02. Classification of Loans and Borrowings.........................................37
SECTION 1.03. Terms Generally................................................................37
SECTION 1.04. Accounting Terms; Exchange Rates...............................................38
ARTICLE II. THE COMMITMENTS.............................................................................38
SECTION 2.01. Commitments....................................................................38
SECTION 2.02. Loans and Borrowings...........................................................39
SECTION 2.03. Requests for Borrowings and Other Credit Extensions............................39
SECTION 2.04. Special Provisions for Credit Extensions.......................................40
SECTION 2.05. Funding Of Borrowings..........................................................42
SECTION 2.06. Interest Elections.............................................................43
SECTION 2.07. Termination and Reduction of Commitments.......................................44
SECTION 2.08. Repayment of Loans; Evidence of Debt...........................................44
SECTION 2.09. Optional Prepayments of Loans..................................................46
SECTION 2.10. Mandatory Prepayments..........................................................46
SECTION 2.11. Fees...........................................................................48
SECTION 2.12. Interest.......................................................................48
SECTION 2.13. Alternate Rate of Interest; Illegality.........................................49
SECTION 2.14. Increased Costs................................................................50
SECTION 2.15. Break Funding Payments.........................................................51
SECTION 2.16. Taxes..........................................................................51
SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set-offs....................53
SECTION 2.18. Mitigation Obligations; Replacement of Lenders.................................54
ARTICLE III. REPRESENTATIONS AND WARRANTIES.............................................................56
SECTION 3.01. Financial Condition............................................................56
SECTION 3.02. No Change......................................................................56
SECTION 3.03. Organization; Powers...........................................................56
SECTION 3.04. Authorization; Enforceability..................................................56
SECTION 3.05. Corporate Structure............................................................57
SECTION 3.06. Compliance with Law............................................................57
SECTION 3.07. No Legal Bar...................................................................57
SECTION 3.08. Governmental Actions...........................................................57
SECTION 3.09. Litigation.....................................................................58
SECTION 3.10. Environmental Matters..........................................................58
SECTION 3.11. No Default; Event of Default...................................................58
SECTION 3.12. Properties.....................................................................58
SECTION 3.13. Taxes..........................................................................59
SECTION 3.14. Federal Regulations............................................................59
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 3.15. ERISA..........................................................................59
SECTION 3.16. Investment Company Act.........................................................59
SECTION 3.17. Security Documents.............................................................59
SECTION 3.18. Chief Executive Office.........................................................60
SECTION 3.19. Disclosure.....................................................................60
SECTION 3.20. Sufficiency of System Contracts................................................61
SECTION 3.21. Immunity.......................................................................61
SECTION 3.22. Export Control.................................................................61
SECTION 3.23. Foreign Corrupt Practices Act..................................................61
SECTION 3.24. Intellectual Property..........................................................61
SECTION 3.25. No Additional Fees.............................................................61
SECTION 3.26. Year 2000......................................................................62
SECTION 3.27. Landing License................................................................62
ARTICLE IV. CONDITIONS..................................................................................62
SECTION 4.01. Conditions Precedent to the First Loan.........................................62
SECTION 4.02. Conditions Precedent to Subsequent Credit Extensions...........................68
ARTICLE V. AFFIRMATIVE COVENANTS........................................................................72
SECTION 5.01. Financial Statements and Other Information.....................................72
SECTION 5.02. Reports........................................................................73
SECTION 5.03. Payment of Obligations.........................................................74
SECTION 5.04. Conduct of Business; System Completion.........................................75
SECTION 5.05. Existence......................................................................75
SECTION 5.06. Compliance with Laws...........................................................75
SECTION 5.07. Performance of Agreements......................................................75
SECTION 5.08. Taxes and Claims...............................................................75
SECTION 5.09. Notices........................................................................76
SECTION 5.10. Insurance......................................................................76
SECTION 5.11. Fiscal Year....................................................................76
SECTION 5.12. Use of Proceeds................................................................76
SECTION 5.13. Environmental Matters..........................................................77
SECTION 5.14. Operating Budgets; Operating Plans.............................................77
SECTION 5.15. Governmental Actions...........................................................78
SECTION 5.16. Cooperation with Independent Engineer..........................................78
SECTION 5.17. Spare Parts....................................................................78
SECTION 5.18. Interest Rate Protection.......................................................78
SECTION 5.19. Maintenance of Process Agent...................................................79
SECTION 5.20. System Operation and Maintenance...............................................79
SECTION 5.21. Event of Loss..................................................................79
SECTION 5.22. Books and Records; Inspection Rights...........................................79
SECTION 5.23. Export Control.................................................................79
SECTION 5.24. Foreign Corrupt Practices Act..................................................80
SECTION 5.25. Further Assurances.............................................................80
SECTION 5.26. Intellectual Property..........................................................80
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 5.27. Certain Additional Material Contracts..........................................80
SECTION 5.28. Upgradeability.................................................................81
SECTION 5.29. First Permitted Upgrade........................................................81
ARTICLE VI. NEGATIVE COVENANTS..........................................................................81
SECTION 6.01. Indebtedness...................................................................81
SECTION 6.02. Liens..........................................................................82
SECTION 6.03. Fundamental Changes............................................................83
SECTION 6.04. Sale of Assets.................................................................83
SECTION 6.05. Investments, Loans, Advances, Guarantees and Acquisitions......................83
SECTION 6.06. Restricted Payments............................................................85
SECTION 6.07. Amendment of System Contracts, Etc.............................................86
SECTION 6.08. Supply Contracts...............................................................87
SECTION 6.09. Addition to Configuration......................................................89
SECTION 6.10. Permitted System Upgrades......................................................89
SECTION 6.11. Leases.........................................................................89
SECTION 6.12. Change of Office...............................................................89
SECTION 6.13. Change of Name.................................................................90
SECTION 6.14. Transactions with Affiliates...................................................90
SECTION 6.15. Sale and Leaseback.............................................................90
SECTION 6.16. Approval of Additional Contracts...............................................90
SECTION 6.17. Capital Expenditures...........................................................91
SECTION 6.18. Limitations on Transfer and Issuance of Interests..............................91
SECTION 6.19. Unrelated Activities; Abandonment..............................................91
SECTION 6.20. Set-off........................................................................91
SECTION 6.21. Changes in Capital Budget......................................................91
SECTION 6.22. Payment of Construction Costs..................................................92
SECTION 6.23. Sales of Capacity..............................................................92
SECTION 6.24. Financial Covenants............................................................93
SECTION 6.25. Amendments, Etc. of Organizational and Other Documents.........................94
SECTION 6.26. Management and Advisory Fees, Etc..............................................95
SECTION 6.27. Immunity.......................................................................95
SECTION 6.28. Amendments to Operating Budget.................................................95
SECTION 6.29. Backhaul.......................................................................95
SECTION 6.30. Exchange Rate Risk.............................................................96
ARTICLE VII. EVENTS OF DEFAULT..........................................................................96
SECTION 7.01. Non-Payment of Obligations.....................................................96
SECTION 7.02. Breach of Warranty.............................................................96
SECTION 7.03. Non-Performance of Certain Covenants and Obligations...........................96
SECTION 7.04. Involuntary Bankruptcy Proceeding, Etc.........................................97
SECTION 7.05. Voluntary Bankruptcy Proceeding, Etc...........................................98
SECTION 7.06. Judgments......................................................................98
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
SECTION 7.07. ERISA..........................................................................98
SECTION 7.08. Impairment of Security, Etc....................................................98
SECTION 7.09. Commercial Operation...........................................................99
SECTION 7.10. Impairment of System Contract..................................................99
SECTION 7.11. Default Under System Contract..................................................99
SECTION 7.12. Liquidated Damages.............................................................99
SECTION 7.13. Revocation of Landing License, Etc.............................................100
SECTION 7.14. Change in Control..............................................................100
SECTION 7.15. Default on Other Indebtedness..................................................100
SECTION 7.16. Delay in Construction or Installation..........................................100
SECTION 7.17. Limitations Regarding St. Croix Affiliate......................................100
SECTION 7.18. Limitations Regarding Global Networks..........................................101
SECTION 7.19. Remedies.......................................................................101
ARTICLE VIII. THE ADMINISTRATIVE AGENT, OTHER AGENTS AND AGENT RELATED PERSONS..........................101
SECTION 8.01. Authorization and Action.......................................................101
SECTION 8.02. Exculpation of, and Reliance by, Agents and Agent Related Persons..............102
SECTION 8.03. Agents, Agent Related Persons and Affiliates...................................103
SECTION 8.04. Lender Credit Decision.........................................................103
SECTION 8.05. Indemnification................................................................103
SECTION 8.06. Collateral Matters.............................................................104
SECTION 8.07. Successor Administrative Agent.................................................105
ARTICLE IX. MISCELLANEOUS...............................................................................106
SECTION 9.01. Notices........................................................................106
SECTION 9.02. Waivers; Amendments............................................................106
SECTION 9.03. Expenses; Indemnity; Damage Waiver.............................................107
SECTION 9.04. Successors and Assigns; Consent and Agreement..................................109
SECTION 9.05. Limited Recourse...............................................................112
SECTION 9.06. Survival.......................................................................112
SECTION 9.07. Counterparts; Integration; Effectiveness.......................................112
SECTION 9.08. Severability...................................................................112
SECTION 9.09. Right of Setoff................................................................113
SECTION 9.10. Governing Law; Jurisdiction; Consent to Service of Process.....................113
SECTION 9.11. WAIVER OF JURY TRIAL...........................................................113
SECTION 9.12. Headings.......................................................................114
SECTION 9.13. Replacement of Independent Engineer............................................114
SECTION 9.14. Confidentiality................................................................114
SECTION 9.15. Right of Quiet Enjoyment.......................................................115
SECTION 9.16. Judgment Currency..............................................................115
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES:
- ----------
<S> <C>
Schedule 1.01 Permitted Reserve L/C Facility
Schedule 2.01 Lenders; Commitments
Schedule 2.08 Principal Amortization Table
Schedule 3.05(a) Borrower Capital Structure
Schedule 3.05(b) Subsidiaries
Schedule 3.05(c) St. Croix Affiliate Capital Structure
Schedule 3.08 Governmental Actions
Schedule 3.13 Taxes
Schedule 3.17 Filings and Other Actions
Schedule 4.02(f) Milestones
Schedule 5.10 Insurance
EXHIBITS:
- ---------
Exhibit A-1 Form of Tranche A-1 Term Note
Exhibit A-2 Form of Tranche A-2 Term Note
Exhibit A-3 Form of Working Capital Note
Exhibit B-1 Form of Credit Extension Request
Exhibit B-2 Form of Credit Extension Certificate
Exhibit B-3 Form of Contractor Construction Progress Certificate
Exhibit B-4 Form of Tyco Construction Progress Certificate
Exhibit C Form of Continuation/Conversion Notice
Exhibit D Form of Assignment and Acceptance
Exhibit E Form of Subsidiary Security Agreement
Exhibit F Form of Subsidiary Guaranty Agreement
Exhibit G Form of Closing Date Certificate
Exhibit H Form of Supplement No. 2 to the Alcatel Supply Contract
Exhibit I Form of Capacity Sales Agreement
Exhibit J-1 Form of Legal Opinion of Appleby, Spurling & Kempe
Exhibit J-2 Form of Legal Opinion of Simpson Thacher & Bartlett
Exhibit J-3 Form of Legal Opinion of Wiggin and Co.
Exhibit J-4 Form of Legal Opinion of Scott Ashby
Exhibit J-5 Form of Legal Opinion of Pascal Durand-Barthez
Exhibit J-6 Form of Legal Opinion of Menaker & Herrmann LLP
Exhibit J-7 Form of Legal Opinion of Charles Matthews
Exhibit J-8 Form of Legal Opinion of TSSL's Legal Counsel
Exhibit J-9 Form of Landing License Legal Opinion
Exhibit K-1 Independent Engineer's Report
Exhibit K-2 Form of Independent Engineer's Closing Date Certificate
Exhibit L-1 Market Consultant's Report
Exhibit L-2 Form of Market Consultant's Closing Date Certificate
Exhibit M Budget and Projections
Exhibit N Form of Exemption Certificate
</TABLE>
v
<PAGE>
CREDIT AGREEMENT, dated as of November 25, 1998 (as amended, supplemented,
amended and restated or otherwise modified from time to time, this "Agreement"),
---------
among MID-ATLANTIC CROSSING LTD., a corporation organized and existing under the
laws of Bermuda (the "Borrower"), the financial institutions from time to time
--------
parties hereto as lenders (collectively, the "Lenders"), DEUTSCHE BANK AG, NEW
-------
YORK BRANCH and CIBC INC., acting by and/or through one or more of its branches,
agencies or affiliates, as lead agents for the Lenders (in such capacity, the
"Lead Agents"), DEUTSCHE BANK AG, NEW YORK BRANCH, as administrative agent for
- ------------
the Lenders (in such capacity, the "Administrative Agent"), CANADIAN IMPERIAL
--------------------
BANK OF COMMERCE, as syndication agent and book runner for the Lenders (in such
capacity, the "Syndication Agent") and CIBC INC., AS DOCUMENTATION AGENT FOR THE
-----------------
LENDERS (IN SUCH CAPACITY, THE "DOCUMENTATION AGENT").
-------------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to them in Section 1.01 of this Agreement;
------------
WHEREAS, the Borrower (together with its Subsidiaries) proposes to develop,
construct, own (and lease), and provide and sell System Capacity on, a subsea
fiber optic ring cable system at a per fiber pair capacity of 20 Gb/s to be
known as the "Mid-Atlantic Crossing Cable System" or "MAC-1," which is intended
to be used to provide telecommunications service among New York, St. Croix and
Florida (as modified from time to time in accordance with the terms hereof, the
"System");
------
WHEREAS, in order to provide for the design, construction and installation
of the System, the Borrower has entered into or will enter into the Supply
Contracts with the System Contractors;
WHEREAS, the Contractor's and TSSL's obligations with respect to the Work
under and as defined in the Alcatel Supply Contract and Tyco Supply Contract,
respectively, are being or will be guaranteed by the applicable Supply Contract
Guarantor pursuant to, and subject to the limitations set forth in, the Supply
Contract Guarantees;
WHEREAS, in order to provide for the operation, administration and
maintenance of the System, the Borrower will enter into (i) an O&M Agreement
with the Operator and (ii) a System Management Agreement with the System
Manager;
WHEREAS, in order to finance a portion of the design, development,
construction and installation of the System, the Shareholder has agreed to make
cash equity contributions to the Borrower in an aggregate amount equal to the
Required Equity Contribution;
WHEREAS, in order to finance the remaining portion of the design,
development, construction and installation of the System, the Borrower is
entering into this Agreement, pursuant to which the Lenders have agreed, subject
to the terms and conditions set forth herein, to make certain Credit Extensions
to the Borrower;
<PAGE>
WHEREAS, in order to market Capacity, the Borrower has entered into the
Marketing Agreement with the Marketing Agent;
WHEREAS, in furtherance of the foregoing and in order to secure and support
the Borrower's obligations to the Lenders under the Loan Documents, the
Borrower, the U.K. Subsidiary and the U.S. Subsidiary will enter into the
Securities Accounts Agreement which sets forth certain provisions regarding the
deposit and application of System Revenues, Backhaul Revenues and other
proceeds; and
WHEREAS, in order to further secure and support the Borrower's obligations
to the Lenders under the Loan Documents, the Shareholder, the Borrower and the
Subsidiaries will enter into the other Security Documents to which they are
parties (and the Subsidiaries will enter into the Subsidiary Guaranty
Agreements);
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I.
DEFINITIONS
-----------
SECTION 1.01. Defined Terms.
-------------
As used in this Agreement, the following terms shall have the meanings
specified below:
"ABR" when used in reference to any Loan or Borrowing, refers to whether
---
such Loan, or the Loans comprising such Borrowing, are bearing interest at a
rate determined by reference to the Alternate Base Rate.
"AC-1 Co-Location Agreement" means the agreement between GC Landing Corp.
--------------------------
and the Borrower pursuant to which GC Landing Corp. will provide the Borrower
(and its Subsidiaries) with the right to use and occupy the Brookhaven, New York
landing station in order to operate the System as contemplated hereby.
"AC-1 Consent" means the consent and agreement to be entered into among GC
------------
Landing Corp., the AC-1 Lenders, the Borrower and the Administrative Agent
pursuant to which, among other things, (a) the AC-1 Lenders consent to the AC-1
Co-Location Agreement, (b) the AC-1 Lenders agree to recognize and not disturb
the rights of the Borrower and its permitted assigns under the AC-1 Co-Location
Agreement upon the exercise of any rights of the AC-1 Lenders and (c) GC Landing
Corp. and the AC-1 Lenders consent to the assignment by the Borrower to the
Administrative Agent of the Borrower's right, title and interest in, to and
under the AC-1 Co-Location Agreement.
"AC-1 Lenders" means the lenders providing financing in connection with the
------------
subsea fiber optic cable system being developed by Atlantic Crossing.
2
<PAGE>
"Accounts" shall be the collective reference to the Borrower Accounts, the
--------
U.S. Subsidiary Accounts, the U.K. Subsidiary Accounts, and each other account,
together with each sub-account of any such account, established and maintained
pursuant to the provisions of the Securities Accounts Agreement.
"Actual Date of Commercial Operation" means the date on which the Basic
-----------------------------------
System is Ready for Commercial Acceptance or the Basic System is Ready for
Provisional Acceptance and the Borrower receives a Commissioning Report (as
defined in the Alcatel Supply Contract) demonstrating as such.
"Additional Contracts" means any contract entered into by the Borrower or
--------------------
any Subsidiary after the Closing Date (other than employment contracts and
contracts involving payments of less than $1,000,000 annually).
"Additional Material Contract" means each Additional Contract designated as
----------------------------
an "Additional Material Contract" in accordance with Section 6.16.
------------
"Additional Non-Material Contract" means each Additional Contract
--------------------------------
designated as an "Additional Non-Material Contract" in accordance with Section
-------
6.16.
- ----
"Adjusted LIBO Rate" means, with respect to any Eurodollar Borrowing for
------------------
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" is defined in the preamble and includes each of its
--------------------
successors and assigns.
"Affiliate" means, with respect to a specified Person, another Person that
---------
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Affiliate Capacity Cash Amount" is defined in Section 6.23.
------------------------------ ------------
"Agent Related Persons" means the Agents, the Lead Agents and their
---------------------
Affiliates and each of their respective officers, directors, partners, agents
and employees.
"Agents" is the collective reference to the Administrative Agent, the
------
Syndication Agent, the Documentation Agent and each Lead Agent.
"Agreement" is defined in the preamble.
--------- --------
"Alcatel" means Alcatel Alsthom, a societe anonyme organized under the laws
-------
of France and the ultimate parent of the Contractor.
"Alcatel Contract Price" means "Contract Price" as defined in the Alcatel
----------------------
Supply Contract.
3
<PAGE>
"Alcatel Contract Variation" means any amendment, supplement, waiver,
--------------------------
consent or other modification to the Alcatel Supply Contract and shall include
any "Contract Variation" as such term is defined in the Alcatel Supply Contract.
"Alcatel Contractor Consent" means the Consent and Agreement, dated as of
--------------------------
November 25, 1998, among the Borrower, the Contractor and the Administrative
Agent and, with respect to any supply contract permitted to replace the Alcatel
Supply Contract in accordance with Section 7.11, any replacement consent and
------------
agreement reasonably acceptable to the Administrative Agent and relating to such
new supply contract.
"Alcatel Escrow Agent" means the escrow agent under the Contractor Escrow
--------------------
Agreement in connection with the Alcatel Supply Contract, and each of its
successors and assigns as such thereunder.
"Alcatel Escrow Dispute Account" means the "Dispute Account" as defined in
------------------------------
the Contractor Escrow Agreement in connection with the Alcatel Supply Contract.
"Alcatel Guarantee" means the Guaranty, dated as of June 2, 1998, made by
-----------------
Alcatel in favor of the Borrower.
"Alcatel Plan of Work" means the plan of work attached as Appendix 3 to the
--------------------
Alcatel Supply Contract.
"Alcatel Supply Contract" means the Project Development and Construction
-----------------------
Contract, dated as of June 2, 1998, between the Contractor and the Borrower, as
supplemented pursuant to the Supplement No. 1 dated as of October 1, 1998,
between the Contractor and the Borrower and as modified by the letter from GCDC
to Alcatel Submarine Networks dated as of October 26, 1998.
"Alternate Base Rate" means, for any day, a rate per annum equal to the
-------------------
greatest of (a) the Prime Rate in effect on such day and (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1%. Any change in the
Alternate Base Rate due to a change in the Prime Rate or the Federal Funds
Effective Rate shall be effective from and including the effective date of such
change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Percentage" means, with respect to any Lender, the percentage
---------------------
of the total Commitments represented by such Lender's Commitments or, with
respect to any Lender and a given Class of Commitments, the percentage of the
total commitments of such Class represented by such Lender's Commitments. If
the Commitments have terminated or expired, the Applicable Percentages shall be
determined based upon the Commitments most recently in effect prior to such
termination or expiration, giving effect to any assignments.
"Applicable Rate" means, for any day, with respect to any ABR Loans or
---------------
Eurodollar Loans, the applicable rate per annum set forth below under the
caption "ABR Spread" or "Eurodollar Spread," as the case may be:
4
<PAGE>
ABR Spread Eurodollar Spread
---------- -----------------
(i) with respect to Term Loans: 2.00% 3.00%
(ii) with respect to Working Capital Loans: 2.00% 3.00%
On the Interest Payment Date occurring on or immediately following the First
Sales Threshold Date, each of the Applicable Rates set forth above shall be
reduced by 0.25% per annum; provided that if a Designated Event shall have
--------
occurred and be continuing, such reduction shall not be made on such date but
shall, instead, be made on the next Interest Payment Date on which there is no
Designated Event then occurring or continuing. On the Principal Payment Date
occurring on or immediately following the Second Sales Threshold Date, each of
the Applicable Rates shall be reduced by a further 0.25% per annum; provided
--------
that if a Designated Event shall have occurred and be continuing, such further
reduction shall not be made on such date but shall, instead, be made on the next
Principal Payment Date on which there is no Designated Event then occurring or
continuing.
"Approved Fund" means, with respect to any Lender that invests in bank
-------------
loans, any other fund that is advised or managed by the same investment advisor
as such Lender or an Affiliate of such investment advisor.
"Assignment and Acceptance" means an assignment and acceptance entered into
-------------------------
by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent,
------------
substantially in the form of Exhibit D or any other form approved by the
---------
Administrative Agent and the Borrower.
"Atlantic Crossing" means Atlantic Crossing Ltd., a Bermuda company and an
-----------------
affiliate of the Borrower.
"Availability Period" means:
-------------------
(a) with respect to the Tranche A-1 Term Loans, the period from and
including the Closing Date to but excluding the earliest of (i) if the Actual
Date of Commercial Operation does not occur prior to the Guaranteed Completion
Date, the Guaranteed Completion Date, (ii) if the Actual Date of Commercial
Operation does occur prior to the Guaranteed Completion Date, the date on which
the System Contractors have received payment in full of all amounts due under
the Supply Contracts in respect of the Work (as defined in the Supply Contracts)
(other than the portion thereof constituting the Final Contractor Payment) and
(iii) the date of termination of the Commitments; and
(b) with respect to the Tranche A-2 Term Loans, the period from and
including the Closing Date to and including the earliest of (i) the Commercial
Operation Date, (ii) the Guaranteed Completion Date and (iii) the date of
termination of the Commitments; and
5
<PAGE>
(c) with respect to any Working Capital Loan, the period from and
including the Closing Date to but excluding the earlier of (i) the Maturity Date
for the Working Capital Loans and (ii) the date of termination of the
Commitments.
"Backhaul Account" is defined in Section 2.15.1 of the Securities Accounts
---------------- --------------
Agreement.
"Backhaul Capacity" means capacity on fiber optic telecommunications
-----------------
systems (other than the System) in respect of which the Borrower or a Subsidiary
has acquired usage rights in accordance with the terms of this Agreement.
"Backhaul Revenues" means, for any period, all revenues received by the
-----------------
Borrower and its Subsidiaries from sales, leases or other dispositions for cash
of Backhaul Capacity (other than any such revenues (i) constituting
reimbursements or payments for operations and maintenance or similar such costs
and (ii) derived from sales, leases or other dispositions for cash of Backhaul
Capacity that was acquired in exchange for Swapped System Capacity).
"Basic System" means the System which, as of the Closing Date, the System
------------
Contractors have been instructed to construct, without taking into account any
upgrade thereof.
"Board" means the Board of Governors of the Federal Reserve System of the
-----
United States of America.
"Borrower" is defined in the preamble.
-------- --------
"Borrower Accounts" shall be the collective reference to the Revenue
-----------------
Account, the Construction Account, the Clean-Up Sub-Account, the Loan Proceeds
Sub-Account, the Delay Proceeds Sub-Account, the Commercial Operation Prepayment
Account, the Upgrade Account, the Upgrade Loan Proceeds Sub-Account, the Upgrade
Delay Proceeds Sub-Account, the O&M Account, the O&M Reserve Account, the Debt
Reserve Account, the Backhaul Account, the Casualty Proceeds Account, the Sales
and Issuances Proceeds Account, and each other account, together with each sub-
account of any such account, established and maintained on behalf of the
Borrower pursuant to the provisions of the Securities Accounts Agreement.
"Borrower Pledge Agreement (English Law)" means the Charge of Shares
---------------------------------------
(English Law), dated as of the date hereof, made by the Borrower in favor of the
Administrative Agent.
"Borrower Pledge Agreement (New York Law)" means the Pledge Agreement (New
----------------------------------------
York Law), dated as of the date hereof, made by the Borrower in favor of the
Administrative Agent.
"Borrower Pledge Agreements" means the Borrower Pledge Agreement (English
--------------------------
Law) and the Borrower Pledge Agreement (New York Law).
"Borrower Security Agreement (Bermuda Law)" means the Security Agreement
-----------------------------------------
(Bermuda Law), dated as of the date hereof, made by the Borrower in favor of the
Administrative Agent.
6
<PAGE>
"Borrower Security Agreement (New York Law)" means the Security Agreement
------------------------------------------
(New York Law), dated as of the date hereof, made by the Borrower in favor of
the Administrative Agent.
"Borrower Security Agreements" means the Borrower Security Agreement (New
----------------------------
York Law) and the Borrower Security Agreement (Bermuda Law).
"Borrowing" means Loans of the same Class and Type, made, converted or
---------
continued on the same date and, in the case of Eurodollar Loans, as to which a
single Interest Period is in effect.
"Business Day" means any day that is not a Saturday, Sunday or other day on
------------
which commercial banks in New York City are authorized or required by law to
remain closed; provided that, when used in connection with a Eurodollar Loan,
--------
the term "Business Day" shall also exclude any day on which banks are not open
------------
for dealings in dollar deposits in the London interbank market.
"Capacity" means System Capacity and Backhaul Capacity.
--------
"Capacity Sales Agreements" means all agreements for the sale, lease or
-------------------------
other disposition of Capacity entered into between the Borrower or any
Subsidiary and any other Person.
"Capacity Sales Revenue" means the cumulative cash revenue received by the
----------------------
Borrower and any Subsidiary and deposited into the Revenue Account minus all
sales and marketing commissions associated therewith.
"Capital Budget" is defined in Section 4.01(f).
-------------- ---------------
"Capital Costs" means all costs and expenses incurred or to be incurred by
-------------
the Borrower or any Subsidiary in connection with the design, development,
installation, construction, completion, start-up and testing of the System (and
shall include, in any event, all interest and other financing costs during
construction incurred or to be incurred by the Borrower or any Subsidiary (if
permitted pursuant to Section 6.01)), all payments under Hedging Agreements, all
------------
costs in the nature of OA&M Expenses, all Marketing Commissions expected to be
payable prior to the Commercial Operation Date which are not anticipated to be
paid with revenues to be received, and all costs associated with the acquisition
of Backhaul Capacity, in each case to the extent set forth in the then current
Capital Budget.
"Capital Lease Obligations" of any Person means the obligations of such
-------------------------
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
7
<PAGE>
"Capital Stock" means any and all shares, interests, participations, units
-------------
or other equivalents (however designated) of capital stock of a corporation, and
any and all equivalent ownership interests in a Person (other than a
corporation).
"Casualty Proceeds" means all payments received by the Administrative
-----------------
Agent, the Borrower or any Subsidiary from any insurer in respect of casualty to
or loss of property, and all awards and proceeds in respect of a taking, but
excluding business interruption insurance or delayed opening of business
insurance and payments in respect of liability policies.
"Casualty Proceeds Account" is defined in Section 2.19.1 of the Securities
------------------------- --------------
Accounts Agreement.
"Certificate of Commercial Acceptance" is defined in the Alcatel Supply
------------------------------------
Contract.
"Certificate of Final Acceptance" is defined in the Alcatel Supply
-------------------------------
Contract.
"Certificate of Provisional Acceptance" is defined in the Alcatel Supply
-------------------------------------
Contract.
"Change in Control" means and shall be deemed to have occurred if (a) prior
-----------------
to the Commercial Operation Date, Global Crossing shall cease to own,
beneficially or of record (whether directly or indirectly), 100% of the
outstanding economic interests in the Borrower or shall cease to have
affirmative management control of the Borrower, (b) from and after the
Commercial Operation Date to, but excluding the date upon which the Contractor
is irrevocably directed to undertake the First Permitted Upgrade pursuant to and
in accordance with Article 6A of Alcatel Supply Contract, Global Crossing shall
cease to own, beneficially or of record (whether directly or indirectly), at
least 80% of the outstanding economic interests in the Borrower or shall cease
to have affirmative management control of the Borrower or (c) from and after the
date upon which the Contractor is irrevocably directed to undertake the First
Permitted Upgrade pursuant to and in accordance with Article 6A of Alcatel
Supply Contract, Global Crossing shall cease to have affirmative management
control of the Borrower, or any other Person or group of related Persons, as
defined in Section 13(d) of the Securities Exchange Act of 1934, shall own
beneficially or of record (whether directly or indirectly) more of the economic
interests of the Borrower than are at the time owned by Global Crossing.
"Change in Law" means (a) the adoption of any law, rule or regulation after
-------------
the Closing Date, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
Closing Date or (c) compliance by any Lender or any parent of any Lender with
any request, guideline or directive of any Governmental Authority made or issued
after the Closing Date (whether or not having the force of law).
"Checking Account" means a checking account of the Borrower into which
----------------
funds may be deposited and withdrawn in accordance with Section 2.26 of the
------------
Securities Accounts Agreement.
"Class," when used in reference to any Loan or Borrowing, refers to whether
-----
such Loan, or the Loans comprising such Borrowing, are Working Capital Loans,
Tranche A-1 Term Loans or Tranche A-2 Term Loans and, when used in reference to
any Commitment, refers to whether
8
<PAGE>
such Commitment is a Working Capital Loan Commitment, a Tranche A-1 Term Loan
Commitment or a Tranche A-2 Term Loan Commitment.
"Clean-Up Sub-Account" is defined in Section 2.1.1 of the Securities
-------------------- -------------
Accounts Agreement.
"Closing Date" means the date on which this Agreement shall have been
------------
executed and delivered by the parties hereto and the conditions specified in
Section 4.01 are satisfied or waived.
- ------------
"Closing Date Certificate" means a certificate of a Responsible Officer of
------------------------
the Borrower, substantially in the form of Exhibit G.
---------
"Co-Arrangers" means CIBC Oppenheimer Corp., a non-bank affiliate of CIBC
------------
Inc. and Deutsche Bank Securities Inc., a Delaware corporation, each in its
capacity as an arranger with respect hereto.
"Code" means the Internal Revenue Code of 1986, as amended from time to
----
time.
"Collateral" means any and all "Collateral," as defined in any applicable
----------
Security Document.
"Commercial Operation Date" means the earlier to occur of (a) the issuance
-------------------------
of the Certificate of Commercial Acceptance with respect to the Basic System and
(b) the issuance of the Certificate of Provisional Acceptance with respect to
the Basic System.
"Commercial Operation Prepayment Account" is defined in Section 2.18.1 of
--------------------------------------- --------------
the Securities Account Agreement.
"Commitment" means, individually or collectively as the context may
----------
require, the Working Capital Loan Commitment or the Term Loan Commitment.
"Committed Capacity Sales Revenue" means revenue from sales of System
--------------------------------
Capacity that the Borrower or any Subsidiary is entitled to receive in cash
under the then existing firmly committed contractual arrangements that require
the making of payments thereunder prior to the First Permitted Upgrade Payment
Date, provided that in calculating the amount of revenue that will constitute
--------
Committed Capacity Sales Revenue, no single capacity purchaser will be permitted
to account for more than 50% of such revenue.
"Consent" means, individually or collectively as the context may require,
-------
the Contractor Consents, the Marketing Agent Consent, the Financial Services
Consent, and, from and after the delivery thereof in accordance with the terms
hereof, the Operator Consent, the System Manager Consent, the AC-1 Consent and
any other consent and agreement entered into in respect of any Additional
Material Contract.
"Consolidated Interest Expense" means, with respect to the Borrower and the
-----------------------------
Subsidiaries for any period, the gross interest expense with respect to
indebtedness for borrowed
9
<PAGE>
money (other than indebtedness for borrowed money among the Borrower and the
Subsidiaries), including all cash and accrued interest expense, of the Borrower
and the Subsidiaries for such period.
"Construction Account" is defined in Section 2.1.1 of the Securities
-------------------- -------------
Accounts Agreement.
"Construction Progress Certificates" means (a) a certificate from the
----------------------------------
Contractor (and countersigned by the Borrower and the Independent Engineer),
substantially in the form of Exhibit B-3 and (b) a certificate from TSSL (and
-----------
countersigned by the Borrower and the Independent Engineer), substantially in
the form of Exhibit B-4.
-----------
"Consultants" means, collectively, the Independent Engineer, the Market
-----------
Consultant and the Insurance Consultant.
"Contest" means, with respect to any tax, Lien, claim or obligation, a
-------
contest pursued in good faith and by appropriate proceedings diligently
conducted, so long as (a) adequate reserves in accordance with GAAP have been
established with respect thereto, (b) no Lien shall have been filed in
connection therewith or any Lien filed in connection therewith shall have been
removed from the record by the bonding thereof and (c) the failure to pay such
tax, Lien, claim or obligation during the pendency of such contest could not
reasonably be expected to have a Material Adverse Effect.
"Continuation/Conversion Notice" means a request by the Borrower to convert
------------------------------
or continue a Working Capital Borrowing or a Term Loan Borrowing in accordance
with Section 2.06, substantially in the form of Exhibit C.
------------ ---------
"Contractor" means Alcatel Submarine Networks, a societe anonyme organized
----------
under the laws of France and Alcatel Submarine Networks, Inc., a Delaware
corporation, collectively.
"Contractor Consents" means (a) the Alcatel Contractor Consent, (b) the
-------------------
Consent and Agreement to be entered into among the Borrower, Pan American
Crossing, TSSL and the Administrative Agent with respect to the Tyco Supply
Contract and the St. Croix Contract, and, with respect to any supply contract
permitted to replace the Tyco Supply Contract in accordance with Section 7.11,
------------
any replacement consent and agreement reasonably acceptable to the
Administrative Agent and relating to such new supply contract and (c) any other
consents reasonably requested by the Lead Agents in connection with the St.
Croix Contracts.
"Contractor Escrow Agreements" means (a) the Escrow Agreement to be entered
----------------------------
into in the event of a dispute under the Alcatel Supply Contract, among the
Contractor, the Borrower and the Alcatel Escrow Agent and (b) the Escrow
Agreement to be entered into in the event of a dispute under the Tyco Supply
Contract among TSSL, the Borrower and the Tyco Escrow Agent, each as described
in the applicable Supply Contract.
10
<PAGE>
"Contractual Obligation" means, as to any Person, any provision of any
----------------------
security issued by such Person or any agreement, instrument, judgment, order,
decree or other undertaking to which such Person is a party or by which it or
any of its property is bound.
"Control" means the possession, directly or indirectly, of (a) the power to
-------
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise or (b)
the ownership of 10% or more of the securities having ordinary voting power for
the election of directors of a Person. "Controlling" and "Controlled" have
----------- ----------
meanings correlative thereto.
"Credit Extension" means (a) the making of a Loan by a Lender or (b) the
----------------
withdrawal or transfer of funds from the Clean-Up Sub-Account, the Delay
Proceeds Sub-Account, the U.S. Delay Proceeds Sub-Account, the Upgrade Delay
Proceeds Sub-Account, the U.S. Upgrade Delay Proceeds Sub-Account or the Upgrade
Loan Proceeds Sub-Account, in accordance with the Securities Accounts Agreement.
"Credit Extension Certificate" means a certificate of the Borrower,
----------------------------
substantially in the form of Exhibit B-2.
-----------
"Credit Extension Date" means (a) in the case of any Credit Extension
---------------------
(other than the making of Working Capital Loans from and after the Commercial
Operation Date), (1) the Closing Date and the last Business Day of each calendar
month and (2) with respect to any Class of Loans, the Termination Date
applicable thereto and (b) in the case of Working Capital Loans from and after
the Commercial Operation Date, a Business Day.
"Credit Extension Request" means a notice from the Borrower, substantially
------------------------
in the form of Exhibit B-1 (with such changes as the Borrower and the
-----------
Administrative Agent shall mutually agree to), together with any attachments
thereto called for by such Exhibit.
"Cutoff Date" means the later to occur of (a) the date which is 30 days
-----------
following the Commercial Operation Date and (b) the date on which all Landing
Licenses required to operate the System have been obtained and shall no longer
be subject to appeal and the Administrative Agent shall have received
appropriate and favorable opinions of counsel in substantially the form of
Exhibit J-9.
- -----------
"Debt Reserve Account" is defined in Section 2.14.1 of the Securities
-------------------- --------------
Accounts Agreement.
"Debt Reserve Amount" means, at any time of determination, an amount equal
-------------------
to the sum of (a) an amount equal to the anticipated interest on the Loans
(based on the then current rates applicable to the then outstanding Loans) for
the following 6 months (after giving effect to any prepayment thereof) plus (b)
an amount equal to the total of the next scheduled principal payment on each of
the Term Loans due on the next Principal Payment Date (without giving effect to
any prepayment thereof), provided that in no event shall the Debt Reserve Amount
--------
exceed the principal amount outstanding under the Term Loans plus six months of
anticipated interest thereon.
11
<PAGE>
"Default" means any event or condition which constitutes an Event of
-------
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Defaulting Lender" means any Lender with respect to which a Lender Default
-----------------
is in effect.
"Delay Proceeds Sub-Account" is defined in Section 2.1.1 of the Securities
-------------------------- -------------
Accounts Agreement.
"Designated Event" means, (a) as of any Principal Payment Date, the
----------------
Borrower's failure to be in compliance with Section 6.24 as of such Principal
------------
Payment Date, as set forth in the certificate delivered by the Borrower to the
Administrative Agent in accordance with Section 5.02(c), or the failure of the
---------------
Borrower to deliver such a certificate when required under Section 5.02(c), and
---------------
such Designated Event shall be deemed to continue until such time as the
Borrower shall have delivered a certificate under Section 5.02(c) indicating
---------------
compliance with Section 6.24 and the Borrower shall be in compliance with
------------
Section 6.24 and (b) if any Tranche A-2 Term Loans have been made, the
- ------------
Certificate of Commercial Acceptance or the Certificate of Final Acceptance with
respect to the First Permitted Upgrade shall not have been issued by the date
which is 90 days after the Scheduled Upgrade Date (as defined in the Alcatel
Supply Contract) in respect of the First Permitted Upgrade, provided that such
--------
Designated Event shall be deemed to continue until such time as an amount equal
to twice the aggregate principal amount of all outstanding Tranche A-2 Term
Loans together with all interest thereon has been applied to the prepayment of
the Term Loans in accordance with clause fifth of Section 2.7.3(a) or clause
----------------
ninth of Section 2.7.4(a) of the Securities Accounts Agreement and all Tranche
----------------
A-2 Term Loan Commitments have been terminated.
"Disputed Invoice" means the portion of any invoice submitted by any System
----------------
Contractor under any Supply Contract the payment of which is being disputed by
the Borrower or the Independent Engineer.
"Distribution Account" means an account established by the Borrower into
--------------------
which the Borrower shall be permitted to deposit its portion of Excess Cash Flow
to the extent Excess Cash Flow is distributed to the Borrower in accordance with
Section 2.7.4(a) of the Securities Accounts Agreement. The Distribution Account
- ----------------
shall not be established pursuant to the Securities Accounts Agreement and the
Secured Parties shall not have a security interest in the Distribution Account.
"Documentation Agent" is defined in the preamble.
------------------- --------
"Dollars" or "$" refers to lawful currency of the United States of America.
------- -
"Environmental Laws" means all applicable laws, rules, permits, orders and
------------------
regulations relating to the protection of the environment and natural resources,
and all similar items under the laws of each jurisdiction (including the United
States and Bermuda), where the Borrower or any Subsidiary is incorporated and/or
operates.
12
<PAGE>
"Environmental Liability" means any liability, contingent or otherwise
-----------------------
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law
or (b) the release or threatened release of any Hazardous Materials into the
environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"ERISA Affiliate" means any entity (whether or not incorporated) that,
---------------
together with the Borrower, is treated as a single employer under Section 414(b)
or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section
412 of the Code, is treated as a single employer under Section 414 of the Code.
"ERISA Event" means (a) any "reportable event," as defined in Section
-----------
4043(c) of ERISA or the regulations issued thereunder with respect to a Plan
(other than an event for which the 30-day notice period is waived under
applicable PBGC regulations); (b) the failure to make a required contribution to
any Plan sufficient to give rise to a lien under Section 302(f) of ERISA; (c)
the existence with respect to any Plan of an "accumulated funding deficiency"
(as defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (d) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (e) the taking of any steps by the Borrower or any of its
ERISA Affiliates to terminate any Plan, if such termination could result in any
liability under Title IV of ERISA with respect to such Plan; (f) the receipt by
the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any
notice relating to an intention to terminate any Plan or Plans or to appoint a
trustee to administer any Plan; (g) the incurrence by the Borrower or any of its
ERISA Affiliates of any liability with respect to the withdrawal or partial
withdrawal, within the meaning of Section 4063 of ERISA, from any Multiemployer
Plan; or (h) the receipt by the Borrower or any ERISA Affiliate of any notice
from any Multiemployer Plan concerning the imposition of Withdrawal Liability or
a determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA.
"Escrowed Downpayments" means downpayments paid by a purchaser of Capacity
---------------------
in respect of the future use of Capacity that are placed in escrow pursuant to
escrow arrangements entered into by the Borrower or a Subsidiary on commercially
reasonable terms and to which the Borrower or such Subsidiary is not yet
entitled, provided that any such downpayment shall cease to be an Escrowed
--------
Downpayment at such time as the Borrower or such Subsidiary becomes entitled
thereto and the funds are released to the Borrower or such Subsidiary in
accordance with the terms of such escrow arrangement.
"Eurodollar," when used in reference to any Loan or Borrowing, refers to
-----------
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Adjusted LIBO Rate.
"Event of Default" is defined in Article VII.
---------------- -----------
13
<PAGE>
"Event of Loss" means the loss, destruction or damage of all of any
-------------
material portion of a Segment.
"Excess Cash Flow" means, (i) on and prior to the Cutoff Date, for each
----------------
period beginning the day after the last date on which amounts were transferred
from the Revenue Account in accordance with Section 2.7.3 of the Securities
-------------
Accounts Agreement (or, in the case of the first such period, beginning on the
Closing Date) and ending on the last Business Day of a month (or, with respect
to the last such period, on the Cutoff Date), the sum of (x) all cash revenue
received during such period by the Borrower or any of its Subsidiaries and
available after the application of the amounts set forth in clauses first
through fourth of Section 2.7.3(a), clause first of Section 2.8.3 and clause
---------------- -------------
first of Section 2.9.3 of the Securities Accounts Agreement plus (y) 15% of the
-------------
difference between (1) all Backhaul Revenues of each Subsidiary during such
period minus (2) the Marketing Commissions paid by any Subsidiary in respect of
its Backhaul Revenues during such period and (ii) for each semi-annual period
ending on a Principal Payment Date (or, with respect to the Initial Principal
Payment Date, the period from the Cutoff Date to the Initial Principal Payment
Date), the sum of (x) all cash revenue received during such period by the
Borrower or any of its Subsidiaries and available after the application of the
amounts set forth in clauses first through eighth of Section 2.7.4(a), clause
----------------
first of Section 2.8.3 and clause first of Section 2.9.3 of the Securities
------------- -------------
Accounts Agreement plus (y) 15% of the difference between (1) all Backhaul
Revenues of each Subsidiary during such period minus (2) the Marketing
Commissions paid by any Subsidiary in respect of its Backhaul Revenues during
such period.
"Excess System Capacity Sales" means, at any time of determination, the
----------------------------
excess, if any of (x) Committed Capacity Sales Revenue at such time of
determination over (y) revenue from sales of System Capacity that, in the base
case Projections, is projected to be received on or prior to the First Permitted
Upgrade Payment Date.
"Excluded Taxes" means, with respect to the Administrative Agent, any other
--------------
Agent, any Lender or any other recipient of any payment to be made by or on
account of any obligation of the Borrower hereunder, (a) Taxes imposed by the
jurisdiction under the laws of which such recipient is organized or in which its
principal office is located or, in the case of any Lender, in which its
applicable lending office is located; provided, however, that if such place of
-------- -------
organization or principal office or lending office is in the United States or a
political subdivision thereof, such Taxes referred to this clause (a) shall not
include any withholding Taxes imposed by the United States or any political
subdivision thereof, (b) any branch profits Taxes imposed by the United States
of America or any similar Tax imposed by any other jurisdiction in which any
Lender is located and (c) in the case of a Lender, any withholding Tax that is
imposed on amounts payable to such Lender to the extent, subject to Section 9.04
------------
with respect to assignees, (i) such withholding Tax is not the result of a
Change in Law or (ii) such withholding Tax is imposed as a result of such
Lender's failure to comply with the provisions of Section 2.16(e).
