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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number: 333-86461
GLOBENET COMMUNICATIONS GROUP LIMITED
(Exact name of registrant as specified in its charter)
Bermuda
(State or other jurisdiction of
incorporation or organization)
2 Carter's Bay Road
Southside, St. David's DDBX
Bermuda
(Address, including zip code, of principal executive offices)
(441) 296-9000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes[x] No [ ]
The number of shares, $1.50 par value per share, of the registrant's common
shares outstanding as of March 31, 2000: 17,044,800 shares.
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GLOBENET COMMUNICATIONS GROUP LIMITED
Table of Contents
Part I. FINANCIAL INFORMATION
Page
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets .......................................... 1
Consolidated Statements of Operations................................. 2
Consolidated Statements of Cash Flows................................. 3
Notes to Unaudited Consolidated Financial Statements.................. 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................. 6
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.......................................................... 12
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 14
Item 2. Changes in Securities and Use of Proceeds...................... 14
Item 3. Defaults Upon Senior Securities................................ 14
Item 4. Submission of Matters to a Vote of Security Holders............ 14
Item 5. Other Information.............................................. 14
Item 6. Exhibits and Reports on Form 8-K............................... 14
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PART I.
FINANCIAL INFORMATION
ITEM 1. Financial Statements.
GlobeNet Communications Group Limited
Consolidated Balance Sheets
(Unaudited)
- --------------------------------------------------------------------------------
(in thousands of U.S. dollars, except share and per share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
$ $
<S> <C> <C>
Assets
Current assets
Restricted cash 79,998 79,998
Accounts receivable (net of allowance of $224; 1999 - $224) 2,203 2,096
Other receivables 218 150
Prepaid expenses and deposits 1,535 1,632
------- -------
83,954 83,876
Restricted cash 357,994 448,399
Fixed assets 49,325 49,148
Construction in progress 141,780 98,062
Other assets 25,324 25,847
------- -------
658,377 705,332
------- -------
Liabilities
Current liabilities
Accounts payable 5,522 36,179
Accrued liabilities 10,807 21,117
------- -------
16,329 57,296
Long-term debt 400,000 400,000
Deferred revenue 6,389 6,455
------- -------
422,718 463,751
------- -------
Shareholders' Equity
Share capital
Class B shares, 2,000 shares authorized, par value $1.50 each
1,000 shares issued and outstanding 2 2
Common shares, 24,000,000 authorized, par value $1.50 each
17,044,800 (1999 - 17,043,900) shares issued and outstanding 25,566 25,566
Additional paid-in capital 249,702 246,866
Deficit (39,611) (30,853)
------- -------
235,659 241,581
------- -------
658,377 705,332
------- -------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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GlobeNet Communications Group Limited
Consolidated Statements of Operations
(Unaudited)
For the three months ended March 31, 2000 and 1999
- --------------------------------------------------------------------------------
(in thousands of U.S. dollars, except share and per share amounts)
<TABLE>
<CAPTION>
2000 1999
$ $
<S> <C> <C>
Revenues
Telecommunications services 6,344 6,035
IRU capacity 79 77
------ ------
6,423 6,112
------ ------
Expenses
Carrier charges 2,449 2,705
General and administrative expenses 9,520 2,105
Amortization of fixed assets 688 406
------ ------
12,657 5,216
------ ------
Operating (loss) income (6,234) 896
Interest on long-term debt 9,608 861
Accrued contingent interest - 235
Interest income (7,110) (83)
------ ------
Loss before income taxes and equity
accounted for investments (8,732) (117)
Provision for income taxes (26) (9)
------ ------
Loss before equity accounted for investments (8,758) (126)
Loss from equity accounted for investments - (232)
------ ------
Net loss and comprehensive loss for the period (8,758) (358)
------ ------
Basic and fully diluted loss per common share
(note 5) (0.51) (0.10)
------ ------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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GlobeNet Communications Group Limited
Consolidated Statements of Cash Flows
(Unaudited)
For the three months ended March 31, 2000 and 1999
- --------------------------------------------------------------------------------
(in thousands of U.S. dollars, except share and per share amounts)
<TABLE>
<CAPTION>
2000 1999
$ $
<S> <C> C>
Cash provided by (used in)
Operating activities
Net loss for the year (8,758) (358)
Items not involving cash
Amortization of fixed assets 688 406
Amortization of other assets 1,045 74
Loss from equity accounted for investments - 232
Accrued contingent interest - 235
Compensatory share options 2,836 -
Net change in non-cash operating items
Accounts receivable (107) (1,141)
Other receivables (68) 587
Note receivable (8) (7)
Prepaid expenses and deposits 97 38
Accounts payable 386 (622)
Accrued liabilities (10,310) 697
Deferred revenue (66) (76)
------- ------
Cash (used in) provided by operating activities (14,265) 65
------- ------
Financing activities
Payments of long-term debt - (2,400)
Deferred financing costs (589) (227)
------- ------
Cash (used in) financing activities (589) (2,627)
------- ------
Investing activities
Restricted cash 90,405 -
Purchase of fixed assets (865) (764)
Construction in progress (74,761) -
Change in other assets 75 2
Due from related party - 1,363
------- ------
Cash provided by investing activities 14,854 601
------- ------
Increase (decrease) in cash for the period - (1,961)
Cash - Beginning of period - 3,030
------- ------
Cash - End of period - 1,069
------- ------
Interest and income taxes paid
Interest 22,184 157
Income taxes 14 8
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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GlobeNet Communications Group Limited
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 2000 and 1999
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(in thousands of U.S. dollars, except share and per share amounts)
1 Nature of operations
GlobeNet Communications Group Limited ("the Company") provides
international telecommunications services to both residential and commercial
customers and is a provider of telecommunications capacity. The Company is
currently developing a fibre optic submarine cable system called Atlantica-1
that will link Bermuda, North and South America and offer capacity between
major cities in the United States, Bermuda, Brazil, Venezuela and Argentina.
Atlantica-1 is currently being constructed.
In November 1997, the Company deployed a fibre optic submarine cable
system which connects Bermuda and the United States ("BUS-1"). The Company
provides international telecommunications services to both residential and
commercial customers in Bermuda through a subsidiary company, TeleBermuda
International Limited ("TBI") through the BUS-1.
On January 10, 1997, TBI was granted its public telecommunications service
licence in Bermuda under the provisions of the Telecommunications Act, 1986
and the Public Telecommunication Service (Licence) Regulations, 1988 for a
five-year term and began commercial operations in May 1997. TBI has an
interconnection agreement with the Bermuda Telephone Company ("BTC"), the
domestic carrier in Bermuda. No consideration was paid by the Company in
relation to these agreements
2 Interim unaudited consolidated financial statements
The unaudited consolidated balance sheet as at March 31, 2000 and the
unaudited consolidated statements of operations for the three months ended
March 31, 2000 and March 31, 1999 and the unaudited consolidated statements
of cash flows for the three months ended March 31, 2000 and March 31, 1999,
in the opinion of management, have been prepared on the same basis as the
audited consolidated financial statements and include all adjustments
necessary for the fair statement of the results of the interim periods. All
adjustments reflected in the consolidated financial statements are of a
normal recurring nature. The data disclosed in the notes to the consolidated
financial statements for these periods are also unaudited. Results for the
three month period ended March 31, 2000 and 1999 are not necessarily
indicative of the results to be expected for the full year.
3 Recent accounting pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities,"
which is effective for fiscal years beginning after June 15, 2000. SFAS 133,
as amended, requires the Company to recognize all derivatives as either
assets or liabilities and measure those instruments at fair value. It further
provides criteria for derivative instruments to be designated as fair value,
cash flow, and foreign currency hedges and establishes respective accounting
standards for reporting changes in the fair value of the derivative
instruments. Upon adoption, the Company will be required to adjust hedging
instruments to fair value in the balance sheet and recognize the offsetting
gains or losses as adjustments to be reported in net income or other
comprehensive income, as appropriate. Management has not determined the
impact of this statement on its financial position, results of operations and
cash flows.
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GlobeNet Communications Group Limited
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 2000 and 1999
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(in thousands of U.S. dollars, except share and per share amounts)
FASB Interpretation No. 43, "Real Estate Sales - an interpretation of FASB
Statement No. 66," was issued in June 1999. It clarifies the standards for
recognition of profit on all real estate sales transactions, including those
related to fibre optic cable that cannot be removed and used separately from
the real estate without incurring significant costs. This interpretation is
effective for all applicable transactions after June 30, 1999. However, no
such transactions have been entered into after June 30, 1999 and we have not
yet completed our analysis of the applicability or the impact of this
statement on future transactions.
4 Common share options
The Company awards options to employees, officers and directors of the
Company under the terms of the 1997 and 1998 Share Option and Incentive
Plans. In addition, the Board of Directors has the authority to grant options
outside of these plans under separate stock option agreements.
During the three months ended March 31, 2000, the Board of Directors
granted 477,521 options at an exercise price of $20.40 to employees and
certain officers and directors. These options vest over three years. The
difference between the market price and the exercised price on the grant date
has been reflected as deferred compensation in shareholders' equity and is
being amortized over the vesting period. As at March 31, 2000, stock options
covering 1,907,299 shares of common stock were outstanding.
The vesting terms of all options accelerate upon a change in control.
Deferred compensation is amortized over the expected vesting period.
5 Basic and fully diluted loss per common share
The basic loss per common share is calculated using the weighted average
number of common shares outstanding of 17,043,900 (1999 - 3,515,927). The
weighted average number of common shares on a fully diluted basis is
calculated on the same basis as the basic weighted average number of shares
as the Company is in a loss position and the effects of possible conversion
would be anti-dilutive.
6 Acquisition of the Company
On March 11, 2000, Worldwide Fiber, Inc. (which has since changed its name
to 360networks inc.) ("360networks") and the Company entered into an
Agreement and Plan of Arrangement pursuant to which 360networks will acquire
the Company in exchange for subordinate voting shares of 360networks. The
consummation of the transaction is subject to the fulfilment of a number of
conditions, including: (a) approval by shareholders, the Bermuda Supreme
Court and certain regulatory authorities; (b) the compliance by the Company
and 360networks with respective obligations under the agreement; and (c) the
completion of an underwritten public offering of 360networks' subordinate
voting shares. The transaction will likely result in 360networks assuming the
Company's long-term debt and the settlement of all outstanding common share
options.
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ITEM 2. Management's Discussion And Analysis Of Financial Condition And
Results Of Operations.
You should read the discussion in this section in conjunction with our
unaudited interim consolidated financial statements and the notes thereto
included elsewhere in this report. Certain information contained in this
section, including information with respect to our plans and expectations for
our business, is forward-looking. You should carefully consider the factors set
forth in this section under the caption "Forward-Looking Statements" and
elsewhere in this report and in the "Business--Risk Factors" section of the
Company's annual report on Form 10-K for the fiscal year ended December 31, 1999
(file no. 333-86461) on file with the Securities and Exchange Commission for a
discussion of important factors that could cause actual results to differ
materially from any forward-looking statements contained in this Form 10-Q.
Overview
GlobeNet Communications Group Limited was incorporated and registered on
June 25, 1998 as a Bermuda exempt company as part of a reorganization of the
TeleBermuda International Limited ("TBI") group of companies. Under the
reorganization, TBI, which was incorporated on January 6, 1995, became our
wholly owned subsidiary, and the issued shares of TBI were exchanged for our
common shares on a one-for-one basis with substantially the same rights and
privileges.
Historically, through our wholly owned subsidiary TBI, we have provided
retail international telecommunications services to, from and through Bermuda.
In November 1997, we successfully completed the deployment of the BUS-1 undersea
fiber optic cable system which connects Bermuda and the United States. The BUS-1
system established us as a full-service facilities-based provider, a company
that has its own long-distance transmission and switching facilities, of
international long-distance service for traffic originating and terminating in
Bermuda.
We plan to extend our business to become a provider of city-to-city
international telecommunications network solutions on a wholesale "carriers'
carrier" basis using a combination of undersea fiber optic cable systems and
terrestrial extensions. We are currently developing the Atlantica-1 Network, an
undersea fiber optic cable system, as part of this plan. We will incorporate the
BUS-1 system into the Atlantica-1 Network.
Our international telecommunications network solutions business is in the
development stage and, accordingly, our historical consolidated financial
information relates primarily to TBI's retail international telecommunications
business and is not necessarily indicative of future results.
We report our results in U.S. dollars, although historically a significant
portion of our revenues and expenses have been settled in Bermuda dollars, which
are pegged to the U.S. dollar at par. Therefore, currency fluctuations have not
affected the results of our existing operations. Substantially all of our costs
incurred in connection with the Atlantica-1 Network will be incurred in U.S.
dollars. While we expect to invoice a majority of our customers in U.S. dollars,
we may be required to invoice certain customers in other currencies. To the
extent we receive revenues in currencies other than U.S. dollars, our results of
operations may be impacted by currency fluctuations.
360networks inc. Transaction
On March 11, 2000, Worldwide Fiber, Inc. (which has since changed its name
to 360networks inc.) ("360networks") and we entered into an Agreement and Plan
of Arrangement pursuant to which 360networks will acquire us in exchange for
subordinate voting shares of 360networks (the "Scheme"). 360networks offers
broadband network services for telecommunications companies, Internet service
providers, application service providers and data-centric enterprises.
360networks is completing a technologically advanced 90,300-kilometer (56,100
mile) network, including a fiber optic terrestrial network in North America
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and Europe and undersea cables linking North America and Europe. 360networks and
its predecessors have been developing communications networks since 1988.
The consummation of the transaction is subject to the fulfillment of a
number of conditions, including (a) due approval of the Scheme by our
shareholders and the applicable governmental authorities (including the Supreme
Court of Bermuda pursuant to Article 99 of the Companies Act 1981 of Bermuda);
(b) expiration or termination of any waiting periods applicable to the
consummation of the Scheme under the Hart-Scott-Rodino Act and procurement of
all consents, registrations, approvals, permits and authorizations required to
be obtained from any governmental entity; (c) the compliance by us and
360networks with our respective obligations under our agreement; and (d) the
completion of an underwritten public offering of 360networks' subordinate voting
shares.
A number of conditions to the consummation of the transaction have now been
satisfied. 360networks completed its public offering of subordinate voting
shares in late April 2000, issuing 53,216,250 shares (which includes shares
subsequently issued pursuant to the underwriters' over-allotment option) at a
purchase price of $14 per share. On May 10, 2000, our two classes of
shareholders duly approved the Scheme. We anticipate that the transaction will
be completed in the second half of this year. Under our agreement with
360networks, our shareholders will receive, upon closing the transaction,
approximately 2.5 360networks' subordinate voting shares for every GlobeNet
common share held.
