As filed with the Securities and Exchange Commission on May 16, 2000
Registration No. 333-94803
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GLOBAL CROSSING LTD.
(Exact name of registrant as specified in its charter)
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Bermuda 4813 98-0189783
(State or other (Primary standard industrial (I.R.S. employer
jurisdiction of classification number) identification
incorporation or number)
organization)
Wessex House
45 Reid Street
Hamilton HM12, Bermuda
(441) 296-8600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
CT Corporation System
1633 Broadway
New York, NY 10019
(212) 479-8200
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:
D. RHETT BRANDON, ESQ. JAMES C. GORTON, ESQ.
Simpson Thacher & Bartlett Global Crossing Ltd.
425 Lexington Avenue 360 N. Crescent Drive
New York, NY 10017 Beverly Hills, CA 90210
(212) 455-2000 (310) 385-5200
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which shall specifically state that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said Section 8(a), may determine.
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EXPLANATORY NOTE
This Post-Effective Amendment No. 1 to Registration Statement on Form S-3
includes a prospectus supplement, which amends and supplements the prospectus
dated March 30, 2000 of Global Crossing Ltd. also included herein.
The information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer is not permitted.
Subject to completion dated May 16, 2000
PROSPECTUS SUPPLEMENT
(To prospectus dated March 30, 2000)
[LOGO] Global Crossing ltd.
2,600,000 Shares of 7% Cumulative Convertible Preferred Stock
and
15,800,000 Shares of Common Stock
-----------
We issued the preferred stock in a private placement in December 1999. The
shares of preferred stock have been subject to important transfer restrictions
described in the offering memorandum that we used in that private placement.
This prospectus supplement and the prospectus that is also part of this
document are each part of a registration statement that registers under the
Securities Act the following securities to make them all freely tradeable:
. the shares of preferred stock of the holders named on pages S-2 and S-3 of
this prospectus supplement and pages 58 through 60 of the related
prospectus;
. the shares of common stock into which the shares of preferred stock may be
converted or exchanged; and
. the shares of common stock that we may use to pay dividends on the shares
of preferred stock.
In particular:
. The holders of our preferred stock named on pages S-2 and S-3 of this
prospectus supplement and pages 58 through 60 of the related prospectus
should deliver this prospectus supplement and the related prospectus when
they offer or sell their shares. Buyers who purchase from them will
receive freely tradeable stock.
. We will deliver this prospectus supplement and the related prospectus when
any holder of preferred stock converts shares of preferred stock into
shares of our common stock, so that this common stock is freely tradeable.
. We will deliver this prospectus supplement and the related prospectus in
connection with resales of shares of common stock that we may issue to pay
cash dividends on the shares of preferred stock, so that this common stock
is freely tradeable.
Our common stock trades on the Nasdaq National Market and the Bermuda Stock
Exchange under the symbol "GBLX". On May 15, 2000, the closing sale price of
our common stock on the Nasdaq National Market was $33 3/4 per share. We do not
intend to list our preferred stock on any exchange or on Nasdaq.
-----------
Investing in our preferred stock and common stock involves risks, which we
describe in the "Risk Factors" section beginning on page 23 of the prospectus
that is also part of this document.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
-----------
The date of this prospectus supplement is May 16, 2000.
SELLING SHAREHOLDERS
We originally issued and sold the shares of preferred stock in December 1999
to Salomon Smith Barney Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Goldman, Sachs & Co., Chase Securities Inc., Morgan Stanley Dean
Witter & Co., CIBC World Markets Corp., Donaldson, Lufkin & Jenrette Securities
Corporation and Credit Suisse First Boston Corporation in a private placement.
These initial purchasers then resold the shares of preferred stock in
transactions exempt from the registration requirements of the Securities Act in
the United States to qualified institutional buyers within the meaning of Rule
144A under the Securities Act.
The selling shareholders listed below may, under this prospectus supplement
and the related prospectus dated March 30, 2000, from time to time offer and
sell the number of shares of preferred stock listed below opposite their names
and the number of shares of common stock into which their shares of preferred
stock may be converted also listed below opposite their names. To the extent a
selling shareholder has been listed below and has also been listed in the
related prospectus dated March 30, 2000, the information contained herein shall
replace the information listed in the prospectus dated March 30, 2000.
Number of Shares Number of Shares
Selling Shareholders of Preferred Stock of Common Stock
- -------------------- ------------------ ----------------
Abbott Laboratories Annuity Retirement
Plan...................................... 200 938.96
Aloha Airlines Non-Pilots Pension Trust... 875 4,107.95
Aloha Airlines Pilots Retirement Trust.... 500 2,347.40
Ameritech Pension Trust................... 300 1,408.44
C & H Sugar Company, Inc.................. 1,350 6,337.98
Canal Insurance Company................... 4,000 18,779.20
Dolphin Limited Partnership I............. 5,000 23,474.00
Forest Alternative Strategies Fund II L.P.
Series A 5 M.............................. 600 2,816.88
Forest Convertible Fund................... 250 1,173.70
Forest Fulcrum Fund LP.................... 7,900 37,088.92
Forest Global Convertible Fund Series A
5......................................... 35,065 164,623.16
Forest Performance Fund LP................ 1,190 5,586.81
Goldman Sachs and Company................. 4,197 19,704.08
Hawaiian Airlines Employees Pension Plan
for Salaried Employees.................... 200 938.96
Hawaiian Airlines Employees Pension Plan--
IAM....................................... 750 3,521.10
Hawaiian Airlines Pilots Retirement Plan.. 1,150 5,399.02
The Income Fund of America, Inc........... 95,000 446,006.00
Lincoln National Convertible Securities
Fund...................................... 18,000 84,506.40
LLT Limited............................... 1,750 8,215.90
Lyxer Master Fund......................... 2,000 9,389.60
Northrop Grumman Corporation.............. 300 1,408.44
Paloma Securities LLC..................... 4,000 18,779.20
Paloma Strategic Securities Limited....... 4,000 18,779.20
Pell Rudman Trust Company................. 4,500 21,126.60
Putnam Convertible Income Growth Trust.... 50,000 234,740.00
Putnam Funds Trust--Putnam High Yield
Trust II.................................. 6,500 30,516.20
Putnam High Yield Advantage Fund.......... 12,800 60,093.44
Putnam High Yield Trust................... 15,600 73,238.88
Putnam Variable Trust--Putnam VT High
Yield Fund................................ 4,300 20,187.64
Queen's Health Plan....................... 300 1,408.44
RBC Capital Services...................... 250 1,173.70
Salomon Smith Barney Inc.................. 54,375 255,279.75
State of Oregon/SAIF Corporation.......... 40,000 187,792.00
SunAmerica Diversified Income Fund........ 1,250 5,868.50
SunAmerica High Income Fund............... 2,600 12,206.48
SunAmerica Seasons Series Trust
Diversified Income Fund................... 150 704.22
S-2
Number of Shares Number of Shares
Selling Shareholders of Preferred Stock of Common Stock
- -------------------- ------------------ ----------------
SunAmerica Series Trust High Yield Bond
Portfolio................................. 4,000 18,779.20
Sunrise Partners LLC...................... 25,000 117,370.00
Sylvan IMA LTD............................ 4,500 21,126.60
Tennessee Consolidated Retirement System.. 40,000 187,792.00
Triton Capital Investments Ltd............ 5,000 23,474.00
The TWC Group, Inc........................ 54,985 258,143.58
Warburg Dillon Read LLC................... 400 1,877.92
Zurich HFR Master Hedge Fund Index LTD.... 110 516.43
S-3
PROSPECTUS
[LOGO] Global Crossing ltd.
2,600,000 Shares of 7% Cumulative Convertible Preferred Stock
and
15,800,000 Shares of Common Stock
----------------
We issued the preferred stock in a private placement in December 1999. The
shares of preferred stock have been subject to important transfer restrictions
described in the offering memorandum that we used in that private placement.
This prospectus is part of a registration statement that registers under the
Securities Act the following securities to make them all freely tradeable:
. the shares of preferred stock of the holders named on pages 58 through
60;
. the shares of common stock into which the shares of preferred stock may
be converted or exchanged; and
. the shares of common stock that we may use to pay dividends on the
shares of preferred stock.
In particular:
. The holders of our preferred stock named on pages 58 through 60 should
deliver this prospectus when they offer or sell their shares. Buyers who
purchase from them will receive freely tradeable stock.
. We will deliver this prospectus when any holder of preferred stock
converts shares of preferred stock into shares of our common stock, so
that this common stock is freely tradeable.
. We will deliver this prospectus in connection with resales of shares of
common stock that we may issue to pay cash dividends on the shares of
preferred stock, so that this common stock is freely tradeable.
Our common stock trades on the Nasdaq National Market and the Bermuda Stock
Exchange under the symbol "GBLX". On March 30, 2000, the closing sale price of
our common stock on the Nasdaq National Market was $43 5/16 per share. We do
not intend to list our preferred stock on any exchange or on Nasdaq.
----------------
Investing in our preferred stock and common stock involves risks, which we
describe in the "Risk Factors" section beginning on page 23 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
----------------
The date of this prospectus is March 30, 2000.
You should rely only on the information contained or incorporated by
reference in this prospectus and any prospectus supplement. We have not
authorized anyone to provide you with different information. We are not making
an offer to sell these securities in any state where the offer is not
permitted. You should not assume that the information contained in this
prospectus or any prospectus supplement is accurate as of any date other than
the date on the front cover of those documents.
TABLE OF CONTENTS
Page
----
Where You Can Find More Information........................................ ii
Incorporation by Reference................................................. ii
Summary.................................................................... 1
Risk Factors............................................................... 23
Cautionary Statement Regarding Forward-Looking Statements.................. 33
Use of Proceeds............................................................ 33
Ratio of Earnings to Fixed Charges and Preferred Dividends................. 34
Dividend Policy............................................................ 34
Dilution................................................................... 34
Description of the Preferred Stock......................................... 35
Book-Entry Procedures and Settlement....................................... 47
Description of the Common Stock............................................ 49
Certain Income Tax Consequences............................................ 51
Selling Shareholders....................................................... 58
Plan of Distribution....................................................... 61
Legal Matters.............................................................. 63
Experts.................................................................... 63
Service of Process and Enforcement of Liabilities.......................... 63
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The Bermuda Monetary Authority has given its consent to the issue and the
transfer of the shares of preferred stock and common stock covered by this
prospectus. Approvals or permissions received from the Bermuda Monetary
Authority do not constitute a guaranty by the Bermuda Monetary Authority as to
our performance or our credit worthiness. Accordingly, in giving those
approvals or permissions, the Bermuda Monetary Authority will not be liable for
our performance or default or for the correctness of any opinions or statements
expressed in this document.
The Bermuda Monetary Authority has classified us as non-resident in Bermuda
for exchange control purposes. Accordingly, we may convert currency, other than
Bermuda currency, held for our account to any other currency without
restriction. Persons, firms or companies regarded as residents of Bermuda for
exchange control purposes require specific consent under the Exchange Control
Act, 1972 of Bermuda, and regulations promulgated under that Act, to purchase
any shares in our capital stock or any debt securities that we may issue. Under
the terms of the consent given to us by the Bermuda Monetary Authority, the
issuance and transfer of the shares of preferred stock and common stock covered
by this prospectus between persons, firms or companies regarded as non-resident
in Bermuda for exchange control purposes may be effected without further
permission from the Bermuda Monetary Authority.
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i
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC. You
may read and copy these reports, proxy statements and other information at the
public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the SEC's regional offices located
at 7 World Trade Center, 13th floor, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You may also obtain copies
of those materials at prescribed rates from the public reference section of the
SEC at 450 Fifth Street, Washington, D.C. 20549. You may obtain copies from the
public reference room by calling the SEC at (800) 732-0330. In addition, we are
required to file electronic versions of those materials with the SEC through
the SEC's EDGAR system. The SEC maintains a web site at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. You may also
review reports and other information concerning us at the offices of the
National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20001-1500.
You may also request a copy of those materials, free of cost, by writing or
telephoning us at the following address:
Investor Relations
Global Crossing Ltd.
360 N. Crescent Drive
Beverly Hills, CA 90210
310-385-5200
INCORPORATION BY REFERENCE
The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by
referring you to those documents. We incorporate by reference in this
prospectus the information contained in the following documents:
. our annual report on Form 10-K for the fiscal year ended December 31,
1999;
. our current reports on Form 8-K filed on January 11, 2000, as amended by
Form 8-K/A filed on January 19, 2000; February 18, 2000; March 2, 2000;
and March 3, 2000;
. the financial statements of Frontier Corporation and the Global Marine
Systems business of Cable & Wireless Plc incorporated by reference or
included in our registration statement on Form S-4 (File No. 333-86693),
filed with the SEC on September 8, 1999; and
. all documents that we file with the SEC under Sections 13(a), 13(c), 14
or 15 of the Securities Exchange Act of 1934 until all the shares of
preferred stock which this prospectus covers are sold and all shares of
common stock that we may issue under this prospectus are sold.
You may obtain copies of those documents from us, free of cost, by
contacting us at the address or telephone number provided in "Where You Can
Find More Information" immediately above.
Information that we file later with the SEC and that is incorporated by
reference in this prospectus will automatically update and supersede
information contained in this prospectus. You will be deemed to have notice of
all information incorporated by reference in this prospectus as if that
information was included in this prospectus.
ii
SUMMARY
This section contains a general summary of the information contained in this
prospectus. It may not include all the information that is important to you.
You should read the entire prospectus, any accompanying prospectus supplement
and the documents incorporated by reference before making an investment
decision.
Global Crossing Ltd.
We are building and offering services over the world's first integrated
global fiber optic network, consisting of 101,000 announced route miles and
serving five continents, 27 countries and more than 200 major cities. Upon
completion of our currently announced systems, our network and its
telecommunications and Internet product offerings will be available in markets
constituting over 80% of the world's international communications traffic.
We are included in both the S&P 500 index and the Nasdaq 100 index. Our
operations are headquartered in Hamilton, Bermuda, with executive offices in
Los Angeles, California; Morristown, New Jersey; and Rochester, New York.
We are incorporated in Bermuda, and the address of our principal executive
offices is Wessex House, 45 Reid Street, Hamilton HM12, Bermuda. Our telephone
number is 441-296-8600. You may visit us at our web site located at
www.globalcrossing.com.
Recent Development
On March 2, 2000, we announced plans to create a new class of common stock
that will track the performance of our complex web hosting business operated by
our wholly-owned subsidiary, GlobalCenter Inc. The creation of this new class
of common stock will be subject to shareholder approval. We expect to complete
this transaction in the summer of 2000, subject to market conditions.
About This Prospectus
Securities covered.......... This prospectus covers the offer and sale of the
following:
. up to 2,600,000 shares of preferred stock
which the shareholders named on pages 58
through 60 own;
. up to 15,000,000 shares of our common
stock which we may issue upon conversion
or exchange of the shares of preferred
stock; and
. up to 800,000 shares of our common stock
which we may issue to pay cash dividends
on the shares of preferred stock.
Terms of the Preferred Stock
Issuer...................... Global Crossing Ltd., a Bermuda company
Liquidation preference...... $250.00 per share
Dividends................... . Dividend rate: 7% of the liquidation
preference per annum on a cumulative basis
from the date of issuance
. Dividend payment dates: quarterly, on
February 1, May 1, August 1 and November 1
of each year, beginning on February 1,
2000
1
. Type of dividend: Holders will receive
cash. We will have the option to deliver
shares of our common stock to the transfer
agent for the preferred stock, which will
resell those shares of common stock and
use the proceeds to pay cash dividends to
the holders of shares of preferred stock.
Conversion.................. Each share of preferred stock may be converted,
at the option of the holder, into 4.6948 shares
of our common stock.
. Conversion price: $53.25, subject to
adjustment in a number of circumstances
described under "Description of the
Preferred Stock--Adjustments to the
Conversion Price" on page 41
The right to convert shares that have been called
for redemption will terminate on the close of
business on the business day immediately
preceding the redemption day.
Non-mandatory redemption.... We may redeem for cash all or any part of the
shares of preferred stock in the following cases:
1.Optional redemption:
. Redemption period: at any time after
December 15, 2004, at our option
. Redemption price: 103.5% of the
liquidation preference if we redeem the
shares in 2004, and thereafter this
percentage gradually declines to 100%
on and after December 15, 2009, plus
accumulated and unpaid dividends to the
redemption date
2.Tax redemption:
. Redemption period: at any time, at our
option, if we are required to pay
additional amounts to the holders of
the shares of preferred stock to offset
specified adverse tax consequences
resulting from a change in applicable
laws or regulations
. Redemption price: 100% of the
liquidation preference, plus accrued
and unpaid dividends to the redemption
date
Mandatory redemption........ None
Change in control put If we become subject to a change in control, each
right....................... holder of shares of preferred stock will have the
right to require us to purchase any or all of the
shares of that holder at a purchase price in cash
equal to 100% of the liquidation preference, plus
accumulated and unpaid dividends to the date of
purchase. This right of holders will be
2
subject to our obligation to offer to repay a
substantial portion of our own and our
subsidiaries' indebtedness and offer to redeem
outstanding shares of a series of preferred stock
of a subsidiary that are tendered for redemption
in connection with a change in control of Global
Crossing. When we have satisfied these
obligations and, subject to the legal
availability of funds for this purpose, we will
purchase all shares tendered upon a change in
control.
Voting rights...............
The holders of preferred stock will not be
entitled to any voting rights, except:
. as required by law;
. to approve amendments to the certificate
of designations of the preferred stock
which would adversely affect, alter or
change the powers, preferences or special
rights of the preferred stock; and
. if six quarterly dividends on the shares
of preferred stock are accrued and unpaid,
the holders of shares of preferred stock,
voting as a single class with holders of
other series of preferred stock that rank
equally or senior to the preferred stock
and have similar voting rights, will be
entitled to elect at the next annual
shareholder meeting two directors on our
board to serve until all accumulated and
unpaid dividends have been paid or
declared and funds have been set aside for
their payment.
Registration rights......... We have agreed for the benefit of the holders of
preferred stock that we will maintain a shelf
registration statement continuously effective
under the Securities Act for a period of up to
two years after the shelf registration statement
first becomes effective or for a shorter period
if all restricted securities traded under the
shelf registration statement have been sold.
If we do not satisfy these obligations, we will
be required to pay liquidated damages.
Ranking.....................
The preferred stock will be, with respect to
dividend rights and upon liquidation, winding up
or dissolution:
. junior to all our existing and future debt
obligations;
. junior to each other class or series of
our capital stock other than (a) our
common stock and any other class or series
of our capital stock the terms of which
provide that that class or series will
rank junior to the preferred stock and (b)
any other class or series of our capital
stock the terms of which provide that that
class or series will rank on a parity with
the preferred stock;
. on a parity with each class or series of
our capital stock the terms of which
provide that that class or series will
rank on a parity with the preferred stock,
including
3
(a) $1.0 billion of our 6 3/8% cumulative
convertible preferred stock which we
issued in a private placement on November
5, 1999 and (b) $400 million of our 6 3/8%
cumulative convertible preferred stock,
series B, which we issued to Hutchison
Whampoa Limited upon completion of the
transaction described in the second
paragraph under "-- Selected historical
financial information" on page 5; and
. senior to our common stock and any other
class or series of our capital stock the
terms of which provide that that class or
series will rank junior to the preferred
stock.
Use of proceeds.............
We will not receive any proceeds from sales of
securities under this prospectus.
Trading..................... Our common stock currently trades on the Nasdaq
National Market and the Bermuda Stock Exchange
under the symbol "GBLX". We have not applied and
do not intend to apply for the listing of the
preferred stock on any securities exchange.
4
Selected historical financial information
We acquired Global Marine Systems on July 2, 1999 and Frontier on September
28, 1999.
On November 24, 1999, we formed, together with Softbank Corp. and Microsoft
Corporation, a new joint venture company called Asia Global Crossing. We have
contributed to Asia Global Crossing our 57.75% ownership interest in Pacific
Crossing and our development rights in East Asia Crossing. Among other things,
each of Softbank and Microsoft contributed $175 million in cash to Asia Global
Crossing. Also on November 24, 1999, we acquired Racal Telecom, a group of
wholly-owned subsidiaries of Racal Electronics plc. On January 12, 2000, we
formed a joint venture with Hutchison Whampoa Limited, called Hutchison Global
Crossing, and issued $400 million aggregate liquidation preference of our 6
3/8% cumulative convertible preferred stock, series B, to Hutchison Whampoa.
On February 22, 2000, we announced a definitive agreement to acquire IXnet,
Inc., a leading provider of specialized IP-based network services to the global
financial services community, and its parent company, IPC Communications, Inc.,
in exchange for shares of our common stock valued at approximately $3.8
billion. Under the terms of the definitive merger agreement, 1.184 shares of
our common stock will be exchanged for each share of IXnet common stock not
owned by IPC and 5.417 shares of our common stock will be exchanged for each
share of IPC common stock. We expect the acquisition to be completed in the
second quarter of 2000. The acquisition is subject to regulatory approval and
customary closing conditions.
In the following tables, we provide selected historical financial
information for (1) Global Crossing, (2) Global Marine Systems, (3) Frontier,
(4) Racal Telecom and (5) HCL Holdings Limited, a group of wholly-owned
subsidiaries of Hutchison Whampoa which has been contributed into the Hutchison
Global Crossing joint venture. We do not provide any separate historical
financial information relating to the Asia Global Crossing joint venture, as
all relevant historical financial information is reflected in the historical
financial information of Global Crossing.
The selected historical financial information presented in the following
tables has been derived from the audited and unaudited financial statements of
Global Crossing, Global Marine Systems, Frontier, Racal Telecom and HCL
Holdings for the periods presented. This information is only a summary, and you
should read it together with the more detailed historical financial information
included or incorporated by reference in this document. For instructions on how
to obtain information incorporated by reference, see "Where You Can Find More
Information" on page ii.
Global Crossing selected historical financial information
The table below shows the selected historical financial information for
Global Crossing. This information has been prepared using the consolidated
financial statements of Global Crossing as of the dates indicated and for each
of the fiscal years in the period from inception, March 19, 1997, to December
31, 1999. The consolidated income statement data below for each of the fiscal
years in the period from inception, March 19, 1997, to December 31, 1999 and
the consolidated balance sheet data as of December 31, 1999 and 1998 have been
derived from financial statements audited by Arthur Andersen, independent
public accountants, which are incorporated by reference in this document. We
derived the remaining data from unaudited condensed consolidated financial
statements.
In reading the following selected historical financial information, please
note the following:
. The statement of operations data for the year ended December 31, 1999
includes the results of Global Marine Systems for the period from July
2, 1999, date of acquisition, through December 31, 1999; the results of
Frontier for the period from September 30, 1999, date of acquisition,
through
5
December 31, 1999; and the results of Racal Telecom for the period from
November 24, 1999; date of acquisition, through December 31, 1999. The
consolidated balance sheet as of December 31, 1999 includes amounts
related to Global Marine Systems, Frontier and Racal Telecom.
. During the year ended December 31, 1999, we recorded a $15 million
expense, net of tax benefit, due to the adoption of Statement of
Position 98-5, "Reporting on the Cost of Start-Up Activities". See the
"Cumulative effect of change in accounting principles" item in the
statement of operations data.
. During the years ended December 31, 1999 and 1998, we recognized $51
million and $39 million, respectively, of stock-related expense relating
to stock options and rights to purchase stock issued during that period
which entitle the holders to purchase common stock. See the "Stock-
related expense" item in the statement of operations data.
. On December 15, 1999, we issued 2,600,000 shares of 7% cumulative
convertible preferred stock at a liquidation preference of $250.00 for
net proceeds of $630 million. Each share of preferred stock is
convertible into 4.6948 shares of common stock based on a conversion
price of $53.25. Dividends on the preferred stock are cumulative from
the date of issue and will be payable on February 1, May 1, August 1 and
November 1 of each year, beginning on February 1, 2000, at the annual
rate of 7%.
. On November 24, 1999, we completed our acquisition of Racal Telecom, a
group of wholly owned subsidiaries of Racal Electronics plc, for
approximately $1.6 billion in cash. Racal Telecom owns one of the most
extensive fiber telecommunications networks in the United Kingdom,
consisting of approximately 4,650 route miles of fiber and reaching more
than 2,000 cities and towns.
. On November 12, 1999, our wholly owned subsidiary, Global Crossing
Holdings Ltd., issued two series of senior unsecured notes, which we
refer to in this document as the "new senior notes". The 9 1/8% senior
notes are due November 15, 2006 with a face value of $900 million, and
the 9 1/2% senior notes are due November 15, 2009 with a face value of
$1,100 million. The new senior notes are guaranteed by us. Interest will
be paid on the notes on May 15 and November 15 of each year, beginning
on May 15, 2000.
. On November 5, 1999, we issued 10,000,000 shares of 6 3/8% cumulative
convertible preferred stock at a liquidation preference of $100.00 for
net proceeds of approximately $969 million. Each share of preferred
stock is convertible into 2.2222 shares of common stock, based on a
conversion price of $45.00. Dividends on the preferred stock are
cumulative from the date of issue and will be payable on February 1, May
1, August 1 and November 1 of each year, beginning on February 1, 2000,
at the annual rate of 6 3/8%.