---------------
"Federal Funds Effective Rate" means, for any day, the weighted average
----------------------------
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if
14
<PAGE>
such rate is not so published for any day that is a Business Day, the average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for
such day for such transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it.
"Fee Letter" means the fee letter, dated as of the date hereof, from the
----------
Borrower to the Lead Agents and the Administrative Agent.
"Final Contractor Payment" means that portion of the Contract Price which
------------------------
is payable (subject to the terms of the Alcatel Supply Contract) to the
Contractor with respect to System Final Completion.
"Financial Services Agreement" means the Financial Services Agreement,
----------------------------
dated as of the date hereof, between the Borrower and GCDC.
"Financial Services Arrangement Fee" means an up-front fee of 1% of the
----------------------------------
aggregate principal amount of the Loans.
"Financial Services Consent" means the Consent and Agreement, dated as of
--------------------------
the date hereof, among the Borrower, GCDC and the Administrative Agent and, with
respect to any financial services agreement permitted to replace the Financial
Services Agreement in accordance with Section 7.11, any consent and agreement
------------
reasonably acceptable to the Administrative Agent and relating to such new
agreement.
"First Capital Cost Completion Date" means the date on which the
----------------------------------
Administrative Agent receives certificates from the Borrower and the Independent
Engineer certifying that System Final Completion has occurred and that all
Capital Costs identified in the then current Capital Budget (other than those
Capital Costs associated with the First Permitted Upgrade) have been paid.
"First Loan" is defined in Section 4.02(b).
---------- ---------------
"First Permitted Upgrade" means a Permitted System Upgrade which doubles
-----------------------
the initial planned capacity of the Basic System from 20 Gb/s per fiber pair to
40 Gb/s per fiber pair.
"First Permitted Upgrade Final Completion" means the date on which the
----------------------------------------
Certificate of Final Acceptance shall have been issued with respect to the First
Permitted Upgrade in accordance with the terms of the Alcatel Supply Contract
and all payments due to the Contractor thereunder shall have been made, as
certified by the Independent Engineer.
"First Permitted Upgrade Payment Date" means the date that the First
------------------------------------
Permitted Upgrade is expected to be commenced (which shall be based upon the
expected commencement date articulated by the Borrower (in the Projections or
otherwise) to any Lead Agent).
"First Sales Threshold Date" means the date on which (1) the sum of (a)
--------------------------
Capacity Sales Revenue plus (b) the amount of revenues in the nature of Capacity
Sales Revenues that the
15
<PAGE>
Borrower or any Subsidiary is entitled to receive in cash under then existing
firmly committed contractual arrangements and that are required to be deposited
into the Revenue Account pursuant to the terms of the Loan Documents (whether
directly or after being held in the U.S. Revenue Account and then transferred to
the Revenue Account pursuant to the Securities Accounts Agreement) not later
than 6 months prior to the Maturity Date in respect of the Term Loans (provided
--------
that such firm commitments shall be included for purposes of this clause (b)
only to the extent that such firm commitments have not matured into cash
payments received and already then included in any amounts included under clause
(a)), equals or exceeds $250,000,000 and (2) at least $120,000,000 of the
aggregate principal amount of the Term Loans have been repaid or prepaid.
"GAAP" means generally accepted accounting principles in the United States
----
of America.
"GCDC" means Global Crossing Development Co.
----
"Global Crossing" means Global Crossing Ltd., a corporation organized and
---------------
existing under the laws of Bermuda.
"Global Network" means Global Crossing Network Center Ltd., a Bermuda
--------------
corporation and a wholly owned subsidiary of Global Crossing.
"Governmental Action" means all permits, authorizations, registrations,
-------------------
consents, approvals, notices and licenses of or with any Governmental Authority
that are required in connection with the construction, installation, ownership,
possession and operation of the System, including all Landing Licenses and
including the St. Croix Corridor License.
"Governmental Authority" means the government of the United States of
----------------------
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any obligation,
--------- ---------
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly, and
---------------
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided, that the term Guarantee shall not include endorsements for
--------
collection or deposit in the ordinary course of business.
16
<PAGE>
"Guaranteed Completion Date" means August 19, 2000.
--------------------------
"Hazardous Materials" means all materials defined as hazardous substances
-------------------
under the Federal Comprehensive Environmental Response, Compensation and
Liability Act, petroleum or petroleum distillates, or friable asbestos or
friable asbestos containing materials, and all similar items under the laws of
each jurisdiction (including the United States and Bermuda) where the Borrower
or any Subsidiary is incorporated and/or operates.
"Hedging Agreement" means any interest rate protection agreement, foreign
-----------------
currency exchange agreement, commodity price protection agreement or other
interest or currency exchange rate or commodity price hedging arrangement.
"Indebtedness" of any Person means, without duplication, (a) all
------------
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person in
respect of the deferred purchase price of property or services (excluding
current accounts payable incurred in the ordinary course of business), (d) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (e) all Guarantees by such Person of
Indebtedness of others, (f) all Capital Lease Obligations of such Person, (g)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty, (h) all obligations under
Hedging Agreements and (i) all obligations, contingent or otherwise, of such
Person in respect of bankers' acceptances.
"Indemnified Taxes" means all Taxes other than Excluded Taxes.
-----------------
"Independent Engineer" means Conexart Technologies, Inc. or such other
--------------------
engineer or engineering firm as may be appointed by the Administrative Agent
with the approval of the Borrower in accordance with Section 9.13.
------------
"Initial Principal Payment Date" means the earlier of (a) the last Business
------------------------------
Day of the month of August, November, February or May which is the first to
occur at least 165 days after the Cutoff Date occurs and (b) the day which is
six months after the Guaranteed Completion Date.
"Initial Syndication Date" means the date on which the Lead Agents close
------------------------
the initial post-Closing Date syndication of the Loans pursuant to Assignment
and Acceptances.
"Insurance Consultant" means Aon Risk Services.
--------------------
"Intercompany Agreement" means the Intercompany Agreement, dated as of the
----------------------
date hereof, in form and substance reasonably satisfactory to the Lead Agents,
between the Borrower and the U.S. Subsidiary.
17
<PAGE>
"Interest Coverage Ratio" means, for any period, the ratio of (a) System
-----------------------
Revenues received during such period minus (i) OA&M Expenses paid during such
period and (ii) Marketing Commissions paid during such period to (b)
Consolidated Interest Expense for such period.
"Interest Payment Date" means (a) with respect to any ABR Loan, the last
---------------------
Business Day of each August, November, February and May and (b) with respect to
any Eurodollar Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part and, in the case of a Eurodollar
Borrowing with an Interest Period of more than 3 months' duration, the days
prior to the last day of such Interest Period that occur at intervals of 3
months' duration after the first day of such Interest Period.
"Interest Period" means, with respect to any Eurodollar Borrowing, the
---------------
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is 1, 2, 3, 6 or, if available to
all Lenders, 12 months thereafter, as the Borrower may elect; provided that (a)
--------
if any Interest Period would end on a day other than a Business Day, such
Interest Period shall be extended to the next succeeding Business Day unless
such next succeeding Business Day would fall in the next calendar month, in
which case such Interest Period shall end on the next preceding Business Day,
(b) any Interest Period that commences on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
last calendar month of such Interest Period) shall end on the last Business Day
of the last calendar month of such Interest Period and (c) unless the
Administrative Agent agrees to the contrary, during the first 6 months after the
Closing Date, the Borrower shall elect Interest Periods of 1 month's duration
(provided that the Borrower may, during such 6 month period, select Interest
Periods of less than 1 month's duration as long as no Lender has informed the
Administrative Agent that it will not make Eurodollar Loans with an Interest
Period of less than 1 month's duration). For purposes hereof, the date of a
Borrowing initially shall be the date on which such Borrowing is made and
thereafter shall be the effective date of the most recent conversion or
continuation of such Borrowing.
"Landing License" means, with respect to any Landing Location, the
---------------
telecommunications license (if such a license is required) issued by a
Governmental Authority of such Landing Location permitting the System to land at
such Landing Location.
"Landing Locations" means, New York, St. Croix and Florida, and each other
-----------------
location in which the System is landed or planned to land in accordance with the
terms hereof.
"Lead Agents" is defined in the preamble.
-----------
"Lender Default" means (a) the refusal (which has not been retracted) of a
--------------
Lender to make available its portion of any Borrowing or (b) a Lender having
notified the Administrative Agent and/or the Borrower that it does not intend to
comply with its obligations under Section 2.01, in the case of either clause (a)
------------
or clause (b) above, as a result of the appointment of a receiver or conservator
with respect to such Lender at the direction or request of any regulatory agency
or authority.
18
<PAGE>
"Lenders" means, the Persons designated on Schedule 2.01 as having made a
------- -------------
Commitment and any other Person that shall have become a party hereto with
respect to the Commitments pursuant to an Assignment and Acceptance, other than
any such Person that ceases to be a party hereto pursuant to an Assignment and
Acceptance.
"LIBO Rate" means, with respect to any Eurodollar Borrowing for any
---------
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBO Rate" with respect to such
---------
Eurodollar Borrowing for such Interest Period shall be the average rate (rounded
upwards, if necessary, to the next 1/16 of 1%) at which dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered by
the principal New York office of each Reference Lender in immediately available
funds in the London interbank market at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such Interest Period.
"Lien" means, with respect to any asset, (a) any mortgage, deed of trust,
----
lien, pledge, hypothecation, encumbrance, charge, security interest or similar
encumbrance in, on or of such asset and (b) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title retention agreement
(or any financing lease having substantially the same economic effect as any of
the foregoing) relating to such asset.
"Loan Documents" shall be the collective reference to this Agreement, the
--------------
Notes, the Fee Letter, the Security Documents and the Subsidiary Guaranty
Agreements.
"Loan Parties" shall be the collective reference to each Shareholder, the
------------
Borrower, each Subsidiary, the St. Croix Affiliate and Global Network.
"Loan Proceeds Sub-Account" is defined in Section 2.1.1 of the Securities
------------------------- -------------
Accounts Agreement.
"Loans" shall be the collective reference to the Working Capital Loans and
-----
the Term Loans.
"Majority Lenders" means, at any time of determination, Non-Defaulting
----------------
Lenders having outstanding Working Capital Loans, outstanding Term Loans and
unused Commitments representing more than 51% of the sum of the total
outstanding Working Capital Loans, outstanding Term Loans and unused Commitments
of all Non-Defaulting Lenders at such time.
"Market Consultant" means T. Soja & Associates.
-----------------
19
<PAGE>
"Marketing Agent" means Global Crossing International Limited, together
---------------
with its subsidiaries and their permitted successors and assigns.
"Marketing Agent Consent" means the Consent and Agreement, dated as of the
-----------------------
date hereof, among the Borrower, the Marketing Agent and the Administrative
Agent and, with respect to any marketing agreement permitted to replace the
Marketing Agreement in accordance with Section 7.11, any consent and agreement
------------
reasonably acceptable to the Administrative Agent and relating to such new
marketing agreement.
"Marketing Agreement" means the Marketing Agreement, dated as of November
-------------------
25, 1998, between the Borrower and the Marketing Agent.
"Marketing Commissions" means commissions payable to the Marketing Agent
---------------------
under the Marketing Agreement, but not including expense reimbursement and other
obligations payable thereunder.
"Master Pledge Trustee" means the pledgee selected by the Borrower and
---------------------
subject to the reasonable consent of the Lead Agents, under the St. Croix Master
Pledge Agreement, together with each of its successors and assigns.
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
business, assets, revenues (at any time of determination after the Commercial
Operation Date), results of operations (at any time of determination after the
Commercial Operation Date) or financial condition of the Borrower and the
Subsidiaries taken as a whole, (b) the ability to achieve the Commercial
Operation Date by the Guaranteed Completion Date, (c) the ability of the
Borrower to perform its obligations under the Loan Documents to which it is a
party or (d) the validity or enforceability of the Loan Documents or the
Consents, the Liens granted under the Loan Documents or the Lenders' rights and
remedies under the Loan Documents or the Consents.
"Material Impact" means (a) a material adverse effect on the Lenders, (b) a
---------------
Material Adverse Effect, (c) a material adverse effect on the revenues of the
Borrower and the Subsidiaries taken as a whole or (d) a material delay in
obtaining, or a material risk in not obtaining, or in the termination or
revocation of, a material Governmental Action necessary to complete or operate
the System as contemplated on the date hereof.
"Maturity Date" means (a) with respect to Term Loans, March 10, 2005 and
-------------
(b) with respect to Working Capital Loans, the earlier of (i) March 10, 2005 and
(ii) the date which is the first anniversary of the date on which the Term Loans
are repaid in full.
"Mid-Atlantic Holdings" means Mid-Atlantic Crossing Holdings Ltd., a
---------------------
corporation organized and existing under the laws of Bermuda.
"Mid-Atlantic Holdings Cash Collateral Agreement" means the cash collateral
-----------------------------------------------
agreement among Mid-Atlantic Holdings, Deutsche Bank Securities Inc., as
securities intermediary and the Administrative Agent.
20
<PAGE>
"Mid-Atlantic Holdings Pledge Agreement (Bermuda Law)" means the Charge
----------------------------------------------------
Over Shares, dated as of the date hereof, made by Mid-Atlantic Holdings in favor
of the Administrative Agent.
"Mid-Atlantic Holdings Pledge Agreement (New York Law)" means the Pledge
-----------------------------------------------------
Agreement, dated as of the date hereof, made by Mid-Atlantic Holdings in favor
of the Administrative Agent.
"Milestones" means, with respect to any Landing License, the events set
----------
forth on Schedule 4.02(f).
----------------
"Moody's" means Moody's Investors Service, Inc.
-------
"Multiemployer Plan" means a multiemployer plan as defined in Section 3(37)
------------------
or Section 4001(a)(3) of ERISA.
"Net Cash Proceeds" means (a) with respect to the sale, transfer, lease or
-----------------
other disposition of any asset (other than Capacity) by the Borrower or any
Subsidiary, an amount certified in reasonable detail by a Responsible Officer of
the Borrower or such Subsidiary to the Lenders as the excess, if any, of (i) the
sum of cash received in connection with such sale, transfer, lease or other
disposition over (ii) the sum of (A) amounts placed in escrow or held as a
reserve, in accordance with GAAP, against any liabilities associated with such
sale or disposition (except that, to the extent and as of the time any such
amounts are released from such reserve, such amounts shall constitute Net Cash
Proceeds), (B) amounts paid to minority interest holders of such asset and the
principal amount of any Indebtedness (other than Indebtedness under this
Agreement) which is secured by any such asset and which is repaid in connection
with the sale, transfer, lease or other disposition thereof, (C) the reasonable
out-of-pocket expenses incurred or to be incurred by the Borrower or such
Subsidiary in connection with such sale, transfer, lease or other disposition
and (D) provision for taxes attributable to such sale, transfer, lease or other
disposition (as estimated by the Borrower in good faith, provided that to the
--------
extent such estimate shall have exceeded the amount of taxes actually paid, such
difference shall thereupon constitute Net Cash Proceeds), (b) with respect to
the issuance of any Capital Stock by the Borrower or any Subsidiary, an amount
certified in reasonable detail by a Responsible Officer of the Borrower or such
Subsidiary to the Lenders as the excess of (i) the sum of the cash received in
connection with such issuance over (ii) the underwriting discounts and
commissions (if any) and other reasonable fees, out-of-pocket expenses and other
costs incurred or to be incurred by the Borrower or such Subsidiary in
connection with such issuance, (c) with respect to the incurrence of
Indebtedness by the Borrower or any Subsidiary, an amount certified in
reasonable detail by a Responsible Officer of the Borrower or such Subsidiary to
the Lenders as the excess of (i) the sum of the cash received in connection with
such incurrence of Indebtedness over (ii) the reasonable fees, out-of-pocket
expenses and other costs incurred or to be incurred by the Borrower or such
Subsidiary in connection with such incurrence of Indebtedness and (d) any amount
received by the Borrower or any Subsidiary in respect of Permitted Receivables
Transactions in excess of $25,000,000 since the date of this Agreement, whether
in one or more transactions and whether or not such transactions are related.
21
<PAGE>
"Non-Defaulting Lender" means and includes each Lender other than a
---------------------
Defaulting Lender.
"Non-Material System Contracts" shall be the collective reference to the
-----------------------------
Financial Services Agreement, the Intercompany Agreement and, after the
execution thereof, each Additional Non-Material Contract and the Contractor
Escrow Agreements.
"Notes" shall be the collective reference to the Term Notes and the Working
-----
Capital Notes.
"One Capacity" means that capacity on the System which is available on
------------
Segment 1.
"OA&M Agreement" means the collective reference to the O&M Agreement and
--------------
the System Management Agreement.
"OA&M Expenses" means all operation, administration and maintenance
-------------
expenses with respect to the System, Backhaul Capacity and other System
Activities which are payable by the Borrower or any Subsidiary (including all
selling, general and administrative expenses, all sales, excise and similar
taxes, all other taxes and duties payable by the Borrower or such Subsidiary,
all payments owing to the Operator under the O&M Agreement in respect of work
performed thereunder, all payments owing to the System Manager under the System
Management Agreement in respect of work performed thereunder, all expenses to be
reimbursed to the Marketing Agent under the Marketing Agreement and all fees
payable to the Administrative Agent); provided, however, that OA&M Expenses
-------- -------
shall not include (i) Capital Costs, (ii) amounts payable in respect of
Permitted System Upgrades and Permitted Costs, (iii) any non-cash expenses, (iv)
income and franchise taxes payable by any Subsidiary, (v) any amounts payable by
the Borrower or a Subsidiary in respect of the acquisition of Backhaul Capacity,
(vi) any commissions payable in respect of the marketing of Capacity and (vii)
any payments made to any Subsidiary under the Intercompany Agreement.
"Obligations" means all obligations of the Borrower and each other Loan
-----------
Party now or hereafter existing under this Agreement, the Notes, each other Loan
Document to which the Borrower or such other Loan Party is or may become a party
and each Rate Protection Agreement, whether for principal, interest, fees,
indemnities, expenses or otherwise (including all such amounts which would
become due but for the operation of the automatic stay under Section 362(a) of
the United States Bankruptcy Code, 11 U.S.C. (S)362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11 U.S.C.
(S)502(b) and 506(b)).
"Obligors" shall be the collective reference to the Borrower, any
--------
Shareholder, any Subsidiary, the System Contractors (until the expiration of the
basic warranty periods under the Supply Contracts) and, prior to the performance
of all obligations under the Supply Contract Guarantees, the Supply Contract
Guarantors.
"O&M Account" is defined in Section 2.10.1 of the Securities Accounts
----------- ------- ------
Agreement.
22
<PAGE>
"O&M Agreement" means the agreement for the operations and maintenance of
-------------
the System to be entered into between the Borrower and the Operator in
accordance with the terms hereof.
"O&M Reserve Account" is defined Section 2.13.1 of the Securities Accounts
------------------- --------------
Agreement.
"Operating Budget" is defined in Section 5.14.
---------------- ------------
"Operating Plan" is defined in Section 5.14.
-------------- ------------
"Operating Year" means, initially, the period from the Commercial Operation
--------------
Date to the following December 31st and, thereafter, each ensuing calendar year.
"Operator" means a Person (other than the Borrower) reasonably satisfactory
--------
to the Lead Agents that is or becomes party to the O&M Agreement.
"Operator Consent" means the Consent and Agreement in form and substance
----------------
reasonably satisfactory to the Administrative Agent to be entered into among the
Borrower, the Operator and the Administrative Agent and, with respect to any
operations and maintenance agreement permitted to replace the O&M Agreement in
accordance with Section 7.11, any consent and agreement reasonably acceptable to
------------
the Administrative Agent and relating to such new operating and maintenance
agreement.
"Other Taxes" means any and all present or future stamp or documentary
-----------
Taxes, charges or similar levies arising from any payment hereunder or from the
execution, delivery or enforcement of, or otherwise with respect to, this
Agreement.
"Pan American Crossing" means Pan American Crossing Ltd., a Bermuda company
---------------------
and an affiliate of the Borrower and the entity developing the subsea fiber
optic cable system commonly known as Pan American Crossing (which currently is
contemplated to have a landing station in St. Croix).
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
----
defined in ERISA and any successor entity performing similar functions.
"Perfectible Collateral" is defined in Section 3.17.
---------------------- ------------
"Permitted Backhaul Account Use" means, with respect to any Person, (i) the
------------------------------
purchase of Backhaul Capacity by such Person, (ii) the transfer by such Person
of funds to the Backhaul Account, the U.K. Backhaul Account or the U.S. Backhaul
Account, (iii) the payment by such Person of Marketing Commissions payable in
respect of sales of Backhaul Capacity purchased or otherwise acquired by such
Person, (iv) the payment of OA&M Expenses if there are insufficient funds
available for such purpose in the O&M Reserve Account and pursuant to Section
-------
2.7.3(a) or 2.7.4(a), as applicable, of the Securities Accounts Agreement and
- -------- --------
(v) the transfer, on a Principal Payment Date, of all or any portion of such
funds to the Revenue Account (such
23
<PAGE>
transferred amounts being referred to, as of any such Principal Payment Date, as
the "Redeposited Amount") for application in accordance with Section 2.7.3(a) or
------------------ ----------------
2.7.4(a), as applicable, of the Securities Accounts Agreement.
- --------
"Permitted Costs" means (a) all amounts due under the Supply Contracts
---------------
(including in respect of Permitted System Upgrades), (b) any and all amounts due
in connection with any change to the configuration of the System permitted under
Section 6.09, (c) any and all amounts due in respect of any capital expenditure
- ------------
permitted under Section 6.17 and (d) any other amount applied to costs of the
------------
type set forth in clauses first through eighth of Section 2.7.4(a) of the
----------------
Securities Accounts Agreement.
"Permitted Encumbrances" means:
----------------------
(a) Liens imposed by law for taxes that are not yet due or are being
contested in accordance with Section 5.03;
------------
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
and other like Liens relating to the construction of the System securing
obligations that are not yet overdue by more than 60 days or are being contested
in accordance with Section 5.03;
------------
(c) other Liens arising in the ordinary course of business that are
not incurred in connection with the obtaining of any loan, advance or credit and
that do not in the aggregate materially impair the use of the property or assets
of the Borrower or the value of such property or assets for the purposes of such
business;
(d) Liens, deposits or pledges to secure statutory obligations arising
in connection with workers' compensation, unemployment insurance and other
social security laws or regulations;
(e) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business and in an aggregate amount not to exceed $2,500,000;
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not materially detract from the value of the affected
property or interfere with the ordinary conduct of business of the Borrower or
any Subsidiary;
(g) Liens arising under any Loan Document;
(h) Liens arising under the Contractor Escrow Agreements;
(i) the rights of any purchaser or lessee of Capacity with respect to
the use of such Capacity as set forth or referred to in the Capacity Sales
Agreements;
24
<PAGE>
(j) the rights of any lessee of property of the Borrower or any
Subsidiary with respect to the use of such property as set forth in a lease
permitted to be entered into pursuant to Section 6.11(d); and
---------------
(k) Liens arising out of judgments or awards with respect to which
appeals or other proceedings for review are being prosecuted in good faith and
by appropriate proceedings diligently conducted and for the payment of which
adequate reserves have been provided or other provisions reasonably satisfactory
to the Administrative Agent have been made.
"Permitted Investments" means:
---------------------
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of America), in each case
maturing within 1 year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 1 year from the
date of acquisition thereof and having, at such date of acquisition, a credit
rating of at least A-l from S&P or at least P-l from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 1 year from the date of acquisition thereof issued
or guaranteed by or placed with, and overnight sweep accounts, money market
deposit accounts issued or offered by, (i) the Administrative Agent or any of
its Affiliates, (ii) any Lender or (iii) any other bank which has a combined
capital and surplus and undivided profits of not less than $250,000,000;
(d) fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (a) above and entered into with
a financial institution satisfying the criteria described in clause (c) above;
and
(e) with respect to the investment of funds on deposit in the Alcatel
Escrow Dispute Account or the Tyco Escrow Dispute Account, investments permitted
by the applicable Contractor Escrow Agreements.
"Permitted Receivables Transaction" means any transfer to another Person of
---------------------------------
the right to receive payments owing to the Borrower or any Subsidiary under
Capacity Sales Agreements (other than pursuant to the Security Documents);
provided that (a) the transferee of such transfer has no recourse to the
- --------
Borrower or any Subsidiary on account of the rights so transferred (whether or
not such transferee realizes payment on such receivables) or otherwise, (b) the
transfer is made on commercially reasonably terms for fair value and (c) the
Borrower or such Subsidiary, as applicable, is paid in full in cash at the time
of such transfer.
"Permitted Reserve L/C Facility" means a letter of credit facility for the
------------------------------
Borrower consistent with the terms set forth on Schedule 1.01.
-------------
"Permitted Sources" means:
-----------------
25
<PAGE>
(a) the proceeds from the issuance of Capital Stock (in the nature of
common equity), or the proceeds of equity contributions, that have been fully
paid in cash to the Borrower or have been committed to be paid in cash to the
Borrower on terms reasonably satisfactory to the Administrative Agent;
(b) the proceeds from the issuance of Permitted Subordinated Debt or
Capital Stock (in the nature of preferred equity) that have been fully paid in
cash to the Borrower or have been committed to be paid in cash to the Borrower
on terms reasonably satisfactory to Administrative Agent;
(c) cash (other than System Revenues) made available to the Borrower
(to the extent actually funded or otherwise committed to on a basis reasonably
satisfactory to Administrative Agent) by Persons other than the Borrower or a
Subsidiary without any recourse to the Borrower or any Subsidiary;
(d) the Borrower's portion of Excess Cash Flow to the extent otherwise
then distributable to the Borrower pursuant to Section 2.7.4(a) of the
----------------
Securities Accounts Agreement or previously distributed to the Borrower in
accordance with such Section and transferred by the Borrower to an account in
respect of which the Secured Parties do not have a security interest; and
(e) other funds made available exclusively for the benefit of the
Borrower under Section 2.22.3(a)(A)(1) of the Securities Accounts Agreement.
-----------------------
"Permitted Subordinated Debt" means Indebtedness of the Borrower (1) which
---------------------------
has (a) no principal payments, redemptions, repurchases, sinking funds or
prepayments prior to the date which is 1 year after the payment in full in cash
of all Obligations, (b) no cash interest payments except to the extent permitted
by Section 6.06(d) hereof and (c) interest rates, interest payment dates,
---------------
subordination provisions, covenants, defaults and other terms and conditions
reasonably satisfactory to the Lead Agents and (2) in respect of which the
lenders thereof have agreed to pledge to the Secured Parties all of such
lenders' rights therein to secure payment of the Obligations.
"Permitted System Upgrades" means upgrades to the System contemplated by
-------------------------
Article 6A of the Alcatel Supply Contract.
"Person" means any natural person, corporation, limited liability company,
------
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
"Plan" means any employee pension benefit plan (other than a Multiemployer
----
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code
or Section 302 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
26
<PAGE>
"Pledge Agreements" shall be the collective reference to the Shareholder
-----------------
Pledge Agreements, the Borrower Pledge Agreements, the U.K. Subsidiary Pledge
Agreement (New York Law), the St. Croix Master Pledge Agreement, together with
any pledge agreements in favor of the Administrative Agent from any transferee
of the Capital Stock of the Borrower, any Subsidiary or the St. Croix Affiliate.
"Presale Revenue Application Certificate" is defined in Section 2.7.3(a) of
--------------------------------------- ----------------
the Securities Accounts Agreement.
"Prime Rate" means the rate of interest per annum established by Deutsche
----------
Bank AG as its prime or reference or base rate in effect at its principal office
in New York City; each change in the Prime Rate shall be effective from and
including the date such change is effective. The Prime Rate is not necessarily
the lowest rate of interest charged to borrowers.
"Principal Payment Date" means the Initial Principal Payment Date and the
----------------------
last Business Day of each month in which a six-month anniversary thereof occurs
and, with respect to each Class of Loans, the Maturity Date for such Class of
Loans.
"Projections" means the reasonably detailed operating projections for the
-----------
System, covering the period from the date of anticipated operation of the System
through the anticipated scheduled date of final maturity with respect to the
Loans and which reflect the reasonable expected case (and not worst case)
projections of the revenues, operating expenses, cash flow, debt service and
other related items for the System, a copy of which is attached hereto as
Exhibit M.
- ---------
"Rate Protection Agreement" means a Hedging Agreement related to interest
-------------------------
rate protection entered into by the Borrower with a Lender or an Affiliate
thereof.
"Ready for Commercial Acceptance" is defined in the Alcatel Supply
-------------------------------
Contract.
"Ready for Provisional Acceptance" is defined in the Alcatel Supply
--------------------------------
Contract.
"Redeposited Amount" is defined in the definition of "Permitted Backhaul
------------------
Account Use."
"Reference Lenders" means CIBC Inc., Deutsche Bank AG, New York Branch, and
-----------------
Westdeutsche Landesbank Girozentrale.
"Register" is defined in Section 9.04(c).
-------- ---------------
"Related Parties" means, with respect to any specified Person, such
---------------
Person's Affiliates and the respective directors, officers and employees of such
Person and such Person's Affiliates.
"Required Equity Contribution" means the $110,000,000 contribution of cash
----------------------------
equity by or on behalf of Mid-Atlantic Holdings to the Borrower to fund the
development, construction, installation and ownership of the System.
27
<PAGE>
"Required Lenders" means, at any time of determination, Non-Defaulting
----------------
Lenders having outstanding Working Capital Loans, outstanding Term Loans and
unused Commitments representing more than 66-2/3% of the sum of the total
outstanding Working Capital Loans, outstanding Term Loans and unused Commitments
of all Non-Defaulting Lenders at such time.
"Requirement of Law" means, as to any Person, the certificate of
------------------
incorporation and bylaws or other organizational or governing documents of such
Person, and any law, treaty, rule, judgment, decree, order or regulation of any
Governmental Authority, and any determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
"Responsible Officer" means, with respect to any matter and with respect to
-------------------
any Person, the President, any Vice President, Assistant Vice President,
Treasurer or Assistant Treasurer of such Person, or any other officer of such
Person who in the normal performance of his operational responsibility would
have knowledge of such matter and the requirements, if any, with respect
thereto.
"Restricted Contingency" means, at any time, the then unallocated portion
----------------------
of the line item in the Capital Budget titled "Restricted Contingency Reserve."
"Restricted Payment" means any dividend or other distribution (whether in
------------------
cash, securities or other property) with respect to any shares of any class of
Capital Stock of the Borrower or any Subsidiary, or any payment (whether in
cash, securities or other property), including any sinking fund or similar
deposit, on account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such shares of Capital Stock of the Borrower
or any Subsidiary (or in respect of any Permitted Subordinated Debt) or any
option, warrant or other right to acquire any such shares of Capital Stock of
the Borrower or any Subsidiary.
"Revenue Account" is defined in Section 2.7.1 of the Securities Accounts
--------------- -------------
Agreement.
"Revenue Application Certificate" is defined in Section 2.7.4(a) of the
------------------------------- ----------------
Securities Accounts Agreement.
"St. Croix Affiliate" means GC St. Croix Co., a St. Croix corporation and
-------------------
an indirect subsidiary of Global Crossing.
"St. Croix Contracts" means, collectively, the St. Croix License,
-------------------
Development and Co-Location Agreement and the St. Croix Master Pledge Agreement.
"St. Croix Corridor License" means the Major Water Permit and Major Land
--------------------------
Permit to be issued by the Department of Natural Resources in St. Croix and
identified as permit numbers X6.05P and X6.13P on Schedule 3.08 hereto, together
-------------
with all United States Virgin Islands administrative or legislative actions or
approvals required in connection therewith.
28
<PAGE>
"St. Croix License, Development and Co-Location Agreements" means the
---------------------------------------------------------
contract or contracts among TSSL, the Borrower, the St. Croix Affiliate and Pan
American Crossing under which, among other things, (A) the St. Croix Affiliate
will agree to make the benefits of the St. Croix Corridor License available to
(i) the Borrower (and its Subsidiaries) and its successors and assigns for
purposes of enabling the construction, ownership and operation of the System as
contemplated hereby in St. Croix, (ii) at the option of the St. Croix Affiliate,
Pan American Crossing (or its designees) and its successors and assigns for
purposes or enabling the construction, ownership and operation of Pan American
Crossing's subsea fiber optic cable system in St. Croix and (iii) at the option
of the St. Croix Affiliate, other affiliates of Global Crossing which are
developing subsea fiber optic cable systems in St. Croix, and (B) certain rights
and obligations will be set forth in respect of the construction of the St.
Croix landing station (which is expected to be constructed pursuant to a
contract between TSSL and Pan American Crossing), together with all other
contracts necessary or appropriate to provide the Borrower (or its Subsidiaries)
with the right to use and occupy the St. Croix landing station in order to
operate the System as contemplated hereby.
"St. Croix Master Pledge Agreement" means the agreement or agreements under
---------------------------------
which, among other things, Global Network will pledge 100% of the Capital Stock
of the St. Croix Affiliate to the Master Pledge Trustee for the benefit of (a)
the Administrative Agent for the benefit of the Secured Parties, (b) at the
option of Global Network, the lenders in connection with the subsea fiber optic
cable system to be constructed by Pan American Crossing and (c) at the option of
Global Network, other lenders in connection with the subsea fiber optic cable
systems that may be constructed or sponsored by Global Crossing and which land
in St. Croix.
"Sales and Issuances Proceeds Account" is defined in Section 2.22.1 of the
------------------------------------ --------------
Securities Accounts Agreement.
"Scheduled RFS Date" is defined in the Alcatel Supply Contract as in effect
------------------
on the date hereof.
"Second Capital Cost Completion Date" means the date on which the
-----------------------------------
Administrative Agent receives certificates from the Borrower and the Independent
Engineer certifying that First Permitted Upgrade Final Completion has occurred
and that all Capital Costs associated therewith have been paid.
"Second Sales Threshold Date" means at the date on which the sum of (a)
---------------------------
Capacity Sales Revenues plus (b) the amount of revenues in the nature of
Capacity Sales Revenues that the Borrower or any Subsidiary is entitled to
receive in cash under then existing firmly committed contractual arrangements
and that are required to be deposited into the Revenue Account pursuant to the
terms of the Loan Documents (whether directly or after being held in the U.S.
Revenue Account and then transferred to the Revenue Account pursuant to the
Securities Accounts Agreement) not later than 6 months prior to the Maturity
Date in respect of the Term Loans (provided that such firm commitments shall be
included for purposes of this clause (b) only to the extent such firm
commitments have not matured into cash payments received and already then
included in any amounts under clause (a)), equals or exceeds $325,000,000 and
29
<PAGE>
(2) at least $160,000,000 of the aggregate principal amount of the Term Loans
have been repaid or prepaid.
"Secured Parties" means the Agents, the Lead Agents, the Securities
---------------
Intermediary, the Lenders and any Affiliate of a Lender party to a Hedging
Agreement.
"Securities Accounts Agreement" means the Securities Accounts, Disbursement
-----------------------------
and Control Agreement, dated as of the date hereof, among the Borrower, the U.K.
Subsidiary, the U.S. Subsidiary, the Administrative Agent and the Securities
Intermediary.
"Securities Intermediary" means Deutsche Bank AG, New York Branch, or its
-----------------------
successor, appointed pursuant to the Securities Accounts Agreement.
"Security Agreements" shall be the collective reference to the Securities
-------------------
Accounts Agreement, the Mid-Atlantic Holdings Cash Collateral Agreement, the
Borrower Security Agreements and each Subsidiary Security Agreement.
"Security Documents" shall be the collective reference to the Pledge
------------------
Agreements, the Security Agreements and any additional security agreement,
pledge agreement or other document which purports to create a security interest
of any kind which is entered into in accordance with the terms hereof (such as,
as a condition to receiving the consent or approval of any party hereto to any
action contemplated hereby).
"Segment" is defined in the Alcatel Supply Contract.
-------
"Segment 1" is defined in the Alcatel Supply Contract.
---------
"Segment 2" is defined in the Alcatel Supply Contract.
---------
"Segment 3" is defined in the Alcatel Supply Contract.
---------
"Shareholder Pledge Agreements" means the Mid-Atlantic Holdings Pledge
-----------------------------
Agreement (Bermuda Law) and the Mid-Atlantic Holdings Pledge Agreement (New York
Law).
"Special Payments" means (a) all payments made by any System Contractor
----------------
under any Supply Contract and all other payments made by any System Contractor
or any Supply Contract Guarantor in respect of any breach or failure by the
applicable System Contractor to perform its obligations under the applicable
Supply Contract, whether as a result of any proceeding, settlement or otherwise,
and (b) all payments under insurance policies maintained by the Borrower or any
Subsidiary to compensate for a delay in the commencement of operations of the
System.
"Special Supply Contract Expenses" is defined in Section 2.7.4(a) of the
-------------------------------- ----------------
Securities Accounts Agreement.
"S&P" means Standard & Poor's Ratings Services.
---
30
<PAGE>
"Statutory Reserve Rate" means a fraction (expressed as a decimal), the
----------------------
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject with
respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred
to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve
percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve
Rate shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage.
"subsidiary" means, with respect to any Person (the "parent") at any date,
---------- ------
any corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent's consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, as well as any other
corporation, limited liability company, partnership, association or other entity
that is, as of such date, otherwise Controlled by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent.
"Subsidiary" means any subsidiary of the Borrower.
----------
"Subsidiary Casualty Proceeds" is defined in Section 2.19.2 of the
---------------------------- --------------
Securities Accounts Agreement.
"Subsidiary Guaranty Agreements" shall be the collective reference to the
------------------------------
U.S. Subsidiary Guaranty Agreement, the U.K. Subsidiary Guaranty Agreement and
each other guaranty agreement made by a Subsidiary in favor of the
Administrative Agent.
"Subsidiary Security Agreements" means the collective reference to the U.S.
------------------------------
Subsidiary Security Agreement, the U.K. Subsidiary Security Agreements and each
other security agreement made by a Subsidiary in favor of the Administrative
Agent.
"Supply Contracts" means the Alcatel Supply Contract, the Tyco Supply
----------------
Contract and the St. Croix License, Development and Co-Location Agreements.
"Supply Contract Guarantees" means the Alcatel Guarantee and the Tyco
--------------------------
Guarantee.
"Supply Contract Guarantors" means Alcatel and the Tyco.
--------------------------
"Swap" is defined in Section 6.23.
---- ------------
"Swapped System Capacity" is defined in Section 6.23.
----------------------- ------------
"Syndication Agent" is defined in the preamble.
----------------- --------
"System" is defined in the second recital.
------ ------ -------
31
<PAGE>
"System Activities" means (a) all activities related to the design,
-----------------
development, engineering, acquisition, installation, construction, landing,
completion, disposition, financing, modification, start-up, testing, operation,
ownership, possession, maintenance and use of the System, (b) the acquisition
and disposition, in accordance with the terms hereof, of Capacity and (c) the
arrangement for the disposition of terrestrial capacity on other systems.
"System Capacity" means One Capacity, Two Capacity and/or Three Capacity,
---------------
as the context may require.
"System Capacity Cash Amount" is defined in Section 6.23.
--------------------------- ------------
"System Contracts" shall be the collective reference to the Alcatel Supply
----------------
Contract, the Alcatel Guarantee, the Capacity Sales Agreements, the Marketing
Agreement, the Non-Material System Contracts, the Financial Services Agreement,
the Consents, and, after the execution thereof, the Tyco Supply Contract, the
Tyco Guarantee, the St. Croix License, Development and Co-Location Agreements,
the AC-1 Co-Location Agreement and each Additional Material Contract.
"System Contractors" means the Contractor, TSSL and any other person
------------------
contracting with the Borrower or a Subsidiary under the St. Croix License,
Development and Co-Location Agreements.
"System Final Completion" means the date on which the Certificate of Final
-----------------------
Acceptance shall have been issued with respect to the Basic System in accordance
with the terms of the Alcatel Supply Contract, as certified by the Independent
Engineer.
"System Management Agreement" means the agreement for the management of the
---------------------------
System to be entered into between the Borrower and the System Manager.
"System Manager" means a Person (other than the Borrower) reasonably
--------------
satisfactory to the Lead Agents that is or becomes party to the System
Management Agreement.
"System Manager Consent" means the Consent and Agreement in form and
----------------------
substance reasonably satisfactory to the Administrative Agent to be entered into
among the Borrower, the System Manager and the Administrative Agent and, with
respect to any system management agreement permitted to replace the System
Management Agreement in accordance with Section 7.11, any consent and agreement
------------
reasonably acceptable to the Administrative Agent and relating to such system
management agreement.
"System Revenues" means, for any period, all revenues received by the
---------------
Borrower or any Subsidiary during such period, including all revenues and
proceeds received by them from (a) sales, leases or other dispositions of
Capacity (including revenues and proceeds derived from Permitted Receivables
Transactions (other than any such revenues and proceeds that constitute Net Cash
Proceeds)), (b) the sale, lease, transfer or other disposition of any of their
assets, (c) all payments made by purchasers of Capacity to the Borrower or any
Subsidiary in respect of operation, administration and maintenance charges, (d)
all payments made by insurers under
32
<PAGE>
business interruption policies and (e) all payments received by the Borrower
under Hedging Agreements after the Commercial Operation Date but excluding from
--- ---------
System Revenues all Special Payments, Casualty Proceeds, Net Cash Proceeds and
Backhaul Revenues (other than any Backhaul Revenues designated for transfer to
the Revenue Account (whether directly or after being held in another Account)
pursuant to the Securities Accounts Agreement).
"Taxes" means any and all present or future taxes, levies, imposts, duties,
-----
deductions, charges or withholdings imposed by any Governmental Authority.
"Term Loans" means the Tranche A-1 Term Loans and the Tranche A-2 Term
----------
Loans.
"Term Loan Commitment" means the Tranche A-1 Term Loan Commitment and the
--------------------
Tranche A-2 Term Loan Commitment.
"Term Notes" is defined in Section 2.08(e).
---------- ---------------
"Termination Date" means, with respect to any Class of Loans, the last day
----------------
of the Availability Period applicable to such Class of Loans.
"Three Capacity" means that capacity on the System which is available on
--------------
Segment 3.
"Tranche A Term Loans" means, collectively, Tranche A-1 Term Loans and
--------------------
Tranche A-2 Term Loans.
"Tranche A Term Loan Commitment" means, collectively, the Tranche A-1 Term
------------------------------
Loan Commitment and the Tranche A-2 Term Loan Commitment.
"Tranche A Term Notes" means, collectively, the Tranche A-1 Term Notes and
--------------------
the Tranche A-2 Term Notes.
"Tranche A-1 Term Loans" is defined in Section 2.01.
---------------------- ------------
"Tranche A-1 Term Loan Commitment" means, (a) as to any Lender, its
--------------------------------
obligation to make Tranche A-1 Term Loans to the Borrower in an aggregate amount
not to exceed at any one time outstanding the amount set forth opposite such
Lender's name on Schedule 2.01 under the
-------------
33
<PAGE>
heading "Tranche A-1 Term Loan Commitment" or, in the case of a Lender that is
an assignee, the amount of the assigning Lender's Tranche A-1 Term Loan
Commitment assigned to such assignee pursuant to Section 9.04 and (b) in the
------------
aggregate, $219,300,000, in each case as such amount may be adjusted from time
to time as provided herein.
"Tranche A-1 Term Note" is defined in Section 2.08(e).
--------------------- ---------------
"Tranche A-2 Term Loans" is defined in Section 2.01.
---------------------- ------------
"Tranche A-2 Term Loan Commitment" means, (a) as to any Lender, its
--------------------------------
obligation to make Tranche A-2 Term Loans to the Borrower in an aggregate amount
not to exceed at any one time outstanding the amount set forth opposite such
Lender's name on Schedule 2.01 under the heading "Tranche A-2 Term Loan
-------------
Commitment" or, in the case of a Lender that is an assignee, the amount of the
assigning Lender's Tranche A-2 Term Loan Commitment assigned to such assignee
pursuant to Section 9.04 and (b) in the aggregate, $30,700,000, in each case as
------------
such amount may be adjusted from time to time as provided herein.
"Tranche A-2 Term Note" is defined in Section 2.08(e).
--------------------- ---------------
"TSSL" means Tyco Submarine Systems Inc., a Delaware corporation.
----
"Two Capacity" means that capacity on the System which is available on
------------
Segment 2.
"Tyco" means Tyco International Ltd., a Bermuda corporation and the
----
ultimate parent of TSSL.
"Tyco Contract Price" means "Contract Price" as defined in the Tyco Supply
-------------------
Contract.
"Tyco Contract Variation" means any amendment, supplement, waiver, consent
-----------------------
or other modification to the Tyco Supply Contract and shall include any
"Contract Variation" as such term is defined in the Tyco Supply Contract.
"Tyco Escrow Agent" means the escrow agent under the Contractor Escrow
-----------------
Agreement in connection with the Tyco Supply Contract, and each of its
successors and assigns as such thereunder.
"Tyco Escrow Dispute Account" means the "Dispute Account" as defined in the
---------------------------
Contractor Escrow Agreement in connection with the Tyco Supply Contract.
"Tyco Guarantee" means the Guaranty made by the Tyco in favor of the
--------------
Borrower, pursuant to which Tyco will guarantee TSSL's obligation under the Tyco
Supply Contract.
"Tyco Plan of Work" means the plan of work described in the Tyco Supply
-----------------
Contract.
"Tyco Supply Contract" means the Project Development and Construction
--------------------
Contract, between TSSL and the Borrower providing for the construction and
installation of the landing stations in New York and Florida.
"Type," when used in reference to any Loan or Borrowing, refers to whether
----
the rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.
"UCC" means the Uniform Commercial Code in effect from time to time in the
---
State of New York.
"Unrestricted Contingency" means, at any time, the then unallocated portion
------------------------
of the line item in the Capital Budget titled "Unrestricted Contingency
Reserve."
34
<PAGE>
"U.K. Backhaul Account" is defined in Section 2.16.1 of the Securities
--------------------- --------------
Accounts Agreement.