Revenues
Revenues from international long-distance services are derived from the
number of minutes of use billed by us and are recorded as the services are
rendered, after deducting an estimate for the traffic for which revenue will not
be collected. Historically deductions have not been material. Revenues from
prepaid calling cards are recognized at the time of usage or upon expiration of
the card. Revenues from private line services are recognized as earned on a
monthly basis.
Customers may enter into agreements to purchase capacity from us in the
form of the granting of indefeasible rights of use, or IRUs, portable IRUs or
capacity leases. Revenue from the sale of capacity by us is recognized at the
date a customer first has access to the capacity, provided certain conditions
are met. IRU and portable IRU sales are methods of transferring rights to fiber
optic cable capacity that grant to the purchaser an indefeasible right to use
the unit of capacity sold for the time, usually the remaining life of the
system, to which the IRU applies. Once the IRU is granted to the purchaser, the
purchase price is non-refundable and the purchaser is required to pay
operations, administration and maintenance fees for as long as connectivity is
maintained. The proceeds from the long-term operating lease of capacity are
deferred and amortized over the term of the contract.
Recent accounting pronouncements
FASB Interpretation No. 43, "Real Estate Sales - an interpretation of FASB
Statement No. 66", was issued in June 1999. It clarifies the standards for
recognition of profit on all real estate sales transactions, including those
related to fiber optic cable that cannot be removed and used separately from the
real estate without incurring significant costs. This interpretation is
effective for all applicable transactions after June 30, 1999. However, no such
transactions have been entered into after June 30, 1999 and we have not yet
completed our analysis of the applicability or the impact of this statement on
future transactions. In addition, we note that the accounting for sales of
capacity is evolving, and is currently under consideration by accounting
standard setters. Any change in accounting literature may affect the timing and
method of recognition of these revenues and related costs.
Carrier Charges and Cost of IRU Capacity
TBI's cost of services is comprised primarily of local access charges and
international termination costs. Local access charges are paid to the Bermuda
Telephone Company for each minute of traffic that we originate or terminate in
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Bermuda. As of January 1, 1999, the Minister of Telecommunications and
Technology's December 1998 directive reduced TBI's local access charge to $0.15
per minute for both originating and terminating traffic. The directive mandated
a second reduction on July 1, 1999 to $0.10 per minute, with a subsequent rate
determination expected in the first half of 2000.
International terminations are completed through our correspondent carriers
and are charged to us on the basis of prevailing international settlement rates.
We receive return traffic on the major routes that effectively offset our
payments for Bermuda-originated traffic. Our primary correspondent carriers are
MCI WorldCom and British Telecom. The current settlement rates with carriers in
the United States and the United Kingdom, which comprise the largest markets for
Bermuda-originated traffic, are $0.30 per minute and the equivalent of $0.48 per
minute, respectively. The rates for international terminations have declined
recently and we expect they will continue to decline as international
conventions are modified and competition among international carriers
intensifies.
For our wholesale carriers' carrier business, costs to build our systems
are capitalized. The cost of capacity sales are calculated on a pro rata basis
of total capacity sold in relation to the estimated total capacity.
Operating Expenses
Our operating expenses include network expenses and general and
administrative costs incurred to sustain and expand our Bermuda operations, as
well as to plan and finance the intended construction of the Atlantica-1
Network. As our systems develop, additional resources will be required to
provide for operations and for sales of capacity. Prior to the RFS date for the
connection from Tuckerton, New Jersey to Fortaleza, Brazil via Bermuda, we will
enter into an agreement with a third party that will provide operation,
administration and maintenance services on our systems. Following this RFS date,
we expect to recover a substantial portion of our operating, administration and
maintenance costs from periodic payments by customers. The amounts of these
payments will be based on the pro rata capacity purchased by the customer in
relation to the total capacity of the system. Each customer's pro rata share
will be capped and therefore, our share of operation, administration and
maintenance costs will be higher at the outset and will decline over time as
capacity is sold.
Results of Operations - Three Months Ended March 31, 2000 Compared With
Three Months Ended March 31, 1999
Revenues
Revenues increased to $6.4 million for the three months ended March 31,
2000 compared to $6.1 million for the three months ended March 31, 1999, an
increase of 4.9%.
Outbound revenues decreased to $4.8 million for the three months ended
March 31, 2000 compared to $5.0 million for the three months ended March
31,1999, a decrease of 4.0%. This decrease was the result of a decrease in the
average rate per minute partially offset by higher traffic volumes. The average
rate per outbound minute realized was $0.84 for the three months ended March 31,
2000 compared to $0.94 for the three months ended March 31, 1999. Outbound
traffic volumes increased to 5.7 million minutes for the three months ended
March 31, 2000 from 5.3 million minutes for the three months ended March 31,
1999. These volume increases were a response to an increase in marketing and
advertising by the Company and were reflective of a positive response to the
rate reductions.
Inbound revenue increased to $1.0 million during the three months ended
March 31, 2000 compared to $0.8 million during the three months ended
March 31, 1999, an increase of 25.0%. Further, revenue from TBI's debit card
product increased to $178,000 during the three months ended March 31, 2000
compared to $137,000 during the three months ended March 31, 1999,an increase of
30.0%. Sales of international private lines increased from $85,000 for three
months ended March 31, 1999 to $319,000 for the three months ended March 31,
2000 due to more effective marketing of this product.
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Carrier Charges
Carrier Charges decreased to $2.5 million during the three months ended
March 31, 2000 compared to $2.7 million during the three months ended March 31,
1999, a decrease of 7.4%.
Local access charges for Bermuda originating and terminating traffic
decreased to $1.3 million for the three months ended March 31, 2000 from $1.4
million for the three months ended March 31, 1999. The decrease reflects
reductions in the settlement rates paid to the Bermuda Telephone Company which
were reduced from $0.27 per minute to $0.10 per minute for outbound traffic and
from $0.24 per minute to $0.10 per minute for inbound traffic. This impact of
lower settlement rates was partially offset by an increase in traffic volume.
Foreign settlements for the three months ended March 31, 2000 decreased to
$1.2 million from $1.3 million for the three months ended March 31, 1999, a
decrease of 7.7%. This decrease was largely due to a reduction in the settlement
rate to terminate calls to the U.S. which decreased from $0.35 to an average
rate of $0.21. The impact of lower settlement rates was partially offset by an
increase in traffic volume.
General and Administrative Expenses
General and administrative expenses increased during the three months ended
March 31, 2000 to $9.5 million compared to $2.1 million during the three
months ended March 31, 1999, an increase of 354.4%. This increase was
primarily due to marketing, promotions and administrative costs associated with
the Atlantica-1 Network and commitment fees related to the Atlantica-1 Network
financing. The increase also reflects costs of $0.9 million related to the
360networks inc. transaction as well as an increase in compensation expense of
$2.8 million resulting from the vesting of certain stock options to the
Company's directors and officers.
Amortization Expense
Amortization of capital assets for the three months ended March 31, 2000
increased to $0.7 million from $0.4 million for the three months ended March 31,
1999, an increase of 75.0%. This increase resulted largely from the amortization
expense attributed to increased ownership in the BUS-1 cable, which was acquired
in November 1999 when the Company increased its ownership in TeleBermuda
International L.L.C. from 20% to 100%. Pursuant to this transaction, the
Company's effective interest in the BUS-1 cable increased from 50% to 100%.
Amortization of deferred financing costs during the three months ended
March 31, 2000 increased to $1.0 million compared to $0.1 million for the
three months ended March 31, 1999. This increase resulted from the amortization
of deferred financing costs incurred as a result of the financing of the
Atlantica-1 Network.
Interest on Long-Term Debt
Interest on long-term debt increased to $8.6 million for the three months
ended March 31, 2000 from $0.8 million for the three months ended March 31,
1999, an increase of 975.0%. This increase was a result of interest costs on the
debt financing for the development of the Atlantica-1 Network secured by the
Company in July 1999.
Interest income
Interest income during the three months ended March 31, 2000 increased to
$7.1 million from $0.1 million during the three months ended March 31, 1999.
This increase was a result of investing certain proceeds from our July 1999
financing for the Atlantica-1 Network.
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Liquidity and Capital Resources
On July 14, 1999, the Company secured financing totaling $986.0 million for
the development and construction of the Atlantica-1 fiber optic undersea cable
system that will link North America, Bermuda and South America. The financing is
comprised of the following components:
. A private placement of common shares issued at $20.40 per share (par
value $1.50) and Class B shares, which have special voting rights, for
aggregate proceeds of $270.6 million. The Company subsequently used $30.6
million of these proceeds to redeem 1,500,000 common shares at an
aggregate price of $20.40 per share (less expenses) from existing
shareholders.
. The issuance of debt in the principal amount of $300.0 million in the
form of 13% senior notes maturing July 15, 2007. Interest on these notes
accrues at a rate of 13% per annum, payable semi-annually in arrears on
each January 15 and July 15 commencing January 15, 2000. The notes are
unsecured.
. A bank credit facility of up to $400.0 million that consists of various
term facilities totaling $390.0 million and a $10.0 million revolving
credit facility. Our subsidiary GlobeNet Communications Holdings Ltd.
("Holdings"), the borrower under the credit facility, may also request an
additional facility of up to $50.0 million, subject to lender approval
and other restrictions. All loans under Holdings' bank credit facility
mature on June 30, 2005 except for one of the term facilities of $100.0
million, which matures on September 30, 2005. The interest rates on the
loans under the credit facility initially range from London Interbank
Offered Rate, or LIBOR, plus 3.5% to LIBOR plus 4.0%. Availability of
funds under the credit facility is subject to certain terms and
conditions. Substantially all of the assets of Holdings and of its
present and future direct and indirect subsidiaries have been pledged as
collateral for the credit facility. In addition, the ultimate parent
company of the supplier for the Atlantica-1 Network has provided an
initial guarantee of $100.0 million of one of the term facilities subject
to certain conditions and adjustments.
. The retirement of subordinated loans in the principal amount of $13.5
million when our former subordinated lenders elected to effectively
convert the principal and $1.9 million of accrued interest on their
subordinated loans into 1,635,286 common shares.
In September 1999, the Company borrowed $100 million under one of its term
facilities of Holdings' bank credit facility.
Future Capital Expenditures and Capital Resources
The development of the Atlantica-1 Network will require us to make
significant capital expenditures in connection with building the undersea cable
system and the related landing stations, and securing terrestrial capacity to
connect the landing stations with major cities. We estimate the total cost to
build the Atlantica-1 Network, including the secondary strand of the Rio
extension (which will connect Fortaleza, Brazil and Rio de Janeiro, Brazil),
landing stations and capital contingencies, will be $825 million. This $825
million estimate does not include potential capital costs, if any, associated
with securing terrestrial capacity, including any terrestrial extension to
Buenos Aires, Argentina. We expect the primary ring of the Atlantica-1 Network
(which will connect Tuckerton, New Jersey, St. David's, Bermuda, Fortaleza,
Brazil, Punta Gorda, Venezuela and Boca Raton, Florida) to be RFS in December
2000.
We have commitments under our supply contract with Alcatel Submarine
Networks and Alcatel Submarine Networks, Inc. (collectively, "Alcatel") to make
payment installments in varying amounts as construction milestones are achieved
on the Atlantica-1 Network. The total of these payment installments for the
years ending December 31, 2000 and December 31, 2001 are $465.6 million and
$62.1 million, respectively.
-10-
<PAGE>
We expect to use the net proceeds we received from the private offering of
our 13% senior notes, the private equity financing (net of the proceeds we used
to repurchase outstanding shares of the Company from existing shareholders) and
the exercise of warrants by our former subordinated lenders, together with
available funds under Holdings' bank credit facility, to finance:
. the construction of the Atlantica-1 Network, including the secondary
strand of the Rio extension, landing stations and capital contingencies,
and
. pre-RFS working capital requirements.
We have already repaid our subordinated loans and TBI's credit facility,
paid transaction costs related to our financings, paid certain working capital
requirements, made an initial payment under our contract with Alcatel and paid
commitment fees and interest on Holdings' bank credit facility from these funds.
We expect to incur up to an additional $85 million of senior debt in the
first half of 2000 to finance the acquisition of terrestrial capacity for the
Atlantica-1 Network. We are considering various options to obtain this
financing. We cannot assure you that we will be able to raise successfully
necessary capital. We may also incur further costs for terrestrial capacity in
the future.
Our expectations of required capital expenditures are based upon our
current estimates. Our actual capital expenditures could vary from our estimates
and these variations could be material.
The Company's use of cash is generally restricted under the terms of
Holdings' bank credit facility to operating and capital expenditures related to
the Atlantica-1 Network and to other telecommunications activities. The
investment of the cash is restricted to investments with a minimum credit rating
of A-1 by Standard & Poor's or P-1 by Moody's.
Historical Capital Expenditures and Capital Resources
We have incurred significant operating losses and capital expenditures
related to the development of TBI. We have financed these expenditures through a
combination of borrowings under TBI's retired credit facility and the retired
subordinated loans, and equity contributions.
Net cash used in operating activities was $14.3 million for the three
months ended March 31, 2000, as compared to net cash provided by operating
activities of $0.1 million for the three months ended March 31, 1999. The use
of cash by operations in 2000 was due primarily to operating losses and due to
the payment of the first interest installment on our 13% senior notes, which was
accrued at December 31, 1999.
Cash used in financing activities was $0.6 million for the three months
ended March 31, 2000 and primarily represents costs associated with preparing
and filing our registration statement in connection with our exchange offer for
our 13% senior notes. Cash used in financing activities was $2.6 million for the
three months ended March 31, 1999 and relates to repayments on our retired term
loan and operating credit facility.
Cash provided by investing activities was $14.9 million for the three
months ended March 31, 2000. These funds were provided from a reduction of $90.4
million in our restricted cash investments offset by $74.8 million costs on the
Atlantica-1 project. The cash provided by investing activities was $0.6 million
for the three months ended March 31, 1999 resulting from the receipt of a
related party receivable and offset by network asset purchases.
Seasonality
Our Bermuda operations experience seasonal fluctuations that are a function
of the volume of tourist traffic. Traffic declines during the winter months when
tourist traffic is low.
