<PAGE>
DRAFT 3/26/99
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-K
---------
[x] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1998.
OR
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 .
Commission file number: 333-61457-08
GLOBAL CROSSING (CAYMAN) LTD.
------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
CAYMAN ISLANDS 98-0167638
------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
c/o CIBC BANK & TRUST COMPANY (CAYMAN) LIMITED
P.O.BOX 694GT
EDWARD STREET
GEORGETOWN, GRAND CAYMAN
CAYMAN ISLANDS
(345)949-8666
------------------------------------------------------------
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
None
Securities registered pursuant to Section 12(g) of the Act:
None
------------------------------------------------------------
(Title of Class)
<PAGE>
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [x] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [_]
At March 31, 1999, the aggregate market value of the voting and non-voting
common equity held by non-affiliates of the registrant was $0.
As of March 31, 1999, the registrant had outstanding 2,630,943 shares of
Class A Common Stock, par value $0.000001 per share; 906,605 shares of Class B
Common Stock, par value $0.000001 per share; and 19,427,281 shares of Class C
Common Stock, par value $0.000001 per share.
==============================================================
PART I
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
We have included certain "forward-looking statements" in this Form 10-K.
These statements describe our attempt to predict future occurrences. We use the
word "believe" "anticipate," "expect," "intend" and similar expressions to
identify forward-looking statements. Forward-looking statements are subject to
risks, assumptions and uncertainties. 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.
Item 1. Business.
(a) General Development of the Business
Global Crossing (Cayman) Ltd. ("Old GCL" or the "Company"), formerly GT
Parent Holdings LDC and thereafter Global Crossing Ltd. LDC, was incorporated
as an exempted limited duration company in the Cayman Islands on March 19, 1997
(date of inception). On March 23, 1999, the Company changed its form of
organization to a company limited by shares incorporated in the Cayman Islands.
From March 19, 1997 through May 26, 1998, the Company was in the development
stage and served as the holding company for certain subsidiaries that were
engaged in the construction and development of certain underwater fiber optic
systems connecting the United States and Europe ("Atlantic Crossing" or "AC-1
system").
Prior to the initial public offering of Global Crossing Ltd. ("New GCL"), all
shares of common stock in New GCL, a Bermuda Company, were owned by the Company.
In August 1998, New GCL declared a stock dividend so that the Company held 1.5
shares of common stock of New GCL for each share of outstanding common stock of
the Company. Pursuant to the terms of the Articles of Association of the
Company, 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 the Company had
such E shares converted into Class B shares of the Company. Accordingly, each
holder of Class D and Class E shares received Class B shares, with the warrants
to purchase Class E shares received by former Class D shareholders then
cancelled in exchange for warrants ("New GCL Warrants") to purchase shares of
common stock of New GCL at an exercise price equal to the initial offering
price.
Immediately subsequent to such transactions and prior to the initial public
offering, each shareholder of the Company, other than CIBC Wood Gundy Capital
(SFC), Inc. ("SFC"), agreed with the Company to exchange their interests in the
Company for shares of common stock of New GCL held by the Company at a rate of
1.5 shares of common stock of New GCL per share of common stock of the Company
(the "Company Exchange"). SFC did not participate in the Company Exchange.
Subsequent to the Company Exchange, each previous shareholder of the Company
holds an equal and proportionate interest in New GCL, with the Company becoming
wholly owned by SFC. All shares of common stock in the Company, other than the
2
<PAGE>
shares owned by SFC and one Class C share held by CIBC Capital
Partners (Cayman) No. 1, have been retired.
On May 13, 1998, the Company, together with New GCL and certain subsidiaries of
Global Crossing Holdings Ltd. ("GCH"), a Bermuda company and operating wholly-
owned subsidiary of New GCL, entered into a Purchase Agreement with GCH and
certain initial purchasers pursuant to which it guaranteed payment and
performance obligations under GCH's 9 5/8% Senior Notes (the "Restricted
Notes"). The Restricted Notes were exchanged for registered Senior Notes (the
"Senior Notes") under an Exchange Offer initiated in October, 1998. The terms of
the Senior Notes are identical in all material respects to those of the
Restricted Notes, except for certain transfer restrictions and registration
rights related to the Restricted Notes and except for certain interest
provisions related to such registration rights. The Company, together with New
GCL and certain subsidiaries of GCH jointly and severally guaranteed the payment
and performance obligations of GCH under the Senior Notes (the "Guarantee"). The
Company is filing this 10-K as a guarantor of the Senior Notes.
Each share of Common Stock of New GCL ("New GCL Common Stock") has one vote,
except that if, and so long as, the Controlled Shares (as defined below) of any
person constitute more than 9.5% (or, in the case of Canadian Imperial Bank of
Commerce ("CIBC") and certain of its affiliates, including the Company
collectively, 35%) of the voting power of the outstanding shares, including New
GCL Common Stock (an "Over-the-Threshold Common Stockholder"), the voting rights
with respect to the Controlled Shares owned by such person will be limited, in
the aggregate, to a voting power of 9.5%, pursuant to a formula set forth in the
Bye-Laws of New GCL ("GCL Bye-laws"). The votes that could be cast by
Over-the-Threshold Common Stockholders but for the restrictions on voting rights
described above will be allocated to the other holders of New GCL Common Stock,
pro rata based upon the number of shares of New GCL Common Stock held by all
other holders of New GCL Common Stock, subject only to the further limitation
that no stockholder allocated any such voting rights may exceed the applicable
limitation set forth above as a result of such allocation. "Controlled Shares"
includes, among other things, all shares of New GCL Common Stock that a person
is deemed (i) to own directly, indirectly or constructively pursuant to Section
958 of the Internal Revenue Code of 1986, as amended (the "Code"), or (ii) to
beneficially own directly or indirectly as a result of the possession of sole or
shared voting power within the meaning of Section 13(d) of the Exchange Act of
1934, as amended (the "Exchange Act") ,and the rules and regulations promulgated
thereunder.
New GCL, the Company, Pacific Capital Group, Inc. ("PCG"), GKW Unified Holdings,
LL ("GKW"), certain affiliates of CIBC, Continental Casualty Company, MRCo, Inc.
and certain other shareholders of New GCL (including certain of New GCL's
officers and directors and their affiliates) (collectively, the "Existing
Holders") have entered into a Stockholders Agreement (the "Stockholders
Agreement") and a Registration Rights Agreement. The Stockholders Agreement
contains certain restrictions on the transfer or other disposition by such
affiliates of CIBC (including the Company) of shares of New GCL Common Stock.
Pursuant to the Stockholders Agreement, New GCL has been granted a right of
first refusal on certain private transfers by the Existing Holders during the
first two years after the consummation of the initial public offering of common
stock of New GCL. In addition, subject to the exceptions set forth in the
Stockholders Agreement, certain of the Existing Holders have rights ("tag-along
rights") permitting such shareholder to participate, on the same terms and
conditions, in certain transfers of shares by other Existing Holders as follows:
(i) PCG, GKW and certain affiliates of CIBC (including the Company) (and their
affiliates and permitted transferees) shall have the right to participate in any
transaction initiated by any of them to transfer 5% or more of the outstanding
securities of New GCL and (ii) PCG, GKW, certain affiliates of CIBC (including
the Company), Continental Casualty Company and MRCo, Inc. (and their affiliates
and permitted transferees) shall have the right to participate in any
transaction initiated by any of them to transfer any securities of New GCL
which transaction would result in a change of control of New GCL.
Pursuant to the Registration Rights Agreement, the Existing Holders have certain
demand and piggyback registration rights and receive indemnification and, in
certain circumstances, expense reimbursement from New GCL in connection with
such registration.
3
<PAGE>
Frontier Transaction
On March 16, 1999, New GCL entered into a definitive agreement and
plan of merger with Frontier Corporation, a New York corporation ("Frontier").
The board of directors of each company has approved the merger. In this
all-stock transaction, the number of shares of New GCL Common Stock to be
exchanged for each Frontier share under the contemplated plan will be determined
by dividing $62.00 by a volume weighted average of trading prices for New GCL
Common Stock for a pricing period prior to the closing, subject to a minimum of
1.0919 shares and a maximum of 1.7939 shares of New GCL Common Stock for each
Frontier share. Frontier may terminate the merger if the applicable price of New
GCL Common Stock is less than $34.56 unless New GCL then agrees to provide
additional merger consideration in the form of additional shares of New GCL
Common Stock or cash to ensure that Frontier shareholders receive $62 of value
for each Frontier share. The merger is intended to qualify as a tax-free
reorganization and is expected to be accounted for as a purchase. Completion of
the transaction is anticipated to occur during the third quarter of 1999. The
transaction is subject to the majority vote of the shareholders of New GCL and
the vote of two-thirds of the common shareholders of Frontier and to other
customary conditions, such as receipt of regulatory approvals. Shareholders of
New GCL, including affiliates of CIBC (including the Company), representing
more than a majority of the voting power of New GCL Common Stock have agreed to
vote in favor of the transaction.
(b) Financial Information about Industry Segments
The Company engages in no business activities other than holding New
GCL shares and accordingly has no industry segments.
(c) Narrative Description of Business
Subsequent to the Company Exchange, the Company's only asset is its
investment in New GCL. The Company does not have any other material assets or
liabilities and engages in no business activities other than holding New GCL
shares and the Guarantee.
Item 2. Properties.
The Company does not have any properties.
Item 3. Legal Proceedings.
The Company is not currently subject to any material legal claims or
proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Not applicable
Item 6. Selected Financial Data.
The selected financial data as of December 31, 1998 and 1997, for the year ended
December 31, 1998 and for the period from March 19, 1997 (Date of Inception) to
December 31, 1997, respectively, are derived from the audited financial
statements and should be read in conjunction with the audited financial
statements and notes included in this Form 10-K.
Statement of Operations Data
<TABLE>
<CAPTION>
For the Period from
Year Ended March 19, 1997
December 31, (date of inception)
1998 to December 31, 1997
------------ -------------------
<S> <C> <C>
SALES AND OPERATING REVENUES $ - $ -
EXPENSES
Sales and marketing - 1,444,000
General and administrative 771,543 1,657,000
------------ --------------
771,543 3,101,000
------------ --------------
OPERATING LOSS (771,543) (3,101,000)
Equity in loss of Global Crossing Ltd. (17,952,007) -
INTEREST INCOME - 2,940,644
------------ --------------
INCOME (LOSS) BEFORE INCOME TAXES (18,723,550) (160,356)
GAIN FROM INITIAL PUBLIC OFFERING 59,523,779 -
PROVISION FOR INCOME TAXES - -
------------ --------------
NET INCOME (LOSS) 40,800,229 (160,356)
Preferred stock dividends - (12,689,923)
------------ --------------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDER (S) $ 40,800,229 $ (12,850,279)
============ ==============
EARNINGS (LOSS) PER SHARE $0.37 $(0.04)
============ ==============
<CAPTION>
Balance Sheet Data:
December 31, 1998 December 31, 1997
<S> <C> <C>
ASSETS
Current Assests:
Cash and cash equivalents $ - $1,452,684
Restricted cash and cash equivalents - 25,275,196
Investment in Global Crossing Ltd. 129,809,904 -
Other assets and prepaid costs - 1,015,958
------------- ------------
129,809,904 27,743,838
Capacity available for sale - 21,200,000
Construction in progress - 497,318,509
Deferred finance and organization costs (note of accumulated
amorization of $2,247,000 as of December 31, 1997) - 25,934,021
------------ ------------
Total assets $129,809,904 $572,196,368
============ ============
LIABILITIES
Current liabilities:
Accrued construction costs - 52,003,875
Accounts payable and accrued liabilities 145,623 1,658,399
Accrued interest - 1,640,854
Deferred revenue - 5,325,000
Current portion of obligations under inland services agreements
and capital leases - 30,188,645
Due to Parent 625,920 -
--------- -----------
$ 771,543 90,816,773
Long-term debt - 162,325,000
Senior notes - 150,000,000
Obligations under inland service agreements and capital leases - 3,009,000
--------- -----------
Total liabilities 771,543 406,150,773
MANDATORILY REDEEMABLE PREFERRED STOCK
(109,830 shares as of December 31, 1997, $1,000 liqidation per share
including $1,281,000 in accrued dividends and net of unamortized
discount and issuance costs of $12,224,000 and $6,962,000, respectively) - 91,924,919
STOCKHOLDER'S(S') EQUITY
Class A common stock, 2,630,943 and 31,102,950 issued as of 2 20
December 31, 1998 and December 31, 1997, respectively
Class B common stock, 906,605 and 50,625,000 issued as of 1 34
December 31, 1998 and December 31,1997 respectively
Class C common stock, 0 and 33,088,200 issued as of 19 34
December 31, 1998 and December 31,1997, respectively - 22
Additional paid-in capital 88,278,247 74,280,922
Retained earnings (deficit) 40,760,092 (160,356)
------------ -----------
Total stockholder's(s') equity 129,038,361 74,120,676
------------ ------------
Total liabilities and stockholder's(s') equity $129,809,904 $572,196,368
============ ============
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
4
<PAGE>
The Company's only asset is its investment in New GCL. The Company has no other
material assets or liabilities and engages in no other business activities,
other than the Guarantee. Old GCL's results of operations primarily reflect its
share of the results of operations of New GCL on an equity accounting basis.
The Company is filing this Form 10-K as a guarantor of the Senior Notes issued
by GCH, a wholly owned subsidiary of New GCL. Prior to the Old GCL Exchange, as
discussed in Item 1 above, the business and operations of New GCL were conducted
through Old GCL. Subsequent to the Old GCL Exchange, Old GCL and New GCL each
present their own separate financial statements in their annual and quarterly
reports filed with the SEC. As such, the comparable prior period financial
information for New GCL is not discussed herein. Management of the Company
assumes no responsibility for the financial and other information of New GCL.
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1998
For the year ended December 31,1998, the Company reported net income applicable
to common stockholder of $40.8 million. This is derived from the gain from the
initial public offering of $59.5 million, offset by the equity in loss of New
GCL of approximately $18 million. For the reasons that have been previously
discussed, management has concluded that providing comparative information is
not relevant.
For the year ended December 31, 1998, New GCL reported sales and operating
revenues of approximately $424 million and expenses of approximately $444
million. The $444 million primarily includes approximately $179 million of
expense related to cost of capacity sold and $140 million relating to the
termination of the Advisory Services Agreement. New GCL had an operating loss of
approximately $20 million, loss before provision for income taxes and
extraordinary item of approximately $35 million, net loss of approximately $88
million, and net loss applicable to common shareholders of approximately $135
million. For the reasons that have been previously discussed, management has
concluded that providing comparative information is not relevant.
BALANCE SHEET AS OF DECEMBER 31, 1998
As of December 31, 1998, The Company reported total assets of $130 million, all
of which relates to its investment in New GCL. The Company has total
liabilities of $.8 million and total stockholder's equity of $129 million.
As of December 31, 1998, New GCL reported total assets of approximately $2.6
billion. The significant assets which comprise total assets are cash and cash
equivalents of $807 million, $368 million of restricted cash and cash
equivalents, $575 million of capacity available for sale, $428 million of
construction in progress, and a $177 million investment in affiliates. The total
liabilities of approximately $1.4 billion are primarily comprised of $129
million of accrued construction costs, $270 million of long term debt, and $796
million of senior notes. Total stockholders' equity is approximately $774
million.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
Item 8. Liquidity and Capital Resources
The shares of New GCL Common Stock held by the Company are "restricted shares"
as that term is defined in Rule 144 under the Securities Act of 1933, as
amended, and as such may not be sold except pursuant to an effective
registration statement under the Securities Act or in compliance with Rule 144
or another duly available exemption under the Securities Act. The shares held by
the Company are subject to additional restrictions on transfer or other
disposition pursuant to the Stockholders Agreement. As this investment in New
GCL represents its principal asset, the Company is reliant upon its Parent, SFC,
for funding its operating expenses. SFC has provided this funding through an
advance which approximated $626,000 at December 31, 1998. The Company will
continue to rely upon SFC to advance funds to meet its financing requirements.