"U.K. Capital Cost Account" is defined in Section 2.2.1 of the Securities
------------------------- -------------
Accounts Agreement.
"U.K. Casualty Proceeds Account" is defined in Section 2.20.1 of the
------------------------------ --------------
Securities Accounts Agreement.
"U.K. Checking Account" means a checking account of the U.K. Subsidiary
---------------------
into which funds may be deposited and withdrawn in accordance with Section 2.26
------------
of the Securities Accounts Agreement.
"U.K. O&M Account" is defined in Section 2.11.1 of the Securities Accounts
---------------- --------------
Agreement.
"U.K. Revenue Account" is defined in Section 2.8.1 of the Securities
-------------------- -------------
Accounts Agreement.
"U.K. Sales and Issuances Account" is defined in Section 2.23.1 of the
-------------------------------- --------------
Securities Accounts Agreement.
"U.K. Subsidiary" means Mid-Atlantic Crossing Holdings UK Ltd, a
---------------
corporation organized under the laws of the United Kingdom and a direct, wholly-
owned subsidiary of the Borrower.
"U.K. Subsidiary Accounts" shall be the collective reference to the U.K.
------------------------
Capital Cost Account, the U.K. Upgrade Account, the U.K. Revenue Account, the
U.K. O&M Account, the U.K. Backhaul Account, the U.K. Casualty Proceeds Account,
the U.K. Sales and Issuances Proceeds Account and each other account, together
with each sub-account of any such account, established and maintained on behalf
of the U.K. Subsidiary pursuant to the provisions of the Securities Accounts
Agreement.
"U.K. Subsidiary Guaranty Agreement" means the Guaranty Agreement, dated as
----------------------------------
of the date hereof, made by the U.K. Subsidiary in favor of the Administrative
Agent.
"U.K. Subsidiary Pledge Agreement (New York Law)" means the Pledge
-----------------------------------------------
Agreement (New York Law) dated as of the date hereof, made by the U.K.
Subsidiary in favor of the Administrative Agent.
"U.K. Subsidiary Security Agreement (English Law)" means the Deed of Charge
------------------------------------------------
(English Law), dated as of the date hereof, made by the U.K. Subsidiary in favor
of the Administrative Agent.
"U.K. Subsidiary Security Agreement (New York Law)" means the Subsidiary
-------------------------------------------------
Security Agreement (New York Law), dated as of the date hereof, made by the U.K.
Subsidiary in favor of the Administrative Agent.
35
<PAGE>
"U.K. Subsidiary Security Agreements" means the U.K. Subsidiary Security
-----------------------------------
Agreement (New York Law) and the U.K. Subsidiary Security Agreement (English
Law).
"Upgrade Account" is defined in Section 2.4.1 of the Securities Accounts
--------------- -------------
Agreement.
"Upgrade Delay Proceeds Sub-Account" is defined in Section 2.4.1 of the
---------------------------------- -------------
Securities Account Agreement.
"Upgrade Loan Proceeds Sub-Account" is defined in Section 2.4.1 of the
--------------------------------- -------------
Securities Account Agreement.
"Upgraded System" means the Basic System, after taking into account the
---------------
First Permitted Upgrade thereof.
"U.S. Backhaul Account" is defined in Section 2.17.1 of the Securities
--------------------- --------------
Accounts Agreement.
"U.S. Capital Cost Account" is defined in Section 2.3.1 of the Securities
------------------------- -------------
Accounts Agreement.
"U.S. Casualty Proceeds Account" is defined in Section 2.21.1 of the
------------------------------ --------------
Securities Accounts Agreement.
"U.S. Checking Account" means a checking account of the U.S. Subsidiary
---------------------
into which funds may be deposited and withdrawn in accordance with Section 2.26
------------
of the Securities Accounts Agreement.
"U.S. Delay Proceeds Sub-Account" is defined in Section 2.3.1 of the
------------------------------- -------------
Securities Accounts Agreement.
"U.S. Landing License" means any Landing License with respect to the United
--------------------
States.
"U.S. O&M Account" is defined in Section 2.12.1 of the Securities Accounts
---------------- --------------
Agreement.
"U.S. Revenue Account" is defined in Section 2.9.1 of the Securities
-------------------- -------------
Accounts Agreement.
"U.S. Sales and Issuances Account" is defined in Section 2.24.1 of the
-------------------------------- --------------
Securities Accounts Agreement.
"U.S. Subsidiary" means MAC Landing Corp., a Delaware corporation and an
---------------
indirect, wholly owned subsidiary of the Borrower.
"U.S. Subsidiary Accounts" shall be the collective reference to the U.S.
------------------------
Capital Cost Account, U.S. Delay Proceeds Sub-Account, the U.S. Upgrade Account,
the U.S. Upgrade Delay Proceeds Sub-Account, the U.S. Revenue Account, the U.S.
O&M Account, the U.S. Backhaul Account, the U.S. Casualty Proceeds Account, the
U.S. Sales and Issuances Proceeds Account,
36
<PAGE>
and each other account, together with each sub-account of any such account,
established and maintained on behalf of the U.S. Subsidiary pursuant to the
provisions of the Securities Accounts Agreement.
"U.S. Subsidiary Guaranty Agreement" means the Guaranty Agreement, dated as
----------------------------------
of the date hereof, made by the U.S. Subsidiary in favor of the Administrative
Agent.
"U.S. Subsidiary Security Agreement" means the Subsidiary Security
----------------------------------
Agreement, dated as of the date hereof, made by the U.S. Subsidiary in favor of
the Administrative Agent.
"U.S. Upgrade Account" is defined in Section 2.6.1 of the Securities
-------------------- -------------
Accounts Agreement.
"U.S. Upgrade Delay Proceeds Sub-Account" is defined in Section 2.6.1 of
--------------------------------------- -------------
the Securities Accounts Agreement.
"Voting Stock" means, with respect to any Person, securities of any class
------------
or classes of Capital Stock in such Person entitling the holders thereof to vote
under ordinary circumstances in the election of members of the board of
directors or other governing body of such Person.
"Withdrawal Liability" means liability to a Multiemployer Plan as a result
--------------------
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
"Working Capital Loan Commitment" means, (a) as to any Lender, its
-------------------------------
obligation to make Working Capital Loans to the Borrower in an aggregate amount
not to exceed at any one time outstanding the amount set forth opposite such
Lender's name on Schedule 2.01 under the heading "Working Capital Loan
-------------
Commitment" or, in the case of a Lender that is an assignee, the amount of the
assigning Lender's Working Capital Loan Commitment assigned to such assignee
pursuant to Section 9.04 and (b) in the aggregate, $10,000,000, in each case as
------------
such amount may be adjusted from time to time as provided herein.
"Working Capital Loans" is defined in Section 2.01.
--------------------- ------------
"Working Capital Note" is defined in Section 2.08(e).
-------------------- ---------------
SECTION 1.02. Classification of Loans and Borrowings.
--------------------------------------
For purposes of this Agreement, Loans may be classified and referred to by
Class (e.g., a "Working Capital Loan") or by Type (e.g., a "Eurodollar Loan") or
-------------------- ---------------
by Class and Type (e.g., a "Eurodollar Working Capital Loan"). Borrowings also
-------------------------------
may be classified and referred to by Class (e.g., a "Working Capital Borrowing")
-------------------------
or by Type (e.g., a "Eurodollar Borrowing") or by Class and Type (e.g., a
--------------------
"Eurodollar Working Capital Borrowing").
- -------------------------------------
SECTION 1.03. Terms Generally.
---------------
The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any
pronoun shall include the corresponding masculine, feminine and neuter forms.
The words
37
<PAGE>
"include" "includes'' and "including" shall be deemed to be followed by the
phrase "without limitation." The word "will" shall be construed to have the same
meaning and effect as the word "shall." Except to the extent expressly provided
to the contrary, (a) any definition of or reference to any agreement, instrument
or other document herein shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented, amended
and restated or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein," "hereof" and "hereunder," and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.
SECTION 1.04. Accounting Terms; Exchange Rates.
--------------------------------
(a) Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as in
effect from time to time.
(b) If any amount that the Borrower or a Subsidiary is entitled to
receive in cash is payable in any currency other than Dollars (such entitlement
being referred to as a "Deferred Non-Dollar Revenue"), such amount shall, in
---------------------------
order to attribute a Dollar value to such Deferred Non-Dollar Revenue for
purposes of any calculation which incorporates any such Deferred Non-Dollar
Revenue, be converted into Dollars using the spot exchange rate for such
currency into Dollars on the date such calculation is made; provided that if the
--------
Borrower or any Subsidiary has entered into a Hedging Agreement in respect of
such Deferred Non-Dollar Revenue which effectively fixes the exchange rate into
Dollars for such Deferred Non-Dollar Revenue, the conversion into Dollars
referred to above shall be made at the exchange rate effectively fixed by such
Hedging Agreement. In addition, if any calculation refers to a price received
by the Borrower or a Subsidiary, such price shall, if in a currency other than
Dollars, be converted into Dollars using the spot exchange rate for such
currency into Dollars on the date such calculation is made.
ARTICLE II.
THE COMMITMENTS
---------------
SECTION 2.01. Commitments.
-----------
Subject to the terms and conditions set forth herein, (a) each Lender
severally agrees to make working capital loans ("Working Capital Loans") to the
---------------------
Borrower from time to time during the Availability Period in an aggregate
principal amount not to exceed such Lender's Working Capital Loan Commitment,
(b) each Lender severally agrees to make term loans ("Tranche A-1 Term Loans")
----------------------
to the Borrower from time to time during the Availability Period in an aggregate
principal amount not to exceed such Lender's Tranche A-1 Term Loan Commitment
and (c) each Lender severally agrees to make term loans ("Tranche A-2 Term
----------------
Loans") to the Borrower from time to time during the
38
<PAGE>
Availability Period in an aggregate principal amount not to exceed such Lender's
Tranche A-2 Term Loan Commitment. Within the foregoing limits and subject to the
terms and conditions set forth herein, the Borrower may, from and after the
Closing Date, borrow, and from and after the Commercial Operation Date, borrow,
prepay and reborrow, Working Capital Loans in an amount such that the aggregate
principal amount of Working Capital Loans outstanding at any time does not
exceed the Working Capital Loan Commitment. Amounts repaid or prepaid in respect
of Term Loans may not be reborrowed.
SECTION 2.02. Loans and Borrowings.
--------------------
(a) Each Loan shall be made as part of a Borrowing consisting of Loans
of the same Class and Type made by the Lenders ratably in accordance with their
respective Commitments in respect of the applicable Class. The failure of any
Lender to make any Loan required to be made by it shall not relieve any other
Lender of its obligations hereunder; provided that the Commitments of the
--------
Lenders are several and no Lender shall be responsible for any other Lender's
failure to make Loans as required hereby.
(b) Each Working Capital Borrowing and Term Loan Borrowing may be ABR
Loans or Eurodollar Loans, or a combination thereof, as the Borrower may request
in accordance herewith.
(c) In the case of Term Loan Borrowings or Working Capital Borrowings
prior to the Commercial Operation Date, each ABR Borrowing and each Eurodollar
Borrowing shall be in an aggregate amount that is not less than $5,000,000, and
in the case of Working Capital Borrowings on and after the Commercial Operation
Date, each ABR Borrowing and each Eurodollar Borrowing shall be in an aggregate
amount that is not less than $1,000,000 or is in an integral multiple of
$100,000 in excess thereof; provided that any such Borrowing may be in an
--------
aggregate amount that is equal to the entire unused balance of the total Term
Loan Commitments or Working Capital Commitments, as the case may be. Borrowings
of more than one Type and Class may be outstanding at the same time; provided
--------
that there shall not at any time be more than a total of eight Eurodollar
Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing if the Interest Period requested with respect thereto would end
after the applicable Maturity Date.
SECTION 2.03. Requests for Borrowings and Other Credit Extensions.
---------------------------------------------------
(a) Credit Extension Requests. To request a Credit Extension, the
-------------------------
Borrower shall deliver a properly completed Credit Extension Request to the
Administrative Agent (a) in the case of a Eurodollar Borrowing, not later than
11:00 a.m., New York City time, 3 Business Days before the date of the proposed
Borrowing or (b) in the case of an ABR Borrowing or of any other Credit
Extension, not later than 11:00 a.m., New York City time, 1 Business Day before
the date of the proposed Borrowing or Credit Extension. Except with respect to
Working Capital Loans requested after the Commercial Operation Date, the
Borrower shall request Credit Extensions no more frequently than once per month,
except as necessary to permit any final
39
<PAGE>
drawings pursuant to Section 2.04(b). Each Credit Extension Request shall be
---------------
irrevocable and shall specify the following information in compliance with
Section 2.02:
- ------------
(i) whether the requested Credit Extension is to be a
Working Capital Loan, a Tranche A-1 Term Loan, a Tranche A-2 Term Loan or
the transfer or withdrawal of funds that are on deposit, or are expected by
the requested Credit Extension Date to be on deposit, in a sub-account of
the Construction Account or the Upgrade Loan Proceeds Sub-Account;
(ii) the aggregate amount of the requested Borrowing or other
Credit Extension;
(iii) the date of such Credit Extension, which shall be a
Credit Extension Date;
(iv) if the requested Credit Extension consists of a
Borrowing, whether such Borrowing is to be an ABR Borrowing or a Eurodollar
Borrowing; and
(v) in the case of a Eurodollar Borrowing, the initial
Interest Period applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period."
If no election as to the Type of any requested Borrowing is specified, then the
requested Borrowing shall be an ABR Borrowing. If no Interest Period is
specified with respect to any requested Eurodollar Borrowing, then the Borrower
shall be deemed to have selected an Interest Period of one month's duration.
Promptly after receipt of a Credit Extension Request, the Administrative Agent
shall review such Credit Extension Request and the attachments thereto to
determine whether all required documentation has been provided in form and
substance reasonably satisfactory to the Administrative Agent and shall (i)
notify the Borrower and the Securities Intermediary of its determination and
(ii) advise each applicable Lender of the details thereof and, if the Credit
Extension Request requests a Borrowing, of the amount of such Lender's Loan to
be made as part of the requested Borrowing.
(b) Credit Extension Certificates. The Borrower shall by 11:00 am on
-----------------------------
each Credit Extension Date designated in a Credit Extension Request, deliver to
the Administrative Agent a Credit Extension Certificate certifying, if such is
the case, that all conditions precedent to the makings of such Credit Extension
have been satisfied, and the Administrative Agent shall, upon receipt of a
properly completed Credit Extension Certificate, deliver such Credit Extension
Certificate to the Securities Intermediary.
SECTION 2.04. Special Provisions for Credit Extensions.
----------------------------------------
(a) Delay Proceeds. At any time that funds are on deposit in the
--------------
Delay Proceeds Sub-Account, the U.S. Delay Proceeds Sub-Account, the Upgrade
Delay Proceeds Sub-Account or the U.S. Upgrade Delay Proceeds Account, (i) the
Borrower shall make Credit Extension Requests designating that amounts to be
withdrawn from the Construction Account be
40
<PAGE>
withdrawn from the Delay Proceeds Sub-Account or the Upgrade Delay Proceeds Sub-
Account, as applicable, until such time as no funds remain on deposit therein,
and such Credit Extension Requests shall not request that any Loans be made
until the funds on deposit in such sub-account have been (or, concurrently with
the making of any requested Loan, will be) fully utilized and (ii) no amounts
shall be transferred to the U.S. Capital Cost Account from the Construction
Account or any sub-account thereof until all funds on deposit in or credited to
the U.S. Delay Proceeds Account and the U.S. Upgrade Delay Proceeds Account have
been fully utilized.
(b) First Loan. On the Closing Date and prior to the advancing of any
----------
Tranche A-2 Term Loans or Working Capital Loans, the Borrower shall make a
Credit Extension Request in respect of a Tranche A-1 Term Loan (the "First
-----
Loan") in an amount equal to $9,192,115.88 which shall represent the aggregate
- ----
principal amount due with respect to (i) the fees and expenses payable to the
Co-Arrangers, the Agents and the Lenders on the Closing Date in connection with
the transactions contemplated hereby (including the reasonable fees and expenses
of counsel and consultants to the Co-Arrangers, the Agents, the Lenders and the
Borrower) and (ii) the fee payable by the Borrower to GCDC pursuant to the
Financial Services Agreement.
(c) Tranche A-2 Term Loan Borrowings and Working Capital Borrowings
---------------------------------------------------------------
Prior to the Commercial Operation Date. The proceeds of Tranche A-2 Term Loans
- --------------------------------------
and, prior to the Commercial Operation Date, Working Capital Loans shall be used
solely to pay Capital Costs in respect of the First Permitted Upgrade in
accordance with the Capital Budget and to pay for the purchase of Backhaul
Capacity by the Borrower and its Subsidiaries in accordance with the Capital
Budget, subject, in each such case, to the satisfaction of the conditions set
forth in Sections 4.02(k) and 4.02(l) and the other conditions precedent to the
---------------- -------
making of Credit Extensions set forth in Section 4.02. Borrowings of Tranche A-
------------
2 Term Loans and, prior to the Commercial Operation Date, Working Capital Loans
for application to the purchase of Backhaul Capacity shall not exceed, in the
aggregate (taking into account all previous Borrowings of Tranche A-2 Term Loans
and Working Capital Loans for such purposes), the lesser of (x) 50% of Excess
System Capacity Sales and (y) $15,000,000. All Tranche A-2 Term Loan and
Working Capital Loan proceeds requested for the purpose of paying Capital Costs
associated with the First Permitted Upgrade in accordance with the Capital
Budget shall be deposited into the Upgrade Loan Proceeds Sub-Account, and all
Tranche A-2 Term Loan and Working Capital Loan proceeds requested for the
purpose of paying for the purchase of Backhaul Capacity in accordance with the
Capital Budget shall be deposited into the Backhaul Account, in each case, for
application in accordance with the applicable provisions of the Securities
Accounts Agreement. At any time that funds are on deposit in the Upgrade Delay
Proceeds Sub-Account or the U.S. Upgrade Delay Proceeds Sub-Account, the
Borrower shall make Credit Extension Requests designating that amounts to be
withdrawn from the Upgrade Loan Proceeds Sub-Account be withdrawn from such sub-
account until such time as no funds remain on deposit therein, and such Credit
Extension Requests shall not request that any Loans be made until the funds on
deposit in such sub-account have been (or, currently with the making of any
requested Loan, will be) fully utilized. If, on the earlier to occur of the
Commercial Operation Date and the Guaranteed Completion Date, all or any portion
of the Tranche A-2 Term Loan Commitment remains undrawn, the Borrower shall be
required to submit a Credit Extension Request
41
<PAGE>
requesting a Borrowing of Tranche A-2 Term Loans in an amount equal to the then
undrawn Tranche A-2 Term Loan Commitments, for deposit into the Upgrade Loan
Proceeds Sub-Account.
(d) Provisions Regarding Clean-Up Borrowing. Contemporaneously with
---------------------------------------
or immediately prior to the Termination Date with respect to the Tranche A-1
Term Loans, the Borrower shall request a final Tranche A-1 Term Loan Borrowing
in accordance with the provisions of Section 2.03 in order to pay or provide for
------------
the Final Contractor Payment and any other Capital Costs identified in the then
current Capital Budget with respect to the Basic System but not yet due and
payable as of such Termination Date, and the Administrative Agent shall deposit
the proceeds of such Borrowings in the Clean-Up Sub-Account pursuant to the
provisions of the Securities Accounts Agreement. The amount to be so requested
shall be equal to the lesser of (i) the aggregate amount of the Tranche A-1 Term
Loan Commitment so remaining available and (ii) the aggregate estimated amount
of such Final Contractor Payment and other Capital Costs. After giving effect
to the foregoing, contemporaneously with or immediately prior to the Termination
Date with respect to the Tranche A-1 Term Loans the Borrower may submit a Credit
Extension Request requesting a Borrowing of Tranche A-1 Term Loans for deposit
into the Backhaul Account in an amount not to exceed the lesser of (a) the
aggregate amount of the Tranche A-1 Term Loan Commitment so remaining available
and (b) the then available Unrestricted Contingency, if any.
SECTION 2.05. Funding Of Borrowings.
---------------------
(a) Each Lender shall make each Loan to be made by it hereunder on the
proposed date thereof by wire transfer of immediately available funds by 12:00
noon, New York City time, to the account of the Administrative Agent most
recently designated by the Administrative Agent for such purpose by notice to
the Lenders. The Administrative Agent will make such Loans available to the
Borrower by promptly transferring the amounts so received, in like funds, to the
applicable Account pursuant to the provisions of the Securities Accounts
Agreement.
(b) Unless the Administrative Agent shall have received notice from a
Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender agrees to pay to the Administrative Agent forthwith on demand
such corresponding amount with interest thereon, for each day from and including
the date such amount is made available to the Borrower to but excluding the date
of payment to the Administrative Agent, at the Federal Funds Effective Rate for
3 days and at the Alternate Base Rate thereafter. If such Lender pays such
amount to the Administrative Agent, then such amount shall constitute such
Lender's Loan included in such Borrowing.
42
<PAGE>
SECTION 2.06. Interest Elections.
------------------
(a) Each Working Capital Borrowing and Term Loan Borrowing initially
shall be of the Type specified in the applicable Credit Extension Request and,
in the case of a Eurodollar Borrowing, shall have an initial Interest Period as
specified in such Credit Extension Request. Thereafter, the Borrower may elect
to convert such Borrowing to a different Type or to continue such Borrowing and,
in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all
as provided in this Article II. The Borrower may elect different options with
----------
respect to different portions of the affected Borrowing, in which case each such
portion shall be allocated ratably among the Lenders holding the Loans
comprising such Borrowing, and the Loans comprising each such portion shall be
considered a separate Borrowing.
(b) To make an election pursuant to this Section, the Borrower shall
notify the Administrative Agent of such election by delivering a
Continuation/Conversion Notice to the Administrative Agent by the time that a
Credit Extension Request would be required under Section 2.03 if the Borrower
------------
were requesting a Borrowing of the Type resulting from such election to be made
on the effective date of such election. Each such notice shall be irrevocable.
(c) Each Continuation/Conversion Notice shall specify the following
information in compliance with Section 2.02:
------------
(i) the Borrowing to which such Continuation/Conversion
Notice applies and, if different options are being elected with respect to
different portions thereof, the portions thereof to be allocated to each
resulting Borrowing (in which case the information to be specified pursuant
to clauses (iii) and (iv) below shall be specified for each resulting
Borrowing);
(ii) the effective date of the election made pursuant to such
Continuation/Conversion Notice, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR
Borrowing or a Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing,
the Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period."
If any such Continuation/Conversion Notice requests a Eurodollar Borrowing but
does not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of a Continuation/Conversion Notice,
the Administrative Agent shall advise each applicable Lender of the details
thereof and of such Lender's portion of each resulting Borrowing.
43
<PAGE>
(e) If the Borrower fails to deliver a timely Continuation/Conversion
Notice with respect to a Eurodollar Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing and the Administrative Agent, at the
request of the Majority Lenders, so notifies the Borrower, then, so long as an
Event of Default is continuing (i) no outstanding Borrowing may be converted to
or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar
Borrowing shall be converted to an ABR Borrowing at the end of the Interest
Period applicable thereto.
SECTION 2.07. Termination and Reduction of Commitments.
----------------------------------------
(a) Unless previously terminated, each Commitment shall terminate on
the Termination Date in respect thereof.
(b) The Borrower shall notify the Administrative Agent of any election
to terminate or reduce the Commitments under paragraph (c) of this Section at
least 5 Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any notice, the Administrative Agent shall advise the
Lenders of the contents thereof. Each notice delivered by the Borrower pursuant
to this Section 2.07 shall be irrevocable. Any termination or reduction of the
------------
Commitments shall be permanent. Each reduction of the Commitments of any Class
shall be made ratably among the Lenders in accordance with their respective
Commitments of such Class.
(c) The Borrower may at any time terminate, or from time to time
reduce, the Commitments of any Class; provided that (i) each reduction of the
--------
Commitments of any Class shall be in an amount that is an integral multiple of
$1,000,000, (ii) the Borrower shall not terminate or reduce the Term Loan
Commitments if the remaining Term Loan Commitments, together with other funds
available to the Borrower, would not, in the reasonable judgment of the
Administrative Agent, be sufficient to pay the remaining amounts owing under the
Supply Contracts and the other costs necessary to complete the System and (iii)
the Borrower shall not terminate or reduce the Tranche A-2 Term Loan Commitment
prior to First Permitted Upgrade Final Completion if the amounts on deposit in
the Upgrade Account (together with other funds available to the Borrower on
terms satisfactory to the Lead Agents) would not, in the reasonable judgment of
the Administrative Agent, be sufficient to pay all costs necessary to complete
the First Permitted Upgrade.
SECTION 2.08. Repayment of Loans; Evidence of Debt.
------------------------------------
(a) The Borrower hereby unconditionally promises to repay (i) the
Working Capital Borrowings as set forth under the heading "Working Capital Loan
Amortization Schedule" on Schedule 2.08, (ii) the Tranche A-1 Term Loan
-------------
Borrowings as set forth under the heading "Tranche A-1 Term Loan Amortization
Schedule" on Schedule 2.08 and (iii) the Tranche A-2 Term Loan Borrowings as set
-------------
forth under the heading "Tranche A-2 Term Loan Amortization Schedule" on
Schedule 2.08; provided that (1) at no time shall the Borrower be obligated to
- ------------- --------
make payments of principal of Loans hereunder in an amount greater than the
total
44
<PAGE>
principal of Loans then outstanding hereunder and (2) in the event that
the Borrower did not draw the full amount of any Term Loan Commitment, the
aggregate principal amount of the corresponding Term Loans payable hereunder
shall be reduced by such amount not drawn (such reduction to be applied to then
remaining installments of principal of such Term Loans pro rata).
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain the Register pursuant to Section 9.04(c) and a sub-
---------------
account therein for each Lender, in which it shall record (i) the amount of each
Loan and each obligation evidenced by a Note made hereunder, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the Register and the accounts maintained
pursuant to paragraph (b) or (c) of this Section shall constitute prima facie
----- -----
evidence of the existence and amounts of the obligations recorded therein;
provided that the failure of any Lender or the Administrative Agent to maintain
- --------
such accounts or any error therein shall not in any manner affect the obligation
of the Borrower to repay the Loans in accordance with the terms of this
Agreement.
(e) The Borrower agrees that, upon the request to the Administrative
Agent by any Lender, the Borrower will execute and deliver to such Lender, as
applicable, (i) a promissory note of the Borrower payable to the order of such
Lender and its registered assigns evidencing the Tranche A-1 Term Loans of such
Lender and substantially in the form of Exhibit A-1, with appropriate insertions
-----------
as to date and principal amount (each, a "Tranche A-1 Term Note"), (ii) a
---------------------
promissory note of the Borrower payable to the order of such Lender and its
registered assigns evidencing the Tranche A-2 Term Loans of such Lender and
substantially in the form of Exhibit A-2, with appropriate insertions as to date
-----------
and principal amount (each a "Tranche A-2 Term Note") and (iii) a promissory
---------------------
note of the Borrower payable to the order of such Lender and its registered
assigns evidencing the Working Capital Loans of such Lender and substantially in
the form of Exhibit A-3, with appropriate insertions as to date and principal
-----------
amount (each, a "Working Capital Note"). Thereafter, the Loans evidenced by any
--------------------
such Note and interest thereon shall at all times (including after assignment
pursuant to Section 9.04) be represented by one or more Notes payable to the
------------
order of the payee named therein and its registered assigns. A Note and the
obligation evidenced thereby may be assigned or otherwise transferred in whole
or in part only by registration of such assignment or transfer of such Note and
the obligation evidenced thereby in the Register (and each Note shall expressly
so provide). Any assignment or transfer of all or part of an obligation
evidenced by a Note shall be registered in the Register only upon surrender for
registration of assignment or transfer of the Note evidencing such obligation,
accompanied by an Assignment and Acceptance duly executed by the assignor
thereof, and
45
<PAGE>
thereupon, if requested by the assignee, one or more new Notes shall be issued
to the designated assignee and the old Note shall be returned by the
Administrative Agent to the Borrower marked "canceled." No assignment of a Note
and the obligation evidenced thereby shall be effective unless it shall have
been recorded in the Register by the Administrative Agent as provided in this
Section 2.08(e).
- ---------------
SECTION 2.09. Optional Prepayments of Loans.
-----------------------------
(a) The Borrower shall have the right at any time and from time to
time to prepay any Borrowing in whole or in part, without premium or penalty,
subject to prior notice in accordance with paragraph (b) of this Section and
subject to the provisions of paragraph (c) of this Section and Section 2.15.
------------
(b) The Borrower shall notify the Administrative Agent in writing or
by telephone (confirmed by telecopy) of any optional prepayment hereunder, not
later than 11:00 a.m., New York City time, 5 Business Days before the date of
prepayment. Each such notice shall be irrevocable and shall specify, in the
case of any prepayment of Loans, the date and amount of prepayment and whether
the prepayment is (i) of Tranche A-1 Term Loans, Tranche A-2 Term Loans, Working
Capital Loans or a combination thereof and (ii) of Eurodollar Loans, ABR Loans
or a combination thereof, and, in each case if a combination thereof, the
principal amount allocable to each, and shall specify how such prepayment shall
be applied to the remaining installments of the Loans. Promptly following
receipt of any such notice, the Administrative Agent shall advise the Lenders of
the contents thereof. Partial optional prepayments shall be in a minimum
aggregate principal amount of $5,000,000 and integral multiples of $100,000 in
excess thereof. Optional prepayments shall be accompanied by accrued interest
to the extent required by Section 2.12. Without in any way limiting the
------------
obligation of the Borrower to confirm in writing any notice it may give
hereunder by telephone, the Administrative Agent may act prior to receipt of
written confirmation without liability upon the basis of such telephonic notice
believed by the Administrative Agent in good faith to be from a Responsible
Officer of the Borrower (or a designee of such Responsible Officer).
(c) Optional prepayments shall be applied to the installments of the
Loans as specified by the Borrower in the notice of prepayment set forth in
paragraph (b) of this Section provided that the Borrower shall not be permitted
--------
to voluntarily prepay Tranche A-2 Term Loans until First Permitted Upgrade Final
Completion.
SECTION 2.10. Mandatory Prepayments.
---------------------
(a) The Borrower shall prepay the outstanding Term Loans in the amount
designated for transfer to the Administrative Agent for application to the
prepayment of the Term Loans pursuant to Section 2.7.3(a) of the Securities
----------------
Accounts Agreement (and such prepayment shall, notwithstanding anything to the
contrary in the Securities Accounts Agreement or otherwise, be required to be
made in such amount notwithstanding that there may be insufficient funds then on
deposit in the Revenue Account to do so).
46
<PAGE>
(b) On each Principal Payment Date, the Borrower shall prepay the
outstanding Term Loans in the amount designated for transfer to the
Administrative Agent for application to the prepayment of the Term Loans
pursuant to Section 2.7.4(a) of the Securities Accounts Agreement (and such
----------------
prepayment shall, notwithstanding anything to the contrary in the Securities
Accounts Agreement or otherwise, be required to be made in such amount
notwithstanding that there may be insufficient funds then on deposit in the
Revenue Account to do so).
(c) The Borrower shall prepay the outstanding Term Loans in the amount
designated for transfer to the Administrative Agent for application to the
prepayment of the Term Loans pursuant to Sections 2.22.3(a), 2.23.3, and
------------------ ------
2.24.3(a) of the Securities Accounts Agreement (and such prepayment shall,
- ---------
notwithstanding anything to the contrary in the Securities Accounts Agreement or
otherwise, be required to be made in such amount notwithstanding that there may
be insufficient funds then on deposit in the Sales and Issuances Proceeds
Account to do so).
(d) The Borrower shall prepay the outstanding Term Loans in the amount
designated for transfer to the Administrative Agent for application to the
prepayment of the Term Loans pursuant to Sections 2.19.3(c) and 2.19.3(d) of the
------------------ ---------
Securities Accounts Agreement (and such prepayment shall, notwithstanding
anything to the contrary in the Securities Accounts Agreement or otherwise, be
required to be made in such amount notwithstanding that there may be
insufficient funds then on deposit in the Casualty Proceeds Account to do so).
(e) The Borrower shall prepay the outstanding Working Capital Loans in
the amount designated for transfer to the Administrative Agent for application
to the prepayment of the Working Capital Loans pursuant to Section 2.1.4 of the
-------------
Securities Accounts Agreement.
(f) Mandatory prepayments shall be accompanied by accrued interest to
the extent required by Section 2.12, and each mandatory prepayment described in
------------
this Section shall be of a principal amount of Term Loans such that the amount
designated for transfer to the Administrative Agent for application to the
prepayment of Term Loans is sufficient to pay such principal amount plus accrued
interest thereon to the date of prepayment.
(g) Fifty percent of each mandatory prepayment of the Term Loans made
pursuant to this Section 2.10 shall be applied to the installments thereof in
------------
the direct order of maturity thereof and fifty percent of each mandatory
prepayment of the Term Loans made pursuant to this Section 2.10 be applied to
------------
the installments thereof in the inverse order of maturity thereof (in each case,
pro rata according to respective outstanding principal amounts among the then
outstanding Tranche A-1 Term Loans and Tranche A-2 Term Loans).
(h) Upon making a mandatory prepayment pursuant to this Section, the
Borrower shall have the right (i) first, to apply such prepayment to the ABR
Loans and to any and all Eurodollar Loans having Interest Period(s) ending on
the date of such prepayment and (ii) then, with respect to Eurodollar Loans
having Interest Period(s) ending on a day other than the date of such
prepayment, to deposit cash in a cash collateral account, on terms and subject
to documentation reasonably satisfactory to the Administrative Agent, sufficient
to prepay in full such Eurodollar Loans (together with accrued interest thereon)
at the end of the applicable
47
<PAGE>
Interest Period(s). Any amounts so deposited shall be held in a cash collateral
account and shall be applied to the prepayment of the applicable Eurodollar
Loans at the end of the current Interest Periods applicable thereto. The
Administrative Agent shall invest funds in any such cash collateral account in
overnight investments constituting Permitted Investments.
SECTION 2.11. Fees.
----
(a) The Borrower agrees to pay to the Administrative Agent for the
account of each Lender a commitment fee, which shall accrue at the rate of 0.75%
per annum on the average daily unused portion of the Commitments of such Lender
during the period from the Closing Date to but excluding the date on which such
Commitment terminates. Accrued commitment fees shall be payable in arrears on
the last Business Day of each August, November, February and May of each year
and on the date on which the Commitments terminate, commencing on the first such
date to occur after the date hereof. All commitment fees shall be computed on
the basis of a year of 360 days and shall be payable for the actual number of
days elapsed (including the first day but excluding the last day). For purposes
of computing commitment fees with respect to the Term Loan Commitments, a Term
Loan Commitment of a Lender shall be deemed to be used to the extent of the
outstanding Term Loans of such Lender. For purposes of computing commitment
fees with respect to the Working Capital Loan Commitments, a Working Capital
Loan Commitment shall be deemed to be used to the extent of the outstanding
Working Capital Loans of such Lender.
(b) The Borrower agrees to pay to the Administrative Agent and the
Lead Agents, for their own accounts, the fees payable in the amounts and at the
times separately agreed upon between the Borrower, the Administrative Agent and
the Lead Agents in the Fee Letter.
(c) All fees payable hereunder shall be paid on the dates due, in
immediately available funds, to the Administrative Agent for distribution to the
Lenders (in the case of paragraph (a) of this Section) or for the account of the
Lead Agents or the Administrative Agent, as the case may be (in the case of
paragraph (b) of this Section).
SECTION 2.12. Interest.
--------
(a) The Loans comprising each ABR Borrowing shall bear interest at a
rate per annum equal to the Alternate Base Rate plus the Applicable Rate.
(b) The Loans comprising each Eurodollar Borrowing shall bear interest
at a rate per annum equal to the Adjusted LIBO Rate for the Interest Period in
effect for such Borrowing plus the Applicable Rate.
(c) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any
48
<PAGE>
Loan, 2% plus the rate otherwise applicable to such Loan as provided above or
(ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans
as provided above.
(d) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan; provided that (i) interest accrued pursuant
--------
to paragraph (c) of this Section shall be payable on demand, (ii) in the event
of any repayment or prepayment of any Loan, accrued interest on the principal
amount repaid or prepaid shall be payable on the date of such repayment or
prepayment, (iii) in the event of any conversion of any Eurodollar Borrowing
prior to the end of the current Interest Period therefor, accrued interest on
such Loan shall be payable on the effective date of such conversion and (iv) all
accrued interest shall be payable upon termination of the Commitments.
(e) All interest hereunder shall be computed on the basis of a year of
360 days, except that interest computed by reference to the Alternate Base Rate
at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).
SECTION 2.13. Alternate Rate of Interest; Illegality.
--------------------------------------
(a) If prior to the commencement of any Interest Period for a
Eurodollar Borrowing:
(i) the Administrative Agent determines (which determination
shall be conclusive absent manifest error) that adequate and reasonable
means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO
Rate, as applicable, for such Interest Period; or
(ii) the Administrative Agent is advised by the Majority Lenders
that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such
Interest Period will not adequately and fairly reflect the cost to such
Lenders of making or maintaining their Loans included in such Borrowing for
such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any
Continuation/Conversion Notice that requests the conversion of any Borrowing to,
or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing.
(b) Notwithstanding any other provision of this Agreement, if on or
after the date of this Agreement the adoption of or any change in any applicable
law or in the interpretation or application thereof shall make it unlawful for
any Lender to make or maintain Eurodollar Loans as contemplated by this
Agreement, (i) such Lender shall give telex, telecopy or telephonic notice
thereof to the Administrative Agent and the Borrower as soon as practicable
49
<PAGE>
(and, with respect to any such telephonic notice, the party delivering the same
agrees to confirm such notice in writing), (ii) the commitment of such Lender
hereunder to make Eurodollar Loans and continue Eurodollar Loans as such shall
forthwith be canceled and (iii) such Lender's Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to ABR Loans on the
respective last days of the then current Interest Periods with respect to such
Loans or within such earlier period as required by law. If any such conversion
of a Eurodollar Loan occurs on a day which is not the last day of the then
current Interest Period with respect thereto, the Borrower shall pay to such
Lender such amounts, if any, as may be required pursuant to Section 2.15.
------------
SECTION 2.14. Increased Costs.
---------------
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended or participated in by, any Lender (except
any such reserve requirement reflected in the Adjusted LIBO Rate); or
(ii) impose on any Lender any other condition affecting this
Agreement or Eurodollar Loans made by such Lender;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender hereunder (whether of principal, interest or
otherwise), then the Borrower will pay to such Lender such additional amount or
amounts as will compensate such Lender for such additional costs incurred or
reduction suffered.
(b) If any Lender determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on the
capital of such Lender or any holding company for such Lender as a consequence
of this Agreement or the Loans made by such Lender to a level below that which
such Lender or the holding company for such Lender could have achieved but for
such Change in Law (taking into consideration such Lender's policies with
respect to capital adequacy), then from time to time the Borrower will pay to
such Lender or such Lender's holding company, as the case may be, such
additional amount or amounts as will compensate such Lender for any such
reduction suffered.
(c) If any Lender becomes entitled to claim compensation pursuant to
this Section, such Lender shall promptly notify the Borrower (with a copy to the
Administrative Agent) of the event by reason of which it has become so entitled.
A certificate of a Lender setting forth the amount or amounts necessary to
compensate such Lender or such holding company, as the case may be, as specified
in paragraph (a) or (b) of this Section delivered to the Borrower (with a copy
to the Administrative Agent), shall constitute prima facie evidence of the
----- -----
correctness of the amount claimed.
(d) The Borrower shall pay such Lender all amounts payable pursuant to
the foregoing provisions of this Section 2.14 within 20 days after receipt of
------------
certification thereof from such Lender. Failure or delay on the part of any
Lender to demand compensation pursuant to this
50
<PAGE>
Section shall not constitute a waiver of such Lender's right to demand such
compensation; provided that the Borrower shall not be required to compensate a
--------
Lender pursuant to this Section for any increased costs or reductions incurred
more than 6 months prior to the date that such Lender notifies the Borrower of
the Change in Law giving rise to such increased costs or reductions and of such
Lender's intention to claim compensation therefor.
SECTION 2.15. Break Funding Payments.
----------------------
In the event of (a) the payment of any principal of any Eurodollar Loan other
than on the last day of an Interest Period applicable thereto, (b) the
conversion of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto or (c) the failure to borrow, convert, continue or
prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto, then, in any such event, the Borrower shall compensate each
Lender for the loss, cost and expense attributable to such event. In the case
of a Eurodollar Loan, the loss to any Lender attributable to any such event
shall be equal to the excess, if any, of (i) the amount of interest that such
Lender would pay for a deposit equal to the principal amount of such Loan for
the period from the date of such payment, conversion or failure to the last day
of the then current Interest Period for such Loan (or, in the case of a failure
to borrow, convert or continue, the duration of the Interest Period that would
have resulted from such borrowing, conversion or continuation) if the interest
rate payable on such deposit were equal to the Adjusted LIBO Rate for such
Interest Period, over (ii) the amount of interest that such Lender would earn on
such principal amount for such period if such Lender were to invest such
principal amount for such period at the interest rate that would be bid by such
Lender (or an affiliate of such Lender) for dollar deposits from other banks in
the eurodollar market at the commencement of such period. A certificate of any
Lender setting forth any amount or amounts that such Lender is entitled to
receive pursuant to this Section shall be delivered by such Lender to the
Borrower (with a copy to the Administrative Agent) and shall constitute prima
-----
facie evidence of the correctness of the amount claimed.
- -----
SECTION 2.16. Taxes.
-----
(a) Any and all payments by or on account of any obligation of the
Borrower hereunder shall be made free and clear of and without deduction for any
Indemnified Taxes or Other Taxes; provided that if the Borrower shall be
--------
required to deduct any Indemnified Taxes or Other Taxes from such payments, then
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section) the Administrative Agent or Lender (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent and each
Lender for the full amount of any Indemnified Taxes or Other Taxes paid by the
Administrative Agent or such Lender, as the case may be, and any penalties,
interest and reasonable expenses arising
51
<PAGE>
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by a Lender or by the Administrative Agent
on its own behalf or on behalf of a Lender, shall constitute prima facie
----- -----
evidence of the correctness of the amount claimed.
(d) As soon as reasonably practicable after any payment of Indemnified
Taxes or Other Taxes by the Borrower to a Governmental Authority, the Borrower
shall deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Administrative Agent.
(e) Each Lender that is not a United States Person, as defined in
Section 7701(a)(30) of the Code (a "Non-U.S. Holder"), on or prior to the date
---------------
of its execution and delivery of this Agreement or on the date of the Assignment
and Acceptance pursuant to which it becomes a Lender, as the case may be, and
from time to time thereafter if requested in writing by the Borrower or the
Administrative Agent (but only so long as such Lender remains lawfully able to
do so), shall provide the Borrower and the Administrative Agent with Internal
Revenue Service Form 1001 or 4224, as appropriate, or any successor or other
form prescribed by the Internal Revenue Service, certifying that such Lender is
exempt from or entitled to a reduced rate of United States withholding tax on
payments of interest pursuant to this Agreement or the Notes or, in the case of
any such Lender that is unable to provide an Internal Revenue Service Form 1001
or 4224 and that claims exemption from U.S. Federal withholding tax under
Section 871(h) or 881(c) of the Code with respect to payments of "portfolio
interest," a Form W-8, or any subsequent versions thereof or successors thereto
(and if such Lender delivers a Form W-8, a certificate substantially in the form
of Exhibit N attached hereto). Any Lender that is legally entitled to an
---------
exemption from or reduction of withholding tax which is an Indemnified Tax with
respect to payments under this Agreement shall deliver to the Borrower (with a
copy to the Administrative Agent), at the time or times reasonably requested by
the Borrower or at such times as are otherwise prescribed by applicable law,
such properly completed and executed documentation prescribed by applicable law
as will permit such payments to be made without withholding or subject to
withholding at a reduced rate. Each Lender further agrees to deliver to the
Borrower and the Administrative Agent the documentation referred to in the
preceding sentence on or before the date such documentation expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent such documentation previously delivered to the Borrower, so that in each
case payments will be permitted to be made hereunder without withholding or
subject to withholding at a reduced rate. If any form or document referred to
in this paragraph (e) requires the disclosure of information (other than
information necessary to compute the tax payable or information required by the
relevant taxing authority to secure such exemption or reduction with respect to
withholding tax and that is necessary to secure such exemption from or reduction
of withholding tax) that the Lender reasonably considers to be confidential, the
Lender shall give notice thereof to the Borrower and shall not be obligated to
include in such form or document such confidential information.
52
<PAGE>
(f) If a Lender or the Administrative Agent shall become aware that it
is entitled to receive a refund in respect of an Indemnified Tax paid by the
Borrower, which refund in the good faith judgment of such Lender is allocable to
such payment made by the Borrower pursuant to this Section, it shall promptly
notify the Borrower of the availability of such refund and shall, within 30 days
after the receipt of a request by the Borrower, apply for such refund. If any
Lender or the Administrative Agent receives a refund in respect of any
Indemnified Tax paid by the Borrower, or as to which it has been indemnified by
the Borrower, which refund in the good faith judgment of such Lender is
allocable to such payment made pursuant to this Section, it shall promptly
notify the Borrower of such refund and shall, within 20 days of receipt, repay
such refund to the Borrower (together with any interest with respect thereto
received from the relevant taxing authority). In any event, each Lender shall
have the right to arrange its tax affairs as it, in its sole discretion, deems
most advantageous to it and nothing shall require a Lender to disclose its tax
returns or other confidential fiscal or tax information to the Borrower.
SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.