-11-
<PAGE>
Forward-Looking Statements
This report includes forward-looking statements. We may use words like
"believe," "anticipate," "expect," "estimate," "may," "will," "should" and
similar expressions to help identify these forward-looking statements. Forward-
looking statements contained in this report include, for example, statements
concerning our plans to design, construct, operate and sell capacity on our
planned cable systems, expectations as to funding our future capital
requirements and other discussions of future plans and strategies, anticipated
developments and other matters that involve predictions of future events.
We have based these forward-looking statements on our current expectations
and projections about future events. These forward-looking statements are
subject to risks and uncertainties, some of which may be outside of our control,
including, among other things:
. our failure to complete our planned cable systems within the currently
estimated time frame and budget,
. our failure to be early to market,
. our failure to sell capacity on our planned cable systems,
. our failure to obtain and maintain all necessary permits, licenses or
authorizations to construct, land and operate our planned cable systems,
. our failure to contract for or build any necessary backhaul facilities
to provide city-to-city connectivity on our planned cable systems,
. our failure to accurately project levels of demand for telecommunications
capacity,
. political, economic, legal or regulatory changes that negatively affect
our operations, and
. our failure to compete effectively in a rapidly evolving marketplace
characterized by intense price competition and incremental new capacity.
This list is only an example of some of the risks, uncertainties and
assumptions that may affect the forward-looking statements contained in this
report. In light of these and other risks, uncertainties or assumptions, the
actual events or results may be very different from those expressed or implied
in the forward-looking statements in this report or may not occur. For
additional factors that could affect the validity of our forward-looking
statements, you should carefully consider the risk factors in our annual report
on Form 10-K for the fiscal year ended December 31, 1999 (file no. 333-86461) on
file with the Securities and Exchange Commission and the other information in
this Form 10-Q. We do not intend to publish updates or revisions of any forward-
looking statement to reflect new information, future events or otherwise.
ITEM 3. Quantitative And Qualitative Disclosures About Market Risk.
We are exposed to various market risks relating to changes in foreign
currency exchange rates and interest rates. Market risk is the potential loss
arising from adverse changes in market prices and rates, such as foreign
currency exchange and interest rates. We do not enter into derivatives or other
financial instruments for trading or speculative purposes.
Foreign Currency Exposure
We are exposed to fluctuations in foreign currencies relative to the U.S.
dollar. Because the Bermuda dollar is pegged to the U.S. dollar, there is no
foreign currency exposure for transactions conducted in this currency. Our
foreign currency exposures as at March 31, 2000 were as follows:
-12-
<PAGE>
Note Receivable: We had a note receivable of (British Pounds)250,000 which
is non-interest bearing and due November 20, 2000.
Account Payable: We had an account payable of 962,179 SDR's, a notional
currency tied to a basket of European currencies, to one of our carriers. This
payable is current and non-interest bearing.
Settlements on International Traffic: Settlements on international traffic
are largely made in U.S. dollars. For the three months ended March 31, 2000,
approximately 15% of the Company's cost of sales and 1% of the Company's revenue
was denominated in a currency other than the U.S. dollar.
Interest Rate Exposure
Long-term debt: As at March 31, 2000, we owed $100.0 million of
variable-rate long-term debt which is due September 30, 2005. The interest rate
on this debt fluctuates with LIBOR. On December 22, 1999, we entered into an
interest rate cap transaction for $50.0 million of this debt, capping the
LIBOR rate at 7.0% for a three-year term. The interest rate exposure on this
debt is also mitigated by the fact that the proceeds from this debt are invested
in short-term investments, the return on which also fluctuates with market
interest rates. As at March 31, 2000, we also owed $300.0 million on our
outstanding senior notes, which is due July 15, 2007 and has a fixed interest
rate of 13%.
Short-term investments: We held $429.6 million in money market investments
at March 31, 2000. The return on this investment portfolio fluctuates with
market interest rates.
The table below provides information about the interest rates of our debt
obligations and the interest rate cap transaction. The table shows the amount of
debt and average interest rates as of March 31, 2000, by expected maturity
dates.
EXPECTED MATURITY DATES
<TABLE>
<CAPTION>
2000 2001 2002 2003 2004 Thereafter Total Fair Value
03/31/2000 03/31/1999
---------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. DOLLAR
DEBT
13% Series B Senior Notes -- -- -- -- -- 300,000 300,000 300,000 N/A
due 2007
Average interest rates - fixed 13%
Bank Credit Facility due 2005 -- -- -- -- -- 100,000 100,000 100,000 N/A
Average interest rates - variable (1)
DERIVATIVE INSTRUMENTS
Interest Rate Cap for -- -- 50,000(2) -- -- -- 50,000 50,592 N/A
contract notional amount
</TABLE>
_________________
(1) The interest rate is calculated at LIBOR plus 4.0%. The interest rate as of
March 31, 2000 was 10.25%.
(2) The interest rate cap fixes the LIBOR rate at 7% for $50,000 of Holdings'
bank credit facility.
-13-
<PAGE>
PART II.
OTHER INFORMATION
ITEM 1. Legal Proceedings.
We are, from time to time, a party to litigation that arises in the normal
course of our business operations. We are not a party to any litigation the
resolution of which we expect to have a material adverse effect on our business,
financial condition and results of operations.
ITEM 2. Changes In Securities And Use Of Proceeds.
Not applicable.
ITEM 3. Defaults Upon Senior Securities.
Not applicable.
ITEM 4. Submission Of Matters To A Vote Of Security Holders.
None.
ITEM 5. Other Information.
Not applicable.
ITEM 6. Exhibits And Reports On Form 8-K.
(a) Exhibits
Exhibit Number Description
-------------- -----------
2.1 Agreement and Plan of Arrangement between Worldwide Fiber Inc. (now
known as 360networks inc.) and GlobeNet Communications Group Limited
dated as of March 11, 2000 (incorporated by reference to Exhibit 10.31
to 360networks inc.'s Registration Statement on Form F-1 (File No.
333-95621)).
3.1 Memorandum of Association of GlobeNet Communications Group Limited
(incorporated by reference to Exhibit 3.1 to GlobeNet Communications
Group Limited's Registration Statement on Form S-4 (File No. 333-
86461)).
3.2 Bye-Laws of GlobeNet Communications Group Limited dated July 12, 1999
(incorporated by reference to Exhibit 3.2 to GlobeNet Communications
Group Limited's Registration Statement on Form S-4 (File No. 333-
86461)).
4.1 Indenture between GlobeNet Communications Group Limited and Bankers
Trust Company, dated as of July 14, 1999 (incorporated by reference to
Exhibit 4.1 to GlobeNet Communications Group Limited's Registration
Statement on Form S-4 (File No. 333-86461)).
4.2 Registration Rights Agreement among GlobeNet Communications Group
Limited, TD Securities (USA) Inc. and Credit Suisse First Boston
Corporation, dated as of July 14, 1999 (incorporated by reference to
Exhibit 4.2 to GlobeNet Communications Group Limited's Registration
Statement on Form S-4 (File No. 333-86461)).
4.3 Credit Agreement among GlobeNet Communications Holdings Ltd., Various
Financial Institutions and Other Persons, Toronto Dominion (Texas)
Inc., Credit Suisse First Boston, and TD Securities (USA) Inc., dated
as of July 14, 1999 (incorporated by reference to Exhibit 4.3(a) to
-14-
<PAGE>
GlobeNet Communications Group Limited's Registration Statement on Form
S-4 (File No. 333-86461)).
4.4 Guaranty by Alcatel in favor of Lenders under Holdings' Bank Credit
Facility (see Exhibit 4.3) and Toronto Dominion (Texas) Inc., dated as
of July 14, 1999 (incorporated by reference to Exhibit 4.3(b) to
GlobeNet Communications Group Limited's Registration Statement on Form
S-4 (File No. 333-86461)).
4.5 Reimbursement Agreement between GlobeNet Communications Holdings Ltd.
and Alcatel, dated as of July 14, 1999 (incorporated by reference to
Exhibit 4.3(c) to GlobeNet Communications Group Limited's Registration
Statement on Form S-4 (File No. 333-86461)).
10.1 Executive Employment Agreement dated March 3, 2000 between Jorge
Escalona and GlobeNet Communications Group Limited.
10.2 Stock Option Agreement dated March 3, 2000 between Jorge Escalona
and GlobeNet Communications Group Limited.
10.3 Supplemental Stock Option Agreement dated March 3, 2000 between
Jorge Escalona and GlobeNet Communications Group Limited.
10.4 Indemnity Agreement dated March 1, 2000 between Jorge Escalona and
GlobeNet Communications Group Limited. (director)
10.5 Indemnity Agreement dated March 1, 2000 between Jorge Escalona and
GlobeNet Communications Group Limited. (officer)
27.1 Financial Data Schedule
(b) Report on Form 8-K
GlobeNet filed a Form 8-K on March 24, 2000 discussing its pending
transaction with 360networks.
-15-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLOBENET COMMUNICATIONS GROUP LIMITED
May 15, 2000 By: /s/ Greg Belbeck
-------------------------------------------
Name: Greg Belbeck
Title: Executive Vice President and Chief
Financial Officer
(duly authorized officer, principal financial
officer and chief accounting officer)
-16-
<PAGE>
Exhibit 10.1
------------
EXECUTIVE EMPLOYMENT AGREEMENT
(Jorge L. Escalona)
THIS EXECUTIVE EMPLOYMENT AGREEMENT (this "Agreement") is made and entered
---------
into effective as of March 3, 2000, by and between GlobeNet Communications Group
Limited, a Bermuda company (together with its successors and assigns, the
"Company"), and Jorge L. Escalona (the "Executive").
------- ---------
WHEREAS, the Executive has special and unique knowledge, abilities and
expertise with respect to the business of the Company; and
WHEREAS, on the terms and conditions set forth herein, the Company desires
to employ the Executive and the Executive desires to be employed by the Company.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment Period. Subject to Section 3, the Company hereby agrees to
-----------------
employ the Executive, and the Executive hereby agrees to be employed by the
Company, in accordance with the terms and provisions of this Agreement, for the
period commencing effective as of March 3, 2000 (the "Effective Date") and
--------------
ending on March 3, 2003 (the "Employment Period"); provided, however, that
----------------- -------- -------
commencing on March 3, 2003 and on each anniversary of such date occurring
thereafter, the Employment Period shall automatically be extended for one
additional year unless at least three months prior to the ensuing anniversary
date, but no more than 12 months prior to such anniversary date, the Company or
the Executive shall have given written notice that it or he, as applicable, does
not wish to extend this Agreement (a "Non-Renewal Notice"). The term
------------------
"Employment Period", as utilized in this Agreement, shall refer to the
-----------------
Employment Period as so automatically extended.
2. Terms of Employment.
-------------------
(a) Position and Duties.
-------------------
(i) During the term of the Executive's employment, the
Executive shall serve as Chief Executive Officer and President of the Company
and, in so doing, shall report to the Company's board of directors (the "Board")
-----
or any committee thereof as may be designated from time to time by the Board.
The Executive shall have supervision and control over, and responsibility for,
such management and operational functions of the Company currently assigned to
such position, and shall have such other powers and duties (including holding
officer positions with the Company and one or more subsidiaries of the Company)
as may from time to time be prescribed by the Board, so long as such powers and
duties are reasonable and customary for the chief executive officer of an
enterprise comparable to the Company.
1
<PAGE>
(ii) The Company shall, during the term of the Executive's
employment, use all reasonable efforts to cause the Executive to be elected or
appointed to the Board to the extent the Company has the right to so cause the
Executive to be elected or appointed. The Executive agrees to serve on the Board
if elected or appointed.
(iii) During the term of the Executive's employment, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote substantially all of his business time
to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable efforts to perform faithfully, effectively and
efficiently such responsibilities. Notwithstanding anything to the contrary in
Section 9, except as otherwise provided in this Section 2(a)(iii), during the
term of the Executive's employment and thereafter, it shall not be a violation
of this Agreement for the Executive to (1) serve on corporate, civic or
charitable boards or committees, (2) deliver lectures or fulfill speaking
engagements and (3) manage personal investments, so long as such activities do
not interfere with the performance of the Executive's responsibilities as a
member of the Board and as an employee of the Company in accordance with this
Agreement; provided, however, the right to serve on corporate boards or
-------- -------
committees and the right to manage personal investments is subject to Section 9.
(b) Compensation.
------------
(i) Base Salary. During the term of the Executive's
-----------
employment, the Executive shall receive an annual base salary ("Annual Base
-----------
Salary"), which shall be paid in accordance with the customary payroll practices
- ------
of the Company, at least equal to the amount specified on Exhibit A attached
hereto.
(ii) Bonuses. For each calendar year of the Company, the
-------
Executive shall be awarded an annual performance bonus (the "Bonus") payable on
-----
March 1st, subject to and in accordance with the terms and provisions of Exhibit
A attached hereto.
(iii) Expenses. During the term of the Executive's employment,
--------
the Executive shall be entitled to receive prompt reimbursement for all
reasonable employment expenses incurred by the Executive in accordance with the
policies, practices and procedures of the Company.
(iv) Stock Options. Contemporaneously with the execution of
-------------
the parties hereto have executed that certain Executive Stock Option Agreement
and that certain Executive Supplemental Stock Option Agreement (collectively,
the "Option Agreements"), pursuant to which the Company grants to the Executive
-----------------
stock options (the "Executive Options") exercisable for shares of capital stock
-----------------
of the Company subject to and in accordance with the terms and provisions of the
Option Agreements.
2
<PAGE>
(v) Perquisites. During the term of the Executive's
-----------
employment, the Executive shall be entitled to receive (in addition to the
benefits described above) such perquisites and fringe benefits appertaining to
the level of his position in accordance with any practice established by the
Board.
(vi) Initial Benefits Package. Commencing as of the
------------------------
Effective Date, and subject to subsection (vii)(B) below, the following benefits
shall be made available to the Executive and/or his family, as the case may be:
(A) the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices,
policies and programs applicable generally to other senior
executives of the Company ("Investment Plans");
----------------
(B) the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in and shall
receive all benefits under welfare benefit plans,
practices, policies and programs ("Welfare Plans")
-------------
provided by the Company (including medical, prescription,
dental, disability, salary continuance, employee life,
group life, accidental death and travel accident insurance
plans and programs) to the extent applicable generally to
other senior executives of the Company; and
(C) the Executive shall be entitled to paid vacation and paid
holidays in accordance with the plans, policies, programs
and practices of the Company for its senior executives.