. On September 28, 1999, we completed the acquisition of Frontier in a
merger transaction valued at over $10 billion, with Frontier
shareholders receiving 2.05 shares of our common stock for each share of
Frontier common stock held. Frontier is one of the largest long distance
telecommunications companies in the United States and one of the leading
providers of facilities-based integrated communications and Internet
services.
. On July 2, 1999, we completed our acquisition of the Global Marine
Systems division of Cable & Wireless Plc for approximately $908 million
in cash and assumed liabilities. Global Marine Systems owns the largest
fleet of cable laying and maintenance vessels in the world and currently
services more than a third of the world's undersea cable miles.
. On May 16, 1999, we entered into a definitive agreement to merge with U
S WEST, Inc. On July 18, 1999, we and U S WEST agreed to terminate our
merger agreement, and U S WEST agreed to merge with Qwest Communications
International Inc. As a result, U S WEST paid us a termination fee of
$140 million in cash and returned 2,231,076 shares of our common stock
purchased in a related tender offer, and Qwest committed to purchase
capacity on the Global Crossing network at
6
established market unit prices for delivery over the next four years and
committed to make purchase price payments to us for this capacity of
$140 million over the next two years. During the year ended December 31,
1999, we recognized $210 million, net of merger related expenses, of
other income in connection with the termination of the U S WEST merger
agreement.
. The "Termination of advisory services agreement" item in the statements
of operations data includes a charge for the termination of the advisory
services agreement as of June 30, 1998. We acquired the rights from
those entitled to fees payable under the advisory services agreement in
consideration for the issuance of common stock having an aggregate value
of $135 million and the cancellation of approximately $3 million owed to
us under a related advance agreement. As a result of this transaction,
we recorded a non-recurring charge in the approximate amount of $138
million during the year ended December 31, 1998. In addition, we
recognized as an expense approximately $2 million of advisory fees
incurred before the termination of the contract.
. We granted warrants to Pacific Capital Group, Inc., a shareholder, and
some of its affiliates for the Pacific Crossing, Mid-Atlantic Crossing
and Pan American Crossing systems and related rights. The $275 million
value of the common stock was originally allocated to "Construction in
progress" in the amount of $112 million and as "Investment in and
advances to/from affiliates" in the amount of $163 million. See the
"property and equipment" item in the balance sheet data. The "Investment
in and advance to/from affiliates" item in the balance sheet data
includes $163 million as of December 31, 1999 and 1998, respectively,
representing the value of the warrants described in the bullet point
immediately above applicable to the Pacific Crossing system.
. Adjusted EBITDA is defined as operating income (loss), plus goodwill
amortization, depreciation and amortization, non-cash cost of capacity
sold, stock related expenses, incremental cash deferred revenue, and
amounts relating to the termination of the advisory services agreement
this definition is consistent with financial covenants contained in our
major financial agreements. This information should not be considered as
an alternative to any measure of performance as promulgated under
generally accepted accounting principles, which we refer to as "GAAP".
Our calculation of adjusted EBITDA may be different from the calculation
used by other companies and, therefore, comparability may be limited.
7
Global Crossing Ltd. and Subsidiaries
(in thousands, except share and per share information)
Period from
March 19, 1997
Year Ended Year Ended (Date of Inception)
December 31, 1999 December 31, 1998 to December 31, 1997
----------------- ----------------- --------------------
Statement of Operations
Data:
Revenue................. $ 1,664,824 $ 419,866 $ --
----------- ----------- -----------
Expenses:
Cost of sales.......... 850,483 178,492 --
Operations,
administration and
maintenance........... 133,202 18,056 --
Sales and marketing.... 149,119 26,194 1,366
Network development.... 26,153 10,962 78
General and
administrative........ 210,107 26,303 1,618
Stock related expense
...................... 51,306 39,374 --
Depreciation and
amortization.......... 124,294 541 39
Goodwill and
intangibles
amortization.......... 127,621 -- --
Termination of advisory
services agreement ... -- 139,669 --
----------- ----------- -----------
1,672,285 439,591 3,101
----------- ----------- -----------
Operating loss.......... (7,461) (19,725) (3,101)
Equity in income (loss)
of affiliates.......... 15,708 (2,508) --
Minority interest....... (1,338) -- --
Other income (expense):
Interest income........ 67,407 29,986 2,941
Interest expense....... (139,077) (42,880) --
Other income, net...... 180,765 -- --
Provision for income
taxes.................. (126,539) (33,067) --
----------- ----------- -----------
Loss before
extraordinary item and
cumulative effect of
change in accounting
principle.............. (10,535) (68,194) (160)
Extraordinary loss on
retirement of debt..... (45,681) (19,709) --
----------- ----------- -----------
Loss before cumulative
effect of change in
accounting principle... (56,216) (87,903) (160)
Cumulative effect of
change in accounting
principle, net of
income tax benefit of
$1,400................. (14,710) -- --
----------- ----------- -----------
Net loss................ (70,926) (87,903) (160)
Preferred stock
dividends.............. (66,642) (12,681) (12,690)
Redemption of preferred
stock.................. -- (34,140) --
----------- ----------- -----------
Net loss applicable to
common shareholders.... $ (137,568) $ (134,724) $ (12,850)
=========== =========== ===========
Net Loss Per Common
Share:
Loss applicable to
common shareholders
before extraordinary
item and cumulative
effect of change in
accounting principle
Basic and diluted....... $ (0.15) $ (0.32) $ (0.04)
=========== =========== ===========
Extraordinary item
Basic and diluted...... $ (0.09) $ (0.06) $ --
=========== =========== ===========
Cumulative effect of
change in accounting
principle
Basic and diluted...... $ (0.03) $ -- $ --
=========== =========== ===========
Net loss applicable to
common shareholders
Basic and diluted...... $ (0.27) $ (0.38) $ (0.04)
=========== =========== ===========
Shares used in computing
basic and diluted loss
per share.............. 502,400,851 358,735,340 325,773,934
=========== =========== ===========
Other Operating Data:
Cash from operating
activities............. $ 506,084 $ 208,727 $ 5,121
Cash used for investing
activities............. (4,009,977) (430,697) (428,743)
Cash from financing
activities............. 4,330,799 1,027,110 425,075
Adjusted EBITDA ........ $ 708,181 $ 364,948 $ 343,233
8
Global Crossing Ltd. and Subsidiaries
(in thousands)
December 31,
---------------------------------
1999 1998 1997
----------- ---------- --------
Balance sheet data:
Current assets including cash and cash
equivalents and restricted cash and cash
equivalents................................ $ 2,946,533 $ 976,615 $ 27,744
Long term restricted cash and cash
equivalents................................ 138,118 367,600 --
Long term accounts receivable............... 52,052 43,315 --
Capacity available for sale................. -- 574,849 --
Property and equipment, net ................ 6,026,053 433,707 518,519
Other assets................................ 661,442 65,757 25,934
Investment in and advances to/from
affiliates, net............................ 323,960 177,334 --
Goodwill and intangibles, net............... 9,557,422 -- --
----------- ---------- --------
Total assets............................... $19,705,580 $2,639,177 $572,197
=========== ========== ========
Current liabilities......................... $ 1,852,593 $ 256,265 $ 90,817
Long term debt.............................. 5,018,544 1,066,093 312,325
Deferred revenue............................ 383,287 25,325 --
Deferred credits and other.................. 796,606 34,174 3,009
----------- ---------- --------
Total Liabilities........................... 8,051,030 1,381,857 406,151
Minority interest........................... 351,338 -- --
Mandatorily redeemable and cumulative
convertible preferred stock ............... 2,084,697 483,000 91,925
Shareholders' equity
Common stock............................... 7,992 4,328 3,258
Treasury stock............................. (209,415) (209,415) --
Other shareholders' equity................. 9,578,927 1,067,470 71,023
Accumulated deficit........................ (158,989) (88,063) (160)
----------- ---------- --------
Total shareholders' equity.................. 9,218,515 774,320 74,121
----------- ---------- --------
Total liabilities and shareholders' equity.. $19,705,580 $2,639,177 $572,197
=========== ========== ========
9
Global Marine Systems selected historical financial information
The table below shows selected historical financial information for Global
Marine Systems presented in United States GAAP. This information has been
prepared using the combined financial statements of Global Marine Systems as of
the dates indicated and for each of the fiscal years in the five-year period
ended March 31, 1999. The combined income statement data below for each of the
three fiscal years ended March 31, 1999 and the combined balance sheet data at
March 31, 1999 and 1998 were derived from United Kingdom GAAP financial
statements audited by KPMG Audit Plc, chartered accountants, which are
incorporated by reference in this document. The combined income statement data
below for each of the fiscal years ended March 31, 1996 and 1995 and the
combined balance sheet data as of March 31, 1997, 1996 and 1995 were derived
from management accounts.
The unaudited translations of Global Marine Systems' sterling amounts into
United States dollars have been translated using convenience translation rates
for the fiscal year ended March 31, 1999. The convenience translations should
not be construed as representations that the sterling amounts have been, could
have been or could in the future be converted into United States dollars at
this rate or any other rate of exchange.
For the Years Ended March 31,
----------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------------------ --------------- --------------- --------------- ---------------
(unaudited)
(in thousands)
Operating revenues...... $347,335 (Pounds)209,997 (Pounds)170,953 (Pounds)181,987 (Pounds)147,996 (Pounds) 79,778
Income from continuing
operations............. 47,051 28,447 13,843 18,992 26,923 10,829
Total assets............ 753,333 466,749 441,899 380,635 359,148 235,459
Long-term obligations... $261,923 (Pounds)162,282 (Pounds)198,055 (Pounds)163,209 (Pounds)167,454 (Pounds) 54,900
Frontier selected historical financial information
The table below shows selected historical financial information for
Frontier. This information has been prepared using the consolidated financial
statements of Frontier as of the dates indicated and for each of the fiscal
years in the five-year period ended December 31, 1998 and for the nine months
ended September 30, 1999 and 1998. The consolidated income statement data below
for each of the fiscal years in the five-year period ending December 31, 1998
and the consolidated balance sheet data as of December 31, 1994 through
December 31, 1998 have been derived from financial statements audited by
PricewaterhouseCoopers LLP, independent accountants, of which the financial
statements for the three-year period ending December 31, 1998 are incorporated
by reference in this document. Global Crossing derived the remaining data from
unaudited consolidated financial statements, which are incorporated by
reference in this document.
Revenues have been impacted by the following acquisitions for the periods
presented:
. On February 27, 1998, Frontier acquired GlobalCenter Inc., a leading
provider in digital distribution, Internet and data services
headquartered in Sunnyvale, California. Frontier acquired all of the
outstanding shares of GlobalCenter and issued 6.4 million shares to
effect this merger. At the time of the merger, GlobalCenter had 1.1
million stock options and warrants outstanding as converted into
Frontier equivalents. This transaction was accounted for using the
pooling of interests method of accounting and, accordingly, historical
information has been restated to include GlobalCenter.
. In August 1995, Frontier merged with ALC Communications Corporation.
Frontier exchanged two shares of its common stock for each ALC common
share. The total shares issued by Frontier to effect the merger were
69.2 million. In March 1995, Frontier acquired American Sharecom Inc.
Frontier acquired all of the outstanding shares of American Sharecom for
approximately 8.7 million shares of Frontier common stock. These
transactions were accounted for as poolings of interests and,
accordingly, historical information has been restated to include ALC and
American Sharecom.
10
. In 1995, Frontier paid $318.4 million in cash for several acquisitions
that were accounted for as purchases. These purchase acquisitions were
Minnesota Southern Cellular Telephone Company, ConferTech International,
Inc., WCT Communications, Inc., Enhanced Telemanagement, Schneider
Communications, Inc. and Schneider Communications' 80.8 percent interest
in LinkUSA Corporation and Link-VTC, Inc. In February 1996, Frontier
acquired the remaining 19.2 percent interest in LinkUSA Corporation for
$2.3 million in cash, and in June 1996 made a payment of $4.3 million to
Link-VTC, Inc. in settlement of the original earnout agreement.
The following extraordinary, unusual or infrequently occurring items have
impacted net income for the periods presented:
. During the nine-month period ended September 30, 1999, Frontier recorded
a $74.5 million charge for costs related to the merger with Global
Crossing. These charges primarily include investment banker fees, legal
fees, accelerated restricted stock compensation and other direct costs.
. In the first quarter of 1998, Frontier recorded a pre-tax charge of $6.5
million associated with the acquisition of GlobalCenter. These charges
included investment banker fees, legal fees and other direct costs.
. In October 1997, Frontier recorded a pre-tax charge of $86.8 million
consisting of a restructuring charge of $43.0 million and a provision
for asset and lease impairments of $43.8 million. The restructuring
charge was primarily associated with a workforce reduction, program
cancellations and discontinuing some product lines. The provision for
asset and lease impairments primarily relates to long term assets and
some lease obligations Frontier was in the process of disposing of or
exiting.
. In March 1997, Frontier recorded a $96.6 million pre-tax charge
primarily related to the write-off of certain leased network facilities
no longer required as a result of the migration of Frontier's major
carrier customer's one-plus traffic volume to other networks and
Frontier's overall network integration efforts.
. In November 1996, Frontier recorded a $48.8 million pre-tax charge. This
charge included $28.0 million for the curtailment of specified Frontier
pension plans and a $20.8 million charge primarily to the write-off of
unrecoverable product development costs for its conference calling
product line.
. In December 1996, Frontier, through GlobalCenter, recorded a pre-tax
charge of $18.9 million related to the write-off of in-process product
development costs associated with the 1996 merger with GCIS, an Internet
management services company.
. Frontier's 1995 operating results reflect pre-tax acquisition related
charges of $114.2 million associated with the integration of a number of
long distance companies acquired during the year, including the August
1995 merger with ALC Communications.
. Frontier determined in 1995 that Statement of Financial Accounting
Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation", was no longer applicable based upon changes in regulation,
increasingly rapid advancements in telecommunications technology and
other factors creating competitive markets. As a result of the
discontinuance of FAS 71, Frontier recorded a non-cash extraordinary
charge of $112.1 million, net of an income tax benefit of $68.4 million,
as of September 30, 1995. Frontier also recorded a $9.0 million loss on
the early extinguishment of debt in 1995.
11
Frontier Corporation and Subsidiaries
(in thousands, except per share information)
Nine Months Nine Months
Ended Ended Year Ended December 31,
September 30, September 30, ----------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
------------- ------------- ---------- ---------- ---------- ---------- ----------
(unaudited)
Consolidated Statements
of Income:
Revenues................ $ 1,995,556 $1,938,522 $2,593,558 $2,374,809 $2,588,519 $2,150,328 $1,667,545
Costs and expenses...... 1,835,514 1,708,518 2,276,162 2,288,651 2,220,296 1,865,492 1,341,919
----------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income........ 160,042 230,004 317,396 86,158 368,223 284,836 325,626
Interest expense........ 48,739 39,516 55,318 48,239 43,312 53,572 50,216
Other income, net of
other expense.......... 19,643 33,480 45,025 38,070 15,850 14,991 20,922
Income taxes............ 77,181 96,634 129,560 44,188 142,556 101,126 109,078
----------- ---------- ---------- ---------- ---------- ---------- ----------
Income before
extraordinary items and
cumulative effect of
changes in accounting
principles............. 53,765 127,334 177,543 31,801 198,205 145,129 187,254
Extraordinary items..... -- -- -- -- -- (121,208) --
Cumulative effect of
changes in accounting
principles............. -- (1,755) (1,755) -- (8,018) (1,477) (7,197)
----------- ---------- ---------- ---------- ---------- ---------- ----------
Consolidated net
income................. 53,765 125,579 175,788 31,801 190,187 22,444 180,057
Dividends on preferred
stock.................. (510) (754) (1,005) (1,019) (1,182) (1,191) (1,187)
----------- ---------- ---------- ---------- ---------- ---------- ----------
Income applicable to
common stock........... $ 53,255 $ 124,825 $ 174,783 $ 30,782 $ 189,005 $ 21,253 $ 178,870
=========== ========== ========== ========== ========== ========== ==========
Earnings per common
share:
Income before
extraordinary item and
cumulative effect of
changes in accounting
principles
Basic.................. $ 1.03 $ .18 $ 1.19 $ .94 $ 1.26
Diluted................ 1.02 .18 1.18 .88 1.16
Cash dividends declared
per common share....... $ .100 $ .668 $ .89 $ .875 $ .855 $ .835 $ .815
Consolidated Balance
Sheets (at period end):
Current assets.......... $ 644,023 $ 566,674 $ 490,305 $ 477,761 $ 524,200 $ 673,826
Property, plant and
equipment, net......... 2,189,138 1,677,559 1,046,884 975,982 883,046 1,034,442
Goodwill and customer
base, net.............. 7,794,241 484,015 517,754 538,296 550,081 222,442
Deferred and other
assets................. 431,614 330,495 432,977 237,353 154,088 130,084
----------- ---------- ---------- ---------- ---------- ----------
Total assets........... $11,059,016 $3,058,743 $2,487,920 $2,229,392 $2,111,415 $2,060,794
=========== ========== ========== ========== ========== ==========
Current liabilities..... $ 750,974 $ 567,697 $ 492,978 $ 424,397 $ 506,073 $ 305,698
Long-term debt.......... 1,800,651 1,350,821 934,681 677,570 618,867 661,549
Other long-term
liabilities............ 31,928 -- -- -- -- --
Deferred income taxes... -- 40,046 10,927 2,542 15,644 98,217
Deferred employee
benefits obligation.... 89,596 81,925 74,965 57,573 58,385 46,001
Shareholder's equity.... 8,385,867 1,018,254 974,369 1,067,310 912,446 949,329
----------- ---------- ---------- ---------- ---------- ----------
Total liabilities and
shareholders' equity.. $11,059,016 $3,058,743 $2,487,920 $2,229,392 $2,111,415 $2,060,794
=========== ========== ========== ========== ========== ==========
12
Racal Telecom selected historical financial information
The table below shows selected historical financial information for Racal
Telecom prepared in United States GAAP. This information has been prepared
using the combined financial statements of Racal Telecom as of the dates
indicated and for each of the fiscal years in the three-year period ended March
31, 1999. The combined income statement data below for each of the two years
ended March 31, 1999 and the combined balance sheet data at March 31, 1999 and
1998 were derived from financial statements audited by Deloitte & Touche,
chartered accountants, which are incorporated by reference in this document. We
derived the remaining data from unaudited combined financial statements.
The unaudited translations of Racal Telecom's sterling amounts into United
States dollars have been translated using convenience translation rates for the
fiscal year ended March 31, 1999. The convenience translations should not be
construed as representations that the sterling amounts have been, could have
been or could in the future be converted into United States dollars at this
rate or any other rate of exchange.
For the Years Ended March 31,
------------------------------------------------------------
1999 1998 1997
--------------------------- --------------- ---------------
(unaudited) (in thousands)
Revenues................ $492,130 (Pounds)295,800 (Pounds)273,000 (Pounds)260,000
Income (loss) from
continuing operations.. (30,450) (18,300) 12,100 16,000
Total assets............ 656,250 401,200 355,900 311,700
Long-term obligations... $118,920 (Pounds) 72,700 (Pounds) 86,400 (Pounds)101,200
HCL Holdings selected historical financial information
The table below shows selected historical financial information for HCL
Holdings prepared in United States GAAP. This information has been prepared
using the combined financial statements of HCL Holdings as of the dates
indicated and for each of the years in the three-year period ended December 31,
1998 and for the nine months ended September 30, 1999 and 1998. The combined
financial information below as of and for each of the three years ended
December 31, 1998 were derived from financial statements audited by
PricewaterhouseCoopers, certified public accountants, which are incorporated by
reference in this document. The combined financial information below as of and
for the nine months ended September 30, 1999 and 1998 were derived from
unaudited combined financial statements.
For the Nine For the Nine
Months Ended Months Ended For the Years Ended December 31,
September 30, September 30, --------------------------------------
1999 1998 1998 1997 1996
------------- ------------- ------------ ------------ ----------
(unaudited)
(in thousands)
Revenues................ HK$ 615,940 HK$ 735,933 HK$ 950,120 HK$1,262,106 HK$790,995
Income (loss) from
continuing operations.. (190,748) HK$(177,318) (279,526) (356,847) (153,626)
Total assets............ 2,364,497 1,857,539 1,369,610 705,687
Long-term obligations... HK$3,022,594 HK$2,306,024 HK$1,403,847 HK$704,586
13
The unaudited translations of HCL Holdings' Hong Kong dollar amounts into
United States dollars have been translated using convenience translation rates
for the fiscal year ended December 31, 1998 and for the nine months ended
September 30, 1999. The convenience translations should not be construed as
representations that the Hong Kong dollar amounts have been, could have been or
could in the future be converted into United States dollars at this rate or any
other rate of exchange.
For the Nine For the Year
Months Ended Ended
September 30, December 31,
1999 1998
------------- ------------
(unaudited)
(in thousands)
Revenues...................................... $ 79,429 $122,664
Income (loss) from continuing operations...... (24,598) (36,088)
Total assets.................................. 304,401 239,794
Long-term obligations......................... $389,123 $297,690
14
Recent Financial Accounting Developments
During the third and fourth quarters of 1999, changes in our business
activities, together with a newly effective accounting standard, caused us to
modify some of our practices regarding recognition of revenue and costs related
to sales of capacity. None of the accounting practices described below affect
our cash flows.
As a result of Financial Accounting Standards Board (FASB) Interpretation
No. 43, "Real Estate Sales, an interpretation of FASB Statement No. 66" (FIN
43), which became effective July 1, 1999, we have accounted revenue from
terrestrial circuits sold after that date as operating leases and have
amortized that revenue over the terms of the related contracts. Previously, we
had recognized these sales as current revenue upon activation of the circuits.
This deferral in revenue recognition has no impact on cash flow.
With the consummation of the Frontier acquisition on September 28, 1999,
service offerings became a significant source of our revenue. Consequently, we
initiated service contract accounting for our subsea systems during the fourth
quarter, because we, since that date, no longer hold subsea capacity
exclusively for sale. As a result, since the beginning of the fourth quarter,
we have depreciated investments in both subsea and terrestrial systems over
their remaining economic lives and have recognized revenue related to service
contracts over the terms of the contracts. We have recognized revenue and costs
related to the sale of subsea circuits upon activation, if the criteria of
sales-type lease accounting have been satisfied with respect to those circuits.
During the fourth quarter, our global network service capabilities were
significantly expanded by the activation of several previously announced
systems and by the integration of other networks obtained through acquisition
and joint venture agreements. With this network expansion, we began offering
our customers flexible bandwidth products to multiple destinations, which makes
the historical practice of fixed, point-to-point routing of traffic and
restoration capacity both impractical and inefficient. To ensure the required
network flexibility, we will modify our future capacity purchase agreements and
our network management in a manner that precludes the use of sales-type lease
accounting.
Because of these contract changes and the network management required to
meet customer demands for flexible bandwidth, multiple destinations and system
performance, we anticipate that most of the contracts for subsea circuits
entered into after January 1, 2000 will be part of a service offering and,
therefore, will not meet the criteria of sales-type lease accounting and will
be accounted for as operating leases. Consequently, we will defer revenue
related to those circuits and amortize it over the appropriate term of the
contract. In certain circumstances, if a contract meets all of the requirements
of sales-type lease accounting, we will recognize revenue without deferral upon
payment and activation.
We note that accounting practice and authoritative guidance regarding the
applicability of sales-type lease accounting to the sale of capacity is still
evolving. Based on the accounting practices described above, we believe that
additional changes, if any, in accounting practice or authoritative guidance
affecting sales of capacity would have little or no impact on our results of
operations.
15
Global Crossing Ltd.
Selected Unaudited Pro Forma Financial Information
The following unaudited pro forma condensed combined financial information
of Global Crossing, Global Marine Systems, Frontier, Racal Telecom and the
Hutchison Global Crossing joint venture, which we refer to as "Pro Forma Global
Crossing Ltd.", has been prepared to demonstrate how these companies or
businesses might have looked if (1) the Global Marine Systems acquisition and
related financing, (2) the Frontier acquisition, (3) the Racal Telecom
acquisition and related financing, (4) the Hutchison Global Crossing joint
venture, including the related issuance of the 6 3/8% cumulative convertible
preferred stock, series B, of Global Crossing, (5) the offering of our 6 3/8%
cumulative convertible preferred stock completed on November 5, 1999, (6) the
offering of the 9 1/8% senior notes due 2006 and 9 1/2% senior notes due 2009
of Global Crossing Holdings completed on November 19, 1999 and (7) the offering
of our 7% cumulative convertible preferred stock completed on December 15, 1999
had been completed as of the date or at the beginning of the period presented.
This pro forma information does not give effect to (a) the $350 million cash
received in connection with the formation of the Asia Global Crossing joint
venture or (b) the IPC and IXnet mergers.
We have prepared the pro forma financial information using the purchase
method of accounting. We expect that we will have reorganization and
restructuring expenses and potential synergies relating to the acquisitions of
Global Marine Systems and Racal Telecom, the Hutchison Global Crossing joint
venture and the acquisition of Frontier's long distance business and increased
opportunities to earn more revenue as a result of those transactions. The
unaudited pro forma information does not reflect these expenses and synergies.