-----------------------------------------------------------
(a) The Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or under Sections 2.14, 2.15 or
------------- ----
2.16, or otherwise) prior to 1:00 p.m., New York City time, on the date when
- ----
due, in immediately available funds, without set-off or counterclaim. Subject
to the provisions of the Securities Accounts Agreement, all such payments shall
be made to the Administrative Agent at its offices at 31 West 52nd Street, New
York, New York, 10019 except that payments pursuant to Sections 2.14, 2.15, 2.16
------------- ---- ----
and 9.03 shall be made directly to the Persons entitled thereto. The
----
Administrative Agent shall distribute any such payments (including payments
received pursuant to the provisions of the Securities Accounts Agreement)
received by it for the account of any other Person to the appropriate recipient
promptly following receipt thereof. Except as set forth herein, if any payment
hereunder shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next succeeding Business Day, and, in the case of any
payment accruing interest, interest thereon shall be payable for the period of
such extension. All payments hereunder shall be made in dollars.
(b) If at any time insufficient funds are received by and available to
the Administrative Agent to pay fully all amounts of principal, interest and
fees then due hereunder, such funds shall be applied, subject to the provisions
of the Securities Accounts Agreement, (i) first, to pay interest and fees then
due hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties, and (ii) second, to pay
principal then due hereunder, ratably among the parties entitled thereto in
accordance with the amounts of principal then due to such parties.
(c) If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans resulting in such Lender receiving payment of a
greater proportion of the aggregate amount of its Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value) a
participation in the Loans of the other Lenders to the extent necessary so that
the benefit of all such payments shall
53
<PAGE>
be shared by the Lenders ratably in accordance with the aggregate amount of
principal of and accrued interest on their respective Loans; provided that (i)
--------
if any such participation is purchased and all or any portion of the payment
giving rise thereto is recovered, such participation shall be rescinded and the
purchase price restored to the extent of such recovery, without interest, and
(ii) the provisions of this paragraph shall not be construed to apply to any
payment made by the Borrower pursuant to and in accordance with the express
terms of this Agreement or any payment obtained by a Lender as consideration for
the assignment of or sale of a participation in any of its Loans to any assignee
or participant, other than to the Borrower or any Subsidiary or other Affiliate
thereof (as to which the provisions of this paragraph shall apply).
(d) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders hereunder that the Borrower will not make
such payment, the Administrative Agent may assume that the Borrower has made
such payment on such date in accordance herewith and may, in reliance upon such
assumption, distribute to the Lenders the amount due. In such event, if the
Borrower has not in fact made such payment, then each of the Lenders severally
agrees to repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the Federal Funds Effective Rate for 3
days and at the Alternate Base Rate thereafter.
(e) If any Lender shall fail to make any payment required to be made
by it pursuant to Section 2.05(b) or 2.17(d), then the Administrative Agent may,
--------------- -------
in its discretion (notwithstanding any contrary provision hereof), apply any
amounts thereafter received by the Administrative Agent for the account of such
Lender to satisfy such Lender's obligations under such Sections until all such
unsatisfied obligations are fully paid.
SECTION 2.18. Mitigation Obligations; Replacement of Lenders.
----------------------------------------------
(a) If (1) any Lender requests compensation under Section 2.14, (2)
------------
the Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.16,
------------
or (3) on or after the date of this Agreement any change in any applicable law
or in the interpretation or application thereof shall make it unlawful for any
Lender to make or maintain Eurodollar Loans as contemplated by this Agreement,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 2.14 or 2.16, as the case may be,
------------ ----
in the future, (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender and (iii) if
applicable, would render lawful the making of Eurodollar Loans by such Lender as
contemplated by this Agreement.
(b) If (1) any Lender requests compensation under Section 2.14 which
------------
is not being requested by the Lenders generally, (2) the Borrower is required to
pay any additional amount to any Lender or any Governmental Authority for the
account of any Lender pursuant to
54
<PAGE>
Section 2.16, (3) on or after the date of this Agreement any change in any
- ------------
applicable law or in the interpretation or application thereof shall make it
unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by
this Agreement or (4) any Lender becomes a Defaulting Lender, then the Borrower
may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, so long as no Default shall have occurred and be
continuing, require such Lender to assign and delegate, without recourse (in
accordance with and subject to the restrictions contained in Section 9.04), all
-------------
its interests, rights and obligations under this Agreement to an assignee that
shall assume such obligations (which assignee may be another Lender, if another
Lender accepts such assignment); provided that (i) the Borrower shall have
--------
received the prior written consent of the Administrative Agent, which consent
shall not unreasonably be withheld or delayed, (ii) such Lender shall have
received payment of an amount equal to the outstanding principal of its Loans,
accrued interest thereon, accrued fees and all other amounts payable to it
hereunder, from the assignee (to the extent of such outstanding principal and
accrued interest and fees) or the Borrower (in the case of all other amounts)
and (iii) in the case of any such assignment resulting from a claim for
compensation under Section 2.14 or payments required to be made pursuant to
------------
Section 2.16, such assignment will result in a reduction in such compensation or
- ------------
payments. A Lender shall not be required to make any such assignment and
delegation if, prior thereto, as a result of a waiver by such Lender or
otherwise, the circumstances entitling the Borrower to require such assignment
and delegation cease to apply.
(c) If a Lender changes its applicable lending office (other than
pursuant to paragraph (d) below) and the effect of such change, as of the date
of such change, would be to cause the Borrower to become obligated to pay any
additional amount under Section 2.14 or 2.16, the Borrower shall not be
------------ ----
obligated to pay such additional amount.
(d) If a condition or an event occurs which would, or would upon the
passage of time or giving of notice, result in the payment of any additional
amount to any Lender by the Borrower pursuant to Section 2.14 or 2.16, such
------------ ----
Lender shall promptly notify the Borrower and the Administrative Agent and shall
take such steps as may reasonably be available to it to mitigate the effects of
such condition or event (which shall include efforts to rebook the Loans held by
such Lender at another lending office, or through another branch or an
affiliate, of such Lender); provided that such Lender shall not be required to
--------
take any step that, in its reasonable judgment, would be materially
disadvantageous to its business or operations or would require it to incur
additional costs (unless the Borrower agrees to fund such costs in a manner
satisfactory to such Lender).
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower represents and warrants to the Administrative Agent, the Lead
Agents and the Lenders on the Closing Date and on the date of each Credit
Extension that:
SECTION 3.01. Financial Condition. The Borrower has heretofore furnished
-------------------
to the Lenders its unaudited consolidated balance sheet and statements of
income, stockholders' equity
55
<PAGE>
and cash flow as of and for the fiscal quarter ended September 30, 1998, in each
case, certified by a Responsible Officer of the Borrower. Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flow of the Borrower and its consolidated
Subsidiaries as of such date and for such period in accordance with GAAP,
subject to year-end adjustments and the absence of footnotes. All material
liabilities of the Borrower on such date are disclosed in such balance sheet.
SECTION 3.02. No Change. Since September 30, 1998, there has been no
---------
development or event and no change which has had or could reasonably be expected
to have a Material Adverse Effect, except as expressly contemplated by the Loan
Documents; provided that an adverse change in sales or prospective sales of
--------
Capacity, whether or not based on changes or perceived changes in external
market conditions (including as a result of increased competition or
introductions or applications of new technology), will not provide a basis for
concluding that any such development, event or change described above has
occurred.
SECTION 3.03. ORGANIZATION; POWERS. The Borrower and each Subsidiary is
--------------------
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and is qualified to do business in each
jurisdiction in which the conduct of its business requires such qualification,
except where the failure to be so qualified could not reasonably be expected to
have a Material Adverse Effect.
SECTION 3.04. AUTHORIZATION; ENFORCEABILITY.
-----------------------------
(a) The Borrower and each Subsidiary has full corporate power and
authority to conduct its business as proposed to be conducted by it in respect
of the System and the System Activities and to execute, deliver and perform each
Loan Document and System Contract (other than the Non-Material System Contracts)
to which it is a party and to take all action as may be necessary to complete
the transactions contemplated hereunder.
(b) The Borrower and each Subsidiary has taken all necessary corporate
action to authorize the Borrowings and other Credit Extensions hereunder by the
Borrower, to grant the Liens provided for in the Security Documents to which it
is a party and to authorize the execution, delivery and performance of this
Agreement and each other Loan Document and System Contract (other than the Non-
Material System Contracts) to which it is a party.
(c) Each of this Agreement and each other Loan Document and System
Contract to which the Borrower or any Subsidiary is a party (other than the Non-
Material Systems Contracts) has been duly executed and delivered by the Borrower
or such Subsidiary, as the case may be, and constitutes a legal, valid and
binding obligation of the Borrower or such Subsidiary, enforceable against the
Borrower or such Subsidiary in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
SECTION 3.05. Corporate Structure.
-------------------
56
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(a) As of the Closing Date, the only shareholder of the Borrower is
Mid-Atlantic Holdings. As of the Closing Date, the capital structure of the
Borrower and the U.S. Subsidiary is as set forth on Schedule 3.05(a).
----------------
(b) As of the Closing Date, the only subsidiary of the Borrower is set
forth on Schedule 3.05(b), and such subsidiary is a wholly owned direct
----------------
subsidiary of the Borrower. From and after the Closing Date, the only
subsidiaries of the Borrower not listed on Schedule 3.05(b) are those, if any,
----------------
created and capitalized in accordance with and subject to Sections 6.05 and
-------------
6.18.
- ----
(c) As of the date of execution and delivery of the St. Croix Master
Pledge Agreement, the only shareholder of the St. Croix Affiliate is Global
Network. As of the date of execution and delivery of the St. Croix Master
Pledge Agreement, the capital structure of the St. Croix Affiliate is as set
forth in Schedule 3.05(c).
----------------
SECTION 3.06. Compliance with Law. The Borrower and each Subsidiary is in
-------------------
compliance with all Requirements of Law, except to the extent any non-compliance
could not reasonably be expected to have a Material Adverse Effect.
SECTION 3.07. No Legal Bar. The execution, delivery and performance by the
------------
Borrower and each Subsidiary of each Loan Document and System Contract to which
it is a party and the Borrowings by the Borrower hereunder and the use of the
proceeds thereof and the granting of all Liens under the Security Documents (a)
will not violate or result in a default under (i) any Requirement of Law binding
on such Person or its assets or (ii) any material Contractual Obligation of such
Person, except, in each such case, where such violation or default could not
reasonably be expected to have a Material Adverse Effect and (b) will not result
in the creation or imposition of any Lien on any asset of the Borrower or any
Subsidiary except Permitted Encumbrances.
SECTION 3.08. Governmental Actions. Part 1 of Schedule 3.08 sets forth, to
-------------------- -------------
the best knowledge of the Borrower, all U.S. Landing Licenses that are required
to be obtained by the Borrower, any Subsidiary, the St. Croix Affiliate or the
System Contractors (and, in the case of the St. Croix Governmental Actions that
do not by their terms permit the Borrower or the U.S. Subsidiary to enjoy the
benefits thereof, effectively conveyed or leased to the Borrower or the U.S.
Subsidiary) in connection with the construction, installation, development,
ownership and operation of the System; Part 2 of Schedule 3.08 sets forth, to
-------------
the best knowledge of the Borrower, all other U.S. Governmental Authorizations
that are required to be obtained by the Borrower, any Subsidiary, the St. Croix
Affiliate or the System Contractors (and, in the case of the St. Croix
Governmental Actions that do not by their terms permit the Borrower or the U.S.
Subsidiary to enjoy the benefits thereof, effectively conveyed or leased to the
Borrower or the U.S. Subsidiary) in connection with the construction,
installation, development, ownership and operation of the System. By written
notice to the Administrative Agent, the Borrower shall be permitted to amend and
supplement such Schedule from time to time in connection with any amendment or
supplement to the schedules provided by the System Contractors under the
applicable Supply Contract.
57
<PAGE>
SECTION 3.09. Litigation. There are no actions, suits or proceedings by or
----------
before any arbitrator or Governmental Authority pending against or, to the best
knowledge of the Borrower, threatened (a) by or against the Borrower, any
Subsidiary or the System or (b) with respect to any Loan Document, in either
case which could reasonably be expected to have a Material Adverse Effect.
SECTION 3.10. Environmental Matters. No condition or violation of
---------------------
Environmental Laws exists with respect to the System, the Borrower, any
Subsidiary or any of their respective properties or assets owned or operated by
them which in each case could reasonably be expected to have a Material Adverse
Effect. To the best knowledge of the Borrower, no other violation of
Environmental Law exists which could reasonably be expected to have a Material
Adverse Effect.
SECTION 3.11. No Default; Event of Default. Neither the Borrower nor any
----------------------------
Subsidiary is in default under any System Contract as of the Closing Date. As of
any date representations and warranties are made or deemed made under this
Agreement subsequent to the Closing Date, neither the Borrower, nor any
Subsidiary, is in default under any System Contract which could reasonably be
expected to have a Material Adverse Effect. No payment Default or any Event of
Default has occurred and is continuing.
SECTION 3.12. Properties. The Borrower and each Subsidiary has good and
----------
valid title to, valid leasehold interests in or an indefeasible right to use all
its real and personal property material to its business free and clear of all
Liens, except for Permitted Encumbrances and minor defects in title that do not
interfere with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes.
SECTION 3.13. Taxes. To the best of the Borrower's knowledge, neither the
-----
Borrower, nor any Subsidiary nor the System is subject to any material tax in
any jurisdiction, except for taxes set forth in Schedule 3.13. The Borrower and
-------------
each Subsidiary has timely filed or caused to be filed all tax returns and
reports required to have been filed by such Person and has paid or caused to be
paid all Taxes shown to be due on such returns except Taxes subject to a
Contest.
SECTION 3.14. Federal Regulations. The Borrower is not engaged nor will it
-------------------
engage in the business of extending credit for the purpose of ``purchasing" or
``carrying'' any ``margin stock" within the respective meanings of each of the
quoted terms under Regulations U and X of the Board of Governors of the Federal
Reserve System as now and from time to time hereafter in effect. No part of the
proceeds of the Loans will be used for "purchasing" or carrying'' any ``margin
stock'' as so defined or for any purpose which violates the provisions of the
Regulations of such Board of Governors.
SECTION 3.15. ERISA. No ERISA Event has occurred or is reasonably expected
-----
to occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to have
a Material Adverse Effect, and no contribution failure has occurred with respect
to any Plan sufficient to give rise to a lien under Section 302(f) of ERISA.
58
<PAGE>
SECTION 3.16. Investment Company Act. Neither the Borrower nor any
----------------------
Subsidiary is an "investment company" as defined in, or subject to regulation
under, the Investment Company Act of 1940.
SECTION 3.17. Security Documents. (a) The recordings, filings and other
------------------
actions indicated on Part A Schedule 3.17 are, on and as of the Closing Date,
-------------
all the recordings, filings and other actions necessary and appropriate to
establish, protect and perfect the Administrative Agent's security interest in
the right, title, estate and interest of the Borrower, each Subsidiary and the
Shareholders in and to (a) the Capital Stock of the Borrower and each Subsidiary
and the Collateral in respect of which the Securities Accounts Agreement
purports to grant a security interest to the Secured Parties, in each case,
which can be perfected by the filing of Uniform Commercial Code financing
statements, by possession by the Administrative Agent or by any other means
under any applicable Requirement of Law of the United States, Bermuda, England
and any other jurisdiction in which a Subsidiary shall be organized and existing
on the date this representation and warranty is made or deemed made and (b) the
Collateral (other than the Collateral described in clause (a)) which can be
perfected by the filing of UCC financing statements in the State of New York, by
making appropriate filings in Bermuda or England or by possession by the
Administrative Agent (the Collateral described in clauses (a) and (b) of this
sentence being referred to as the "Perfectible Collateral"). The Security
-----------------------
Documents (together with the filings and other actions referred to above) are
effective to create in favor of the Administrative Agent, valid and enforceable
first priority Liens on, and first priority security interests in, all right,
title, estate and interest of the Shareholders, the Borrower and each Subsidiary
in and to the Perfectible Collateral and valid and enforceable Liens on, and
security interests in, all right, title, estate and interest of the Borrower and
each Subsidiary in and to the other Collateral.
(b) The recordings, filings and other actions indicated on Part B of
Schedule 3.17 are, on and as of the Closing Date, all the recordings, filings
- -------------
and other actions necessary and appropriate to establish, protect and perfect
the Master Pledge Trustee's security interest in the right, title, estate and
interest of Global Network in and to the Capital Stock of the St. Croix
Affiliate. Upon the execution and delivery thereof, the St. Croix Master
Pledge Agreement will be effective to create in favor of the Master Pledge
Trustee valid and enforceable first priority Liens on, and first priority
security interests in, all right, title, estate and interest of the Global
Network in and to the Capital Stock of the St. Croix Affiliate.
SECTION 3.18. Chief Executive Office. As of the Closing Date, the "chief
----------------------
executive office," "major executive office" and "place of business" of the
Borrower is in Hamilton, Bermuda; the "chief executive office," "major executive
office" and "place of business" of the U.S. Subsidiary is in California, United
States; the "chief executive office," "major executive office" and "place of
business" of the U.K. Subsidiary is in Gloustershire, England; and the "chief
executive office," "major executive office" and "place of business" of the St.
Croix Affiliate is in St. Thomas, United States. As of the Closing Date, neither
the Borrower, the U.K. Subsidiary nor the St. Croix Affiliate have any "chief
executive office," "major executive office" or "place of business" (as such
terms are defined in the UCC) in the United States or any state or other
jurisdiction thereof. As of the Closing Date, neither the
59
<PAGE>
Borrower, the U.S. Subsidiary nor the St. Croix Affiliate have any "chief
executive office," "major executive office" or "place of business" in England or
other jurisdiction thereof.
SECTION 3.19. Disclosure. The written factual information furnished by (or
----------
based on written information furnished by) the Borrower to the Lenders in
connection with the negotiation of the Loan Documents (excluding any financial
projections and other estimates or views of future circumstances), taken as a
whole, does not contain, as of the Closing Date, any untrue statements of
material fact and does not omit to state, as of the Closing Date, any material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which they were made, not materially misleading (unless
superseded or corrected and disclosed in writing to the Lead Agents prior to the
Closing Date). The costs set forth in the Capital Budget reflect, as of the
Closing Date, the Borrower's best estimates of all costs necessary for the
construction, installation and financing of the System. The projections
delivered by the Borrower to the Lead Agents on the Closing Date in accordance
with Section 4.01(h) have been prepared in good faith and have been based on
---------------
assumptions which were reasonable at the time prepared. The Operating Plan
delivered with the initial Operating Budget has been, and the Operating Budget
for each ensuing Operating Year, as of the date delivered to the Administrative
Agent in accordance with the terms hereof, shall have been, prepared by the
Borrower in good faith and have been based on assumptions which were reasonable
at the time prepared.
SECTION 3.20. Sufficiency of System Contracts. The services to be
-------------------------------
performed and other rights granted pursuant to the System Contracts comprise all
of the material services, materials and property interests required to complete
the System, and the services to be performed and other rights granted pursuant
to the System Contracts, together with services to be performed and rights to be
granted in favor of the Borrower or any Subsidiary pursuant to contracts which
the Borrower believes will, as and when such services and rights will be
required by the Borrower and any Subsidiary, be available on commercially
reasonable terms, comprise all of the material services, materials and property
interests required to perform the System Activities.
SECTION 3.21. Immunity. Neither the Borrower nor any Subsidiary is
--------
entitled to claim for itself, any of its assets or the System immunity from
suit, execution, attachment or other legal process in any proceeding in any
jurisdiction in connection with any of the Loan Documents to which it is a
party.
SECTION 3.22. Export Control. The Borrower and each Subsidiary is in
--------------
compliance with all U.S. export laws and regulations applicable to it, except to
the extent that any non-compliance could not reasonably be expected to have a
Material Adverse Effect.
SECTION 3.23. Foreign Corrupt Practices Act. None of the Borrower, any
-----------------------------
Subsidiary or any of its officers, directors, employees, agents or affiliates,
acting on its behalf, has taken any action in connection with the System or the
System Activities that violates the Foreign Corrupt Practices Act of the United
States, if applicable.
60
<PAGE>
SECTION 3.24. Intellectual Property. The Borrower and each Subsidiary owns
---------------------
or is licensed or otherwise has the right to use or obtain (and has maintained
in full force and effect and has not abandoned) all of the trademarks,
copyrights, patents, licenses and other intellectual property rights that are
reasonably necessary for the operation of each of their respective businesses,
without, to the best of the Borrower's knowledge, conflict with the rights of
any other Person and free of Liens (other than Permitted Encumbrances), except
where the failure to have any such rights could not reasonably be expected to
have a Material Adverse Effect.
SECTION 3.25. No Additional Fees. Other than as contemplated in the
------------------
Projections delivered by the Borrower to the Lead Agents on the Closing Date in
accordance with Section 4.01(h) and the Capital Budget, the Borrower has not
---------------
paid nor become obligated to pay any fee or commission to any broker, finder or
intermediary for or on account of arranging the financing of the transactions
contemplated by, or for the legality, validity or enforceability of, the Loan
Documents or the System Contracts.
SECTION 3.26. Year 2000. Any reprogramming required to permit the proper
---------
functioning, in and following the year 2000, of the Borrower's and each
Subsidiary's computer systems and equipment containing embedded microchips
(including systems and equipment supplied by others or with which the Borrower's
or, any Subsidiary's systems interface) which the Borrower, such Subsidiary
possesses as of the date this representation is made or deemed made and the
testing of all such systems and equipment, as so reprogrammed, will be completed
by January 1, 1999. The cost to the Borrower and, its Subsidiaries of such
reprogramming and testing and of the reasonably foreseeable consequences of the
year 2000 to the Borrower and, its Subsidiaries (including, without limitation,
reprogramming errors and the failure of others' systems or equipment) could not
reasonably be expected to result in a Material Adverse Effect. Except for such
of the reprogramming referred to in the preceding sentence as may be necessary,
the computer and management information systems of the Borrower and, its
Subsidiaries are, and, with ordinary course upgrading and maintenance, will
continue to be, sufficient to permit the Borrower to conduct its business
without causing a Material Adverse Effect.
SECTION 3.27. LANDING LICENSE. The Borrower filed an application for the
---------------
U.S. Landing License with the FCC on October 30, 1998 and has provided each of
the Lead Agents with a complete and accurate copy of such application.
ARTICLE IV.
CONDITIONS
----------
SECTION 4.01. Conditions Precedent to the First Loan. The obligations of
--------------------------------------
the Agents and the Lenders hereunder, including the obligation to make the First
Loan, shall be subject to the fulfillment in a manner reasonably satisfactory to
the Lead Agents, or waiver by the Lead Agents, of each of the following
conditions precedent:
(a) Loan Documents. The Administrative Agent shall have received,
--------------
with a counterpart for each Lender, each of the following documents:
61
<PAGE>
(i) this Agreement, duly executed and delivered by each of
the parties hereto;
(ii) the Securities Accounts Agreement, duly executed and
delivered by the Borrower, each Subsidiary, the Administrative Agent and
the Securities Intermediary;
(iii) the Shareholder Pledge Agreements, each duly executed and
delivered by Mid-Atlantic Holdings and the Administrative Agent, together
with (A) the stock certificates representing all of the Capital Stock of
the Borrower owned by Mid-Atlantic Holdings and (B) undated stock powers
for such stock certificates representing such Capital Stock, executed in
blank and delivered by a duly authorized officer of Mid-Atlantic Holdings;
(iv) the Borrower Pledge Agreements, each duly executed and
delivered by the Borrower and the Administrative Agent, together with (A)
the stock certificates representing all of the Capital Stock of the U.K.
Subsidiary and (B) undated stock powers for each stock certificate
representing such Capital Stock, executed in blank and delivered by a duly
authorized officer of the Borrower;
(v) the Borrower Security Agreements, each duly executed and
delivered by the Borrower and the Administrative Agent;
(vi) the U.S. Subsidiary Security Agreement, duly executed and
delivered by the U.S. Subsidiary and the Administrative Agent;
(vii) the U.S. Subsidiary Guaranty Agreement, duly executed and
delivered by the U.S. Subsidiary;
(viii) the U.K. Subsidiary Pledge Agreement (New York Law) duly
executed and delivered by the U.K. Subsidiary and the Administrative Agent,
together with (A) the Stock Certificates representing all the Capital Stock
of the U.S. Subsidiary and (B) updated stock powers for each stock
certificate representing such Capital Stock , executed in blank and
delivered by a duly authorized officer of the U.K. Subsidiary.
(ix) the U.K. Subsidiary Security Agreements, each duly
executed and delivered by the U.K. Subsidiary and the Administrative Agent;
(x) the U.K. Subsidiary Guaranty Agreement, duly executed and
delivered by the U.K. Subsidiary; and
(xi) the Mid-Atlantic Holdings Cash Collateral Agreement, duly
executed and delivered by Mid-Atlantic Holdings.
(b) System Contracts. The Administrative Agent shall have received,
----------------
with a counterpart for each Lender, each of the following documents:
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<PAGE>
(i) a true and complete copy of the Alcatel Supply Contract,
duly certified as such by a Responsible Officer of the Borrower as of the
Closing Date and as being in full force and effect;
(ii) a true and complete copy of the Alcatel Guarantee, duly
certified as such by a Responsible Officer of the Borrower as of the
Closing Date and as being in full force and effect;
(iii) the Alcatel Contractor Consent, duly executed and
delivered by the Contractor, the Administrative Agent and the Borrower;
(iv) a true and complete copy of the Marketing Agreement, duly
certified as such by a Responsible Officer of the Borrower as of the
Closing Date and as being in full force and effect;
(v) the Marketing Agent Consent, duly executed and delivered
by the Marketing Agent, the Administrative Agent and the Borrower;
(vi) a true and complete copy of the Financial Services
Agreement, duly certified as such by a Responsible Officer of the Borrower
as of the Closing Date and as being in full force and effect;
(vii) the Financial Services Consent, duly executed and
delivered by GCDC, the Administrative Agent and the Borrower; and
(viii) a true and complete copy of the Intercompany Agreement,
duly certified as such by a Responsible Officer of the Borrower as of the
Closing Date and as being in full force and effect.
(c) Legal Opinions. The Administrative Agent shall have received,
--------------
with a counterpart for each Lender, the following executed legal opinions, each
dated the Closing Date:
(i) the legal opinion of Appleby, Spurling & Kempe, Bermuda
counsel to the Borrower and Mid-Atlantic Holdings, substantially in the
form of Exhibit J-1;
-----------
(ii) the legal opinion of Simpson Thacher & Bartlett, special
New York counsel to the Borrower and the U.S. Subsidiary, substantially in
the form of Exhibit J-2;
-----------
(iii) the legal opinion of Wiggin and Co., special English
counsel to the U.K. Subsidiary, substantially in the form of Exhibit J-3;
-----------
(iv) the legal opinion of Scott Ashby, English counsel to
Alcatel, substantially in the form of Exhibit J-4; and
-----------
63
<PAGE>
(v) the legal opinion of Pascal Durand-Barthez, French
counsel to Alcatel, substantially in the form of Exhibit J-5; and
-----------
(vi) the legal opinion of Menaker & Herrmann LLP, New York
counsel to the Contractor, substantially in the form of Exhibit J-6; and
-----------
(vii) the legal opinion of Charles Matthews, French counsel to
the Contractor, substantially in the form of Exhibit J-7;
-----------
(d) Independent Engineer's Report. The Administrative Agent shall
-----------------------------
have received, with a copy for each Lender, the final report of the Independent
Engineer, a copy of which is attached as Exhibit K-1, together with a
-----------
certificate from the Independent Engineer in the form of Exhibit K-2.
-----------
(e) Market Consultant's Report. The Administrative Agent shall have
--------------------------
received, with a copy for each Lender, the final report of the Market
Consultant, a copy of which is attached as Exhibit L-1, together with a
-----------
certificate from the Market Consultant in the form of Exhibit L-2.
-----------
(f) Capital Budget. The Administrative Agent shall have received,
--------------
with a copy for each Lender, a true and correct copy of the construction budget
(which sets forth all Capital Costs to be incurred prior to System Final
Completion and which will include, without limitation, line items for the
purchase of Backhaul Capacity, restricted and unrestricted contingency, and
payments to be made under each Supply Contract) and a true and correct copy of a
construction drawdown schedule (including a drawdown schedule with respect to
the Loans) (as amended in accordance with the terms hereof, the "Capital
-------
Budget"), prepared and certified as to such as of the Closing Date by the
- ------
Borrower, a copy of which is attached as Exhibit M.
---------
(g) Landing Licenses. The Lead Agents shall be reasonably satisfied
----------------
that the Borrower and any Subsidiary will appropriately file for, or will cause
to be filed for, all necessary applications for the issuance of the Landing
Licenses and that such Landing Licenses will be obtained in each case on or
prior to the date indicated on Schedule 4.02(f) as the date by which such
----------------
Landing License is to be obtained.
(h) Projections. The Administrative Agent shall have received, with a
-----------
copy for each Lender, a copy of the Projections certified as of the Closing Date
by a Responsible Officer of the Borrower as being prepared in good faith and
based on reasonable assumptions, a copy of which is attached as Exhibit M.
---------
(i) Security Interests (Recordings and Filings). Each of the
-------------------------------------------
documents and instruments set forth in Schedule 3.17 (i) shall have been
-------------
delivered to the Administrative Agent for recording or filing or (ii) shall have
been recorded or filed in the respective places or offices set forth in Schedule
--------
3.17, and, in each such case, any and all recording and filing fees with respect
- ----
thereto shall have been paid, and each of the other actions set forth in
Schedule 3.17 shall have been taken.
- -------------
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<PAGE>
(j) No Violation of Law. The consummation of the transactions
-------------------
contemplated by the Loan Documents and by the System Contracts shall not violate
any Requirement of Law.
(k) Financial Statements. The Administrative Agent shall have
--------------------
received and the Lead Agents shall be reasonably satisfied with true and correct
copies of (i) the unaudited balance sheet and related financial statements of
the Borrower for the fiscal quarter ended September 30, 1998, certified as such
by a Responsible Officer of the Borrower and (ii) the most recent unaudited
balance sheet and related financial statements of Mid-Atlantic Holdings,
certified as such by a Responsible Officer of Mid-Atlantic Holdings.
(l) Fees. The Administrative Agent and the Lead Agents shall have
----
received all fees and expenses (including counsel and consultant fees and
expenses) due and payable by the Borrower to the Administrative Agent and the
Lead Agents on or prior to the Closing Date.
(m) Agent for Service of Process. The Administrative Agent shall have
----------------------------
received evidence that the Borrower and each other Loan Party that does not have
an office in the United States has irrevocably appointed an agent in New York or
New Jersey for service of process.
(n) Corporate Proceedings of the Borrower. The Administrative Agent
-------------------------------------
shall have received a copy of the resolutions, in form and substance reasonably
satisfactory to the Lead Agents, of the Board of Directors of the Borrower
authorizing (i) the execution, delivery and performance of the Supply Contracts,
this Agreement and the other Loan Documents to which it is a party, (ii) the
Borrowings contemplated hereunder and (iii) the granting by it of the Liens
created pursuant to the Security Documents to which it is a party, certified by
the Secretary or an Assistant Secretary of the Borrower as of the Closing Date,
which certificate shall be in form and substance reasonably satisfactory to the
Lead Agents and shall state that the resolutions thereby certified have not been
amended, modified, revoked or rescinded.
(o) Borrower Incumbency Certificate. The Administrative Agent shall
-------------------------------
have received a certificate of the Borrower, dated the Closing Date, as to the
incumbency and signature of the officers of the Borrower executing any Loan
Document or any Supply Contract, in form and substance reasonably satisfactory
to the Lead Agents, executed by the President or any Vice President and the
Secretary or any Assistant Secretary of the Borrower.
(p) Corporate Proceedings of Mid-Atlantic Holdings. The
----------------------------------------------
Administrative Agent shall have received a copy of the resolutions, in form and
substance reasonably satisfactory to the Lead Agents, of the Board of Directors
of Mid-Atlantic Holdings authorizing (i) the execution, delivery and performance
of the Loan Documents to which Mid-Atlantic Holdings is a party and (ii) the
granting by it of the Liens created pursuant to the Security Documents to which
it is a party, certified by the Secretary or an Assistant Secretary of Mid-
Atlantic Holdings as of the Closing Date, which certificate shall be in form and
substance reasonably satisfactory to Lead Agents and shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded.
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<PAGE>
(q) Shareholder Incumbency Certificates. The Administrative Agent
-----------------------------------
shall have received a certificate of Mid-Atlantic Holdings, dated the Closing
Date, as to the incumbency and signature of the officers of Mid-Atlantic
Holdings executing any Loan Document, in form and substance reasonably
satisfactory to the Lead Agents, executed by the President or any Vice President
and the Secretary or any Assistant Secretary of Mid-Atlantic Holdings.
(r) Corporate Proceedings of Subsidiaries. The Administrative Agent
-------------------------------------
shall have received a copy of the resolutions, in form and substance reasonably
satisfactory to the Lead Agents, of the Board of Directors of each Subsidiary
authorizing (i) the execution, delivery and performance of the Supply Contracts
and the Loan Documents to which such Subsidiary is a party and (ii) the granting
by it of the Liens created pursuant to the Security Documents to which such
Subsidiary is a party, certified by a Responsible Officer of such Subsidiary as
of the Closing Date, which certificate shall be in form and substance reasonably
satisfactory to the Lead Agents and shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded.
(s) Subsidiary Incumbency Certificates. The Administrative Agent
----------------------------------
shall have received a certificate of each Subsidiary, dated the Closing Date, as
to the incumbency and signature of the officers of such Subsidiary executing any
Loan Document or any Supply Contract, in form and substance reasonably
satisfactory to the Lead Agents, executed by two Responsible Officers of such
Subsidiary.
(t) Corporate Documents. The Administrative Agent shall have received
-------------------
true and complete copies of the certificate of incorporation and by-laws (or
such other organizational and governing documents) of each of Mid-Atlantic
Holdings, the Borrower and the U.S. Subsidiary, certified as of the Closing Date
as complete and correct copies thereof by a Responsible Officer of such Person.
(u) Closing Date Certificate. The Administrative Agent shall have
------------------------
received the Closing Date Certificate in the form of Exhibit G, dated the
---------
Closing Date and duly executed by a Responsible Officer of the Borrower, stating
that (a) no default in any material respect as to the Borrower or any Subsidiary
has occurred and is continuing under any System Contract and (b) to the best of
the Borrower's knowledge, no default in any material respect as to any other
party thereto has occurred and is continuing under any System Contract.
(v) Representations and Warranties. All representations and
------------------------------
warranties made by the Borrower and each other Loan Party in any Loan Document
shall be true and correct in all material respects when made (unless any such
representation or warranty relates solely to an earlier date, in which case it
shall have been true and correct in all material respects as of such earlier
date).
(w) No Default or Event of Default. No Default or Event of Default
------------------------------
shall have occurred and be continuing as of the Closing Date.
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(x) Satisfactory Documentation. All documentation received by the
--------------------------
Administrative Agent or the Lead Agents shall be reasonably satisfactory to the
Lead Agents.
(y) Credit Extension Request. The Administrative Agent shall have
------------------------
received a properly completed Credit Extension Request in accordance with
Section 2.03 executed by a Responsible Officer of the Borrower.
- ------------
(z) Credit Extension Certificate. The Administrative Agent shall have
----------------------------
received a properly completed Credit Extension Certificate in accordance with
Section 2.03, dated as of the applicable Credit Extension Date, executed by a
- ------------
Responsible Officer of the Borrower.
SECTION 4.02. Conditions Precedent to Subsequent Credit Extensions.
----------------------------------------------------
The making of any Credit Extension after the First Loan shall be subject to the
fulfillment, or waiver by the Majority Lenders, of each of the following
conditions precedent:
(a) Representations and Warranties. All representations and
------------------------------
warranties made by the Borrower and each other Loan Party in any Loan Document
shall be true and correct in all material respects when made (unless any such
representation or warranty relates solely to an earlier date, in which case it
shall have been true and correct in all material respects as of such earlier
date).
(b) No Payment Default or Event of Default. No payment Default or
--------------------------------------
Event of Default shall have occurred and be continuing on such date, and no
Event of Loss shall have occurred and be continuing on such date (i) which Event
of Loss could reasonably be expected to have a Material Adverse Effect or (ii)
with respect to which Event of Loss the cost to repair is in excess of
$5,000,000 unless (A) the Borrower is able to certify (as confirmed by the
Independent Engineer) in its reasonable judgment that the Commercial Operation
Date can occur on or prior to the Guaranteed Completion Date with the Loans,
equity and insurance payments available to it or (B) the risk of loss with
respect to that portion of the System giving rise to the Event of Loss is borne
by a System Contractor under a Supply Contract.
(c) No Change in Law. No change shall have occurred after the Closing
----------------
Date in any applicable law that would make any Lender's participation in the
transactions contemplated by the Loan Documents illegal, provided that (1) the
--------
non-satisfaction of this condition precedent shall, in the case of a Credit
Extension consisting of a Borrowing, permit only the Lender affected to fail to
fund its portion of the Loans then being requested and (2) this condition
precedent shall not apply in the case of any other Credit Extension.
(d) No Force Majeure. No event of force majeure (as such term is
----------------
defined in the applicable System Contract) shall exist which at such time
permits any party (other than the Borrower) to any System Contract (other than
any Capacity Sales Agreement and any Non-Material System Contract) to terminate
such System Contract.
(e) Governmental Actions (other than Landing Licenses). Unless such
--------------------------------------------------
Credit Extension consists solely of Working Capital Loans made after the
Commercial Operation Date,
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(i) the Administrative Agent shall have received a certificate of a Responsible
Officer of the Borrower stating that each Governmental Action (other than
Landing Licenses) set forth in Schedule 3.08 which is required in accordance
-------------
with such Schedule (as such Schedule may be amended or supplemented in
accordance with Section 3.08) to be obtained (and, in the case of St. Croix
------------
Governmental Actions that do not by their terms permit the Borrower or the U.S.
Subsidiary to enjoy the benefits thereof, effectively conveyed or leased to the
Borrower or the U.S. Subsidiary by the St. Croix Affiliate, as applicable) on or
prior to the date of such Credit Extension shall have been duly obtained (and,
in the case of St. Croix Governmental Actions that do not by their terms permit
the Borrower or the U.S. Subsidiary to enjoy the benefits thereof, effectively
conveyed or leased to the Borrower or the U.S. Subsidiary by the St. Croix
Affiliate, as applicable), except for those Governmental Actions specifically
described in such certificate (the "Delinquent Governmental Actions") which the
--------------------------------
Borrower, a Subsidiary, the St. Croix Affiliate or a System Contractor failed to
obtain (or, in the case of St. Croix Governmental Actions that do not by their
terms permit the Borrower or the U.S. Subsidiary to enjoy the benefits thereof,
the St. Croix Affiliate failed to effectively convey or lease to the Borrower or
the U.S. Subsidiary, as applicable) by the date of such Credit Extension,
provided that such failure on the date of such Credit Extension could not
- --------
reasonably be expected to have a Material Adverse Effect and (ii) nothing shall
have come to the attention of the Administrative Agent or the Borrower (and the
Borrower shall so certify to such effect) indicating that the St. Croix Corridor
License will not be obtained or will not either by its terms permit the Borrower
or the U.S. Subsidiary to enjoy the benefits thereof or be effectively conveyed
or leased by the St. Croix Affiliate to the Borrower or the U.S. Subsidiary by
the date set forth in Schedule 3.08, unless, based upon the date that the St.
-------------
Croix Corridor License is then anticipated to be obtained or, if the St. Croix
Corridor License does not by its terms permit the Borrower or the U.S.
Subsidiary to enjoy the benefits thereof, the date on which the St. Croix
Affiliate will be able to effectively convey or lease the St. Croix Corridor
License to the Borrower or the U.S. Subsidiary, such delay would not, in the
opinion of the Lead Agents, reasonably be expected to have a Material Adverse
Effect.
(f) Landing Licenses. Unless such Credit Extension consists solely of
----------------
Working Capital Loans made after the Commercial Operation Date, the
Administrative Agent shall have received a certificate of a Responsible Officer
of the Borrower stating that each Milestone set forth in Schedule 4.02(f) which
----------------
is required in accordance with such Schedule to have been satisfied on or prior
to the date of such Credit Extension shall have been duly satisfied or, with
respect to any such Milestone which has not been so satisfied by such date, such
certificate shall set forth the details associated with any such delay. If any
Milestone with respect to a Landing License shall not have been satisfied by the
date associated with such Milestone set forth on Schedule 4.02(f), then the
----------------
Lenders shall not be required to make any Credit Extension until such Milestone
has been satisfied or the Majority Lenders otherwise agree. Once issued and
"final," each Landing License shall be in full force and effect and shall not be
subject to any appeal or contest in respect of which there is a material risk
that such Landing License will be revoked.
(g) Credit Extension Request. The Administrative Agent shall have
------------------------
received a properly completed Credit Extension Request in accordance with
Section 2.03 executed by a
- ------------
68
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Responsible Officer of the Borrower, which Credit Extension Request shall, if it
is being requested in respect of payments due under a Supply Contract, be
accompanied by a properly completed Construction Progress Certificate, executed
by a Responsible Officer of the applicable System Contractor and countersigned
by a Responsible Officer of the Borrower and the Independent Engineer.
(h) Credit Extension Certificate. The Administrative Agent shall have
----------------------------
received a properly completed Credit Extension Certificate in accordance with
Section 2.03, dated as of the applicable Credit Extension Date, executed by a
- ------------
Responsible Officer of the Borrower.
(i) Special Credit Extension Requirements. The requested Credit
--------------------------------------
Extensions shall, to the extent applicable, be in compliance with the provisions
of Section 2.04.
------------
(j) Insurance. With respect to the first Credit Extension made more
---------
than 10 days after the Closing Date, the Administrative Agent shall have
received, with a copy for each Lender, a certificate of the Insurance
Consultant, in form and substance reasonably satisfactory to the Lead Agents,
stating that all insurance policies required to be maintained by the Borrower
and each Subsidiary on the date of such certificate pursuant to this Agreement
have been obtained and are in full force and effect, name the Administrative
Agent or its designee as loss payee and additional insured, as appropriate, and
are not subject to cancellation without prior notice.
(k) First Permitted Upgrade and Backhaul Borrowing. In the case of
----------------------------------------------
Credit Extensions consisting of Tranche A-2 Term Loans made (i) for the purpose
of funding the Upgrade Loan Proceeds Sub-Account the Borrower (A) shall have
made the election and directed the Contractor to construct the First Permitted
Upgrade under the Alcatel Supply Contract or (B) shall have been required to
request such Credit Extension pursuant to Section 2.04(c) or (ii) for the
---------------
purpose of funding the Backhaul Account, (1) the Borrower shall not have
commenced the First Permitted Upgrade and shall not then be required to effect
the First Permitted Upgrade pursuant to Section 5.29 and (2) the Borrower shall
------------
have demonstrated to the satisfaction of the Lead Agents that the amount of
Committed Capacity Sales Revenue will exceed System Capacity sales revenue
projected, in the base case Projections, to be received on or prior to the First
Permitted Upgrade Payment Date.
(l) Required Equity Contribution. With respect to the second Credit
----------------------------
Extension Request consisting of Loans, the Borrower shall have certified that
the entire Required Equity Contribution shall have been made by or on behalf of
Mid-Atlantic Holdings to the Borrower. Such certification shall indicate that
the proceeds thereof have been used to finance System Activities in accordance
with the Capital Budget or otherwise in a manner satisfactory to the Majority
Lenders. The Lead Agents may request and the Borrower shall provide, if so
requested, evidence that reasonably demonstrates that such proceeds were used to
finance System Activities in accordance with the Capital Budget.
(m) Tyco Supply Contract and St. Croix Contracts. With respect to the
--------------------------------------------
second Credit Extension consisting of the Loans, the Borrower shall have
delivered to the Lenders:
69
<PAGE>
(i) copies of duly executed counterparts of the Tyco Supply
Contract, the Tyco Guarantee and the St. Croix Contracts, which documents
shall be in form and substance reasonably satisfactory to the Lead Agents,
together with (1) duly executed originals of the Contractor Consents with
respect thereto, which Contractor Consents shall be in form and substance
reasonably satisfactory to the Lead Agents and (2) opinions of such counsel
to any party to the foregoing documents as the Lead Agents may reasonably
request in form and substance reasonably satisfactory to the Lead Agents
(in the case of the Tyco Supply Contract and the Tyco Guarantee,
substantially in the form of Exhibit J-7);
-----------
(ii) a certificate of a Responsible Officer of the Borrower
stating that (A) the Tyco Supply Contract, the Tyco Guarantee and the St.
Croix Contracts, if performed by the parties thereto in accordance with the
terms and conditions thereof, will appropriately integrate with the Alcatel
Supply Contract and will provide for the completion of the System landing
stations by the dates specified therefor in the construction plan referred
to in the report prepared by the Independent Engineer and within the
amounts budgeted therefor in the Capital Budget (in each case without any
extension of the then applicable Scheduled RFS Date under the Alcatel
Supply Contract and without otherwise giving rise to the Contractor's right
to demand an Alcatel Contract Variation with respect to the Alcatel
Contract Price or otherwise) and stating that there is no known reason to
believe that the parties thereto will be unable to perform the Tyco Supply
Contract and the St. Croix Contracts in accordance with their respective
terms and (B) the St. Croix Contracts provide the Borrower (or its
Subsidiaries) with the unencumbered right (subject only to Permitted
Encumbrances) to use and occupy the St. Croix landing station and to
utilize the associated water corridor in connection with the System as
contemplated hereby;
(iii) a report of the Independent Engineer which confirms the
conclusions contained in the certificate referred to in clause (ii) above
(such report to be in form and substance reasonably satisfactory to the
Lead Agents); and
(iv) copies of duly executed counterparts of a legally
enforceable undertaking, in form and substance reasonably satisfactory to
the Lead Agents, of Global Crossing to contribute equity to the Borrower to
enable the Borrower to pay the costs of completing the St. Croix landing
station in the event that (a) the St. Croix landing station is not
completed as part of the system being constructed by Pan American Crossing
and TSSL pursuant to a Project Development and Supply Contract between them
dated as of July 21, 1998 by the date specified in the construction plan
referred to in the Independent Engineer's Report, (b) the costs of
completing the St. Croix landing station exceed the amount budgeted
therefor (including such portion of the then available Unrestricted
Contingency as is not allocated to the First Permitted Upgrade) in the
Capital Budget and (c) there are insufficient offsetting savings in other
items included in the Capital Budget that could be applied to pay the costs
of completing the St. Croix landing station.