Regarding the Company's investment in New GCL, because the cost of developing
and constructing New GCL's systems, operating New GCL's business depends on a
variety of factors (including New GCL's ability to successfully negotiate
construction supply contracts at favorable prices, New GCL's ability to generate
sufficient sales, changes in the competitive environment of the markets New GCL
serves, the levels of participation by New GCL's joint venture partners, and
changes in technology), actual costs and revenues may vary, possibly materially,
from expected amounts. Such variations may impact New GCL's future capital
requirements. The development of additional systems, which New GCL may pursue,
would lead to additional future capital requirements.
YEAR 2000 COMPLIANCE
5
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The Company believes that its computer information systems will enable it to
process transactions relating to Year 2000 and beyond and that its computer
systems will not be adversely affected.
In the event that New GCL does not successfully achieve Year 2000 compliance,
the Company's business could be adversely affected.
See the index on page F-1, Index to Financial Statements.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The following table sets forth certain information concerning directors of the
Company as of March 31, 1999.
Name Age Positions and Offices Held
- - ---- --- --------------------------
Evan Charles Burtton 48 Director as of 3/23/99
Michael Francis Benedict Gillooly 51 Director as of 3/23/99
Christopher Francis Richmond 52 Director as of 3/23/99
There are no other executive officers or other significant employees.
Business Experience, Directorships:
Evan Charles Burtton
Evan Charles Burtton has been a Director and Financial Controller
with CIBC Bank and Trust Company (Cayman) Limited since June 1994 and a
Director and Financial Controller for CIBC Holdings (Cayman) Limited since
March, 1990. Both CIBC Bank and Trust Company (Cayman) Limited and CIBC
Holdings (Cayman) Limited, located at P.O. Box 694, CIBC Building, Edward
Street, George Town, Grand Cayman, Cayman Islands, are affiliates of the
Company. Mr. Burtton is a chartered accountant and is, in connection with his
employment, a director of a number of licensed banks, mutual funds and
investment holding companies, none of which are subject to reporting
requirements under sections 12 or 15(d) of the Securities Exchange Act of 1934,
as amended, or registered under the Investment Company Act of 1940, as amended.
Michael Francis Benedict Gillooly
6
<PAGE>
Michael Francis Benedict Gillooly has been a Director at each of CIBC
Bank and Trust Company (Cayman) Limited and CIBC Holdings (Cayman) Limited since
September, 1990. Mr. Gillooly is, in connection with his employment, a director
of a number of licensed banks, mutual funds and investment holding companies,
none of which are subject to reporting requirements under sections 12 or 15(d)
of the Securities Exchange Act of 1934, as amended, or registered under the
Investment Company Act of 1940, as amended.
Christopher Francis Richmond
Christopher Francis Richmond has been a Managing Director at CIBC
Bank and Trust Company (Cayman) Limited since May, 1998, and has been a Managing
Director at CIBC Trust Company (Bahamas) Limited since November 1985. Mr.
Richmond is a chartered accountant. In connection with his employment, Mr.
Richmond is a director of a number of licensed banks, mutual funds and
investment holding companies, none of which are subject to reporting
requirements under sections 12 or 15(d) of the Securities Exchange Act of 1934,
as amended, or registered under the Investment Company Act of 1940, as amended.
Item 11. Executive Compensation.
Not applicable
Item 12. Security Ownership of Certain Beneficial Owners and Management
As indicated in Item 1 above, 100% of the voting securities of Old GLC, other
than the one Class C share held by CIBC Capital Partners (Cayman) No. 1, are
directly held by CIBC Wood Gundy Capital (SFC) Inc., 161 Bay Street, Toronto,
Ontario M5J 258. Canadian Imperial Bank of Commerce, with principal offices at
BCE Place, 161 Bay Street, Toronto, Ontario M5J 2S8, may be deemed the
beneficial owner of the securities held by CIBC Wood Gundy Capital (SFC) Inc.,
its wholly owned subsidiary.
The following sets forth the ownership by management as of March 23, 1999, of
Common Shares of Canadian Imperial Bank of Commerce, the ultimate parent of
the Company:
<TABLE>
<CAPTION>
Amount and nature of
Name beneficial ownership Percent of class
- - ---- -------------------- ----------------
<S> <C> <C>
Evan Charles Burtton 500 shares held directly *
and 2,780 shares held indirectly**
Michael Francis Benedict Gillooly 848 shares indirectly held** *
Christopher Francis Richmond 4,500 shares indirectly held** *
</TABLE>
* Represents beneficial ownership of less than 1%.
** Indirectly held shares are owned through an employee stock purchase plan.
Item 13. Certain Relationships and Related Transactions.
SFC has paid for certain expenses and other investing transactions in the
amount of approximately $626,000 on behalf of the Company. These amounts due
to SFC are non-interest bearing and have no specific terms of repayment. In
addition, certain administrative and other services are provided to the
Company by CIBC without charge.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) List of Financial Statements, Financial Statement Schedules and
Exhibits:
1. Financial Statements - Included in Part II of this Form 10-K:
Balance Sheets as of December 31, 1998 and 1997
7
<PAGE>
Statements of Operations for the year ended December 31, 1998
and for the period from March 19, 1997 (Date of Inception) to December
31, 1997
Statements of changes in Stockholder's(s') Equity for the
year ended December 31, 1998 and for the period from March 19, 1997
(Date of Inception) to December 31, 1997.
Statements of Cash Flows for the year ended December 31, 1998
and for the period from March 19, 1997 (Date of Inception) to December
31, 1997
Notes to Financial Statements
2. Financial Statement Schedules:
See Exhibit 27.
3. Exhibit Index:
Exhibit
-------
Exhibit
Number
- - ------
3.1 Memorandum & Articles of Association (As Amended and Restated by
Special Resolution dated March 23, 1999)
10.1(a) Indenture, dated as of May 18, 1998, between Global Crossing Holdings
Ltd. and United States Trust Company of New York, as Trustee.
10.2(b) Form of Stockholders Agreement among Global Crossing Ltd. and the
investors named therein.
10.3(b) Form of Registration Rights Agreement among Global Crossing Ltd. and
the investors named therein.
10.4(c) Voting Agreement, dated March 16, 1999, among certain shareholders of
Global Crossing Ltd., parties thereto, Frontier Corporation and, for
certain purposes only, Global Crossing Ltd..
23.1 Consent of Arthur Andersen LLP.
27 Financial Data Schedule
(a) Incorporated by reference to Global Crossing Holdings Ltd.
Registration Statement on S-4 (File No. 333-61457)
(b) Incorporated by reference to Global Crossing Ltd. Registration
Statement on Form S-1 (File No. 333-53393).
(c) Incorporated by reference to Global Crossing Ltd. Current Report on
Form 8-K filed on March 19, 1999.
(b) Reports on Form 8-K.
The Company filed no Current Reports on Form 8-K during the last quarter
of the period covering this report:
8
<PAGE>
(c) See Item 14(a)(3) above.
(d) See Item 14(a)(2) above.
9
<PAGE>
Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act
No annual report or proxy material has been sent to security holders.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
GLOBAL CROSSING (CAYMAN) LTD.
(Formerly Global Crossing Ltd., LDC)
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Public Accountants F-2
Balance Sheets as of December 31, 1998 and 1997 F-3
Statements of Operations for the year ended December 31, 1998
and for the period from March 19, 1997 (Date of Inception) to December 31,
1997 F-4
Statements of changes in Stockholder's(s') Equity for the year ended December
31, 1998 and for the period from March 19, 1997 (Date of Inception) to
December 31, 1997 F-5
Statements of Cash Flows for the year ended December 31, 1998 and for the
period from March 19, 1997 (Date of Inception) to December 31, 1997
F-6
Notes to Financial Statements F-8
</TABLE>
F-1
<PAGE>
ARTHUR ANDERSEN LLP
--------------------
Harbour Centre
PO Box 1929
Grand Cayman
Cayman Islands BWI
Report of Independent Public Accountants
To Global Crossing (Cayman) Ltd.
(formerly Global Crossing Ltd., LDC):
We have audited the accompanying balance sheets of Global Crossing (Cayman) Ltd.
(a Cayman Islands incorporated company) (formerly Global Crossing Ltd., LDC) as
of December 31, 1998 and 1997, and the related statements of operations,
changes in stockholder's (stockholders') equity and cash flows for the year
ended December 31, 1998 and 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 audits.
We conducted our audits 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 audits provide 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 (Cayman) Ltd.
(formerly Global Crossing Ltd., LDC) as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for the year ended December 31,
1998 and 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.
* /s/ Arthur Andersen LLp
Grand Cayman, B.W.I.
March 26, 1999
F-2
<PAGE>
GLOBAL CROSSING (CAYMAN) LTD. (formerly GLOBAL CROSSING LTD., LDC)
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ - $ 1,452,684
Restricted cash and cash equivalents - 25,275,196
Investment in Global Crossing Ltd. 129,809,904 -
Other assets and prepaid costs - 1,015,958
----------------- -----------------
129,809,904 27,743,838
Capacity available for sale - 21,200,000
Construction in progress - 497,318,509
Deferred finance and organization costs (net of accumulated
amortization of $2,247,000 as of December 31, 1997) - 25,934,021
----------------- -----------------
Total assets $ 129,809,904 $ 572,196,368
================= =================
LIABILITIES
Current liabilities:
Accrued construction costs $ - $ 52,003,875
Accounts payable and accrued liabilities 145,623 1,658,399
Accrued interest - 1,640,854
Deferred revenue - 5,325,000
Current portion of obligations under inland services agreements
and capital leases - 30,188,645
Due to Parent 625,920 -
----------------- -----------------
771,543 90,816,773
Long-term debt - 162,325,000
Senior notes - 150,000,000
Obligations under inland service agreements and capital leases - 3,009,000
----------------- -----------------
Total liabilities 771,543 406,150,773
----------------- -----------------
MANDATORILY REDEEMABLE PREFERRED STOCK
(109,830 shares as of December 31, 1997, $1,000 liquidation per share
including $1,281,000 in accrued dividends and net of unamortized
discount and issuance costs of $12,224,000 and $6,962,000, respectively) - 91,924,919
----------------- -----------------
STOCKHOLDER'S(S') EQUITY
Class A common stock, 2,630,943 and 31,102,950 issued as of
December 31, 1998 and December 31, 1997, respectively 2 20
Class B common stock, 906,605 and 50,625,000 issued as of
December 31, 1998 and December 31, 1997, respectively 1 34
Class C common stock, 19,427,281 and 50,625,000 issued as of
December 31, 1998 and December 31, 1997, respectively 19 34
Class D common stock, 0 and 33,088,200 issued as of
December 31, 1998 and December 31, 1997, respectively - 22
Additional paid-in capital 88,278,247 74,280,922
Retained earnings (deficit) 40,760,092 (160,356)
----------------- -----------------
Total stockholder's(s') equity 129,038,361 74,120,676
----------------- -----------------
Total liabilities and stockholder's(s') equity $ 129,809,904 $ 572,196,368
</TABLE>
- - -----------------------
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
GLOBAL CROSSING (CAYMAN) LTD. (formerly GLOBAL CROSSING LTD., LDC)
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
AND FOR THE PERIOD FROM MARCH 19, 1997
(DATE OF INCEPTION) TO DECEMBER 31, 1997
----------------------------------------
<TABLE>
<CAPTION>
For the Period from
March 19, 1997
Year Ended (date of inception)
December 31, 1998 to December 31, 1997
----------------- --------------------
<S> <C> <C>
SALES AND OPERATING REVENUES $ - $ -
EXPENSES
Sales and marketing - 1,366,000
Network development - 78,000
General and administrative 771,543 1,657,000
----------------- --------------------
771,543 3,101,000
----------------- --------------------
OPERATING LOSS (771,543) (3,101,000)
Equity in loss of Global Crossing Ltd. (17,952,007) -
INTEREST INCOME - 2,940,644
----------------- --------------------
LOSS BEFORE PROVISION FOR INCOME TAXES AND GAIN
FROM INITIAL PUBLIC OFFERING (18,723,550) (160,356)
GAIN FROM INITIAL PUBLIC OFFERING 59,523,779 -
PROVISION FOR INCOME TAXES - -
----------------- --------------------
NET INCOME (LOSS) 40,800,229 (160,356)
Preferred stock dividends - (12,689,923)
----------------- --------------------
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDER(S) $ 40,800,229 $ (12,850,279)
================= ====================
EARNINGS (LOSS) PER SHARE - BASIC AND DILUTED $ 0.37 $ (0.04)
================= ====================
SHARES USED IN COMPUTING BASIC AND DILUTED
EARNINGS (LOSS) PER SHARE 111,197,595 325,773,934
================= ====================
</TABLE>
- - -----------------------
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
GLOBAL CROSSING (CAYMAN) LTD. (formerly GLOBAL CROSSING LTD., LDC)
STATEMENTS OF CHANGES IN STOCKHOLDER'S(S') EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
AND FOR THE PERIOD FROM MARCH 19, 1997
(DATE OF INCEPTION) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
Common Stock
- - --------------------------------------------------------------------------------------------------------------------------------
Class A Class B Class C Class D Class E Amount
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Issuance of Class A common stock for
cash in March 1997 11,250,000 - - - - $ 7
Class A common stock distributed for
nil consideration to the initial
purchaser of preference shares
in March 1997 19,852,950 - - - - 13
Issuance of Class B common stock for
cash in March 1997 - 50,625,000 - - - 34
Issuance of Class C common stock for
cash in March 1997 - - 50,625,000 - - 34
Issuance of Class D common stock for
cash to certain Class B
shareholders in March 1997 - - - 33,088,200 - 22
Costs incurred related to the issuance
of common stock - - - - - -
Preferred stock dividends - - - - - -
Net loss for the period - - - - - -
----------- ------------ ----------- ---------- --------- ---------
Balance, December 31, 1997 31,102,950 50,625,000 50,625,000 33,088,200 - $ 110
Issuance of Class B common stock for
cash in January 1998 - 450,000 - - - -
Issuance of Class E common stock for
cash in January 1998 - - - 187,500 -
Issuance of Class E common stock for
cash in April 1998 - - - - 150,000 -
Cash reimbursement to certain
shareholders - - - - - -
Unearned compensation - - - - - -
Compensation Expense - - - - - -
PCG Warrants - 12,203,170 - - - 9
Common stock issued in exchange
for termination of advisory
services agreement - 7,105,263 - - - 5
Preferred stock dividends - - - - - -
Redemption of preferred stock - - - - - -
TDC Exchange - - - - - - (
Conversion of Class D shares - - - (33,088,200) 30,534,017 (2)
Old GCL Exchange (28,472,007) (69,476,828) (31,197,719) - (30,871,517) (100)
Retirement of treasury shares - - - - - -
Equity transaction of
Equity Investment - - - - - -
Net income for the year ended
December 31, 1998 - - - - - -
----------- ------------ ----------- ---------- --------- ---------
Balance, December 31, 1998 2,630,943 906,605 19,427,281 - - $ 22
============= ============= ============= ============= ============= ==============
<CAPTION>
Class A(1) Class B(1) Class C(1) Class D(1) Class E(1) Undesignated(1)
------------- ------------- ------------- ------------- ------------- --------------
Authorized as of December 31, 1997
and 1998 1,000,000,000 1,000,000,000 1,000,000,000 3,000,000,000 1,000,000,000 43,000,000,000
============= ============= ============= ============= ============= ==============
(1) Par value is $.000001 per share.