The pro forma information, while helpful in illustrating the financial
characteristics of the combined company under one set of assumptions, does not
attempt to predict or suggest future results. The pro forma information also
does not attempt to show how the combined company would actually have performed
had the companies been combined throughout these periods. If the companies had
actually been combined in prior periods, these companies and businesses might
have performed differently. You should not rely on pro forma financial
information as an indication of the results that would have been achieved if
the Global Marine Systems, Frontier and Racal Telecom acquisitions and the
Hutchison Global Crossing joint venture had taken place earlier or the future
results that the companies will experience after completion of these
transactions.
You should read these unaudited pro forma condensed combined financial
statements in conjunction with the historical financial statements of Global
Crossing, Global Marine Systems, Frontier, Racal Telecom and HCL Holdings,
which are incorporated by reference in this document.
16
Pro Forma Global Crossing Ltd.
Unaudited Pro Forma Condensed Combined Balance Sheet
as of December 31, 1999
(in thousands)
Global Hutchison Global
Crossing Global Crossing Crossing
Historical(1) Adjustments(2) Pro Forma
------------- --------------- -----------
ASSETS
Current Assets:
Cash, restricted cash and
investments....................... $ 1,726,793 $(50,000) $ 1,676,793
Accounts receivable, net........... 966,973 -- 966,973
Other assets and prepaid costs..... 252,767 -- 252,767
----------- -------- -----------
Total Current Assets............. 2,946,533 (50,000) 2,896,533
Restricted cash and cash
equivalents........................ 138,118 -- 138,118
Accounts receivable................. 52,052 -- 52,052
Property and equipment, net......... 6,026,053 (83,800) 5,942,253
Goodwill and other intangibles,
net................................ 9,557,422 -- 9,557,422
Investment in and advances to/from
affiliates, net.................... 323,960 538,800 862,760
Other assets, net................... 661,442 -- 661,442
----------- -------- -----------
Total Assets..................... $19,705,580 $405,000 $20,110,580
=========== ======== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accrued construction costs......... $ 275,361 $ -- $ 275,361
Accounts payable and accrued
liabilities....................... 944,780 5,000 949,780
Accrued interest and preferred
dividends......................... 66,745 -- 66,745
Deferred revenue................... 127,367 -- 127,367
Income taxes payable............... 140,034 -- 140,034
Current portion of long term
debt.............................. 5,496 -- 5,496
Other current liabilities.......... 292,810 -- 292,810
----------- -------- -----------
Total Current Liabilities........ 1,852,593 5,000 1,857,593
Long term debt..................... 5,018,544 -- 5,018,544
Deferred revenue................... 383,287 -- 383,287
Deferred credits and other......... 796,606 -- 796,606
----------- -------- -----------
Total Liabilities................ 8,051,030 5,000 8,056,030
----------- -------- -----------
MINORITY INTEREST................... 351,338 -- 351,338
----------- -------- -----------
MANDATORILY REDEEMABLE AND
CUMULATIVE CONVERTIBLE PREFERRED
STOCK:
10 1/2% Mandatorily Redeemable
Preferred Stock, 5,000,000 shares
issued and outstanding as of
December 31, 1999, $100
liquidation preference per
share............................. 485,947 -- 485,947
----------- -------- -----------
6 3/8% Cumulative Convertible
Preferred Stock, 10,000,000
shares issued and outstanding as
of December 31, 1999, $100
liquidation preference per
share............................. 969,000 400,000 1,369,000
----------- -------- -----------
7% Cumulative Convertible
Preferred Stock, 2,600,000 and no
shares issued and outstanding as
of December 31, 1999, $250
liquidation preference per
share............................. 629,750 -- 629,750
----------- -------- -----------
SHAREHOLDERS' EQUITY:
Common stock, 3,000,000,000 shares
authorized, par value $.01,
799,137,142 issued as of December
31, 1999.......................... 7,992 -- 7,992
Treasury stock, 22,033,758
shares............................ (209,415) -- (209,415)
Other shareholders' equity......... 9,578,927 -- 9,578,927
Accumulated deficit................ (158,989) -- (158,989)
----------- -------- -----------
9,218,515 -- 9,218,515
----------- -------- -----------
Total Liabilities and
Shareholder's Equity............ $19,705,580 $405,000 $20,110,580
=========== ======== ===========
17
Pro Forma Global Crossing Ltd.
Unaudited Pro Forma Condensed Combined Statements of Operations
For the Year Ended December 31, 1999
(in thousands, except share and per share amounts)
Global Global
Global Marine Marine Racal
Crossing Systems Systems Frontier Frontier Racal Telecom Telecom
Historical(3) Historical Adjustments Historical Adjustments Historical(13) Adjustments
------------- ---------- ----------- ---------- ----------- ------------- ------------
Operating
Revenues........... $ 1,664,824 $173,498 $ -- $1,995,556 $ -- $306,019 $ --
----------- -------- -------- ---------- --------- -------- ---------
Operating Expenses:
Operating,
selling, general
and
administrative.... 1,369,064 127,165 -- 1,551,234 -- 286,442 --
Stock-related
expense........... 51,306 -- -- 10,412 (10,412)(9) -- --
Merger Expenses... -- -- -- 74,519 -- 24,600 --
Depreciation and
amortization...... 124,294 12,817 -- 173,600 -- 52,716 --
Goodwill and
intangibles
amortization...... 127,621 812 (812)(5) 25,749 (25,749)(10) -- 55,843 (14)
19,690 (5) 303,774 (10)
----------- -------- -------- ---------- --------- -------- ---------
1,672,285 140,794 18,878 1,835,514 267,613 363,758 55,843
----------- -------- -------- ---------- --------- -------- ---------
Operating income
(loss)............. (7,461) 32,704 (18,878) 160,042 (267,613) (57,739) (55,843)
Equity in income
(loss) of
affiliates......... 15,708 4,539 -- 17,235 -- (560) --
Minority interest.. (1,338) -- -- -- -- -- --
Other income
(expense):
Interest
expense........... (139,077) (6,869) (24,000)(6) (48,739) -- (30,908) (96,363)(15)
Interest income... 67,407 511 -- 4,754 -- 3,856 --
Other income
(expenses)........ 180,765 143 -- (2,346) -- 369 --
----------- -------- -------- ---------- --------- -------- ---------
Income (loss)
before provision
for income taxes,
extraordinary item
and cumulative
effect of change in
accounting
principle.......... 116,004 31,028 (42,878) 130,946 (267,613) (84,982) (152,206)
(Provision)
benefit for
income taxes...... (126,539) (11,885) 7,200 (7) (77,181) -- 30,116 23,115 (16)
----------- -------- -------- ---------- --------- -------- ---------
Income (loss)
before
extraordinary item
and cumulative
effect of change in
accounting
principle.......... (10,535) 19,143 (35,678) 53,765 (267,613) (54,866) (129,091)
Preferred stock
dividends......... (66,642) -- -- (510) 510 (11) -- --
----------- -------- -------- ---------- --------- -------- ---------
Income (loss)
applicable to
common shareholders
before
extraordinary item
and cumulative
effect of change in
accounting
principle.......... (77,177) 19,143 (35,678) 53,255 (267,103) (54,866) (129,091)
Diluted earnings
adjustment........ -- -- -- 270 (270)(12) -- --
----------- -------- -------- ---------- --------- -------- ---------
Income (loss)
applicable to
common shareholders
before
extrarodinary item
and cumulative
effect of change in
accounting
principle
(Diluted).......... $ (77,177) $ 19,143 $(35,678) $ 53,525 $(267,373) $(54,866) $(129,091)
=========== ======== ======== ========== ========= ======== =========
Income (loss) per
common share:
Income (loss)
applicable to
common
shareholders
before
extraordinary
item and
cumulative effect
of change in
accounting principle
Basic and
diluted......... $ (0.15)
===========
Shares used in
computing
information
applicable to
common
shareholders
Basic and
diluted......... 502,400,851
===========
Hutchison
Global Global
Crossing Financing Crossing
Adjustments(2) Adjustments(17) Pro Forma
-------------- --------------- ----------------
Operating
Revenues........... $ -- $ -- $ 4,139,897
-------------- --------------- ----------------
Operating Expenses:
Operating,
selling, general
and
administrative.... -- -- 3,333,905
Stock-related
expense........... -- -- 51,306
Merger Expenses... -- -- 99,119
Depreciation and
amortization...... -- -- 363,427
Goodwill and
intangibles
amortization...... -- -- 506,928
-------------- --------------- ----------------
-- -- 4,354,685
-------------- --------------- ----------------
Operating income
(loss)............. -- -- (214,788)
Equity in income
(loss) of
affiliates......... (15,825) -- (143)
(21,240) --
Minority interest.. -- (1,338)
Other income
(expense):
Interest
expense........... -- 93,577 (495,695)
(243,316)
Interest income... -- -- 76,528
Other income
(expenses)........ -- -- 178,931
-------------- --------------- ----------------
Income (loss)
before provision
for income taxes,
extraordinary item
and cumulative
effect of change in
accounting
principle.......... (37,065) (149,739) (456,505)
(Provision)
benefit for
income taxes...... -- (7,200) (162,374)
-------------- --------------- ----------------
Income (loss)
before
extraordinary item
and cumulative
effect of change in
accounting
principle.......... (37,065) (156,939) (618,879)
Preferred stock
dividends......... (25,529) (108,936) (201,107)
-------------- --------------- ----------------
Income (loss)
applicable to
common shareholders
before
extraordinary item
and cumulative
effect of change in
accounting
principle.......... (62,594) (265,875) (819,986)
Diluted earnings
adjustment........ -- --
-------------- --------------- ----------------
Income (loss)
applicable to
common shareholders
before
extrarodinary item
and cumulative
effect of change in
accounting
principle
(Diluted).......... $(62,594) $(265,875) $ (819,986)
============== =============== ================
Income (loss) per
common share:
Income (loss)
applicable to
common
shareholders
before
extraordinary
item and
cumulative effect
of change in
accounting principle
Basic and
diluted......... $ (1.07)
================
Shares used in
computing
information
applicable to
common
shareholders
Basic and
diluted......... 767,355,151 (18)
================
18
Pro Forma Global Crossing Ltd.
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
(1) This column represents the historical financial position of Global
Crossing as of December 31, 1999, including the assets acquired in the
Frontier merger and the Global Marine Systems and Racal Telecom
acquisitions.
(2) On January 12, 2000, we and Hutchison Whampoa Limited formed a joint
venture called Hutchison Global Crossing. This joint venture is owned in
equal parts by us and Hutchison Whampoa. In exchange for its 50%
interest, Hutchison Whampoa contributed to the joint venture its existing
building-to-building fixed-line telecommunications network in Hong Kong
and certain Internet-related assets previously held by Hutchison
Telecommunications Limited. In exchange for our 50% interest, we
contributed to the joint venture international telecommunications
capacity rights on our network and know-how related to Internet data
centers valued at $350 million and $50 million in cash. In addition, we
issued to Hutchison Whampoa $400 million aggregate liquidation preference
of our 6 3/8% cumulative convertible preferred stock, series B,
convertible into our common stock. The Hutchison Global Crossing joint
venture is anticipated to be accounted for as an unconsolidated joint
venture under the equity method of accounting.
Total Consideration
Cash contributed................................... $ 50,000
6 3/8% Cumulative Convertible Preferred Stock,
Series B.......................................... 400,000
Estimated cost of capacity contributed............. 83,800
Global Crossing transaction costs.................. 5,000
--------
Total consideration.................................. 538,800
Less:Historical net tangible book value of HCL
Holdings:
Historical HCL Holdings net liabilities at December
31, 1999........................................... $(149,393)
Cash contributed................................... 50,000
Estimated cost of capacity contributed............. 83,800
---------
Adjusted net tangible book value................... (15,593)
50% ownership interest............................. 7,797
---------
(7,796)
--------
Total Goodwill....................................... $546,596
========
We have tentatively considered the carrying value of the acquired assets to
approximate their fair value, with all of the excess of those acquisition
costs being attributable to goodwill. We are in the process of fully
evaluating the assets to be acquired and, as a result, the purchase price
allocation among the tangible and intangible assets acquired and their
useful lives may change. We currently anticipate that goodwill associated
with the merger will be amortized over a 25-year life.
These adjustments also include the assumed equity in the results of
operations of Hutchison Global Crossing for the year ended December 31,
1999.
(3) This column represents the historical results of operations for the year
ended December 31, 1999 including the results of Global Marine Systems
operations for the six months ended December 31, 1999, the results of
Frontier operations for the three months ended December 31, 1999 and
Racal Telecom for the period from November 24, 1999 to December 31, 1999.
(4) This column represents the historical results of operations of Global
Marine Systems for the six months ended June 30, 1999.
19
(5) These adjustments reflect the amortization expense of the excess
consideration over the net assets acquired (goodwill), which we have
estimated to be approximately $693 million. We are amortizing goodwill and
other intangible assets on the straight-line method over 3-25 years. The
initial purchase price allocation is based on current estimates. We will
make the final purchase price allocation based upon final values for
certain assets and liabilities. As a result, the final purchase price
allocation may differ from the presented estimate.
(6) This amount reflects the assumed interest expense, at an 8% interest rate,
incurred on the $600 million debt assumed issued as of the earliest date
presented in connection with the acquisition of Global Marine Systems.
(7) This adjustment represents the tax benefit resulting from the interest
expense assumed in connection with the debt issued for the acquisition of
Global Marine Systems.
(8) This column represents Frontier's historical results of operations for the
nine months ended September 30, 1999.
(9) This adjustment assumes Frontier's stock related expenses would not have
been incurred had the merger occurred at the earliest date presented.
(10) These adjustments reflect the amortization expense of the excess
consideration over the net assets acquired (goodwill), which we have
estimated to be approximately $7.7 billion. We are amortizing goodwill and
other intangible assets on a straight-line method over 6-25 years. The
initial purchase price allocation is based on current estimates. We will
make the final purchase price allocation based upon final values for
certain assets and liabilities. As a result, the final purchase price
allocation may differ from the presented estimate.
(11) This adjustment assumes that Frontier's preferred stock dividends would
not have been incurred, as Frontier's preferred stock would have been
redeemed as of the earliest date presented.
(12) To eliminate diluted earnings adjustment due to the combined net loss
position.
(13) This column represents Racal Telecom's results from operations in United
States GAAP, the disposal of the Racal Translink and Racal Fieldforce
divisions of Racal Telecommunications Limited which we did not acquire and
pro forma adjustments to reflect the likely effect of the trading among
Racal Translink, Racal Fieldforce and Racal Telecom based on contractual
obligations among the divisions. We summarize these adjustments in the
table below:
20
Racal Telecom Pro Forma
Unaudited Pro Forma Condensed Combined Statements of Operations
For the period from January 1, 1999 to November 23, 1999
(in thousands)
US GAAP and Racal
BV Acquisition Accounting Telecom Racal
and Carve-Out Policy Interim Telecom
Historical(a) Adjustments Adjustments(d) Period(e) Pro Forma
------------ -------------- -------------- --------- ---------
Operating Revenues...... $390,578 $(110,354)(c) $(22,447) $47,937 $306,019
305 (b)
-------- --------- -------- ------- --------
Operating Expenses:
Operating, selling,
general and
administrative........ 355,110 (99,595)(c) 1,737 53,544 311,042
246 (b)
Depreciation and
amortization.......... 61,774 (11,978)(c) (3,340) 6,265 52,716
(5)(b)
-------- --------- -------- ------- --------
416,884 (111,332) (1,603) 59,809 363,758
-------- --------- -------- ------- --------
Operating income
(loss)................. (26,306) 1,283 (20,844) (11,872) (57,739)
Equity in income (loss)
of affiliates.......... (560) -- -- (560)
Other income (expense):
Interest expense....... (30,905) (3)(b) -- -- (30,908)
Interest income........ -- 3,089 (c) -- 767 3,856
Other income
(expense)............. 76,390 (76,021)(c) -- -- 369
-------- --------- -------- ------- --------
Income (loss) before
extraordinary item,
taxes and cumulative
effect of changes in
accounting principle... 18,619 (71,652) (20,844) (11,105) (84,982)
(Provision) benefit for
income taxes.......... 3,563 (70)(b) 18,918 7,705 30,116
-------- --------- -------- ------- --------
Income (loss) before
extraordinary item and
cumulative effect of
changes in accounting
principle.............. $ 22,182 $ (71,722) $ (1,926) $(3,400) $(54,866)
======== ========= ======== ======= ========
(a) This column represents the combined historical results of operations
of Racal Telecommunications Limited, Racal Telecommunications Networks
Limited, Racal Internet Services Limited and Racal Telecommunications
Inc., which we refer to as "Racal Telecom", in accordance with United
Kingdom GAAP translated into United States dollars for the 41 weeks
ended October 15, 1999.
(b) We are treated as having acquired the business and assets of Racal
Network Services BV as that company was in the process of being
reorganized into Racal Telecommunications Networks Limited in the
course of 1999. These adjustments reflect the financial position and
results of operations of Racal Network Services BV as if this
transaction had been completed as of the dates or at the beginning of
the periods presented.
(c) In July 1999, the Racal Telecom business was separated into three
divisions: Racal Telecom, Racal Translink and Racal Fieldforce. On
October 1, 1999, the Racal Translink and Racal Fieldforce businesses
were sold to another company within the Racal Electronics plc group.
This adjustment eliminates the results of operations of Racal
Translink and Racal Fieldforce, reflects the likely effect of the
trading among Racal Translink, Racal Fieldforce and Racal Telecom
based on contractual obligations among the divisions and adjusts the
profit on disposal of these operations. No taxation liabilities were
incurred on the disposal as this disposal was to another Racal
Electronics plc group company.
(d) The Racal Telecom combined financial statements are prepared in
accordance with United Kingdom GAAP which differ in certain material
respects from United States GAAP. The differences that are material
are disclosed in the notes to the combined financial statements,
incorporated by reference. In addition, an adjustment has been made to
treat sales of dark fiber made by Racal Telecom after July 1, 1999 as
operating leases, recognizing income over the period of the service
provision in accordance with the provision of FASB Interpretation No
43.
(e) This column represents Racal Telecom's historical results from October
16, 1999 to November 23, 1999.
21
(14) This adjustment reflects the amortization expense of the excess
consideration over the net assets acquired (goodwill), which we have
preliminarily estimated to be $1.6 billion. We have tentatively considered
the carrying value of the acquired assets to approximate fair value, with
all excess of those acquisition costs being attributable to goodwill. We
are in the process of fully evaluating the assets to be acquired and, as a
result, the purchase price allocation among the tangible and intangible
assets acquired, and their related useful lives, may change. We currently
anticipate that goodwill associated with the transaction will be amortized
over a 25-year life.
(15) This amount reflects the assumed interest expense, at a 9% interest rate,
including the amortization of deferred financing fees incurred on the $1.1
billion debt assumed issued as of the earliest date presented in
connection with the acquisition of Racal Telecom.
(16) This adjustment represents the tax benefit resulting from the interest
expense assumed in connection with the debt issued for the acquisition of
Racal Telecom.
(17) These adjustments represent the assumed interest expenses, including
amortization of deferred financing fees, in connection with the issuance
and assumed repayment of existing debt related to the 9 1/8% senior notes
due 2006 and 9 1/2% senior notes due 2009 of Global Crossing Holdings, our
6 3/8% cumulative convertible preferred stock and our 7% cumulative
convertible preferred stock, including the over-allotment. In connection
with the issuance of the 9 1/8% senior notes due 2006 and 9 1/2% senior
notes due 2009 of Global Crossing Holdings, we incurred approximately
$29.7 million in financing fees. The financing fees will be amortized over
the life of the debt.
(18) Pro forma per share data are based on the number of our common shares that
would have been outstanding had the merger occurred at the earliest date
presented. We issued 355,181,000 shares in connection with the Frontier
merger.
22
RISK FACTORS
Before investing in our shares of preferred stock or common stock, you
should carefully consider the risks described below and the other information
included or incorporated by reference in this prospectus.
Risk Factors Relating to the Preferred Stock
The preferred stock is subordinated to all our existing indebtedness and will
not limit our ability to incur future indebtedness that will rank senior to
the preferred stock.
The preferred stock will be subordinated to all our indebtedness with
respect to the payments of interest and amounts distributable upon our
dissolution, liquidation or winding up. The terms of the preferred stock will
not limit the amount of indebtedness or other obligations that we may incur.
Further, we may incur additional indebtedness in order to finance the
construction or acquisition of additional fiber optic and telecommunications
systems and equipment. That indebtedness will rank senior to the preferred
stock.
The preferred stock is structurally subordinated to the obligations of our
subsidiaries.
Because we are a holding company and our assets consist primarily of our
equity interests in our operating subsidiaries, our obligations on the
preferred stock will be structurally subordinated to all liabilities of our
operating subsidiaries. At December 31, 1999, we and our operating
subsidiaries had approximately $5,019 million principal amount of long-term
indebtedness, of which $1,295 million was secured, and approximately $1,853
million of current liabilities and vendor financing ranking senior to our
equity interests in our operating subsidiaries.
We cannot assure you that, in the event of our dissolution, liquidation,
reorganization or winding up, you will receive any portion of your initial
investment.
We are currently restricted from paying cash dividends and from redeeming the
shares of preferred stock. We also could be prevented in some circumstances
from paying dividends in shares of our common stock.
The terms of the instruments governing our indebtedness and an outstanding
series of preferred stock of Global Crossing Holdings restrict our ability to
pay cash dividends and to redeem our shares of preferred stock. Our ability to
pay cash dividends and redeem our shares of preferred stock will depend on our
meeting certain financial criteria, which in turn will require significant
improvements in our EBITDA and consolidated net worth. Even if the terms of
the instruments governing our indebtedness and preferred stock of Global
Crossing Holdings allow us to pay cash dividends and to redeem our shares of
preferred stock, we can make those payments only from our "surplus", that is
the excess of our total assets over the sum of our liabilities plus the par
value of our outstanding capital stock and any share premium attributable to
our outstanding capital stock. In addition, we can make cash dividends only if
we would, after paying those dividends, be able to pay our liabilities as they
become due. We cannot assure you that we will have any surplus. The same test
applies before we can pay dividends in shares of our common stock.
Our ability to issue senior preferred stock in the future could adversely
affect the rights of holders of preferred stock and our common stock.
We are authorized to issue additional preferred stock in one or more series
on terms that may be determined at the time of issuance by our board of
directors. In some instances, a series of preferred stock could include voting
rights, preferences as to dividends and liquidation, conversion and redemption
rights that will rank senior to the preferred stock, and in all instances,
senior to our common stock. The future issuance of
23
preferred stock could effectively diminish or supersede the dividends and
liquidation preferences of the preferred stock and adversely affect our common
stock.
We cannot assure you that an active trading market will develop for the
preferred stock.
There is no market for the preferred stock. In addition, the liquidity of
any trading market in the preferred stock, and the market price quoted for
shares of preferred stock, may be adversely affected by changes in the overall
market for convertible securities and by changes in our financial performance
or prospects or in the prospects of companies in our industry generally. As a
result, we cannot assure you that an active trading market will develop for the
preferred stock, or, if one develops, that the shares of preferred stock will
trade at prices higher than the initial offering price.
We may not have sufficient funds to purchase any shares of preferred stock
upon a change in control.
If we become subject to a change in control, each holder of shares of
preferred stock will have the right to require us to purchase all or any part
of that holder's shares of preferred stock at a purchase price in cash equal to
100% of the liquidation preference of those shares, plus all accumulated and
unpaid dividends on those shares to the date of purchase.
This right of holders is subject to the obligation of Global Crossing
Holdings to (a) repay its debt obligations in full under its corporate credit
facility and (b) purchase all of its senior notes and outstanding shares of
preferred stock that have been tendered for purchase in connection with a
change in control of Global Crossing. In addition, this right of holders is
subject to the repurchase or repayment of our future indebtedness which we are
required to repurchase or repay in connection with a change in control.
If Global Crossing Holdings is unable to satisfy the obligations described
in the paragraph above, we can either purchase shares of preferred stock that
have been tendered to us upon a change in control of Global Crossing in
violation of our debt agreements and covenants in connection with the senior
notes and preferred stock of Global Crossing Holdings or choose not to purchase
any shares of preferred stock. We cannot assure you that Global Crossing
Holdings will have sufficient funds available at the time of a change in
control to meet those obligations.
A change in control of Global Crossing may also be an event of default under
our other debt agreements and require repayment of that debt in whole or in
part as a result of acceleration or otherwise. In that circumstance, we may not
have access to sufficient cash to purchase shares of preferred stock tendered
to us upon a change in control.
Risk Factors Relating to Our Common Stock
We do not plan on paying dividends in the foreseeable future and, as a result,
shareholders will need to sell shares to realize a return on their investment.
We have not declared or paid any cash dividends on our common stock since
our inception. We do not anticipate paying cash dividends on our common stock
in the foreseeable future. Our ability to pay dividends is limited by some of
our debt instruments. Consequently, shareholders will need to sell shares of
our common stock to realize a return on their investment, if any.
24
Our stock performance may be volatile.
Historically, the market prices for securities of emerging companies in the
telecommunications industry have been highly volatile. A number of factors
could cause the market price of our common stock to fluctuate substantially
including:
. quarterly variations in operating results;
. competition;
. announcements of technological innovations or new products by us or our
competitors;
. product enhancements by us or our competitors;
. regulatory changes;
. any differences in actual results and results expected by investors and
analysts;
. changes in financial estimates by securities analysts; and
. other events or factors.