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(n) Corporate Proceedings of the St. Croix Affiliate and Global
-----------------------------------------------------------
Network. With respect to the second Credit Extension consisting of the Loans,
- -------
the Administrative Agent shall have received a copy of the resolutions, in form
and substance reasonably satisfactory to the Lead Agents, of the Board of
Directors of the St. Croix Affiliate and Global Network authorizing (i) the
execution, delivery and performance of the St. Croix Contracts and (ii) the
granting by Global Network of the Liens created pursuant to the St. Croix Master
Pledge Agreement, certified by a Responsible Officer of the St. Croix Affiliate
or Global Network, as applicable, as of the date of such second Credit
Extension, which certificates shall be in form and substance reasonably
satisfactory to the Lead Agents and shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded.
(o) St. Croix Affiliate and Global Network Incumbency Certificates.
--------------------------------------------------------------
With respect to the second Credit Extension consisting of the Loans, the
Administrative Agent shall have received a certificate of the St. Croix
Affiliate and Global Network, dated the date of such second Credit Extension, as
to the incumbency and signature of the officers of the St. Croix Affiliate or
Global Network, as applicable, executing any St. Croix Contract, in form and
substance reasonably satisfactory to the Lead Agents, executed by at least two
Responsible Officers of the St. Croix Affiliate and Global Network, as
applicable.
(p) Corporate Documents. With respect to the second Credit Extension
-------------------
consisting of the Loans, the Administrative Agent shall have received true and
complete copies of the certificate of incorporation and by-laws (or such other
organizational and governing documents) of the St. Croix Affiliate and Global
Network, certified as of the date of such second Credit Extension as complete
and correct copies thereof by a Responsible Officer of such Person. Such
organization and governing documents of the St. Croix Affiliate shall, among
other things, limit the business of the St. Croix Affiliate to the performance
of its obligations under the St. Croix Contracts and shall not permit the
incurrence of Indebtedness or Liens.
(q) Atlantic Crossing Co-Location Agreement. With respect to the
---------------------------------------
second Credit Extension consisting of the Loans, the Borrower shall have
delivered to the Lenders (i) a duly executed original of the AC-1 Co-Location
Agreement, (ii) an assignment agreement between the Borrower and the
Administrative Agent pursuant to which the Borrower will assign the AC-1 Co-
Location Agreement to the Administrative Agent for the benefit of the Secured
Parties, (iii) the AC-1 Consent and evidence of the consent of all other
relevant parties with respect thereto and (iv) opinions of counsel to Atlantic
Crossing and, to the extent requested by the Lead Agents, the other parties to
the foregoing documents, all of such documents and opinions to be in form and
substance reasonably satisfactory to the Lead Agents.
ARTICLE V.
AFFIRMATIVE COVENANTS
---------------------
Until the Commitments have expired or been terminated and the principal of
and interest on each Loan and all fees and other obligations payable hereunder
and under the Loan Documents shall have been paid in full, the Borrower
covenants and agrees with the Administrative Agent, the Lead Agents and the
Lenders that:
71
<PAGE>
SECTION 5.01. Financial Statements and Other Information. The Borrower
------------------------------------------
shall deliver to the Administrative Agent, with a copy for each Lender, the
following:
(a) within 90 days after the end of each fiscal year of the Borrower
commencing with the 1998 fiscal year, its audited consolidated balance sheet and
related statements of operations, stockholders' equity and cash flows as of the
end of and for such year, setting forth in each case in comparative form the
figures for the previous fiscal year, all reported on by independent public
accountants of recognized national standing (without qualification or exception
as to the scope of such audit) to the effect that such consolidated financial
statements present fairly in all material respects the financial condition and
results of operations of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower (commencing with the fiscal quarter
ending March 31, 1999), its consolidated balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end of and for such
fiscal quarter and the then elapsed portion of the fiscal year, setting forth in
each case in comparative form the figures for the corresponding period or
periods of (or, in the case of the balance sheet, as of the end of) the previous
fiscal year, all certified by a Responsible Officer of the Borrower as
presenting fairly in all material respects the financial condition and results
of operations of the Borrower and its consolidated Subsidiaries on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments and the absence of footnotes;
(c) concurrently with any delivery of financial statements under
clause (a) or (b) above, a certificate of a Responsible Officer of the Borrower
certifying to such officer's knowledge whether a payment Default or Event of
Default has occurred and is continuing and, if a payment Default or Event of
Default has occurred, specifying the details thereof and any action taken or
proposed to be taken with respect thereto;
(d) concurrently with any delivery of financial statements under
clause (a) above, a certificate of the accounting firm, if available from such
accounting firm, that reported on such financial statements (which certificate
may be limited to accounting matters and may disclaim responsibility for legal
interpretations) stating whether they obtained knowledge during the course of
their examination of such financial statements of any Default (which certificate
may be limited to the extent permitted by accounting rules or guidelines); and
(e) such other information in respect of the conditions or operations,
financial or otherwise, of the Borrower or any Subsidiary as the Administrative
Agent may from time to time reasonably request.
SECTION 5.02. Reports. (a) The Borrower shall deliver to the
-------
Administrative Agent, with a copy for each Lender, within 20 days after the end
of each calendar quarter (commencing with the calendar quarter ending on
September 30, 1998) a report which sets forth the aggregate sales of Capacity as
at the end of such quarter, the amount of Capacity remaining to be sold, any
terminations of sales of Capacity during such quarter, the purchase price
therefor
72
<PAGE>
and the date such payments shall become (or became) due. The Borrower shall have
no obligation to provide copies or otherwise disclose the contents of individual
Capacity Sales Agreements to any party hereto other than the Lead Agents, who
shall keep such copies and contents strictly confidential and, subject to the
following sentence, shall not disclose such copies or contents to any other
party. If a Default, Event of Default or Designated Event shall have occurred
and be continuing, the Lead Agents shall be permitted to disclose the contents
of individual Capacity Sales Agreements to the Lenders and/or make copies of
individual Capacity Sales Agreements for the Lenders, provided that such
--------
contents shall be subject to the confidentiality undertakings set forth in
Section 9.14, shall always be deemed to be clearly marked as confidential and,
- ------------
notwithstanding clause (d) of Section 9.14, shall not be disclosed to any party
------------
to this Agreement except in accordance with this sentence and the other
provisions of Section 9.14.
------------
(b) The Borrower shall (i) deliver to the Administrative Agent,
promptly after the Borrower's receipt thereof, such other reports (excluding
ordinary correspondence) regarding the System, the Borrower or any Subsidiary as
any System Contractor, the Operator, the System Manager or the Marketing Agent
is required to provide to the Borrower under any System Contract, (ii) deliver
to the Administrative Agent promptly upon receipt or transmission copies of all
amendments, material waivers, written consents and other modifications
(including all material Contract Variations) under any System Contract, other
than as to any Capacity Sales Agreement or any Non-Material System Contract
(other than the Intercompany Agreement), and (iii) use reasonable efforts to
deliver to the Administrative Agent in advance of execution, drafts of
amendments to the Supply Contracts, the OA&M Agreement, the Marketing Agreement
and the Supply Contract Guarantees, unless such amendment is, in accordance with
the terms hereof, permitted to be made without the consent of any party hereto,
in which case the Borrower shall not be required to deliver drafts of such
amendment to the Administrative Agent prior to the execution thereof.
(c) The Borrower shall deliver to the Administrative Agent, within 20
days after the end of each calendar quarter occurring after the Commercial
Operation Date, a certificate of a Responsible Officer of the Borrower setting
forth reasonably detailed calculations demonstrating the Borrower's compliance
with Section 6.24; provided that if the Initial Principal Payment Date occurs
------------ --------
less than 6 months after the Commercial Operation Date, the Borrower shall not
be required to demonstrate compliance with the Interest Coverage Ratio
requirement set forth in Section 6.24(b) as of the Initial Principal Payment
---------------
Date.
(d) The Borrower shall assist and cooperate with the Independent
Engineer in providing the Lenders with such reports as the Lenders through the
Administrative Agent shall reasonably request of the Independent Engineer
(including a monthly construction progress report).
(e) The Borrower shall deliver to the Administrative Agent, with a
copy for each Lender, within 20 days after the end of each calendar quarter
(commencing with the calendar quarter ending on December 31, 1998) a comparison
of the then current Capital Budget and then current Operating Budget to the
actual costs and expenditures during such quarter.
73
<PAGE>
SECTION 5.03. Payment of Obligations. The Borrower shall, and shall cause
----------------------
each Subsidiary to, pay at or before maturity or before they become delinquent,
as the case may be, all its material obligations of whatever nature, unless the
amount or validity thereof is subject to a Contest.
SECTION 5.04. Conduct of Business; System Completion. The Borrower and
--------------------------------------
each Subsidiary shall engage solely in System Activities and activities
incidental thereto. The Borrower and, if any Subsidiary shall become a party to
any Supply Contract (whether pursuant to a supplement thereto or otherwise),
such Subsidiary, shall diligently enforce all of its rights under such Supply
Contract and the related Supply Contract Guarantee and shall cooperate with, and
take all reasonable action that it can to assist, the applicable System
Contractor to complete the System in accordance with the terms of such Supply
Contract. The Borrower shall, and shall cause each Subsidiary to, enforce all of
its rights under, any leases or subleases in respect of real property on which
any landing station comprising part of the System will be situated.
SECTION 5.05. Existence. The Borrower shall, and shall cause each
---------
Subsidiary to, do or cause to be done all things necessary to preserve, renew
and keep in full force and effect its legal existence and take all reasonable
action to maintain all rights, privileges and franchises material, necessary or
desirable in the normal conduct of its business except those as to which the
failure to maintain such rights, privileges and franchises could not reasonably
be expected to have a Material Adverse Effect; provided that the foregoing shall
` --------
not prohibit any merger, consolidation, liquidation or dissolution permitted
under Section 6.03.
------------
SECTION 5.06. Compliance with Laws. The Borrower shall, and shall cause
--------------------
each Subsidiary to, comply in all material respects with all Requirements of Law
applicable to it or its property, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
SECTION 5.07. Performance of Agreements. The Borrower shall, and shall
-------------------------
cause each Subsidiary to, observe the covenants and agreements of the Borrower
and such Subsidiary contained in the System Contracts except where the failure
to so observe such covenants and agreements could not reasonably be expected to
have a Material Adverse Effect.
SECTION 5.08. Taxes and Claims. (a) The Borrower shall, and shall cause
----------------
each Subsidiary to, pay and discharge all Taxes lawfully imposed on it or on its
income or profits or on any of its property prior to the date on which penalties
attach thereto unless such Tax is subject to a Contest.
(b) The Borrower shall use reasonable efforts to maintain and keep in
full force and effect all clearance rulings, decrees or similar items necessary
to continue the Borrower's exemption from the impositions of any Tax or similar
charge (other than de minimis Taxes or Taxes and other charges set forth on
-- -------
Schedule 3.13) under the laws of Bermuda on the Borrower and its assets and
- -------------
revenues.
SECTION 5.09. Notices. The Borrower shall, promptly after a Responsible
-------
Officer of the Borrower has knowledge thereof, give written notice to the
Administrative Agent of (a) the
74
<PAGE>
occurrence of a Default or Event of Default (b) any default under any
Contractual Obligation of the Borrower or any Subsidiary that could reasonably
be expected to have a Material Adverse Effect, (c) any litigation or similar
proceeding affecting the Borrower, any Subsidiary or the System which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect, (d) the occurrence of any ERISA Event that alone or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability in an aggregate amount in excess of $5,000,000, (e) the execution of
any Additional Contract (together with, in the case of Additional Material
Contracts, a copy thereof), (f) any material event constituting force majeure
----- -------
under any Supply Contract or any other material delay in the construction of the
System, (g) any loss or damage to the System in excess of $5,000,000 (whether or
not insured), (h) the cancellation or revocation of any material Governmental
Action or insurance maintained by the Borrower, (i) any Lien (other than
Permitted Encumbrances) against any collateral security or the System and (j)
any other development that has resulted in, or could reasonably be expected to
result in, a Material Adverse Effect.
SECTION 5.10. Insurance. The Borrower shall at all times carry and
---------
maintain or cause to be carried and maintained insurance satisfying the
provisions set forth in Schedule 5.10. Upon the request of the Administrative
-------------
Agent, the Borrower shall provide the Administrative Agent with full information
regarding the insurance then carried, or caused to be carried, by the Borrower.
SECTION 5.11. Fiscal Year. The fiscal year of the Borrower and the
-----------
Subsidiaries shall be the 12-month period ending on December 31 of each year.
SECTION 5.12. Use of Proceeds. The proceeds of the First Loan shall be
---------------
used to pay (i) the fees and expenses payable to the Co-Arrangers, the Agents
and the Lenders in connection with the transactions contemplated hereby, (ii)
the fee payable to GCDC pursuant to the Financial Services Agreement and (iii)
the fees and expenses of counsel and consultants to the Co-Arrangers, the
Agents, the Lenders and the Borrower in connection with the transactions
contemplated hereby on the Closing Date. The proceeds of the Term Loans and,
prior to the Commercial Operation Date, the Working Capital Loans shall be used
to finance System Activities in accordance with the Capital Budget and to pay
fees and expenses directly related thereto; provided that, notwithstanding the
--------
foregoing, the proceeds of the Tranche A-2 Term Loans and, prior to the
Commercial Operation Date, the Working Capital Loans shall be used solely to pay
Capital Costs in respect of the First Permitted Upgrade and to pay for the
purchase of Backhaul Capacity by the Borrower and its Subsidiaries, in each such
case as more particularly described in Section 2.04(c) (provided, however, that
--------------- -------- -------
following such time, if ever, as the Borrower obtains a fully executed amendment
to the Alcatel Supply Contract that reduces the amount payable thereunder by the
Borrower in respect of the First Permitted Upgrade (such reduction, the "Cost
-----
Savings"), the Borrower and the Lenders shall amend this Agreement so as to
- -------
increase the Unrestricted Contingency by an amount equal to such Cost Savings
(up to a maximum of $5,000,000) and to permit the Borrower to utilize the Cost
Savings portion (up to a maximum of $5,000,000) of the Tranche A-2 Term Loan
Commitment for any permitted use of such Unrestricted Contingency). The proceeds
of the Working Capital Loans shall, on and after the Commercial Operation Date,
be used for working capital purposes. The proceeds of the
75
<PAGE>
Loans will not in any event be used for payments of dividends or interest on any
securities (other than in respect of interest on the Loans during construction
included in the Capital Budget or as expressly permitted by the terms hereof or
of the Securities Accounts Agreement).
SECTION 5.13. Environmental Matters. The Borrower shall, and shall cause
---------------------
each Subsidiary to, comply with any and all applicable Environmental Laws,
except where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect.
SECTION 5.14. Operating Budgets; Operating Plans. (a) At least 30 days
----------------------------------
prior to the Commercial Operation Date, and after prior review by, and the
approval of, the Lead Agents (who shall be permitted to consult with the
Independent Engineer and whose approval shall not be unreasonably withheld), the
Borrower will adopt (i) an operating budget detailing anticipated OA&M Expenses
(an "Operating Budget") for the initial Operating Year and (ii) an operating
----------------
plan updating the Projections (the "Operating Plan") for the period from the
----------------
first day of the initial Operating Year through the Maturity Date which shall
set forth the anticipated OA&M Expenses and revenues (net of marketing
commissions), by Operating Year.
(b) At least 30 days prior to the commencement of each subsequent
Operating Year, and after prior review by, and the approval of, the Lead Agents
(who shall be permitted to consult with the Independent Engineer and whose
approval shall not be unreasonably withheld), the Borrower will adopt an
Operating Budget for such Operating Year; provided that any proposed Operating
--------
Budget shall be deemed to be approved by the Lead Agents as long as the OA&M
Expenses set forth in such proposed budget are not greater than 115% of the OA&M
Expenses in respect of such Operating Year set forth in the Operating Plan
approved pursuant to Section 5.14(a).
---------------
(c) The Borrower shall, simultaneously with the delivery of each
Operating Budget (other than the initial Operating Budget), deliver to the
Administrative Agent (for informational purposes only), an update of the
Operating Plan.
(d) The Borrower shall deliver copies of the Operating Budgets for
each such Operating Year promptly to the Administrative Agent.
SECTION 5.15. Governmental Actions. The Borrower shall (a) promptly make,
--------------------
or cause to be made, all filings for all Governmental Actions required in
connection with the construction, installation or operation of the System as
soon as reasonably possible and in accordance with the Alcatel Plan of Work and
the Tyco Plan of Work (and, in any event, in time to comply with the dates for
procurement of Governmental Actions set forth in Schedule 3.08), (b) assist the
--------------
System Contractors where necessary or appropriate in all follow-up necessary to
obtain on a timely basis all such Governmental Actions, (c) at the reasonable
request of the Administrative Agent, meet and confer with, and use reasonable
efforts to cause the System Contractors to meet and confer with, representatives
of the Administrative Agent with respect to the status of Governmental Actions
required in connection with the construction, installation or operation of the
System and (d) from and after the Actual Date of Commercial Operation, maintain
(or cause the Operator or a Subsidiary to maintain) in full force and effect all
material Governmental Actions as are at the time necessary in order to operate
and maintain the System,
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except where the failure to file or maintain such Governmental Actions could not
reasonably be expected to have a Material Adverse Effect.
SECTION 5.16. Cooperation with Independent Engineer. The Borrower shall,
-------------------------------------
and shall cause each Subsidiary to, keep the Independent Engineer fully informed
on a timely basis with respect to the design of and other material matters
relating to, the System (including, without limitation, the integration of the
cable, the landing stations and the other parts thereof), and shall meet (and,
to the extent within its control, cause the System Contractors to meet) the
Independent Engineer at reasonable times and upon reasonable notice to discuss
any and all of the foregoing.
SECTION 5.17. Spare Parts. The Borrower shall, on and after the Actual
-----------
Date of Commercial Operation, maintain, or cause the Operator to maintain, spare
parts with respect to the System as are customary for the submarine fiber-optic
cable industry.
SECTION 5.18. Interest Rate Protection. The Borrower shall, within 3
------------------------
months after the Closing Date, enter into Hedging Agreements with one or more
Lenders or Affiliates thereof with respect to a percentage of the aggregate
amount of all Term Loan Commitments to be agreed upon by the Borrower and the
Lead Agents for a period to be agreed upon by the Borrower and the Lead Agents,
provided, however, that if the Borrower and the Lead Agents have not agreed on
- -------- -------
the foregoing matters by the end of such 3 month period the percentage of the
aggregate amount of Term Loan Commitment to be hedged shall be at least 50%.
SECTION 5.19. Maintenance of Process Agent. The Borrower shall, and shall
----------------------------
cause each of the Loan Parties that does not maintain an office in New York or
New Jersey to maintain in New York or New Jersey a Person acting as agent to
receive on its behalf service of process.
SECTION 5.20. System Operation and Maintenance. The Borrower shall, and
--------------------------------
shall cause each Subsidiary to, from and after the Actual Date of Commercial
Operation, cause the System to be operated and maintained in an efficient and
business-like manner in accordance with the terms of the System Contracts.
SECTION 5.21. Event of Loss. If an Event of Loss shall occur and no Event
-------------
of Default shall have occurred and be continuing and (a) in the Independent
Engineer's reasonable opinion it is technically feasible to restore, rebuild or
replace the affected portion of the System within 1 year, (b) in the Lead
Agents' reasonable opinion there are or will be sufficient funds available to
the Borrower (including from the proceeds of insurance) to restore, rebuild or
replace the affected portion of the System so that the System will be able to
operate on a commercially feasible basis (and in any event on a basis sufficient
to pay the Loans and all other obligations owing to the Lenders), and (c) in the
Independent Engineer's reasonable opinion, it is reasonably likely that the
Borrower and the Subsidiaries will have as and when needed all rights of way and
permits necessary to restore, rebuild or replace the affected portion of the
System, then the Borrower, at its sole cost and expense, shall restore, rebuild
or replace the affected portion of the System.
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SECTION 5.22. Books and Records; Inspection Rights. The Borrower shall,
------------------------------------
and shall cause each Subsidiary to, keep proper books of record and account in
which full, true and correct entries are made of all dealings and transactions
in relation to its business and activities. The Borrower shall, and shall cause
each Subsidiary to, permit any representative of the Lenders designated by the
Administrative Agent, upon reasonable prior notice, to visit and inspect its
properties, to examine and make copies from its books and records (which shall
not include the right to examine or make copies of the Capacity Sales
Agreements, which right shall be governed by Section 5.02(a)), and to discuss
--------------
its affairs, finances and condition with its officers and (at the Borrower's
expense no more than twice a year) its independent accountants, all at such
reasonable times and as often as reasonably requested.
SECTION 5.23. Export Control. The Borrower shall, and shall cause each
--------------
Subsidiary to, comply in all respects
with all U.S. export laws and regulations unless the failure to so comply could
not reasonably be expected to have a Material Adverse Effect.
SECTION 5.24. Foreign Corrupt Practices Act. The Borrower shall, and shall
-----------------------------
cause each Subsidiary to, comply in all material respects with the Foreign
Corrupt Practices Act of the United States, if applicable.
SECTION 5.25. Further Assurances. The Borrower shall cause to be promptly
------------------
and duly taken, executed, acknowledged and delivered all such further acts,
documents and assurances as the Administrative Agent from time to time may
reasonably request in order to carry out more effectively the intent and
purposes of this Agreement, the other Loan Documents and the Consents, including
with respect to the maintenance of perfection of all Perfectible Collateral and
the proper grant and perfection of Liens on Perfectible Collateral hereafter
acquired.
SECTION 5.26. Intellectual Property. The Borrower shall not, and shall not
---------------------
permit any Subsidiary to, do any act, or omit to do any act, whereby any of its
intellectual property may lapse or become abandoned or dedicated to the public
or unenforceable, unless such lapse, abandonment, dedication or unenforceability
could not reasonably be expected to have a Material Adverse Effect. The Borrower
shall take, and shall cause each Subsidiary to take, all reasonably necessary
steps to maintain and pursue any application (and to obtain the relevant
registration) filed with respect to, and to maintain any registration of, any
material part of its intellectual property, except where the failure to so
maintain, obtain or pursue could not reasonably be expected to have a Material
Adverse Effect.
SECTION 5.27. Certain Additional Material Contracts. (a) The Borrower
-------------------------------------
shall, or shall cause its Subsidiaries to, enter into (a) with the Operator on
or before May 31, 1999, (i) the O&M Agreement, in form and substance reasonably
satisfactory to the Lead Agents and (ii) the Operator Consent, and, concurrently
with the execution thereof, the Borrower and the Lead Agents (who shall be
permitted to engage, at the Borrower's expense, an independent insurance
consultant reasonably acceptable to the Borrower and the Lead Agents for such
purpose) shall amend Schedule 5.10 to add such insurances as the Borrower and
-------------
the Lead Agents shall agree shall be required to be maintained by the Borrower
during the operational phase of
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the System or any Segment thereof and (b) with the System Manager on or before
May 31, 1999, (i) the System Management Agreement, in form and substance
reasonably satisfactory to the Lead Agents, and (ii) the System Manager Consent.
Concurrently with the execution and delivery of each such document, the Borrower
shall provide, or cause to be provided to, the Administrative Agent such legal
opinions in connection therewith as the Administrative Agent shall reasonably
request.
(b) If and when the Borrower or any Subsidiary enters into any lease
or sublease for real property on which a landing station that will comprise part
of the System will be situated, such leases shall be in form and substance and
pursuant to arrangements reasonably satisfactory to the Lead Agents (whose
satisfaction may be based upon the taking of such steps as the Lead Agents
reasonably believe are appropriate (i) to mitigate any risks associated with the
bankruptcy of any party thereto) and (ii) if legally practicable, to perfect a
security interests for the benefit of the Secured Parties with respect thereto).
(c) If the Administrative Agent so requests, the Borrower shall, and
shall cause each Subsidiary to, take any and all action required to grant the
Administrative Agent, for the benefit of the Secured Parties, a perfected first
priority security interest (or, if applicable, an assignment effective upon the
occurrence of an Event of Default and the giving by the Administrative Agent to
the counterparty thereto of notice thereof, or a similar available right) in or
of each such Person's rights, title and interests in, to and under the Supply
Contracts, the Supply Contract Guarantees, and, if legally practicable, any
lease for real property on which any landing station comprising part of the
System will be located, in each such case, at such time as such Person becomes a
party to, or acquires any rights, title or interests in, any such contract or
agreement.
SECTION 5.28. Upgradeability. The Borrower shall, and shall cause each
--------------
Subsidiary to, pursue any and all rights and remedies against the Contractor
under the Alcatel Supply Contract if the Contractor is unable to deliver a
System which is practicably susceptible to upgrade under the Alcatel Supply
Contract beyond 20 Gb/s per fiber pair.
SECTION 5.29. First Permitted Upgrade. The Borrower shall, and shall cause
-----------------------
its Subsidiaries to, promptly undertake and complete, in accordance with the
schedule associated therewith set forth in the Alcatel Supply Contract, the
First Permitted Upgrade if, for two consecutive semi-annual periods, the value
of all unsold System Capacity (which shall be calculated by multiplying (a) the
number of unsold STM-1's by (b) the lesser of (i) the average price received by
the Borrower and its Subsidiaries for an STM-1 during the six month period
immediately preceding the time of determination and (ii) the Borrower's and its
Subsidiaries then listed prices for STM-1's), is less than the sum of (x) the
aggregate principal amount of Loans then outstanding plus interest thereon (less
any funds then on deposit in the Debt Service Reserve Account) plus (y) the
----
amount of any undrawn Tranche A-1 Term Loan Commitments.
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ARTICLE VI.
NEGATIVE COVENANTS
------------------
Until the Commitments have expired or terminated and the principal of and
interest on each Loan and all fees and other obligations payable hereunder and
under the Loan Documents have been paid in full, the Borrower covenants and
agrees with the Administrative Agent, the Lead Agents and the Lenders that:
SECTION 6.01. Indebtedness. The Borrower shall not, and shall not permit
------------
any Subsidiary to, create, incur, assume or suffer to exist any Indebtedness,
except:
(a) Indebtedness incurred under the Loan Documents;
(b) Permitted Subordinated Debt;
(c) Capital Lease Obligations permitted by Section 6.11;
------------
(d) trade or other similar Indebtedness incurred in the ordinary
course of business and payable within 60 days;
(e) Indebtedness under, or constituting net exposure under, interest
Hedging Agreements entered into in accordance with Section 5.18 or other Hedging
------------
Agreements otherwise permitted by the Lead Agents;
(f) leases and purchase money debt with aggregate annual payments not
to exceed $1,000,000;
(g) Indebtedness under any Permitted Receivables Transaction;
(h) deferred payment obligations of the Borrower or a Subsidiary in
respect of Backhaul Capacity that are incurred in compliance with the provisions
of Section 6.29;
------------
(i) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or another Subsidiary, provided that (A) with respect
--------
to any Indebtedness of any Subsidiary to the Borrower, (x) such Indebtedness
shall be evidenced by a promissory note in the form of Exhibit A to the Borrower
---------
Pledge Agreements or such other form as shall be reasonably satisfactory to the
Administrative Agent which shall, in either case, be pledged to the
Administrative Agent pursuant to the Borrower Pledge Agreements and (y) the loan
or other advance by the Borrower to the Subsidiary shall have been made in
accordance with Section 6.05(a)(ii) and (B) with respect to any Indebtedness of
-------------------
the Borrower to any Subsidiary, the repayment of such Indebtedness shall be
subordinated to the repayment of the Loans and all other Obligations in a manner
reasonably satisfactory to the Administrative Agent;
(j) Guarantees by the Borrower of Indebtedness of any Subsidiary
permitted to be incurred hereunder and Guarantees by any Subsidiary of
Indebtedness of the Borrower permitted to be
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<PAGE>
incurred hereunder or of Indebtedness of another Subsidiary permitted to be
incurred hereunder, provided that any such Guarantee referred to in this clause
--------
(j) shall be subordinated to the same extent as the Indebtedness being so
guaranteed;
(k) Indebtedness under a Permitted Reserve L/C Facility; and
(l) other unsecured Indebtedness of the Borrower in an aggregate
principal amount not to exceed $1,750,000 at any one time.
SECTION 6.02. Liens. The Borrower shall not, and shall not permit any
-----
Subsidiary to, create, incur, assume or permit to exist any Lien on the
Collateral or on the System or any of its other assets, except Permitted
Encumbrances.
SECTION 6.03. Fundamental Changes. The Borrower shall not, and shall not
-------------------
permit any Subsidiary to, merge into or consolidate or amalgamate with any other
Person, or permit any other Person to merge into or consolidate or amalgamate
with it, or liquidate, dissolve or wind up or terminate itself, except that (a)
any Subsidiary may merge into or consolidate with the Borrower in a transaction
in which the Borrower is the surviving corporation and (b) any Subsidiary may
merge into or consolidate with another Subsidiary in a transaction in which the
surviving entity is a wholly owned Subsidiary.
SECTION 6.04. Sale of Assets. The Borrower shall not, and shall not permit
--------------
any Subsidiary to, sell, lease (as lessor), convey, assign, transfer or
otherwise dispose of (each, a "Transfer") all or any portion of its assets
--------
except (a) Transfers of Capacity in accordance with Section 6.23, (b) Transfers
------------
of assets by any Subsidiary to the Borrower, (c) Transfers of assets (other than
Capacity) in the ordinary course of business not required for the efficient
operation of the System for fair value, (d) Transfers of non-cash assets to a
Subsidiary but only to the extent such Transfers are in the ordinary course of
business or are in connection with constructing, maintaining, owning or
operating the System or, with the prior approval of the Administrative Agent,
are necessary to facilitate the obtaining of Governmental Actions or the
minimization of Taxes (e) Transfers of cash to a Subsidiary in accordance with
Section 6.05, (f) Transfers of obsolete, worn out, unusable, unuseful or
- ------------
defective equipment and other assets for fair value and Transfers of equipment
or assets (other than Capacity) to the extent such equipment or assets are being
replaced by equipment or assets having a fair market value or utility to the
System equal to or greater than the fair market value of the equipment or assets
being so transferred, including any such Transfers made in connection with a
Permitted System Upgrade and (g) Transfers of accounts solely for cash in
accordance with the terms of a Permitted Receivables Transaction, provided that
--------
the proceeds or the Net Cash Proceeds of Transfers under (A) clauses (C), (F)
and (G) shall be applied to the prepayment of the loans if required in
accordance with the provisions of the Securities Accounts Agreements and (B)
under clauses (A) and (G) shall be deposited into the Revenue Account if
required in accordance with the provisions of the Securities Accounts Agreement.
SECTION 6.05. Investments, Loans, Advances, Guarantees and Acquisitions.
---------------------------------------------------------
(a) The Borrower shall not, and shall not permit any Subsidiary to, purchase,
hold or acquire (including pursuant to any merger with any Person that was not a
wholly owned Subsidiary prior to such merger) any Capital Stock, evidences of
indebtedness or other securities (including any
81
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option, warrant or other right to acquire any of the foregoing) of, make or
permit to exist any loans or advances to, Guarantee any obligations of, or make
or permit to exist any investment or any other interest in, any other Person, or
purchase or otherwise acquire (in one transaction or a series of transactions)
any assets of any other Person constituting a business unit, or become a general
or limited partner in any partnership or a joint venturer in any joint venture
or enter into any profit sharing or royalty agreement or similar arrangement
whereby the Borrower's or any Subsidiary's income or profits are, or might be,
shared with any Person, or create any new Subsidiary, except:
(i) Permitted Investments;
(ii) investments by the Borrower in, or loans or other
advances by the Borrower to, a Subsidiary, provided that (A) such
--------
investment, loan or other advance is necessary to capitalize such
Subsidiary in accordance with applicable law, to enable such Subsidiary to
acquire assets to be used to operate the System or to otherwise fulfill
obligations incurred in connection with the System and reflected in the
Capital Budget or the Operating Budget or, with the prior consent of the
Administrative Agent, to facilitate the obtaining of Landing Licenses or
the minimization of material Taxes and (B) such investment, loan or other
advance, if made in cash, is made with funds made available for such
purpose in accordance with the Securities Accounts Agreement or from
Permitted Sources;
(iii) investments by a Subsidiary in, or loans or other
advances by a Subsidiary to, the Borrower;
(iv) the Guarantees set forth in the System Contracts;
(v) endorsements for collection or deposit in the ordinary
course of business;
(vi) indemnity or "hold harmless" provisions included in
contracts or agreements entered into in the ordinary course of business;
(vii) joint marketing agreements entered into in accordance
with Section 6.16; and
------------
(viii) Indebtedness and Guarantees permitted by Section 6.01;
------------
and
(ix) guarantees by the Borrower of obligations of any
Subsidiary that are permitted to be incurred hereunder and guarantees by
any Subsidiary of obligations of the Borrower that are permitted to be
incurred hereunder (other than, in each such case, those refereed to in
clause (viii) above); and
(x) the Borrower and its Subsidiaries may create or acquire
new Subsidiaries in accordance with Section 6.05(b).
---------------
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(b) Neither the Borrower nor any Subsidiary shall create or acquire
any Subsidiary or acquire the Capital Stock of any other Person unless:
(1) such Person shall be a direct or indirect wholly owned
Subsidiary of the Borrower;
(2) the creation or acquisition of such new Subsidiary could not
reasonably be expected to have a Material Impact;
(3) such Subsidiary shall be or become a party to (i) a guaranty
in substantially the form of the guaranty agreement attached hereto as
Exhibit F (or such other form as the Borrower may reasonably request to
---------
conform such guaranty to local law or to avoid adverse tax consequences,
which form shall, in any event, be reasonably satisfactory to
Administrative Agent) and (ii) a security agreement in substantially the
form of the security agreement attached hereto as Exhibit E, in each case,
---------
with such modifications as the Administrative Agent may reasonably request
or consent to;
(4) the Borrower shall pledge, have pledged or cause or have
caused to be pledged to the Administrative Agent all of the outstanding
shares of such Capital Stock or other ownership interests of such
Subsidiary owned directly by it, along with undated stock powers for such
certificates, executed in blank (or, if any such shares of Capital Stock or
other ownership interests are uncertificated, confirmation and evidence
satisfactory to the Administrative Agent that the security interest in such
uncertificated securities has been perfected by the Administrative Agent in
accordance with Article 8 of the UCC or any similar law which may be
applicable); in order to effect the foregoing, the Borrower shall either
amend the Borrower Pledge Agreements in order to identify the Capital Stock
and other related collateral in respect of such Subsidiary, or, in the case
of a Subsidiary incorporated or otherwise existing pursuant to the laws of
any jurisdiction other than the United States or any political subdivision
thereof, shall enter into a pledge agreement in form and substance
reasonably satisfactory to the Administrative Agent;
(5) the parties to the Securities Accounts Agreements and the new
Subsidiary shall enter into a supplement thereto or amendment thereof
whereby the new Subsidiary shall become a party thereto and the Securities
Accounts Agreement shall be amended in accordance with Section 5.4.2
-------------
thereof;
(6) the Borrower shall, and shall cause the new Subsidiary to,
take such other actions as the Administrative Agent may reasonably request
in order to perfect a first priority security interest of the
Administrative Agent in such types of collateral as were perfected with
respect to the other Subsidiaries as of the Closing Date; and
(7) the Administrative Agent shall have received such opinions of
legal counsel for the Borrower relating to each of the matters identified
in clauses (1), (3), (4), (5) and (6) above as the Administrative Agent
shall reasonably request, which legal opinions shall be in form and
substance reasonably satisfactory to the Administrative Agent.
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<PAGE>
SECTION 6.06. Restricted Payments. The Borrower shall not, and shall not
-------------------
permit any Subsidiary to, declare or make any Restricted Payment or any payment
in connection with any tax sharing arrangement except for (a) Restricted
Payments by a Subsidiary to the Borrower, or to any parent of a Subsidiary that
is, directly or indirectly, wholly owned by the Borrower, (b) distributions by
the Borrower or any Subsidiary in respect of its Capital Stock which are payable
solely in additional Capital Stock of the Borrower or such Subsidiary, but only
to the extent such additional Capital Stock is subject to a first priority Lien
in favor of the Administrative Agent, (c) distributions by the Borrower of the
Borrower's portion of Excess Cash Flow to the extent then distributable to the
Borrower pursuant to the Section 2.7.4(a) of the Securities Accounts Agreement,
----------------
(d) distributions by the Borrower from the Distribution Account and (e)
distributions by the Borrower or the U.S. Subsidiary of funds made available
exclusively for the benefit of any such Person pursuant to Section
-------
2.22.3(a)(A)(1) or 2.24.3(a)(A)(1) of the Securities Accounts Agreement.
- --------------- ---------------
SECTION 6.07. Amendment of System Contracts, Etc. (a) The Borrower shall
----------------------------------
not, and shall not permit any Subsidiary to, amend, supplement or otherwise
modify, or grant any material waivers or material consents under, or agree to
any material contract variation or material discretionary or other material
change that requires the consent or agreement of the Borrower under, any System
Contract without the prior written consent of the Majority Lenders (such consent
not to be unreasonably withheld) other than (i) Contract Variations in
accordance with Section 6.08, (ii) as permitted by the terms of such System
------------
Contract without the consent of the Borrower or such Subsidiary, (iii)
amendments, supplements or other modifications or waivers, consents, contract
variations, or exercises of discretionary action or other changes to Non-
Material System Contracts which are entered into in the ordinary course of
business and which could not reasonably be expected to have a Material Impact,
provided that in any event no amendments, supplements or other
- --------
modifications may be made to the provisions relating to the Alcatel Escrow
Dispute Account or the TSSL Dispute Account contained in the applicable
Contractor Escrow Agreements without the prior written consent of the
Administrative Agent, (iv) administerial, clarifying or correcting amendments to
any System Contract or other immaterial amendments to any System Contract (other
than the Supply Contracts and the Supply Contract Guarantees, in respect of
which such amendments may be made with the consent of the Lead Agents) which
could not reasonably be expected to have a Material Impact (it being understood
that, for purposes of this clause (iv), an increased cost permitted pursuant to
Section 5.14 shall not be deemed to have a Material Impact solely by reason of
- ------------
such increased cost), (v) other amendments, supplements or modifications or
waivers, consents, contract variations or exercises of discretionary action or
other changes not involving the Supply Contracts that do not involve increased
costs other than as permitted pursuant to Section 5.14 and which, in any event,
------------
could not reasonably be expected to have a Material Impact, (vi) amendments,
supplements or other modifications required to implement the provisions of
Section 6.09 or 6.10, and (vii) amendments, supplements or other modifications
- ------------ ----
or waivers, consents, contract variations or other changes to Capacity Sales
Agreements so long as any such amendments are on commercially reasonable terms
and comply with the proviso to Section 6.23(a); provided, however, that,
--------------- -------- -------
notwithstanding the foregoing, no amendments, supplements or other modifications
or waivers, consents, contract variations or other changes to the Intercompany
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Agreement or the U.S. Landing Agreement shall be made without the prior written
consent of the Lead Agents.
(b) The Borrower shall not, and shall not permit any Subsidiary to,
terminate or permit the termination of any System Contract other than (i) in
accordance with its terms (other than at the option of the Borrower or any
Subsidiary), (ii) as permitted by such System Contract without the consent of
the Borrower or such Subsidiary, (iii) as required by applicable law, (iv) a
System Contract (other than the Supply Contract Guarantees) which the Borrower
reasonably believes (and in respect of which, if such System Contract is a
Supply Contract, the O&M Agreement, the System Management Agreement or the
Marketing Agreement, the Lead Agents concur in writing prior to any termination
thereof), is no longer useful to the Borrower's business, or which the Borrower
reasonably believes (and in respect of which, if such System Contract is a
Supply Contract, the O&M Agreement, the System Management Agreement or the
Marketing Agreement, the Lead Agents concur in writing prior to any termination
thereof) is useful to the Borrower's business and is replaced with a new
contract (and within a time period) reasonably acceptable to the Administrative
Agent, (v) as to Non-Material System Contracts, so long as such Non-Material
System Contract is, at the request of the Administrative Agent (upon such
consultation with the Independent Engineer as the Administrative Agent shall
require), replaced with a new contract (and within a time period) reasonably
acceptable to the Administrative Agent, and (vi) the termination of a Capacity
Sales Agreement, provided that if the Borrower or any Subsidiary is terminating
--------
or consenting to the termination of a Capacity Sales Agreement, such termination
or consent to termination shall be permitted only if it is commercially
reasonable; provided, however, that, notwithstanding the foregoing, the Borrower
-------- -------
shall not, and shall not permit any Subsidiary to, terminate or permit the
termination of the Intercompany Agreement or any lease or sublease for real
property on which a landing station that will comprise part of the System will
be located without the prior written consent of the Lead Agents, other than in
accordance with clause (i) of this sentence.
(c) The Borrower and each Subsidiary shall be permitted to replace
certain System Contracts in accordance with the terms of Article VII.
-----------
SECTION 6.08. Supply Contracts. (a) The Borrower shall not, without the
----------------
prior written consent of the Majority Lenders (or, with respect to any Contract
Variation that will not increase the costs under a Supply Contract by more than
$500,000 for any individual Contract Variation and up to $3,000,000 in the
aggregate for all Contract Variations taken together, the Administrative Agent),
such consent in each case not to be unreasonably withheld, enter into any
Contract Variation, or grant any waiver or consent under, a Supply Contract
other than (i) Contract Variations, waivers or consents made on an emergency
basis to the extent there are funds available for the payment thereof in the
Capital Budget (including the Unrestricted Contingency, but excluding the
Restricted Contingency except to the extent that the Restricted Contingency is
permitted to be so utilized in accordance with Section 6.21) so long as such
------------
Contract Variation, waiver or consent could not reasonably be expected to have a
Material Adverse Effect, (ii) Contract Variations, waivers or consents required
to add an additional Landing Location or select an alternative Landing Location
consistent with the provisions of Section 6.09, (iii) Contract Variations,
------------
waivers or consents required to undertake a Permitted
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System Upgrade consistent with the provisions of Section 6.10, (iv) Contract
------------
Variations, waivers or consents that merely change the route of the System (so
long as the Landing Locations do not change) without increasing the cost under
the Supply Contracts (or, if such change would increase the cost under the
Supply Contracts, such increase is funded with Permitted Sources), so long as
such Contract Variation, waiver or consent could not reasonably be expected to
have a Material Adverse Effect, (v) Contract Variations, waivers or consents
otherwise permitted by Section 6.07, (vi) Supplement No. 2 to the Alcatel Supply
------------
Contract (which shall be substantially in the form of the document attached as
Exhibit H hereto with such changes as are reasonably satisfactory to the Lead
- ---------
Agents) and (vii) immaterial consents and waivers that could not reasonably be
expected to have a Material Adverse Effect, provided that in no event shall any
--------
such Contract Variation, waiver or consent made in accordance with this
Section 6.08(a) be expected to materially adversely affect the revenues of the
- ---------------
Borrower and the Subsidiaries or, in the reasonable opinion of the Borrower at
the time of the amendment, their ability to achieve the Commercial Operation
Date on or before the earlier to occur of (A) the date that is the 3 month
anniversary of the Scheduled RFS Date and (B) the Guaranteed Completion Date.
(b) The Borrower shall not, (i) without the prior written consent of
the Majority Lenders (such consent not to be unreasonably withheld), (A) reduce
the amount or change the date (unless such change is consistent with a change to
the Scheduled RFS Date or to a "Scheduled Segment RFS Date" (as defined in the
Alcatel Supply Contract as in effect on the date hereof) which is permitted
hereunder) or basis for payment of liquidated damages under any Supply Contract
or (B) reduce the duration of any warranty period under any Supply Contract and
(ii) without the prior written consent of the Lead Agents (based upon
consultation with the Independent Engineer and such consent not to be
unreasonably withheld), (w) reduce the scope of any warranty under any Supply
Contract, (x) reduce the scope or availability of intellectual property under
any Supply Contract or (y) materially change the terms of payment as set forth
in any Supply Contract.
(c) The Borrower shall not, (i) without the prior written consent of
the Lead Agents (whose consent shall not be unreasonably withheld and who may,
in determining whether to give such consent, consult with the Independent
Engineer), agree to (A) procedures for the acceptance testing of the Basic
System (and, if the Borrower elects to or is required to undertake the First
Permitted Upgrade, the Upgraded System) contemplated under the definition of
"Acceptance Testing" or any comparable definition, (B) new acceptance testing of
the Basic System (and, if the Borrower elects to or is required to undertake the
First Permitted Upgrade, the Upgraded System), as contemplated under the
definition of "Acceptance Testing" or any comparable definition, (C) new
performance requirements for the Basic System (and, if the Borrower elects to or
is required to undertake the First Permitted Upgrade, the Upgraded System), as
contemplated under the definition of "Performance Requirements" or any
comparable definition and any material term or appendix or exhibit underlying
the substance of such definition, (D) any equitable adjustment to the price
under any Supply Contract or (E) issue, with respect to the Basic System (and,
if the Borrower elects to or is required to undertake the First Permitted
Upgrade, the Upgraded System), a Certificate of Commercial Acceptance, a
Certificate of Provisional Acceptance or a Certificate of Final Acceptance under
the Alcatel Supply Contracts or a Certificate of Final Completion or a
Certificate of Substantial Completion
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under the Tyco Supply Contract or any other such comparable certificates under
any Supply Contract and (ii) without the prior written consent of the Majority
Lenders, (A) grant or otherwise consent to any extension of time under Article
17(B) of the Alcatel Supply Contract or (B) agree to any arrangement to extend
the Scheduled RFS Date with respect to the Basic System or, if the Borrower
elects or is required to undertake the First Permitted Upgrade, the "Scheduled
Upgrade Date" (as defined in the Alcatel Supply Contract as in effect on the
date hereof whether pursuant to the penultimate sentence of Section 6A(K) of the
Alcatel Supply Contract or otherwise) by more than 3 months or to extend any
"Scheduled Segment RFS Date" (as defined in the Alcatel Supply Contract as in
effect on the date hereof) by more than 3 months.