(vii) Other Compensation Matters. The Company agrees that if
--------------------------
neither an Evaluation Event or change of control (as each such term is defined
in the Executive Supplemental Stock Option Agreement) occurs within three (3)
months of the Effective Date; provided, however, that such three month period
shall be extended for up to an additional three (3) months to the extent the
Company has entered into definitive documentation to effect either such
Evaluation Event or change of control, the closing of which is subject only to
conditions that are customary for such transactions (e.g., regulatory and
shareholder approvals), then:
(A) the Executive shall receive a cash signing bonus of $350,000;
(B) it shall establish a benefits package for the Executive commensurate
with industry standards for a chief executive officer, including
incentive, savings and retirement plans, welfare benefit plans (e.g.,
medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident
insurance plans and programs), and automobile and vacation policies;
(C) vesting of the Executive Stock Options granted under the Executive
Supplemental Stock Option Agreement shall be triggered in accordance
3
<PAGE>
with the terms and provisions of such supplemental stock option
agreement; and
(D) the Executive shall be reimbursed on a fully grossed up basis for his
actual and reasonable relocation expenses in moving his family to
Florida, including exploratory trips, closing costs associated with
selling his present home and purchasing a new home (including points
and reasonable attorney fees), and moving costs.
3. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. If the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), the Company may give to the
Executive written notice in accordance with Section 11(b) of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
-------------------------
the 30 days after such receipt, the Executive shall not have returned to full-
time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the Executive's inability to perform his duties and
----------
obligations hereunder for a period of 180 consecutive days due to mental or
physical incapacity as determined by a physician selected by the Company or its
insurers and acceptable to the Executive or the Executive's legal representative
(such agreement as to acceptability not to be withheld unreasonably).
(b) Cause or Board Termination. The Company may terminate the
--------------------------
Executive's employment during the Employment Period for Cause or without Cause.
For purposes of this Agreement, "Cause" shall mean (i) a breach by the Executive
-----
of the Executive's obligations under Section 2(a)(iii) (other than as a result
of physical or mental incapacity) which constitutes a continued material
nonperformance by the Executive of his obligations and duties thereunder, as
reasonably determined by the Board, and which is not remedied within 30 days
after receipt of written notice from the Company specifying such breach, (ii)
commission by the Executive of an act of fraud upon, or willful misconduct
toward, the Company or any Affiliate (as defined below in this Section 3(b)), as
reasonably determined by a majority of the disinterested members of the Board
(neither the Executive nor members of his family being deemed disinterested for
this purpose) after a hearing by the Board following fourteen days' notice to
the Executive of such hearing, (iii) a material breach by the Executive of
Section 6 or Section 9, (iv) the conviction of the Executive of any felony or
crime of moral turpitude (or a plea of nolo contendere thereto) or (v) the
---- ----------
failure of the Executive to carry out, or comply with, in any material respect
any lawful directive of the Board consistent with the terms of this Agreement,
which is not remedied within 30 days after receipt of written notice from the
Company specifying such failure. As used in this Agreement, "Affiliate" means,
---------
with respect to a Person, any other Person controlling, controlled by or under
common control with the first Person; the term "control," and correlative terms,
-------
means
4
<PAGE>
the power, whether by contract, equity ownership or otherwise, to direct the
policies or management of a Person; and "Person" means an individual,
------
partnership, corporation, limited liability company, trust or unincorporated
organization, or a government or agency or political subdivision thereof.
(c) Good Reason. The Executive's employment may be terminated during
-----------
the Employment Period by the Executive for Good Reason or without Good Reason;
provided, however, that the Executive agrees not to terminate his employment for
- -------- -------
Good Reason unless (i) the Executive has given the Company at least 30 days'
prior written notice of his intent to terminate his employment for Good Reason,
which notice shall specify the facts and circumstances constituting Good Reason
and (ii) the Company has not remedied such facts and circumstances constituting
Good Reason within such 30-day period. For purposes of this Agreement, "Good
----
Reason" shall mean:
- ------
(i) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company within ten business days after
receipt of notice thereof given by the Executive; provided, however, that Good
-------- -------
Reason may not be asserted by the Executive under this clause (i) of Section
3(c) after a Non-Renewal Notice has been given by either the Company or the
Executive;
(ii) any termination or material reduction of the Executive's
compensation or benefits;
(iii) any failure by the Company to comply with any of the
provisions of Section 2(b), other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(iv) any failure by the Company to comply with and satisfy
Section 8(c);
(v) without limiting the generality of the foregoing, any
material breach by the Company or any of its subsidiaries or other Affiliates of
this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause
---------------------
or without Cause, or by the Executive for Good Reason or without Good Reason,
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 11(b). For purposes of this Agreement, a "Notice of
---------
Termination" means a written notice which (i) indicates the specific termination
- -----------
provision in this Agreement relied upon, (ii) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated and (iii) if the Date of
5
<PAGE>
Termination (as defined below) is other than the date of receipt of such notice,
specifies the termination date (which date shall not be more than 15 days after
the giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance which contributes to
a showing of Good Reason or Cause shall not waive any right of the Executive or
the Company hereunder or preclude the Executive or the Company from asserting
such fact or circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
------------------- -------------------
Executive's employment is terminated by the Company for Cause or without Cause,
or by the Executive for Good Reason or without Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein pursuant to
Section 3(d), as the case may be and (ii) if the Executive's employment is
terminated by reason of death or Disability, the date of death of the Executive
or the Disability Effective Date, as the case may be.
4. Obligations of the Company upon Termination.
-------------------------------------------
(a) Good Reason; Other Than for Cause, Death or Disability. If,
------------------------------------------------------
during the Employment Period, the Company shall terminate the Executive's
employment other than for either Cause or Disability or the Executive shall
terminate his employment for Good Reason, and the termination of the Executive's
employment in any case is not due to his death or Disability:
(i) The Company shall (except as otherwise hereinafter
provided) pay to the Executive in a lump sum in cash within ten days after the
Date of Termination the aggregate of the following amounts:
(1) the portion of the Annual Base Salary through the Date
of Termination to the extent not theretofore paid and any
compensation previously deferred by the Executive ("Accrued
-------
Obligations");
-----------
(2) the portion of the Executive's then current Annual
Base Salary for the then-remaining term of the Employment Period;
(3) a pro rata portion of the projected Bonus (based upon
the Company's actual performance for the calendar year in which
such termination occurs through the Date of Termination) that
would have been payable to the Executive pursuant to Section
2(b)(ii) hereof for such calendar year if such Executive had
remained in the employ of the Company through the end of such
calendar year, based upon the number of days during such calendar
year prior to the Date of Termination (the "Accrued Bonus"); and
-------------
6
<PAGE>
(ii) The Executive shall vest, as of the Date of Termination,
in the Executive Options that would otherwise vest after the Date of Termination
to the extent provided in the Option Agreements.
(b) Death or Disability. If the Executive's employment is terminated
-------------------
by reason of the Executive's death or Disability during the Employment Period,
the Company shall (except as otherwise hereinafter provided) pay to his legal
representatives in a lump sum in cash within ten days after the Date of
Termination the aggregate of the following amounts: (i) the Accrued Obligations;
(ii) the Accrued Bonus and (iii) the equivalent of three months Annual Base
Salary. Further, the Executive shall vest, as of the Date of Termination, in
the Executive Options that would otherwise vest after the Date of Termination to
the extent provided in the Option Agreements. The Company shall have no further
payment obligations to the Executive or his legal representatives under this
Agreement.
(c) Cause; Other than for Good Reason. If the Executive's employment
---------------------------------
shall be terminated by the Company for Cause or by the Executive without Good
Reason during the Employment Period, the Company shall have no further payment
obligations to the Executive other than for payment of the Accrued Obligations.
Further, (i) all unvested rights under or in respect of the Executive Options or
any stock option, stock appreciation right or similar agreement (including the
Option Agreements) that would otherwise vest after the Date of Termination shall
be canceled and of no further force or effect and (ii) the expiration date of
any Executive Options which have already vested shall be as provided in the
Option Agreements.
5. Full Settlement; Mitigation. In no event shall the Executive be
---------------------------
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Executive
obtains other employment. Neither the Executive nor the Company shall be liable
to the other party for any damages in addition to the amounts payable under
Section 4 arising out of the termination of the Executive's employment prior to
the end of the Employment Period; provided, however, that the Company shall be
-------- -------
entitled to seek damages for any breach by the Executive of Section 6, 7 or 9.
6. Confidential Information and Intellectual Property.
--------------------------------------------------
(a) The Executive acknowledges that the Company and its Affiliates
have trade, business and financial secrets and other confidential and
proprietary information (collectively, the "Confidential Information").
------------------------
Confidential Information shall not include (i) information that is generally
known to other Persons who can obtain economic value from its disclosure or use
and (ii) information required to be disclosed by the Executive pursuant to a
subpoena or court order, or pursuant to a requirement of a governmental agency
or law of the United States of America or a state thereof or any governmental or
political subdivision thereof; provided, however, that the Executive shall
-------- -------
7
<PAGE>
(at the Company's sole cost and expense) take all reasonable steps to prohibit
disclosure pursuant to subsection (ii) above.
(b) The Executive agrees (i) to hold the Confidential Information in
confidence and (ii) not to release such information to any Person (other than
Company employees and other Persons to whom the Company has authorized the
Executive to disclose such information and then only to the extent that such
Company employees and other Persons authorized by the Company have a need for
such knowledge) or as required pursuant to Section 6(a)(ii) above.
(c) The Executive further agrees not to use any Confidential
Information for the benefit of any Person other than the Company and its
Affiliates.
(d) To the extent permitted by law, all rights worldwide with respect
to any and all intellectual or other property of any nature produced, created or
suggested by the Executive during the Employment Period or resulting from his
service shall be deemed to be a work for hire and shall be the sole and
exclusive property of the Company. The Executive agrees to execute, acknowledge
and deliver to the Company, at the Company's request, such further documents as
the Company finds appropriate to evidence the Company's rights in such property.
(e) The Executive agrees to sign the Company's standard form of
confidentiality agreement at the request of the Company.
7. Surrender of Materials Upon Termination. Upon any termination of the
---------------------------------------
Executive's employment, the Executive shall immediately return to the Company
all copies, in whatever form, of any and all Confidential Information and other
properties of the Company and its Affiliates which are in the Executive's
possession, custody or control.
8. Successors and Assigns.
----------------------
(a) This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns and the Company shall have the right
to assign this Agreement.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement,
8
<PAGE>
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
9. Non-Competition.
---------------
(a) The Executive covenants and agrees with the Company that, while
he is an employee of the Company or any Affiliate thereof and thereafter, (1)
during the applicable Non-Compete Period with respect to the matters referred to
in clause (i) below, (2) for a period of two years after termination of
employment with respect to the matters referred to in clause (ii) below and (3)
for a period of one year after termination of employment with respect to the
matters referred to in (iii) below, he will not, without the prior written
consent of the Company, either directly or indirectly:
(i) solicit any contractors, customers or distributors of the
Company or any Affiliate thereof or endeavor to entice away from the Company or
any Affiliate thereof any such Person or otherwise interfere with the
relationship between such Person and the Company or any Affiliate thereof for
the purposes of competing with the Company or any Affiliate thereof; or
(ii) endeavor to entice away from the Company or any Affiliate
thereof any person who is employed by the Company or any Affiliate thereof,
either directly or indirectly, or interfere in any way with the
employer/employee relations between any such employee and the Company or any
Affiliate thereof; or
(iii) offer employment to any person who was employed by the
Company or any Affiliate thereof at any time within the 12-month period
preceding the date upon which the Executive ceases to be an employee of the
Company or any Affiliate thereof (but the Executive may offer employment to any
such person whose employment with the Company or any Affiliate thereof was
terminated by the Company or any Affiliate thereof without cause (with "cause"
having the meaning similar to Cause) or by such person for good reason (with
good reason having the meaning similar to Good Reason)).
(b) The Executive covenants and agrees with the Company and each
Affiliate thereof that:
(i) while he is an employee of the Company or any Affiliate
thereof, he shall not directly or indirectly compete in any manner against the
Company or any of its Affiliates; and
(ii) during the applicable Non-Compete Period, he will not,
directly or indirectly, in any manner whatsoever, including either individually
or in partnership or jointly or in conjunction with any other Person, as
principal, agent, shareholder, employee or in any other manner whatsoever, carry
on or be engaged in or
9
<PAGE>
concerned with or interested in or lend money to, guarantee the debts or
obligations of or permit his name to be used by a Competitive Business (as
defined below).
(c) (i) For the purposes of this Section 9, a "Competitive
Business" shall mean any business relating to or involving (A) the ownership (as
its principal business) and/or the construction (as its principal business)
and/or operation (as its principal business) of any submarine cable system which
is located or is to be located between (1) Bermuda and the United States of
America, (2) Bermuda and South America, (3) the United States of America and
South America or (4) any two or more countries or continents if the Company or
any Affiliate thereof is constructing, owning and/or operating or is to
construct, own and/or operate any submarine cable system between any such
countries or continents during the Executive's employment hereunder or (B)
telecommunication services (including electronic commerce) in Bermuda.
(ii) For purposes of this Agreement, the term "Non-Compete
Period" shall mean, in the case of:
(1) termination of employment by the Company for Cause,
two years following such termination;
(2) termination of employment by the Company due to the
Executive's Disability or without Cause, (A) the period of time
following such termination and continuing until the expiration of
the Employment Period plus (B) such additional period of time (if
any) that the Company continues (in its sole discretion) to pay
the Executive the Annual Base Salary in accordance with its
customary practices for paying executive salary (but the
aggregate time under (A) and (B) of this clause (2) shall not
exceed two years);
(3) termination of employment by the Company as a result
of it providing a Non-Renewal Notice under Section 1, that period
of time (if any) following termination and continuing for as long
as the Company continues (in its sole discretion) to pay the
Executive the Annual Base Salary in accordance with its customary
practices for paying executive salary (not to exceed two years);
(4) termination of employment by the Executive for Good
Reason, the period of time following such termination and
continuing until the expiration of the Employment Period (but in
no event to exceed two years);
(5) termination of employment by the Executive without
Good Reason, two years following such termination; and
10
<PAGE>
(6) termination of employment by the Executive as a
result of the Executive providing a Non-Renewal Notice under
Section 1, one year from the date of termination plus such
additional period (which additional period may not exceed one
year) for as long as the Company in its sole discretion pays,
during any such additional period, the Executive the Annual Base
Salary in accordance with its customary practices for paying
executive salary, provided that the Company shall notify the
Executive of the Company's intention not later than 60 days prior
to the expiration of the Employment Period if the Company intends
to pay the Executive as aforesaid during such additional period.