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
Total
Treasury Additional Unearned Retained Stockholder's
Stock Paid-In Compensation Earnings (Stockholders')
Capital (Deficit) Equity
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Issuance of Class A common stock for
cash in March 1997 $ - $ 7,499,993 $ - $ - $ 7,500,000
Class A common stock distributed for
nil consideration to the initial
purchaser of preference shares
in March 1997 - 13,234,987 - - 13,235,000
Issuance of Class B common stock for
cash in March 1997 - 31,249,966 - - 31,250,000
Issuance of Class C common stock for
cash in March 1997 - 33,749,966 - - 33,750,000
Issuance of Class D common stock for
cash to certain Class B
shareholders in March 1997 - 2,499,978 - - 2,500,000
Costs incurred related to the issuance
of common stock - (1,264,045) - - (1,264,045)
Preferred stock dividends - (12,689,923) - - (12,689,923)
Net loss for the period - - - (160,356) (160,356)
------------- ------------ ------------ ------------ -------------
Balance, December 31, 1997 - 74,280,922 - (160,356) 74,120,676
Issuance of Class B common stock for
cash in January 1998 - 750,000 - - 750,000
Issuance of Class E common stock for
cash in January 1998 - 312,500 - - 312,500
Issuance of Class E common stock for
cash in April 1998 - 1,725,179 - - 1,725,179
Cash reimbursement to certain
shareholder's(s') - (7,047,044) - - (7,047,044)
Unearned compensation - 67,130,700 (67,130,700) - -
Compensation Expense - - 21,134,991 - 21,134,991
PCG Warrants - 275,297,000 - - 275,297,009
Common stock issued in exchange
for termination of advisory
services agreement - 135,000,000 - - 135,000,005
Preferred stock dividends - (8,306,433) - - (8,306,433)
Redemption of preference shares - (34,140,067) - - (34,140,067)
TDC Exchange (209,414,620) 209,414,620 - - -
Conversion of Class D shares - - - - (2)
Old GCL Exchange (418,894,373) 45,995,709 120,219 (372,778,545)
Retirement of treasury shares 209,414,620 (209,414,620) - - -
Equity transaction of Equity
Investment - 2,169,863 - - 2,169,863
Net income for the year ended
December 31, 1998 - - - 40,800,229 40,800,229
------------- ------------ ------------ ------------ -------------
Balance, December 31, 1998 $ - $ 88,278,247 $ - $40,760,092 $129,038,361
============= ============ ============ ============ =============
</TABLE>
F-5
<PAGE>
GLOBAL CROSSING (CAYMAN) LTD. (formerly GLOBAL CROSSING LTD., LDC)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
AND FOR THE PERIOD FROM MARCH 19, 1997
(DATE OF INCEPTION) TO DECEMBER 31, 1997
<TABLE>
<CAPTION>
For the Period from
March 19, 1997 (Date
of Inception) to
December 31, 1998 December 31, 1997
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) applicable to common stockholder (s) $ 40,800,229 $ (12,850,279)
Adjustments to reconcile net income (loss) to net cash
cash provided by operating activities:
Gain from initial public offering of Global Crossing Ltd. (59,523,779) -
Equity in loss of Global Crossing Ltd. 17,952,007 -
Depreciation - 39,000
Preferred stock dividends - 12,689,963
Increase in other assets and prepaid costs - (1,032,000)
Increase in capacity available for sale - (21,200,000)
Increase in deferred revenue - 5,325,000
Increase in obligations under inland service agreements - 20,900,000
Increase in accounts payable and accrued liabilities 145,623 1,249,000
Increase in Due to Parent 625,920 -
----------------- ----------------
Net cash provided by operating activities - 5,120,684
----------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Global Crossing Ltd. (1,452,684) -
Cash paid for construction in progress and
capacity available for sale - (428,743,000)
----------------- ----------------
Net cash used in investing activities (1,452,684) (428,743,000)
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Finance and organizational costs incurred - (28,181,000)
Proceeds from issuance of common stock and additional - 73,736,000
paid-in capital
Preferred stock issuance costs - (7,530,000)
Proceeds from issuance of preferred stock - 100,000,000
Proceeds from long-term debt - 162,325,000
Proceeds from issuance of senior notes - 150,000,000
Increase in restricted cash and cash equivalents, current
and long-term - (25,275,000)
----------------- ----------------
Net cash provided by financing activities - 425,075,000
----------------- ----------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,452,684) 1,452,684
----------------- ----------------
CASH AND CASH EQUIVALENTS, beginning of year 1,452,684 -
----------------- ----------------
CASH AND CASH EQUIVALENTS, end of year $ - $ 1,452,684
================= ================
SUPPLEMENTAL INFORMATION ON NON-CASH
OPERATING ACTIVITIES
Decrease in operating assets
Interest receivable $ 123,000 $ -
Other assets and prepaid costs 892,958 -
Deferred finance and organization costs 25,934,021 -
Capacity available for sale 21,200,000 -
Construction in progress 497,318,509 -
Decrease in operating liabilities -
Accounts payable and accrued liabilities (1,658,399) -
Accrued interest and preferred stock dividends (2,921,854) -
Deferred revenue (5,325,000) -
Current portion of obligations under inland services
agreements (17,891,000) -
Obligations under inland services agreements (3,009,000) -
Accrued construction costs (52,003,875) -
Current portion of obligations under capital leases (12,297,645) -
-------------- ----------------
$ 450,361,715 $
============= ================
SUPPLEMENTAL INFORMATION ON NON-CASH
INVESTING ACTIVITIES
Investment in Global Crossing Ltd. $ (88,238,132) $ -
Costs incurred for construction in progress and capacity
available for sale - 497,319,000
Accrued construction costs - (52,004,000)
Amortization of deferred finance and organization costs - (2,223,000)
Increase in accrued interest (1,641,000)
Decrease in obligations under capital leases (12,298,000)
Increase in accrued liabilities (410,000)
-------------- ----------------
$ (88,238,132) $ 428,743,000
============== ================
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL INFORMATION ON NON-CASH
FINANCING ACTIVITIES
<S> <C> <C>
Restricted cash and cash equivalents $ 25,275,196 $
Long-term debt (162,325,000) -
Senior notes (150,000,000) -
Issuance of Mandatorily redeemable preferred stock (90,643,919) -
Issuance of Class B common stock for cash in
January 1998 750,000 -
Issuance of Class E common stock for cash in
January 1998 312,500 -
Issuance of Class E common stock for cash in
April 1998 1,725,179 -
Cash reimbursement to certain shareholders (7,047,044) -
Compensation Expense 21,134,991 -
PCG Warrants 275,297,009 -
Common stock issued in exchange for termination of
advisory services agreement 135,000,005 -
Preferred stock dividends (8,306,433) -
Redemption of preferred stock (34,140,067) -
Conversation of Class D shares (2) -
Old GCL Exchange (372,778,545) -
Equity transactions of Equity Investment 2,169,863 -
Common stock distributed to holders of preferred stock - 13,235,000
--------------- ----------
$ (363,576,267) 13,235,000
=============== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for taxes - -
Cash paid during the year for interest, net of
capitalized interest - 8,136
</TABLE>
F-7
<PAGE>
GLOBAL CROSSING (CAYMAN) LTD. (formerly GLOBAL CROSSING LTD., LDC)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND FOR THE PERIOD FROM MARCH 19, 1997
(DATE OF INCEPTION) TO DECEMBER 31, 1997
NOTE 1. ORGANIZATION
Global Crossing (Cayman) Ltd., formerly Global Crossing Ltd., LDC ("Old GCL"),
formerly GT Parent Holdings LDC, was incorporated as an exempted limited
duration company in the Cayman Islands on March 19, 1997 (date of inception).
From March 19, 1997 through May 26, 1998, Old GCL was in the development stage
and was engaged in the construction and development of an underwater fiber
optic system connecting the United States and Europe ("Atlantic Crossing" or
"AC-1 system"). On May 26, 1998, the United States to United Kingdom segment of
the AC-1 system was placed into service and Old GCL began generating revenues.
During the development stage, Old GCL recognized approximately $101 million in
revenues and had minimal operating costs as the costs of construction were
capitalized. During the period from March 19, 1997 through June 30, 1998, Old
GCL incurred a net loss applicable to common stockholders of approximately
$214.5 million. This loss was primarily the result of (1) the termination of an
Advisory Services Agreement, dated March 25, 1997 (as amended, the "Advisory
Services Agreement") with PCG Telecom with respect to the AC-1 system under
which PCG Telecom was entitled to an advisory fee based upon the gross revenues
of Atlantic Crossing Ltd. ("ACL"); (2) awards under Old GCL's Stock Incentive
Plan; (3) the extraordinary loss on the retirement of Global Telesystems
Holdings, Ltd. ("GTH") Senior Notes which were repurchased on May 18, 1998; and
(4) the redemption of GTH Preference Shares on June 17, 1998. Old GCL financed
its net losses, debt service, capital expenditure and other cash needs through
the proceeds of sales of common and preferred equity and the issuance of debt.
Prior to the initial public offering of Global Crossing Ltd. ("New GCL"), all
shares of common stock in New GCL, a Bermuda Company, were owned by Old GCL. In
August 1998, New GCL declared a stock dividend so that Old GCL held 1.5 shares
of common stock of New GCL for each share of common stock of Old GCL
outstanding. Pursuant to the terms of the Articles of Association of Old GCL,
prior to the 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 E
shares converted into Class B shares of Old GCL. Accordingly, each holder of
Class D and Class E shares received Class B shares, with the warrants to
purchase Class E shares received by former Class D shareholders then cancelled
in exchange for warrants ("New GCL Warrants") to purchase shares of common stock
of New GCL at an exercise price equal to the initial offering price.
Immediately subsequent to such transactions and prior to the initial public
offering, each shareholder of Old GCL, other than CIBC Wood Gundy Capital (SFC),
Inc. ("SFC" or "Parent"), agreed with Old GCL to exchange their interests in Old
GCL for shares of common stock of New GCL held by Old GCL at a rate of 1.5
shares of common stock of New GCL per share of common stock of Old GCL (the "Old
GCL Exchange"). SFC did not participate in the Old GCL Exchange. Subsequent to
the Old GCL Exchange, each previous shareholder of Old GCL (now referred to as
the "Company") holds an equal proportionate interest in New GCL, with the
Company becoming wholly owned by SFC. All shares of common stock in Old GCL,
other than the shares owned by SFC and one Class C share held by CIBC Capital
Partners (Cayman) No. 1, have been retired.
The pro forma financial statements for the Company appearing below give effect
to the Old GCL Exchange. Subsequent to the Old GCL Exchange, the Company's only
asset is its investment in New GCL. The Company engages in no business
activities other than holding New GCL shares.
F-8
<PAGE>
Old GCL summarized Pro Forma Financial Statements (in 000's):
<TABLE>
<CAPTION>
Old GCL Adjusted
ASSETS Old GCL Historical Old GCL Exchange December 31, 1997
December 31, 1997 (Unaudited) (Unaudited)
----------------- ----------- -----------
<S> <C> <C> <C>
Cash and cash equivalents $ 1,453 $ (1,453) $ -
Restricted cash and cash equivalents 25,275 (25,275) -
Other assets and prepaid costs 1,015 (1,015) -
Capacity available for sale 21,200 (21,200) -
Construction in progress 497,319 (497,319) -
Deferred finance and organization costs (net of accumulated
amortization of $2,247 as of December 31, 1997) 25,934 (25,934) -
Investment in Global Crossing Ltd. - 12,452 12,452
--------- ---------- ---------
Total Assets $ 572,196 $(559,744) $ 12,452
========= ========== =========
LIABILITIES
Accrued construction costs $ 52,004 $ (52,004) $ -
Accounts payable and accrued liabilities 1,658 (1,658) -
Accrued interest 1,641 (1,641) -
Deferred revenue 5,325 (5,325) -
Current portion of obligations under inland services
agreement and capital leases 30,189 (30,189) -
Long-term debt 162,325 (162,325) -
Senior notes 150,000 (150,000) -
Obligations under inland services agreements and
capital leases 3,009 (3,009) -
--------- ---------- ---------
Total liabilities 406,151 (406,151) -
MANDATORILY REDEEMABLE PREFERRED STOCK (109,830 shares
as of December 31, 1997, $1000 liquidation per share
including $1,281 accrued dividends and net of
unamortized discount and issuance costs of $12,224 and
$6,962, respectively) 91,924 (91,924) -
STOCKHOLDER'S(S') EQUITY 74,121 (61,669) 12,452
--------- ---------- ---------
Total Liabilities and Stockholder's(s') Equity $ 572,196 $(559,744) $ 12,452
========= ========== =========
<CAPTION>
Old GCL Adjusted
Old GCL Historical for the period from
for the period from March 19, 1997
March 19, 1997 (Date of Inception)
(Date of Inception) Old GCL Exchange to December 31, 1997
to December 31, 1997 (Unaudited) (unaudited)
-------------------- ------------- --------------------
<S> <C> <C> <C>
Sales and operating revenue $ - $ - $ -
Operating expenses 3,101 (3,101) -
------------ ------------ ---------
Operating loss (3,101) 3,101 -
Equity in loss of New GCL - (27) (27)
Interest Income 2,941 (2,941) -
------------ ------------ ---------
Loss before provision for income taxes (160) 133 (27)
Provision for income taxes - - -
------------ ------------ ---------
NET INCOME (LOSS) (160) 133 (27)
Preferred stock dividends (12,690) 12,690 -
------------ ------------ ---------
Net loss applicable to common stockholder(s) $ (12,850) $ 12,823 $ (27)
============ ============ =========
</TABLE>
- - --------------------
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
NOTE 2. BASIS OF PRESENTATION
The Company's financial statements have been prepared in accordance with
Generally Accepted Accounting Principles in the United States ("U.S. GAAP").
U.S. GAAP requires that management of the Company make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Management of the Company believes that the estimates
utilized in preparing the financial statements are reasonable and prudent;
however, actual results could differ from those estimates. The following is a
summary of significant accounting policies consistently followed by the Company,
which are in accordance with U.S. GAAP.
The Financial Statements include the results of operations with affiliated
entities (refer to Note 5).
Comparative Financial Statements
The accompanying financial statements for the period from March 19, 1997 (Date
of Inception) to December 31, 1997 include the accounts of Old GCL.
Equity Method of Accounting
The Company holds an investment in New GCL where the principal objective of
investing is to obtain capital gains over the investment term that is typically
medium term. Because of the significance of transactions with SFC and its
affiliates, the number of representatives on New GCL's Board of Directors
affiliated with Canadian Imperial Bank of Commerce ("CIBC"), and the Company's
guarantee of New GCL debt, the Company accounts for the investment using the
equity method of accounting whereby a proportionate share of income, losses,
dividend and capital transactions are recorded in the Company's financial
statements.
Recently Adopted and New Accounting Standards
The Financial Accounting Standards Board has 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 or SFAS 131 as of
and for the year ended December 31, 1998.
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.
Earnings (Loss) per Share
Earnings (loss) per share is calculated in accordance with Statement of
Financial Accounting Standards No. 128 "Earnings Per Share". Share and per share
data presented reflects all stock dividends and stock splits.
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings (loss) per share:
<TABLE>
<CAPTION>
For the Period from
March 19, 1997
Year Ended (date of inception)
In thousands except for stock outstanding December 31, 1998 to December 31, 1997
and per share information ----------------- --------------------
<S> <C> <C>
Basic and diluted
Net income (loss) $ 40,800 $ (160)
Preferred stock dividends - (12,690)
-------------- --------------
Net income (loss) applicable to common stockholder(s) $ 40,800 $ (12,850)
============== ==============
Weighted average stock outstanding - basic and diluted 111,197,595 325,773,934
============== ==============
Earnings (loss) per share - basic and diluted $ 0.37 $ (0.04)
============== ==============
</TABLE>
Dilutive options for Old GCL did not have an impact on the computation of
diluted loss per share in 1997 and 1998 since they were anti-dilutive.