In addition, the stock market has experienced volatility that has affected
the market prices of equity securities of many companies, and that often has
been unrelated to the operating performance of these companies. These broad
market fluctuations may adversely affect the market price of our common stock.
The sale of a substantial number of shares of our common stock in the public
market could adversely affect the market price of our common stock.
A substantial number of our shares of common stock are eligible for sale
under an exemption from the registration requirements or are subject to
registration rights pursuant to which holders may require us to register those
shares in the future. Sales or the expectation of sales of a substantial number
of shares of our common stock in the public market could adversely affect the
prevailing market price of our common stock.
Our large shareholders face voting and transfer restrictions that could
deprive shareholders of opportunities to realize takeover premiums for their
shares or affect our stock price.
The voting and transfer restrictions described in the next two paragraphs
could make it difficult for any person or group of persons acting in concert,
other than some existing shareholders, to acquire a substantial ownership
position in, or control of, us. To the extent that these provisions discourage
takeover attempts, they could deprive shareholders of opportunities to realize
takeover premiums for their shares or could depress the trading price of our
common stock.
Voting restrictions. Our bye-laws provide that each share of our common
stock will have one vote. However, if the shares controlled by any person
constitute more than 9.5% or, in the case of Canadian Imperial Bank of Commerce
and its affiliates, more than 20% of the total votes cast at a shareholder
meeting in connection with any matter on which our shareholders are voting, the
voting rights of that shareholder's shares will be limited to 9.5%, or 20% in
the case of Canadian Imperial Bank of Commerce and its affiliates, of the total
votes cast in connection with that matter. The additional votes of those shares
will be allocated to the other holders of common stock on a pro rata basis. The
other holders who were allocated these additional votes may not exceed the
above limitation as a result of this allocation.
Transfer restrictions. The bye-laws also prohibit any transfer of shares of
common stock that, subject to specified exceptions, would result in a natural
person beneficially owning shares in excess of 5% of the outstanding shares of
common stock or a group of persons or any person other than a natural person
25
beneficially owning shares in excess of 9.5% of the outstanding shares of
common stock, without the approval of a majority of the members of the board of
directors and shareholders holding at least a majority of the total votes cast
at the shareholder meeting called to approve that transfer.
Risk Factors Relating to Our Business
We cannot assure you of the successful integration of newly acquired
businesses. We cannot assure you that the expected benefits will be achieved.
Part of our growth strategy is to make selective strategic acquisitions of
businesses operated by others. Achieving the benefits of these acquisitions
will depend in part on the integration of those businesses with our business in
an efficient manner. We cannot assure you that this will happen or that it will
happen in a timely manner. The consolidation of operations following these
acquisitions will often require substantial attention from management. The
diversion of management attention and any difficulties encountered in the
transition and integration process could have a material adverse effect on the
revenue, levels of expenses and operating results of the combined company. We
cannot assure you that the combined company will realize any of the anticipated
benefits of any acquisition.
It may be difficult to evaluate our business because we have a limited
operating history.
We were organized in March 1997 and, with the exception of our Frontier,
Global Marine Systems and Racal Telecom subsidiaries, have a limited operating
history. Because of this limited history and our rapid growth through
successive acquisitions, it may be difficult for potential investors to
evaluate the performance of our operations. In particular, comparisons of our
results of operations from one period to another may not be fully indicative of
our current ability to conduct our business.
We may encounter difficulties in completing our cable systems currently under
development.
Our ability to achieve our strategic objectives will depend in large part
upon the successful, timely and cost-effective completion of our cable systems
currently under development, as well as on achieving substantial capacity sales
on these systems once they become operational and on our other operational
systems. The construction of these systems will be affected by a variety of
factors, uncertainties and contingencies, many of which are beyond our control,
including:
. our ability to manage their construction effectively;
. our ability to obtain all construction and operating permits and
licenses;
. third-party contractors performing their obligations on schedule; and
. our ability to enter into favorable construction contracts with a
limited number of suppliers.
These factors may significantly delay or prevent completion of one or more
of our systems currently under development, which could have a material adverse
effect on our business, financial condition and results of operations.
We cannot assure you that each of these systems will be completed at the
cost and in the time frame currently estimated by us, or even at all. Although
we award contracts for construction of our systems to suppliers who in most
cases are expected to be bound by a fixed-price construction cost schedule and
to provide guarantees in respect of completion dates and system design
specifications, we cannot assure you that the actual construction costs or the
time required to complete these systems will not exceed our current estimates.
These circumstances could have a material adverse effect on our business,
financial condition and results of operations.
26
Our revenue growth plan depends on product and service expansion.
We intend to grow revenue and profits by:
. introducing new services and products;
. developing or acquiring additional cable systems; and
. upgrading capacity on our planned systems.
Our inability to effect these expansions of our products and services could
have a material adverse effect on our business, financial condition and results
of operations.
We face competition which may reduce demand for our products and services.
The international telecommunications industry is highly competitive. We
compete primarily on the basis of price, availability, service quality and
reliability, customer service and the location of our systems and services. The
ability of our competitors to provide comparable products and services at
similar prices could have a material adverse effect on demand for our products
and services. In addition, much of our planned growth is predicated upon the
growth in demand for international telecommunications capacity and services. We
cannot assure you that this anticipated demand growth will occur.
We are growing rapidly in a changing industry.
Our strategy is to be the premier provider of global broadband
telecommunication services for both wholesale and retail customers. As a result
of this aggressive strategy, we are experiencing rapid expansion and expect it
to continue for the foreseeable future. This growth has increased our operating
complexity. At the same time, the international telecommunications industry is
changing rapidly due to, among other things:
. the easing of regulatory constraints;
. the privatization of established carriers;
. the expansion of telecommunications infrastructure;
. the growth in demand for bandwidth caused by expansion of Internet and
data transmissions;
. the globalization of the world's economies; and
. the changing technology for wired, wireless and satellite communication.
We cannot assure you that we will succeed in adapting to the rapid changes
in the international telecommunications industry.
We may have difficulty in obtaining the additional financing required to
develop our business.
In order to further implement our aggressive growth strategy, we anticipate
that we will require substantial additional equity and debt financing. Under
our business plan, we and our affiliates expect to require significant
financing by the end of 2000 to build out the Global Crossing network and
provide additional services to our customers. Obtaining additional financing
will be subject to a number of factors, including:
. the state of operations of our company;
. our actual or anticipated results of operations, financial condition and
cash flows;
. investor sentiment towards companies with substantial international
operations; and
. generally prevailing market conditions.
27
If additional funds are raised through the issuance of equity securities,
the percentage ownership of our then current shareholders will be reduced, and
the new equity securities may have rights, preferences or privileges senior to
those of the holders of our common stock. If additional funds are raised
through the issuance of debt securities, these securities would have some
rights, preferences and privileges senior to those of the holders of our common
stock, and the terms of this debt could impose restrictions on our operations
and result in significant interest expense to us. In the event that we are
unable to raise sufficient financing on satisfactory terms and conditions in
the future, our company would be adversely affected.
We face price declines that could adversely affect our business.
Advances in fiber optic technology have resulted in significant per circuit
price declines in the fiber optic cable transmission industry. Recent changes
in technology caused prices for telecommunications capacity and services to go
down even further. If there is less demand than we project or a bigger drop in
prices than we project, there could be a material adverse effect on our
business, financial condition and results of operations. We cannot assure you,
even if our projections with respect to those factors are realized, that we
will be able to implement our strategy or that our strategy will be successful
in the rapidly evolving telecommunications market.
We confront several system risks that could affect our operations.
Each of our systems is and will be subject to the risks inherent in a large-
scale, complex fiber optic telecommunications system. The operation,
administration, maintenance and repair of our systems requires the coordination
and integration of sophisticated and highly specialized hardware and software
technologies and equipment located throughout the world. We cannot assure you
that our systems will continue to function as expected in a cost-effective
manner. The failure of the hardware or software to function as required could
render a cable system unable to perform at design specifications.
Each of our undersea systems either has or is expected to have a design life
of generally 25 years, while each of our terrestrial systems either has or is
expected to have a design life of at least 20 years. The economic lives of
these systems, however, are expected to be shorter than their design lives, and
we cannot assure you of the actual useful life of any of these systems. A
number of factors will ultimately affect the useful life of each of our
systems, including:
. quality of construction;
. unexpected damage or deterioration; and
. technological or economic obsolescence.
Failure of any of our systems to operate for its full design life could have
a material adverse effect on our business, financial condition and results of
operations.
Our success depends on our ability to maintain, hire and successfully integrate
key personnel.
Our future success depends on the skills, experience and efforts of our
officers and key technical and sales employees. In particular, our senior
management has significant experience in the telecommunications and Internet
industries, and the loss of any of them could negatively affect our ability to
execute our business strategy. In addition, we cannot assure you that we will
be able to integrate new management into our existing operations. Competition
for these individuals is intense, and we may not be able to attract, motivate
and retain highly skilled qualified personnel. We do not have "key person" life
insurance policies covering any of our employees.
28
We face risks associated with international operations.
Because we will derive substantial revenue from international operations and
intend to have substantial physical assets in several jurisdictions along our
routes, our business is subject to risks inherent in international operations,
including:
. political and economic conditions;
. unexpected changes in regulatory environments;
. exposure to different legal standards; and
. difficulties in staffing and managing operations.
We have not experienced any material adverse effects with respect to our
foreign operations arising from these factors. However, problems associated
with these risks could arise in the future. Finally, managing operations in
multiple jurisdictions may place further strain on our ability to manage our
overall growth.
Because many of our customers deal predominantly in foreign currencies, we may
be exposed to exchange rate risks and our net income may suffer due to currency
translations.
We primarily invoice for our services in United States dollars; however,
most of our customers and many of our prospective customers derive their
revenue in currencies other than United States dollars. The obligations of
customers with substantial revenue in foreign currencies may be subject to
unpredictable and indeterminate increases in the event that such currencies
devalue relative to the United States dollar. Furthermore, such customers may
become subject to exchange control regulations restricting the conversion of
their revenue currencies into United States dollars. In such event, the
affected customers may not be able to pay us in United States dollars. In
addition, where we invoice for our services in currencies other than United
States dollars, our net income may suffer due to currency translations in the
event that such currencies devalue relative to the United States dollar and we
do not elect to enter into currency hedging arrangements in respect of those
payment obligations.
Our operations are subject to regulation in the United States and abroad and
require us to obtain and maintain a number of governmental licenses and
permits. If we fail to comply with those regulatory requirements or obtain and
maintain those licenses and permits, we may not be able to conduct our
business.
In the United States, our intrastate, interstate, and international
telecommunications networks and services are subject to regulation at the
federal, state, and local levels. We also have facilities and provide services
in numerous countries in Europe, Latin America, and Asia. Our operations in
those countries are subject to regulation at the national level and, in some
cases, at the state, provincial, and local levels.
. Our interstate and international operations in the United States are
governed by the Communications Act of 1934, as amended by the
Telecommunications Act of 1996. There are several ongoing proceedings at
the FCC and in the federal courts regarding the implementation of
various aspects of the Telecommunications Act. The outcomes of these
proceedings may affect the manner in which we are permitted to provide
our services in the United States and may have a material adverse effect
on our operations.
. The intrastate activities of our local telephone service companies are
regulated by the states in which they do business. A number of states in
which we operate are conducting proceedings related to the provision of
services in a competitive telecommunications environment. These
proceedings may affect the manner in which we are permitted to provide
our services in one or more states and may have a material adverse
effect on our operations.
29
. Our operations outside the United States are governed by the laws of the
countries in which we operate. The regulation of telecommunications
networks and services outside the United States varies widely. In some
countries, the range of services that we are legally permitted to
provide may be limited. In other countries, existing telecommunications
legislation is in the process of development, is unclear or
inconsistent, or is applied in an unequal or discriminatory fashion. Our
inability or failure to comply with the telecommunications laws and
regulations of one or more of the countries in which we operate could
result in the temporary or permanent suspension of operations in one or
more countries. We also may be prohibited from entering certain
countries at all or from providing all of our services in one or more
countries. In addition, many of the countries in which we operate are
conducting proceedings that will affect the implementation of their
telecommunications legislation. We cannot be certain of the outcome of
these proceedings. These proceedings may affect the manner in which we
are permitted to provide our services in these countries and may have a
material adverse effect on our operations.
. In the ordinary course of constructing our networks and providing our
services we are required to obtain and maintain a variety of
telecommunications and other licenses and authorizations in the
countries in which we operate. We also must comply with a variety of
regulatory obligations. Our failure to obtain or maintain necessary
licenses and authorizations, or to comply with the obligations imposed
upon license-holders in one or more countries, may result in sanctions,
including the revocation of authority to provide services in one or more
countries.
We depend on third parties for many functions. If the services of those third
parties are not available to us, we may not be able to conduct our business.
We depend and will continue to depend upon third parties to:
. construct some of our systems and provide equipment and maintenance;
. provide access to a number of origination and termination points of our
systems in various jurisdictions;
. construct and operate landing stations in a number of those
jurisdictions;
. acquire rights of way;
. provide terrestrial capacity to our customers through contractual
arrangements; and
. act as joint venture participants with regard to some of our current and
potential future systems.
We cannot assure you that third parties will perform their contractual
obligations or that they will not be subject to political or economic events
which may have a material adverse effect on our business, financial condition
and results of operations. If they fail to perform their obligations, we may
not be able to conduct our business. If any of our joint venture participants
experiences a change in strategic direction such that their strategy regarding
our mutual joint venture diverges from our own, we may not be able to realize
the benefits anticipated to be derived from the joint venture.
We have substantial leverage which may limit our ability to comply with the
terms of our indebtedness and may restrict our ability to operate.
Our significant indebtedness could adversely affect us by leaving us with
insufficient cash to fund operations and impairing our ability to obtain
additional financing. The amount of our debt could have important consequences
for our future, including, among other things:
. cash from operations may be insufficient to meet the principal and
interest on our indebtedness as it becomes due;
. payments of principal and interest on borrowings may leave us with
insufficient cash resources for our operations; and
. restrictive debt covenants may impair our ability to obtain additional
financing.
30
We have incurred a high level of debt. As of December 31, 1999, we and our
consolidated subsidiaries had a total of $8,051 million of total liabilities,
including approximately $5,056 million in senior indebtedness, of which $1,295
million was secured. As of that date, we additionally had outstanding
cumulative convertible preferred stock with a face value of $1,650 million. Our
subsidiary, Global Crossing Holdings, also has mandatorily redeemable preferred
stock outstanding with a face value of $500 million. In addition, our Pacific
Crossing joint venture entered into an $850 million non-recourse credit
facility, under which it had incurred $750 million of indebtedness as of
December 31, 1999.
Our ability to repay our debt depends upon a number of factors, many of
which are beyond our control. In addition, we rely on dividends, loan
repayments and other intercompany cash flows from our subsidiaries to repay our
obligations. Our operating subsidiaries have entered into a senior secured
corporate credit facility. Accordingly, the payment of dividends from these
operating subsidiaries and the making and repayments of loans and advances are
subject to statutory, contractual and other restrictions.
In addition, if we are unable to generate sufficient cash flow to meet our
debt service requirements, we may have to renegotiate the terms of our long-
term debt. We cannot assure you that we would be able to renegotiate
successfully those terms or refinance our indebtedness when required or that
satisfactory terms of any refinancing would be available. If we were not able
to refinance our indebtedness or obtain new financing under these
circumstances, we would have to consider other options, such as:
. sales of some assets;
. sales of equity;
. negotiations with our lenders to restructure applicable indebtedness; or
. other options available to us under applicable law.
Our principal shareholders may be able to influence materially the outcome of
shareholder votes.
As of March 3, 2000, Pacific Capital Group and its affiliates had a 11.98%
beneficial ownership interest in us. We have entered into various transactions
with Pacific Capital Group and its affiliates and assumed the on-going
development of some of our systems from an affiliate of Pacific Capital Group.
Mr. Gary Winnick, chairman of our board of directors, controls Pacific Capital
Group and its subsidiaries. In addition, several of our other officers and
directors are affiliated with Pacific Capital Group. Furthermore, as of March
3, 2000, Canadian Imperial Bank of Commerce and its affiliates had a 9.69%
beneficial ownership interest in us. Canadian Imperial Bank of Commerce and its
affiliates have acted as underwriter, lender or initial purchaser in several of
our financial transactions in connection with the development and construction
of our systems. Several members of our board of directors are employees of an
affiliate of Canadian Imperial Bank of Commerce.
As of March 3, 2000, Pacific Capital Group and Canadian Imperial Bank of
Commerce collectively beneficially owned 21.67% of the outstanding shares of
our common stock. Accordingly, Pacific Capital Group and Canadian Imperial Bank
of Commerce may be able to influence materially the outcome of matters
submitted to a vote of our shareholders, including the election of directors.
Officers and directors own a substantial portion of us and may have conflicts
of interest.
Our executive officers and directors have substantial equity interests in
us. As of March 3, 2000, all our directors and executive officers as a group
collectively beneficially owned 24.72% of our outstanding common stock,
including shares beneficially owned by Pacific Capital Group and certain shares
beneficially owned by Canadian Imperial Bank of Commerce. Some of these
individuals have also received amounts from us due to advisory services fees
paid to Pacific Capital Group and its affiliates.
31
Some of our directors and executive officers also serve as officers and
directors of other companies. Additionally, some of our officers and directors
are active investors in the telecommunications industry. Service as one of our
directors or officers and as a director or officer of another company could
create conflicts of interest when the director or officer is faced with
decisions that could have different implications for us and the other company.
A conflict of interest could also exist with respect to allocation of time and
attention of persons who are our directors or officers and directors and
officers of another company. The pursuit of these other business interests
could distract these officers from pursuing opportunities on our behalf. These
conflicts of interest could have a material adverse effect on our business,
financial condition and results of operations.
We cannot predict our future tax liabilities.
We believe that a significant portion of the income derived from our
undersea systems will not be subject to tax by any of (1) Bermuda, which
currently does not have a corporate income tax, or (2) some other countries in
which we conduct activities or in which our customers are located. However, we
base this belief upon:
. the anticipated nature and conduct of our business, which may change;
and
. our understanding of our position under the tax laws of the various
countries in which we have assets or conduct activities, which position
is subject to review and possible challenge by taxing authorities and to
possible changes in law, which may have retroactive effect.
We cannot predict the amount of tax to which we may become subject and
cannot be certain that any of these factors would not have a material adverse
effect on our business, financial condition and results of operations.
Our shareholders may be subject to Foreign Personal Holding Company, Passive
Foreign Investment Company, Controlled Foreign Corporation and Personal
Holding Company rules.
We believe that neither we nor any of our non-United States subsidiaries
are a foreign personal holding company and do not expect that either we or any
of our affiliates will become a foreign personal holding company. However, we
cannot assure you in this regard. If one of our shareholders is a United
States person and we or one of our non-United States subsidiaries are
classified as a foreign personal holding company, then that shareholder would
be required to pay tax on its pro rata share of our or our relevant non-United
States subsidiary's undistributed foreign personal holding income. We intend
to manage our affairs so as to attempt to avoid or minimize having income
imputed to United States persons under these rules, to the extent this
management of our affairs would be consistent with our business goals,
although we cannot assure you in this regard.
We believe that we are not a passive foreign investment company and do not
expect to become a passive foreign investment company in the future. However,
we cannot assure you in this regard. In addition, our expectations are based,
in part, on interpretations of existing law that we believe are reasonable,
but which have not been approved by any taxing authority. If we were a passive
foreign investment company, then any of our shareholders that is a United
States person could be liable to pay tax at the then prevailing rates on
ordinary income plus an interest charge upon some distributions by us or when
that shareholder sold our capital stock at a gain.
Furthermore, additional tax considerations would apply if we or any of our
affiliates were a controlled foreign corporation or a personal holding
company.
32
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
We have included or incorporated by reference in this prospectus forward-
looking statements that state our own or our management's intentions, beliefs,
expectations or predictions for the future. Forward-looking statements are
subject to a number of risks, assumptions and uncertainties which could cause
our actual results to differ materially from those projected in the forward-
looking statements. These risks, assumptions and uncertainties include:
. the ability to complete systems within the currently estimated time
frames and budgets;
. the ability to compete effectively in a rapidly evolving and price
competitive marketplace;
. changes in the nature of telecommunications regulation in the United
States and other countries;
. changes in business strategy;
. the successful integration of newly acquired businesses;
. the impact of technological change; and
. other risks referenced from time to time in our filings with the SEC.
USE OF PROCEEDS
We will not receive any proceeds from sales of securities under this
prospectus.
33
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
The following table presents our historical ratios of earnings to fixed
charges and preferred dividends for the periods indicated:
Period From
Year Ended Year Ended March 19, 1997
December 31, December 31, (Date of Inception)
1999 1998 to December 31, 1997
------------ ------------ --------------------
Ratio...................... -- -- --
Deficiency................. $(49,607) $(95,371) $(12,850)
For the purposes of this computation, earnings are defined as income (loss)
before income taxes plus fixed charges and preferred dividends. Fixed charges
consist of interest expense, including amortization of deferred debt issuance
costs and the interest portion of capital lease obligations, and the portion of
rental expense that is representative of the interest factor, deemed to be one-
third of minimum operating lease rentals.
DIVIDEND POLICY
We do not anticipate paying dividends on our common stock in the foreseeable
future. The terms of some of our debt instruments place limitations on our
ability to pay dividends. Future dividends on our common stock, if any, will be
at the discretion of our board of directors and will depend on, among other
things, our operations, capital requirements and surplus, general financial
condition, contractual restrictions and such other factors as our board of
directors may deem relevant.
DILUTION
Our net tangible book value at December 31, 1999 was approximately $(339)
million or $(0.42) per share of common stock. Net tangible book value per share
represents the amount of our tangible assets, meaning (1) total assets less
intangible assets, (2) reduced by our total liabilities and our mandatorily
redeemable preferred stock and (3) divided by the number of shares of common
stock outstanding.
After giving effect to 12,206,480 shares of our common stock covered by this
prospectus related to the conversion of the preferred stock at the conversion
price of $53.25 per share, our adjusted net tangible book value as of December
31, 1999 would have been appropriately $311 million or $0.39 per share. This
represents an immediate increase in net tangible book value of $0.81 per share
to existing shareholders and an immediate dilution of $52.86 per share to new
investors purchasing shares of our common stock under this prospectus. The
following table illustrates this per share dilution:
Conversion price per share............................... $53.25
Net tangible book value per share before the
conversions........................................... $(0.42)
Increase per share attributable to conversions under
this prospectus....................................... $ 0.81
------
Adjusted net tangible book value per share after the
conversions............................................. $ 0.39
------
Dilution per share to new investors...................... $52.86
======
34
DESCRIPTION OF THE PREFERRED STOCK
The following section describes all the material terms of the preferred
stock, but does not purport to be complete and is subject to and qualified in
its entirety by reference to the certificate of designations relating to the
preferred stock. We have filed the certificate of designations as an exhibit to
the registration statement of which this prospectus is a part. You may also
obtain a copy of the certificate of designations by contacting us at the
address provided under "Where You Can Find More Information" on page ii.
General
As of March 20, 2000, there were 2,600,000 shares of our 7% cumulative
convertible preferred stock, $0.01 par value per share and $250.00 liquidation
preference per share, outstanding. The shares of preferred stock are validly
issued, fully paid and nonassessable.
The holders of the shares of preferred stock have no preemptive or
preferential rights to purchase or subscribe to stock, obligations, warrants or
any other of our securities.
Ranking
The preferred stock ranks, with respect to dividend rights and upon
liquidation, winding up and dissolution:
. junior to all our existing and future debt obligations;
. junior to "senior stock", which is each other class or series of
our capital stock other than (a) our common stock and any other
class or series of our capital stock the terms of which provide
that that class or series will rank junior to the preferred stock
and (b) any other class or series of our capital stock the terms
of which provide that that class or series will rank on a parity
with the preferred stock;
. on a parity with "parity stock", which is our 6 3/8% cumulative
convertible preferred stock and each other class or series of our
capital stock that has terms which provide that that class or
series will rank on a parity with the preferred stock;
. senior to "junior stock", which is our common stock and each class
or series of our capital stock that has terms which provide that
that class or series will rank junior to the preferred stock.
The terms "senior stock", "parity stock" and "junior stock" include
warrants, rights, calls or options exercisable for or convertible into that
type of stock.
Dividends
The holders of the shares of preferred stock are entitled to receive, when,
as and if declared by our board of directors out of funds legally available for
payment, cumulative dividends per share at the annual rate of 7% of the $250.00
liquidation preference per share of preferred stock. The dividend rate is
equivalent to $17.50 per share annually. The right of the holders of the shares
of preferred stock to receive dividend payments is subject to the rights of any
holders of shares of senior stock and parity stock.
Dividends are payable in equal amounts on February 1, May 1, August 1 and
November 1 of each year, beginning on February 1, 2000. If any of those dates
is not a business day, then dividends will be payable on the next succeeding
business day. Dividends will accrue from the most recent date as to which
dividends will have been paid or, if no dividends have been paid, from the date
of the original issuance of the shares of preferred stock. The first dividend
period began on December 15, 1999 and will be shorter than a full quarter.