(d) The Executive covenants and agrees that until the expiration of
his covenants set out in Sections 9(a) and (b), he shall use his reasonable best
efforts to ensure that any and all current and future opportunities relating to
the telecommunications businesses and electronic commerce business of the
Company and its Affiliates and any businesses ancillary thereto shall be carried
out through the Company and its Affiliates.
(e) The foregoing covenants are given by the Executive acknowledging
that he has specific knowledge of the affairs of the Company and its Affiliates.
(f) The Executive acknowledges and agrees that the nature of the
Confidential Information to which he will have access during his employment by
the Company or any Affiliate thereof would make it difficult, if not impossible,
for him to perform in a similar capacity for a Competitive Business within the
two year period following his termination for any reason from the Company,
without disclosing or utilizing the Confidential Information and that if he were
to perform in a similar capacity for a Competitive Business it would be
inevitable that he would disclose and/or use Confidential Information.
(g) The Executive acknowledges that during and limited only to the
two year period following his termination for any reason from the Company,
violations of the provisions of Section 6 or 9 will cause immediate and
irreparable harm to the Company, entitling the Company to an injunction in or by
a court of competent jurisdiction or arbitration in addition to any other
remedies the Company may have at law or in equity, including recovery of
reasonable attorneys' fees and costs incurred by the Company in enforcing the
provisions of Section 6 or 9. In the event that any covenant contained in
Section 9 or portion of any such covenant should be unenforceable or be declared
invalid for any reason whatsoever, such unenforceability or invalidity shall not
affect the enforceability or validity of the remaining portions of the covenants
and such unenforceable or invalid portions shall be severable from the remainder
of this Agreement. The Executive hereby acknowledges and agrees that, during and
limited only to the two year period following his termination for any reason
from the Company, all restrictions contained in this Section 9 are reasonable
and valid and all defenses to the strict enforcement thereof by the Company and
are hereby waived by him.
11
<PAGE>
(h) Nothing in Section 9 shall be deemed to prevent or prohibit the
Executive from making investments in his personal capacity unless such
investments are of a type that may conflict with the efficient performance of
his duties or with any of his obligations to the Company or any Affiliate
thereof; provided further that nothing contained herein shall preclude the
--------
Executive from purchasing or owning equity interests in any Person engaged in a
Competitive Business whose shares are traded on a recognized stock exchange or
over-the-counter market, so long as the Executive's holdings therein do not
exceed five percent (5%) of the issued and outstanding capital of the Person in
question.
(i) The Executive acknowledges and agrees that he has received good
and valuable consideration in exchange for his covenants and obligations under
this Agreement.
10. Effect of Agreement on Other Benefits. The existence of this
-------------------------------------
Agreement shall not prohibit or restrict the Executive's entitlement to full
participation in the executive compensation, employee benefit and other plans or
programs in which senior executives of the Company are eligible to participate.
11. Miscellaneous.
-------------
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS.
The captions of this Agreement are not part of the provisions hereof and shall
have no force or effect. Whenever the terms "hereof", "hereby", "herein", or
------ ------ ------
words of similar import are used in this Agreement they shall be construed as
referring to this Agreement in its entirety rather than to a particular section
or provision, unless the context specifically indicates to the contrary. Any
reference to a particular "Section" or "paragraph" shall be construed as
------- ---------
referring to the indicated section or paragraph of this Agreement unless the
context indicates to the contrary. The use of the term "including" herein shall
---------
be construed as meaning "including without limitation." This Agreement may not
----------------------------
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: Mr. Jorge Escalona
-------------------
54 Skyline Drive
Morristown, NJ 07960
12
<PAGE>
If to the Company: GlobeNet Communications
-----------------
Group Limited
2 Carter's Bay Road, Southside
St. David's DD BX
Bermuda
Attn: Office of General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(c) If any provision of this Agreement is held to be illegal, invalid
or unenforceable under present or future laws effective during the term of this
Agreement, such provision shall be fully severable; this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a portion of this Agreement; and the remaining provisions of
this Agreement shall remain in full force and effect and shall not be affected
by the illegal, invalid or unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable
provision there shall be added automatically as part of this Agreement a
provision as similar in terms and scope to such illegal, invalid or
unenforceable provision as may be possible and be legal, valid and enforceable.
(d) The Company shall obtain and maintain a director's and officer's
liability insurance policy during the term of the Executive's employment
covering the Executive on commercially reasonable terms, and the amount of
coverage shall be reasonable in relation to the Executive's position and
responsibilities hereunder; provided, however, that such coverage may be reduced
-------- -------
or eliminated to the extent that the Company reduces or eliminates coverage for
its directors and executives generally.
(e) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(f) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, shall not be deemed to be
a waiver of such provision or right or any other provision or right of this
Agreement.
(g) The Executive acknowledges that money damages would be both
incalculable and an insufficient remedy for a breach of Section 6 or 9 by the
Executive and that any such breach would cause the Company irreparable harm.
Accordingly, the Company, in addition to any other remedies at law or in equity
it may have, and shall be entitled, without the requirement of posting of bond
or other security, to equitable relief, including injunctive relief and specific
performance, in connection with a breach of Section 6 or 9 by the Executive.
The Company shall be entitled to obtain such remedies from any court of
competent jurisdiction on a provisional basis pending the resolution of
13
<PAGE>
a Dispute involving an alleged breach of Section 6 or 9, and without first
obtaining a provisional award authorizing such remedies from an arbitral panel.
(h) The provisions of this Agreement constitute the complete
understanding and agreement between the parties with respect to the subject
matter hereof.
(i) This Agreement may be executed in two or more counterparts.
(j) (i) The Executive and the Company shall endeavor initially to
resolve amicably any dispute, difference, claim, or controversy arising out of
or relating to this Agreement, or the breach thereof (a "Dispute") first by
-------
negotiation. The party claiming the existence of a Dispute shall provide
written notice to the other party specifying the nature and basis of the
Dispute. In the event that no agreement is reached within 30 days after notice
of the existence of a Dispute has been provided, either party shall have the
right to have such Dispute determined by arbitration as provided in this Section
11(j).
(ii) Any and all Disputes that are not resolved through
negotiation as set forth above shall be finally settled in a binding arbitration
administered by the American Arbitration Association under its Commercial
Arbitration Rules then in effect. The place of arbitration shall be New York,
New York. If the parties are unable to agree on the appointment of a single
arbitrator to conduct the arbitration within 20 days after the claimant has
filed its demand for arbitration, then the arbitration shall be conducted by a
panel of three arbitrators, appointed as follows: The Company and the Executive
each shall appoint one arbitrator, and the two arbitrators so appointed shall
appoint the third arbitrator, who shall chair the panel. No arbitrator may be
affiliated, associated, or related to the Company, any Affiliate, employee or
executive of the Company, or the Executive in any manner whatsoever.
(iii) The award of the arbitrators shall be final and binding,
and judgment upon any such award may be entered by any court of competent
jurisdiction. The arbitrators shall have no authority to award damages in excess
of compensatory damages, and each party hereby irrevocably waives any right to
recover such non-compensatory damages (including exemplary damages, treble
damages, and any other penalty or type of punitive damages) with respect to any
Dispute arising hereunder. Each party shall bear such party's own expenses
related to any arbitration, but the parties shall share equally the expenses of
the arbitration tribunal and the AAA.
(k) This Section 11 and Sections 4, 5, 6, 7 and 9 of this Agreement
shall survive the termination of this Agreement and termination of this
Agreement shall not release any party hereto from any liability arising out of
its breach of this Agreement prior to termination.
(l) The Executive represents and warrants to the Company that, to the
best of his personal knowledge and belief, neither the execution and delivery of
this
14
<PAGE>
Agreement, his commencement of employment hereunder nor the performance of his
duties hereunder conflicts with any contractual commitment on his part owed to
any third party or violates or interferes with any rights of any third party. In
this regard, the Company has been provided a copy of the relevant provisions of
the Executive's agreement with AT&T dated September 1, 1999.
(m) The Company shall have the right to secure, in its own name or
otherwise, and at its own expense, life, disability, accident or other insurance
covering the Executive and the Executive shall have no right, title or interest
in or to such insurance. The Executive shall assist the Company in procuring
such insurance by submitting to reasonable examinations and signing such
applications and other instruments as may be required by the insurance carriers
to which applications is made for any such insurance.
(n) At the request of the Company, the Executive shall execute the
necessary documents to become a party to (i) the Amended and Restated
Securityholders' Agreement dated July 14, 1999, by and among the Company and
various other parties including various shareholders of the Company (the "SHA")
---
and (ii) the Registration Rights Agreement referred to therein.
(o) The Executive represents and warrants to the Company that he does
not hold any interest in any of the following New Investors (as that term is
defined in the Amended and Restated Securityholders' Agreement referred to in
the SHA): Boston Ventures Limited Partnership V, L.P., Kelso Investment
Associates VI, L.P., KEP VI, L.L.C., Providence Equity Partners III L.P.,
Providence Equity Operating Partners III L.P., Spectrum Equity Investor III,
L.P., SEI III Entrepreneurs' Fund, L.P., Spectrum III Investment Managers' Fund,
L.P., Sandler Capital Partners IV, L.P., or Sandler Capital Partners IV FTE,
L.P., and covenants that he will not acquire an interest in the foregoing New
Investors during the Employment Period.
[Remainder of Page Intentionally Left Blank]
15
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization from the Board, the Company has caused this
Agreement to be executed in its name on its behalf, all as of the day and year
first above written.
EXECUTIVE
/s/ JORGE L. ESCALONA
---------------------
Jorge L. Escalona
GLOBENET COMMUNICATIONS
GROUP LIMITED
By: MICHAEL KEDAR
--------------
Name: Michael Kedar
Title: Chairman & Acting CEO
16
<PAGE>
Exhibit A
Attached to and made a part of that certain Executive Employment Agreement
dated effective as of March 3, 2000, between GlobeNet Communications Group
Limited and Jorge L. Escalona.
1. Annual Base Salary: $600,000 per calendar year (to be prorated in
------------------
respect of calendar year 2000), which shall be
increased annually at an amount at least equal to
CPI plus 2%.
2. Bonus: $250,000 per calendar year (to be prorated in
-----
respect of calendar year 2000 commencing as of
February 1st ), subject to approval by the Board.
17
<PAGE>
Exhibit 10.2
------------
STOCK OPTION AGREEMENT
AGREEMENT made effective as of the 3rd day of March, 2000 ("Effective
Date") between GlobeNet Communications Group Limited, a Bermuda company (the
"Company") and Jorge L. Escalona ("Executive").
In consideration of the mutual agreements and other matters set forth
herein, the Company and Executive hereby agree as follows:
1. Grant of Option. The Company hereby irrevocably grants to Executive
---------------
the right and option ("Option") to purchase all or any part of an aggregate of
250,000 shares of authorized but unissued common shares of the Company, par
value U.S. $1.50 ("Shares"), on the terms and conditions set forth herein. This
Option shall not be treated as an incentive stock option within the meaning of
section 422(b) of the U.S. Internal Revenue Code of 1986, as amended (the
"Code"). In connection with this Option grant, Executive hereby rescinds,
revokes and otherwise disclaims any and all rights to the 16,667 options granted
to him under that certain Consulting Letter Agreement dated January 25, 2000 and
approved by resolution of the Board of Directors of the Company (the "Board") on
February 8, 2000.
2. Option Price. The purchase price of Shares purchased pursuant to the
------------
exercise of this Option shall be U.S. $20.40 per share ("Option Price").
3. Vesting. Subject to the other provisions set forth herein, this
-------
Option shall vest and be exercisable for the percentage of the aggregate number
of Shares offered by this Option determined by the period of time from the
Effective Date to the date of such exercise, in accordance with the following
vesting schedule:
Percentage of Shares
Period of Time That are Vested
-------------- ---------------
Less than 1 year 0%
1 year 33%
1 year and 3 months 42%
1 year and 6 months 50%
1 year and 9 months 58%
2 years 67%
2 years and 3 months 75%
2 years and 6 months 83%
2 years and 9 months 91%
3 years or more 100%
Notwithstanding the above vesting schedule, Executive shall be 100% vested
in this Option upon (i) an underwritten public offering of the Company's common
shares, (ii) a private sale (or
1
<PAGE>
series of related private sales) of 50% or more of the common shares of the
Company (or merger or other business combination having the same effect)
(collectively (i) and (ii), an "Evaluation Event"), or (iii) a change of
control, defined to be the purchase of more than 50% of the voting securities of
the Company by one or more entities where the Company is not the surviving
entity.
4. Exercise of Option. Subject to the earlier expiration of this Option
------------------
as herein provided, this Option may be exercised in whole or part with respect
to the portion of this Option that has vested under Section 3 hereof, by written
notice to the Company at its principal executive office addressed to the
attention of its General Counsel, at any time and from time to time after the
first anniversary of the Effective Date.
This Option may be exercised only while Executive remains an employee of
the Company and will terminate and cease to be exercisable upon Executive's
termination of employment with the Company, except that:
(a) If Executive's employment with the Company terminates by reason
of Disability (as defined in the Executive Employment Agreement effective as of
March 3, 2000, by and between Executive and Company (the "Employment
Agreement")), this Option shall become 100% vested and shall be exercisable at
any time until the completion of one year after an Evaluation Event.
(b) If Executive dies while in the employ of the Company, Executive
shall be fully vested in this Option and Executive's estate, or the person who
acquires this Option by will or the laws of descent and distribution or
otherwise by reason of the death of Executive, may exercise this Option in full
at any time until the completion of one year after an Evaluation Event.
(c) If the Company terminates Executive's employment with the Company
for Cause (as defined in the Employment Agreement) this Option shall terminate
and cease to be exercisable in its entirety (including with respect to Shares
that have previously vested under Section 3 hereof). If Executive voluntarily
terminates employment with the Company for other than Good Reason (as defined in
the Employment Agreement), vesting under this Option shall terminate as of the
date of such termination and Executive shall have ninety (90) days to exercise
the Shares that have previously vested under Section 3 hereof.
(d) If (i) Executive terminates his employment with the Company for
Good Reason (as defined in the Employment Agreement), (ii) the Company
terminates Executive's employment with the Company for other than Cause (as
defined in the Employment Agreement), or (iii) the Company does not renew
Executive's Employment Agreement at the termination thereof, this Option shall
become 100% vested and shall be exercisable at any time until the completion of
one year after an Evaluation Event.