NOTE 3. INVESTMENT IN NEW GCL
F-11
<PAGE>
New GCL provides Internet and long distance telecommunications facilities and
services utilizing a network of undersea and terrestrial digital fiber optic
cable systems. The Company owns approximately a 16.8% interest or 68,894,488
shares of Common Stock in New GCL. The first five cable systems under
development by New GCL, together with associated terrestrial backhaul capacity,
will form an interconnected worldwide high capacity fiber optic network (the
"Global Crossing Network") consisting of AC-1 system; Pacific Crossing
("PC-1"), a system connecting the United States and Asia; Mid-Atlantic Crossing
("MAC"), a system connecting the Eastern United States and the Caribbean; Pan
American Crossing ("PAC"), a system connecting the Western United States,
Central America and the Caribbean, South American Crossing ("SAC"), connecting
the major cities of South America to MAC, PAC, and the rest of New GCL's System,
and Pan European Crossing ("PEC"), a 68,100 kilometer terrestrial system
connecting 24 European cities to each other and to the undersea systems. The
undersea component of the Global Crossing Network initially will total 81,400
kilometers.
The investment consists of the following:
<TABLE>
<CAPTION>
As of December 31, 1998
Carrying Value Market Value Unrealized Gain
-------------- ------------ ---------------
<S> <C> <C> <C>
Investment in New GCL $129,809,904 $1,554,431,886 $1,424,621,982
</TABLE>
Investment Transfer and Voting Restrictions
Each share of Common Stock of New GCL ("New GCL Common Stock") has one vote,
except that if, and so long as, the Controlled Shares (as defined below) of any
person constitute more than 9.5% (or, in the case of CIBC and certain of its
affiliates, including the Company collectively, 35%) of the voting power of the
outstanding shares, including New GCL Common Stock (an "Over-the-Threshold
Common Stockholder"), the voting rights with respect to the Controlled Shares
owned by such person will be limited, in the aggregate, to a voting power of
9.5%, pursuant to a formula set forth in the Bye-Laws of New GCL ("GCL
Bye-laws"). The votes that could be cast by Over-the-Threshold Common
Stockholders but for the restrictions on voting rights described above will be
allocated to the other holders of New GCL Common Stock, pro rata based upon the
number of shares of New GCL Common Stock held by all other holders of New GCL
Common Stock, subject only to the further limitation that no stockholder
allocated any such voting rights may exceed the applicable limitation set forth
above as a result of such allocation. "Controlled Shares" includes among other
things, all shares of New GCL Common Stock that a person is deemed (i) to own
directly, indirectly or constructively pursuant to Section 958 of the Internal
Revenue Code of 1986, as amended (the "Code"), or (ii) to beneficially own
directly or indirectly as a result of the possession of sole or shared voting
power within the meaning of Section 13(d) of the Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder.
New GCL, the Company, Pacific Capital Group, Inc. ("PCG") GKW Unified Holdings,
LL ("GKW"), certain affiliates of CIBC, Continental Casualty Company, MRCo. Inc.
and certain other shareholders of New GCL (including certain of New GCL's
officers and directors and their affiliates) (collectively, the "Existing
Holders") have entered into a Stockholders Agreement. The Stockholders
Agreement contains certain restrictions on the transfer or other disposition by
such affiliates of CIBC (including the Company) of shares of New GCL common
stock. Pursuant to the Stockholders Agreement (i) New GCL has been granted a
right of first refusal on certain private transfers by the Existing Holders
during the first two years after the consummation of the initial public offering
of common stock of New GCL; and (ii) no Stockholder (as defined in the
Stockholders Agreement) shall Transfer (as defined in the Stockholders
Agreement) any securities to any person if such Transfer would, for purposes of
section 551 of the Code, result in more than 50% of the vote or value of the
outstanding capital stock of the Company being owned, directly or indirectly,
(taking into account the applicable attribution and constructive ownership rules
under the Code), by 5 or fewer individuals. In addition, subject to the
exceptions set forth in the Stockholders Agreement, certain of the Existing
Holders have rights ("tag-along rights") permitting such shareholder to
participate, on the same terms and conditions, in certain transfers of shares by
other Existing Holders as follows: (i) PCG, GKW and certain affiliates of CIBC
(including the Company) (and their affiliates and permitted transferees) shall
have the right to participate in any transaction initiated by any of them to
transfer 5% or more of the outstanding securities of New GCL and (ii) PCG, GKW,
certain affiliates of CIBC, Continental Casualty Company and MRCo, Inc. (and
their affiliates and permitted transferees) shall have the right to participate
in any transaction initiated by any of them to transfer any securities of New
GCL which transaction would result in a change of control of New GCL.
The shares of New GCL Common Stock held by the Company are "restricted shares"
as that term is defined in Rule 144 under the Securities Act of 1933, as
amended, and as such may not be sold except pursuant to an effective
registration statement under the Securities Act or in compliance with Rule 144
or another duly available exemption under the Securities Act.
Dividends
The Company does not anticipate receiving dividends in the foreseeable future
as New GCL's ability to pay dividends is limited by certain debt instruments.
Contingent Issuances of New GCL Stock
New GCL has 26,852,778 options outstanding under employee benefit plans as of
December 31, 1998. The exercise prices range from $0.83-$13.26 with a weighted
average remaining life of 9.3 years.
New GCL entered into a warrant agreement with PCG. PCG's warrants became
exercisable at the IPO of New GCL. The warrants give each holder the option to
convert each share under warrant into a fraction of a Class B share based on 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 36,906,370 shares available under
the PCG warrants.
F-12
<PAGE>
Summary Financial Statements for New GCL
The selected condensed consolidated financial data of New GCL as of December 31,
1998 and 1997, for the year ended December 31, 1998 and for the period from
March 19, 1997 (Date of Inception) to December 31, 1997 was as follows:
<TABLE>
<CAPTION>
For the
Period from March 19,
Year Ended 1997 (Date of Inception)
December 31, 1998 to December 31, 1997
----------------- --------------------
(000's)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues $ 424,099 $ -
Expenses:
Cost of Capacity sold 178,492 -
Termination of Advisory Services Agreement 139,669 -
Other 125,663 3,101
----------- ---------
443,824 3,101
Operating Loss (19,725) (3,101)
Equity in Loss of Affiliates (2,508) -
Net interest (expense) income (12,894) 2,941
Provision for Income Taxes (33,067) -
----------- ---------
Loss before Extraordinary Item (68,194) (160)
Extraordinary Loss on Retirement of Senior Notes (19,709) -
----------- ---------
Net loss $ (87,903) $ (160)
=========== =========
<CAPTION>
December 31, 1998 December 31, 1997
----------------- -----------------
BALANCE SHEET DATA
<S> <C> <C>
Current Assets $ 1,002,115 $ 27,744
Construction in Progress and Capacity Available for 1,003,056 518,519
Sale
Other 634,006 25,934
----------- ---------
Total Assets $ 2,639,177 $ 572,197
=========== =========
Current Liabilities $ 251,890 $ 90,817
Long Term Debt 269,598 162,325
Senior Notes 796,495 150,000
Other 59,499 3,009
----------- ---------
Total Liabilities 1,377,482 406,151
Mandatorily Redeemable Preferred Stock 487,375 91,925
Shareholder's Equity 774,320 74,121
----------- ---------
Total Liabilities and Shareholder's(s') Equity $ 2,639,177 $ 572,197
=========== =========
</TABLE>
The financial information described herein includes summarized financial
statements and certain accounting policies for New GCL. The complete financial
statements and notes thereto are included in the New GCL Form 10-K as filed
with the Securities and Exchange Commission (Registration No. 000-24565)
Significant accounting policies of New GCL were as follows:
a) Development Stage Company
New GCL was in its development stage until May 1998 when the United States to
United Kingdom segment was placed into service and New GCL began generating
significant revenues.
b) Sales Type Lease Revenue and Deferred Revenue
Customers of New GCL can enter into Capacity Purchase Agreements ("CPAs") to
purchase an Indefeasible Right of Use ("IRU") in units of capacity on any of New
GCL's fiber optic cable systems ("Systems"). The purchase price for capacity on
the System is non-refundable once the applicable segment purchased on a System
is ready for
F-13
<PAGE>
service ("RFS"). The IRU purchased entitles the customer to all rights and
obligations of ownership of the capacity for a period of 25 years after the
System RFS date. New GCL's revenues from the sale of capacity are recognized in
the period that the rights and obligations of ownership transfer to the
purchaser. Customers who have entered into CPAs for capacity have paid deposits
toward the purchase price and such amounts have been included as deferred
revenue.
New GCL has entered into contracts, called Inland Services Agreements, to obtain
IRUs for terrestrial capacity. New GCL in turn sells this third party
terrestrial capacity under separate CPAs to certain customers for the purpose of
extending capacity from certain System landing stations to major
telecommunication cities. 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 for terms of 25 years after the RFS date
of the related system.
c) Sales Type Lease Cost of Sales
Cost of undersea sales in any period 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 cost of sales matches costs with the value of
each sale relative to total expected revenues.
During 1998, New GCL entered into Inland Services Agreements to obtain IRUs for
terrestrial capacity for terms of 25 years. Under the IRUs, New GCL 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. New GCL has accounted for the IRUs as capital leases.
The cost of acquiring this terrestrial capacity is charged to cost of sales in
the period that the related revenue is recognized. New GCL capitalized the
present value of total future payments (excluding Operations, Administration and
Maintenance ("OA&M") costs) in capacity available for sale and recorded an equal
amount as an obligation under Inland Services Agreements in New GCL's
consolidated balance sheets.
d) Operating Type Lease Revenue and Deferred Revenue
New GCL may enter into operating lease agreements to lease capacity on its
terrestrial fiber optic cable systems. These agreements may grant the customer a
right to use capacity on the terrestrial systems for periods of time, which may
be substantially less than the design life of such systems (generally 25 years).
New GCL will amortize revenues from these operating lease agreements on its
terrestrial fiber optic systems over the lives of the agreements with cash
received but not yet recognized as operating revenues, recorded as deferred
revenue in New GCL's consolidated balance sheets.
e) OA&M Revenue
Pursuant to the terms of its existing CPAs, New GCL is obliged to use
commercially reasonable efforts to cause the AC-1 system to be maintained in
efficient working order and in accordance with industry standards. In exchange
for the operating, administration and maintenance services provided by New GCL
through the OA&M agreement with Tyco Submarine Systems Ltd, ("TSSL"), customers
are obligated for the term of the IRU to pay for their allocable share of the
costs for operating and maintaining the system. Undersea OA&M revenues are
recognized in the period the services are provided. On an annual basis, the
actual OA&M costs incurred by New GCL are accumulated and an adjustment is made
to true up actual OA&M revenues so that they equal 110% of actual costs
incurred, provided specified contractual limits have not been reached.
f) Maintenance Costs
New GCL has entered into an OA&M agreement with TSSL whereby TSSL is obligated
to provide operating administration and maintenance functions to the AC-1
system, which include management and maintenance of a Network Operating Center,
assumption of vessel costs obtaining and renewing all operating permits,
providing repair equipment, providing cable protection and ordering and
restocking equipment spares. The OA&M agreement is for an initial term of eight
years with two renewal periods of eight and one half years each at New GCL's
option. The OA&M costs related to this agreement are expensed as incurred.
OA&M costs relating to Inland Service Agreements are expensed as incurred.
g) Commissions and Advisory Services Fees
New GCL's policy is to record sales commissions and advisory fee expenses and
related payables upon the recognition of revenue so as to appropriately match
these costs with the related revenue. Under the Advisory
F-14
<PAGE>
Services Agreement ("ASA") which was terminated by year end, New GCL paid PCG
Telecom Services LLC ("PCG Telecom") and its affiliates 2% of revenues for
advisory services performed. Under the Sales Agency Agreement ("SAA") New GCL
pays TSSL a commission based on a percentage of capacity revenues.
h) Construction in Progress
Costs incurred prior to a Segment's completion are reflected as construction in
progress and are recorded as capacity available for sale or as a depreciable
asset at the date each Segment of the system becomes operational. Capacity
available for sale is recorded at the lower of cost or fair value less costs to
sell and is charged to costs of sales 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.
i) 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 New GCL's consolidated balance
sheets. Costs incurred to obtain financing through the issuance of preferred
stock have been reflected as a reduction in the carrying value of the issued
preferred stocks. Costs incurred to obtain financing through the issuance of
common stock has been charged to paid-in capital. The financing costs relating
to the debt are amortized over the lesser of the term of the related debt
agreements or the expected payment date of the debt obligation. In 1998, certain
preferred stock was redeemed at which time the remaining balance of unamortized
discount and offering costs was charged against additional paid-in capital. 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 preferred
stock is included as a component of preferred stock dividends.
j) Interest Rate Derivatives
New GCL uses derivative financial instruments for the purpose of reducing its
exposure to adverse fluctuations in interest rates. As of December 31, 1998, New
GCL does not utilize derivative financial instruments for trading or other
speculative purposes. The counterparty to this instrument is CIBC. New GCL is
exposed to credit loss in the event of non-performance by CIBC.
New GCL has entered into interest rate swap agreements to hedge its exposure to
interest rates on its long term debt. Since these agreements qualify for hedge
accounting, cash amounts paid or received on the agreement are accrued and
recognized as an adjustment to interest expense on the related debt.
k) New Accounting Standard
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").
New GCL is required to adopt SOP 98-5 during January, 1999. The adoption of SOP
98-5 will result in a charge against net income in the first quarter of 1999
which management estimated will be approximately $15 million.
NOTE 4. GAIN ON INITIAL PUBLIC OFFERING
In accordance with Staff Accounting Bulletin No. 51, the Company has recognized
a gain of approximately $59.5 million as a result of the initial public offering
of New GCL common stock that occured on August 13, 1999 (the "IPO").
No. of Shares Issued, including 1,940,000 shares
sold by insiders: 24,150,000
Price Per Share: $19.00
Total Dollar Amount, net of expenses: $391,074,000
The Company's Ownership Percentage in New GCL Prior
to the IPO: 18.8%
The Company's Ownership Percentage in New GCL Subsequent
to the IPO; 16.8%
No income taxes have been provided on this gain, as the Company is not subject
to direct taxation in the Cayman Islands.
NOTE 5. RELATED PARTY TRANSACTIONS AND BALANCES
SFC is a wholly owned subsidiary of CIBC.
In addition to the Company's ownership in New GCL, CIBC has beneficial ownership
of an additional 28,732,312 shares of Common Stock and options or approximately
7% in New GCL.
SFC has paid for certain expenses and other investing transactions on behalf of
the Company. The amounts due to SFC are non-interest bearing and have no
specific terms of repayment. In addition, certain administrative and other
services are provided to the Company by CIBC and its affiliates without charge.