35
Dividends will be payable to holders of record as they appear in our stock
records at the close of business on January 15, April 15, July 15 and October
15 of each year or on a record date which will be fixed by our board of
directors and which will be not more than 60 days and not less than 10 days
before the applicable quarterly dividend payment date. Dividends will be
cumulative from each quarterly dividend payment date, whether or not we will
have funds legally available for the payment of those dividends. Accumulations
of dividends on shares of preferred stock will not bear interest. Dividends
payable on the shares of preferred stock for any period shorter than a full
quarterly period will be computed on the basis of a 360-day year consisting of
twelve 30-day months.
Dividends on the shares of preferred stock will be payable in cash. We will
have the option to pay all or any part of a dividend by delivering shares of
our common stock to the transfer agent. In this case, we must deliver to the
transfer agent a number of shares of our common stock which, when resold by the
transfer agent, will result in net cash proceeds sufficient to pay the
applicable dividend in cash to the holders of the shares of preferred stock.
The holders of shares of preferred stock will not receive any shares of our
common stock as dividend. If the proceeds of any resale of shares of our common
stock do not result in sufficient cash proceeds to pay a dividend, we will
promptly provide cash to the transfer agent in an amount equal to the
difference between the amount of the dividend and the proceeds of that resale.
All shares of common stock that we may deliver to the transfer agent as
provided in this paragraph for the payment of dividends will be registered
under the Securities Act.
We will not (1) declare or pay any dividend on or (2) set apart any sum for
the payment of dividends on any outstanding shares of preferred stock with
respect to any dividend period unless we have declared and paid or have
declared and set apart a sufficient sum for the payment of all dividends on all
outstanding shares of this issue of preferred stock for all preceding dividend
periods.
We will not (1) declare, pay or set apart funds for the payment of any
dividend or other distribution with respect to any junior stock or parity stock
or (2) redeem, purchase or otherwise acquire for consideration junior stock or
parity stock through a sinking fund or otherwise, unless we have paid or set
apart funds for the payment of all accrued and unpaid dividends with respect to
the shares of this issue of preferred stock and any parity stock at the time
those dividends are payable. As an exception to clause (1) of this paragraph,
we will be able to (a) declare and pay dividends on junior stock or parity
stock which are payable solely in shares of parity stock or junior stock, in
the case of parity stock, or junior stock, in the case of junior stock, or by
the increase in the liquidation value of junior stock or parity stock and (b)
redeem, purchase or otherwise acquire junior stock or parity stock in exchange
for consideration consisting of parity stock or junior stock, in the case of
parity stock, or junior stock, in the case of junior stock.
36
Redemption
Optional Redemption
Except as provided below under "--Tax Redemption", we may not redeem any
shares of preferred stock before December 15, 2004. After that date, we will
have the option to redeem for cash any or all shares of preferred stock, at any
time or from time to time, upon not less than 30 nor more than 60 days' prior
notice sent by first class mail to each holder's registered address, at the
following redemption prices, expressed as a percentage of the liquidation
preference per share, plus accumulated and unpaid dividends to the date of
redemption, beginning on December 15 of each of the following years:
Redemption
Period Price
------ ----------
2004.......................................................... 103.5%
2005.......................................................... 102.8%
2006.......................................................... 102.1%
2007.......................................................... 101.4%
2008.......................................................... 100.7%
2009 and thereafter........................................... 100.0%
Tax Redemption
For purposes of this section, "additional amounts" means amounts that we
must pay to the holders of the shares of preferred stock as additional
dividends, to make up for any deduction or withholding for any present or
future taxes, assessments or other governmental charges imposed by any
jurisdiction, political subdivision or taxing authority described in the second
sentence of the fourth paragraph of this section in respect of any amounts that
we or a successor corporation must pay with respect to the shares of preferred
stock, so that the net amounts paid to the holders of the shares of preferred
stock, after that deduction or withholding, will be not less than the amount
specified in those shares. However, we will not be obligated to pay additional
amounts to any holder that:
. resides in or is a citizen of the jurisdiction, political
subdivision or taxing authority imposing the taxes, assessments or
other governmental charges that would otherwise trigger our
obligation to pay additional amounts; or
. is a fiduciary, partnership or limited liability company if, and
to the extent that, the payment of additional amounts would be
required by a jurisdiction, political subdivision or taxing
authority described in the second sentence of the fourth paragraph
of this section to be included in the income for tax purposes of a
beneficiary or settlor with respect to that fiduciary or a member
of that partnership or limited liability company who would not
have been entitled to any additional amounts had that beneficiary,
settlor or member held those shares of preferred stock directly.
In addition, we will not be obligated to pay any additional amounts to a
holder on account of:
. any tax, assessment or other governmental charge that would not
have been imposed but for (a) the existence of any present or
former connection between the holder, or certain other persons,
and the taxing jurisdiction or political subdivision, (b) the
presentation of shares of preferred stock for payment after a
specified time period or (c) the presentation of shares of
preferred stock for payment in Bermuda or any political
subdivision of or in Bermuda, unless those shares could not have
been presented for payment elsewhere;
. any estate, inheritance, gift, sales, transfer, personal property
or similar tax, assessment or other governmental charge;
37
. any tax, assessment or other governmental charge that is payable
otherwise than by withholding from payment of the liquidation
preference of or any dividends on the shares of preferred stock;
. any tax, assessment or other governmental charge that is imposed
or withheld by reason of the failure by the holder or the
beneficial owner of the shares of preferred stock to comply with a
request by us to (a) provide information, documents or other
evidence concerning the nationality, residence or identity of the
holder or beneficial owner or (b) make and deliver any declaration
or other similar claim, other than a claim for refund of a tax,
assessment or other governmental charge withheld by us, or satisfy
any information or reporting requirements, which, in the case of
clauses (a) or (b), is required or imposed by a statute, treaty,
regulation or administrative practice of the taxing jurisdiction
as a precondition to exemption from all or part of that tax,
assesment or other governmental charge; or
. any combination of the items identified by bullet points above.
We will have the option to redeem for cash any or all shares of preferred
stock at any time or from time to time, upon not less than 30 nor more than 60
days' prior notice sent by first-class mail to each holder's registered
address, at 100% of the liquidation preference per share plus accumulated and
unpaid dividends to the date of redemption, if there is a "change in tax law"
that would require us or any successor corporation to pay additional amounts
with respect to the shares of preferred stock on the next succeeding dividend
payment date, and the payment of those additional amounts cannot be avoided by
the use of any reasonable measures available to us or any successor
corporation.
A "change in tax law" that would trigger the provisions of the preceding
paragraph would be (a) a change in or amendment to laws, regulations or rulings
of any jurisdiction, political subdivision or taxing authority described in the
next sentence, (b) a change in the official application or interpretation of
those laws, regulations or rulings or (c) any execution of or amendment to any
treaty affecting taxation to which any jurisdiction, political subdivision or
taxing authority described in the next sentence is party. The jurisdictions,
political subdivisions and taxing authorities referred to in the previous
sentence are (a) Bermuda or any political subdivision or governmental authority
of or in Bermuda with the power to tax, (b) any jurisdiction, other than the
United States, from or through which we or our paying agent is making payments
on the shares of preferred stock or any political subdivision or governmental
authority of or in that jurisdiction with the power to tax or (c) any other
jurisdiction, other than the United States, in which we or a successor
corporation is organized or any political subdivision or governmental authority
of or in that jurisdiction with the power to tax.
In addition, we will have the option to redeem for cash any or all shares of
preferred stock at any time or from time to time, upon not less than 30 nor
more than 60 days' prior notice sent by first-class mail to each holder's
registered address, at 100% of the liquidation preference per share plus
accumulated and unpaid dividends to the date of redemption, if the entity
formed by a consolidation, merger or amalgamation involving Global Crossing or
the entity to which we convey, transfer or lease substantially all our
properties and assets is required to pay additional amounts in respect of any
tax, assessment or governmental charge imposed on any holder of shares of
preferred stock as a result of a change in tax law that occurred after the date
of the consolidation, merger, amalgamation, conveyance, transfer or lease.
Provisions Relating to the Optional and Tax Redemption
In the case of any partial redemption, we will select the shares of
preferred stock to be redeemed on a pro rata basis, by lot or any other method
that we, in our discretion, deem fair and appropriate. However, we may redeem
all the shares held by holders of fewer than 100 shares or who would hold fewer
than 100 shares as a result of the redemption.
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If the redemption date falls after a dividend payment record date and before
the related dividend payment date, the holders of the shares of preferred stock
at the close of business on that dividend payment record date will be entitled
to receive the dividend payable on those shares on the corresponding dividend
payment date, even if those shares are redeemed after that dividend payment
record date.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up of
Global Crossing or a reduction or decrease in our capital stock resulting in a
distribution of assets to the holders of any class or series of our capital
stock, each holder of shares of preferred stock will be entitled to payment out
of our assets available for distribution of an amount equal to the then
effective liquidation preference per share of preferred stock held by that
holder, plus all accumulated and unpaid dividends on those shares to the date
of that liquidation, dissolution, winding up or reduction or decrease in
capital stock, before any distribution is made on any junior stock, including
our common stock, but after any distributions on any of our indebtedness or
shares of our senior stock. After payment in full of the liquidation preference
and all accumulated and unpaid dividends to which holders of shares of
preferred stock are entitled, the holders will not be entitled to any further
participation in any distribution of our assets. If, upon any voluntary or
involuntary liquidation, dissolution or winding up of Global Crossing or a
reduction or decrease in our capital stock, the amounts payable with respect to
shares of preferred stock and all other parity stock are not paid in full, the
holders of shares of preferred stock and the holders of the parity stock will
share equally and ratably in any distribution of our assets in proportion to
the full liquidation preference and all accumulated and unpaid dividends to
which each such holder is entitled.
Neither the voluntary sale, conveyance, exchange or transfer, for cash,
shares of stock, securities or other consideration, of all or substantially all
of our property or assets nor the consolidation, merger or amalgamation of
Global Crossing with or into any corporation or the consolidation, merger or
amalgamation of any corporation with or into Global Crossing will be deemed to
be a voluntary or involuntary liquidation, dissolution or winding up of Global
Crossing or a reduction or decrease in our capital stock.
We are not required to set aside any funds to protect the liquidation
preference of the shares of preferred stock, although the liquidation
preference will be substantially in excess of the par value of the shares of
the preferred stock.
Voting Rights
Except as required under Bermuda law or as provided in the certificate of
designations, the holders of the shares of preferred stock will not be entitled
to vote on any matter as our shareholders, except as follows:
(1) The affirmative vote of the holders of at least a majority of the
outstanding shares of preferred stock, voting with holders of shares of all
other series of preferred stock affected in the same way as a single class,
in person or by proxy, at a special or annual meeting called for that
purpose, or by written consent in lieu of meeting, will be required to amend,
repeal or change any provisions of the certificate of designations in any
manner which would adversely affect, alter or change the powers, preferences
or special rights of the preferred stock and any of those securities affected
in the same way. With respect to any matter on which the holders are entitled
to vote as a separate class, each share of preferred stock will be entitled
to one vote.
(2) If at any time the equivalent of six quarterly dividends payable on
the shares of preferred stock are accrued and unpaid, whether or not
consecutive and whether or not declared, the holders of all outstanding
shares of preferred stock and any parity stock or senior stock having similar
voting rights then exercisable, voting separately as a single class without
regard to series, will be entitled to elect at the next annual meeting of our
shareholders two directors to serve until all dividends accumulated and
unpaid on any of those voting shares have been paid or declared and funds set
aside to provide for payment in full. In exercising the voting rights
described in this paragraph, each outstanding share of preferred stock will
be entitled to one vote.
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The creation, authorization or issuance of any other class or series of our
capital stock or the increase or decrease in the amount of authorized capital
stock of any of those classes or series or of the preferred stock, or any
increase, decrease or change in the par value of any class or series of capital
stock, including the preferred stock, will not require the consent of the
holders of the preferred stock and will not be deemed to affect adversely,
alter or change the powers, preferences and special rights of the shares of
preferred stock.
Conversion Rights
Each share of preferred stock will be convertible at any time and from time
to time, at the option of the holder, into fully paid and nonassessable shares
of our common stock. The number of shares of common stock deliverable upon
conversion of a share of preferred stock, adjusted as provided under "--
Adjustments to the Conversion Price", is referred to in this document as the
"conversion ratio". The conversion ratio will be 4.6948 and will equal the
ratio the nominator of which will be the $250.00 liquidation preference per
share and the denominator of which will be the conversion price. The conversion
price will be $53.25, subject to adjustment from time to time.
A holder of shares of preferred stock may convert any or all of those shares
by surrendering to us at our principal office or at the office of the transfer
agent, as may be designated by our board of directors, the certificate or
certificates for those shares of preferred stock accompanied by a written
notice stating that the holder elects to convert all or a specified whole
number of those shares in accordance with the provisions of this section and
specifying the name or names in which the holder wishes the certificate or
certificates for shares of common stock to be issued. In case the notice
specifies a name or names other than that of the holder, the notice will be
accompanied by payment of all transfer taxes payable upon the issuance of
shares of common stock in that name or names. Other than those taxes, we will
pay any documentary, stamp or similar issue or transfer taxes that may be
payable in respect of any issuance or delivery of shares of common stock upon
conversion of shares of preferred stock. As promptly as practicable after the
surrender of that certificate or certificates and the receipt of the notice
relating to the conversion and payment of all required transfer taxes, if any,
or the demonstration to our satisfaction that those taxes have been paid, we
will deliver or cause to be delivered (a) certificates representing the number
of validly issued, fully paid and nonassessable full shares of our common stock
to which the holder, or the holder's transferee, of shares of preferred stock
being converted will be entitled and (b) if less than the full number of shares
of preferred stock evidenced by the surrendered certificate or certificates is
being converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by the surrendered certificate or certificates less
the number of shares being converted. This conversion will be deemed to have
been made at the close of business on the date of giving the notice and of
surrendering the certificate or certificates representing the shares of
preferred stock to be converted so that the rights of the holder thereof as to
the shares being converted will cease except for the right to receive shares of
common stock and accrued and unpaid dividends with respect to the shares of
preferred stock being converted, and the person entitled to receive the shares
of common stock will be treated for all purposes as having become the record
holder of those shares of common stock at that time.
If a holder of shares of preferred stock exercises conversion rights, upon
delivery of the shares for conversion, those shares will cease to accrue
dividends as of the end of the day immediately preceding the date of
redemption, but those shares will continue to be entitled to receive all
accrued dividends which the holder is entitled to receive through the last
preceding dividend payment date. Any accrued and unpaid dividends will be
payable by us as and when those dividends are paid to any remaining holders or,
if none, on the date which would have been the next succeeding dividend payment
date had there been remaining holders or at a later time when we believe we
have adequate available capital under applicable law to make such a payment.
However, shares of preferred stock surrendered for conversion after the close
of business on any record date for the
payment of dividends declared and before the opening of business on the
dividend payment date relating to that record date must be accompanied by a
payment in cash of an amount equal to the dividend declared in respect of those
shares.
In case any shares of preferred stock are to be redeemed, the right to
convert those shares of preferred stock will terminate at the close of business
on the business day immediately preceding the date fixed for redemption unless
we default in the payment of the redemption price of those shares.
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Except as provided for in the following sentence, we will make no payment or
adjustment to any holder of shares of preferred stock surrendered for
conversion in respect of any accrued and unpaid dividends on the shares of
preferred stock surrendered for conversion. If we redeem the preferred stock
between December 15, 2004 through and including January 14, 2005, any holder of
shares of preferred stock, electing to convert the shares of preferred
stock between December 15, 2004 through and including January 14, 2005, will be
entitled to receive dividends accrued between November 1, 2004 and December 15,
2004 on the converted shares of preferred stock.
In connection with the conversion of any shares of preferred stock, no
fractions of shares of common stock will be issued, but we will pay a cash
adjustment in respect of any fractional interest in an amount equal to (a) the
fractional interest multiplied by the liquidation preference per share, divided
by (b) the conversion price. If more than one share of preferred stock will be
surrendered for conversion by the same holder at the same time, the number of
full shares of common stock issuable on conversion of those shares will be
computed on the basis of the total number of shares of preferred stock so
surrendered.
We will at all times reserve and keep available, free from preemptive
rights, for issuance upon the conversion of shares of preferred stock a number
of our authorized but unissued shares of common stock that will from time to
time be sufficient to permit the conversion of all outstanding shares of
preferred stock if necessary to permit the conversion of all outstanding shares
of preferred stock. Before the delivery of any securities which we will be
obligated to deliver upon conversion of the preferred stock, we will comply
with all applicable federal and state laws and regulations which require action
to be taken by us. All shares of common stock delivered upon conversion of the
preferred stock will upon delivery be duly and validly issued and fully paid
and nonassessable, free of all liens and charges and not subject to any
preemptive rights.
Adjustments to the Conversion Price
The conversion price will be subject to adjustment from time to time as
follows:
(1) Stock splits and combinations. In case we, at any time or from time to
time after the issuance date of the shares of preferred stock (a) subdivide
or split the outstanding shares of our common stock, (b) combine or
reclassify the outstanding shares of our common stock into a smaller number
of shares or (c) issue by reclassification of the shares of our common stock
any shares of our capital stock, then the conversion price in effect
immediately prior to that event or the record date for that event, whichever
is earlier, will be adjusted so that the holder of any shares of preferred
stock thereafter surrendered for conversion will be entitled to receive the
number of shares of our common stock or of our other securities which the
holder would have owned or have been entitled to receive after the occurrence
of any of the events described above, had those shares of preferred stock
been surrendered for conversion immediately before the occurrence of that
event or the record date for that event, whichever is earlier.
(2) Stock dividends in common stock. In case we, at any time or from time
to time after the issuance date of the shares of preferred stock, pay a
dividend or make a distribution in shares of our common stock on any class of
our capital stock other than dividends or distributions of shares of common
stock or other securities with respect to which adjustments are provided in
paragraph (1) above, and the total number of shares constituting the dividend
or distribution exceeds 25% of the total number of shares of common stock
outstanding at the close of business on the record date fixed for
determination of shareholders entitled to receive the dividend or
distribution, the conversion price will be adjusted so that the holder of
each share of preferred stock will be entitled to receive, upon conversion of
that share, the number of shares of our common stock determined by
multiplying (a) the conversion price by (b) a fraction, the numerator of
which will be the number of shares of common stock outstanding and the
denominator of which will be the sum of that number of shares and the total
number of shares issued in that dividend or distribution. In case the total
number of shares constituting that dividend or distribution does not exceed
25% of the total number of shares of common stock outstanding at the close of
business on the record date fixed for that dividend or
41
distribution, the shares of common stock will be considered to be issued at
the time of any such next succeeding dividend or other distribution in which
the number of shares of common stock issued, together with the number of
shares issued in all previous such dividends and distributions, will exceed
such 25%.
(3) Issuance of rights or warrants. For purposes of this paragraph and
paragraph (4), "current market price" means the average of the daily closing
prices for the five consecutive trading days selected by our board of
directors beginning not more than 20 trading days before, and ending not
later than the date of the applicable event described in this paragraph and
the date immediately preceding the record date fixed in connection with that
event. In case we issue to all holders of our common stock rights or warrants
expiring within 45 days entitling those holders to subscribe for or purchase
our common stock at a price per share less than the current market price, the
conversion price in effect immediately before the close of business on the
record date fixed for determination of shareholders entitled to receive those
rights or warrants will be reduced by multiplying the conversion price by a
fraction, the numerator of which is the sum of the number of shares of our
common stock outstanding at the close of business on that record date and the
number of shares of common stock that the aggregate offering price of the
total number of shares of our common stock so offered for subscription or
purchase would purchase at the current market price and the denominator of
which is the sum of the number of shares of common stock outstanding at the
close of business on that record date and the number of additional shares of
our common stock so offered for subscription or purchase. For purposes of
this paragraph (3), the issuance of rights or warrants to subscribe for or
purchase securities convertible into shares of our common stock will be
deemed to be the issuance of rights or warrants to purchase shares of our
common stock into which those securities are convertible at an aggregate
offering price equal to the sum of the aggregate offering price of those
securities and the minimum aggregate amount, if any, payable upon conversion
of those securities into shares of our common stock. This adjustment will be
made successively whenever any such event occurs.
(4) Distribution of indebtedness, securities or assets. In case we
distribute to all holders of our common stock, whether by dividend or in a
merger, amalgamation or consolidation or otherwise, evidences of
indebtedness, shares of capital stock of any class or series, other
securities, cash or assets, other than common stock, rights or warrants
referred to in paragraph (3) above or a dividend payable exclusively in cash
and other than as a result of a fundamental change described in paragraph (5)
below, the conversion price in effect immediately before the close of
business on the record date fixed for determination of shareholders entitled
to receive that distribution will be reduced by multiplying the conversion
price by a fraction, the numerator of which is the current market price on
that record date less the fair market value, as determined by our board of
directors, whose determination in good faith will be conclusive, of the
portion of those evidences of indebtedness, shares of capital stock, other
securities, cash and assets so distributed applicable to one share of common
stock and the denominator of which is the current market price. This
adjustment will be made successively whenever any such event occurs.
(5) Fundamental changes. For purposes of this paragraph (5), "fundamental
change" means any transaction or event, including any merger, consolidation,
sale of assets, tender or exchange offer, reclassification, compulsory share
exchange or liquidation, in which all or substantially all outstanding shares
of our common stock are converted into or exchanged for stock, other
securities, cash or assets. If a fundamental change occurs, the holder of
each share of preferred stock outstanding immediately before that fundamental
change occurred, will have the right upon any subsequent conversion to
receive, but only out of legally available funds, to the extent required by
applicable law, the kind and amount of stock, other securities, cash and
assets that that holder would have received if that share had been converted
immediately prior to the fundamental change.
We will not, however, be required to give effect to any adjustment in the
conversion price unless and until the net effect of one or more adjustments,
each of which will be carried forward until counted toward adjustment, will
have resulted in a change of the conversion price by at least 1%, and when the
cumulative net effect of more than one adjustment so determined will be to
change the conversion price by at least 1%, that change in the conversion price
will be given effect. In the event that, at any time as a result of the
provisions of
42
this section, the holder of shares of preferred stock upon subsequent
conversion become entitled to receive any shares of our capital stock other
than common stock, the number of those other shares so receivable upon
conversion of shares of preferred stock will thereafter be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions contained in this section.
There will be no adjustment to the conversion price in case of the issuance
of any shares of our stock in a merger, reorganization, acquisition,
reclassification, recapitalization or other similar transaction except as
provided in this section.
In any case in which this section requires that an adjustment as a result
of any event become effective from and after a record date, we may elect to
defer until after the occurrence of that event (a) issuing to the holder of
any shares of preferred stock converted after that record date and before the
occurrence of that event the additional shares of common stock issuable upon
that conversion over and above the shares issuable on the basis of the
conversion price in effect immediately before adjustment and (b) paying to
that holder any amount in cash in lieu of a fractional share of common stock.
If we take a record of the holders of our common stock for the purpose of
entitling them to receive a dividend or other distribution, and after this and
before the distribution to our shareholders legally abandon our plan to pay or
deliver that dividend or distribution, then no adjustment in the number of
shares of our common stock issuable upon conversion of shares of preferred
stock or in the conversion price then in effect will be required by reason of
the taking of that record.
Our board of directors will have the power to resolve any ambiguity or
correct any error in this section, and its action in so doing will be final
and conclusive.
Change in Control Put Right
For purposes of this section, "change in control" of Global Crossing means
the occurrence of any of the following:
. any "person", as that term is used in Section 13(d)(3) of the
Exchange Act, other than a "permitted holder", is or becomes the
beneficial owner, directly or indirectly, of 35% or more of the
voting stock, measured by voting power rather than number of
shares, of Global Crossing, and the permitted holders own, in the
aggregate, a lesser percentage of the total voting stock, measured
by voting power rather than by number of shares, of Global
Crossing than that person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for
election a majority of the board of directors of Global Crossing;
for the
purposes of this clause, that person will be deemed to
"beneficially own" any voting stock of a specified corporation
held by a parent corporation if that person beneficially owns,
directly or indirectly, more than 35% of the voting stock,
measured by voting power rather than by number of shares, of that
parent corporation and the permitted holders beneficially own,
directly or indirectly, in the aggregate a lesser percentage of
voting stock, measured by voting power rather than by number of
shares, of that parent corporation and do not have the right or
ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of
that parent corporation;
. during any period of two consecutive years, "continuing directors"
cease for any reason to constitute a majority of the board of
directors of Global Crossing;
. Global Crossing consolidates or merges with or into any other
person, other than a consolidation or merger (a) of Global
Crossing into Global Crossing Holdings or Global Crossing Holdings
into Global Crossing, or Global Crossing with or into a subsidiary
of Global Crossing or (b) under a transaction in which the
outstanding voting stock of Global
43
Crossing is changed into or exchanged for cash, securities or
other property with the effect that the beneficial owners of the
outstanding voting stock of Global Crossing immediately before
that transaction, beneficially own, directly or indirectly, more
than 35% of the voting stock, measured by voting power rather than
number of shares, of the surviving corporation immediately
following that transaction; or
. the sale, transfer, conveyance or other disposition, other than by
way of merger or consolidation, in one or a series of related
transactions, of all or substantially all of the assets of Global
Crossing and its subsidiaries, taken as a whole, to any person
other than a subsidiary of Global Crossing or a permitted holder
or a person more than 50% of the voting stock, measured by voting
power rather than by number of shares, of which is owned, directly
or indirectly, following such transaction or transactions by the
permitted holders; however, sales, transfers, conveyances or other
dispositions in the ordinary course of business of capacity on
cable systems owned, controlled or operated by Global Crossing or
any subsidiary or of telecommunications capacity or transmission
rights acquired by Global Crossing or any subsidiary for use in
its business, including for sale, lease, transfer, conveyance or
other disposition to any customer of Global Crossing or any
subsidiary will not be deemed a disposition of assets for purposes
of this paragraph.