SECTION 6.09. Addition to Configuration. The Borrower shall not, without
-------------------------
the prior written consent of the Majority Lenders (which consent shall not be
unreasonably withheld), add any additional Landing Location or select, or agree
to the selection of, any alternative Landing Location to the contemplated
configuration of the System unless (a) in the case of adding an additional
Landing Location, all costs related to such addition are funded with Permitted
Sources, (b) such change could not reasonably be expected to materially
adversely affect the revenues of the Borrower and its Subsidiaries or their
ability to achieve the Commercial Operation Date on or prior to the Guaranteed
Completion Date and (c) no material liabilities of or costs to the Borrower or
any Subsidiary shall be created which are not provided for from Permitted
Sources.
SECTION 6.10. Permitted System Upgrades. The Borrower shall not request
-------------------------
that the Contractor perform any Permitted System Upgrade unless (a) the costs
thereof are paid (i) in the case of the First Permitted Upgrade, with proceeds
from Tranche A-2 Term Loan Borrowings and/or with Permitted Sources and (ii) in
the case of any other Permitted System Upgrade, with Permitted Sources (b) such
addition could not reasonably be expected to materially adversely affect the
revenues of the Borrower and its Subsidiaries or, if the Permitted System
Upgrade is commenced prior to the Commercial Operation Date, their ability to
achieve the Commercial Operation Date on or prior to the earlier to occur of (x)
the date which is the 3 month anniversary of the Scheduled RFS Date and (y) the
Guaranteed Completion Date.
SECTION 6.11. Leases. The Borrower shall not, and shall not permit any
------
Subsidiary to, enter into any lease except for (a) leases of personal property
in the ordinary course of business, (b) leases of real property in the ordinary
course of business, (c) Capital Lease Obligations for the lease of office
equipment and automobiles in the ordinary course of business, (d) with the prior
written consent of the Administrative Agent (which consent shall not be
unreasonably withheld), leases to other Persons of a portion of the Borrower's
or any Subsidiary's cable landing stations as long as such leases do not
interfere with the Borrower's and the Subsidiary's use thereof in any material
respect and (e) leases of Capacity in accordance with clause (a) of
Section 6.04.
- ------------
SECTION 6.12. Change of Office. The Borrower shall not, and shall not
----------------
permit any Subsidiary to, change the location of its principal place of business
unless the Borrower shall have given the Administrative Agent at least 20 days'
prior written notice thereof and all action
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reasonably requested by the Administrative Agent to protect and perfect the
Liens and security interests in the Collateral shall have been taken.
SECTION 6.13. Change of Name. The Borrower shall not, and shall not permit
--------------
any Subsidiary to, change its name unless the Borrower shall have given the
Administrative Agent at least 20 days' prior written notice thereof and all
action reasonably requested by the Administrative Agent to protect and perfect
the Liens and security interests in the Collateral shall have been taken.
SECTION 6.14. Transactions with Affiliates. The Borrower shall not, and
----------------------------
shall not permit any Subsidiary to, enter into any agreement with any Affiliate
of the Borrower except (a) the Loan Documents or the System Contracts in effect
as of the Closing Date, (b) the St. Croix Contracts and the AC-1 Co-Location
Agreement and (c) transactions in the ordinary course of business (including
(subject to the other provisions hereof) sales of Capacity and joint sales and
marketing agreements) which are on fair and reasonable terms not less favorable
than the Borrower or any Subsidiary could obtain in an arm's-length transaction
with a Person which is not an Affiliate, provided that (i) after giving effect
--------
to such transaction, the Borrower or such Subsidiary will be in compliance with
the terms hereof and (ii) entering into any such transaction could not
reasonably be expected to have a Material Impact.
SECTION 6.15. Sale and Leaseback. The Borrower shall not, and shall not
------------------
permit any Subsidiary to, enter into any arrangement with any Person providing
for the leasing of real or personal property which has been or is to be sold by
it to such Person.
SECTION 6.16. Approval of Additional Contracts. Without the prior written
--------------------------------
consent of the Majority Lenders (such consent not to be unreasonably withheld),
the Borrower shall not, and shall not permit any Subsidiary to, enter into any
Additional Contract, other than (a) Capacity Sales Agreements or other
agreements or arrangements for the disposition of Capacity permitted by the
terms of Section 6.23, (b) contracts for the acquisition of Backhaul Capacity
------------
(including options therefor) permitted by the terms of Section 6.23 or 6.29, (c)
------------ ----
other contracts (including, without limitation, agreements providing for the
connection of the System to other fiber optic networks, pipeline and cable
crossing agreements, co-location agreements, joint sales and marketing
agreements and restoration agreements) in the ordinary course of business to the
extent amounts payable thereunder, if any, are provided for in the Capital
Budget or the Operating Budget or from Permitted Sources, unless any such
contract must be approved by the Administrative Agent, the Lead Agents or any
other Person or group of Persons pursuant to the terms of this Agreement and (d)
with the prior written consent of the Lead Agents, if such Additional Contract
relates to the System and is being entered into as a quid pro quo for
------------
the purchase of Capacity by the counterparty thereto. The Borrower shall be
permitted to replace System Contracts as set forth in Section 6.07 and Article
------------ -------
VII. At the time any such Additional Contract (other than a Capacity Sales
- ---
Agreement) is entered into, the Borrower and the Administrative Agent (upon
consultation with the Independent Engineer, if necessary) shall designate such
Additional Contract as either an "Additional Material Contract" or an
"Additional Non-Material Contract," provided that each of the O&M Agreement, the
--------
System Management Agreement, and any contract in respect of the leasing of real
property on which a landing station
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that comprises part of the System will be located shall be designated as an
"Additional Material Contract."
SECTION 6.17. Capital Expenditures. The Borrower shall not, and shall not
--------------------
permit any Subsidiary to, make any expenditure in respect of the purchase of
capital assets, except for expenditures which are (a) covered by the Capital
Budget or the then current Operating Budget or (b) to the extent not covered by
the Capital Budget or the then current Operating Budget, paid for from Permitted
Sources or with the transfer of Capacity pursuant to the terms hereof.
SECTION 6.18. Limitations on Transfer and Issuance of Interests.
-------------------------------------------------
The Borrower shall not, and shall not permit any Subsidiary to, (a) permit the
transfer of any ownership interest in any Subsidiary, except to another wholly
owned Subsidiary of the Borrower in accordance with Section 6.03 or (b) issue
------------
any additional ownership interests unless in each such case (and subject in any
event to the provisions of Section 7.14) such ownership interests (i) are being
------------
issued in accordance with Section 6.06(b) or are being issued by a Subsidiary to
---------------
the Borrower (whether in addition to or in substitution for the then outstanding
Capital Stock of such Subsidiary) and (ii) are made subject to the first
priority Lien in favor of the Administrative Agent.
SECTION 6.19. Unrelated Activities; Abandonment. The Borrower shall not,
---------------------------------
and shall not permit any Subsidiary to, (i) engage in any business other than
System Activities or as otherwise contemplated by the System Contracts and the
Loan Documents, and activities incidental thereto or (ii) abandon the diligent
development, construction, installation or operation of the System.
SECTION 6.20. Set-off. Without the prior written consent of the
-------
Administrative Agent (such consent not to be unreasonably withheld), the
Borrower shall not, and shall not permit any Subsidiary to, exercise any right
of set-off with respect to amounts owing to it by any System Contractor under
any Supply Contract.
SECTION 6.21. Changes in Capital Budget. Without the prior written consent
-------------------------
of the Majority Lenders (such consent not to be unreasonably withheld), the
Borrower shall not modify the Capital Budget to increase the aggregate amount
payable thereunder unless such modification is a necessary conforming change
related to an amendment to a System Contract permitted by Section 6.07 or
------------
Section 6.08 or is made in respect of the First Permitted Upgrade or the payment
- ------------
of Marketing Commissions and, in each such case, is concurrent and consistent
with any Permitted Sources or other funds made available to the Borrower which
were not theretofore contemplated in the Capital Budget (including liquidated
damages being applied to obligations hereunder and proceeds of insurance applied
in accordance with the terms of this Agreement); provided that the foregoing
--------
shall not prevent the Borrower from applying identified cost savings in a budget
category (as confirmed by the Independent Engineer or the Administrative Agent,
as applicable) to cost overruns in another budget category (as confirmed by the
Independent Engineer or the Administrative Agent, as applicable) or to new
budget categories reasonably acceptable to the Lead Agents without increasing
the aggregate amount payable under the Capital Budget; provided, further, that
-------- --------
the Borrower shall be permitted to apply (A) the Unrestricted
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Contingency to other budget categories without the consent of the Administrative
Agent, the Lead Agents or any other Lender and (B) the Restricted Contingency to
other budget categories with the consent of the Lead Agents; and provided,
--------
further, that if and when all cable stations comprising part of the System have
- -------
been completed to the satisfaction of the Independent Engineer and for an
aggregate cost no greater than the aggregate amount budgeted therefor in the
then current Capital Budget, the Restricted Contingency shall be reduced by
$12,000,000 (or, if less than $12,000,000 remains allocated to the Restricted
Contingency, by such lesser amount) and the Unrestricted Contingency shall be
increased by a like amount.
SECTION 6.22. Payment of Construction Costs. The Borrower shall not, and
-----------------------------
shall not permit its Subsidiaries to, pay any amount in respect of the
construction and installation of the Basic System or the Upgraded System other
than those costs set forth or provided for in the Capital Budget, as the same
may be amended in accordance with Section 6.21, unless (i) such amount is paid
------------
for with the proceeds of Special Payments or Casualty Proceeds applied in
accordance with the Securities Accounts Agreement or with Permitted Sources,
(ii) such amount relates to the payment of Marketing Commissions and is paid
with funds made available for such purpose from the Revenue Account in
accordance with the provisions of the Securities Accounts Agreement or (iii)
such amount relates to the acquisition of Backhaul Capacity and is paid with
funds made available for such purpose from the Backhaul Account, the U.K.
Backhaul Account or the U.S. Backhaul Account in accordance with the provisions
of the Securities Accounts Agreement.
SECTION 6.23. Sales of Capacity. (a) The Borrower shall not, and shall not
-----------------
permit any Subsidiary to, sell or otherwise dispose of Capacity except pursuant
to Capacity Sales Agreements substantially in the form of Exhibit I or otherwise
---------
on commercially reasonable terms, which shall, subject to paragraph (b) below,
include the disposition thereof for non-cash consideration, such as for capacity
on other systems; provided that, in any event, (i) all such agreements and
--------
arrangements shall provide that any amounts payable to the Borrower or any
Subsidiary shall be paid to the Revenue Account or the U.S. Backhaul Account (as
the case may be) in accordance with the provisions of the Securities Accounts
Agreement and (ii) no agreement providing for future payments shall restrict
either contractually or as a matter of law the granting of a security interest
in such agreement by the Borrower or any Subsidiary to the Lenders.
(b) (1) The Borrower shall not, and shall not permit any Subsidiary
to, sell, lease, transfer or otherwise dispose of System Capacity in exchange
for non-cash consideration (such System Capacity being referred to as "Swapped
-------
System Capacity" and such sale, lease, transfer or other disposition being
- ---------------
referred to as a "Swap") to Affiliates of the Borrower or any Subsidiary,
----
whether in one transaction or a series of related transactions, if the aggregate
value of the Swapped System Capacity (which shall be determined by reference to
the Borrower's listed prices for such System Capacity at the time of such
disposition) being disposed of to all such Affiliates exceeds $10,000,000,
unless the Lead Agents otherwise agree to the contrary. If any non-cash
consideration received by the Borrower or any Subsidiary in exchange for Swapped
System Capacity disposed of to an Affiliate of the Borrower or a Subsidiary is
disposed of for cash (the amount of such cash being referred to as the
"Affiliate Capacity Cash Amount"), the
- -------------------------------
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amount of Swapped System Capacity disposed of to Affiliates of the Borrower and
such Subsidiary shall be deemed to be reduced by an amount equal to the amount
of System Capacity that a third party could purchase for the Affiliate Capacity
Cash Amount at the Borrower's listed System Capacity prices at the time of such
disposition.
(2) Swapped System Capacity shall only be disposed of in exchange for
fair value for other fiber optic cables or capacity thereon which can and will
be connected to the System or are being acquired in connection with facilitating
sales of Capacity or for other assets relating to and useful for the System
(which would not, for the avoidance of doubt, include satellite capacity or
wireless capacity (other than for restoration purposes)).
(3) The Borrower shall not, and shall not permit any Subsidiary to,
Swap any System Capacity if, after giving effect to such Swap, the aggregate
amount of System Capacity disposed of pursuant to Swaps exceeds (i) prior to the
First Permitted Upgrade Final Completion, one STM-16 and (ii) on and after First
Permitted Upgrade Final Completion, two STM-16's.
SECTION 6.24. Financial Covenants. (a) Minimum Capacity Sales Revenue.
------------------- ------------------------------
The Borrower shall not permit Capacity Sales Revenue to be less than the
following amounts as of the last day of the calendar quarter immediately
preceding each Principal Payment Date set forth below:
Principal Payment Minimum Cumulative
Date Capacity Sales Revenue
---- --------------------------
(in Dollars)
First 96,200,000
Second 135,700,000
Third 178,200,000
Fourth 215,800,000
Fifth 243,500,000
Sixth 269,000,000
Seventh 290,300,000
Eighth 311,100,000
Ninth 331,100,000
Tenth 351,300,000
(b) Minimum Interest Coverage Ratio. The Borrower shall not permit,
-------------------------------
(1) for the 6 month period ending on the first date set forth below and (2)
thereafter, for any period consisting of two consecutive 6 month periods (each
of which shall consist of 2 calendar quarters) ending on the last day of the
calendar quarter immediately preceding a Principal Payment Date (other than the
Initial Principal Payment Date if it occurs less than 6 months after the
Commercial Operation Date) occurring in any year set forth below, the Interest
Coverage Ratio for such period to be less than the ratio set forth below:
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Year Interest Coverage Ratio
---- -----------------------
2000 3.00:1
2001 3.50:1
2002 4.00:1
2003 and onwards 7.00:1
(c) Minimum Remaining Asset Value to Debt. If the System delivered by
-------------------------------------
the Contractor shall not be practicably susceptible to the full implementation
of the First Permitted Upgrade, the Borrower shall not permit the value of all
unsold System Capacity (which shall be calculated by multiplying the number of
unsold STM-1's by the average price received by the Borrower and the
Subsidiaries for an STM-1 during the 6 month period immediately preceding the
time of determination) to be less than 125% of the aggregate principal amount of
the Loans then outstanding plus interest thereon (less any funds then on deposit
in the Debt Reserve Account).
Notwithstanding anything to the contrary contained in this Agreement, the
failure to comply with Section 6.24(a), 6.24(b) and/or 6.24(c) at any time shall
--------------- ------- -------
not constitute an Event of Default, but shall, instead, cause 100% of Excess
Cash Flow to be paid to the Administrative Agent for the account of the Lenders
in accordance with Section 2.7.4(a) of the Securities Accounts Agreement until
----------------
such time as the Borrower shall have delivered a certificate to the
Administrative Agent in accordance with Section 5.02(c) evidencing the
---------------
Borrower's compliance with this Section 6.24.
------------
SECTION 6.25. Amendments, Etc. of Organizational and Other Documents.
------------------------------------------------------
The Borrower shall not, and shall not permit any Subsidiary to, amend,
supplement or otherwise modify, or permit the amendment, modification or
supplementation of, (a) the certificate of incorporation or by-laws or other
organizational documents (including any Bylaws or Memoranda of Association) in a
manner which is inconsistent with or violates the terms of or could reasonably
be expected to prevent compliance with any of the terms of any Loan Document or
System Contract or could materially adversely affect the Lenders or any
Collateral or (b) if issued in accordance with and subject to the terms of this
Agreement, any documents evidencing or relating to Permitted Subordinated Debt
which could adversely affect the Lenders or result in provisions that are more
onerous on the Borrower or any Subsidiary.
SECTION 6.26. Management and Advisory Fees, Etc. The Borrower shall not,
---------------------------------
and shall not permit any Subsidiary to, pay any management, advisory, consulting
or other similar fees to any Affiliate of the Borrower without the prior consent
of the Lead Agents, other than the (i) Financial Services Arrangement Fee
payable pursuant to the Financial Services Agreement as in effect on the date
hereof, (ii) Marketing Commissions payable pursuant to the Marketing Agreement
as in effect on the date hereof and (iii) fees payable under the OA&M Agreement
as in effect on the date such agreement is approved by the Lead Agents in
accordance with Section 5.27.
------------
SECTION 6.27. Immunity. Neither the Borrower nor any Subsidiary shall, in
--------
any proceeding in Bermuda, the United States or elsewhere, in connection with
any Loan Document,
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claim for itself, any of its assets or the System, immunity from suit,
execution, attachment or other legal process.
SECTION 6.28. Amendments to Operating Budget. The Borrower shall not amend
------------------------------
or modify the Operating Budget for any Operating Year to increase the aggregate
amount of expenses set forth therein without the prior written consent of the
Lead Agents unless (i) after giving effect to such amendment, the OA&M Expenses
set forth therein are not greater than 115% of the OA&M Expenses in respect of
such Operating Year set forth in the Operating Plan approved pursuant to
Section 5.14(a) or (ii) the amendment applies identified cost savings in
- ---------------
a budget category (as confirmed by the Independent Engineer or the
Administrative Agent, as applicable) to cost overruns in another budget category
(as confirmed by the Independent Engineer or the Administrative Agent, as
applicable) or to new budget categories reasonably acceptable to the Lead Agents
without increasing the aggregate amount payable under such Operating Budget.
SECTION 6.29. Backhaul. (a) The Borrower shall not, and shall not permit
--------
any Subsidiary to, make any cash expenditures in respect of Backhaul Capacity
other than from (x) funds available for such purpose from the Capital Budget,
(y) the Backhaul Account, the U.K. Backhaul Account or the U.S. Backhaul Account
and (z) Permitted Sources.
(b) Backhaul Capacity shall consist only of capacity on fiber optic
telecommunications systems (other than the System) which can and will be
connected to the System or is being acquired in connection with facilitating
sales of System Capacity or for other assets relating to and useful for the
System (which would not, for the avoidance of doubt, include satellite capacity
or wireless capacity (other than for restoration purposes)).
(c) At any time of determination, (x) the aggregate amount of the
deferred payment obligations of the Borrower and any Subsidiary in respect of
the purchase of Backhaul Capacity from other Persons minus (y) the lesser of (i)
the aggregate amount of the deferred payment obligations of other Persons to the
Borrower and any Subsidiary in respect of the purchase of Backhaul Capacity from
the Borrower and any Subsidiary and (ii) $10,000,000, shall not exceed
$15,000,000.
SECTION 6.30. Exchange Rate Risk. The Borrower shall not, and shall not
------------------
permit any Subsidiary to, incur any material currency exchange rate risk in
respect of deferred payment obligations of other Persons to the Borrower or a
Subsidiary that are payable in any currency other than Dollars and which are due
to the Borrower or a Subsidiary more than one year after the contracted
obligation with respect to such deferred payment obligation was entered into.
ARTICLE VII.
EVENTS OF DEFAULT
-----------------
Each of the following events or occurrences described in this Article VII
-----------
shall constitute an "Event of Default."
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SECTION 7.01. Non-Payment of Obligations. The Borrower shall fail to pay
--------------------------
any principal of any Loan when and as the same shall become due and payable; or
the Borrower shall fail to pay any interest on any Loan or any fee payable under
this Agreement or any other Loan Document when and as the same shall become due
and payable, and such failure shall continue unremedied for a period of 5 days;
or the Borrower or any Subsidiary shall fail to pay any other amount payable
under this Agreement or any other Loan Document when and as the same shall
become due and payable, and such failure shall continue unremedied for a period
of 5 days following the Borrower's receipt of written notice thereof from the
Administrative Agent.
SECTION 7.02. Breach of Warranty. Any representation or warranty made or
------------------
deemed made by the Borrower or any Loan Party in this Agreement, or in any other
Loan Document to which it is a party or in any certificate delivered by the
Borrower or any Loan Party pursuant to this Agreement or any other Loan Document
shall prove to have been false or misleading in any material respect as of the
time made or deemed made and, if such misrepresentation is capable of being
corrected as of a subsequent date, such misrepresentation shall not have been
corrected as of a day within 30 calendar days (or if such misrepresentation
could not reasonably be expected to have a Material Adverse Effect, within 60
calendar days) following written notice thereof being given by the
Administrative Agent to the Borrower or such Loan Party.
SECTION 7.03. Non-Performance of Certain Covenants and Obligations.
----------------------------------------------------
(a) The Borrower shall fail to observe or perform any covenant or agreement
contained in Article VI of this Agreement (other than Section 6.24); (b) (1) any
---------- ------------
Subsidiary shall fail to perform any of its covenants or agreements contained in
clause (b) of Article IV of the Subsidiary Guaranty Agreement to which it is a
----------
party, (2) any Shareholder shall fail to perform any negative covenant or
agreement contained in any Loan Document to which is a party, or (3) any other
Person pledging shares of Capital Stock to the Administrative Agent shall fail
to perform any of its negative covenants or agreements contained in any pledge
agreement in favor of the Administrative Agent to which it may become a party;
or (c) the Borrower or any other Loan Party shall fail to observe or perform any
covenant or agreement contained in this Agreement or any other Loan Document to
which it is a party (other than those specified in Sections 7.01 and 7.02 above,
------------- ----
in clauses (a) and (b) of this Section 7.03 or in Section 6.24), and such
------------ ------------
failure in any case shall continue unremedied or unwaived for a period of 30
days after the Borrower or such Loan Party receives written notice thereof from
the Administrative Agent; provided, however, if, with respect to this clause
-------- -------
(c), (i) such failure cannot be cured within such 30 day period despite the
Borrower's or such Loan Party's best efforts to do so, (ii) such failure is
susceptible of cure, (iii) the Borrower or such other Loan Party is continuously
proceeding with diligence and in good faith to cure such failure and (iv) the
existence of such failure has not had and could not reasonably be expected to
have a Material Adverse Effect, then such 30 day cure period shall be extended
to such date, not to exceed a 90 day cure period in the aggregate, as shall be
necessary for the Borrower or such other Loan Party to cure such failure.
SECTION 7.04. Involuntary Bankruptcy Proceeding, Etc. An involuntary
--------------------------------------
proceeding shall be commenced or an involuntary petition shall be filed seeking
(a) liquidation, reorganization or other relief in respect of (i) the Borrower,
(ii) any Subsidiary, (iii) any
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Shareholder, (iv) prior to the Commercial Operation Date, a System Contractor or
a Supply Contract Guarantor or (v) any other counterparty to the System
Contracts (other than the Capacity Sales Agreements) or, in any such case, its
debts, or a substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect
or (b) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the (i) Borrower, (ii) any Subsidiary, (iii)
any Shareholder, (iv) prior to the Commercial Operation Date, a System
Contractor or a Supply Contract Guarantor or (v) any other Obligor or any other
counterparty to the System Contracts (other than the Capacity Sales Agreements)
or for a substantial part of its assets, and, in any such case, such proceeding
or petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered; provided that, with
--------
respect to a System Contractor, such proceeding shall not constitute an Event of
Default hereunder so long as (A) the applicable Supply Contract has not been
terminated or rejected and such System Contractor is continuing to diligently
perform its obligations under the applicable Supply Contract or (B) the
applicable Supply Contract Guarantor has not suffered any of the events
described above and is diligently performing its obligations under the
applicable Supply Contract Guarantee, and provided further that, with respect
-------- -------
to any other counterparty to a System Contract, such proceeding shall not
constitute an Event of Default hereunder so long as such event could not
reasonably be expected to have a Material Adverse Effect.
SECTION 7.05. Voluntary Bankruptcy Proceeding, Etc. The Borrower, any
------------------------------------
Subsidiary, any Shareholder, prior to the Commercial Operation Date, a System
Contractor or a Supply Contract Guarantor, or, at any time, any other
counterparty to a System Contract (other than the Capacity Sales Agreements)
shall (a) voluntarily commence any proceeding or file any petition seeking
liquidation, reorganization or other relief under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in effect,
(b) consent to the institution of any proceeding or petition described in
Section 7.04, (c) apply for or consent to the appointment of a receiver,
- ------------
trustee, custodian, sequestrator, conservator or similar official for the (i)
Borrower, (ii) any Subsidiary, (iii) any Shareholder, (iv) prior to the
Commercial Operation Date, a System Contractor or a Supply Contract Guarantor,
or (v) any other counterparty to a System Contract (other than the Capacity
Sales Agreements) or, in each such case, for a substantial part of its assets,
(d) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (e) make a general assignment for the benefit
of creditors or (f) take any action for the purpose of effecting any of the
foregoing, provided that, with respect to a System Contractor, any such event or
--------
action shall not constitute an Event of Default hereunder so long as (A) the
applicable Supply Contract has not been terminated or rejected and such System
Contractor is continuing to diligently perform its obligations under the
applicable Supply Contract or (B) the applicable Supply Contract Guarantor has
not taken any of the actions described above and is diligently performing its
obligations under the applicable Supply Contract Guarantee; and provided further
-------- -------
that, with respect to any other counterparty to a System Contract, such
proceeding shall not constitute an Event of Default hereunder so long as such
event could not reasonably be expected to have a Material Adverse Effect.
SECTION 7.06. Judgments. One or more final judgments (a) for the payment
---------
of money in an aggregate amount (not paid or covered by insurance) in excess of
$5,000,000 shall
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be rendered against the Borrower or any Subsidiary, and, in each case, the same
shall not have been vacated, discharged, stayed or bonded pending appeal within
60 days from the entry thereof or (b) shall be entered in the form of an
injunction or similar form of relief requiring suspension or abandonment of the
construction, installation or operation of the System and such injunction or
similar relief shall not have been stayed, discharged or vacated within 60 days.
SECTION 7.07. ERISA. An ERISA Event shall have occurred that, in the
-----
opinion of the Required Lenders, when taken together with all other ERISA Events
that have occurred, could reasonably be expected to have a Material Adverse
Effect.
SECTION 7.08. Impairment of Security, Etc. Any Loan Document shall cease
---------------------------
to be in full force and effect or the Borrower or any Loan Party shall so assert
in writing; or the Lien as to any material portion of the Collateral created by
any Security Document shall cease to be enforceable or, in the case of
Perfectible Collateral, of the same effect and priority purported to be created
thereby; or a Supply Contract Guarantee shall cease to be in full force and
effect (except as a result of the express provisions thereof) or such Supply
Contract Guarantor shall so assert in writing.
SECTION 7.09. Commercial Operation. The Commercial Operation Date shall
--------------------
not have occurred by the Guaranteed Completion Date.
SECTION 7.10. Impairment of System Contract. Any System Contract (other
-----------------------------
than a Capacity Sales Agreement) shall cease to be valid and binding and in full
force and effect, other than, except with respect to a Supply Contract and a
Supply Contract Guarantee, as contemplated by the terms of Section 6.07;
------------
provided that, with respect to any such System Contract (other than a Supply
- --------
Contract Guarantee and, unless a Supply Contract is being replaced in accordance
with Section 7.11, the related Contractor Consent, as to which the following
------------
provision shall not be applicable), an Event of Default shall not occur under
this Section so long as such event is cured by the Borrower by replacing such
System Contract with the consent of the Majority Lenders (such consent not to be
unreasonably withheld or delayed) within 60 days of the occurrence of such
event.
SECTION 7.11. Default Under System Contract. (a) Any party to any System
-----------------------------
Contract (other than a Capacity Sales Agreement and a Supply Contract) shall be
in material default thereunder and, other than with respect to a Supply Contract
Guarantee, such default shall continue unremedied for 30 consecutive days and
such default could reasonably be expected to have a Material Adverse Effect,
unless such System Contract (together with the related Consent, if any, in
respect thereof) has been replaced with the consent of the Majority Lenders
within 60 days of such default (such consent not to be unreasonably withheld or
delayed); (b) prior to the date of System Final Completion, an "Event of
Default" shall have occurred and be continuing under a Supply Contract, unless
such Supply Contract has been replaced with the prior written consent of the
Majority Lenders within 60 days of such event (such consent not to be
unreasonably withheld or delayed) or the related Supply Contract Guarantor is
diligently performing its obligations under the related Supply Contract
Guarantee and has cured such "Event of Default" within such 60-day period, it
being understood that a failure of the Contractor
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to achieve the Commercial Operation Date by the Scheduled RFS Date shall not
constitute an Event of Default under this Section so long as the Commercial
Operation Date occurs by the Guaranteed Completion Date; or (c) if any Tranche
A-2 Term Loan has been made, at any time prior to First Permitted Upgrade Final
Completion, an "Event of Default" under the Alcatel Supply Contract shall have
occurred and be continuing with respect to the Contractor's performance of the
First Permitted Upgrade, and such event could reasonably be expected to have a
Material Adverse Effect.
SECTION 7.12. Liquidated Damages. Any System Contractor shall fail to pay
------------------
when due any amounts owing as liquidated damages under any Supply Contract
(unless the relevant Supply Contract Guarantor is duly performing its
obligations under the its Supply Contract).
SECTION 7.13. Revocation of Landing License, Etc. Any Landing License or
----------------------------------
other Governmental Action which shall at the time be necessary for the
performance of any material System Activity in a manner contemplated under the
Loan Documents and the System Contracts shall be revoked or shall otherwise
terminate (or shall be amended or modified in a materially adverse manner) and
such revocation or termination (or such amendment or modification thereof) could
reasonably be expected to have a Material Adverse Effect, unless such Landing
License or other Governmental Action is replaceable and is replaced with the
prior written consent of the Majority Lenders (such consent not to be
unreasonably withheld or delayed) with an alternative Landing License or other
Governmental Action permitting the performance of such System Activity within 60
days of the occurrence of such event.
SECTION 7.14. Change in Control. A Change in Control shall occur.
-----------------
SECTION 7.15. Default on Other Indebtedness. The Borrower or any
-----------------------------
Subsidiary shall (a) default in any payment of principal of or interest on any
Indebtedness (other than Indebtedness under the Loan Documents) or in the
payment of any obligations under Hedging Agreements, in any case in an aggregate
amount in excess of $2,500,000, beyond the period of grace, if any, provided in
the instrument or agreement under which such Indebtedness was created or (b)
default in the performance of any other agreement relating to such Indebtedness
or contained in any instrument or agreement evidencing, securing or relating
thereto, in each case beyond the period of grace, if any, provided therein, or
any other event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or permit the holders of such Indebtedness
to cause, such Indebtedness to become due prior to its stated maturity.
SECTION 7.16. Delay in Construction or Installation. The construction or
-------------------------------------
installation of the System shall be suspended under any Supply Contract for more
than 60 days or the System (or any Segment thereof) shall be abandoned by the
Borrower.
SECTION 7.17. Limitations Regarding St. Croix Affiliate. The St. Croix
-----------------------------------------
Affiliate engages in any activity (including the incurrence of Indebtedness or
Liens) in violation of its charter restriction contemplated by Section 4.02 (p)
----------------
or amends its charter with respect thereto, in each case without the consent of
the Majority Lenders, provided, however, that the foregoing shall not be an
-------- -------
Event of Default if (a) such Indebtedness and Liens relate to an amount which is
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less than $1,000,000 in the aggregate and (b) the incurrence of such
Indebtedness or Liens could not reasonably be expected to have a Material
Adverse Effect.
SECTION 7.18. Limitations Regarding Global Networks. Global Networks
-------------------------------------
ceases to be a 100% wholly owned direct or indirect subsidiary of Global
Crossing.
SECTION 7.19. Remedies. If any Event of Default described in Sections 7.04
-------- -------------
or 7.05 shall occur with respect to the Borrower or any Subsidiary, the
----
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall automatically become
immediately due and payable, without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower.
If any Event of Default (other than any Event of Default described in
Section 7.04 or 7.05 with respect to the Borrower or any Subsidiary) shall occur
- ------------ ----
for any reason, whether voluntary or involuntary, and be continuing, the
Administrative Agent may, and at the request or with the consent of the Majority
Lenders shall, by notice to the Borrower, take any or all of the following
actions, at the same or different times: (a) terminate the Commitments, and
thereupon the Commitments shall terminate immediately, (b) declare the Loans
then outstanding to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower and (c) exercise such other
rights or remedies as the Lenders may have under the Loan Documents, the
Consents or applicable law.
ARTICLE VIII.
THE ADMINISTRATIVE AGENT, OTHER AGENTS
AND AGENT RELATED PERSONS
-------------------------
SECTION 8.01. Authorization and Action. Each Lender hereby appoints and
------------------------
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers and discretion under this Agreement as are delegated
to the Administrative Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto. As to any matters not expressly
provided for by this Agreement (including enforcement or collection of the
Notes), the Administrative Agent (or trustee under any of the Loan Documents, as
applicable) shall not be required to exercise any discretion or take any action,
but shall be required to act or to refrain from acting (and shall be fully
protected in so acting or refraining from acting) upon the instructions of the
Majority Lenders, the Required Lenders or the Lenders, as the case may be, for
actions or refraining from acting pursuant to the terms of this Agreement and
such instructions shall be binding upon all Lenders and all holders of Notes;
provided, however, that the Administrative Agent (or trustee under any of the
- -------- -------
Loan Documents, as applicable) shall not be required to take any action that
exposes the Administrative Agent (or trustee under any of the Loan Documents, as
applicable) to personal liability (unless indemnified
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to its reasonable satisfaction) or that is contrary to this Agreement or
applicable law. The Administrative Agent agrees to give to each Lender prompt
notice of each notice given to it by the Borrower or any Subsidiary pursuant to
the terms of this Agreement.
SECTION 8.02. Exculpation of, and Reliance by, Agents and Agent Related
---------------------------------------------------------
Persons.
- -------
Neither the Administrative Agent (including in its capacity as trustee under any
of the Loan Documents or otherwise) nor any other Agent nor any Agent Related
Person shall be liable to any Lender for any action taken or omitted to be taken
by it or them under or in connection with this Agreement, any other Loan
Document or any Consent, except for its or their own gross negligence or willful
misconduct. Without limiting the generality of the foregoing, the
Administrative Agent (including in its capacity as trustee under any of the Loan
Documents or otherwise) and each Agent Related Person:
(a) may treat the payee of any Note as the holder thereof or any
Lender as a Lender until the Administrative Agent receives and accepts an
Assignment and Acceptance entered into by such payee or Lender, as assignor, and
an eligible assignee, as assignee, as provided in Section 9.04;
------------
(b) may consult with legal counsel (including counsel for the
Borrower), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts;
(c) makes no warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, warranties or representations
(whether written or oral) made in or in connection with this Agreement, any
other Loan Document or any Consent;
(d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement, any other Loan Document or any Consent, on the part of the Borrower
or any Subsidiary, or to inspect the property (including the books and records)
of the Borrower or any Subsidiary;
(e) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of, or the
perfection or priority of any lien or security interest created or purported to
be created under or in connection with, this Agreement or any other instrument
or document furnished pursuant hereto;
(f) shall incur no liability to any Lender under or in respect of this
Agreement, any other Loan Document or any Consent, by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier,
telegram, or telex) believed by it to be genuine and signed or sent by the
proper party or parties; and
(g) shall not be under any obligation to hold any title deeds, Loan
Documents or any other documents in connection with any property the subject of
a Lien under any Loan Document or any other security in its possession, or to
take any steps to protect or preserve the
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same and may permit the relevant Loan Party to retain all such title deeds, Loan
Documents and other documents in its possession, except as otherwise provided in
the Loan Documents.
SECTION 8.03. Agents, Agent Related Persons and Affiliates. With respect
--------------------------------------------
to its Commitment, the Credit Extensions made by it and any Note issued to it,
Deutsche Bank AG and CIBC Inc., and their respective Affiliates shall have the
same rights and powers under this Agreement as any other Lender and may exercise
the same as though it were not an Agent; and the term "Lender" or "Lenders"
shall, unless otherwise expressly indicated, include Deutsche Bank AG and CIBC
Inc. and any Affiliate thereof in its individual capacity. Deutsche Bank AG and
CIBC Inc. and their Affiliates may accept deposits from, lend money to, act as
trustee under indentures of, accept investment banking engagements from and
generally engage in any kind of business with, the Borrower, any Subsidiary and
any Person who may do business with or own securities of the Borrower or any
such Subsidiary, all as if Deutsche Bank AG and CIBC Inc. and their Affiliates
were not an Agent and without any duty to account therefor to the Lenders.
SECTION 8.04. Lender Credit Decision. Each Lender acknowledges that it
----------------------
has, independently and without reliance upon any Agent or Agent Related Person
or any other Lender and based on the financial statements referred to in
Section 3.01 and such other documents and information as it has deemed
- ------------
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon any Agent or Agent Related Person or any other Lender based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.
SECTION 8.05. Indemnification. The Lenders agree to indemnify each Agent
---------------
and Agent Related Person (to the extent not reimbursed by the Borrower or a
Subsidiary), ratably according to the respective principal amounts of the Loans
owing to them, and Commitments issued by them, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against such Agent or Agent Related Person
in any way relating to or arising out of this Agreement, any other Loan Document
or any Consent or any action taken or omitted by such Agent or Agent Related
Person under this Agreement, any other Loan Document or any Consent, provided
--------
that no Lender shall be liable to any Agent or Agent Related Person for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from such Agent's
or Agent Related Person's gross negligence or willful misconduct. Without
limiting the foregoing, each Lender agrees to reimburse each Agent and Agent
Related Person promptly upon demand for its ratable share of any out-of-pocket
expenses (including counsel fees) incurred by such Agent or Agent Related Person
in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that such Agent or Agent
Related Person is not reimbursed for such expenses by the Borrower or any
Subsidiary.
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SECTION 8.06. Collateral Matters. (a) The Administrative Agent (including
------------------
in its capacity as trustee under any of the Loan Documents or otherwise) is
authorized on behalf of all the Lenders, without the necessity of any notice to
or further consent from the Lenders, from time to time to take any action with
respect to any collateral security or the Security Documents which may be
necessary to perfect and maintain perfected the security interest in and Liens
upon the collateral security granted pursuant to the Security Documents.
(b) The Lenders irrevocably authorize the Administrative Agent
(including in its capacity as trustee under any of the Loan Documents or
otherwise), at its option and in its discretion, to release (i) any security
interest or Lien granted to or held by it upon any collateral security (A) upon
termination of the Commitments and payment in full in cash of all principal of
and interest on the Loans and all fees, costs, indemnities, gross-ups and
expenses that are payable under this Agreement or under any other Loan Document
and have been invoiced as of such termination date (in which case the Lenders
hereby authorize the Administrative Agent (or trustee under any of the Loan
Documents, as applicable) to execute, and the Administrative Agent (or trustee
under any of the Loan Documents, as applicable) agrees to execute, reasonable
releases in connection with this Agreement and the Loan Documents (other than,
in any event, as to items stated to survive the termination of this Agreement or
a Loan Document)); (B) constituting property sold or to be sold or disposed of
as part of or in connection with any disposition permitted hereunder; (C)
constituting property in which the Borrower or any Subsidiary owned no interest
at the time the security interest and/or Lien was granted or at any time
thereafter; (D) consisting of an instrument evidencing Indebtedness or other
debt instrument, if the Indebtedness evidenced thereby has been paid in full; or
(E) if approved, authorized or ratified in writing by the Majority Lenders or,
if required by Section 9.02, the Required Lenders or each Lender, as applicable,
------------
and (ii) any guarantor from its obligations under any Guaranty constituting a
Loan Document in the event such guarantor is not required to be a guarantor
pursuant to the terms of this Agreement. Upon request by the Administrative
Agent (or trustee under any of the Loan Documents, as applicable) at any time,
the Lenders will confirm in writing the such party's authority to release
particular types or items of collateral security or a Guaranty pursuant to this
Section.
(c) Except as otherwise provided in the Loan Documents, all moneys
which under any trusts therein contained are received by the Administrative
Agent in its capacity as trustee may, subject to the terms hereof, be invested
in the name of or under the control of the Administrative Agent in any
investment for the time being authorized by English law for the investment by
trustees of trust money or in any other investments which may be selected by the
Administrative Agent. Additionally the same may be placed on deposit in the name
of or under the control of the Administrative Agent at such bank or institution
(including the Administrative Agent) and upon such terms as the Administrative
Agent may think fit.
(d) Each Lender hereby confirms its approval of the Loan Documents
and any security created or to be created pursuant thereto and hereby
authorizes, empowers and directs the Administrative Agent (by itself or by such
person(s) as it may nominate) to execute and enforce the same as trustee or as
otherwise provided (and whether or not expressly in the Lender's names) on its
behalf.
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SECTION 8.07. Successor Administrative Agent. The Administrative Agent may
------------------------------
resign at any time by giving 30 days' written notice thereof to the Lenders and
the Borrower and may be removed at any time with or without cause by the
Majority Lenders. Upon any such resignation or removal, the Majority Lenders
shall have the right to appoint a successor Administrative Agent with the prior
written consent of the Borrower (not to be unreasonably withheld or delayed) so
long as no Event of Default has occurred and is continuing. If no successor
Administrative Agent shall have been so appointed by the Majority Lenders, and
shall have accepted such appointment, within 30 days after the retiring
Administrative Agent's giving of notice of resignation or the Majority Lenders'
removal of the retiring Administrative Agent, then the retiring Administrative
Agent may, on behalf of the Lenders, appoint, with the prior written consent of
the Borrower (not to be unreasonably withheld or delayed) so long as no Event of
Default has occurred and is continuing, a successor Administrative Agent which
shall be a Lender or a commercial bank organized under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of at least $250,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, discretion, privileges and duties of the retiring
Administrative Agent, and the retiring Administrative Agent shall be discharged
from its duties and obligations under this Agreement. After any retiring
Administrative Agent's resignation or removal hereunder as Administrative Agent,
the provisions of this Article VIII shall inure to its benefit as to any actions
------------
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.
ARTICLE IX.
MISCELLANEOUS
-------------
SECTION 9.01. Notices. Except in the case of notices and other
-------
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it at Wessex House, 45 Reid Street,
Hamilton, Bermuda HM12, Attention of Mid-Atlantic Crossing Ltd., Vice President
(Telecopy No. 441-296-6749);
(b) if to the Administrative Agent, to it at 31 West 52nd Street, New
York, New York 10019, Attention of Lydia Zaininger (Telecopy No. 212-469-8256);
(c) if to a Lead Agent (i) in the case of Deutsche Bank AG, New York
Branch, to it at 31 West 52nd Street, New York, New York 10019, Attention of
John Lilly (Telecopy No. 212-469-3713) and (ii) in the case of CIBC Inc., to it
at 425 Lexington Avenue, New York, New York 10017, Attention of Christine
Harrigan (Telecopy No. 212-856-3562); and
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(d) if to any other Lender, to it at its address (or telecopy number)
set forth on Schedule 2.01.
-------------
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given (a) to the Borrower or any Subsidiary in accordance
with the terms of this Agreement shall be deemed to have been given when sent
(answerback received) in the case of telecopy, when delivered, in the case of
hand or overnight courier service, and 5 days after mailing, in the case of
certified or registered mail, or (b) to any party hereto in accordance with the
terms of this Agreement other than for purposes of the immediately preceding
clause (a), shall be deemed to have been given on the date of receipt.
SECTION 9.02. Waivers; Amendments. (a) No failure or delay by the
-------------------
Administrative Agent or any Lender in exercising any right or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of the
Administrative Agent and the Lenders hereunder are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provision of this Agreement, any other Loan Document or any Consent or
consent to any departure by the Borrower or any Subsidiary therefrom shall in
any event be effective unless the same shall be permitted by paragraph (b) of
this Section, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan shall not be construed as a
waiver of any Default, regardless of whether the Administrative Agent or any
Lender may have had notice or knowledge of such Default at the time.
(b) Subject to Sections 5.4.2 and 5.4.3 of the Securities Accounts
-------------- -----
Agreement, neither this Agreement, any other Loan Document, any Consent nor any
provision hereof or thereof may be waived, amended or modified except pursuant
to an agreement or agreements in writing entered into by the Loan Parties
thereto and the Majority Lenders or by such Loan Parties and the Administrative
Agent with the consent of the Majority Lenders (unless expressly provided
otherwise in this Agreement); provided that no such agreement shall (i) increase
--------
the Commitment of any Lender without the written consent of such Lender, (ii)
reduce the principal amount of any Loan or reduce the rate of interest thereon,
or reduce any fees payable hereunder, without the written consent of each Lender
affected thereby, (iii) postpone the scheduled date of payment of the principal
amount of any Loan, or any interest thereon, or any fees payable hereunder, or
reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of any Commitment, without the written consent of
each Lender affected thereby, (iv) change Section 2.17(b) or (c) in a manner
--------------- ---
that would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, (v) amend Section 2.10(b) of this Agreement,
---------------
Section 2.7.3(a) of the Securities Accounts Agreement or Section 2.7.4(a) of the
- ---------------- ----------------
Securities Accounts Agreement without the consent of the Required Lenders, (vi)
change any of the provisions of this Section or the definition of "Required
Lenders," "Majority Lenders" or any other provision hereof specifying the number
or percentage
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of Lenders required to waive, amend or modify any rights hereunder or make any
determination or grant any consent hereunder or (vii) release all or
substantially all of the Collateral (other than in accordance with the terms of
the Security Documents) or release any guarantor from its obligations under a
guaranty (other than in accordance with the provisions thereof), without the
written consent of each Lender; provided further that no such agreement shall
-------- -------
amend, modify or otherwise affect the rights or duties of the Administrative
Agent hereunder without the prior written consent of the Administrative Agent.