F-15
<PAGE>
Transactions with CIBC and its Affiliates
During 1998, CIBC and its affiliates entered into certain financing transactions
with New GCL in connection with the development and construction of its
systems. In particular, CIBC or one of its affiliates: (i) arranged and was the
initial lender under a $200 million bridge facility, which was repaid and
terminated on May 18, 1998; (ii) is one of the lead agents under a $482 million
credit facility for AC-1 system; (iii) was an initial purchaser in connection
with the May 1998 issuance by GCH of its $800 million Senior Notes; (iv)
together with other lenders, entered into a credit agreement with an affiliate
of New GCL, effective July 30, 1998, for the $850 million non-recourse project
debt financing of PC-1; (v) together with other lenders, issued a $104 million
loan to Pacific Crossing Ltd. to make the initial payments with respect to the
construction contract for PC-1, which was repaid and terminated on July 30,
1998; (vi) was an underwriter in the August 1998 initial public offering of
common stock of New GCL; (vii) was an initial purchaser in the December 1998
offering of GCH's 10 1/2% senior exchangeable preferred stock due 2008; and
(viii) together with other lenders, entered into a credit agreement with Mid
Atlantic Crossing Ltd., effective November 25, 1998, for the $260 million
non-recourse project debt financing of MAC. During 1998, New GCL paid CIBC and
its affiliates approximately $19 million (plus $6 million from a joint venture
of New GCL) in fees in connection with these transactions. Certain members of
the Board of Directors of New GCL are employees of an affiliate of CIBC. During
1998, New GCL and its affiliates paid CIBC approximately $150,000 in Board of
Directors fees from New GCL.
NOTE 6. GUARANTEE
On May 13, 1998, the Company, together with New GCL and certain subsidiaries of
Global Crossing Holdings Ltd. ("GCH"), a Bermuda company and operating
wholly-owned subsidiary of New GCL, entered into a Purchase Agreement with GCH
and certain initial purchasers pursuant to which it guaranteed payment and
performance obligations under GCH's $800 million 9 5/8% Senior Notes due 2008
(the"Restricted Notes"). The Restricted Notes were exchanged for registered
Senior Notes (the "Senior Notes") under an Exchange Offer initiated in October,
1998. The terms of the Senior Notes are identical in all material respects to
those of the Restricted Notes, except for certain transfer restrictions and
registration rights related to the Restricted Notes and except for certain
interest provisions related to such registration rights. The Company, together
with New GCL and certain subsidiaries of GCH jointly and severally guaranteed
the payment and performance obligations of GCH under the Senior Notes (the
"Guarantee").
NOTE 7. INCOME TAXES
The Company is incorporated and resident in the Cayman Islands and, as such,
there are no income taxes levied to any such companies or on undistributed
earnings.
Note 8. QUARTERLY FINANCIAL DATA (unaudited)
The Company's unaudited quarterly results are as follows:
<TABLE>
<CAPTION>
1998 Quarter Ended
-----------------------------------------------------------------
000's (except for per share data) March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenues...................................... - - - -
Operating Income (loss)....................... $ - $ - $ - $ (772)
Income (loss) before extraordinary (700) (29,222) 2,558 8,640
item........................................
Net Income (loss)............................. (700) (29,222) 62,081 8,640
Net income (loss) applicable to common
shareholder's(s')........................... (700) (29,222) 62,081 8,640
============== =========== ============= ============
Earnings (loss) per share basic and diluted... $ (0.01) $ (0.27) $ 0.68 $ 0.38
============== =========== ============= ============
<CAPTION>
For the Period from
March 19, 1997 1997 Quarter Ended
to ---------------------------------------------
March 31, 1997 June 30 September 30 December 31
--------------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues................................. $ - $ - $ - $ -
Operating (loss)......................... - (142) (669) (2,290)
Income (loss) before extraordinary item.. - 1,205 485 (1,850)
Net Income (loss) - 1,205 485 (1,850)
Net income (loss) applicable to common
shareholders........................... $ (195) $ (2,836) $ (3,692) $ (6,127)
============== =========== ============= ============
Earnings (loss) per share basic and diluted $ - $ (0.01) $ (0.01) $ (0.02)
============== =========== ============= ============
</TABLE>
NOTE 9. SUBSEQUENT EVENTS
Effective March 9, 1999, New GCL declared on February 3, 1999, a two-for-one
stock split effected in the form of a stock dividend to Stockholders of record
on February 16, 1999. All New GCL share information presented in these financial
statements gives retroactive effect to this transaction.
Frontier Acquisition
On March 16, 1999, New GCL entered into a definitive agreement and plan of
merger with Frontier Corporation, a New York Corporation ("Frontier"). The
Board of Directors of each company has approved the merger. In this all-stock
transaction, the number of shares of New GCL Common Stock to be exchanged for
each Frontier share under the contemplated plan will be determined by dividing
$62.00 by a volume weighted average of trading prices for New GCL Common Stock
for a pricing period prior to the closing, subject to a minimum of 1.0919 shares
and a maximum of 1.7939 shares of New GCL Common Stock for each Frontier share.
Frontier may terminate the merger if the applicable price of New GCL Common
Stock is less than $34.56 unless New GCL then agrees to provide additional
merger consideration in the form of additional shares of New GCL Common Stock or
cash to ensure that Frontier shareholders receive $62 of value for each Frontier
share. The merger is intended to qualify as a tax-free reorganization and is
expected to be accounted for as a purchase. Completion of the transaction is
anticipated to occur during the third quarter of 1999. The transaction is
subject to the majority vote of the shareholders of New GCL and the vote of
two-thirds of the common shareholders of Frontier and to other customary
conditions, such as receipt of regulatory approvals. Shareholders of New GCL,
including affiliates of CIBC (including the Company), representing more than a
majority of the voting power of New GCL Common Stock have agreed to vote in
favor of the transaction.
Effective March 23, 1999, the Company changed its name to Global Crossing
(Cayman) Ltd. from Global Crossings Ltd., LDC.
F-16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 31st day
of March 1999.
GLOBAL CROSSING (CAYMAN) LIMITED
(Registrant)
By: /s/ EVAN CHARLES BURTTON
----------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 31st day of March 1999.
NAME TITLE
/s/ CHRISTOPHER FRANCIS RICHMOND Director (Principal Executive Officer)
- - ------------------------------------
/s/ EVAN CHARLES BURTTON Director (Principal Accounting Officer
- - ------------------------------------- Principal Financial Officer)
/s/ MICHAEL FRANCIS BENEDICT GILLOOLY Director
- - -------------------------------------
<PAGE>
EXHIBIT INDEX
(3.1) Memorandum & Articles of Association
(23) Consent of Arthur Andersen LLP
(27) Financial Data Schedule.
<PAGE>
THE COMPANIES LAW (1998 REVISION)
COMPANY LIMITED BY SHARES
MEMORANDUM & ARTICLES
OF
ASSOCIATION
OF
GLOBAL CROSSING (CAYMAN) LTD.
(As Amended and Restated by Special Resolution dated [ ], 1999)
<PAGE>
THE COMPANIES LAW (1998 REVISION)
COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF
GLOBAL CROSSING (CAYMAN) LTD.
(As Amended and Restated by Special Resolution dated [ ], 1999)
1. The name of the Company is GLOBAL CROSSING (CAYMAN) LTD.
2. The Registered Office of the Company will be situate at the offices
of CIBC Bank & Trust Company (Cayman) Limited, P.O. Box 694GT, Edward
Street, George Town, Grand Cayman, Cayman Islands or at such other
location as the Directors may from time to time determine.
3. The objects for which the Company is established are unrestricted and
the Company shall have full power and authority to carry out any
object not prohibited by any law as provided by Section 7(4) of The
Companies Law (1998 Revision).
4. The Company shall have and be capable of exercising all the functions
of a natural person of full capacity irrespective of any question of
corporate benefit as provided by Section 27(2) of The Companies Law
(1998 Revision).
5. Nothing in the preceding sections shall be deemed to permit the
Company to carry on the business of a Bank or Trust Company without
being licensed in that behalf under the provisions of the Banks and
Trust Companies Law (1995 Revision) or to carry on Insurance Business
from within the Cayman Islands or the business of an Insurance
Manager, Agent, Sub-agent or Broker without being licensed in that
behalf under the provisions of the Insurance Law (1998 Revision) or
to carry on the business of Company Management without being licensed
in that behalf under the provisions of the Companies Management Law
(1998 Revision).
6. The Company will not trade in the Cayman Islands with any person,
firm or corporation except in furtherance of the business of the
Company carried on outside the Cayman Islands; Provided that nothing
in this section shall be construed as to prevent the Company
effecting and concluding contracts in the Cayman Islands, and
exercising in the Cayman Islands all of its powers necessary for the
carrying on of its business outside the Cayman Islands.
7. The liability of the members is limited to the amount, if any, unpaid
on the shares respectively held by them.
<PAGE>
8. The capital of the Company is US$50,000.00 divided into 1,000,000,000
Class A Shares of a nominal or par value of US$0.000001 each,
1,000,000,000 Class B Shares of a nominal or par value of US$0.000001
each, 1,000,000,000 Class C Shares of a nominal or par value of
US$0.000001 each, 3,000,000,000 Class D Shares of a nominal or par
value of US$0.000001 each, 1,000,000,000 Class E Shares of a nominal
or par value of US$0.000001 each and 43,000,000,000 Undesignated
Shares of a nominal or par value of US$0.000001 each provided always
that subject to the provisions of The Companies Law (1998 Revision)
and the Articles of Association the Company shall have power to
redeem or purchase any of its shares and to sub-divide or consolidate
the said shares or any of them and to issue all or any part of its
capital whether original, redeemed, increased or reduced with or
without any preference, priority or special privilege or subject to
any postponement of rights or to any conditions or restrictions
whatsoever and so that unless the conditions of issue shall otherwise
expressly provide every issue of shares whether stated to be
Ordinary, Preference or otherwise shall be subject to the powers on
the part of the Company hereinbefore provided.
9. The Company may exercise the power contained in Section 224 of The
Companies Law (1998 Revision) to deregister in the Cayman Islands and
be registered by way of continuation in some other jurisdiction.
<PAGE>
THE COMPANIES LAW (1998 REVISION)
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
GLOBAL CROSSING (CAYMAN) LTD.
(Amended and Restated by Special Resolution dated [ ], 1999)
INTERPRETATION
1. (a) The regulations contained or incorporated in Table "A"
in the First Schedule of the Companies Law (1998 Revision)
shall not apply to this Company and the following
regulations shall comprise the Articles of Association of
the Company.
(b) In these Articles the words standing in the first column of
the table next hereinafter contained shall bear the meanings
set opposite to them respectively in the second column
hereof, if not inconsistent with the subject or context.
Words Meanings
Affiliate Shall mean any other person, directly or indirectly,
controlling or controlled by or under direct or indirect
common control with such person.
Board of
Directors The Board of Directors of the Company.
Business Day Any day (except Saturday and Sunday) on which banks in the
Cayman Islands, Bermuda and New York, New York are open for
business.
Cash Payment The initial payment made to the Company in respect of
Shares.
Class A
Shareholder A holder of Class A Shares.
Class B
Shareholder A holder of Class B Shares.
Class C
Shareholder A holder of Class C Shares.
Class D
Shareholder A holder of Class D Shares.
Class E
Shareholder A holder of Class E Shares.
Class A Shares The Company's Class A Common Shares, par value of
U.S.$0.000001 per share.
-1-
<PAGE>
Class B Shares The Company's Class B Common Shares, par value of
U.S.$0.000001 per share.
Class C Shares The Company's Class C Common Shares, par value of
U.S.$0.000001 per share.
Class D Shares The Company's Class D Common Shares, par value of
U.S.$0.000001 per share.
Class E Shares The Company's Class E Common Shares, par value of U.S.
$0.000001 per share.
Company Global Crossing (Cayman) Ltd.
Companies Law The Companies Law (1998 Revision) of the Cayman Islands
and any statutory amendment or modification thereof. Any
reference to a provision of the Companies Law is to that
provision as modified by law for the time being in force.
Distribution All payments or distributions to holders of Shares.
Dollars The lawful currency of the United States.
Fiscal Quarters Shall have the meaning set forth in Article 19 hereof.
Fiscal Year Shall have the meaning set forth in Article 19 hereof.
Investment Any investment authorized by the Memorandum of Association
of the Company.
in writing Written, printed, lithographed, photographed, telefaxed or
telexed or represented by any other substitute for writing
or partly one and partly another.
month Calendar month.
Non-Qualified Person A person or persons holding Shares in breach of any
restriction mentioned in Article 13 hereof.
Register The register of Shareholders of the Company maintained in
accordance with Section 40 of the Companies Law as
supplemented by these Articles.
Seal The common seal of the Company including any facsimile
thereof.
Shareholder A person who is registered as the holder of Shares in the
Register for the time being kept by or on behalf of the
Company.
Shares The Company's Class A Shares, Class B Shares, Class C
Shares, Class D Shares and Class E Shares.
signed Includes a signature or representation of a signature
affixed by mechanical means.
-2-
<PAGE>
2. In these Articles, unless there be something in the subject or
context inconsistent with such construction:
(a) Words importing the singular number shall include the plural
number and vice versa.
(b) Words importing the masculine gender only shall include the
feminine gender.
(c) Words importing persons only shall include companies or
associations or bodies of persons, whether corporate or not.
(d) The word "may" shall be construed as permissive and the word
"shall" shall be construed as imperative.
(e) References to enactments shall include reference to any
modification or re-enactments thereof for the time being in
force.
(f) References to dollars (or $) are references to dollars of
the United States of America.
3. Subject to the two preceding Articles any words defined in the
Companies Law shall, if not inconsistent with the subject or context,
bear the same meaning in these Articles.
PRELIMINARY
4. The preliminary expenses incurred in forming the Company and in
connection with its initial offer and issue of its Shares shall be
paid by the Company.
5. The business of the Company shall be commenced as soon after the
organization of the Company as practicable.
SITUATION OF REGISTERED OFFICE OF THE COMPANY
6. The Registered Office shall be at such address in the Cayman Islands
as the Directors shall from time to time determine.
MANAGEMENT
7. The management of the Company is vested in the Directors.
SHARE CAPITAL; RIGHTS
8. (a) The authorized share capital of the Company at the date of
the adoption of these Articles is US$ $50,000, divided into
1,000,000,000 Class A Shares of par value $0.000001 per
share, 1,000,000,000 Class B Shares of par value $0.000001
per share, 1,000,000,000 Class C Shares of par value
$0.000001 per share, 3,000,000,000 Class D Shares of par
value $0.000001 per share, 1,000,000,000 Class E shares
of par value $0.000001 per share and 43,000,000,000
undesignated shares of par value $.000001 per share.
(b) Each Class B Share shall be exchangeable at any time or from
time to time, at the option of the holder thereof, into a
Class A Share.
(c) Each Class D Share shall be exchangeable at any time or from
time to time, at the option of the holder thereof, into (i)
a Class E Share upon the payment to the Company by the
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holder thereof of a cash payment of US $2.20 per share (less
actual cash distributions received by such time on each
Class C Share) or (ii) a fractional share of a Class E
Share, where the numerator of such fraction shall be the
difference between (x) the market value of each Class E
Share at the time of such exchange as determined by
resolution of the Directors and (y) US $2.20 (less actual
cash distributions received by such time on each Class C
Share) and where the denominator of such fraction shall be
such market value. If any holder of a Class D Share shall
exchange its Class D Shares into Class E Shares in
accordance with clause (ii) of the preceding sentence then,
at the time of any such exchange, the holder shall receive
from the Company, for no additional consideration, a warrant
(exercisable for ten years from the date of the exchange) to
receive additional Class E Shares in an amount equal to the
difference between (x) the number of Class D Shares
exchanged and (y) the number of Class E Shares received, in
each case pursuant to clause (ii) of the preceding sentence.
The per share exercise price in respect of such warrant
shall be the per share market value of the Class E Shares as
determined in accordance with the foregoing clause (ii). If
the Company shall make any distribution or dividend on the
Common Stock in securities of another entity, the holder of
each Class D Share shall be entitled at its option to
receive in exchange for such Class D Share a warrant
(exercisable for ten years from the date of the exchange) to
purchase voting common stock of such entity at the
equivalent of US $2.20 per share (less actual cash
distributions received by such time on each Class C Share),
adjusted to give effect to the revised capitalization
structure of such new entity. Immediately prior to an
initial public offering or a change in control transaction,
each Class E Share shall be exchangeable, at the option of
the holder thereof, into a Class B Share for no
consideration other than the surrender of such Class E
Share.