For purposes of the above paragraph, "permitted holder" means Pacific
Capital Group and CIBC Oppenheimer Corp. and their respective affiliates; and
"continuing directors" means individuals who at the beginning of the period of
determination constituted the board of directors of Global Crossing, together
with any new directors whose election by that board of directors or whose
nomination for election by the shareholders of Global Crossing was approved by
a vote of at least a majority of the directors of Global Crossing then still
in office who were either directors at the beginning of that period or whose
election or nomination for election was previously so approved or is designee
of any one of the "permitted holders" or any combination of the permitted
holders or was nominated or elected by any permitted holder(s) or any of their
designees.
If there is a change in control of Global Crossing, each holder of shares
of preferred stock will have the right to require us to purchase all or any
part of that holder's shares of preferred stock at a purchase price in cash
equal to 100% of the liquidation preference of those shares, plus all
accumulated and unpaid dividends on those shares to the date of purchase.
Within 30 days following any change in control, Global Crossing will mail a
notice to each holder describing the transaction or transactions that
constitute the change in control and offering to purchase that holder's
preferred stock on the date specified in that notice, which date will be no
earlier than 30 days and no later than 60 days from the date the notice is
mailed.
We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations to the extent those laws and
regulations are applicable in connection with the purchase of preferred stock
as a result of a change in control. To the extent that the provisions of any
securities laws or regulations conflict with any of the provisions of this
section, we will comply with the applicable securities laws and regulations
and will be deemed not to have breached our obligations under this section.
On the date scheduled for payment of the shares of preferred stock, we
will, to the extent lawful, (a) accept for payment all shares of preferred
stock properly tendered, (b) deposit with the transfer agent an amount equal
to the purchase price of the shares of preferred stock so tendered and (c)
deliver or cause to be delivered to the transfer agent shares of preferred
stock so accepted together with an officers' certificate stating the aggregate
liquidation preference of the shares of preferred stock being purchased by us.
The transfer agent will promptly mail or deliver to each holder of shares of
preferred stock so tendered the applicable payment for those shares of
preferred stock, and the transfer agent will promptly countersign and mail or
deliver, or cause to be transferred by book-entry, to each holder new shares
of preferred stock equal in liquidation preference to any unpurchased portion
of the shares of preferred stock surrendered, if any. We will publicly
announce the results of our offer on or as soon as practicable after the
payment date for the purchase of shares of preferred stock in connection with
a change in control of Global Crossing.
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We will not be required to make an offer to purchase any shares of
preferred stock upon the occurrence of a change in control of Global Crossing
if a third party makes that offer in the manner, at the times and otherwise in
compliance with the requirements described in this section and purchases all
shares of preferred stock validly tendered and not withdrawn.
The right of the holders of shares of preferred stock described in this
section will be subject to the obligation of Global Crossing Holdings to:
. repay its debt obligations in full under its corporate credit
facility; and
. offer to purchase and purchase all of its senior notes and
outstanding shares of preferred stock that have been tendered for
purchase in connection with a change in control of Global
Crossing.
In addition, the right of the holders of shares of preferred stock
described in this section will be subject to the repurchase or repayment of
our future indebtedness, which we are required to repurchase or repay in
connection with a change in control.
When we have satisfied these obligations and, subject to the legal
availability of funds for this purpose, we will purchase all shares tendered
upon a change in control.
In addition, the holders of shares of preferred stock may not be able to
exercise the rights described in this section if we fail to meet specified
solvency tests under Bermuda law. These solvency tests would require us to
determine that we will be solvent, taking into account the purchase of shares
of preferred stock as provided in this section, and that we will not otherwise
breach the provisions of any act, regulation or license applicable to us.
Exchange of Shares of Preferred Stock
If we are reorganized so that the shares of our common stock are exchanged
for shares of the common stock of a new entity, the common stock of which is
traded on the Nasdaq National Market or another recognized securities
exchange, then, by notice to the holders of the preferred stock but without
any required consent on their part, we will have the option to cause the
exchange of the shares of preferred stock for shares of preferred stock of
that new entity having the same terms and conditions as provided in the
certificate of designations of the preferred stock. If we exercise that
option, we will indemnify the holders of shares of preferred stock if such an
exchange would, under then applicable United States federal income tax law,
result in
the recognition of gain by holders of shares of the preferred stock. However,
we will not indemnify you for any payments described under "--Tax Redemption"
on page 39 unless and to the extent it is so provided in that section.
However, in the event that the new entity is not incorporated as a Bermuda
company or in the event the share structure of the new entity is not identical
to our own, the rights attaching to the preferred stock of the new entity may
be adjusted so as to comply with the local law of the country of incorporation
of that new entity or the share structure of that new entity.
Registration Rights
On December 15, 1999, we entered into a registration rights agreement with
the initial purchasers of the preferred stock. Under the registration rights
agreement, we agreed to use our reasonable best efforts to cause a shelf
registration statement to become effective under the Securities Act to cover
resales of our shares of preferred stock and common stock that we may issue
upon conversion of the shares of preferred stock or to pay dividends on the
shares of preferred stock. We also agreed to use our reasonable best efforts
to maintain that registration statement continuously effective for up to two
years after the shelf registration first becomes effective or a shorter period
if all restricted securities traded under the shelf registration statement
have all been sold.
45
If the shelf registration statement ceases to be effective or usable in
connection with resales of shares of preferred stock and common stock during
the periods specified in the registration rights agreement--we will refer to
that event as a "registration default"--then we will pay to each holder of
shares registrable under the registration rights agreement, with respect to the
first 90-day period immediately following the occurrence of a registration
default, additional dividends on the preferred stock in an amount equal to
0.50% per year, which we will refer to as "special dividends". The amount of
the special dividends will increase by an additional 0.25% per year with
respect to any subsequent 90-day period, but in no event will that rate exceed
1.00% per year in the aggregate regardless of the number of registration
defaults, until all registration defaults have been cured. If, after the cure
of all registration defaults then in effect, there is a subsequent registration
default, the special dividend rate for that subsequent registration default
will initially be 0.25%, regardless of the special dividend rate in effect with
respect to any prior registration default at the time of the cure of that
registration default. All accrued special dividends will be paid to the holders
entitled to those dividends, in the manner provided for the payment of
dividends in the certificate of designations.
Special dividends, like ordinary dividends, will be paid in cash, although
we will have the option to deliver shares of our common stock to the transfer
agent for the preferred stock, which will resell those shares of common stock
and use the proceeds to pay special dividends in cash to the holders.
This is a summary of some important provisions of the registration rights
agreement. This summary is subject to, and is qualified in its entirety by
reference to, all the provisions of the registration rights agreement. We filed
the registration rights agreement as an exhibit to the registration statement
of which this prospectus is a part. Alternatively, you may request a copy of
the registration rights agreement by contacting us at the address provided
under "Where You Can Find More Information" on page ii.
Transfer Agent, Registrar and Dividend Disbursing Agent
The transfer agent, registrar, dividend disbursing agent and redemption
agent for the shares of preferred stock is EquiServe.
Book-Entry Issuance
The shares of preferred stock is issued as one or more global certificates
registered in the name of the DTC or its nominee. The depositary for the
preferred stock is the DTC. The preferred stock has been issued in accordance
with the procedures described under "Book-Entry Procedures and Settlement"
below.
46
BOOK-ENTRY PROCEDURES AND SETTLEMENT
Upon issuance, all book-entry certificates will be represented by one or
more fully registered global certificate, without coupons. Each global
certficate will be deposited with, or on behalf of, the DTC, a securities
depository, and will be registered in the name of the DTC or a nominee of the
DTC. The DTC will thus be the only registered holder of the shares of
preferred stock.
Purchasers of shares of preferred stock may only hold interests in the
global certificates through the DTC if they are participants in the DTC
system. Purchasers may also hold interests through a securities intermediary--
banks, brokerage houses and other institutions that maintain securities
accounts for customers--that has an account with the DTC or its nominee. The
DTC will maintain accounts showing the security holdings of its participants,
and these participants will in turn maintain accounts showing the security
holdings of their customers. Some of these customers may themselves be
securities intermediaries holding securities for their customers. Thus, each
beneficial owner of a book-entry certficate will hold that certficate
indirectly through a hierarchy of intermediaries, with the DTC at the "top"
and the beneficial owner's own securities intermediary at the "bottom".
The shares of preferred stock of each beneficial owner of a book-entry
certficate will be evidenced solely by entries on the books of the beneficial
owner's securities intermediary. The actual purchaser of shares of preferred
stock will generally not be entitled to have the shares represented by the
global certificates registered in its name and will not be considered the
owner under our charter or bye-laws. In most cases, a beneficial owner will
also not be able to obtain a paper certificate evidencing the holder's
ownership of shares of preferred stock. The book-entry system for holding
securities eliminates the need for physical movement of certificates and is
the system through which most publicly traded stock is held in the United
States. However, the laws of some jurisdictions require some purchasers of
securities to take physical delivery of their securities in definitive form.
These laws may impair the ability of a beneficial owner to transfer book-entry
shares of preferred stock.
A beneficial owner of book-entry shares of preferred stock represented by a
global certficate may exchange the shares for definitive (paper) shares of
preferred stock only if:
. the DTC is unwilling or unable to continue as depositary for that
global certficate and we do not appoint a qualified replacement
for the DTC within 90 days; or
. we, in our sole discretion, decide to allow some or all book-entry
certificates to be exchangeable for definitive shares of preferred
stock in registered form.
Any global certficate that is so exchanged will be exchanged in whole for
definitive shares of preferred stock in registered form, with the same terms
and of an equal aggregate liquidation preference. Definitive shares of
preferred stock will be registered in the name or names of the person or
persons specified by the DTC in a written instruction to the registrar of the
preferred stock. The DTC may base its written instruction upon directions that
it receives from its participants.
In this prospectus, references to actions taken by holders of shares of
preferred stock will mean actions taken by the DTC upon instructions from its
participants, and references to payments and notices of redemption to holders
of shares of preferred stock will mean payments and notices of redemption to
the DTC as the registered holder of the shares of preferred stock for
distribution to participants in accordance with the DTC's procedures.
The DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered under section 17A of the Exchange Act. The rules
applicable to the DTC and its participants are on file with the SEC.
47
The DTC's management is aware that some computer applications, systems, and
the like for processing dates that are dependent upon calendar dates, including
dates before, on, and after January 1, 2000, may encounter "Year 2000
problems". The DTC has informed its participants and other members of the
financial community that it has developed and is implementing a program so that
its systems, as they relate to the timely payment of distributions to
shareholders, book-entry deliveries, and settlement of trades within the DTC,
continue to function appropriately. This program includes a technical
assessment and a remediation plan, each of which is complete. Additionally, the
DTC's plan includes a testing phase, which is expected to be completed within
appropriate time frames.
We will not have any responsibility or liability for any aspect of the
records relating to, or payments made on account of, beneficial ownership
interests in the book-entry securities or for maintaining, supervising or
reviewing any records relating to beneficial ownership interests.
The DTC may discontinue providing its services as securities depositary at
any time by giving reasonable notice. Under those circumstances, in the event
that a successor securities depositary is not appointed, share certificates are
required to be printed and delivered. Additionally, we may decide to
discontinue use of the system of book-entry transfers through the DTC or any
successor depositary with respect to the shares of preferred stock. In that
event, certificates for the shares will be printed and delivered.
The information in this section concerning the DTC and the DTC's book-entry
system has been obtained from sources that we believe to be reliable, but we do
not take responsibility for the accuracy of that information.
48
DESCRIPTION OF COMMON STOCK
The following summary is a description of the material terms of our common
stock, does not purport to be complete and is subject in all respects to the
applicable provisions of Bermuda law and of our constituent documents and of
the constituent documents of our subsidiaries. We have filed our memorandum of
association and bye-laws as exhibits to the registration statement of which
this prospectus is a part.
General
Under our memorandum of association, our authorized share capital is
$30,200,000, divided into:
. 3,000,000,000 shares of common stock, par value $0.01 per share; and
. 20,000,000 shares of preferred stock, par value $0.01 per share.
Voting and transfer restrictions
Voting restriction. Each share of our common stock has one vote, except that
if any shareholder owns, directly, indirectly or constructively under Section
958 of the Internal Revenue Code or beneficially directly or indirectly as a
result of the possession of sole or shared voting power within the meaning of
Section 13(d) of the Exchange Act and the rules and regulations promulgated
under that act, more than 9.5%, or, in the case of Canadian Imperial Bank of
Commerce and its affiliates, collectively, more than 20%, of the votes cast in
connection with any matter which our shareholders are voting on, the number of
votes of that shareholder will be limited to 9.5%, or, in the case of the
Canadian Imperial Bank of Commerce and its affiliates, collectively, to 20% of
those votes cast, based on a formula contained in our bye-laws. The additional
votes that could be cast by that shareholder but for the restrictions on the
voting rights will be allocated to the other shareholders pro rata, based on
their number of shares of common stock. Shareholders that have been allocated
additional votes may not exceed the voting limitations as a result of that
allocation.
Transfer restriction. Our bye-laws also provide that any transfer of shares
of common stock or any interest in those shares that results in a shareholder,
other than Pacific Capital Group, GKW Unified Holdings, Canadian Imperial Bank
of Commerce, Continental Casualty Company or MRCo or their affiliates or some
of their lenders, beneficially owning within the meaning of Section 13(d) of
the Exchange Act, directly or indirectly, 5% of the outstanding shares of our
common stock, if that shareholder is a natural person, or otherwise 9.5% of the
outstanding shares of our common stock, without the approval of a majority of
the members of the board of directors and of shareholders holding at least a
majority of the total votes cast at the shareholder meeting called to approve
that transfer will not be registered in the share register and will be void and
of no effect.
Amendments to the voting reallocation and transfer restriction provisions of
our bye-laws require the approval of our board of directors and shareholders
holding at least 75% of the votes of all outstanding shares of common stock. In
the event of any amendment to these bye-laws, under some circumstances, we have
the obligation to indemnify and hold harmless any shareholder who, as a result
of that amendment, becomes subject to treatment as a U.S. shareholder for
purposes of Section 951 and subsequent sections of the Internal Revenue Code
from and against all losses, costs, damages, liabilities and expenses directly
or indirectly arising out of that treatment.
These voting and transfer restrictions could make it difficult for any
person or group of persons acting in concert, other than some existing owners,
to acquire control of Global Crossing.
Distributions
Holders of common stock are treated equally with respect to all
distributions to our shareholders.
49
Global Crossing registration rights agreement, voting agreement and share
transfer restriction agreement
Pacific Capital Group, GKW Unified Holdings, affiliates of Canadian Imperial
Bank of Commerce, Continental Casualty Company, MRCo, ourselves and some other
shareholders of ours, including some of our officers and directors and their
affiliates, have entered into a registration rights agreement filed as an
exhibit to our registration statements.
Under the registration rights agreement, our shareholders who are parties to
that agreement and a number of their transferees have demand and piggyback
registration rights and will receive indemnification and, in some
circumstances, reimbursement for expenses from us in connection with an
applicable registration.
Some of our principal shareholders representing at that time over a majority
of the voting power of our common stock entered into a voting agreement with
Frontier in March 1999 in connection with the Frontier merger. These
shareholders reaffirmed their voting obligations under the voting agreement in
connection with subsequent amendments made to the merger agreement during 1999.
Under the second reaffirmation of voting agreement and share transfer
restriction agreement dated September 2, 1999, these shareholders also agreed,
from September 2, 1999 until March 28, 2000, not to transfer record or
beneficial ownership of any shares of our common stock held by those
shareholders, other than transfer to charities, transfers made with our consent
and other limited exceptions, and to work in good faith toward implementing a
program with the purpose that, if these shareholders wish to sell or transfer
their shares after March 28, 2000, these sales or transfers would be completed
in a manner that would provide for an orderly trading market for the shares of
our common stock.
Also on September 2, 1999, fourteen of our executive officers and three
executive officers of Frontier entered into a share transfer restriction
agreement with us. Under this agreement, our executive officers agreed not to
sell or transfer shares of our common stock, and the Frontier executive
officers agreed not to sell or transfer shares of Frontier common stock and the
shares of our common stock they would receive in exchange for their Frontier
common stock in the merger, until March 28, 2000, subject to substantially the
same exceptions as are applicable to the second reaffirmation of voting
agreement and share transfer restriction agreement described in the paragraph
immediately above.
Transfer Agent, Registrar and Dividend Disbursing Agent
The transfer agent, registrar, dividend disbursing agent and redemption
agent for the shares of our common stock will be EquiServe.
50
CERTAIN INCOME TAX CONSEQUENCES
Taxation of Global Crossing
We believe that a significant portion of the income derived from our subsea
systems will not be subject to tax in Bermuda, which currently has no corporate
income tax, or other countries in which we or our affiliates conduct activities
or in which our customers are located, including the United States. However,
this belief is based upon the anticipated nature and conduct of our business,
which may change, and upon our understanding of our position under the tax laws
of the various countries in which we have assets or conduct activities, which
position is subject to review and possible challenge by taxing authorities and
to possible changes in law, which may have retroactive effect. The extent to
which certain taxing jurisdictions may require us to pay tax or to make
payments in lieu of tax cannot be determined in advance. In addition, our
operations and payments due to us may be affected by changes in taxation,
including retroactive tax claims or assessments of withholding on amounts
payable to us or other taxes assessed at the source, in excess of the taxation
we anticipate based on business contacts and practices and the current tax
regimes. There can be no assurance that these factors will not have a material
adverse effect on us.
Bermuda Tax Considerations
Under current Bermuda law, we are not subject to tax on income or capital
gains. Furthermore, we have obtained from the Minister of Finance of Bermuda
under the Exempted Undertakings Tax Protection Act 1966, an undertaking that,
in the event that Bermuda enacts any legislation imposing tax computed on
profits, income, any capital asset, gain or appreciation, then the imposition
of that tax will not be applicable to us or to any of our operations, neither
will that tax, or any tax in the nature of estate duty or inheritance tax,
become applicable to our stock, until March 28, 2016. This undertaking does
not, however, prevent the imposition of any tax or duty on persons ordinarily
resident in Bermuda or any property tax on any company, including ourselves,
owning real property or leasehold interests in Bermuda.
United States Federal Income Tax Considerations
We and our non-United States subsidiaries will be subject to United States
federal income tax at regular corporate rates, and to United States branch
profits tax, on our income, if any, that is effectively connected with the
conduct of a trade or business within the United States, and will be required
to file federal income tax returns reflecting that income. We intend to conduct
our operations so as to reduce the amount of our effectively connected income.
However, we cannot assure you that the Internal Revenue Service will agree with
the positions we take in this regard. Moreover, our United States subsidiaries
will be subject to United States federal income tax on their worldwide income
regardless of its source, subject to reduction by allowable foreign tax
credits, and distributions by our United States subsidiaries to us or to our
non-United States subsidiaries generally will be subject to United States
withholding tax.
Taxation of Shareholders
Bermuda Tax Considerations
Under current Bermuda law, no income, withholding or other taxes or stamp or
other duties are imposed upon the issue, transfer or sale of the preferred
stock or on any payments thereunder. See "Taxation of Global Crossing--Bermuda
Tax Considerations" for a description of the undertaking on taxes obtained by
us from the Minister of Finance of Bermuda.
51
United States Federal Income Tax Considerations
The following is a summary of certain United States federal income tax
consequences, as of the date hereof, for beneficial owners of shares of
preferred stock and shares of common stock into which the shares of preferred
stock may be converted, that hold the shares of preferred stock and the shares
of common stock as capital assets, and that are "United States persons" under
the Internal Revenue Code. Under the Internal Revenue Code, you are a "United
States person" if you are:
. a citizen or resident of the United States;
. a corporation or partnership created or organized in or under the
laws of the United States or any political subdivision of the United
States;
. an estate the income of which is subject to United States federal
income taxation regardless of its source;
. a trust that is subject to the supervision of a court within the
United States and the control of one or more United States persons;
or
. a trust that has a valid election in effect under applicable United
States Treasury regulations to be treated as a United States person.
This summary is based on current law, which is subject to change, perhaps
retroactively, is for general purposes only and should not be considered tax
advice. This summary does not represent a detailed description of the United
States federal income tax consequences to you in light of your particular
circumstances. In addition, it does not present a description of the United
States federal income tax consequences applicable to you if you are subject to
special treatment under the United States federal income tax laws, including
if you are:
. a dealer in securities or currencies;
. a trader in securities if you elect to use a mark-to-market method
of accounting for your securities holdings;
. a financial institution;
. an insurance company;
. a tax-exempt organization;
. a person liable for alternative minimum tax;
. a person holding shares of preferred stock or shares of common stock
as part of a hedging, integrated or conversion transaction,
constructive sale or straddle;
. a person owning, actually or constructively, 10% or more of our
voting stock or 10% or more of the voting stock of any of our non-
United States subsidiaries; or
. a United States person whose "functional currency" is not the United
States dollar.
We cannot assure you that a later change in law will not alter
significantly the tax considerations that we describe in this summary.
If a partnership holds shares of preferred stock or shares of common stock,
the tax treatment of a partner will generally depend upon the status of the
partner and the activities of the partnership. If you are a partner of a
partnership holding shares of preferred stock or shares of common stock, you
should consult your tax advisor.
You should consult your own tax advisor concerning the particular United
States federal income tax consequences to you of the ownership and disposition
of the shares of preferred stock and the shares of common stock, as well as
the consequences to you arising under the laws of any other taxing
jurisdiction.
52
Taxation of Dividends
Subject to the passive foreign investment company rules discussed below, the
gross amount of distributions you receive on your shares of preferred stock or
shares of common stock will generally be treated as dividend income to you if
the distributions are made from our current and accumulated earnings and
profits calculated according to United States federal income tax principles.
That income will be includible in your gross income as ordinary income on the
day you receive it. You will not be entitled to claim a dividends received
deduction with respect to distributions you receive from us.
Although we expect to have earnings and profits with respect to 2000, the
existence of current or accumulated earnings and profits in subsequent years
will depend on future levels of profits and losses which we cannot accurately
predict at this time. To the extent that the amount of any distribution exceeds
our current and accumulated earnings and profits for a taxable year, the
distribution will first be treated as a tax-free return of capital, causing a
reduction in your adjusted basis in the shares, thereby increasing the amount
of gain, or decreasing the amount of loss, you will recognize on a subsequent
disposition of the shares, and the balance in excess of adjusted basis will be
taxed as capital gain recognized on a sale or exchange.
If, for United States federal income tax purposes, we are classified as a
"United States-owned foreign corporation", distributions made to you with
respect to your shares that are taxable as dividends generally will be treated
for United States foreign tax credit purposes as (1) foreign source "passive
income" or, in the case of some holders, foreign source "financial services
income" and (2) United States source income, in proportion to our earnings and
profits in the year of such distribution allocable to foreign and United States
sources, respectively. For this purpose, we will be treated as a United States-
owned foreign corporation so long as stock representing 50% or more of the
voting power or value of our stock is owned, directly or indirectly, by United
States persons.
Redemption Premium
Under Section 305(c) of the Internal Revenue Code and the applicable
regulations thereunder, if in certain circumstances the redemption price of the
preferred stock exceeds its issue price by more than a de minimis amount, the
difference, which we call "redemption premium", will be taxable as a
constructive distribution to you over time of additional preferred stock. These
constructive distributions would be treated first as a dividend to the extent
of our current and accumulated earnings and profits and otherwise would be
subject to the treatment described above for dividends. Because the preferred
stock provides for optional rights of redemption by us at prices in excess of
the issue price, you could be required to recognize such excess if, based on
all of the facts and circumstances, the optional redemptions are more likely
than not to occur. Applicable regulations provide a "safe harbor" under which a
right to redeem will not be treated as more likely than not to occur if (1) you
are not related to us within the meaning of the regulations; (2) there are no
plans, arrangements or agreements that effectively require or are intended to
compel us to redeem the stock; and (3) exercise of the right to redeem would
not reduce the yield of the stock, as determined under the regulations.
Regardless of whether the optional redemptions are more likely than not to
occur, constructive dividend treatment will not result if the redemption
premium does not exceed a de minimis amount or is in the nature of a penalty
for premature redemption. We intend to take the position that the existence of
our optional redemption rights does not result in a constructive distribution
to you.
Disposition of the Shares of Preferred Stock or Shares of Common Stock
Subject to the passive foreign investment company rules discussed below,
when you sell or otherwise dispose of your shares of preferred stock, other
than by way of a conversion, or you sell or otherwise dispose of your shares of
common stock, you will recognize capital gain or loss in an amount equal to the
difference between the amount you realize for the shares and your adjusted tax
basis in the shares. In general, your adjusted tax basis in the shares of
preferred stock will be your cost of obtaining the shares of preferred stock
53
increased by any redemption premium previously included in income by you and
reduced by any previous distributions that are not characterized as dividends.
In general, your adjusted tax basis in the shares of common stock will be your
initial tax basis as described below in the discussion regarding conversion,
reduced by any previous distributions that are not characterized as dividends.