SECTION 9.03. Expenses; Indemnity; Damage Waiver. (a) The Borrower shall
----------------------------------
pay (i) all reasonable out-of-pocket expenses incurred by the Agents, the Lead
Agents, and their respective Affiliates, including the reasonable fees, charges
and disbursements of one documentation counsel for the Agents and the Lead
Agents and their respective Affiliates, in connection with the syndication of
the credit facilities provided for herein, the preparation of the Commitment
Letter dated as of June 26, 1998 and August 13, 1998, among the Borrower, CIBC
Oppenheimer Corp. and Deutsche Bank Securities Inc. and the Commitment Letter
dated as of May 29, 1998, among the Borrower, CIBC Oppenheimer Corp. and CIBC
Inc., this Agreement and the other Loan Documents, and any amendments,
modifications or waivers of the provisions hereof and of any other Loan Document
(whether or not the transactions contemplated hereby or thereby shall be
consummated) and the reasonable fees, charges and disbursements of one counsel
for the Agents and the Lead Agents and their respective Affiliates in connection
with the ongoing consideration of legal matters relevant to any of the
foregoing, including the ongoing compliance with this Agreement and the security
relating hereto and thereto, (ii) the reasonable fees and expenses of any local
counsel retained by the Administrative Agent, (iii) the reasonable fees and
expenses of the Consultants in connection with the preparation of their reports
and the ongoing fees and expenses of the Independent Engineer, (iv) any expenses
the Borrower or any Subsidiary specifically agrees to pay pursuant to any
provision of the Loan Documents and (v) all reasonable out-of-pocket expenses
incurred by the Agents or any Lender, but only in connection with the
enforcement or protection of its rights or remedies in connection with this
Agreement and the Loan Documents, including its rights under this Section, or in
connection with the Loans made hereunder, including in connection with any
workout, restructuring or negotiations in respect thereof, provided that with
--------
respect to legal fees, the Borrower shall be responsible to pay only the
reasonable fees and expenses of one or more counsel selected by the
Administrative Agent for the benefit of itself, the Lead Agents, the other
Agents, the Lead Agents, the Lenders and their respective Affiliates. Other than
as set forth above, the Administrative Agent, the Lead Agents and the Lenders
shall be responsible for their own expenses, including ongoing administration
expenses (which the Administrative Agent's fee is intended to cover) and
expenses incurred in connection with assignments. With respect to out-of-pocket
expenses incurred in connection with amendments, modifications or waivers to
this Agreement or the Loan Documents and in connection with the ongoing
consideration of legal matters relevant to this Agreement and the other Loan
Documents (except for matters relating to the enforcement or protection of
rights or remedies and except when an Event of Default has occurred and is
continuing) the Administrative Agent agrees to confer with the Borrower in
advance of the incurrence of any such expenses.
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(b) The Borrower shall indemnify the Administrative Agent, the Lead
Agents and each Lender, and each Related Party of any of the foregoing Persons
(each such Person being called an "Indemnitee") against, and shall hold each
----------
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses (subject, in the case of ordinary expenses, to the provisions
of Section 9.03(a)), including the fees, charges and disbursements of any
---------------
counsel for any Indemnitee, incurred by or asserted against any Indemnitee
arising out of, in connection with, or as a result of (i) the execution or
delivery of this Agreement or any agreement or instrument contemplated hereby,
the performance by the parties hereto of their respective obligations hereunder
or the consummation of the transactions contemplated hereby, (ii) any presence
or release of Hazardous Materials on or from any property owned or operated by
the Borrower or any Subsidiary, or any Environmental Liability related in any
way to the Borrower or any Subsidiary, (iii) the use by the Lead Agents of the
syndication materials (whether or not such materials were provided by the
Borrower) or (iv) any actual or prospective claim, litigation, investigation or
proceeding relating to any of the foregoing, whether based on contract, tort or
any other theory and regardless of whether any Indemnitee is a party thereto;
provided that such indemnity shall not, as to any Indemnitee, be available to
- --------
the extent that such losses, claims, damages, liabilities or related expenses
resulted from the gross negligence or willful misconduct of such Indemnitee or
relate to a claim brought by an assignee or Participant against the Lender
making such assignment or participation. If for any reason the foregoing
indemnification is unavailable to any Indemnitee or is insufficient to hold it
harmless, then the Borrower shall contribute to the amount paid or payable by
such Indemnitee as a result of such loss, claim, damage, liability or related
expense in such proportion as is appropriate to reflect the relative economic
interests of the Borrower and the Shareholders on the one hand and such
Indemnitee on the other hand in the transactions contemplated hereby as well as
the relative fault of the Borrower and such Indemnitee with respect to such
loss, claim, damage or liability and any other relevant equitable
considerations.
(c) Each Indemnitee claiming any right to indemnity under paragraph
(b) of this Section by reason of the institution of any action against such
Indemnitee shall notify the Borrower thereof and shall consult with the Borrower
from time to time in connection with the defense of such action. In case any
such action shall be brought against such Indemnitee, the Borrower shall be
entitled, at its expense, to assume the defense thereof or to participate in
such action with counsel of its choice (which counsel shall be reasonably
satisfactory to such Indemnitee); provided that the Borrower may not settle any
--------
such action without the prior written consent of such Indemnitee (such consent
not to be unreasonably withheld or delayed) and the Borrower shall not be
entitled to assume the defense thereof if (i) such Indemnitee reasonably
determines, on the advice of counsel, that representation of both the Borrower
and such Indemnitee by the Borrower's counsel would present such counsel with a
conflict of interest, (ii) the defendants in, or targets of, any such action
include both such Indemnitee and the Borrower, and such Indemnitee shall have
reasonably concluded, on advice of counsel, that there may be legal defenses
available to it which are significantly different from those available to the
Borrower, (iii) the Borrower shall not have employed counsel satisfactory to
such Indemnitee to represent such Indemnitee within a reasonable time after
notice of the institution of any such action or (iv) such Indemnitee is faced
with potential criminal liability.
105
<PAGE>
SECTION 9.04. Successors and Assigns; Consent and Agreement. (a) The
---------------------------------------------
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns permitted hereby,
except that the Borrower may not assign or otherwise transfer any of its rights
or obligations hereunder without the prior written consent of each Lender (and
any attempted assignment or transfer by the Borrower without such consent shall
be null and void). Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby and, to the extent expressly
contemplated hereby, the Agent Related Parties and Related Parties of the
Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement. All Lenders now or hereafter parties to this Agreement hereby
agree to be bound by the terms of the Contractor Consents to the same extent as
the Administrative Agent.
(b) Any Lender may assign to one or more assignees (other than to the
Borrower, any Subsidiary or any of its Affiliates) all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) and the other Loan Documents;
provided that (i) except in the case of an assignment to a Lender or an
- --------
assignment solely of a Lender's rights or benefits under the Loan Documents to
an Affiliate of any Lender or, with respect to any Lender that is a fund that
invests in bank loans, to an Approved Fund, no such assignment shall be
permitted without the prior written consent of each of the Borrower and the
Administrative Agent (which shall not be unreasonably withheld), (ii) except in
the case of an assignment to a Lender or an Affiliate of a Lender or, with
respect to any Lender that is a fund that invests in bank loans, to an Approved
Fund, or an assignment of the entire remaining amount of the assigning Lender's
Commitment, the amount of the Commitment of the assigning Lender subject to each
such assignment (determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to the Administrative Agent) shall not
be less than $5,000,000 unless each of the Borrower and the Administrative Agent
otherwise consent (which consent shall not be unreasonably withheld), (iii) each
partial assignment shall be made as an assignment of a proportionate part of all
the assigning Lender's rights and obligations under this Agreement, (iv) the
parties to each assignment shall execute and deliver to the Administrative Agent
an Assignment and Acceptance for its acceptance and recording in the Register,
together with a processing and recordation fee of $3,500 (which shall be paid by
the assignor and/or assignee but not the Borrower), (v) the assignee shall not,
as of the effective date of such assignment, be entitled to receive any greater
payment under Section 2.14 or 2.16 than the assigning Lender shall be entitled
------------ ----
to receive with respect to the obligations sold and (vi) notwithstanding
anything to the contrary in this Section 9.04(b), unless an Event of Default
---------------
shall have occurred and be continuing, the Lead Agents, collectively, shall
retain a combination of Loan Commitments and principal amount of Loans in an
amount not less than the lesser of (x) $20,000,000 in the aggregate and (y) 10%
(or such other percentage as may be agreed upon by the Lead Agents and the
Borrower) of the total amount of Loan Commitments and Loans than outstanding
unless the Borrower shall otherwise consent (such consent not to be unreasonably
withheld), provided that all or any portion of such Loan Commitments and the
--------
Loans made thereunder may be held by the Lead Agents as lenders of record only.
Upon acceptance and recording pursuant to paragraph (d) of this Section, from
and after the effective date specified in each Assignment and Acceptance, the
assignee thereunder
106
<PAGE>
shall be a party hereto and, to the extent of the interest assigned by such
Assignment and Acceptance, have the rights and obligations of a Lender under
this Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto). Any assignment or
transfer by a Lender of rights or obligations under this Agreement that does not
comply with this paragraph shall be treated for purposes of this Agreement as a
sale by such Lender of a participation in such rights and obligations in
accordance with paragraph (e) of this Section.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders and the registered
owner(s) of any obligation evidenced by a Note, and the Commitment of, and
principal amount of the Loans owing to, each Lender pursuant to the terms hereof
from time to time (the "Register"). The Notes and the obligations evidenced
--------
thereby may be assigned or otherwise transferred in whole or in part only by
registration in the Register and the Note evidencing the same shall be
registered on the Register only upon surrender for registration of assignment or
transfer of the Note evidencing such obligation, duly endorsed by (or
accompanied by a written instrument of assignment or transfer duly executed by)
the registered owner thereof, and thereupon one or more new Note(s) in the same
aggregate principal amount shall be issued to the designated assignee(s) and the
old Notes shall be returned by the Administrative Agent to the Borrower marked
"canceled." No assignment of any Note or obligation evidenced thereby shall be
effective unless it has been recorded in the Register as provided in this
Section 9.04(c). The entries in the Register shall be conclusive, and the
- ---------------
Borrower, the Administrative Agent and the Lenders may treat each Person whose
name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the processing and recordation
fee referred to in paragraph (b) of this Section, evidence of such assignee's
exemption from withholding Taxes and any written consent to such assignment
required by paragraph (b) of this Section, the Administrative Agent shall accept
such Assignment and Acceptance and record the information contained therein in
the Register. No assignment shall be effective for purposes of this Agreement
unless it has been recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent, or the Lead Agents, sell participations to one or more
banks or other entities (a "Participant") in all or a portion of such Lender's
-----------
rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (i) such Lender's
--------
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrower, the Administrative Agent, the Lead
Agents and the other Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations
107
<PAGE>
under this Agreement. Any agreement or instrument pursuant to which a Lender
sells such a participation shall provide that such Lender shall retain the sole
right to enforce this Agreement and to approve any amendment, modification or
waiver of any provision of this Agreement. Subject to paragraph (f) of this
Section, the Borrower agrees that each Participant shall be entitled to the
benefits of Sections 2.14, 2.15 and 2.16 to the same extent as if it were a
------------- ---- ----
Lender and had acquired its interest by assignment pursuant to paragraph (b) of
this Section.
(f) A Participant shall not be entitled to receive any greater payment
under Section 2.14, 2.15 or 2.16 than the applicable Lender would have been
------------ ---- ----
entitled to receive with respect to the participation sold to such Participant,
and any such payment received by a Participant shall be in lieu of, and not
duplicative of, the comparable payment that would have been due to such
applicable Lender. A Participant shall not be entitled to the benefits of
Section 2.16 unless the Borrower is notified of the participation sold to such
- ------------
Participant and such Participant agrees, for the benefit of the Borrower, to
comply with the provisions of Section 2.16(e) as though it were a Lender.
---------------
(g) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including any such pledge or assignment to a Federal Reserve Bank,
and this Section shall not apply to any such pledge or assignment of a security
interest; provided that no such pledge or assignment of a security interest
--------
shall release a Lender from any of its obligations hereunder or substitute any
such assignee for such Lender as a party hereto.
SECTION 9.05. Limited Recourse. There shall be full recourse to the
----------------
Borrower and each Subsidiary for the liabilities of the Borrower and the
Subsidiaries under this Agreement and the other Loan Documents, but in no event
shall any holder of any equity interest in the Borrower (or any officer or
director of such holder or any officer or director of the Borrower or any
Subsidiary, in its capacity as such) be personally liable or obligated for such
liabilities of the Borrower and the Subsidiaries.
SECTION 9.06. Survival. All covenants, agreements, representations and
--------
warranties made by the Borrower herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any
Loans, and shall continue in full force and effect as long as the principal of
or any accrued interest on any Loan or any fee or any other amount payable under
this Agreement is outstanding and unpaid and so long as the Commitments have not
expired or terminated. The provisions of Sections 2.14, 2.15, 2.16 and 9.03 and
------------- ---- ---- ----
Article VIII shall survive and remain in full force and effect regardless of the
- ------------
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Commitments or the termination of
this Agreement or any provision hereof.
SECTION 9.07. Counterparts; Integration; Effectiveness. This Agreement may
----------------------------------------
be executed in counterparts (and by different parties hereto on different
counterparts), each of which shall constitute an original, but all of which when
taken together shall constitute a single
108
<PAGE>
contract. This Agreement and any agreements referred to herein and any separate
letter agreements with respect to fees payable to an Agent and/or Agent Related
Person constitute the entire contract among the parties relating to the subject
matter hereof and supersede any and all previous agreements and understandings,
oral or written, relating to the subject matter hereof. Except as provided in
Section 4.01, this Agreement shall become effective when it shall have been
- ------------
executed by the Borrower and the Administrative Agent and when the
Administrative Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and, subject to and in accordance with Section 9.04, their respective successors
------------
and assigns. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy shall be as effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 9.08. Severability. Any provision of this Agreement held to be
------------
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 9.09. Right of Setoff. If an Event of Default shall have occurred
---------------
and be continuing, each Lender is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held (other than deposits in the Accounts) and other indebtedness at any time
owing by such Lender to or for the credit or the account of the Borrower against
any of and all the obligations of the Borrower now or hereafter existing under
this Agreement held by such Lender, irrespective of whether or not such Lender
shall have made any demand under this Agreement and although such obligations
may be unmatured. The rights of each Lender under this Section are in addition
to other rights and remedies (including other rights of setoff) which such
Lender may have.
SECTION 9.10. Governing Law; Jurisdiction; Consent to Service of Process.
----------------------------------------------------------
(a) This Agreement shall be construed in accordance with and governed by the
laws of the State of New York.
(b) The Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such New
York State or, to the extent permitted by law, in such federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement
shall affect any right that the Administrative Agent or any Lender may otherwise
have to bring any
109
<PAGE>
action or proceeding relating to this Agreement against the Borrower or its
properties in the courts of any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any court referred to in
paragraph (b) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(d) Each party to this agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
------------
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law. The Borrower shall not object to
receiving service of process in any jurisdiction.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
--------------------
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
SECTION 9.12. Headings. Article and Section headings and the Table of
--------
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 9.13. Replacement of Independent Engineer. Any appointment by the
-----------------------------------
Administrative Agent of a replacement engineer to act as the "Independent
Engineer" under the Loan Documents and the System Contracts shall be subject to
the approval of the Borrower, such approval not to be unreasonably withheld or
delayed.
SECTION 9.14. Confidentiality. Each of the Administrative Agent, the Lead
---------------
Agents, any other Agents and the Lenders agrees to maintain the confidentiality
of the Information (as defined below), except that Information may be disclosed
(a) to its and its Affiliates' directors, officers, employees and agents,
including accountants, legal counsel and other advisors (it being understood
that the Persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any governmental or regulatory
authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement,
(e) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or the enforcement of rights
hereunder, (f) subject to an agreement containing provisions substantially the
same as those of this Section, to any assignee of or Participant in, or any
prospective assignee of or Participant in, any of its rights or obligations
under this Agreement, (g) with the consent of the Borrower (not to be
unreasonably withheld or delayed), (h) to the extent such Information (x)
becomes publicly available other than as a result of a breach of this Section or
(y) becomes
110
<PAGE>
available to the Administrative Agent, the Lead Agents or any Lender on a
nonconfidential basis from a source other than the Borrower or (i) to any direct
or indirect contractual counterparties in swap agreements or such contractual
counterparties' professional advisors, provided that such contractual
counterparty or professional advisor to such contractual counterparty agrees in
writing to keep such information confidential to the same extent required of the
Lenders hereunder. For the purposes of this Section, "Information" means all
information received from or on behalf of the Borrower relating to the
- ------------
Borrower, any Subsidiary, its business or the System, other than any such
information that is available to the Administrative Agent or any Lender on a
nonconfidential basis prior to disclosure by the Borrower; provided that,
--------
in the case of information received from the Borrower after the date hereof,
such information is clearly identified at the time of delivery as confidential.
Any Person required to maintain the confidentiality of Information as provided
in this Section shall be considered to have complied with its obligation to do
so if such Person has exercised the same degree of care to maintain the
confidentiality of such Information as such Person would accord to its own
confidential information.
SECTION 9.15. Right of Quiet Enjoyment. The Administrative Agent and each
------------------------
Lender agrees, for the benefit of each Person not an Affiliate of the Borrower
now or hereafter acquiring rights from the Borrower or any Subsidiary in respect
of any Capacity pursuant to a Capacity Sales Agreement, indefeasible right of
use agreement, or otherwise in accordance with Section 6.23 (a "Capacity
------------ --------
Purchaser"), that, notwithstanding any other provision hereof or any other Loan
- ----------
Document, so long as no event has occurred and is continuing under such
agreement which entitles the Borrower or a Subsidiary to suspend service to such
Capacity Purchaser, the Administrative Agent and such Lender will not take or
cause to be taken any action to interfere with such Capacity Purchaser's right
to quiet enjoyment. The Administrative Agent agrees to provide, and the Lenders
hereby authorize it to provide, at the written request of the Borrower, a
written confirmation of the foregoing for the benefit of such Capacity
Purchasers.
SECTION 9.16. Judgment Currency. If, for the purposes of obtaining
-----------------
judgment in any court, it is necessary to convert a sum due hereunder in one
currency into another currency, the parties hereto agree, to the fullest extent
permitted by law, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Administrative Agent could
purchase the former currency with such other currency on the Business Day
preceding that on which final judgment is given. The obligation of the Borrower
in respect of any sum due from it to the Administrative Agent hereunder shall,
notwithstanding any judgment in a currency other than the currency in which such
sum shall have been due, be discharged only to the extent that, on the Business
Day following receipt thereof by the Administrative Agent, the Administrative
Agent may in accordance with normal banking procedures purchase the currency in
which sum was due with such other currency in which judgment was rendered; if
the currency so purchased exceeds the sum originally due to the Administrative
Agent in the former currency, the Administrative Agent agrees to remit to the
Borrower such excess.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
111
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
MID-ATLANTIC CROSSING LTD.
By: /s/ K. Eugene Shutler
-----------------------------------
Name: K. Eugene Shutler
Title: Senior Vice President
DEUTSCHE BANK AG, NEW YORK
BRANCH, as a Lead Agent and as
Administrative Agent
By: /s/ John R. Lilly, Jr.
-----------------------------------
Name: John R. Lilly, Jr.
Title: Director
By: /s/ Jon D. Storck
-----------------------------------
Name: Jon D. Storck
Title: Vice President
CIBC INC.,
as a Lead Agent and as Documentation Agent
By: /s/ Neal Sobol
-----------------------------------
Name: Neal Sobol
Title: Executive Director
CANADIAN IMPERIAL BANK OF COMMERCE.,
as Syndication Agent
By: /s/ Neal Sobol
-----------------------------------
Name: Neal Sobol
Title: Executive Director
[CREDIT AGREEMENT]
<PAGE>
LENDERS:
- -------
DEUTSCHE BANK AG, NEW YORK
BRANCH AND/OR CAYMAN ISLANDS
BRANCH
By: /s/ John R. Lilly, Jr.
-----------------------------------
Name: John R. Lilly, Jr.
Title: Director
By: /s/ Jon D. Storck
-----------------------------------
Name: Jon D. Storck
Title: Vice President
CIBC INC.
By: /s/ Neal Sobol
-----------------------------------
Name: Neal Sobol
Title: Executive Director
[CREDIT AGREEMENT]
<PAGE>
BANK OF MONTREAL, CHICAGO BRANCH
By: /s/ W. T. Calder
-----------------------------------
Name: W. T. Calder
Title: Managing Director
[CREDIT AGREEMENT]
<PAGE>
BAYERISCHE HYPO-UND-VEREINSBANK,
NEW YORK BRANCH
By: /s/ Paul J. Colatrella
-----------------------------------
Name: Paul J. Colatrella
Title: Director
By: /s/ Eric A. Muth
-----------------------------------
Name: Eric A. Muth
Title: Associate Director
[CREDIT AGREEMENT]
<PAGE>
BAYERISCHE LANDESBANK
GIROZENTRALE
By: /s/ Chris Stolarski
-----------------------------------
Name: Chris Stolarski
Title: Vice President
By: /s/ Alexander Kohnert
-----------------------------------
Name: Alexander Kohnert
Title: Vice President
[CREDIT AGREEMENT]
<PAGE>
CREDITANSTALT AG
By: /s/ Martin Frank
-----------------------------------
Name: Martin Frank
Title: Assistant General Manager
By: /s/ Martin Benger
-----------------------------------
Name: Martin Benger
Title: Deputy Manager
[CREDIT AGREEMENT]
<PAGE>
DRESDNER BANK AG NEW YORK & GRAND
CAYMAN BRANCHES
By: /s/ Patrick Keleher
-----------------------------------
Name: Patrick A. Keleher
Title: Vice President
By: /s/ Helen Ng
-----------------------------------
Name: Helen Ng, PE
Title: Assistant Vice President
<PAGE>
THE GOVERNOR AND COMPANY OF THE
BANK OF SCOTLAND
By: /s/ Ian Campbell Garden
-----------------------------------
Name: Ian Campbell Garden
Title: Director, Project Finance
[CREDIT AGREEMENT]
<PAGE>
IKB DEUTSCHE INDUSTRIEBANK AG
LUXEMBOURG BRANCH
By: /s/ Peter Viering /s/ Manfred Ziwey
---------------------------------------------
Name: Peter Viering Manfred Ziwey
Title: Director Sr. Vice President
[CREDIT AGREEMENT]
<PAGE>
SUDWESTDEUTSCHE LANDESBANK
GIROZENTRALE
By: /s/ Lorenzo Osimani /s/ Nicola Hahn
----------------------------------------------
Name: Lorenzo Osimani Nicola Hahn
Title: Sr. Vice President Sr. Analyst
[CREDIT AGREEMENT]
<PAGE>
WESTDEUTSCHE LANDESBANK
GIROZENTRALE
By: /s/ Charles Columbus
-----------------------------------
Name: Charles Columbus
Title: Managing Director/manager
By: /s/ Roger McDaniel
-----------------------------------
Name: Roger McDaniel
Title: Vice President
[CREDIT AGREEMENT]
<PAGE>
EXHIBIT 5.1
JC/sde
#73694.6
17th December, 1998
Global Crossing Holdings Ltd.
Wessex House
45 Reid Street
Hamilton HM 12
Dear Sirs,
RE: GLOBAL CROSSING HOLDINGS LTD. (THE "COMPANY")
--------------------------------------------------
We have acted as legal counsel in Bermuda to the Company in connection with
the Exchange Offer to be made pursuant to the Exchange Offer Registration
Statement and pursuant to which the Company shall offer to the Holders of all
outstanding Transfer Restricted Securities held by such Holders, the opportunity
to exchange all such outstanding Transfer Restricted Securities for New
Preferred Stock, and where appropriate, for New Exchange Notes.
Unless otherwise defined in this opinion or the Schedules to it,
capitalised terms have the meanings assigned to them in the Registration Rights
Agreement.
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;
<PAGE>
2
(c) the authority, capacity and power of each of the persons signing the
Documents (other than the Company);
(d) that any factual statements made in any of the Documents are true,
accurate and complete;
(e) that the Operative Documents 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 have been validly authorised, executed and
delivered by each of the parties thereto, other than the Company, and the
performance thereof is within the capacity and powers of each such party
thereto, and that each such party to which the Company purportedly
delivered the Operative Documents has actually received and accepted
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 governed;
(h) that the Operative Documents are 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 opinion 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 is 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, 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 Shareholder of the Company;
<PAGE>
3
(k) that the Company has entered into its obligations under the Operative
Documents in good faith for the purpose of carrying on its business and
that, at the time it did so, there were reasonable grounds for believing
that the transactions contemplated by the Operative Documents and by the
amendment of the Bye-laws of the Company would benefit the Company; and
(l) that when executed, or in the case of the Exchange Offer Registration
Statement when filed, any document presented to us in draft 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) When issued in accordance with the terms of the Bye-laws of the Company,
and the Exchange Offer Registration Statement, the New Preferred Stock to
be issued as part of the Exchange Offer will be duly authorised, validly
issued, fully paid and non-assessable shares of the Company.
(2) The New Exchange Notes have been duly authorised for issuance and, upon due
execution and delivery of the Indenture, in accordance with the authority
given in the Resolutions, and when issued in accordance with the Indenture
and the Exchange Offer Registration Statement, the New Exchange Notes will
constitute valid and binding obligations of the Company enforceable against
the Company in accordance with their terms.
(3) A final and conclusive judgment of the United States Federal or New York
State Courts based upon the Securities, the Bye-laws of the Company or the
Operative Documents under which a sum of money is payable (not being a sum
payable in respect of taxes or other charges of a like nature, in respect
of a fine or other penalty, or in respect of multiple damages as defined in
The Protection of Trading Interests Act 1981) may be the subject of
enforcement proceedings in the Supreme Court of Bermuda without re-
examination of the merits of the case under the common law doctrine of
obligation by action on the debt evidenced by the foreign court's judgment.
On general principles, we would expect such proceedings to be successful
provided that the court which gave the judgment was competent to hear the
action in accordance with private international law principles as applied
in Bermuda and the judgment is not contrary to public policy in Bermuda,
has not been obtained by fraud or in proceedings contrary to natural
justice and is not based on an error in Bermuda law.
Enforcement of such a judgment against assets in Bermuda may involve the
conversion of the judgment debt into Bermuda dollars, but the Bermuda Monetary
<PAGE>
4
Authority has indicated that its present policy is to give the consents
necessary to enable recovery in the currency of the obligation.
RESERVATIONS
- ------------
We have the following reservations:-
(a) The term "enforceable" as used in this opinion means that the obligations
assumed by the relevant party under the Bye-laws of the Company and the
Operative Documents are of a type which the courts of Bermuda enforce. It
does not mean that those obligations will necessarily be enforced in all
circumstances in accordance with their terms, because of the matters
referred to in reservation (b).
(b) 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 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.
(c) Enforcement of the obligations of the Company under the Bye-laws of the
Company and 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.
(d) 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.
(e) 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.
(f) 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.
(g) We express no opinion as to the validity, binding effect or enforceability
of any provision incorporated into the Bye-laws of the Company or any of
the Operative
<PAGE>
5
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.
(h) We express no opinion as to the validity or binding effect of any provision
of the Bye-laws of the Company or 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.
(j) 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 such 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 in connection with the Exchange Offer
Registration Statement and is not to be made available to, or relied on by any
other person or entity, or for any other purpose without our prior written
consent. We consent to the filing of this opinion as an exhibit to the Exchange
Offer Registration Statement of the Company and to reference to our Firm in the
"Service of Process and Enforcement of Liabilities" and "Legal Matters" sections
of the Exchange Offer Registration Statement.
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 and
we assume no obligation to review or update this opinion if applicable laws or
the existing facts or circumstances should change.
<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>
1
SCHEDULE 1
----------
1. A copy of the Offering Memorandum dated November 24, 1998 relating to the
offering and sale of $500,000,000 aggregate principal amount of its 10 1/2%
Senior Exchangeable Preferred Stock due 2008 (excluding Exhibits) (the
"Final Memorandum").
2. A copy of the executed Purchase Agreement dated November 23, 1998 (excluding
Exhibits) and made between the Company, Salomon Smith Barney, Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, CIBC Oppenheimer Corp., Deutsche
Bank Securities, Inc., Goldman, Sachs & Co., Morgan Stanley & Co.
Incorporated, Chase Securities Inc. and Donaldson, Lufkin & Jennette
Securities Corporation (the "Purchase Agreement").
3. A draft (sent to us by fax on December 1, 1998) of the Indenture to be dated
on the date of issuance of the Exchange Notes (as that terms is defined in
the Purchase Agreement) and to be made by the Company and trustee pursuant
to which the Notes are to be issued (the "Indenture").
4. The Registration Rights Agreement dated as of December 2, 1998 and made
between the Company, Salomon Smith Barney Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, CIBC Oppenheimer Corp., Deutsche Bank
Securities, Inc., Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated,
Chase Securities Inc. and Donaldson, Lufkin & Jennette Securities
Corporation (the "Registration Rights Agreement").
5. A draft of the Exchange Offer Registration Statement faxed to us on December
17, 1998.
6. A certified copy of excerpts from the Minutes of the Meetings of the Board
of Directors of the Company held on 1 December, 1998 and the unanimous
written resolutions of the Shareholders of the Company adopted on 1st
December, 1998 (the "Resolutions").
7. A certified copy of the Memorandum of Increase of Share Capital of the
Company.
8. Certified copies of the Certificate of Incorporation, Memorandum of
Association and Bye-laws of the Company (collectively referred to as the
"Constitutive Documents").
9. A Certificate of Compliance dated November 30, 1998 issued by the Ministry
of Finance in respect of the Company.
10. A copy of a letter evidencing consent of the Bermuda Monetary Authority to
the issue by the Company of the New Preferred Stock Securities and the New
Exchange Notes.
(The documents referred to in 2, 3 and 4 above are together referred to as the
"Operative Documents".)
<PAGE>
EXHIBIT 5.2
December 21, 1998
Global Crossing Holdings Ltd.
Wessex House
45 Reid Street
Hamilton HM12, Bermuda
Ladies and Gentlemen:
We have acted as U.S. counsel for Global Crossing Holdings Ltd., a
corporation organized under the laws of Bermuda (the "Company"), in connection
with the Registration Statement on Form S-4 (the "Registration Statement") filed
by the Company with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
the issuance by the Company of 5,000,000 shares of 10 1/2% Senior Exchangeable
Preferred Stock due 2008, no par value (the "Exchange Preferred Stock"). Shares
of the Exchange Preferred Stock are to be offered by the Company in exchange for
(the "Exchange Offer") its outstanding 5,000,000 shares of 10 1/2% Senior
Exchangeable Preferred Stock due 2008, no par value (the "Old Preferred Stock").
Pursuant to the Registration Statement, the Company has also registered 10 1/2%
Senior Subordinated Exchange Notes due 2008 (the "Exchange Notes"), which, at
the Company's option, may be issued in exchange for the Old Preferred Stock or
the Exchange Preferred Stock subject to certain conditions. The Exchange Notes
would be issued under an
<PAGE>
Global Crossing Holdings Ltd. -2-
indenture to be executed at the time of issuance between the Company and a
trustee for holders of the Exchange Notes (the "Indenture").
We have examined the Registration Statement and the Indenture, a form of
which has been filed with the Commission as an exhibit to the Registration
Statement. In addition, we have examined, and have relied as to matters of fact
upon, the originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records, agreements, documents and other
instruments and such certificates or comparable documents of public officials
and of officers and representatives of the Company, and have made such other and
further investigations, as we have deemed relevant and necessary as a basis for
the opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents.
We have further assumed that, with respect to each of the parties to the
Indenture and the Exchange Notes, as the case may be, (i) such person was duly
incorporated or organized and is validly existing under the laws of the
jurisdiction in which it was incorporated or organized, (ii) such person has the
power and authority to execute the Indenture and the Exchange Notes, as the case
may be, to which it is a party and to take all actions contemplated to be taken
by it thereunder and (iii) such person has duly authorized, executed and
delivered the Indenture and the Exchange Notes, as the case may be, to which it
is a party in accordance with the charter or other organizational documents of
such person.
<PAGE>
Global Crossing Holdings Ltd. -3-
Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion that when (1) the Indenture has
been duly qualified under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), (2) the Board of Directors of the Company, a duly
constituted and acting committee thereof or duly authorized officers thereof
have taken all necessary corporate action to approve the issuance and terms of
the Exchange Notes and related matters, and (3) the Exchange Notes have been
duly executed, authenticated, issued and delivered in accordance with the
provisions of the Indenture, the Exchange Notes will constitute valid and
legally binding obligations of the Company enforceable against the Company in
accordance with their terms and entitled to the benefits of the Indenture.
Our opinion set forth above is subject to (i) the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, (ii) general
equitable principles (whether considered in a proceeding in equity or at law),
(iii) an implied covenant of good faith and fair dealing and (iv) the effects of
the possible judicial application of foreign laws or foreign governmental or
judicial action affecting creditors' rights.
We are members of the Bar of the State of New York, and we do not
express any opinion herein concerning any law other than the laws of the State
of New York and the federal laws of the United States. Insofar as the opinions
set forth herein relate to issues governed by the laws of Bermuda, we have
assumed the correctness of the opinion of Appleby, Spurling & Kempe, which is
also filed as an exhibit to the Registration Statement.
We hereby consent to the use of this opinion as an exhibit to the
Registration
<PAGE>
Global Crossing Holdings Ltd. -4-
Statement and to the reference to our firm under the caption "Legal Matters" in
the Prospectus included therein.
Very truly yours,
/s/ Simpson Thacher & Bartlett
SIMPSON THACHER & BARTLETT
<PAGE>
EXHIBIT 12.1
Global Crossing Holdings Ltd. and Subsidiaries
Ratio of Earnings to Combined Fixed Charges and Preferred Dividends
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Historical
For the Period
From March 19,
1997 (Date of
Three Months Inception) to
Ended Nine Months Ended December 31,
September 30, September 30, 1998 1997
(unaudited) (unaudited) (unaudited)
---------------------------------------------------------------
<S> <C> <C> <C>
INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY ITEM $ 33,636,362 $ (77,677,018) $ (160,356)
ADD:
Capitalized interest included in cost of
capacity sold 1,066,952 1,959,732 -
-------------------------------------------------------------
34,703,314 (75,717,286) (160,356)
-------------------------------------------------------------
FIXED CHARGES:
Interest expense, including amortization
of deferred finance fees and issuance
discount 17,983,947 25,659,937 -
Portion of rents representative of an
interest factor 27,896 151,446 2,147
-------------------------------------------------------------
18,011,843 25,811,383 2,147
-------------------------------------------------------------
INCOME (LOSS), AS ADJUSTED,
BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM $ 52,715,157 $ (49,905,903) $ (158,209)
=============================================================
FIXED CHARGES:
Fixed charges, as above 18,011,843 25,811,383 2,147
Interest capitalized 12,682,641 36,903,673 9,776,767
-------------------------------------------------------------
$ 30,694,484 $ 62,715,056 $ 9,778,914
Preferred share dividends - 8,306,433 12,689,923
Total fixed charges and preferred dividends $ 30,694,484 $ 71,021,489 $ 22,468,837
=============================================================
EXCESS OF EARNINGS OVER COMBINED FIXED
CHARGES AND PREFERRED DIVIDENDS
(EXCESS OF COMBINED FIXED CHARGES AND
PREFERRED DIVIDENDS OVER EARNINGS) $ 22,020,673 $ (120,927,392) $(22,627,046)
=============================================================
Ratio of earnings to combined fixed charges and
preferred dividends 1.72 - -
-------------------------------------------------------------
<CAPTION>
Proforma
For the Period
From March 19,
Three Months 1997 (Date of
Ended Nine Months Ended Inception) to
September 30, 1998 September 30, 1998 December 31, 1997
-------------------------------------------------------------------
<S> <C> <C> <C>
INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY ITEM $ 33,636,362 $ (77,677,018) $ (160,356)
ADD:
Capitalized interest included in cost of
capacity sold 1,066,952 1,959,732 -
-------------------------------------------------------------
34,703,314 (75,717,286) (160,356)
-------------------------------------------------------------
FIXED CHARGES:
Interest expense, including amortization
of deferred finance fees and issuance
discount 17,983,947 25,659,937 -
Portion of rents representative of an
interest factor 27,896 151,446 2,147
-------------------------------------------------------------
18,011,843 25,811,383 2,147
-------------------------------------------------------------
INCOME (LOSS), AS ADJUSTED,
BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM $ 52,715,157 $ (49,905,903) $ (158,209)
=============================================================
FIXED CHARGES:
Fixed charges, as above 18,011,843 25,811,383 2,147
Interest capitalized 12,682,641 36,903,673 9,776,767
-------------------------------------------------------------
$ 30,694,484 $ 62,715,056 $ 9,778,914
Preferred share dividends 13,125,000 47,681,433 53,970,745
Total fixed charges and preferred dividends $ 43,819,484 $ 110,396,489 $ 63,749,659
=============================================================
EXCESS OF EARNINGS OVER COMBINED FIXED
CHARGES AND PREFERRED DIVIDENDS
(EXCESS OF COMBINED FIXED CHARGES AND
PREFERRED DIVIDENDS OVER EARNINGS) $ 8,895,673 $(160,302,392) $ (63,907,868)
=============================================================
Ratio of earnings to combined fixed charges and
preferred dividends 1.20 - -
-------------------------------------------------------------
</TABLE>
<PAGE>
Global Crossing Holdings Ltd. and Subsidiaries
Ratio of Earnings to Fixed Charges
(Expressed in U.S. Dollars)
<TABLE>
<CAPTION>
Historical
For the Period
From March 19,
Three Months 1997 (Date of
Ended Inception) to
September 30, Nine Months Ended December 31,
1998 September 30, 1998 1997
-------------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY ITEM $ 33,636,362 $ (77,677,018) $ (160,356)
ADD:
Capitalized interest included in cost of
capacity sold 1,066,952 1,959,732 -
--------------------------------------------------------------------------
34,703,314 (75,717,286) (160,356)
--------------------------------------------------------------------------
FIXED CHARGES:
Interest expense, including amortization
of deferred finance fees and issuance
discount 17,983,947 25,659,937 -
Portion of rents representative of an
interest factor 27,896 151,446 2,147
--------------------------------------------------------------------------
18,011,843 25,811,383 2,147
--------------------------------------------------------------------------
INCOME (LOSS), AS ADJUSTED,
BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM $ 52,715,157 $ (49,905,903) $ (158,209)
==========================================================================
FIXED CHARGES:
Fixed charges, as above 18,011,843 25,811,383 2,147
Interest capitalized 12,682,641 36,903,673 9,776,767
--------------------------------------------------------------------------
$ 30,694,484 $ 62,715,056 $ 9,778,914
==========================================================================
EXCESS OF EARNINGS OVER FIXED
CHARGES (EXCESS OF FIXED CHARGES
OVER EARNINGS) $ 22,020,673 $(112,620,959) $(9,937,123)
==========================================================================
Ratio of earnings to fixed charges 1.72 - -
--------------------------------------------------------------------------
<CAPTION>
Proforma
For the Period
From March 19,
Three Months 1997 (Date of
Ended Nine Months Ended Inception) to
September 30, 1998 September 30, 1998 December 31, 1997
-----------------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C>
INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY ITEM $ 33,636,362 $ (77,677,018) $ (160,356)
ADD:
Capitalized interest included in cost of
capacity sold 1,066,952 1,959,732 -
-----------------------------------------------------------------------------------
34,703,314 (75,717,286) (160,356)
-----------------------------------------------------------------------------------
FIXED CHARGES:
Interest expense, including amortization
of deferred finance fees and issuance
discount 17,983,947 25,659,937 -
Portion of rents representative of an
interest factor 27,896 151,446 2,147
-----------------------------------------------------------------------------------
18,011,843 25,811,383 2,147
-----------------------------------------------------------------------------------
INCOME (LOSS), AS ADJUSTED,
BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM $ 52,715,157 $ (49,905,903) $ (158,209)
===================================================================================
FIXED CHARGES:
Fixed charges, as above 18,011,843 25,811,383 2,147
Interest capitalized 12,682,641 36,903,673 9,776,767
-----------------------------------------------------------------------------------
$ 30,694,484 $ 62,715,056 $ 9,778,914
===================================================================================
EXCESS OF EARNINGS OVER FIXED
CHARGES (EXCESS OF FIXED CHARGES
OVER EARNINGS) $ 22,020,673 $ (112,620,959) $(9,937,123)
===================================================================================
Ratio of earnings to fixed charges 1.72 - -
-----------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 21.1
------------
Subsidiaries of the Registrant
SUBSIDIARY JURISDICTION OF
- ---------- ----------------
INCORPORATION
-------------
Global Crossing Network Center Ltd. Bermuda
Global Crossing International, Ltd. Bermuda
Global Telesystems Holdings Ltd. Bermuda
Pacific Crossing Holdings Ltd. Bermuda
Mid-Atlantic Crossing Holdings Ltd. Bermuda
Pan American Crossing Holdings Ltd. Bermuda
Global Crossing Landing Holdings Ltd. Bermuda
GC St. Croix Co. U.S. Virgin Islands
Global Crossing Development Co. Delaware
Global Crossing Holdings U.K. Ltd. UK
Global Crossing Marketing USA Inc. Delaware
Atlantic Crossing Ltd. Bermuda
GCT Pacific Holdings Ltd. Bermuda
Mid-Atlantic Crossing Ltd. Bermuda
Pan American Crossing Ltd. Bermuda
GC Pacific Landing Corp. Delaware
<PAGE>
2
Global Crossing Marketing U.K. Ltd. UK
GT Landing Corp. Delaware
Global Telesystems GmbH Germany
GT Netherlands B.V. Netherlands
GT U.K. Ltd. UK
Atlantic Crossing Holdings U.K. Ltd. UK
Pacific Crossing Ltd. Bermuda
Mid-Atlantic Crossing Holdings U.K. Ltd. UK
Pan-American Crossing UK Ltd. UK
PAC Panama Ltd. Bermuda
PC Landing Corp. Delaware
PCL Japan Ltd. Japan
Pacific Crossing UK Limited UK
MAC Landing Corp. Delaware
PAC Landing Corp. Delaware
Global Crossing Mexicana S. de R.L. de C.V. Mexico
<PAGE>
Exhibit 23.3
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of this
Registration Statement.
/s/ Arthur Andersen & Co.
Hamilton, Bermuda
December 21, 1998
<PAGE>
EXHIBIT 25.1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2)_________
---------------
U.S. TRUST COMPANY OF TEXAS, N.A.
(Exact name of trustee as specified in its charter)
75-2353745
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
2001 Ross Ave, Suite 2700 75201
Dallas, Texas (Zip Code)
(Address of trustee's
principal executive offices)
Compliance Officer
U.S. Trust Company of Texas, N.A.
2001 Ross Ave, Suite 2700
Dallas, Texas 75201
(214) 754-1200
(Name, address and telephone number of agent for service)
---------------
Global Crossing Holdings Ltd.
(Exact name of obligor as specified in its charter)
Bermuda 98-0186828
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
Wessex House HM12
45 Reid Street (Zip Code)
Hamilton, Bermuda
(Address of principal executive offices)
---------------
10-1/2% Senior Subordinated Notes due 2008
(Title of the indenture securities)
<PAGE>
GENERAL
1. General Information.
--------------------
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of Dallas (11th District), Dallas, Texas
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Dallas, Texas
The Office of the Comptroller of the Currency, Dallas, Texas
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
2. Affiliations with Obligor and Underwriters.
-------------------------------------------
If the obligor or any underwriter for the obligor is an affiliate of the
Trustee, describe each such affiliation.
None.
3. Voting Securities of the Trustee.
---------------------------------
Furnish the following information as to each class of voting securities of
the Trustee:
As of December 21, 1998
- --------------------------------------------------------------------------------
Col A. Col B.
- --------------------------------------------------------------------------------
Title of Class Amount Outstanding
- --------------------------------------------------------------------------------
Capital Stock - par value $100 per share 5,000 shares
4. Trusteeships under Other Indentures.
------------------------------------
Not Applicable
5. Interlocking Directorates and Similar Relationships with the Obligor or
-----------------------------------------------------------------------
Underwriters.
-------------
<PAGE>
Not Applicable
<PAGE>
6. Voting Securities of the Trustee Owned by the Obligor or its Officials.
-----------------------------------------------------------------------
Not Applicable
7. Voting Securities of the Trustee Owned by Underwriters or their Officials.
--------------------------------------------------------------------------
Not Applicable
8. Securities of the Obligor Owned or Held by the Trustee.
-------------------------------------------------------
Not Applicable
9. Securities of Underwriters Owned or Held by the Trustee.
--------------------------------------------------------
Not Applicable
10. Ownership or Holdings by the Trustee of Voting Securities of Certain
--------------------------------------------------------------------
Affiliates or Security Holders of the Obligor.
----------------------------------------------
Not Applicable
11. Ownership or Holdings by the Trustee of any Securities of a Person Owning
-------------------------------------------------------------------------
50 Percent or More of the Voting Securities of the Obligor.
-----------------------------------------------------------
Not Applicable
12. Indebtedness of the Obligor to the Trustee.
-------------------------------------------
Not Applicable
13. Defaults by the Obligor.
------------------------
Not Applicable
14. Affiliations with the Underwriters.
-----------------------------------
Not Applicable
15. Foreign Trustee.
----------------
Not Applicable
16. List of Exhibits.
-----------------
T-1.1 - A copy of the Articles of Association of U.S. Trust Company of
Texas, N.A.; incorporated herein by reference to Exhibit T-1.1 filed with
Form T-1 Statement, Registration No. 22-21897.
<PAGE>
16. (con't.)
T-1.2 - A copy of the certificate of authority of the Trustee to commence
business; incorporated herein by reference to Exhibit T-1.2 filed
with Form T-1 Statement, Registration No. 22-21897.
T-1.3 - A copy of the authorization of the Trustee to exercise corporate
trust powers; incorporated herein by reference to Exhibit T-1.3
filed with Form T-1 Statement, Registration No. 22-21897.
T-1.4 - A copy of the By-laws of the U.S. Trust Company of Texas, N.A., as
amended to date; incorporated herein by reference to Exhibit T-1.4
filed with Form T-1 Statement, Registration No. 22-21897.
T-1.6 - The consent of the Trustee required by Section 321(b) of the Trust
Indenture Act of 1939.
T-1.7 - A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority.