(d) Any share exchangeable pursuant to the terms of this Article
into a Share (including a multiple or fraction thereof) of
another class shall upon satisfaction of all preconditions
to such exchange as set forth above, be repurchased by the
Company in such manner as the Board of Directors shall
determine and the Company shall issue such Share (including
a multiple or fraction thereof) of such other class as
provided for herein in consideration thereof.
ALTERATION OF SHARE CAPITAL
9. The Company may from time to time by ordinary resolution increase the
share capital by such sum, to be divided into shares of such amount
as the resolution shall prescribe.
10. The new Shares shall be subject to the same provisions with reference
to dividend, distribution, lien, transfer, transmission, forfeiture
and otherwise as the Shares in the original share capital.
11. The Company may by ordinary resolution:
(a) consolidate and divide all or any of its share capital into
shares of larger amount than its existing Shares;
(b) sub-divide its existing Shares, or any of them into shares
of smaller amount than is fixed by the Memorandum of
Association, subject nevertheless to the provisions of
Section 13 of the Companies Law; and
(c) cancel any shares which, at the date of the passing of the
resolution, have not been taken or agreed to be taken by any
person.
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12. The Company may by special resolution reduce its share capital and
any capital redemption reserve in any manner authorized by law.
NON-QUALIFIED PERSONS
13. The Directors may impose such procedures and restrictions as they
consider necessary or desirable for the purpose of ensuring that no
Shares of the Company are held by any person or persons in
circumstances (whether directly or indirectly affecting such person
or persons and whether taken alone or in conjunction with any other
person or persons, connected or not, or any other circumstance
appearing to the Directors to be relevant) which in the opinion of
the Directors might result in the Company incurring any tax
liability, the Company being involved in any litigation, the Company
becoming a reporting person, or otherwise subject to any other
requirements it was not subject to immediately prior to such
transaction, under United States federal or state securities laws or
regulations, or the Company being registered or regulated as an
investment company under the United States Investment Company Act of
1940, as amended, or suffering any other pecuniary or fiscal
disadvantage or other adverse effect which the Company might not
otherwise incur or suffer.
14. A person who becomes aware that he is holding or owning Shares in
breach of any restriction mentioned in Article 13 above shall
promptly notify the Directors in writing of his status as a Non
Qualified Person.
15. If it comes to the notice of the Directors that any Shares are so
held by any such Non-Qualified Person, the Directors, by written
notice, will instruct the Non-Qualified Person as to the steps to be
taken to cure such status in accordance with the provisions of these
Articles, and such Non-Qualified Person will immediately comply with
such instructions.
16. No person shall be recognized by the Company as holding any Share
upon any trust, and the Company shall not be bound by or recognize
(even when having notice thereof) any equitable, contingent, future
or partial interest in any Share, or (save only as by these Articles
otherwise provided or as by law required) any other right in respect
of any Share, except an absolute right thereto in the Register.
17. The Directors shall keep or cause to be kept a Register as required
by Section 40 of the Companies Law.
18. The Directors in each year shall prepare or cause to be prepared an
annual return and declaration setting forth the particulars required
by Section 187 of the Companies Law and deliver a copy thereof to the
Registrar of Companies.
FISCAL PERIODS
19. The "Fiscal Year" of the Company shall end on December 31 of each
year. The "Fiscal Quarters" of the Company shall end on March 31,
June 30, September 30 and December 31 of each Fiscal Year.
PURPOSES OF THE COMPANY
20. Without limiting the objects of the Company as set forth in the
Company's Memorandum of Association, the principal purposes for which
the Company is established are for seeking capital appreciation
through investment in the securities of companies engaged in the
development, sales and operation of telecommunications systems and to
engage in all activities and transactions as
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the Board of Directors may deem reasonably necessary or advisable or
incidental in connection therewith.
INDEMNITY
21. Every Director (including for the purposes of this Article any
Alternate Director appointed pursuant to the provisions of these
Articles), Managing Director, agent, Secretary, Assistant Secretary,
or other officer for the time being and from time to time of the
Company and the personal representatives of the same shall be
indemnified and secured harmless out of the assets and funds of the
Company against all actions, proceedings, costs, charges, expenses,
losses, damages or liabilities incurred or sustained by him in or
about the conduct of the Company's business or affairs or in the
execution or discharge of his duties, powers, authorities or
discretions, including without prejudice to the generality of the
foregoing, any costs, expenses, losses or liabilities incurred by him
in defending (whether successfully or otherwise) any civil
proceedings concerning the Company or its affairs in any court
whether in the Cayman Islands or elsewhere.
22. No such Director, Alternate Director, Managing Director, agent,
Secretary, Assistant Secretary or other officer of the Company shall
be liable (i) for the acts, receipts, neglects, defaults or omissions
of any other such director or officer or agent of the Company or (ii)
by reason of his having joined in any receipt for money not received
by him personally or (iii) for any loss on account of defect of title
to any property of the Company or (iv) on account of the
insufficiency of any security in or upon which any money of the
Company shall be invested or (v) for any loss incurred through any
bank, broker or other agent or (vi) for any loss occasioned by any
negligence, default, breach of duty, breach of trust, error of
judgement or oversight on his part or (vii) for any loss, damage or
misfortune whatsoever which may happen in or arise from the execution
or discharge of the duties, powers authorities, or discretions of his
office or in relation thereto, unless the same shall happen through
his own dishonesty.
LIMITATION ON REDEMPTIONS AND DISTRIBUTIONS
23. Except with the unanimous approval of the Board of Directors, no
Shareholder shall be entitled (i) to receive Distributions from the
Company other than as provided in Article 25; or (ii) to cause the
Company to redeem such Shareholder's Shares.
REDEMPTION AND PURCHASE OF COMPANY'S SHARES
24. (a) Subject to the provisions of the Companies Law, the Company may:
(i) issue shares which are to be redeemed or are liable
to be redeemed;
(ii) purchase its own shares (including any redeemable
shares); and
(iii) make a payment in respect of the redemption or
purchase of its own shares otherwise than out of
profits or the proceeds of a new issue of shares.
(b) A Share that is liable to be redeemed may be redeemed by the
Company giving to the Shareholder not fewer than thirty days
notice in writing of the intention to redeem such Shares
specifying the date of such redemption which must be a day
on which banks in the Cayman Islands are open for business.
(c) The amount payable on such redemption on each Share so
redeemed shall be the amount determined by the Directors.
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(d) Any Share in respect of which notice of redemption has been
given shall not be entitled to participate in the profits of
the Company in respect of the period after the date
specified as the date of redemption in the notice of
redemption.
(e) The redemption or purchase of any Share shall not be deemed
to give rise to the redemption or purchase of any other
Share.
(f) At the date specified in the notice of redemption or
purchase, the holder of the Shares being redeemed or
purchased shall be bound to deliver up to the Company at its
registered office the certificate thereof for cancellation
and thereupon the Company shall pay to him the redemption or
purchase monies in respect thereof.
(g) The Directors may when making payments in respect of
redemption or purchase of Shares in accordance with the
provisions of this Article, if authorized by the terms of
issue of the Shares being redeemed or purchased or with the
agreement of the holder of such Shares, make such payment
either in cash or in specie.
(h) The Shares are not redeemable, whether at the request of a
holder or the Company.
DISTRIBUTIONS
25. Distributions shall be made to the Shareholders in the sole
discretion of the Directors. The net proceeds derived from the
Company's investments, after provision for reserves, expenses, fees
and taxes, if any, of the Company, shall be distributed to the
Shareholders in the manner and order of priority set forth below.
(a) first, 100% to the Class A, B, C and E Shareholders,
proportionate to their ownership of the total number of
Class A, B, C and E Shares outstanding, until the Class C
Shareholders have received cumulative distributions in an
amount that will yield an internal rate of return of 10%
(the "10% IRR"), compounded annually, on the aggregate Cash
Payments paid in respect of the Class C Shares; provided,
however, that any distributions made to the Class C
Shareholders in respect of their Class C Shares prior to the
third anniversary of initial issuance of the Class C Shares
shall be deemed to be made, solely for purposes of computing
the 10% IRR hereunder, on the date of such third
anniversary.
(b) second, 90% to the Class A, B, C and E Shareholders,
proportionate to their ownership of the total number of
Class A, B, C and E Shares outstanding, and 10% to the
Class D Shareholders proportionate to their ownership of the
Class D Shares, until the Class C Shareholders have received
cumulative distributions in an amount that will yield an
internal rate of return of 30% (the "30% IRR"), compounded
annually, on the aggregate Cash Payments paid in respect of
the Class C Shares; provided, however, that any
distributions made to the Class C Shareholders in respect of
their Class C Shares prior to the third anniversary of
initial issuance of the Class C Shares shall be deemed to be
made, solely for purposes of computing the 30% IRR
hereunder, on the date of such third anniversary.
(c) third, 80% of the remaining net proceeds, if any, to the
Class A, B, C and E Shareholders, proportionate to their
ownership of the Class total number of A, B, C and E Shares
outstanding, and 20% of the remaining net proceeds, if any,
to the Class D Shareholders proportionate to their ownership
of the Class D Shares.
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<PAGE>
26. The Directors shall use their best efforts to make Distributions only
in cash or marketable securities unless Shareholders holding a
majority of the shares consent to an in-kind Distribution pursuant to
which all Shareholders participate in each asset distributed in the
proportions established under Article 25. In the context of a
liquidation of the Company, the Directors shall use their best
efforts to make Distributions only in cash or marketable securities,
provided that if such distributions cannot, with such best efforts,
be made, the Directors may cause the Company to make in-kind
Distributions pursuant to which all Shareholders participate in each
asset distributed in the proportions established under Article 25.
All Distributions pursuant to this Article 28 shall be made in the
same priority and proportions as Distributions at such time would be
made pursuant to Article 25.
27. Notwithstanding anything in these Articles to the contrary, no
Distribution shall be made (i) if such Distribution would violate any
contract or agreement to which the Company is then a party or any law
then applicable to the Company, or (ii) to the extent that the
Directors, in their sole discretion, determines that any amount
otherwise distributable should be retained by the Company to pay, or
establish a reserve for the payment of, any liability or obligation
of the Company, including obligations to pay or withhold any U.S.
federal income or other taxes or taxes imposed by any other
jurisdiction.
28. Notwithstanding anything in these Articles to the contrary, the
Directors are authorized to take any action that they determine to be
necessary or appropriate to cause the Company to comply with any U.S.
federal withholding requirement or any withholding requirements of
any other jurisdictions with respect to any payment or Distribution
by the Company to any Shareholder or other person. All amounts so
withheld, and, in the manner determined by the Directors, amounts
withheld with respect to any payment or Distribution by any person to
the Company shall be treated as Distributions to the Shareholders to
which such amounts would have been distributed (under these Articles)
but for withholding. If any such withholding requirement with respect
to any Shareholder exceeds the amount distributable to such
Shareholder under these Articles or if any such withholding
requirement was not satisfied with respect to any amount previously
distributed to such Shareholder, such Shareholder and any successor
or assignee with respect to such Shareholder's interest in the Shares
of the Company will indemnify and hold harmless the Directors and the
Company for such excess withholding requirement, as the case may be.
29. No Distribution shall be paid otherwise than out of profits, the
share premium account or, subject to the restrictions of the
Companies Law, capital.
30. If several persons are registered as joint holders of any Share, any
of them may give effectual receipts for any Distribution or other
monies payable on or in respect of the Share.
31. No Distribution shall bear interest against the Company.
CLASS A SHARES
32. The names of all of the Class A Shareholders shall be filed with the
Register.
33. The Class A Shareholders of the Company shall not be liable for the
repayment and discharge of any debts and obligations of the Company
except to the extent of the Cash Payments made in respect of the
Class A Shares held by them, the amount of which Cash Payments, less
any portion that previously has been dividended to a holder thereof,
or distributed to a holder thereof or applied in accordance with the
provisions of the Companies Law, may be used to discharge all
liabilities and expenses of the Company.
34. In no event shall any Class A Shareholder be obligated to make any
contribution to the Company.
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CLASS B SHARES
35. The names of all the Class B Shareholders shall be filed with the
Register.
36. The Class B Shareholders shall not be liable for the repayment and
discharge of any debts and obligations of the Company except to the
extent of the Cash Payments made in respect of the Class B Shares
held by them, the amount of which Cash Payments, less any portion
that previously has been dividended to a holder thereof, or
distributed to a holder thereof or applied in accordance with the
provisions of the Companies Law, may be used to discharge all
liabilities and expenses of the Company.
37. In no event shall any Class B Shareholder be obligated to make any
contribution to the Company.
CLASS C SHARES
38. The names of all the Class C Shareholders shall be filed with the
Register.
39. The Class C Shareholders shall not be liable for the repayment and
discharge of any debts and obligations of the Company except to the
extent of the Cash Payments made in respect of the Class C Shares
held by them, the amount of which Cash Payments, less any portion
that previously has been dividended to a holder thereof, or
distributed to a holder thereof or applied in accordance with the
provisions of the Companies Law, may be used to discharge all
liabilities and expenses of the Company.
40. In no event shall any Class C Shareholder be obligated to make any
contribution to the Company.
CLASS D SHARES
41. The names of all the Class D Shareholders shall be filed with the
Register.
42. The Class D Shareholders shall not be liable for the repayment and
discharge of any debts and obligations of the Company except to the
extent of the Cash Payments made in respect of the Class D Shares
held by them, the amount of which Cash Payments, less any portion
that previously has been dividended to a holder thereof, or
distributed to a holder thereof or applied in accordance with the
provisions of the Companies Law, may be used to discharge all
liabilities and expenses of the Company.
43. In no event shall any Class D Shareholder be obligated to make any
contribution to the Company.
CLASS E SHARES
44. The names of all the Class E Shareholders shall be filed with the
Register.
45. The Class E Shareholders shall not be liable for the repayment and
discharge of any debts and obligations of the Company except to the
extent of the Cash Payments made in respect of the Class E Shares
held by them, the amount of which Cash Payments, less any portion
that previously has been dividended to a holder thereof, or
distributed to a holder thereof or applied in accordance with the
provisions of the Companies Law, may be used to discharge all
liabilities and expenses of the Company.
46. In no event shall any Class E Shareholder be obligated to make any
contribution to the Company.
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<PAGE>
MODIFICATION OF RIGHTS
47. Whenever the capital of the Company is divided into different classes
of shares the special rights attached to any class may (unless
otherwise provided by the terms of issue of the shares of that class)
be varied or abrogated either whilst the Company is a going concern
or during or in contemplation of a winding up, with the consent in
writing of the holders of not less than 80% of the issued shares of
the class, or with the sanction of a resolution passed at a separate
meeting of the holders of the Shares of the class by 80% of the votes
cast at such meeting, but not otherwise. To every such separate
meeting all the provisions of these Articles relating to general
meetings of the Company or to the proceedings thereat shall, mutatis
mutandis, apply except that the necessary quorum shall be one or more
persons at least holding or representing by proxy one-half in nominal
amount of the issued shares of the class (but so that if at any
adjourned meeting of such holders a quorum as above defined is not
present, those Shareholders who are present shall be a quorum) and
that every Shareholder of the class shall on a poll have one vote for
each share of the class held by him.
48. The rights attached to Class A Shares, Class B Shares, Class C
Shares, Class D Shares and Class E Shares shall be deemed to be
varied by the creation or issue of any shares (other than Class A
Shares, Class B Shares, Class C Shares, Class D Shares and Class E
Shares) ranking pari passu with or in priority to them as regards
participating in the profits or assets of the Company.