For foreign tax credit limitation purposes, such gain or loss will generally be
treated as United States source. If you are an individual, and the shares of
preferred stock or common stock being sold or otherwise disposed of are capital
assets that you have held for more than one year, your gain recognized will be
taxed at a maximum tax rate of 20%. Your ability to deduct capital losses is
subject to limitations.
A redemption of the preferred stock by us would be treated, under Section
302 of the Internal Revenue Code, either as a sale or exchange giving rise to
capital gain or loss, or as described below as a dividend.
If a redemption of the shares for cash is treated as a dividend with respect
to you under Section 302 of the Internal Revenue Code, you (1) will not
recognize any loss on the exchange and (2) will recognize dividend income,
rather than capital gain, equal to the amount of cash received, without regard
to your basis in the shares surrendered in the exchange, to the extent of your
proportionate share of our current or accumulated earnings and profits. Under
Section 302 of the Internal Revenue Code, the redemption will not be treated as
a dividend provided that, after giving effect to the constructive ownership
rules of Section 318 of the Internal Revenue Code, the redemption (1)
represents a "complete termination" of your stock interest in us, (2) is
"substantially disproportionate" with respect to you or (3) is "not essentially
equivalent to a dividend" with respect to you, all within the meaning of
Section 302(b) of the Internal Revenue Code. A redemption will be "not
essentially equivalent to a dividend" as to you if it results in a "meaningful
reduction" in your interest in us, after application of the constructive
ownership rules of Section 318 of the Internal Revenue Code. In general, there
are no fixed rules for determining whether a "meaningful reduction" has
occurred. You should consult your tax advisor as to your ability in light of
your own particular circumstances to satisfy any of the foregoing tests.
Conversion
Generally, no gain or loss will be recognized upon conversion of shares of
preferred stock into shares of common stock, except with respect to any cash
paid in lieu of fractional shares of common stock. The tax basis of shares of
common stock received upon conversion of shares of preferred stock generally
will be equal to the tax basis of the shares of preferred stock so converted
and the holding period of the shares of common stock generally will include the
holding period of the shares of preferred stock so converted.
Adjustments to the conversion ratio of the preferred stock pursuant to the
anti-dilution provisions, see "Description of the Preferred Stock--Adjustments
to the Conversion Price" on page 41, may result in a taxable deemed
distribution to you pursuant to Section 305 of the Code if (1) as a result of
that adjustment your proportionate interest in our assets or earnings and
profits is increased and (2) the adjustment is not made under a bona fide,
reasonable anti-dilution formula. An adjustment to the conversion ratio of the
preferred stock would not be considered made under such a formula if the
adjustment were made to compensate you for certain taxable distributions to
other common stock holders. Thus, under certain circumstances, an adjustment
might give rise to a taxable dividend to you even though you did not receive
any cash.
Passive Foreign Investment Company
We do not believe that we are a passive foreign investment company for
United States federal income tax purposes and do not expect to become one in
the future, although we can provide no assurance in this regard. This
conclusion is based, in part, on interpretations of existing law that we
believe are reasonable, but which have not been approved by any taxing
authority. A company is considered a passive foreign investment company for any
taxable year if either:
. at least 75% of its gross income is passive income; or
. at least 50% of the value of its assets is attributable to assets
that produce or are held for the production of passive income.
54
The 50% of value test is based on the average of the value of our assets
for each quarter during the taxable year. If we own at least 25% by value of
another company's stock, we will be treated as owning our proportionate share
of the assets and earning our proportionate share of the income of that
company. The determination of whether we are a passive foreign investment
company is made annually. Accordingly, it is possible that we may become a
passive foreign investment company in the current or any future taxable year
due to changes in our asset or income composition.
If we are a passive foreign investment company for any taxable year during
which you hold shares of preferred stock or shares of common stock, unless you
make a "QEF election" or a "mark to market election" as described below, you
will be subject to special tax rules with respect to any "excess distribution"
that you receive and any gain you realize from a sale or other disposition,
including a pledge, of the shares of preferred stock or shares of common
stock. Distributions you receive in a taxable year that are greater than 125%
of the average annual distributions you received during the shorter of the
three preceding taxable years or your holding period for the shares of
preferred stock or shares of common stock will be treated as excess
distributions. Under these special tax rules:
. the excess distribution or gain will be allocated ratably over
your holding period for the shares of preferred stock or shares of
common stock;
. the amount allocated to the current taxable year, and any taxable
year before the first taxable year in which we were a passive
foreign investment company, will be treated as ordinary income;
and
. the amount allocated to each other year will be subject to tax at
the highest tax rate in effect for that year and the interest
charge generally applicable to underpayments of tax will be
imposed on the resulting tax attributable to each such year.
If you hold shares of preferred stock or shares of common stock in any year
in which we are a passive foreign investment company, you are required to file
Internal Revenue Service Form 8621.
The special passive foreign investment company tax rules described above
will not apply to you if you elect to have us treated as a "qualified electing
fund", which we call a "QEF election", and we provide certain information to
you. If we are treated as a passive foreign investment company, we intend to
notify you and to provide to you such information as may be required for you
to make the QEF election effective.
If you make a QEF election, you will be taxable currently on your pro rata
share of our ordinary earnings and net capital gain, at ordinary income and
capital gain rates, respectively, for each taxable year during which we are
treated as a passive foreign investment company, regardless of whether or not
you receive distributions, so that you may recognize taxable income without
the corresponding receipt of cash from us with which to pay your resulting tax
obligation. Your basis in the shares of preferred stock or shares of common
stock will be increased to reflect taxed but undistributed income.
Distributions of income that had previously been taxed will result in a
corresponding reduction of basis in the shares of preferred stock or shares of
common stock and will not be taxed again as a distribution to you.
Alternatively, if you own shares of preferred stock or shares of common
stock and such stock is treated as "marketable stock", you may make a mark to
market election. If you make such an election, you will not be subject to the
passive foreign investment company rules described above. Instead, in general,
you will include in income each year as ordinary income the excess, if any, of
the fair market value of your marketable stock at the end of the taxable year
over its adjusted basis and will be permitted an ordinary loss in respect of
the excess, if any, of the adjusted basis of such stock over its fair market
value at the end of the taxable year, but only to the extent of the net amount
previously included in income as a result of the mark to market election. Your
basis in the marketable stock will be adjusted to reflect any such income or
loss amounts. Any gain or loss on the sale of the marketable stock will be
ordinary income or loss, except that such loss will be ordinary
55
loss only to the extent of the previously included net mark to market gain. The
mark to market election is only available with respect to stock that is
regularly traded on certain United States exchanges and other exchanges
designated by the United States Treasury. We do not expect that the shares of
preferred stock will meet those requirements. Assuming that the shares of
common stock are regularly traded, the shares should be treated as "marketable
stock" for these purposes.
You should consult your own tax advisors concerning the United States
federal income tax consequences of holding shares of preferred stock or shares
of common stock if we are considered a passive foreign investment company in
any taxable year, including the advisability and availability of making any of
the foregoing elections.
Foreign Personal Holding Company
If we or one of our non-United States subsidiaries were classified as a
foreign personal holding company, you would be required, regardless of your
percentage ownership, to include in income, as a dividend, your pro rata share
of our, or our relevant non-United States subsidiary's, undistributed foreign
personal holding company income, generally, taxable income with certain
adjustments, if you held shares of preferred stock or shares of common stock on
the last day of our taxable year, or if earlier, the last day on which we
satisfied the shareholder test described below. In addition, if we were
classified as a foreign personal holding company, and you acquired shares of
preferred stock or shares of common stock from a decedent, you would not
receive a "stepped-up" basis in that stock. Instead, you would have a tax basis
equal to the lower of the fair market value of those shares of preferred stock
or shares of common stock or the decedent's basis in them.
A foreign corporation will be classified as a foreign personal holding
company if (1) at any time during the corporation's taxable year, five or fewer
individuals, who are United States citizens or residents, directly or
indirectly own more than 50% of the corporation's stock, by either voting power
or value--we call this the "shareholder test"--and (2) the corporation receives
at least 60% of its gross income, 50% after the initial year of qualification,
as adjusted, for the taxable year from certain passive sources--we call this
the "income test". It is possible that we and our non-United States
subsidiaries could meet the shareholder test in a given taxable year. It is
also possible that we or one of our non-United States subsidiaries would meet
the income test in a given year and would be treated as a foreign personal
holding company. We intend to manage our affairs so as to attempt to avoid or
minimize having income imputed to you under these rules, to the extent such
management of our affairs is consistent with our business goals, although there
can be no assurance in this regard.
Personal Holding Company
A corporation classified as a personal holding company is subject to a 39.6%
tax on its undistributed personal holding company income. Foreign corporations
determine their liability for personal holding company tax by considering only
(1) gross income derived from United States sources and (2) gross income that
is effectively connected with a United States trade or business. A corporation
will be classified as a personal holding company if (1) at any time during the
last half of the corporation's taxable year, five or fewer individuals own more
than 50% of the corporation's stock, by value, directly or indirectly and (2)
the corporation receives at least 60% of its gross income, as adjusted, from
certain passive sources. However, if a corporation is a foreign personal
holding company or a passive foreign investment company, it cannot be a
personal holding company. It is possible that we and our subsidiaries could
meet the personal holding company shareholder test in a given taxable year. It
is also possible that we or one of our subsidiaries would meet the income test
in a given year and would be treated as a personal holding company. We intend
to manage our affairs so as to attempt to avoid or minimize the imposition of
the personal holding company tax, to the extent such management of our affairs
is consistent with our business goals, although there can be no assurance in
this regard.
56
Controlled Foreign Corporations
For the purposes of this paragraph, we will refer to United States persons
that own, or are deemed for United States federal income tax purposes to own,
under complex attribution and constructive ownership rules, 10% or more of our
voting stock or the voting stock of any of our non-United States subsidiaries
as "10% shareholders". If 10% shareholders own, in the aggregate, more than
50%, measured by voting power or value, of our shares or the shares of any of
our non-United States subsidiaries, directly, indirectly, or by attribution, we
or any such non-United States subsidiary would be a controlled foreign
corporation. If characterized as controlled foreign corporations, then a
portion of our undistributed income may be includible in the taxable income of
our 10% shareholders, and all or a portion of the gain recognized by those 10%
shareholders on the disposition of their shares, which could otherwise qualify
for capital gains treatment, may be converted into ordinary dividend income. It
is possible that we and our non-United States corporate subsidiaries may be
controlled foreign corporations or may become controlled foreign corporations
in the future. However, as discussed above, controlled foreign corporation
status generally only has potentially adverse consequences to 10% shareholders.
Information Reporting and Backup Withholding
In general, unless you are an exempt recipient such as a corporation,
information reporting will apply to dividends in respect of the shares of
preferred stock or the proceeds received on the sale, exchange, or redemption
of the shares of preferred stock paid to you within the United States and in
some cases, outside of the United States. Additionally, if you fail to provide
your taxpayer identification number, or fail either to report in full dividend
and interest income or to make certain certifications, you will be subject to
backup withholding at the rate of 31%. Any amounts withheld under the backup
withholding rules will be allowed as a refund or a credit against your United
States federal income tax liability, provided you furnish the required
information to the United States Internal Revenue Service.
57
SELLING SHAREHOLDERS
We originally issued and sold the shares of preferred stock in December 1999
to Salomon Smith Barney Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Goldman, Sachs & Co., Chase Securities Inc., Morgan Stanley Dean
Witter & Co., CIBC World Markets Corp., Donaldson, Lufkin & Jenrette Securities
Corporation and Credit Suisse First Boston Corporation in a private placement.
These initial purchasers then resold the shares of preferred stock in
transactions exempt from the registration requirements of the Securities Act in
the United States to qualified institutional buyers within the meaning of Rule
144A under the Securities Act.
The selling shareholders listed below may, under this prospectus, from time
to time offer and sell the number of shares of preferred stock listed below
opposite their names and the number of shares of common stock into which their
shares of preferred stock may be converted also listed below opposite their
names.
Number of Shares Number of Shares
Selling Shareholders of Preferred Stock of Common Stock
- -------------------- ------------------ ----------------
Oppenheimer Convertible Securities Fund.... 50,000 234,740.00
CALAMOS Market Neutral Fund--CALAMOS
Investment Trust........................... 400 1,877.92
FIST Franklin Convertible Securities Fund.. 12,000 56,337.60
Northern Trust............................. 22,700 106,571.96
Bankers Trust.............................. 2,150 10,093.82
BONY....................................... 900 4,225.32
Investor's Bank............................ 22,720 106,665.86
State Street............................... 3,500 16,431.80
First Union................................ 290 1,361.49
Union Bank California...................... 2,100 9,859.08
Wachovia................................... 250 1,173.70
Sanwa Bank................................. 375 1,760.55
Employee Benefit Convertible Securities
Fund....................................... 1,100 5,164.28
Nations Capital Income Fund................ 16,000 75,116.80
Pacific Innovations Trust Capital Income
Fund....................................... 1,200 5,633.76
J & W Seligman & Co., Inc. ................ 39,025 183,214.57
CALAMOS Global Growth and Income Fund--
CALAMOS Investment Trust................... 1,715 8,051.58
CALAMOS Market Neutral Fund--CALAMOS
Investment Trust........................... 1,650 7,746.42
CALAMOS Convertible Fund--CALAMOS
Investment Trust........................... 5,000 23,474.00
The Fondren Foundation..................... 235 1,103.28
SPT........................................ 3,700 17,370.76
Kettering Medical Center Funded
Depreciation Account....................... 230 1,079.80
Unifi, Inc. Profit Sharing Plan and Trust.. 380 1,784.02
Greek Catholic Union....................... 75 352.11
United Food and Commercial Workers Local
1262 and Employers Pension Fund............ 1,650 7,746.42
Boilermaker--Blacksmith Pension Trust...... 4,500 21,126.60
Knoxville Utilities Board Retirement
System..................................... 800 3,755.84
CALAMOS Convertible Portfolio--CALAMOS
Advisors Trust............................. 250 1,173.70
Consulting Group Capital Markets Funds..... 1,200 5,633.76
City of Knoxville Pension System........... 1,250 5,868.50
Dorinco Reinsurance Company................ 3,000 14,084.40
Southern Farm Bureau Life Insurance
Company.................................... 3,000 14,084.40
Associated Electric & Gas Insurance
Services Limited........................... 3,250 15,258.10
The Dow Chemical Company Employees'
Retirement Plan............................ 8,400 39,436.32
Champion International Corporation Master
Retirement Trust........................... 3,500 16,431.80
Port Authority of Allegheny County
Retirement and Disability Allowance Plan
for the Employees Represented by Local 85
of the Amalgamated Transit Union........... 4,500 21,126.60
58
Number of Shares Number of Shares
Selling Shareholders of Preferred Stock of Common Stock
- -------------------- ------------------ ----------------
Van Waters & Rogers, Inc. Retirement Plan
(f.k.a. Univar Corporation)............... 1,400 6,572.72
Delta Airlines Master Trust............... 7,500 35,211.00
AIM Global Infrastructure Fund............ 400 1,877.92
Tribeca Investments LLC................... 44,100 207,040.68
Morgan Stanley Dean Witter................ 4,030 18,920.04
United Food and Commercial Workers Local
1262 and Employers Pension Fund........... 2,350 11,032.78
ZCM/HFR Index Management, L.L.C. ......... 375 1,760.55
Bear, Stearns & Co. Inc. ................. 38,350 180,045.58
White River Securities LLC................ 38,350 180,045.58
BTPO Growth US Value...................... 5,000 23,474.00
BT Equities Strategies Convertible Arb.... 5,000 23,474.00
GLG Market Neutral Fund................... 47,000 220,655.60
Granville Capital Corporation............. 98,000 460,090.40
OCM Convertible Trust..................... 12,500 58,685.00
Delta Air Lines Master Trust.............. 10,500 49,295.40
State Employees' Retirement Fund of the
State of Delaware......................... 9,000 42,253.20
State of Connecticut Combined Investments
Funds..................................... 27,500 129,107.00
Partner Reinsurance Company Ltd. ......... 4,750 22,300.30
Chrysler Corporation Master Retirement
Trust..................................... 22,750 106,806.70
Motion Picture Industry Health Plan--
Active Member Fund........................ 2,750 12,910.70
Motion Picture Industry Health Plan--
Retiree Member Fund....................... 1,500 7,042.20
Vanguard Convertible Securities Fund,
Inc. ..................................... 16,250 76,290.50
Southport Management Partners, LP......... 5,000 23,474.00
Southport Partners International, Ltd. ... 15,000 70,422.00
South Dakota Retirement System............ 20,000 93,896.00
Maryland State Retirement System.......... 8,212 38,553.70
University of Virginia Health............. 39 183.10
Occidental Petroleum...................... 1,020 4,788.70
Merrill Lynch Insurance Group............. 1,415 6,643.14
Ohio BWC.................................. 717 3,366.17
Shell Pension Trust....................... 804 3,774.62
BVI SS Board.............................. 146 685.44
1976 Distribution Trust FBO Jane A.
Lauder.................................... 75 352.11
1976 Distribution Trust FBO Aerin
Lauder/Zinterhoffer....................... 75 352.11
New Orleans Fire Fighters................. 603 2,830.96
Grable Foundation......................... 570 2,676.04
City University of New York............... 384 1,802.80
Grady Hospital............................ 578 2,713.59
Morgan Stanley Dean Witter Convertible
Securities Trust.......................... 12,000 56,337.60
Sage Capital.............................. 8,000 37,558.40
Tribeca Investments LLC................... 44,100 207,040.68
South Dakota Retirement System............ 20,000 93,896.00
Sagamore Hill Hub Fund Ltd. .............. 16,000 75,116.80
Deutsche Bank Securities Inc. ............ 507,831 2,384,164.98
LRM Funds Class I......................... 3,000 14,084.40
Aristeia Trading, L.L.C. ................. 6,125 28,755.65
Aristeia International, Ltd. ............. 11,375 53,403.35
Advantus Capital Management, care of
Credit Suisse Asset Management............ 8,500 39,905.80
The Travelers Indemnity Company........... 22,630 106,243.32
The Travelers Series Trust Convertible
Bond Portfolio............................ 1,200 5,633.76
The Travelers Insurance Company........... 14,471 67,938.45
The Travelers Insurance Company Separate
Account TLAC.............................. 1,699 7,976.47
Alta Partners Holdings, LDC............... 30,000 140,844.00
Fortis Equity Portfolios, Inc.--Growth and
Income.................................... 6,000 28,168.80
Hamilton Partners Limited................. 55,000 258,214.00
59
Number of Shares Number of Shares
Selling Shareholders of Preferred Stock of Common Stock
- -------------------- ------------------ ----------------
Allstate Insurance Company................ 10,000 46,948.00
JMG Capital Partners, L.P................. 67,000 314,551.60
JMG Triton Offshore Fund, Ltd............. 83,400 389,668.40
Chartwell Investment Partners............. 4,000 18,779.20
Putnam Convertible Income--Growth Trust... 30,000 140,844.00
Putnam Funds Trust--Putnam High Yield Fund
II........................................ 10,065 47,253.16
Agway Inc. Employee's Retirement Trust.... 450 2,112.66
Abbott Laboratories Annuity Retirement
Plan...................................... 835 3,920.16
Strategic Global Fund--High Yield Fixed
Income (Putnam) Fund...................... 900 4,225.32
Northrop Gumman Corporation............... 1,430 6,713.56
Ameritech Pension Trust................... 1,160 5,445.97
Putnam High Yield Managed Trust........... 2,870 13,474.08
Putnam High Yield Fixed Income Fund, LLC.. 1,390 6,525.77
BNP Arbitrage SNC......................... 5,000 23,474.00
Fidelity Financial Trust: Fidelity
Convertible Securities Fund............... 36,000 169,012.80
Fortis Series Fund, Inc.--Growth and
Income Series............................. 34,000 159,623.20
60
PLAN OF DISTRIBUTION
The selling shareholders named on pages 58 through 60 may from time to time
sell their shares of preferred stock and the common stock covered by this
prospectus to purchasers directly. Alternatively, the selling shareholders may
from time to time offer their shares of preferred stock and common stock
through brokers, dealers or agents who may receive compensation in the form of
discounts, concessions or commissions from the selling shareholders or the
purchasers of those shares for whom they may act as agent.
In addition, we may sell from time to time shares of common stock covered by
this prospectus to pay cash dividends on the shares of preferred stock. We may
sell those shares to purchasers directly or through brokers, dealers or agents
who may receive compensation in the form of discounts, concessions or
commissions from us or the purchasers of those shares for whom they may act as
agent. From time to time, we may also deliver shares of common stock covered by
this prospectus to holders of preferred stock in exchange for shares of
preferred stock on terms to be determined in privately negotiated transactions
with those holders. Shares of preferred stock acquired by us in those
transactions will be cancelled.
The selling shareholders and any such brokers, dealers or agents who
participate in the distribution of shares of preferred stock or common stock as
described in the previous paragraph may be deemed to be "underwriters", and any
profits on the sale of those shares by them and any discounts, commissions or
concessions received by those brokers, dealers or agents might be deemed to be
underwriting discounts and commissions under the Securities Act. If the selling
shareholders are deemed to be underwriters, the selling shareholders may be
subject to statutory liabilities of the Securities Act, including Sections 11,
12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.
The shares of preferred stock and common stock covered by this prospectus
may be sold from time to time by us, the selling shareholders or, if permitted,
by pledgees, donees, transferees or other successors in interest. Those shares
may be disposed of from time to time in one or more transactions through any
one or more of the following:
. a block trade, in which the broker or dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
. purchases by a broker or dealer principal and resale by the broker or
dealer for its account;
. ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
. an exchange distribution in accordance with the rules of the exchange
or transactions in the over-the-counter market;
. the writing of options on the shares;
. by the purchasers directly;
. sales through underwriters or dealers who may receive compensation in
the form of underwriting discounts, concessions or commissions from the
selling shareholders or successors in interest or from the purchasers of
the shares for whom they may act as agent; and
. the pledge of the shares as security for any loan or obligation,
including pledges to brokers or dealers who may, from time to time,
themselves effect distributions of the shares or interests in the shares.
In addition, the shares of common stock and preferred stock covered by this
prospectus may be sold in private transactions or under Rule 144 rather than
under this prospectus.
We cannot assure you that any selling shareholder will sell any or all of
its shares under this prospectus or that any selling shareholder will not
transfer, devise or gift its shares by other means not described in this
prospectus.
Those sales may be made at prices and at terms then prevailing or at prices
related to the then current market price or at negotiated prices and terms. In
effecting sales, brokers or dealers may arrange for other brokers or dealers to
participate.
61
In the event of any such offering, we will distribute a revised prospectus
or prospectus supplement, if required, which will provide the aggregate amount
and type of shares being offered and the terms of the offering, including the
name or names of any underwriters, dealers or agents or any discounts,
commissions and other items constituting compensation from the selling
shareholders or us and any discounts, commissions or concessions allowed or
reallowed or paid to dealers. We will file that prospectus supplement and, if
necessary, a post-effective amendment to the registration statement of which
this prospectus is a part, with the SEC to reflect the disclosure of additional
information with respect to the distribution of those shares.
To the best of our knowledge, there are currently no plans, arrangements or
understandings between any selling shareholders and any broker, dealer, agent
or underwriter regarding the sale by any selling shareholder of shares of
preferred stock or common stock covered by this prospectus.
The selling shareholders and any other person participating in the
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including Regulation M which may limit
the timing of purchases and sales of any shares by the selling shareholders and
any other such person. Furthermore, under Regulation M under the Exchange Act,
any person engaged in the distribution of the shares may not simultaneously
engage in market-making activities with respect to the particular shares being
distributed for certain periods before the commencement of the distribution.
All of the above may affect the marketability of the shares and the ability of
any person or entity to engage in market-making activities with respect to the
shares.
Under the terms of the registration rights agreement, holders of securities
covered by a shelf registration statement, on the one hand, and us, on the
other hand, have agreed to indemnify each other against certain liabilities,
including certain liabilities under the Securities Act, or will be entitled to
contribution in connection with those liabilities.
Under the registration rights agreement, we have agreed to pay substantially
all expenses of the registration, offering and sale of the shares of preferred
stock and common stock covered by this prospectus to the public, including SEC
filing fees and expenses of compliance with state securities or "blue sky"
laws. However, the selling shareholders will pay all underwriting discounts,
selling commissions and related fees, if any.
62
LEGAL MATTERS
Certain Bermuda legal matters with respect to the securities will be passed
upon for us by Appleby, Spurling & Kempe. As of January 14, 2000, lawyers of
Appleby, Spurling & Kempe who have participated in the preparation of this
document beneficially owned approximately 4,000 shares of our common stock.
EXPERTS
The consolidated financial statements of Global Crossing and its
subsidiaries incorporated by reference in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen, independent public
accountants, as indicated in their reports with respect thereto, and are
incorporated by reference in reliance upon the authority of said firm as
experts in giving said reports.
The consolidated financial statements incorporated by reference in this
Registration Statement of which this prospectus is a part to the Annual Report
on Form 10-K of Frontier Corporation for the year ended December 31, 1998 and
audited historical financial statements included on pages 22-42 of Frontier
Corporation's Form 8-K dated January 26, 1999, have been so incorporated in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The combined financial statements of Global Marine Systems incorporated by
reference in this prospectus have been incorporated by reference in reliance
upon the report of KPMG Audit Plc, chartered accountants, incorporated by
reference in this prospectus and upon the authority of said firm as experts in
accounting and auditing.