Notwithstanding the above, this Option shall not be exercisable in any
event after the expiration of ten years from the Effective Date. The purchase
price of Shares as to which this Option is exercised shall be paid in full at
the time of exercise in cash (including check, bank draft or money order payable
to the order of the Company). No fraction of a Share shall be issued by the
Company upon exercise of this Option; rather, Executive shall provide a cash
payment for such
2
<PAGE>
amount as is necessary to effect the issuance and acceptance of only whole
Shares. Unless and until a certificate or certificates representing such Shares
shall have been issued by the Company to Executive, Executive (or the person
permitted to exercise this Option in the event of Executive's death) shall not
be or have any of the rights or privileges of a shareholder of the Company with
respect to Shares acquirable upon an exercise of this Option.
5. Administration. The Board shall have such powers and authorities
--------------
related to the administration of this Agreement as are consistent with the
Company's memorandum of association and bye-laws and applicable law. The Board
shall have full power and authority to take all actions and to make all
determinations required or provided for under this Agreement, and shall have
full power and authority to take all such other actions and determinations not
inconsistent with the specific terms and provisions of this Agreement that the
Board deems to be necessary or appropriate to the administration of this
Agreement. All such actions and determinations shall be by an affirmative
majority vote of the Board or by unanimous consent of the Board executed in
writing in accordance with the Company's memorandum of association and bye-laws
and applicable law. The interpretation and construction by the Board of any
provision of this Agreement shall be final and conclusive.
The Board from time to time may appoint a Committee (the "Committee"). The
Board, in its sole discretion, may provide that the role of the Committee shall
be limited to making recommendations to the Board concerning any determinations
to be made and actions to be taken by the Board pursuant to or with respect to
this Agreement, or the Board may delegate to the Committee such powers and
authorities related to the administration and implementation of this Agreement,
as set forth in the preceding paragraph and in other applicable provisions, as
the Board shall determine, consistent with the Company's memorandum of
association and bye-laws and applicable law. In the event that this Agreement
provides for any action to be taken by or determination to be made by the Board,
such action may be taken by or such determination may be made by the Committee
if the power and authority to do so has been delegated to the Committee by the
Board as provided for in this Section. Unless otherwise expressly determined by
the Board, any such action or determination by the Committee shall be final,
binding and conclusive.
6. Status of Shares. Executive understands that at the time of the
----------------
execution of this Agreement the Shares to be issued upon exercise of this Option
have not been registered under the U.S. Securities Act of 1933, as amended, any
Canadian securities laws, or other applicable securities laws ("Securities
Laws"). Until the Shares acquirable upon the exercise of this Option have been
registered for issuance under Securities Laws, the Company will not issue such
Shares unless the holder of this Option provides the Company, at its request,
with a written opinion of legal counsel, who shall be satisfactory to the
Company, addressed to the Company and satisfactory in form and substance to the
Company's counsel, to the effect that the proposed issuance of such Shares to
such Option holder may be made without registration under Securities Laws. In
the event exemption from registration under Securities Laws is available upon an
exercise of this Option, Executive (or the person permitted to exercise this
Option in the event of Executive's death), if requested by the Company to do so,
will execute and deliver to the Company in writing an agreement containing such
provisions as the Company may require to assure compliance with Securities Laws.
If the Executive is an employee of the Company at the time the aforesaid opinion
is provided to the Company, the
3
<PAGE>
Company shall bear the legal fees incurred by the Executive in connection with
the preparation of said opinion.
Executive agrees that the Shares which Executive may acquire by exercising
this Option shall be acquired for investment without a view to distribution,
within the meaning of Securities Laws, and shall not be sold, transferred,
assigned, pledged or hypothecated in the absence of an effective registration
statement for the Shares under Securities Laws or an applicable exemption from
the registration requirements of Securities Laws. Executive also agrees that
the Shares which Executive may acquire by exercising this Option will not be
sold or otherwise disposed of in any manner which would constitute a violation
of any Securities Laws.
In addition, Executive agrees (i) that the certificates representing the
Shares purchased under this Option may bear such legend or legends as the Board
deems appropriate in order to assure compliance with Securities Laws and (ii)
that the Company may refuse to register the transfer of the Shares purchased
under this Option in the register of members of the Company if such proposed
transfer would in the opinion of counsel satisfactory to the Company constitute
a violation of any Securities Law and that the Company may give related
instructions to its transfer agent, if any, to stop registration of the transfer
of such Shares.
7. Employment Relationship. For purposes of this Agreement, Executive
-----------------------
shall be considered to be in the employment of the Company as long as Executive
remains an employee of either the Company, a parent or subsidiary corporation of
the Company, or a company or a parent or subsidiary of such company assuming or
substituting a new option for this Option. Any question as to whether and when
there has been a termination of such employment, and the cause of such
termination, shall be determined pursuant to the Employment Agreement.
8. Transferability of Options. This Option shall, during an Executive's
--------------------------
lifetime, be exercisable only by the Executive, and neither this Option nor any
right hereunder shall be transferable by the Executive, by operation of law or
otherwise, other than as may be provided in this Agreement or as may be provided
by will or the laws of descent and distribution. Except as may be provided in
this Agreement, this Option shall not be charged, mortgaged, pledged or
hypothecated (by operation of law or otherwise) or subject to execution,
attachment or similar processes.
9. Effect of Changes in Capitalization.
-----------------------------------
(a) Changes in Shares. If the number of outstanding Shares is
increased or decreased or the Shares are changed into or exchanged for a
different number or kind of shares or other securities of the Company as a
result of any recapitalization, reclassification, share split, reverse split,
combination of Shares, exchange of Shares, Share dividend or other distribution
payable in share capital, or other increase or decrease in such Shares effected
without receipt of consideration by the Company occurring after the Effective
Date, the number and kinds of Shares for which this Option is outstanding shall
be adjusted proportionately and accordingly so that the proportionate interest
of the Executive immediately following such event shall, to the extent
practicable, be the same as immediately before such event. Any such adjustment
in this Option shall not change the aggregate Option Price payable with respect
to Shares that are subject to the
4
<PAGE>
unexercised portion of this Option outstanding but shall include a corresponding
proportionate adjustment in the Option Price per Share.
(b) Reorganization in which the Company is the Surviving or
Continuing Entity and in which no Change of Control Occurs. Subject to the
following paragraph hereof, if the Company shall be the surviving or continuing
entity in any reorganization, merger, amalgamation, or consolidation of the
Company with one or more other entities, this Option shall pertain to and apply
to the securities to which a holder of the number of Shares subject to such
Option would have been entitled immediately following such reorganization,
merger, amalgamation, or consolidation, with a corresponding proportionate
adjustment of the Option Price per Share so that the aggregate Option Price
thereafter shall be the same as the aggregate Option Price of the Shares
remaining subject to the Option immediately prior to such reorganization,
merger, amalgamation, or consolidation.
(c) Adjustments. Adjustments under this Section 9 related to Shares
or securities of the Company shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. No fractional Shares or
other securities shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case by
rounding downward to the nearest whole Share.
(d) No Limitations on Company. The granting of this Option shall not
affect or limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations, or changes of its capital or
business structure or to merge, amalgamate, consolidate, dissolve, or liquidate,
or to sell or transfer all or any part of its business or assets.
10. Withholding of Tax. To the extent that the exercise of this Option
------------------
or the disposition of Shares acquired by exercise of this Option results in
compensation income to Executive for tax purposes, Executive shall deliver to
the Company at the time of such exercise or disposition such amount of money as
the Company may require to meet its obligation under applicable tax laws or
regulations, and, if Executive fails to do so, the Company is authorized to
withhold from any cash or Shares remuneration then or thereafter payable to
Executive any tax required to be withheld by reason of such resulting
compensation income. Upon an exercise of this Option, the Company is further
authorized in its discretion to satisfy any such withholding requirement out of
any cash or Shares distributable to Executive upon such exercise.
11. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of any successors to the Company and all persons lawfully claiming under
Executive.
12. Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of Bermuda.
5
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunto duly authorized, and Executive has executed
this Agreement, all as of the day and year first above written.
GLOBENET COMMUNICATIONS GROUP LIMITED
By: MICHAEL KEDAR
-------------
JORGE L. ESCALONA
-----------------
Jorge L. Escalona
6
<PAGE>
Exhibit 10.3
------------
SUPPLEMENTAL STOCK OPTION AGREEMENT
AGREEMENT made effective as of the 3rd day of March, 2000 ("Effective
Date") between GlobeNet Communications Group Limited, a Bermuda company (the
"Company") and Jorge L. Escalona ("Executive").
In consideration of the mutual agreements and other matters set forth
herein, the Company and Executive hereby agree as follows:
1. Grant of Option. The Company hereby irrevocably grants to Executive
---------------
the right and option ("Option") to purchase all or any part of an aggregate of
100,000 Shares of authorized but unissued common shares of the Company, par
value U.S. $1.50 ("Shares"), on the terms and conditions set forth herein. This
Option shall not be treated as an incentive stock option within the meaning of
section 422(b) of the U.S. Internal Revenue Code of 1986, as amended (the
"Code").
2. Option Price. The purchase price of Shares purchased pursuant to the
------------
exercise of this Option shall be U.S. $20.40 per share ("Option Price").
3. Vesting. Subject to the other provisions set forth herein, this
-------
Option shall only commence vesting if an Evaluation Event or change of control
(as such terms are defined below) does not occur within three (3) months of the
Effective Date, provided, however, that such three month period shall be
extended for up to an additional three (3) months to the extent the Company has
entered into definitive documentation to effect either such Evaluation Event or
change of control, the closing of which is subject only to conditions that are
customary for such transactions (e.g., regulatory and shareholder approvals). If
such Evaluation Event or change of control occurs within the time period
described above, then the Option shall automatically expire and this Agreement
shall immediately terminate. If such an Evaluation Event or change of control
does not occur within the time period described above, then this Option shall
commence vesting as of the day immediately following the end of such time
period, exercisable for the percentage of the aggregate number of Shares offered
by this Option determined by the period of time from the Effective Date to the
date of such exercise, in accordance with the following vesting schedule:
Percentage of Shares
Period of Time That are Vested
-------------- ---------------
Less than 1 year 0%
1 year 33%
1 year and 3 months 42%
1 year and 6 months 50%
1 year and 9 months 58%
2 years 67%
2 years and 3 months 75%
2 years and 6 months 83%
1
<PAGE>
2 years and 9 months 91%
3 years or more 100%
Notwithstanding the above vesting schedule, Executive shall be 100% vested
in this Option upon (i) an underwritten public offering of the Company's common
shares, (ii) a private sale (or series of related private sales) of 50% or more
of the common shares of the Company (or merger or other business combination
having the same effect) (collectively (i) and (ii), an "Evaluation Event"), or
(iii) a change of control, defined to be the purchase of more than 50% of the
voting securities of the Company by one or more entities where the Company is
not the surviving entity.
4. Exercise of Option. Subject to the earlier expiration of this Option
------------------
as herein provided, this Option may be exercised in whole or part with respect
to the portion of this Option that has vested under Section 3 hereof, by written
notice to the Company at its principal executive office addressed to the
attention of its General Counsel, at any time and from time to time after the
first anniversary of the Effective Date.
This Option shall not be exercisable in any event after the expiration of
three months from the Effective Date unless there is a Vesting Trigger Date. If
there is a Vesting Trigger Date, this Option may be exercised only while
Executive remains an employee of the Company and will terminate and cease to be
exercisable upon Executive's termination of employment with the Company, except
that:
(a) If Executive's employment with the Company terminates by reason
of Disability (as defined in the Executive Employment Agreement effective as of
March 3, 2000, by and between Executive and Company (the "Employment
Agreement")), this Option shall become 100% vested and shall be exercisable at
any time until the completion of one year after an Evaluation Event.
(b) If Executive dies while in the employ of the Company, Executive
shall be fully vested in this Option and Executive's estate, or the person who
acquires this Option by will or the laws of descent and distribution or
otherwise by reason of the death of Executive, may exercthis Option in full at
any time until the completion of one year after an Evaluation Event.
(c) If the Company terminates Executive's employment with the Company
for Cause (as defined in the Employment Agreement) this Option shall terminate
and cease to be exercisable in its entirety (including with respect to Shares
that have previously vested under Section 3 hereof). If Executive voluntarily
terminates employment with the Company for other than Good Reason (as defined in
the Employment Agreement), vesting under this Option shall terminate as of the
date of such termination and Executive shall have ninety (90) days to exercise
the Shares that have previously vested under Section 3 hereof.
(d) If (i) Executive terminates his employment with the Company for
Good Reason (as defined in the Employment Agreement), (ii) the Company
terminates Executive's employment with the Company for other than Cause (as
defined in the Employment Agreement), or (iii) the Company does not renew
Executive's Employment Agreement at the termination thereof,
2
<PAGE>
this Option shall become 100% vested and shall be exercisable at any time until
the completion of one year after an Evaluation Event.
Notwithstanding the above, this Option shall not be exercisable in any
event after the expiration of ten years from the Effective Date. The purchase
price of Shares as to which this Option is exercised shall be paid in full at
the time of exercise in cash (including check, bank draft or money order payable
to the order of the Company). No fraction of a Share shall be issued by the
Company upon exercise of this Option; rather, Executive shall provide a cash
payment for such amount as is necessary to effect the issuance and acceptance of
only whole Shares. Unless and until a certificate or certificates representing
such Shares shall have been issued by the Company to Executive, Executive (or
the person permitted to exercise this Option in the event of Executive's death)
shall not be or have any of the rights or privileges of a shareholder of the
Company with respect to Shares acquirable upon an exercise of this Option.
5. Administration. The Board of Directors of the Company (the "Board")
--------------
shall have such powers and authorities related to the administration of this
Agreement as are consistent with the Company's memorandum of association and by
laws and applicable law. The Board shall have full power and authority to take
all actions and to make all determinations required or provided for under this
Agreement, and shall have full power and authority to take all such other
actions and determinations not inconsistent with the specific terms and
provisions of this Agreement that the Board deems to be necessary or appropriate
to the administration of this Agreement. All such actions and determinations
shall be by an affirmative majority vote of the Board or by unanimous consent of
the Board executed in writing in accordance with the Company's memorandum of
association and bye-laws and applicable law. The interpretation and construction
by the Board of any provision of this Agreement shall be final and conclusive.
The Board from time to time may appoint a Committee (the "Committee"). The
Board, in its sole discretion, may provide that the role of the Committee shall
be limited to making recommendations to the Board concerning any determinations
to be made and actions to be taken by the Board pursuant to or with respect to
this Agreement, or the Board may delegate to the Committee such powers and
authorities related to the administration and implementation of this Agreement,
as set forth in the preceding paragraph and in other applicable provisions, as
the Board shall determine, consistent with the Company's memorandum of
association and bye-laws and applicable law. In the event that this Agreement
provides for any action to be taken by or determination to be made by the Board,
such action may be taken by or such determination may be made by the Committee
if the power and authority to do so has been delegated to the Committee by the
Board as provided for in this Section. Unless otherwise expressly determined by
the Board, any such action or determination by the Committee shall be final,
binding and conclusive.