NOTE
As of December 21, 1998 the Trustee had 5,000 shares of Capital Stock
outstanding, all of which are owned by U.S. T.L.P.O. Corp. As of December 21,
1998, U.S. T.L.P.O. Corp. had 35 shares of Capital Stock outstanding, all of
which are owned by U.S. Trust Corporation. U.S. Trust Corporation had
outstanding 18,428,249.00 shares of $5 par value Common Stock as of December 21,
1998.
The term "Trustee" in Items 2, 5, 6, 7, 8, 9, 10 and 11 refers to each of U.S
Trust Company of Texas, N.A., U.S. T.L.P.O. Corp. and U.S. Trust Corporation.
In as much as this Form T-1 is filed prior to the ascertainment by the Trustee
of all the facts on which to base responsive answers to Items 2, 5, 6, 7, 9, 10
and 11, the answers to said Items are based upon incomplete information. Items
2, 5, 6, 7, 9, 10 and 11 may, however, be considered correct unless amended by
an amendment to this Form T-1.
In answering any items in this Statement of Eligibility and Qualification which
relates to matters peculiarly within the knowledge of the obligors or their
directors or officers, or an underwriter for the obligors, the Trustee has
relied upon information furnished to it by the obligors and will rely on
information to be furnished by the obligors or such underwriter, and the Trustee
disclaims responsibility for the accuracy or completeness of such information.
---------------
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the Trustee, U.S
Trust Company of Texas, N.A., a national banking association organized under the
laws of the United States of America, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Dallas, and State of Texas on the
21st day of December, 1998.
U.S. Trust Company
of Texas, N.A., Trustee
By: /s/Cynthia Chaney
---------------------------
Cynthia Chaney
Authorized Officer
<PAGE>
Exhibit T-1.6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939 as amended in connection with the proposed issue of Global Crossing
Holdings Ltd. 10 1/2% Senior Subordinated Notes due 2008, we hereby consent that
reports of examination by Federal, State, Territorial or District authorities
may be furnished by such authorities to the Securities and Exchange Commission
upon request therefore.
U.S. Trust Company of Texas, N.A.
By: /s/Cynthia Chaney
-------------------------------
Cynthia Chaney
Authorized Signature
<PAGE>
Board of Governors of the Federal Reserve System
OMB Number: 7100-0036
Federal Deposit Insurance Corporation
OMB Number: 3064-005
Office of the Comptroller of the Currency
Federal Financial Institutions OMB Number: 1557-0081
Examination Council Expires March 31, 2001
- --------------------------------------------------------------------------------
(LOGO) (1)
Please Refer to Page I, Table of Contents, for
The required disclosure of estimated burden.
- --------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC OFFICES
ONLY AND TOTAL ASSETS OF LESS THAN $100 MILLION - - FFIEC 033
REPORT AT THE CLOSE OF BUSINESS September 30, 1998
This report is required by law: 12 U.S.C. Section (S)324 (State member banks);
12 U.S.C. Section (S)1817 (State nonmember banks); and 12 U.S.C. Section (S)161
(National banks).
(19980930)
- --------------------
(RCRI 9999)
This report form is to be filed by banks with domestic offices only. Banks with
branches and consolidated subsidiaries in U.S. territories and possessions, Edge
or Agreement subsidiaries, foreign branches, consolidated foreign subsidiaries,
or International Banking Facilities must file FFIEC 031.
- --------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National Banks.
I, Alfred B. Childs, SVP & Cashier
------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and are true
to the best of my knowledge and belief.
/s/ Alfred B. Childs
- ---------------------------------------
Signature of Officer Authorized to Sign Report
October 21, 1998
- ----------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: these instructions may in some
cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it has
been examined by us and to the bestof our knowledge and belief has been prepared
in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and appropriate Federal regulatory authority
and are true to the correct.
/s/ William Goodwin
- --------------------
Director (Trustee)
/s/ Stuart M. Pearman
- ----------------------
Director (Trustee)
/s/ J. T. Moore, Jr.
- ---------------------
Director (Trustee)
- --------------------------------------------------------------------------------
<PAGE>
Submission of Reports
Each bank must prepare its Reports of Condition and Income either:
(a) in electronic form and then file the computer data file directly with the
banking agencies' collection agent, Electronic Data Systems Corporation
(EDS), by modem or on computer diskette; or
(b) in hard-copy (paper form and arrange for another party to convert the paper
report to electronic form. That party (if other than EDS) must transmit the
bank's computer data file to EDS.
For electronic filing assistance, contact EDS Call Report Services, 2150 N.
Prospect Ave., Milwaukee, WI 53202, telephone (800) 255-1571.
To fulfill the signature and attestation requirement for the Reports of
Condition and Income for this report date, attach this signature page to the
hard-copy record of the completed report that the bank places in its files.
- --------------------------------------------------------------------------------
FDIC Certificate Number _____________
(RCRI 9050)
US Trust Company of Texas, National Association
- -----------------------------------------------
Legal Title of Bank (TEXT 9010)
Dallas
- -----------------------------------------------
City (TEXT 9130)
TX 75201
- -----------------------------------------------
State Abbrev. (TEXT 9200) Zip Code. (TEXT 9220)
Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of the Comptroller of the Currency
<PAGE>
U.S. Trust Company of Texas, N.A. Call State #: 48-6797 FFIEC 033
2001 Ross Avenue, Suite 2700 Date: Cert #: 33217 RC-1
Dallas, TX 75201 09/30/98
Vendor ID:
D
Transit #: 11101765
---------------
9
---------------
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR September 30, 1998
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC - Balance Sheet
<TABLE>
<CAPTION>
C200 (less than)
Dollar Amounts in
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Thousands
- ---------
ASSETS
1. Cash and balances due from depository institutions: RCON
----
a. Noninterest-bearing balances and currency and coin 0081 956 1.a
(1,2)__________________ ------ ------ -------
b. Interest bearing balances 0071 1,375 1.b
(3)____________________ ------ ------ -------
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column 1754 0 2.a
A)_____________________ ------ ------ -------
b. Available-for-sale securities (from Schedule RC-B, column 1773 117,282 2.b
D)______________ ------ ------ -------
3. Federal funds sold (4) and securities purchased under agreements to 1350 5,000 3
resell: -------
4. Loans and lease financing receivables: RCON
----
a. Loans and leases, net of unearned income (from Schedule 2122 21,497 4.a
RC-C)____________ ------
b. LESS: Allowance for loan and lease 3123 245 4.b
losses_______________________________ ------
c. LESS: Allocated transfer risk 3128 0 4.c
reserve___________________________________ ------
RCON
d. Loans and leases, net of unearned income, allowance, and reserve ----
(item 4.a minus 4.b and 4.c)___________ 2125 21,252 4.d
------ ------ -------
5. Trading 3545 0 5.
assets______________ ------ ------ -------
6. Premises and fixed assets (including capitalized 2145 669 6.
leases)_____________ ------ ------ -------
7. Other real estate owned (from Schedule 2150 0 7.
RC-M)_______________ ------ ------ -------
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M)________________________ 2130 0 8.
------ ------ -------
9. Customers' liability to this bank on acceptances 2155 0 9.
outstanding_________ ------ ------ -------
10. Intangible assets (from Schedule 2143 0 10.
RC-M)_______________ ------ ------ -------
11. Other assets (from Schedule 2160 1,921 11.
RC-F)_______________ ------ ------ -------
12. Total assets (sum of items 1 through 2170 148,455 12.
11)_________________ ------ ------ -------
</TABLE>
(1) Includes cash items in process of collection and unposted debits.
(2) Included time certificates of deposit not held for trading.
<PAGE>
U.S. Trust Company of Texas, N.A. Call State #: 48-6797 FFIEC 033
2001 Ross Avenue, Suite 2700 Date: Cert #: 33217 RC-2
Dallas, TX 75201 09/30/98
Vendor ID:
D
Transit #: 11101765
---------------
10
---------------
Schedule RC - Continued
<TABLE>
<CAPTION>
Dollar Amounts in
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Thousands
- ---------
LIABILITIES
13. Deposits: RCON
a. In domestic offices (sum of totals of ----
columns A and C from Schedule RCON 2200 119,853 13.a
RC-E)_______________ ---- -------
(1) Noninterest-bearing 6631 10,673 13.a.1
(1)_________________ -------
(2) Interest-bearing 6636 109,180 13.a.2
-------
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs
(1) Noninterest-bearing________
(2) Interest-bearing____________
RCON
14. Federal funds purchased(2) and securities sold under agreements to ----
repurchase: 2800 0 14
-------
15. a. Demand notes issued to the U.S. 2840 0 15.a
Treasury__________________________ ------ ------ -------
b. Trading 3548 0 15.b
liabilities_____________________ ------ ------ -------
16. Other borrowed money:
a. With a remaining maturity of one year or 2332 1,000 16.a
less____________________________ ------ ------ -------
b. With a remaining maturity of more than one year through three A547 2,000 16.b
years__________________________ ------ ------ -------
c. With a remaining maturity of more than three A548 1,000 16.c
years_________________________ ------ ------ -------
17. Not applicable
18. Bank's liability on acceptances executed and 2920 0 18.
outstanding____________________ ------ ------ -------
19. Subordinated notes and 3200 0 19.
debentures______________________ ------ ------ -------
20. Other liabilities (from Schedule 2930 2,493 20.
RC-G)___________________________ ------ ------ -------
21. Total liabilities (sum of items 13 through 2948 126,346 21.
20)_____________________________ ------ ------ -------
22. Not applicable
EQUITY CAPITAL
RCON
----
23. Perpetual preferred stock and related 3838 7,000 23.
surplus______________________________________________ ------ ------ -------
3230 500 24.
24. Common stock_________________________________________ ------ ------ -------
25. Surplus (exclude all surplus related to preferred 3839 8,384 25.
stock)_______________________________________________ ------ ------ -------
26. a. Undivided profits and capital 3632 5,261 26.a
reserves_____________________________________________ ------ ------ -------
b. Net unrealized holding gains (losses) on available-for-sale 8434 964 26.b
securities________________________ ------ ------ -------
27. Cumulative foreign currency translation
adjustments_______________________________________
28. Total equity capital (sum of items 23 through 3210 22,109 28.
27)____________________________ ------ ------ -------
29. Total liabilities and equity capital (sum of items 21 and 2257 148,455 29.
28)___________________ ------ ------ -------
</TABLE>
Memorandum
<PAGE>
To be reported only with the March Report of Condition.
Number
<TABLE>
<S> <C> <C> <C>
1. Indicate in the box at the right the number of the statement below that
best describes the most comprehensive level of auditing work performed for
the bank by independent external auditors 6724 N/A M.1
as of any date during 1997______________________________________________
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors
(may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001061323
<NAME> GLOBAL CROSSING HOLDINGS LTD.
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> JAN-01-1998 JUL-01-1998
<PERIOD-END> SEP-30-1998 SEP-30-1998
<CASH> 877,499,797 877,499,797
<SECURITIES> 0 0
<RECEIVABLES> 29,110,516 29,110,516
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 940,770,580 940,770,580
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 2,049,096,067 2,049,096,067
<CURRENT-LIABILITIES> 154,162,431 154,162,431
<BONDS> 1,173,573,972 1,173,573,972
0 0
0 0
<COMMON> 12,000 12,000
<OTHER-SE> 721,347,664 721,347,664
<TOTAL-LIABILITY-AND-EQUITY> 2,049,096,067 2,049,096,067
<SALES> 218,948,792 117,692,925
<TOTAL-REVENUES> 231,887,999 125,958,694
<CGS> 90,438,176 49,237,947
<TOTAL-COSTS> 190,219,373 22,865,024
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 2,210,995 1,198,878
<INTEREST-EXPENSE> 25,659,937 17,983,947
<INCOME-PRETAX> (77,677,018) 33,636,362
<INCOME-TAX> 16,331,590 7,331,590
<INCOME-CONTINUING> (94,008,608) 26,304,772
<DISCONTINUED> 0 0
<EXTRAORDINARY> 19,709,472 0
<CHANGES> 0 0
<NET-INCOME> (156,164,580) 26,304,772
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
Offer for Any and All Outstanding Shares of
10 1/2% Senior Exchangeable Preferred Stock Due 2008
(Liquidation Preference $100 per Share)
in Exchange for Shares of
10 1/2% Senior Exchangeable Preferred Stock Due 2008
(Liquidation Preference $100 per Share)
Which Have Been Registered under the Securities Act of 1933
Pursuant to the Prospectus dated , 1999
of
GLOBAL CROSSING HOLDINGS LTD.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON _________________ (the "EXPIRATION DATE") UNLESS EXTENDED BY
GLOBAL CROSSING HOLDINGS LTD. TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW
YORK CITY TIME ON THE EXPIRATION DATE.
The Exchange Agent is:
EQUISERVE - FIRST CHICAGO TRUST DIVISION
By Registered or Certified Mail: By Hand Delivery:
<TABLE>
<S> <C>
EquiServe - First Chicago Trust Division EquiServe - First Chicago Trust Division
P.O. Box 2569 100 William Street
Jersey City, New Jersey 07303-2569 New York, New York 10005
Attn: Corporate Actions Attn: Corporate Actions
By Overnight Delivery:
EquiServe - First Chicago Trust Division
14 Wall Street, 8th Floor
New York, New York 10005
Attn: Corporate Actions
</TABLE>
Delivery of this Letter of Transmittal to an address other than as set
forth above will not constitute a valid delivery.
<PAGE>
2
The undersigned acknowledges receipt of the Prospectus dated _____________,
1999 (the "Prospectus") of Global Crossing Holdings Ltd., a Bermuda corporation
(the "Company"), and this Letter of Transmittal which together describe the
Company's offer (the "Exchange Offer") to exchange $100 liquidation preference
of its 10 1/2% Senior Exchangeable Preferred Stock due 2008, which have been
registered under the Securities Act of 1933, as amended (the "Securities Act")
(the "Exchange Preferred Stock") for each $100 liquidation preference of its
outstanding 10 1/2% Senior Exchangeable Preferred Stock due 2008 (the "Old
Preferred Stock" and, together with the Exchange Preferred Stock, the
"Securities") from the holders thereof.
Holders of Old Preferred Stock who tender their shares in exchange for
Exchange Preferred Stock shall be deemed to have tendered for exchange any
shares of Old Preferred Stock received as dividends on such shares of Old
Preferred Stock. The terms of the Exchange Preferred Stock are substantially
identical in all respects (including principal amount, interest rate and
maturity) to the terms of the Old Preferred Stock for which they may be
exchanged pursuant to the Exchange Offer, except that the Exchange Preferred
Stock are freely transferable by holders thereof (except as provided herein or
in the Prospectus).
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus.
This Letter of Transmittal is to be completed by holders of shares of Old
Preferred Stock either if shares of Old Preferred Stock are to be forwarded
herewith or if tenders of shares of Old Preferred Stock are to be made by book-
entry transfer to an account maintained by EquiServe-First Chicago Trust
Division (the "Exchange Agent") at the Depository Trust Company ("Book-Entry
Transfer Facility" or "DTC") pursuant to the procedures set forth in the
Prospectus.
Holders of shares of Old Preferred Stock whose certificate or certificates
for such shares of Old Preferred Stock are not immediately available or who
cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their shares
of Old Preferred Stock according to the guaranteed delivery procedures set forth
in the Prospectus.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. SIGNATURES MUST BE
PROVIDED BELOW AND THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL
MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES
OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE
AGENT.
<PAGE>
3
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
If the space provided below is inadequate, the certificate numbers and
liquidation preferences should be listed on a separate signed schedule affixed
hereto.
- --------------------------------------------------------------------------------
DESCRIPTION OF PREFERRED STOCK TENDERED HEREWITH
- --------------------------------------------------------------------------------
Aggregate Liquidation
Name(s) and Address(es) of Certificate Liquidation Preference of Old
Registered Holder(s) Number(s)* Preference of Old Preferred Stock
(Please fill in, if blank) Preferred Stock* Tendered**
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered all
shares of Old Preferred Stock represented by the aggregate liquidation
preference of Old Preferred Stock indicated in Column 2. See instruction 4.
(THE BOX BELOW IS TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[_] CHECK HERE IF TENDERED SHARES OF OLD PREFERRED STOCK ARE BEING DELIVERED
BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE
AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
Account Number
Transaction Code Number
<PAGE>
4
[_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY
IF TENDERED SHARES OF OLD PREFERRED STOCK ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name of Registered Holder(s)
Window Ticket Number (if any)
--------------------------------------------
Name of Eligible Institution that Guaranteed Delivery
Date of Execution of Notice of Guaranteed Delivery
If Delivered by Book-Entry Transfer:
Name of Tendering Institution
--------------------------------------------
Account Number
Transaction Code Number
--------------------------------------------------
[_] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED SHARES OF OLD
PREFERRED STOCK FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER
TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE
10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name:
Address:
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described aggregate
liquidation preference of the Company's 10 1/2% Senior Exchangeable Preferred
Stock (the "Old Preferred Stock") in exchange for a like aggregate liquidation
preference of the Company's 10 1/2% Senior Exchangeable Preferred Stock (the
"Exchange Preferred Stock"), shares of which have been registered under the
Securities Act of 1933, as amended (the "Securities Act") upon the terms and
subject to the conditions set forth in the Prospectus dated ___________, 1999
(as the same may be amended or supplemented from time to time, the
"Prospectus"), receipt of which is acknowledged, and in this Letter of
Transmittal (which, together with the Prospectus, constitute the "Exchange
Offer").
Subject to, and effective upon, the acceptance for exchange of all or any
portion of the shares of Old Preferred Stock tendered herewith in accordance
with the terms and conditions of the Exchange Offer (including, if the Exchange
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the undersigned hereby exchanges, assigns and transfers to, or upon
the order of, the Company all right, title and interest in and to such shares of
Old Preferred Stock as are being tendered herewith. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent as its true and lawful
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Company, in connection with the Exchange Offer) with
respect to the tendered shares of Old Preferred Stock, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), subject only to the right of withdrawal described in
the Prospectus, to (i) deliver certificates for shares of Old Preferred Stock to
the Company together with all accompanying evidences of transfer and
authenticity to, or upon the order of, the Company, upon receipt by the Exchange
Agent, as the undersigned's agent, of the shares of Exchange Preferred Stock to
be issued in exchange for such shares of Preferred Stock, (ii) present
certificates for such shares of Old Preferred Stock for transfer, and to
transfer the shares of Old Preferred Stock on the books of the Company, and
(iii) receive for the account of the Company all benefits and otherwise exercise
all rights of beneficial ownership of such shares of Old Preferred Stock, all in
accordance with the terms and conditions of the Exchange Offer.
The undersigned represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the shares of Old Preferred
Stock tendered hereby and that, when the same are accepted for exchange, the
Company will acquire good and unencumbered title to the tendered Old Preferred
Stock, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned also warrants that it will,
upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary or desirable to complete the
exchange, assignment and transfer of the tendered shares of Old Preferred Stock
or transfer ownership of shares of Old Preferred Stock on the account books
maintained by the book-entry transfer facility. The undersigned further agrees
that acceptance of any and all validly tendered shares of Old Preferred Stock by
the Company and the issuance of Exchange Preferred Stock in exchange therefor
shall constitute
<PAGE>
6
performance in full by the Company of its obligations under the Registration
Rights Agreement (as defined in the Prospectus) and that the Company shall have
no further obligations or liabilities thereunder. The undersigned will comply
with its obligations under the Registration Rights Agreement. The undersigned
has read and agrees to all terms of the Exchange Offer.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus. The undersigned recognizes that as a result of these conditions
(which may be waived, in whole or in part, by the Company), as more particularly
set forth in the Prospectus, the Company may not be required to exchange any of
the shares of Old Preferred Stock tendered hereby and, in such event, the shares
not exchanged will be returned (or, in the case of shares of Old Preferred Stock
tendered by book-entry transfer, such shares of Old Preferred Stock will be
credited to an account maintained at DTC), without expense to the tendering
holder promptly following the expiration or termination of the Exchange Offer.
The undersigned understands that tenders of shares of Old Preferred Stock
pursuant to any one of the procedures described in the Prospectus and in the
instruction attached hereto will, upon the Company's acceptance for exchange of
such tendered shares of Old Preferred Stock, constitute a binding agreement
between the undersigned and the Company upon the terms and subject to the
conditions of the Exchange Offer. The undersigned recognizes that, under
circumstances set forth in the Prospectus, the Company may not be required to
accept for exchange any of the shares of Old Preferred Stock tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the shares of Exchange
Preferred Stock be issued in the name(s) of the undersigned or, in the case of a
book-entry transfer of shares of Old Preferred Stock, that such shares of
Exchange Preferred Stock be credited to the account indicated above maintained
at DTC. If applicable, substitute certificates representing shares of Old
Preferred Stock not exchanged or not accepted for exchange will be issued to the
undersigned or, in the case of book-entry transfer of shares of Old Preferred
Stock, will be credited to the account indicated above maintained at DTC.
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please deliver shares of Exchange Preferred Stock to the undersigned at the
address shown below the undersigned's signature.
By tendering shares of Old Preferred Stock and executing this Letter of
Transmittal, the undersigned represents that Exchange Preferred Stock acquired
in the exchange will be obtained in the ordinary course of business of the
undersigned, that the undersigned has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of such Exchange Preferred Stock, that the undersigned is not an
"affiliate" of the Company within the meaning of Rule 405 under the Act and that
if the undersigned or the person receiving such Exchange Preferred Stock,
whether or not such person is the undersigned, is not a broker-dealer, the
undersigned represents that it is not engaged in, and does not intend to engage
in, a distribution of Exchange Preferred Stock. If the undersigned or the person
receiving such Exchange Preferred Stock, whether or not such person is the
undersigned, is a broker-dealer that will receive Exchange Preferred Stock for
its own account in exchange for shares of Old Preferred Stock that were acquired
as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Preferred Stock; however, by so acknowledging
<PAGE>
TENDERING HOLDER(S) SIGN HERE
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
(SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 3)
Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) of shares of Preferred Stock hereby tendered or in whose name
shares of Old Preferred Stock are registered on the books of the Company, or by
any person(s) authorized to become the registered holder(s) by endorsements and
documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, please set forth the
full title of such person. See Instruction 3.
(SIGNATURE(S) OF HOLDER(S))
Date
----------------------------------------
Name(s)
-------------------------------------
- --------------------------------------------
(PLEASE PRINT)
Capacity (full title)
-----------------------
Address
-------------------------------------
(INCLUDING ZIP CODE)
Daytime Area Code and Telephone No.
---------
Taxpayer Identification No.
-----------------
<PAGE>
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTION 3)
Authorized Signature
----------------------
Dated
-------------------------------------
Name
--------------------------------------
Title
-------------------------------------
Name of Firm
------------------------------
Address
-----------------------------------
- ------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.
---------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if shares of Exchange Preferred Stock or shares of Old
Preferred Stock not tendered are to be issued in the name of someone other than
the registered holder of the shares of Old Preferred Stock whose name(s)
appear(s) above.
Issue
[_] Shares of Preferred Stock not tendered to:
Shares of Exchange Preferred Stock to:
Name(s)
-------------------------------------------------------------------------
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Daytime Area Code and Telephone Number
------------------------------------------
Tax Identification Number
-------------------------------------------------------
<PAGE>
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if shares of Exchange Preferred Stock or shares of Old
Preferred Stock not tendered are to be sent to someone other than the
registered holder of the shares of Old Preferred Stock whose name(s) appear(s)
above, or such registered holder(s) at an address other than that shown above.
Mail
[_] Shares of Old Preferred Stock not tendered to:
Shares of Exchange Preferred Stock to:
Name(s)
-------------------------------------------------------------------------
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES.
Certificates for all physically delivered shares of Old Preferred Stock or
confirmation of any book-entry transfer to the Exchange Agent's or its agent's
account at a book-entry transfer facility of shares of Old Preferred Stock
tendered by book-entry transfer, as well as a properly completed and duly
executed copy of this Letter of Transmittal or facsimile thereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at any of its addresses set forth herein on or prior to the
Expiration Date.
Holders of shares of Old Preferred Stock may tender shares of Old Preferred
Stock by book-entry transfer by crediting the shares of Old Preferred Stock to
the Exchange Agent's account at the DTC in accordance with the DTC's Automated
Tender Offer Program ("ATOP") and by complying with applicable ATOP procedures
with respect to the Exchange Offer. DTC participants that are accepting the
Exchange Offer should transmit their acceptance to DTC, which will edit and
verify the acceptance and execute a book-entry delivery to the Exchange Agent's
account at DTC. DTC will then send a computer-generated message (an "Agent's
Message") to the Exchange Agent for its acceptance in which the holder of the
shares of Old Preferred Stock acknowledges and agrees to be bound by the terms
of, and makes the representations and warranties contained in, this Letter of
Transmittal, the DTC participant confirms on behalf of itself and the
beneficial owners of such shares of Old Preferred Stock all provisions of this
Letter of Transmittal (including any representations and warranties) applicable
to it and such beneficial owner as fully as if it had completed the information
required herein and executed and transmitted this Letter of Transmittal to the
Exchange Agent. Delivery of the Agent's Message by DTC will satisfy the terms
of the Exchange Offer as to execution and delivery of a Letter of Transmittal
by the participant identified in the Agent's Message. DTC participants may also
accept the Exchange Offer by submitting a Notice of Guaranteed Delivery through
ATOP.
The method of delivery of this Letter of Transmittal, the shares of Old
Preferred Stock and any other required documents is at the election and risk of
the holder, and except as otherwise provided below, the delivery will be deemed
made only when actually received or confirmed by the Exchange Agent. If such
delivery is by mail, it is suggested that registered mail with return receipt
requested, properly insured, be used. In all cases sufficient time should be
allowed to permit timely delivery.
Holders whose shares of Old Preferred Stock are not immediately available or
who cannot deliver their shares of Old Preferred Stock and all other required
documents to the Exchange Agent on or prior to the Expiration Date or comply
with book-entry transfer procedures on a timely basis must tender their shares
of Old Preferred Stock pursuant to the guaranteed delivery procedure set forth
in the Prospectus. Pursuant to such procedure: (i) such tender must be made by
or through an Eligible Institution (as defined in the Prospectus); (ii) on or
prior to the Expiration Date, the Exchange Agent must have received from such
Eligible Institution a letter, telegram or facsimile transmission (receipt
confirmed by telephone and an original delivered by guaranteed overnight
courier) setting forth the name and address of the tendering holder, the names
in which such shares of Old Preferred Stock are registered, and, if possible,
the certificate numbers of the shares of Old Preferred Stock to be tendered;
and (iii) all tendered shares of Old Preferred Stock (or a confirmation of any
book-entry transfer of such shares of Old Preferred Stock into the Exchange
Agent's account at a book-entry transfer facility or an Agent's Message in lieu
thereof) as well as this Letter of Transmittal and all other documents required
by this Letter of Transmittal, must be received by the Exchange Agent within
three New York Stock Exchange trading days after the date of execution of such
letter, telegram or facsimile transmission, all as provided in the Prospectus.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance
of the shares of Old Preferred Stock for exchange.
<PAGE>
2. PARTIAL TENDERS; WITHDRAWALS.
If less than the total number of any shares of Old Preferred Stock evidenced
by a submitted certificate is tendered, the tendering holder must fill in the
number of shares of Old Preferred Stock tendered in the box entitled "Number of
Shares Tendered." A newly issued certificate for the shares of Old Preferred
Stock submitted but not tendered will be sent to such holder as soon as
practicable after the Expiration Date. All shares of Old Preferred Stock
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise clearly indicated.
If not yet accepted, a tender pursuant to the Exchange Offer may be withdrawn
prior to the Expiration Date. To be effective with respect to the tender of
shares of Old Preferred Stock, a notice of withdrawal must: (i) be received by
the Exchange Agent before the Company notifies the Exchange Agent that they
have accepted the tender of shares of Old Preferred Stock pursuant to the
Exchange Offer; (ii) specify the name of the shares of Old Preferred Stock;
(iii) contain a description of the Old Preferred Stock to be withdrawn, the
certificate numbers shown on the particular certificates evidencing such shares
of Old Preferred Stock and the number of shares of Old Preferred Stock
represented by such certificates; and (iv) be signed by the holder in the same
manner as the original signature on this Letter of Transmittal (including any
required signature guarantee). The Exchange Agent will return the properly
withdrawn shares of Preferred Stock promptly following receipt of notice of
withdrawal. If shares of Preferred Stock have been tendered pursuant to the
procedure for book-entry transfer, any notice of withdrawal must specify the
name and number of the account at the book-entry transfer facility to be
credited with the withdrawn shares of Preferred Stock or otherwise comply with
the book-entry transfer facility's procedures. All questions as to the validity
of notices of withdrawals, including time of receipt, will be determined by the
Company, and such determination will be final and binding on all parties.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder(s) of the
shares of Preferred Stock tendered hereby, the signature must correspond with
the name(s) as written on the face of the certificates without alteration,
enlargement or any change whatsoever.
If any of the shares of Old Preferred Stock tendered hereby are owned of
record by two or more joint owners, all such owners must sign this Letter of
Transmittal.
If a number of shares of Old Preferred Stock registered in different names
are tendered, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal as there are different
registrations of shares of Old Preferred Stock.
When this Letter of Transmittal is signed by the registered holder or holders
(which term, for the purposes described herein, shall include the book-entry
transfer facility whose name appears on a security listing as the owner of the
shares of Old Preferred Stock) of shares of Preferred Stock listed and tendered
hereby, no endorsements of certificates or separate written instruments of
transfer or exchange are required.
If this Letter of Transmittal is signed by a person other than the registered
holder or holders of the shares of Old Preferred Stock listed, such shares of
Old Preferred Stock must be endorsed or accompanied by separate written
instruments of transfer or exchange in form satisfactory to the Company and
duly executed by the registered holder, in either case signed exactly as the
name or names of the registered holder or holders appear(s) on the shares of
Old Preferred Stock.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
<PAGE>
Endorsements on certificates or signatures on separate written instruments of
transfer or exchange required by this Instruction 3 must be guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution, unless shares of Old Preferred Stock are tendered: (i) by a holder
who has not completed the Box entitled "Special Issuance Instructions" on this
Letter of Transmittal; or (ii) for the account of an Eligible Institution. In
the event that the signatures in this Letter of Transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantees
must be by an eligible guarantor institution which is a member of The
Securities Transfer Agents medallion Program (STAMP). If shares of Old
Preferred Stock are registered in the name of a person other than the signer of
this Letter of Transmittal, the shares of Old Preferred Stock surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of transfer or exchange, in satisfactory form as determined by the
Company, in its sole discretion, duly executed by the registered holder with
the signature thereon guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders should indicate, as applicable, the name and address to
which the Exchange Preferred Stock or certificates for shares of Old Preferred
Stock not exchanged are to be issued or sent, if different from the name and
address of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the tax identification number of the person named
must also be indicated. Holders tendering shares of Old Preferred Stock by
book-entry transfer may request that shares of Old Preferred Stock not
exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such holder may designate.
5. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the transfer
and exchange of shares of Old Preferred Stock to it or its order pursuant to
the Exchange Offer. If a transfer tax is imposed for any reason other than the
transfer and exchange of shares of Old Preferred Stock to the Company or its
order pursuant to the Exchange Offer, the amount of any such transfer taxes
(whether imposed on the registered holder or any other person) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exception therefrom is not submitted herewith the amount of such transfer taxes
will be billed directly to such tendering holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the shares of Old Preferred Stock listed
in this Letter of Transmittal.
6. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive, in whole or in part, either
of the conditions to the Exchange Offer set forth in the Prospectus.
7. MUTILATED, LOST, STOLEN OR DESTROYED SECURITIES.
Any holder whose shares of Old Preferred Stock have been mutilated, lost,
stolen or destroyed, should contact the Exchange Agent at the address indicated
below for further instructions.
8. SUBSTITUTE FORM W-9
Each holder of shares of Old Preferred Stock whose shares of Old Preferred
Stock are accepted for exchange (or other payee) is required to provide a
correct taxpayer identification number ("TIN"), generally the holder's Social
Security or federal employer identification number, and certain other
information, on Substitute Form W-9, which is provided under "Important Tax
Information" below, and to certify that the holder (or other payee) is not
subject to backup withholding. Failure to provide the information on the
Substitute Form W-9 may subject the holder (or other payee) to a $50 penalty
imposed by the Internal Revenue Service and 31% federal income tax backup
withholding on payments made in connection with the shares of Old Preferred
Stock. The box in Part 3 of the Substitute Form W-9 may be checked if the
holder (or other
<PAGE>
2
courier) setting forth the name and address of the tendering holder, the names
in which such shares of Old Preferred Stock are registered, and, if possible,
the certificate numbers of the shares of Old Preferred Stock to be tendered; and
(iii) all tendered shares of Old Preferred Stock (or a confirmation of any book-
entry transfer of such shares of Old Preferred Stock into the Exchange Agent's
account at a book-entry transfer facility or an Agent's Message in lieu thereof)
as well as this Letter of Transmittal and all other documents required by this
Letter of Transmittal, must be received by the Exchange Agent within three New
York Stock Exchange trading days after the date of execution of such letter,
telegram or facsimile transmission, all as provided in the Prospectus.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the shares of Old Preferred Stock for exchange.
2. Partial Tenders; Withdrawals.
If less than the total number of any shares of Old Preferred Stock
evidenced by a submitted certificate is tendered, the tendering holder must fill
in the number of shares of Old Preferred Stock tendered in the box entitled
"Number of Shares Tendered." A newly issued certificate for the shares of Old
Preferred Stock submitted but not tendered will be sent to such holder as soon
as practicable after the Expiration Date. All shares of Old Preferred Stock
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise clearly indicated.
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date. To be effective with respect to the
tender of shares of Old Preferred Stock, a notice of withdrawal must: (i) be
received by the Exchange Agent before the Company notifies the Exchange Agent
that they have accepted the tender of shares of Old Preferred Stock pursuant to
the Exchange Offer; (ii) specify the name of the shares of Old Preferred Stock;
(iii) contain a description of the Old Preferred Stock to be withdrawn, the
certificate numbers shown on the particular certificates evidencing such shares
of Old Preferred Stock and the number of shares of Old Preferred Stock
represented by such certificates; and (iv) be signed by the holder in the same
manner as the original signature on this Letter of Transmittal (including any
required signature guarantee). The Exchange Agent will return the properly
withdrawn shares of Preferred Stock promptly following receipt of notice of
withdrawal. If shares of Preferred Stock have been tendered pursuant to the
procedure for book-entry transfer, any notice of withdrawal must specify the
name and number of the account at the book-entry transfer facility to be
credited with the withdrawn shares of Preferred Stock or otherwise comply with
the book-entry transfer facility's procedures. All questions as to the validity
of notices of withdrawals, including time of receipt, will be determined by the
Company, and such determination will be final and binding on all parties.
3. Signature on this Letter of Transmittal; Written Instruments and
Endorsements; Guarantee of Signatures.
If this Letter of Transmittal is signed by the registered holder(s) of the
shares of Preferred Stock tendered hereby, the signature must correspond with
the name(s) as written on the face of the certificates without alteration,
enlargement or any change whatsoever.
<PAGE>
3
If any of the shares of Old Preferred Stock tendered hereby are owned of
record by two or more joint owners, all such owners must sign this Letter of
Transmittal.
If a number of shares of Old Preferred Stock registered in different names
are tendered, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
shares of Old Preferred Stock.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the shares of Old Preferred Stock) of shares of Preferred Stock listed
and tendered hereby, no endorsements of certificates or separate written
instruments of transfer or exchange are required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the shares of Old Preferred Stock listed, such
shares of Old Preferred Stock must be endorsed or accompanied by separate
written instruments of transfer or exchange in form satisfactory to the Company
and duly executed by the registered holder, in either case signed exactly as the
name or names of the registered holder or holders appear(s) on the shares of Old
Preferred Stock.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution, unless shares of Old Preferred Stock are tendered: (i) by a holder
who has not completed the Box entitled "Special Issuance Instructions" on this
Letter of Transmittal; or (ii) for the account of an Eligible Institution. In
the event that the signatures in this Letter of Transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantees
must be by an eligible guarantor institution which is a member of The Securities
Transfer Agents medallion Program (STAMP). If shares of Old Preferred Stock are
registered in the name of a person other than the signer of this Letter of
Transmittal, the shares of Old Preferred Stock surrendered for exchange must be
endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Company, in its
sole discretion, duly executed by the registered holder with the signature
thereon guaranteed by an Eligible Institution.
4. Special Issuance and Delivery Instructions.
Tendering holders should indicate, as applicable, the name and address to
which the Exchange Preferred Stock or certificates for shares of Old Preferred
Stock not exchanged are to be issued or sent, if different from the name and
address of the person signing this Letter of Transmittal. In the case of
issuance in a different name, the tax identification number of the person named
must also be indicated. Holders tendering shares of Old Preferred Stock
<PAGE>
4
by book-entry transfer may request that shares of Old Preferred Stock not
exchanged be credited to such account maintained at the Book-Entry Transfer
Facility as such holder may designate.
5. Transfer Taxes.
The Company shall pay all transfer taxes, if any, applicable to the
transfer and exchange of shares of Old Preferred Stock to it or its order
pursuant to the Exchange Offer. If a transfer tax is imposed for any reason
other than the transfer and exchange of shares of Old Preferred Stock to the
Company or its order pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered holder or any other person)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exception therefrom is not submitted herewith the amount of such
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the shares of Old Preferred Stock listed in
this Letter of Transmittal.
6. Waiver of Conditions.
The Company reserves the absolute right to waive, in whole or in part,
either of the conditions to the Exchange Offer set forth in the Prospectus.
7. Mutilated, Lost, Stolen or Destroyed Securities.
Any holder whose shares of Old Preferred Stock have been mutilated, lost,
stolen or destroyed, should contact the Exchange Agent at the address indicated
below for further instructions.
6. Substitute Form W-9
Each holder of shares of Old Preferred Stock whose shares of Old Preferred
Stock are accepted for exchange (or other payee) is required to provide a
correct taxpayer identification number ("TIN"), generally the holder's Social
Security or federal employer identification number, and certain other
information, on Substitute Form W-9, which is provided under "Important Tax
Information" below, and to certify that the holder (or other payee) is not
subject to backup withholding. Failure to provide the information on the
Substitute Form W-9 may subject the holder (or other payee) to a $50 penalty
imposed by the Internal Revenue Service and 31% federal income tax backup
withholding on payments made in connection with the shares of Old Preferred
Stock. The box in Part 3 of the Substitute Form W-9 may be checked if the holder
(or other payee) has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 3 is checked and a TIN
is not provided by the time any payment is made in connection with the shares of
Old Preferred Stock, 31% of all such payments will be withheld until a TIN is
provided.
9. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to the Exchange Agent at the address and
telephone number indicated above.
<PAGE>
5
IMPORTANT: This Letter of Transmittal or a facsimile or copy thereof
(together with certificates of shares of Old Preferred Stock or confirmation of
book-entry transfer and all other required documents) or a Notice of Guaranteed
Delivery must be received by the Exchange Agent on or prior to the Expiration
Date.
<PAGE>
6
IMPORTANT TAX INFORMATION
Under U.S. Federal income tax law, a holder of shares of Old Preferred
Stock whose shares of Old Preferred Stock are accepted for exchange may be
subject to backup withholding unless the holder provides EquiServe-First
Chicago Trust Division, as Paying Agent (the "Paying Agent"), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of shares of Old
Preferred Stock is awaiting a TIN) and that (A) the holder of shares of Old
Preferred Stock has not been notified by the Internal Revenue Service that he or
she is subject to backup withholding as a result of a failure to report all
interest or dividends or (B) the Internal Revenue Service has notified the
holder of shares of Old Preferred Stock that he or she is no longer subject to
backup withholding; or (ii) an adequate basis for exemption from backup
withholding. If such holder of shares of Old Preferred Stock is an individual,
the TIN is such holder's social security number. If the Paying Agent is not
provided with the correct TIN, the holder of shares of Old Preferred Stock may
be subject to certain penalties imposed by the Internal Revenue Service.
Certain holders of shares of Old Preferred Stock (including, among others,
all corporations and certain foreign individuals) are not subject to these
backup withholding and reporting requirements. However, exempt holders of shares
of Old Preferred Stock should indicate their exempt status on Substitute Form
W-9. For example, a corporation must complete the Substitute Form W-9, providing
its TIN and indicating that it is exempt from backup withholding. In order for a
foreign individual to qualify as an exempt recipient, the holder must submit a
Form W-8, signed under penalties of perjury, attesting to that individual's
exempt status. A Form W-8 can be obtained from the Paying Agent.
If backup withholding applies, the Paying Agent is required to withhold 31%
of any such payments made to the holder of shares of Old Preferred Stock or
other payee. Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the amount
of tax withheld. If withholding results in an overpayment of taxes, a refund may
be obtained from the Internal Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
surrendering holder of shares of Old Preferred Stock has not been issued a TIN
and has applied for a TIN or intends to apply for a TIN in the near future. If
the box in Part 3 is checked, the holder of shares of Old Preferred Stock or
other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Paying Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Paying Agent.
The holder of shares of Old Preferred Stock is required to give the Paying
Agent the TIN (e.g., social security number or employer identification number)
of the record owner of the shares of Old Preferred Stock.
<PAGE>
7
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
PAYER'S NAME: EQUISERVE-FIRST CHICAGO TRUST DIVISION, AS PAYING AGENT
- ---------------------------------------------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR TIN IN Social Security number(s) or
THE BOX AT RIGHT AND CERTIFY BY Employer Identification Number(s)
SUBSTITUTE SIGNING AND DATING BELOW.
-----------------------------------------------------------------------------
<S> <C> <C>
Part 2--Certification--Under penalties of perjury, I certify that:
Form W-9 (1) The number shown on this form is my correct taxpayer identification
Department of the Treasury number (or I am waiting for a number to be issued for me), and
Internal Revenue Service
(2) I am not subject to backup withholding because: (a) I am
exempt from backup withholding, or (b) I have not been notified by
the Internal Revenue Service (IRS) that I am subject to backup
withholding as a result of a failure to report all interest or
dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
Payor's Request for
Taxpayer Identification Certification Instructions--You must cross out item (2)
Number ("TIN") above if you have been notified by the IRS that you are currently
subject to backup withholding because of under reporting interest or
dividends on your tax return.
-----------------------------------------------------------------------------
Part 3--Awaiting TIN
--------------------------------------
Signature
--------------------------------------
Date
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50
PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP
WITHHOLDING OF 31% OF ANY CASH PAYMENTS MADE TO YOU. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF THE SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable cash payments made to me thereafter will be withheld until I
provide a taxpayer identification number.
- --------------------------------------------------------------------------------
Signature Date
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
Offer for Any and All Outstanding Shares of
10 1/2% Senior Exchangeable Preferred Stock due 2008
(Liquidation Preference $100 per Share)
in Exchange for Shares of
10 1/2% Senior Exchangeable Preferred Stock due 2008
(Liquidation Preference $100 per Share)
Which Have Been Registered under the Securities Act of 1933
Pursuant to the Prospectus dated , 1999
of
GLOBAL CROSSING HOLDINGS LTD.
Registered holders of outstanding 10 1/2% Senior Exchangeable Preferred
Stock due 2008 (the "Old Preferred Stock") who wish to tender their Old
Preferred Stock in exchange for a like principal amount of new 10 1/2% Senior
Exchangeable Preferred Stock due 2008 (the "Exchange Preferred Stock") and whose
shares of Old Preferred Stock are not immediately available or who cannot
deliver their shares of Old Preferred Stock and Letter of Transmittal (and any
other documents required by the Letter of Transmittal) to First Chicago Trust
Company of New York (the "Exchange Agent") prior to the Expiration Date, may use
this Notice of Guaranteed Delivery or one substantially equivalent hereto. This
Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight courier) or mail to the Exchange Agent. See "The Exchange
Offer--Procedures for Tendering Shares of Old Preferred Stock" in the
Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
EQUISERVE - FIRST CHICAGO TRUST DIVISION
By Hand Delivery: By Mail:
EquiServe - First Chicago Trust (insured or registered recommended)
Division EquiServe - First Chicago Trust
P.O. Box 2569 Division
Jersey City, NJ 07303-2569 100 William Street
Attn: Corporate Actions New York, NY 10005
Attn: Corporate Actions
By Overnight Courier: By Facsimile:
EquiServe - First Chicago Trust (212) 222-4720 or (201) 222-4721
Division
14 Wall Street, 8th Floor Confirm by Telephone:
New York, NY 10005 (201) 222-4707
Attn: Corporate Actions
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission via a facsimile transmission to a number other
than as set forth above will not constitute a valid delivery.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company the number of shares of Old
Preferred Stock indicated below, upon the terms and subject to the conditions
contained in the Prospectus dated ____________, 1998 of Global Crossing Holdings
Ltd. (the "Prospectus"), receipt of which is hereby acknowledged.
Aggregate Liquidation Preference Amount Tendered: $_____________________________
Name(s) of Registered Holder(s):________________________________________________
Certificate Number(s) (if available):___________________________________________
Total Liquidation Preference Represented by Old Preferred
Stock Certificate(s): $__________________________________
If shares of Old Preferred Stock will be tendered by book-entry transfer,
provide the following information:
DTC Account Number:_____________________________
Date:___________________________________________
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(Not to be used for signature guarantee)
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended, hereby guarantees to deliver to the Exchange Agent at one of
its addresses on the reverse side, the certificates representing the Old
Preferred Stock (or a confirmation of book-entry transfer of such Old Preferred
Stock into the Exchange Agent's account at the book-entry transfer facility),
together with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, and any other
documents required by the Letter of Transmittal within three New York Stock
Exchange trading days after the Expiration Date (as defined in the Prospectus
and the Letter of Transmittal).
Name of Firm:
(Authorized Signature)
Address:
Title:
(Zip Code) Name:
(Please type or print)
Area Code and Telephone No.:
Date:
NOTE: DO NOT SEND CERTIFICATES FOR SHARES OF OLD PREFERRED STOCK WITH THIS
NOTICE OF GUARANTEED DELIVERY. CERTIFICATES FOR SHARES OF OLD PREFERRED STOCK
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