CERTIFICATES
49. Every person whose name is entered as a Shareholder in the Register
shall be entitled, without payment, to a certificate specifying the
share or shares held by him, provided that in the case of shares held
jointly by several persons, the Company shall not be bound to issue
more than one certificate therefor, and delivery of a certificate for
a Share to one of several joint holders shall be sufficient delivery
to all.
50. Where a Shareholder has transferred or exchanged part of the Shares
comprised in his holding he shall be entitled to a certificate for
the balance.
51. If a share certificate is defaced, lost or destroyed, it may be
renewed on such terms (if any) as to evidence any indemnity as the
Directors thinks fit.
TRANSFER OF SHARES
52. The instrument of transfer of any share shall be executed by or on
behalf of the transferor and if so required by the Directors shall
also be executed on behalf of the transferee and the transferor shall
be deemed to remain a holder of the share until the name of the
transferee is entered in the Register of Members in respect thereof.
53. The following provisions shall apply to all shares:
(a) Shares shall be transferred in any usual or common form
approved by the Directors or failing such determination in
the following form:
I [Transferor] for good and valuable consideration received
by me from [Transferee] do hereby transfer to the said
[Transferee] the [ ] share(s) standing in my name in the
Register of Global Crossing (Cayman) Ltd. to hold unto the
said [Transferee] his executors, administrators and
assigns, and 1, the said [Transferor] do hereby consent
that my name remain on the Register of the said Company
until such time as the said
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Company may enter the transferee's name thereon; And I the
said [Transferee] do hereby agree to take the said share(s).
As witness our hands
Signed by the said [Transferor] on the day of [month, year]
in the presence of:
------------------ ------------------
Witness Transferor
Signed by the said [Transferee] on the day of [month, year]
in the presence of:
------------------ ------------------
Witness Transferee
(b) The Directors may suspend the registration of transfers
during the fourteen days immediately preceding a general
meeting. The Directors may decline to recognize any
instrument of transfer unless the instrument of transfer is
accompanied by the certificate of the shares to which it
relates, and such other evidence as the Directors may
reasonably require to show the right of the transferor to
make the transfer. If the Directors refuse to register a
transfer of any shares, the Directors shall within two
months after the day on which the transfer was lodged with
the Company send to the transferee notice of the refusal.
(c) The legal personal representative of a deceased sole holder
of a share shall be the only person recognized by the
Company as having any title to the share. In the case of a
share registered in the name of two or more holders, the
survivors or survivor, or the legal personal representatives
of the deceased survivor, shall be the only person
recognized by the Company as having any tide to the share.
(d) Any person becoming entitled to a share in consequence of
the death or bankruptcy of a Shareholder shall, upon such
evidence being produced as may from time to time be properly
required by the Directors, have the right either to be
registered as a Shareholder in respect of the share or,
instead of being registered himself, to make such transfer
of the share as the deceased or bankrupt person could have
made; but the Directors shall, in either case, have the same
right to decline or suspend registration as the Directors
would have had in the case of a transfer of the share by the
deceased or bankrupt person before the death or bankruptcy.
(e) A person becoming entitled to a share by reason of the death
or bankruptcy of the holder shall be entitled to the same
dividends and other advantages to which he would be entitled
if he were the registered holder of the share, except that
he shall not, before being registered as a Shareholder in
respect of the share, be entitled in respect of it to
exercise any right conferred by membership in relation to
meetings of the Company.
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GENERAL MEETING
54. The Directors may, whenever it thinks fit, convene a general meeting
of all Shareholders or of the Class A, Class B, Class C, Class D and
Class E Shareholders.
55. Articles 57 through 78 below shall apply to any general meetings of
Shareholders or any class of Shareholders. Class A Shareholders,
Class B Shareholders, Class C Shareholders, Class D Shareholders and
Class E Shareholders shall be entitled to receive notice of, and
attend, general meetings held by Class A Shareholders, Class B
Shareholders and Class C Shareholders. Only Class D Shareholders and
Class E Shareholders, as the case may be, shall be entitled to
receive notice of, and attend, general meetings held by Class D
Shareholders and Class E Shareholders, respectively.
56. Holders of 10% of the outstanding Shares of any class may convene a
general meeting of the Shareholders of such class in the same manner
as nearly as possible as that in which meetings may be convened by
the Directors. Holders of 25% of the Class B Shares or Class C
Shares may convene a general meeting of the Shareholders in the same
manner as nearly as possible as that in which meetings may be
convened by the Directors.
NOTICE OF GENERAL MEETINGS
57. Subject to the provisions of Section 60 of the Companies Law relating
to special resolutions, seven days' notice at the least counting from
the date service is deemed to take place as provided in these
Articles specifying the place, the day and the hour of the meeting
and, in case of special business, the general nature of that
business, shall be given in the manner hereafter provided or in such
other manner (if any) as may be prescribed by the Company in general
meeting to such persons as are, under the Articles of the Company,
entitled to receive such notices from the Company; but with the
consent of all the Shareholders entitled to receive notice of some
particular meeting, that meeting may be convened by such shorter
notice or without notice and in such manner as those Shareholders may
think fit.
58. The accidental omission to give notice of a meeting to or the
non-receipt of a notice of a meeting by any Shareholder shall not
invalidate the proceedings at any meeting.
PROCEEDINGS AT GENERAL MEETINGS
59. All business carried out at a general meeting shall be deemed special
with the exception of the consideration of the accounts, balance
sheets, and ordinary report of the Directors and Auditors, the
election of directors by the Shareholders, and the fixing of the
remuneration of the Auditors. No special business shall be transacted
at any general meeting without the consent of all Shareholders
entitled to receive notice of that meeting unless notice of such
special business has been given in the notice convening that meeting.
60. No business shall be transacted at any general meeting of the Class
A, B and C Shareholders unless a quorum of such Shareholders and a
majority of the holders of Class B Shares and a majority of the
holders of Class C Shares are present at the time when the meeting
proceeds to business; save as herein provided, Shareholders holding
at least a majority in number of the issued Shares in the applicable
class of the Company present in person or by proxy shall be a quorum.
61. If within two hours from the time appointed for the meeting a quorum
is not present, the meeting, if convened upon the requisition of
Shareholders, shall stand adjourned to the second business day
thereafter, at the same time and place, and the quorum necessary for
the transaction of the
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business of Shareholders at such meeting shall be a majority of the
Shares. In any other case it shall stand adjourned to the second
business day thereafter, at the same time and place, and the quorum
necessary for the transaction of the business of Shareholders at such
meeting shall be a majority of the Shares.
62. The Chairman of the Board of Directors shall preside as chairman at
every general meeting of the Company.
63. If there is no such Chairman, or if at any meeting he is not present
in person or by proxy within one hour after the time appointed for
holding the meeting or is unwilling to act as chairman, the members
present shall choose one of the shareholders of the Company to be
chairman.
64. The Chairman may with the consent of any meeting at which a quorum is
present (and shall if so directed by the meeting) adjourn a meeting
from time to time and from place to place, but no business shall be
transacted at any adjourned meeting other than the business left
unfinished at the meeting from which the adjournment took place. When
a meeting is adjourned for ten days or more, notice of the adjourned
meeting shall be given as in the case of an original meeting. Save as
aforesaid it shall not be necessary to give any notice of an
adjournment or of the business to be transacted at an adjourned
meeting.
65. At any general meeting a resolution put to the vote of the meeting
shall be decided by a poll.
VOTES OF SHAREHOLDERS
66. (a) Every Class A Shareholder, Class B Shareholder and Class C
Shareholder present in person or by proxy shall be entitled
to one vote in respect of each Class A, Class B and Class C
Share held by him.
(b) The Class A Shareholders, voting separately as a class,
shall be entitled to elect one member of the Board of
Directors.
(c) The Class B Shareholders, voting separately as a class,
shall be entitled to elect six members of the Board of
Directors.
(d) The Class C Shareholders, voting separately as a class,
shall be entitled to elect six members of the Board of
Directors.
(e) For the avoidance of doubt, it is declared that the Class D
Shareholders and the Class E Shareholders shall have no
right to vote at any general meeting of the Company;
provided, however, that such Shareholders shall be entitled
to vote on matters in accordance with Article 49 and the
Companies Law and shall be entitled to one vote with respect
thereto for each Class D Share and each Class E Share held
by such Shareholder.
67. In the case of joint holders of a Share, the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted to
the exclusion of the votes of the other joint holders, and for this
purpose seniority shall be determined by the order in which the names
stand in the Register in respect of the Shares.
68. A Shareholder who has appointed special or general attorneys or a
Shareholder who is subject to a disability may vote, by his said
attorney, curator, committee, receiver, curator bonis or other person
in the nature of a committee, receiver, or curator bonis appointed by
a court and such attorney, committee, receiver, curator bonis or
other person may on a poll vote by proxy.
-13-
<PAGE>
69. No objection shall be raised to the qualification of any voter except
at the meeting or adjourned meeting at which the vote objected to is
given or tendered, and every vote not disallowed at such meeting
shall be valid for all purposes. Any such objection made in due time
shall be referred to the Chairman of the meeting, whose decision
shall be final and conclusive.
70. Votes may be given either personally or by proxy.
71. A Shareholder entitled to more than one vote need not, if it votes,
use all his votes or cast all the votes it uses in the same way.
72. The instrument appointing a proxy shall be in writing under the hand
of the appointee or of his attorney duly authorized in writing, or if
the appointor is a corporation, either under its common seal or under
the hand of an officer or attorney so authorized.
73. Any person (whether a Shareholder of the Company or not) may be
appointed to act as a proxy. A Shareholder may appoint more than one
proxy to attend on the same occasion.
74. No instrument appointing a proxy shall be valid after the expiration
of twelve months from the date named in it as the date of its
execution, except at an adjourned meeting or on a poll demanded at a
meeting or an adjourned meeting in cases where the meeting was
originally held within twelve months from such date.
75. An instrument of proxy shall be in the following form or such other
form as the Directors may approve:
GLOBAL CROSSING (CAYMAN) LTD.
(Name or Names) of (address) being a
Shareholder/Shareholders of the above-named Company hereby
appoint (Name of Proxy) or failing him, (Name of
Alternative Proxy) of (Address) as my/our proxy to vote for
me/us on my/our behalf at the general meeting of the Class
Shareholders to be held on the day of and at all
contributions or adjournments thereof.
Signed this day of __________________________
(Signature)
76. The Directors may at the expense of the Company send, by post or
otherwise, to the Shareholders instruments of proxy (with or without
prepaid postage for their return) for use at any general meeting or
at any meeting of any class of Shareholders of the Company. If for
the purpose of any meeting invitations to appoint as proxy a person
or one of a number of persons specified in the invitations are issued
at the expense of the Company, such invitations shall be issued to
all (and not to some only) of the Shareholders entitled to be sent a
notice of the meeting and to vote thereat by proxy.
77. A vote given in accordance with the terms of an instrument of proxy
shall be valid notwithstanding the death or insanity of the principal
or the revocation of the instrument of proxy, or of the authority
under which the instrument of proxy was executed, or the transfer of
the Share in respect of which the instrument of proxy is given;
provided that no intimation in writing of such death, insanity,
revocation or transfer shall have been received by the Company at the
registered office before commencement of the meeting or adjourned
meeting at which the instrument of proxy is used.
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<PAGE>
78. Any corporation which is a Shareholder of the Company may by
resolution of its directors or other governing body, authorize such
person as it thinks fit to act as its representative at any meeting
of the Company or at any meeting of any class of Shareholders of the
Company, and the person so authorized shall be entitled to exercise
the same powers on behalf of the corporation which he represents as
that corporation could exercise if it were an individual Shareholder
of the Company and such corporation shall for the purposes of these
presents be deemed to be present in person at any such meeting if a
person so authorized is present thereat.
DIRECTORS
79. The Company in general meeting may from time to time fix the maximum
and minimum number of Directors to be appointed but unless such
number is fixed as aforesaid the number of Directors shall be
unlimited.
80. Subject to the provisions of these Articles of Association, a
Director shall hold office until such time as he is removed from
office by an ordinary resolution of the Company in general meeting.
81. The remuneration of the Directors shall from time to time be
determined by the Board of Directors.
82. There will be no share qualification for Directors.
83. The Directors shall have power at any time and from time to time to
appoint a person as Director, either as a result of a casual vacancy
or as an additional Director, subject to the maximum number (if any)
imposed by the Company in general meeting.
ALTERNATE DIRECTOR
84. Any Director may in writing appoint another person to be his
alternate to act in his place at any meeting of the Directors at
which he is unable to be present. Every such alternate shall be
entitled to notice of meetings of the Directors and to attend and
vote thereat as a Director when the person appointing him is not
personally present and where he is a Director to have a separate vote
on behalf of the Director he is representing in addition to his own
vote. A Director may at any time in writing revoke the appointment of
an alternate appointed by him. Such alternate shall not be an officer
of the Company and shall be deemed to be the agent of the Director
appointing him. The remuneration of such alternate shall be payable
out of the remuneration of the Director appointing him and the
proportion thereof shall be agreed between them.
85. Any Director may appoint any person, whether or not a Director of the
Company, to be the proxy of that Director to attend and vote on his
behalf, in accordance with instructions given by that Director, or in
the absence of such instructions at the discretion of the proxy, at a
meeting or meetings of the Directors which that Director is unable to
attend personally. The instrument appointing the proxy shall be in
writing under the hand of the appointing Director and shall be in the
form printed below or any other form approved by the Directors, and
must be lodged with the chairman of the meeting of the Directors at
which such proxy is to be used, or first used, prior to the
commencement of the meeting:
GLOBAL CROSSING (CAYMAN) LTD.
I the undersigned being a Director of the above Company HEREBY
APPOINT and when failing, [ I to be my Proxy and on my behalf to
attend, vote at a meeting of Directors of the said Company to be held
on the day of and at all continuations and adjournments thereof
-15-
<PAGE>
Date: ________________ ______________________
Signature of Director
POWERS AND DUTIES
86. The business of the Company shall be managed by the Directors, who
may pay all expenses incurred in setting up and registering the
Company and may exercise all such powers of the Company as are not,
by the Law or these Articles, required to be exercised by the Company
in general meeting, subject, nevertheless, to any Regulation of these
Articles, to the provisions of the Law, and to such regulations,
being not inconsistent with the aforesaid Regulations, or provisions
as may be prescribed by the Company in general meeting; but no
regulation made by the Company in general meeting shall invalidate
any prior act of the Directors which would have been valid if that
regulation had not been made.
87. The Directors may from time to time appoint any person, whether or
not a director of the Company to hold such office in the Company as
the Directors may think necessary for the administration of the
Company, including without prejudice to the foregoing generality, the
office of Chief Executive Officer, Chief Operating Officer,
President, one or more Vice-Presidents, Treasurer, Assistant
Treasurer, Chief Financial Officer, Directors or Controller, and for
such term and at such remuneration (whether by way of salary or
commission or participation in profits or partly in one way and
partly in another), and with such powers and duties at the Directors
may think fit.
88. The Directors shall appoint the Company Secretary (and if need be an
Assistant Secretary or Assistant Secretaries) who shall hold office
for such term, at such remuneration and upon such conditions and with
such powers as they think fit. Any Secretary or Assistant Secretary
so appointed by the Directors may be removed by the Directors.
89. (a) The Directors may delegate any of their powers to committees
consisting of such member or members of their body as they
think fit; any committee so formed shall in the exercise of
the powers so delegated conform to any regulations that may
be imposed on it by the Directors. The Directors may also
appoint one or more of their number to the office of
Managing Director for such term and at such remuneration
(whether by way of salary or commission or participation in
profits of partly in one way and partly in another) and may
delegate to any such Managing Director such of their powers
as they consider desirable to be exercised by him. Any such
delegation may be made subject to any condition the
Directors may impose and may be revoked or altered at any
time, and any such appointment shall ipso facto determine if
the Managing Director ceases from any cause to be a Director,
or if the Company in general meeting resolves that his
tenure of office be terminated.