6. Status of Shares. Executive understands that at the time of the
----------------
execution of this Agreement the Shares to be issued upon exercise of this Option
have not been registered under the U.S. Securities Act of 1933, as amended, any
Canadian securities laws, or other applicable securities laws ("Securities
Laws"). Until the Shares acquirable upon the exercise of this Option have been
registered for issuance under Securities Laws, the Company will not issue such
Shares unless the holder of this Option provides the Company, at its request,
with a written opinion of legal counsel, who shall be satisfactory to the
Company, addressed to the Company and satisfactory in form and
3
<PAGE>
substance to the Company's counsel, to the effect that the proposed issuance of
such Shares to such Option holder may be made without registration under
Securities Laws. In the event exemption from registration under Securities Laws
is available upon an exercise of this Option, Executive (or the person permitted
to exercise this Option in the event of Executive's death), if requested by the
Company to do so, will execute and deliver to the Company in writing an
agreement containing such provisions as the Company may require to assure
compliance with Securities Laws. If the Executive is an employee of the Company
at the time the aforesaid opinion is provided to the Company, the Company shall
bear the legal fees incurred by the Executive in connection with the preparation
of said opinion.
Executive agrees that the Shares which Executive may acquire by exercising
this Option shall be acquired for investment without a view to distribution,
within the meaning of Securities Laws, and shall not be sold, transferred,
assigned, pledged or hypothecated in the absence of an effective registration
statement for the Shares under Securities Laws or an applicable exemption from
the registration requirements of Securities Laws. Executive also agrees that
the Shares which Executive may acquire by exercising this Option will not be
sold or otherwise disposed of in any manner which would constitute a violation
of any Securities Laws.
In addition, Executive agrees (i) that the certificates representing the
Shares purchased under this Option may bear such legend or legends as the Board
deems appropriate in order to assure compliance with Securities Laws and (ii)
that the Company may refuse to register the transfer of the Shares purchased
under this Option in the register of members of the Company if such proposed
transfer would in the opinion of counsel satisfactory to the Company constitute
a violation of any Securities Law and that the Company may give related
instructions to its transfer agent, if any, to stop registration of the transfer
of such Shares.
7. Employment Relationship. For purposes of this Agreement, Executive
-----------------------
shall be considered to be in the employment of the Company as long as Executive
remains an employee of either the Company, a parent or subsidiary corporation of
the Company, or a company or a parent or subsidiary of such company assuming or
substituting a new option for this Option. Any question as to whether and when
there has been a termination of such employment, and the cause of such
termination, shall be determined pursuant to the Employment Agreement.
8. Transferability of Options. This Option shall, during an Executive's
--------------------------
lifetime, be exercisable only by the Executive, and neither this Option nor any
right hereunder shall be transferable by the Executive, by operation of law or
otherwise, other than as may be provided in this Agreement or as may be provided
by will or the laws of descent and distribution. Except as may be provided in
this Agreement, this Option shall not be charged, mortgaged, pledged or
hypothecated (by operation of law or otherwise) or subject to execution,
attachment or similar processes.
9. Effect of Changes in Capitalization.
-----------------------------------
(a) Changes in Shares. If the number of outstanding Shares is
increased or decreased or the Shares are changed into or exchanged for a
different number or kind of shares or other securities of the Company as a
result of any recapitalization, reclassification, share split, reverse split,
combination of Shares, exchange of Shares, Share dividend or other distribution
4
<PAGE>
payable in share capital, or other increase or decrease in such Shares effected
without receipt of consideration by the Company occurring after the Effective
Date, the number and kinds of Shares for which this Option is outstanding shall
be adjusted proportionately and accordingly so that the proportionate interest
of the Executive immediately following such event shall, to the extent
practicable, be the same as immediately before such event. Any such adjustment
in this Option shall not change the aggregate Option Price payable with respect
to Shares that are subject to the unexercised portion of this Option outstanding
but shall include a corresponding proportionate adjustment in the Option Price
per Share.
(b) Reorganization in which the Company is the Surviving or
Continuing Entity and in which no Change of Control Occurs. Subject to the
following paragraph hereof, if the Company shall be the surviving or continuing
entity in any reorganization, merger, amalgamation, or consolidation of the
Company with one or more other entities, this Option shall pertain to and apply
to the securities to which a holder of the number of Shares subject to such
Option would have been entitled immediately following such reorganization,
merger, amalgamation, or consolidation, with a corresponding proportionate
adjustment of the Option Price per Share so that the aggregate Option Price
thereafter shall be the same as the aggregate Option Price of the Shares
remaining subject to the Option immediately prior to such reorganization,
merger, amalgamation, or consolidation.
(c) Adjustments. Adjustments under this Section 9 related to Shares
or securities of the Company shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. No fractional Shares or
other securities shall be issued pursuant to any such adjustment, and any
fractions resulting from any such adjustment shall be eliminated in each case by
rounding downward to the nearest whole Share.
(d) No Limitations on Company. The granting of this Option shall not
affect or limit in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations, or changes of its capital or
business structure or to merge, amalgamate, consolidate, dissolve, or liquidate,
or to sell or transfer all or any part of its business or assets.
10. Withholding of Tax. To the extent that the exercise of this Option
------------------
or the disposition of Shares acquired by exercise of this Option results in
compensation income to Executive for tax purposes, Executive shall deliver to
the Company at the time of such exercise or disposition such amount of money as
the Company may require to meet its obligation under applicable tax laws or
regulations, and, if Executive fails to do so, the Company is authorized to
withhold from any cash or Shares remuneration then or thereafter payable to
Executive any tax required to be withheld by reason of such resulting
compensation income. Upon an exercise of this Option, the Company is further
authorized in its discretion to satisfy any such withholding requirement out of
any cash or Shares distributable to Executive upon such exercise.
11. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of any successors to the Company and all persons lawfully claiming under
Executive.
12. Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the laws of Bermuda.
5
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by its officer thereunto duly authorized, and Executive has executed
this Agreement, all as of the day and year first above written.
GLOBENET COMMUNICATIONS GROUP LIMITED
By: MICHAEL KEDAR
-------------
JORGE L. ESCALONA
------------------
Jorge L. Escalona
6
<PAGE>
Exhibit 10.4
------------
INDEMNITY AGREEMENT
-------------------
THIS Agreement is made as of and effective the 1st day of March, 2000
between Jorge L. Escalona, of Morristown, New Jersey, USA ("GlobeNet Director"),
and GlobeNet Communications Group Limited, a company incorporated under the laws
of Bermuda ("GlobeNet").
WHEREAS the GlobeNet Director has agreed to act as a director of GlobeNet,
at the request of GlobeNet;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the sum of
$1 now paid by the GlobeNet Director to GlobeNet (the receipt of which is hereby
acknowledged) and for other good and valuable consideration, it is hereby agreed
as follows:
1. GlobeNet acknowledges that the GlobeNet Director has been requested by
GlobeNet to act as a GlobeNet Director.
2. GlobeNet agrees to indemnify and save harmless the GlobeNet Director,
his heirs and legal representatives, to the fullest extent permitted by Section
98 of the Companies Act 1981 against all costs, charges, liability, damages, and
expenses, including an amount paid to settle an action or to satisfy a judgment,
reasonably incurred by him in respect of any civil, criminal or administrative
action or proceeding to which he is made a party by reason of, or in any
connection with him, being or having been a director of GlobeNet if: (a) the
GlobeNet Director acted in his capacity as a Director and (b) in the case of a
criminal or administrative action or proceeding that is enforced by a monetary
penalty, the GlobeNet Director had reasonable grounds for believing that his
conduct was lawful.
3. Without prejudice to the generality of section 2, but for the purposes
of Section 97 of the Companies Act 1981, or otherwise for the purpose of
determining whether the GlobeNet Director was acting within his capacity as a
director, the termination of any civil, criminal or administrative action or
proceeding by judgment, order, settlement, conviction or similar or other result
shall not, of itself, create a presumption either that the GlobeNet Director did
not act honestly and in good faith with a view to the best interests of GlobeNet
or that, in the case of a criminal or administrative action or proceeding that
is enforced by a monetary penalty, the GlobeNet Director did not have reasonable
grounds for believing that his conduct was lawful.
4. If approval of any court is required in respect of any indemnification
of the GlobeNet Director by GlobeNet, then GlobeNet shall promptly make
application for approval of such court to indemnify the GlobeNet Director, his
heirs and legal representatives, against all costs, charges, liability, damages,
and expenses reasonably incurred by him/her in connection with such action if:
(a) the GlobeNet Director acted honestly and in good faith with a view to the
best interests of GlobeNet; and (b) in the case of a criminal or administrative
action or
Page 1 of 3
<PAGE>
proceeding that is enforced by a monetary penalty, the GlobeNet Director had
reasonable grounds for believing that his/her conduct was lawful.
5. Subject as hereinafter provided, GlobeNet shall pay all amounts
covered by this Agreement and incurred or reasonably likely to be incurred, by
the GlobeNet Director, his heirs and legal representatives, in defending any
civil, criminal or administrative action or proceeding to which the GlobeNet
Director or his heirs and legal representatives are made a party by reason of,
or in any connection with, the GlobeNet Director being or having been a director
of GlobeNet in advance of such action or proceeding. In respect of any such
action or proceeding, including an action by or on behalf of GlobeNet to procure
judgment in its favour and in respect of which GlobeNet is obligated to make
application for approval of the court to indemnify the GlobeNet Director, or his
heirs and legal representatives, GlobeNet shall pay all such amounts in advance
of such action or proceeding only upon receipt of an undertaking satisfactory to
GlobeNet by or on behalf of the GlobeNet Director, or his heirs and legal
representatives, to repay such amount if the court determines that the GlobeNet
Director, or his heirs and legal representatives, is not entitled to be
indemnified.
6. The GlobeNet Director shall not have any right to indemnification
hereunder in respect of any settlement of any civil, criminal or administrative
action or proceeding without GlobeNet's consent to such settlement, such consent
not to be unreasonably withheld.
7. This Agreement shall not operate to abridge, limit, restrict, or
exclude any other defences or rights, in law or in equity, to which the GlobeNet
Director may be entitled by operation of law or under any statute, bye-law of
GlobeNet, agreement, vote of shareholders of GlobeNet, vote of disinterested
directors of GlobeNet, or otherwise.
8. This Agreement shall be deemed to have been made in and shall be
construed in accordance with the laws of Bermuda applicable therein, and the
parties hereby agree that any claims, disputes or questions arising out of or in
relation to this Agreement may be submitted to the jurisdiction of the courts of
Bermuda. Each of the parties hereto irrevocably attorns to the non-exclusive
jurisdiction of the courts of Bermuda.
9. This Agreement and the benefit and obligation of all covenants herein
contained shall enure to the benefit of and be binding upon the heirs,
executors, administrators, legal personal representatives and successors and
assigns of each of the parties hereto.
10. This Agreement shall continue until and terminate upon the later of:
(a) fifteen (15) years after the date that the GlobeNet Director shall have
ceased to serve as a director of GlobeNet; or (b) the final termination of all
pending proceedings in respect of which the GlobeNet Director is granted rights
of indemnification or advancement of expenses. This Agreement shall be binding
upon GlobeNet and its successors and assigns and shall inure to the benefit of
the GlobeNet Director and his heirs, executors and administrators.
Page 2 of 3
<PAGE>
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.
SIGNED, SEALED & DELIVERED )
in the presence of )
)
) JORGE L. ESCALONA
) ------------------
(Witness) ) Jorge L. Escalona
)
(Name) )
GLOBENET COMMUNICATIONS
GROUP LIMITED
By: LIN GENTEMANN(seal)
-------------
Name: Lin Gentemann
Title Corporate Secretary
Page 3 of 3
<PAGE>
Exhibit 10.5
------------
INDEMNITY AGREEMENT
-------------------
This Agreement is made as of and effective the 1st day of March, 2000
("Agreement"), by and between GlobeNet Communications Group Limited, a Bermuda
corporation ("Company"), and Jorge L. Escalona of Morristown, New Jersey, USA
("Indemnitee"):
RECITALS:
--------
A. Highly competent persons are becoming more reluctant to serve publicly-
held corporations as officers, counsel or other key employees or in other
capacities unless they are provided with adequate protection through insurance
or adequate indemnification against inordinate risks of claims and actions
against them arising out of their service to and activities on behalf of the
corporation.
B. The increasing difficulties of obtaining adequate insurance and the
uncertainties relating to indemnification may impair the ability of the Company
to continue to attract and retain such persons.
C. The Board of Directors of the Company (the "Board") has determined that
the potential inability to attract and retain such persons is detrimental to the
best interest of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future.
D. It is reasonable, prudent and necessary for the Company contractually
to obligate itself to indemnify such persons to the fullest extent permitted by
the Company's Bye-Laws and the Companies Act 1981 of Bermuda, so that they will
serve or continue to serve the Company free from undue concern that they will
not be so indemnified.
E. Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that he be
so indemnified.
AGREEMENT:
---------
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Services by Indemnitee. Indemnitee agrees to serve as an officer,
----------------------
employee, agent or fiduciary of the Company and/or an affiliate thereof, and may
at the request of the Company, agree to serve as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust or
other enterprise. Indemnitee may at any time and for any reason resign from such
position (subject to any other contractual obligation or any obligation imposed
by operation of law), in which event the Company shall have no obligation under
this Agreement to continue Indemnitee in any such position.
<PAGE>
2. Indemnification - General. The Company shall indemnify and advance
-------------------------
Expenses (as hereinafter defined) to Indemnitee as provided in this Agreement
and to the fullest extent permitted by the Company's Bye-Laws and the Companies
Act 1981 of Bermuda in effect on the date hereof and to such greater extent as
applicable law may thereafter from time to time permit. The rights of Indemnitee
provided under the preceding sentence shall include, but shall not be limited
to, the rights set forth in the other Sections of the Agreement. This Agreement
shall also apply to any claims brought against the Indemnitee which antedate the
date hereof, so long as Indemnitee was serving in a Corporate Status (as
hereinafter defined) with respect to any such claims.
3. Proceedings Other Than Proceedings by or in the Right of the Company.
--------------------------------------------------------------------
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 3 if, by reason of his Corporate Status, he is, or is threatened to be
made, a party to any threatened, pending, or completed Proceeding (as
hereinafter defined), other than a Proceeding by or in the right of the Company.
Pursuant to this Section 3, Indemnitee shall be indemnified against Expenses,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with such Proceeding
or any claim, issue or matter therein, if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal Proceeding, had no reasonable cause
to believe his conduct was unlawful.
4. Proceeding by or in the Right of the Company. Indemnitee shall be
--------------------------------------------
entitled to the rights of indemnification provided in this Section 4 if, by
reason of his Corporate Status, he is, or is threatened to be made, a party to
any threatened, pending or completed Proceeding brought by or in the right of
the Company to procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified against Expenses, judgments, penalties, fines
and amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such Proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company. Notwithstanding the foregoing, no indemnification against such
Expenses and against judgments, penalties, fines and amounts paid in settlement
shall be made in respect of any claim, issue or matter in any such Proceeding as
to which Indemnitee shall have been adjudged to be liable to the Company if
applicable law prohibits such indemnification; provided, however, that, if
applicable law so permits, indemnification against Expenses shall nevertheless
be made by the Company in such event if and only to the extent that the court in
which such Proceeding shall have been brought or is pending, shall determine.
5. Indemnification for Expenses of a Party Who is Wholly or Partly
---------------------------------------------------------------
Successful. Notwithstanding any other provision of this Agreement, to the extent
- ----------
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against all Expenses actually and reasonably incurred by him or on
his behalf in connection therewith. If Indemnitee is not wholly successful in
such Proceeding but is successful, on the merits or otherwise, as to one or more
but less than all claims, issues or matters in such Proceeding, the Company
shall indemnify Indemnitee against all Expenses actually and reasonably incurred
by him or on his behalf in connection with each successfully resolved claim,
issue or matter. If Indemnitee is not successful with respect to a claim, issue
or matter, Indemnitee's right to indemnification for Expenses with regard to
such claim, issue or matter shall be governed by Sections 3 and 4 of this
Agreement. For purposes of this Section and without limitation, the
2
<PAGE>
termination of any claim, issue or matter in such a Proceeding by dismissal,
with or without prejudice, shall be deemed to be a successful result as to such
claim, issue or matter.
6. Indemnification for Expenses of a Witness. Notwithstanding any other
-----------------------------------------
provision of this Agreement, to the extent that Indemnitee is or is threatened
to be made, by reason of his Corporate Status, a witness in any Proceeding, he
shall be indemnified against all Expenses actually and reasonably incurred by
him or on his behalf in connection therewith.
7. Advancement of Expenses. The Company shall advance all reasonable
-----------------------
Expenses incurred by or on behalf of Indemnitee in connection with any
Proceeding within twenty days after the receipt by the Company of a statement or
statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statements shall reasonably evidence the Expenses incurred by Indemnitee and
shall include or be preceded or accompanied by an undertaking by or on behalf of
Indemnitee to repay any Expenses advanced if it shall ultimately be determined
that Indemnitee is not entitled to be indemnified against such Expenses.
8. Procedure for Determination of Entitlement to Indemnification.
-------------------------------------------------------------
(a) To obtain indemnification against this Agreement, Indemnitee
shall submit to the Company a written request, including therein or therewith
such documentation and information as is reasonably available to Indemnitee and
is reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board of Directors in
writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant
to the first sentence of Section 8(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case: (i) if a Change in Control (as hereinafter defined) shall
have occurred, by Independent Counsel (as hereinafter defined) (unless
Indemnitee shall request that such determination be made by the Board of
Directors or the stockholders, in which case by the person or persons or in the
manner provided for in clauses (ii) or (iii) of this Section 8(b)) in a written
opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee; (ii) if a Change of Control shall not have occurred, (A) by the
Board of Directors by a majority vote of a quorum consisting of Disinterested
Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or, even if obtainable,
if such quorum of Disinterested Directors so directs, by Independent Counsel in
a written opinion to the Board of Directors, a copy of which shall be delivered
to Indemnitee or (C) by the stockholders of the Company; or (iii) as provided in
Section 9(b) of this Agreement; and, if it is so determined that Indemnitee is
entitled to indemnification, payment to Indemnitee shall be made within ten (10)
days after such determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person, persons or
entity upon reasonable advance request any documentation or information which is
not privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with the person, persons or entity making
3
<PAGE>
such determination shall be borne by the Company (irrespective of the
determination as to Indemnitee's entitlement to indemnification) and the Company
hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 8(b) hereof, the
Independent Counsel shall be selected as provided in this Section 8(c). If a
Change of Control shall not have occurred, the Independent Counsel shall be
selected by the Board of Directors, and the Company shall give written notice to
Indemnitee advising her of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent Counsel shall be
selected by Indemnitee (unless Indemnitee shall request that such selection be
made by the Board of Directors, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the Company advising it of
the identity of the Independent Counsel so selected. In either event, Indemnitee
or the Company, as the case may be, may, within seven (7) days after such
written notice of selection shall have been given, deliver to the Company or to
Indemnitee, as the case may be, a written objection to such selection. Such
objection may be asserted only on the ground that the Independent Counsel so
selected does not meet the requirements of "Independent Counsel" as defined in
Section 17 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
made, the Independent Counsel so selected may not serve as Independent Counsel
unless and until a court has determined that such objection is without merit.
If, within twenty (20) days after submission by Indemnitee of a written request
for indemnification pursuant to Section 8(a) hereof, no Independent Counsel
shall have been selected and not objected to, either the Company or Indemnitee
may petition the court of competent jurisdiction for resolution of any objection
which shall have been made by the Company or Indemnitee to the other's selection
of Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the Court or by such other person as the Court shall
designate, and the person with respect to whom an objection is so resolved or
the person so appointed shall act as Independent Counsel under Section 8(b)
hereof. The Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to Section 8(b) hereof, and the Company shall pay all reasonable
fees and expenses incident to the procedures of this Section 8(c), regardless of
the manner in which such Independent Counsel was selected or appointed. Upon the
due commencement of any judicial proceeding or arbitration pursuant to Section
10(a)(iii) of this Agreement, Independent Counsel shall be discharged and
relieved of any further responsibility in such capacity (subject to the
applicable standards of professional conduct then prevailing).
9. Presumptions and Effect of Certain Proceedings.
----------------------------------------------
(a) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person, persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 8(a) of this
Agreement, and the Company shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
4
<PAGE>
(b) If the person, persons or entity empowered or selected under
Section 8 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within sixty (60) days after
receipt by the Company of the request therefor, then requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law; provided, however, that such sixty (60) day period may be
extended for a reasonable time, not to exceed an additional thirty (30) days, if
the person, persons or entity making the determination with respect to
entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating of documentation and/or information relating
thereto; and provided, further, that the foregoing provisions of this Section
9(b) shall not apply (i) if the determination of entitlement to indemnification
is to be made by the stockholders pursuant to Section 8(b) of this Agreement and
if (A) within fifteen (15) days after receipt by the Company of the request for
such determination the Board of Directors has resolved to submit such
determination to the stockholders for their consideration at an annual meeting
thereof to be held within seventy-five (75) days after such receipt and such
determination is made at such meeting, or (B) a special meeting of stockholders
is called within fifteen (15) days after such receipt for the purpose of making
such determination, such meeting is held for such purpose within sixty (60) days
after having been so called and such determination is made at such meeting, or
(ii) if the determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 8(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
10. Remedies of Indemnitee.
----------------------
(a) In the event that (i) a determination is made pursuant to Section
8 of this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 7 of this Agreement, (iii) the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 8(b) of
this Agreement and such determination shall not have been made and delivered in
a written opinion within ninety (90) days after receipt by the Company of the
request for indemnification, or (iv) payment of indemnification is not made
pursuant to Section 6 of this Agreement within ten (10) days after receipt by
the Company of a written request therefor, or (v) payment of indemnification is
not made within ten (10) days after a determination has been made that
Indemnitee is entitled to indemnification or such determination is deemed to
have been made pursuant to Section 8 or 9 of this Agreement, Indemnitee shall be
entitled to an adjudication in an appropriate court in Bermuda, or in any other
court of competent jurisdiction, of his entitlement to such indemnification or
advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an
award in arbitration to be conducted by a single arbitrator in Hamilton, Bermuda
pursuant to the Commercial Arbitration
5
<PAGE>
Rules of the American Arbitration Association. Indemnitee shall commence such
proceeding seeking an adjudication or an award in arbitration within one hundred
eighty (180) days following the date on which Indemnitee first has the right to
commence such proceeding pursuant to this Section 10(a). The Company shall not
oppose Indemnitee's right to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made pursuant
to Section 8 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 10 shall be conducted in all respects as a de novo trial, or
arbitration, on the merits that Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have occurred, in any
judicial proceeding or arbitration commenced pursuant to this Section 10, the
Company shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have been
made pursuant to Section 8 or 9 of this Agreement that Indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to this Section 10, absent
(i) a misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not materially
misleading, in connection with the request for indemnification, or (ii) a
prohibition of such indemnification under applicable law.
(d) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 10 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in any such court or before any such arbitrator
that the Company is bound by all the provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 10, seeks
a judicial adjudication of or an award in arbitration to enforce her rights
under, or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 17 of this Agreement) actually and reasonably incurred by
her in such judicial adjudication or arbitration, but only if he prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated.
11. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.
-----------------------------------------------------------
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Company's Memorandum of Association, Bye-Laws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal.
6
<PAGE>
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees,
agents or fiduciaries of the Company or of any other corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise which such
person serves at the request of the Company, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the maximum extent
of the coverage available for any such director, officer, employee or agent
under such policy or policies.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
12. Duration of Agreement. This Agreement shall continue until and
---------------------
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as an officer, employee, agent or fiduciary of the
Company or a director, officer, employee, agent or fiduciary of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which Indemnitee served at the request of the Company; or (b) the
final termination of all pending Proceedings in respect of which Indemnitee is
granted rights of indemnification or advancement of expenses hereunder and of
any Proceeding commenced by Indemnitee pursuant to Section 10 of this Agreement
relating thereto. This Agreement shall be binding upon the Company and its
successors and assigns and shall inure to the benefit of Indemnitee and his
heirs, executors and administrators.
13. Severability. If any provision or provisions of this Agreement shall
------------
be held to be invalid, illegal or unenforceable for any reason whatsoever: (a)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
14. Exception to Right of Indemnification or Advancement of Expenses.
----------------------------------------------------------------
Notwithstanding any other provision of this Agreement, Indemnitee shall not be
entitled to indemnification or advancement of Expenses under this Agreement with
respect to any Proceeding, or any claim therein, brought or made by him against
the Company.
15. Identical Counterparts. This Agreement may be executed in one or more
----------------------
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs
to be produced to evidence the existence of this Agreement.
7
<PAGE>
16. Headings. The headings of the paragraphs of this Agreement are
--------
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to effect the construction hereof.
17. Definitions. For purposes of this Agreement:
-----------
(a) "Change in Control" means a change in control of the Company
occurring after the Effective Date of a nature would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to
any similar item on any similar schedule or form) promulgated under the
Securities Exchange Act of 1934 (the "Act"), whether or not the Company is then
subject to such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have occurred if after
the Effective Date (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Act) is or becomes the "beneficial owner" (as defined in rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities without the prior approval of at least two-thirds of the
members of the Board of Directors in office immediately prior to such person
attaining such percentage interest; (ii) the Company is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy contest, as a
consequence of which members of the Board of Directors in office immediately
prior to such transaction or event constitute less than a majority of the Board
of Directors thereafter; or (iii) during any period of two (2) consecutive
years, individuals who at the beginning of such period constituted the Board of
Directors (including for this purpose any new director whose election or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were directors at
the beginning of such period) cease for any reason to constitute a majority of
the Board of Directors.
(b) "Corporate Status" describes the status of a person who is or was
an officer, employee, agent or fiduciary of the Company or a director, officer,
employee, agent or fiduciary of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which such person is
or was serving at the request of the Company.
(c) "Disinterested Director" means a director of the Company who is
not and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(d) "Effective Date" means the date of this Agreement.
(e) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of expert, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness in
a Proceeding.
(f) "Independent Counsel" means a law firm, or a member of a law
firm, that is experienced in matters of corporation law and neither presently
is, nor in the past five (5) years has been, retained to represent: (i) the
Company or Indemnitee in any matter material to either such party, or (ii) any
other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who,
8
<PAGE>
under the applicable standards of professional conduct then prevailing, would
have a conflict of interest in representing either the Company or Indemnitee in
an action to determine Indemnitee's rights under this Agreement.
(g) "Proceeding" includes any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee pursuant to Section 10 of this Agreement to enforce
his rights under this Agreement.
18. Modification and Waiver. No supplement, modification or amendment of
-----------------------
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
19. Notice of Indemnitee. Indemnitee agrees promptly to notify the
--------------------
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder.
20. Notices. All notices, requests, demands and other communications
-------
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed:
(a) If to Indemnitee, to: Jorge L. Escalona
54 Skyline Drive
Morristown, New Jersey 07960
(b) If to the Company, to: GlobeNet Communications Group Limited
2 Carter's Bay Road
Southside, St. David's DD02
Bermuda
Attn: Chief Executive Officer
cc: General Counsel
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
21. Governing Law. The parties agree that this Agreement shall be
-------------
governed by, and construed and enforced in accordance with, the laws of Bermuda.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
SIGNED, SEALED & DELIVERED:
By: JORGE L. ESCALONA
-----------------
Jorge L. Escalona
GLOBENET COMMUNICATIONS
GROUP LIMITED
LIN GENTEMANN
- -------------
Name: Lin Gentemann
Title: Corporate Secretary
10
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<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31,
2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
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<SECURITIES> 0
<RECEIVABLES> 2,645
<ALLOWANCES> 224
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<CURRENT-ASSETS> 83,954
<PP&E> 197,299
<DEPRECIATION> 6,194
<TOTAL-ASSETS> 658,377
<CURRENT-LIABILITIES> 16,329
<BONDS> 400,000
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<COMMON> 25,566
<OTHER-SE> 210,091
<TOTAL-LIABILITY-AND-EQUITY> 658,377
<SALES> 0
<TOTAL-REVENUES> 6,423
<CGS> 0
<TOTAL-COSTS> 2,449
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<LOSS-PROVISION> 27
<INTEREST-EXPENSE> 9,608
<INCOME-PRETAX> (8,732)
<INCOME-TAX> 26
<INCOME-CONTINUING> (8,758)
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