(b) The Directors may from time to time and at any time by power
of attorney appoint any company, firm or person or body of
persons, whether nominated directly or indirectly by the
Directors, to be the attorney or attorneys of the Company
for such purposes and with such powers, authorities and
discretion (not exceeding those vested in or exercisable by
the Directors under these Articles) and for such period and
subject to such conditions as they may think fit, and any
such power of attorney may contain such provisions for the
protection and convenience of persons dealing with any such
attorney as the Directors may think fit, and may also
authorize any such attorney to delegate all or any of the
powers, authorities and discretion vested in him.
-16-
<PAGE>
(c) The Directors may from time to time provide for the
management of the affairs of the Company in such manner as
they shall think fit.
DISQUALIFICATION OF DIRECTORS
90. The office of Director shall be vacated, if the Director:
(a) files a petition in bankruptcy or makes any arrangement or
composition with his creditors;
(b) is found to be or becomes of unsound mind; or
(c) resigns his office by notice in writing to the Company.
PROCEEDINGS OF DIRECTORS
91. The Directors may meet together (either within or without the Cayman
Islands) for the despatch of business, adjourn, and otherwise
regulate their meetings and proceedings as they think fit. Questions
arising at any meeting shall be decided by a majority of votes. A
Chairman may at any time summon a meeting of the Directors and 25% of
the Directors may at any time summon a meeting of the Directors in
the same manner as nearly as possible as that in which meetings may
be summoned by the Chairman.
92. A Director or Directors may participate in any meeting of the Board,
or of any committee appointed by the Board of which such Director or
Directors are members, by means of telephone or similar communication
equipment by way of which all persons participating in such meeting
can hear each other and such participation shall be deemed to
constitute presence in person at the meeting.
93. (a) The quorum necessary for the transaction of the business of
Directors shall be a majority of the Directors, provided,
that one director elected by the Class B Shareholders and
one director elected by the Class C Shareholders is present
if such Directors have been elected. A director represented
by proxy or by an Alternate Director at any meeting shall be
deemed to be present for the purposes of determining whether
or not a quorum is present.
(b) If within two hours from the time appointed for the meeting
and Directors have been elected by Class B Shareholders
and/or Class C Shareholders and such director elected by the
Class B Shareholders or a Class C Shareholders, as the case
may be, is not present, the meeting shall stand adjourned to
the second business day thereafter, at the same time and
place, at which the quorum necessary for the transaction of
the business of Directors shall be a majority of the
Directors.
94. A Director who is in any way, whether directly or indirectly,
interested in a contract or proposed contract with the Company shall
declare the nature of his interest at a meeting of the Directors. A
general notice given to the Directors by any Director to the effect
that he is a member of any specified company or firm and is to be
regarded as interested in any contract which may thereafter be made
with that company or firm shall be deemed a sufficient declaration of
interest in regard to any contract so made. A Director may vote in
respect of any contract or proposed contract or arrangement
notwithstanding that he may be interested therein and if he does so
his vote shall be counted and he may be counted in the quorum at any
meeting of the Directors at which any such contract or proposed
contract or arrangement shall come before the meeting for
consideration.
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<PAGE>
95. A Director may hold any other office or place of profit under the
Company (other than the office of auditor) in conjunction with his
office of Director for such period and on such terms (as to
remuneration and otherwise) as the Directors may determine and no
Director or intending Director shall be disqualified by his office
from contracting with the Company either with regard to his tenure
of any such other office or place of profit or as vendor, purchaser
or otherwise, nor shall any such contract or arrangement entered into
by or on behalf of the Company in which any Director is in any way
interested, be liable to be avoided, nor shall any Director so
contracting or being so interested be liable to account to the
Company for any profit realized by any such contract or arrangement
by reason of such Director holding that office or of the fiduciary
relation thereby established. A Director, notwithstanding his
interest, may be counted in the quorum present at any meeting whereat
he or any other Director is appointed to hold any such office or
place of profit under the Company or whereat the terms of any such
appointment are arranged and he may vote on any such appointment or
arrangement.
96. Any Director may act by himself or his firm in a professional
capacity for the Company, and he or his firm shall be entitled to
remuneration for professional services as if he were not a Director;
provided that nothing herein contained shall authorize a Director or
his firm to act as auditor to the Company.
97. The Directors shall cause minutes to be made in books or loose-leaf
folders provided for the purpose of recording:
(a) all appointments of officers made by the Directors;
(b) the names of the Directors present at each meeting of the
Directors and of any committee of the Directors;
(c) all resolutions and proceedings at all meetings of the
Company, and of the Directors and of committees of
Directors.
98. When the Chairman and Secretary of a meeting of the Directors sign
the minutes of such meeting the same shall be deemed to have been
duly held notwithstanding actually come together or that there may
have been a technical defect in the proceedings.
99. A resolution signed by all the Directors shall be as valid and
effectual as if it had been passed at a Meeting of the Directors duly
called and constituted. When signed a resolution may consist of
several documents each signed by one or more of the Directors.
100. The continuing Directors may act notwithstanding any vacancy in their
body but if and so long at their number is reduced below the number
fixed by or pursuant to the Articles of the Company as the necessary
quorum of Directors, the continuing Directors may act for the purpose
of increasing the number, or of summoning a general meeting of the
Company, but for no other purpose.
101. The Directors may elect a chairman of their meetings and determine
the period for which he is to hold office; but if no such chairman is
elected, or if at any meeting the chairman is not present within one
hour after the time appointed for holding the same, the Directors
present may choose one of their number to be chairman of the meeting.
102. A committee appointed by the Directors may elect a chairman of its
meetings; if no such chairman is elected, or if at any meeting the
chairman is not present within 30 minutes after the time appointed
for holding the same, the members present may choose one of their
number to be chairman of the meeting.
-18-
<PAGE>
103. A committee appointed by the Directors may meet and adjourn as it
thinks proper. Questions arising at any meeting shall be determined
by a majority of votes of the committee members present and in case
of an equality of votes the chairman shall have a second or casting
vote.
104. All acts done by any meeting of the Directors or of a committee of
Directors, or by any person acting as a Director, shall
notwithstanding that it be afterwards discovered that there was some
defect in the appointment of any such Director or person acting as
aforesaid, or that they or any of them were disqualified, be a valid
act as if every such person had been duly appointed and was qualified
to be a Director.
EXPENSES OF THE COMPANY
105. The Company shall pay all expenses incurred by the Company.
ACCOUNTS
106. The Directors shall cause to be kept proper accounts with respect to:
(a) all sums of money received and expended by the Company and
the matters in respect of which such receipt and expenditure
take place; and
(b) all sales and purchases by the Company; and
(c) the assets and liabilities of the Company.
107. The books of account shall be kept at the registered office or at
such other place outside the U.S. as the Directors thinks fit, and
shall always be open to inspection by the Directors. No Shareholder,
shall have any right of inspecting any account or book or document of
the Company except as conferred by the Companies Law or authorized by
the Directors.
FILING OF TAX RETURNS
108. The Directors shall prepare and file, or cause the accountants of the
Company to prepare and file and tax or other information returns
required by Cayman Islands law or any other law of any other
jurisdiction for each tax year of the Company, and shall be
authorized to make any tax elections as permitted by the Company.
CAPITALIZATION OF PROFITS
109. The Directors may determine that it is desirable to capitalize any
part of the amount for the time being standing to the credit of any
of the Company's reserve accounts or to the credit of the profit and
loss account or otherwise available for distribution, and accordingly
that such sum be set free for distribution amongst the Shareholders
who would have been entitled thereto if distributed by way of
dividend and in the same proportions on condition that the same be
not paid in cash but be applied either in or towards paying up any
amounts for the time being unpaid on any Shares held by such
Shareholders respectively or paying up in full unissued shares or
debentures of the Company to be allotted and distributed credited as
fully paid up to and amongst such Shareholders in the proportion
aforesaid, or partly in the one way and partly in the other, and the
Directors shall give effect to such determination; provided always
that a share premium account and capital redemption reserve may only
be applied in accordance with the provisions of the Companies Law.
-19-
<PAGE>
110. When such determination pursuant to Article 109 hereof has been made,
the Directors shall make all appropriations and applications of the
undivided profits resolved to be capitalised thereby, and all
allotments and issues of fully paid shares or debentures, if any, and
generally shall do all acts and things required to give effect
thereto, with full power to the Directors to make such provision by
payment in cash or otherwise as it thinks fit for the case of shares
or debentures becoming distributable in fractions.
NOTICES
111. Any notice or document may be served by the Company, from the Cayman
Islands or any other location, on any Shareholder either personally,
by facsimile or by sending it through the post in a prepaid letter or
via a recognized courier service, fees prepaid, addressed to such
Shareholder at his address as appearing in the Register. In the case
of joint holders of a Share, all notices shall be given to that one
of the joint holders whose name stands first in the Register in
respect of the joint holding, and notice so given shall be sufficient
notice to all the joint holders.
112. Notices to be posted to addresses outside the Cayman Islands shall be
forwarded by prepaid airmail.
113. Any Shareholder present, either personally or by proxy, at any
meeting of the Company shall for all purposes be deemed to have
received due notice of such meeting and, where requisite, of the
purposes for which such meeting was convened.
114. Any notice or other document, if served by (a) post, shall be deemed
to have been served five days after the time when the letter
containing the same is posted and if served by courier, shall be
deemed to have been served five days after the time when the letter
containing the same is delivered to the courier (in proving such
service it shall be sufficient to prove that the letter containing
the notice or document was properly addressed and duly posted or
delivered to the courier), or, (b) facsimile, shall be deemed to have
been served upon confirmation of receipt or (c) recognized delivery
service, shall be deemed to have been served 48 hours after the time
when the letter containing the same is delivered to the courier
service and in proving such service it shall be sufficient to prove
that the letter containing the notice or document was properly
addressed and duly posted or delivered to the courier.
115. Any notice or document delivered or sent by post to or left at the
registered address of any Shareholder in pursuance of these Articles
shall notwithstanding that such Shareholder be then dead or bankrupt,
and whether or not the Company has notice of his death or bankruptcy,
be deemed to have been duly served in respect of any share registered
in the name of such Shareholder as sole or joint holder, unless his
name shall at the time of the service of the notice or document, have
been removed from the Register as the holder of the share, and such
service shall for all purposes be deemed a sufficient service of such
notice or document on all persons interested (whether jointly with or
as claiming through or under him) in the share.
CLOSING REGISTER OF SHAREHOLDERS OR FIXING RECORD DATE
116. For the purpose of determining Shareholders entitled to notice of or
to vote at any Meeting of Shareholders or any adjournment thereof, or
in order to make a determination of Shareholders for any other proper
purpose, the Directors of the Company may provide that the Register
shall be closed for transfers for a stated period.
117. In lieu of or apart from closing the Register the Directors may fix
in advance a date as the record date for any such determination of
Shareholders entitled to notice of or to vote at a Meeting of the
Shareholders and for the purpose of determining the Shareholders
entitled to receive a
-20-
<PAGE>
Distribution the Directors may either before or on the date of
declaration of such Distribution fix a date as the record date for
such determination.
118. If the Register is not so closed and no record date is fixed for the
determination of Shareholders entitled to notice of or to vote at a
Meeting of Shareholders or Shareholders entitled to receive a
Distribution, the date on which notice of the Meeting is mailed or
the date on which the resolution of the Directors declaring such
Distribution is adopted, as the case may be, shall be the record date
for such determination of Shareholders. When a determination of
Shareholders entitled to vote at any Meeting has been made in the
manner provided in this Article, such determination shall apply to
any adjournment thereof.
THE SEAL
119. The Seal of the Company shall not be affixed to any instrument except
by the authority of a resolution of the Board of Directors provided
always that such authority may be given prior to or after the
affixing of the Seal and if given after may be in general form
confirming a number of affixings of the Seal. The Seal shall be
affixed in the presence of a Director or the Secretary (or an
Assistant Secretary) of the Company or in the presence of any one or
more persons as the Directors may appoint for the purpose and every
person as aforesaid shall sign every instrument to which the Seal of
the Company is so affixed in their presence.
120. The Company may maintain a facsimile of its Seal in such countries or
places as the Directors may appoint and such facsimile Seal shall not
be affixed to any instrument except by the authority of a resolution
of the Board of Directors provided always that such authority may be
given prior to or after the affixing of such facsimile Seal and if
given after may be in general form confirming a number of affixings
of such facsimile Seal. The facsimile Seal shall be affixed in the
presence of such person or persons as the Directors shall for this
purpose appoint and such person or persons as aforesaid shall sign
every instrument to which the facsimile Seal of the Company is so
affixed in their presence and such affixing of the facsimile Seal and
signing as aforesaid shall have the same meaning and effect as if the
Company Seal had been affixed in the presence of and the instrument
signed by a Director or the Secretary (or an Assistant Secretary) of
the Company or in the presence of any one or more persons as the
Directors may appoint for the purpose.
121. Notwithstanding the foregoing, the Secretary or any Assistant
Secretary shall have the authority to affix the Seal, or the
facsimile Seal, to any instrument for the purposes of attesting
authenticity of the matter contained therein but which does not
create any obligation binding on the Company.
DISCLOSURE
122. The Directors shall if lawfully required to do so under the laws of
any jurisdiction to which the Company is subject or in compliance
with the rules of any Stock Exchanges upon which Shares are listed be
entitled to disclose any information regarding the affairs of the
Company including without limitation information contained in the
Register and transfer books of the Company.
REGISTRATION BY WAY OF CONTINUATION
123. (a) The Company may by special resolution resolve to be
registered by way of continuation in a jurisdiction outside
the Cayman Islands or such other jurisdiction in which it is
for the time being incorporated, registered or existing.
(b) In furtherance of a resolution adopted pursuant to
sub-clause (a) of this Article, the Directors may cause an
application to be made to the Registrar of Companies to
deregister the Company in the Cayman Islands or such other
jurisdiction in which it is for
-21-
<PAGE>
the time being incorporated, registered or existing and may
cause all such further steps as they consider appropriate to
be taken to effect the transfer by way of continuation of
the Company.
WINDING UP
126. If the Company shall be dissolved and wound up a liquidator,
appointed by a majority of the Class B Shareholders shall proceed, in
its sole discretion, with the sale or liquidation of all of the
assets of the Company and the final distribution of the assets of the
Company, in the following manner and order of priority:
(a) to payment and discharge of the claims of all creditors of
the Company who are not Shareholders;
(b) to payment and discharge of the claims of all creditors of
the Company who are Shareholders; and
(c) to payment and discharge to the Shareholders in accordance
with the provisions of Article 25, after giving effect to
any prior payments in accordance with the such provisions.
-22-
<PAGE>
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Global Crossing (Cayman) Ltd.
(formerly Global Crossing Ltd., LDC):
As independent public accountants, we hereby consent to the incorporation by
reference in the Form 10-K of Global Crossing (Cayman) Ltd. (formerly Global
Crossing Ltd., LDC) ("Old GCL"), of our report dated March 26, 1999, relating to
the balance sheets of Old GCL as of December 31, 1998 and 1997, and the related
statements of operations, changes in stockholder's (stockholders') equity and
cash flows for the year ended December 31, 1998 and for the period from March
19, 1997 (Date of Inception) to December 31, 1997, which report is incorporated
by reference or included in the annual report on Form 10-K of Old GCL for the
year ended December 31, 1998 and for the period from March 19, 1997 (Date of
Inception) through December 31, 1997.
Grand Cayman, B.W.I.
March 26, 1999
/s/ Arthur Andersen LLP
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