The financial statements of Racal Telecom incorporated by reference in this
registration statement of which this prospectus is a part have been audited by
Deloitte & Touche, independent auditors, as stated in their report incorporated
by reference in this registration statement of which this prospectus is a part.
The consolidated financial statements incorporated by reference in this
registration statement of which this prospectus is a part of HCL Holdings
Limited and subsidiaries have been so incorporated in reliance on the reports
of PricewaterhouseCoopers, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES
We are organized under the laws of Bermuda. In addition, a number of our
directors and officers reside outside of the United States and a substantial
portion of our assets are located outside of the United States. As a result, it
may be difficult for you to effect service of process within the United States
upon those persons or to realize against them in courts of the United States
upon judgments of courts of the United States predicated upon civil liabilities
under the United States federal securities laws. Furthermore, our Bermuda
counsel, Appleby Spurling & Kempe, has advised us that there is doubt as to the
enforcement in Bermuda, in original actions or in actions of enforcement of
judgments of United States courts, of liabilities predicated upon United States
federal securities laws, although Bermuda courts will enforce foreign judgments
for liquidated amounts in civil matters subject to some conditions and
exceptions.
63
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2,600,000 Shares of 7% Cumulative Convertible Preferred Stock
and
15,800,000 Shares of Common Stock
[LOGO] GLOBAL CROSSING
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PART II
Item 14. Other Expenses of Issuance and Distribution.
The registrant estimates that expenses in connection with the offering
described in this Registration Statement will be as follows:
SEC registration fee............................................ $230,858
Nasdaq National Market listing fee.............................. 17,500
Bermuda Stock Exchange listing fee.............................. 17,500
Printing and engraving expenses................................. 150,000
Legal fees and expenses......................................... 250,000
Accounting fees and expenses.................................... 150,000
Transfer agent and registrar fees............................... 5,000
Miscellaneous................................................... 29,142
--------
Total......................................................... $850,000
Item 15. Indemnification of Directors and Officers.
The Bye-laws of the Registrant provide for indemnification of the
Registrant's officers and directors against all liabilities, loss, damage or
expense incurred or suffered by such party as an officer or director of the
Registrant; provided that such indemnification shall not extend to any matter
which would render it void pursuant to the Companies Act of 1981 as in effect
from time to time in Bermuda.
The Companies Act provides that a Bermuda company may indemnify its
directors in respect of any loss arising or liability attaching to them as a
result of any negligence, default, breach of duty or breach of trust of which
they may be guilty. However, the Companies Act also provides that any
provision, whether contained in the company's bye-laws or in a contract or
arrangement between the company and the director, indemnifying a director
against any liability which would attach to him in respect of his fraud or
dishonesty will be void.
The directors and officers of the Registrant are covered by directors' and
officers' insurance policies maintained by the Registrant.
Item 16. Exhibits.
The following is a complete list of Exhibits filed as part of this
Registration Statement, which are incorporated herein:
Exhibit
Number Exhibit Description
------- -------------------
2.1 Agreement and Plan of Merger, dated as of March 16, 1999 (the
"Frontier Merger Agreement"), among the Registrant, Frontier
Corporation and GCF Acquisition Corp. (incorporated by reference to
Exhibit 2 to the Registrant's Current Report on Form 8-K filed on
March 19, 1999 (the "March 19, 1999 8-K")).
2.2 Consent and Amendment No. 1 to the Frontier Merger Agreement, dated as
of May 16, 1999, among the Registrant, GCF Acquisition Corp. and
Frontier Corporation (incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K filed on May 18, 1999 (the
"May 18, 1999 8-K")).
2.3 Amendment No. 2 to the Frontier Merger Agreement, dated as of
September 2, 1999, among the Registrant, GCF Acquisition Corp. and
Frontier Corporation (incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K filed on September 3, 1999
(the "September 3, 1999 8-K")).
2.4 Sale and Purchase Agreement, dated as of April 26, 1999, between Cable
& Wireless plc and the Registrant (incorporated by reference to
Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on
July 16, 1999 (the "July 16, 1999 8-K")).
2.5 Amendment to the Sale and Purchase Agreement, dated as of June 25,
1999, between Cable & Wireless plc and the Registrant (incorporated by
reference to Exhibit 2.2 to the July 16, 1999 8-K).
2.6 Agreement and Plan of Merger, dated as of May 16, 1999, between the
Registrant and U S West, Inc. (incorporated by reference to Exhibit 2
to the Registrant's Current Report on Form 8-K filed on May 21, 1999
(the "May 21, 1999 8-K")).
II-1
Exhibit
Number Exhibit Description
------- -------------------
2.7 Letter Agreement, dated as of May 16, 1999, between the Registrant and
U S West, Inc. (incorporated by reference to Exhibit 99 to the May 21,
1999 8-K).
2.8 Termination Agreement, dated as of July 18, 1999, between the
Registrant and U S West, Inc. (incorporated by reference to Exhibit
10.1 to the Registrant's Current Report on Form 8-K filed on July 20,
1999 (the "July 20, 1999 8-K")).
2.9 Agreement and Plan of Merger, dated as of February 22, 2000, among the
Registrant, Georgia Merger Sub Corporation, IPC Communications, Inc.,
IPC Information Systems, Inc., Idaho Merger Sub Corporation and IXnet,
Inc. (incorporated by reference to Exhibit 2.10 to Registrant's annual
report on Form 10-K for the year ended December 31, 1999).
3.1 Memorandum of Association of the Registrant (incorporated by reference
to Exhibit 3.1 to the Registrant's Registration Statement on Form S-
1/A filed on July 2, 1998 (the "July 2, 1998 S-1/A")).
3.2 Certificate of Incorporation of Change of Name of the Registrant dated
April 30, 1998 (incorporated by reference to Exhibit 3.3 to the
Registrant's Registration Statement on Form S-1/A filed on July 23,
1998 (the "July 23, 1998 S-1/A")).
3.3 Memorandum of Increase of Share Capital of the Registrant dated July
9, 1998 (incorporated by reference to Exhibit 3.4 to the July 23, 1998
S-1/A).
3.4 Memorandum of Increase of Share Capital of the Registrant dated
September 27, 1999 (incorporated by reference to Exhibit 3.1 to the
Registrant's Quarterly Report on Form 10-Q filed on November 15, 1999
(the "November 15, 1999 10-Q")).
3.5 Bye-laws of the Registrant as in effect on October 14, 1999
(incorporated by reference to Exhibit 3.2 to the November 15, 1999 10-
Q).
3.6 Certificate of Designations of 6 3/8% Cumulative Convertible Preferred
Stock of the Registrant dated November 5, 1999 (incorporated by
reference to Exhibit 3.3 to the November 15, 1999 10-Q).
3.7 Certificate of Designations of 7% Cumulative Convertible Preferred
Stock of the Registrant, dated December 15, 1999 (incorporated by
reference to Exhibit 3.9 to the Global Crossing Holdings Ltd.
Registration Statement on Form S-4 filed on January 11, 2000 (File No.
333-94449)).
3.8 Certificate of Designations of 6 3/8% Cumulative Convertible Preferred
Stock, Series B, of the Registrant, dated January 12, 2000
(incorporated by reference to Exhibit 3.10 to Registrant's annual
report on Form 10-K for the year ended December 31, 1999).
4.1 Certificate of Designations of 10 1/2% Senior Exchangeable Preferred
Stock Due 2008 of Global Crossing Holdings Ltd. dated December 1, 1998
(incorporated by reference to Schedule A to Exhibit 3.2 to the Global
Crossing Holdings Ltd. Registration Statement on Form S-4 filed on
December 22, 1998.)
4.2 Indenture, dated as of May 18, 1998, between Global Crossing Holdings
Ltd. and United States Trust Company of New York, as Trustee
(incorporated by reference to Exhibit 4.2 to the Global Crossing
Holdings Ltd. Registration Statement on Form S-4 filed on December 22,
1998).
4.3 Supplemental Indenture, dated as of June 25, 1999, between Global
Crossing Holdings Ltd. and United States Trust Company of New York, to
the Indenture dated as of May 18, 1998 (incorporated by reference to
Exhibit 4.4 to the Registrant's Registration Statement on Form S-4
filed on July 12, 1999).
4.4 Credit Agreement, dated as of July 2, 1999, among the Registrant,
Global Crossing Holdings Ltd., the Lenders party thereto and The Chase
Manhattan Bank as Administrative Agent (incorporated by reference to
Exhibit 10.7 to the Registrant's Registration Statement on Form S-4/A
filed on August 5, 1999).
II-2
Exhibit
Number Exhibit Description
------- -------------------
4.5 Indenture, dated as of November 19, 1999, among Global Crossing Ltd.,
Global Crossing Holdings Ltd. and United States Trust Company of New
York (incorporated by reference to Exhibit 4.5 to the Global Crossing
Holdings Ltd. Registration Statement on Form S-4 filed on January 11,
2000 (File No. 333-94449)).
Except as hereinabove provided, there is no instrument with respect to
long-term debt of the Registrant and its consolidated subsidiaries
under which the total authorized amount exceeds 10 percent of the
total consolidated assets of the Registrant. The Registrant agrees to
furnish to the SEC upon its request a copy of any instrument relating
to long-term debt.
5.1 Opinion of Appleby, Spurling & Kempe (previously filed).
10.1 Project Development and Construction Contract, dated as of March 18,
1997, among AT&T Submarine Systems, Inc. and Atlantic Crossing Ltd.
(formerly Global Telesystems Ltd.) (incorporated by reference to
Exhibit 10.2 to the July 23, 1998 S-1/A).
10.2 Project Development and Construction Contract, dated as of April 21,
1998, among Tyco Submarine Systems, Ltd. and Pacific Crossing Ltd.
(incorporated by reference to Exhibit 10.3 to the July 23, 1998 S-
1/A).
10.3 Project Development and Construction Contract, dated as of June 2,
1998, among Alcatel Submarine Networks and Mid-Atlantic Crossing Ltd.
(incorporated by reference to Exhibit 10.4 to the July 23, 1998 S-
1/A).
10.4 Project Development and Construction Contract, dated as of July 21,
1998, among Tyco Submarine Systems, Ltd. and Pan American Crossing
Ltd. (incorporated by reference to Exhibit 10.5 to the Registrant's
Quarterly Report on Form 10-Q filed on November 16, 1998).
10.5 Project Development and Construction Contract, dated as of July 30,
1999, among Alcatel Submarine Networks and South American Crossing
Ltd. (incorporated by reference to Exhibit 10.5 to the Global Crossing
Holdings Ltd. Registration Statement on Form S-4 filed on January 11,
2000 (File No. 333-94449)).
10.6 Lease made as of October 1, 1999 between North Crescent Realty V, LLC
and Global Crossing Development Company (incorporated by reference to
Exhibit 10.1 to the November 15, 1999 10-Q).
10.7 Form of Stockholders Agreement dated as of August 12, 1998 among the
Registrant and the investors named therein (incorporated by reference
to Exhibit 9.1 to the July 23, 1998 S-1/A).
10.8 Form of Registration Rights Agreement dated as of August 12, 1998
among the Registrant and the investors named therein (incorporated by
reference to Exhibit 4.4 to the July 23, 1998 S-1/A).
10.9 Voting Agreement, dated as of March 16, 1999, among certain
shareholders of the Registrant parties thereto, Frontier Corporation
and, for certain purposes only, the Registrant (incorporated by
reference to Exhibit 10.2 to the March 19, 1999 8-K).
10.10 Second Reaffirmation of Voting Agreement and Share Transfer
Restriction Agreement, dated as of September 2, 1999 (incorporated by
reference to Annex S-B to the joint proxy statement/prospectus
supplement included in the Registrant's Registration Statement on Form
S-4 filed on September 8, 1999 (the "September 8, 1999 S-4").
10.11 Share Transfer Restriction Agreement, dated as of September 2, 1999,
among certain shareholders of Global Crossing Ltd., certain
shareholders of Frontier Corporation and Global Crossing Ltd.
(incorporated by reference to Annex S-C to the joint proxy
statement/prospectus supplement included in the September 8, 1999 S-
4).
10.12 Tender Offer and Purchase Agreement, dated as of May 16, 1999, between
the Registrant and U S WEST, Inc. (incorporated by reference to
Exhibit (c)(2) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21,
1999).
II-3
Exhibit
Number Exhibit Description
------- -------------------
10.13 Standstill Agreement dated as of May 16, 1999 between U S WEST, Inc.
and the Registrant (incorporated by reference to Exhibit (c)(4) to U S
WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).
10.14 Voting Agreement dated as of May 16, 1999 between U S WEST, Inc. and
the Registrant (incorporated by reference to Exhibit (c)(3) to U S
WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).
10.15 Tender and Voting Agreement dated as of May 16, 1999 among U S WEST,
Inc., the Registrant and the shareholders party thereto (incorporated
by reference to Exhibit (c)(5) to U S WEST, Inc.'s Schedule 14D-1
filed on May 21, 1999).
10.16 Agreement dated as of May 16, 1999 among the Registrant and the
shareholders party thereto (incorporated by reference to Exhibit
(c)(6) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).
10.17 Transfer Agreement dated as of May 16, 1999 among the Registrant and
the shareholders party thereto (incorporated by reference to Exhibit
(c)(8) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).
10.18 Amendment No. 1 dated as of July 18, 1999 to Tender Offer and Purchase
Agreement dated as of May 16 1999 between the Registrant and U S WEST,
Inc. (incorporated by reference to Exhibit 10.2 to the July 20, 1999
8-K).
10.19 Agreement, dated as of July 18, 1999, between Qwest Communications
International Inc. and the Registrant (incorporated by reference to
Exhibit 10.3 to the July 20, 1999 8-K).
10.20 Agreement, dated as of July 18, 1999, between Global Crossing Holdings
Ltd. and Qwest Communications International Inc. (incorporated by
reference to Exhibit 10.4 to the July 20, 1999 8-K).
10.21 Registration Rights Agreement, dated as of December 15, 1999, among
the Registrant and the initial purchasers of the Registrant's 7%
Cumulative Convertible Preferred Stock named therein (previously filed
with this Registration Statement).
10.22 1998 Global Crossing Ltd. Stock Incentive Plan, as amended and
restated effective December 7, 1999 (incorporated by reference to
Exhibit 10.21 to the Global Crossing Holdings Ltd. Registration
Statement on Form S-4 filed on January 11, 2000 (File No. 333-94449)).
10.23 Form of Non-Qualified Stock Option Agreement as in effect on September
30, 1999 (incorporated by reference to Exhibit 10.2 to the November
15, 1999 10-Q).
10.24 Frontier Corporation Supplemental Retirement Savings Plan as amended
and restated effective January 1, 1996 (incorporated by reference to
Exhibit 10.13 to Frontier Corporation's Annual Report on Form 10-K
filed March 28, 1997).
10.25 Amendment No. 1, effective March 16, 1999, to Frontier Corporation
Supplemental Retirement Savings Plan (incorporated by reference to
Exhibit 10.2 to Frontier Corporation's Quarterly Report on Form 10-Q
filed August 3, 1999).
10.26 Amendment No. 2, dated September 21, 1999, to Frontier Corporation
Supplemental Retirement Savings Plan (incorporated by reference to
Exhibit 10.5 to the November 15, 1999 10-Q).
10.27 Employment Agreement dated as of February 19, 1999 between the
Registrant and Robert Annunziata (incorporated by reference to Exhibit
10.8 to the Registrant's Quarterly Report on Form 10-Q filed on May
10, 1999).
10.28 Executive Contract dated January 1, 1998 between Joseph P. Clayton and
Frontier Corporation (incorporated by reference to Exhibit 10.22 to
Frontier Corporation's Annual Report on Form 10-K filed March 26,
1998).
II-4
Exhibit
Number Exhibit Description
------- -------------------
10.29 Amendment dated May 1, 1999 to Executive Contract between Joseph P.
Clayton and Frontier Corporation (incorporated by reference to Exhibit
10.9 to the November 15, 1999 10-Q).
10.30 Sale Agreement, dated October 10, 1999, among Controls and
Communications Limited, The Racal Corporation, Racal Electronics plc
and the Registrant (incorporated by reference to Exhibit 2.1 of the
Registrant's Current Report on Form 8-K filed on October 21, 1999).
10.31 Subscription and Sale and Purchase Agreement, dated November 15, 1999,
among Hutchison Whampoa Limited, Hutchison Telecommunications Limited,
the Registrant and HCL Holdings Limited (incorporated by reference to
Exhibit 10.33 to the Global Crossing Holdings Ltd. Registration
Statement on Form S-4 filed on January 11, 2000 (File No. 333-94449)).
10.32 Registration Rights Agreement, dated as of December 15, 1999, among
the Registrant and the initial purchasers of the Registrant's 7%
Cumulative Convertible Preferred Stock named therein (incorporated by
reference to Exhibit 10.21 to the Registrant's Registration Statement
on Form S-3 (File No. 333-94803) filed on January 18, 2000).
10.33 Employment Agreement, dated as of December 5, 1999, between the
Registrant and Leo J. Hindery, Jr. (incorporated by reference to
Exhibit 10.32 to the Registrant's annual report on Form 10-K for the
year ended December 31, 1999).
10.34 Form of Change of Control Agreement between the Registrant and
Executive Officers of the Registrant approved by the Board of
Directors in January 2000 (incorporated by reference to Exhibit 10.33
to the Registrant's annual report on Form 10-K for the year ended
December 31, 1999).
10.35 Employment Agreement, dated as of December 3, 1999, between the
Registrant and John A. Scarpati (incorporated by reference to Exhibit
10.36 to Registrant's annual report on Form 10-K for the year ended
December 31, 1999).
12.1 Statement of Computation of Earnings to Fixed Charges (incorporated by
reference to Exhibit 12.1 to Registrant's annual report on Form 10-K
for the year ended December 31, 1999).
21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit
21.1 to Registrant's annual report on Form 10-K for the year ended
December 31, 1999).
23.1 Consent of Arthur Andersen (previously filed).
23.2 Consent of PricewaterhouseCoopers LLP (previously filed).
23.3 Consent of KPMG Audit Plc (previously filed).
23.4 Consent of Deloitte & Touche (previously filed).
23.5 Consent of PricewaterhouseCoopers (previously filed).
23.6 Consent of Appleby, Spurling & Kempe (included in Exhibit 5.1).
24.1 Power of Attorney of the Registrant (previously filed with this
Registration Statement).
24.2 Power of Attorney of Leo J. Hindery, Jr. (filed herewith).
Item 17. Undertakings.
(1) The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-5
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(d) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at the time shall be deemed to be the
initial bona fide offering thereof.
(e) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on May 16, 2000.
Global Crossing Ltd.
By: /s/ Dan J. Cohrs
----------------------------------
Name: Dan J. Cohrs
Title: Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Capacity Date
--------- -------- ----
/*/ Chairman of the Board and May 16, 2000
___________________________________________ Director
Gary Winnick
/*/ Co-Chairman of the Board May 16, 2000
___________________________________________ and Director
Lodwrick M. Cook
/*/ Vice Chairman of the Board May 16, 2000
___________________________________________ and Director
Thomas J. Casey
/*/ Director; Vice Chairman of May 16, 2000
___________________________________________ the Board, Asia Global
Jack M. Scanlon Crossing
/*/ Chief Executive Officer May 16, 2000
___________________________________________ and Director
Leo J. Hindery, Jr.
/*/ Chief Financial Officer May 16, 2000
___________________________________________ (principal financial
Dan J. Cohrs officer and principal
accounting officer)
/*/ Director May 16, 2000
___________________________________________
Jay R. Bloom
Director
___________________________________________
Norman Brownstein
/*/ Director May 16, 2000
___________________________________________
William E. Conway
II-7
Signature Capacity Date
--------- -------- ----
/*/ Director May 16, 2000
___________________________________________
Dean C. Kehler
/*/ Director May 16, 2000
___________________________________________
Geoffrey J.W. Kent
/*/ Director May 16, 2000
___________________________________________
David L. Lee
/*/ Director May 16, 2000
___________________________________________
Barry Porter
/*/ Director May 16, 2000
___________________________________________
Bruce Raben
/*/ Director May 16, 2000
___________________________________________
Michael R. Steed
/*/ Director May 16, 2000
___________________________________________
Robert Annunziata
/*/ Director May 16, 2000
___________________________________________
James F. McDonald
/*/ Director May 16, 2000
___________________________________________
Eric Hippeau
/*/ Director May 16, 2000
___________________________________________
Joseph P. Clayton
/*/ Director May 16, 2000
___________________________________________
Douglas H. McCorkindale
___________________________________________ Director
Canning Fok
*By Power-of-Attorney
/s/ Dan J. Cohrs Attorney-in-Fact May 16, 2000
___________________________________________
Dan J. Cohrs
II-8
EXHIBIT INDEX
Exhibit
Number Exhibit Description
------- -------------------
2.1 Agreement and Plan of Merger, dated as of March 16, 1999 (the
"Frontier Merger Agreement"), among the Registrant, Frontier
Corporation and GCF Acquisition Corp. (incorporated by reference to
Exhibit 2 to the Registrant's Current Report on Form 8-K filed on
March 19, 1999 (the "March 19, 1999 8-K")).
2.2 Consent and Amendment No. 1 to the Frontier Merger Agreement, dated as
of May 16, 1999, among the Registrant, GCF Acquisition Corp. and
Frontier Corporation (incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K filed on May 18, 1999 (the
"May 18, 1999 8-K")).
2.3 Amendment No. 2 to the Frontier Merger Agreement, dated as of
September 2, 1999, among the Registrant, GCF Acquisition Corp. and
Frontier Corporation (incorporated by reference to Exhibit 2 to the
Registrant's Current Report on Form 8-K filed on September 3, 1999
(the "September 3, 1999 8-K")).
2.4 Sale and Purchase Agreement, dated as of April 26, 1999, between Cable
& Wireless plc and the Registrant (incorporated by reference to
Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on
July 16, 1999 (the "July 16, 1999 8-K")).
2.5 Amendment to the Sale and Purchase Agreement, dated as of June 25,
1999, between Cable & Wireless plc and the Registrant (incorporated by
reference to Exhibit 2.2 to the July 16, 1999 8-K).
2.6 Agreement and Plan of Merger, dated as of May 16, 1999, between the
Registrant and U S West, Inc. (incorporated by reference to Exhibit 2
to the Registrant's Current Report on Form 8-K filed on May 21, 1999
(the "May 21, 1999 8-K")).
2.7 Letter Agreement, dated as of May 16, 1999, between the Registrant and
U S West, Inc. (incorporated by reference to Exhibit 99 to the May 21,
1999 8-K).
2.8 Termination Agreement, dated as of July 18, 1999, between the
Registrant and U S West, Inc. (incorporated by reference to Exhibit
10.1 to the Registrant's Current Report on Form 8-K filed on July 20,
1999 (the "July 20, 1999 8-K")).
2.9 Agreement and Plan of Merger, dated as of February 22, 2000, among the
Registrant, Georgia Merger Sub Corporation, IPC Communications, Inc.,
IPC Information Systems, Inc., Idaho Merger Sub Corporation and IXnet,
Inc. (incorporated by reference to Exhibit 2.10 to Registrant's annual
report on Form 10-K for the year ended December 31, 1999).
3.1 Memorandum of Association of the Registrant (incorporated by reference
to Exhibit 3.1 to the Registrant's Registration Statement on Form S-
1/A filed on July 2, 1998 (the "July 2, 1998 S-1/A")).
3.2 Certificate of Incorporation of Change of Name of the Registrant dated
April 30, 1998 (incorporated by reference to Exhibit 3.3 to the
Registrant's Registration Statement on Form S-1/A filed on July 23,
1998 (the "July 23, 1998 S-1/A")).
3.3 Memorandum of Increase of Share Capital of the Registrant dated July
9, 1998 (incorporated by reference to Exhibit 3.4 to the July 23, 1998
S-1/A).
3.4 Memorandum of Increase of Share Capital of the Registrant dated
September 27, 1999 (incorporated by reference to Exhibit 3.1 to the
Registrant's Quarterly Report on Form 10-Q filed on November 15, 1999
(the "November 15, 1999 10-Q")).
3.5 Bye-laws of the Registrant as in effect on October 14, 1999
(incorporated by reference to Exhibit 3.2 to the November 15, 1999 10-
Q).
3.6 Certificate of Designations of 6 3/8% Cumulative Convertible Preferred
Stock of the Registrant dated November 5, 1999 (incorporated by
reference to Exhibit 3.3 to the November 15, 1999 10-Q).
3.7 Certificate of Designations of 7% Cumulative Convertible Preferred
Stock of the Registrant, dated December 15, 1999 (incorporated by
reference to Exhibit 3.9 to the Global Crossing Holdings Ltd.
Registration Statement on Form S-4 filed on January 11, 2000 (File No.
333-94449)).
Exhibit
Number Exhibit Description
------- -------------------
3.8 Certificate of Designations of 6 3/8% Cumulative Convertible Preferred
Stock, Series B, of the Registrant, dated January 12, 2000
(incorporated by reference to Exhibit 3.10 to Registrant's annual
report on Form 10-K for the year ended December 31, 1999).
4.1 Certificate of Designations of 10 1/2% Senior Exchangeable Preferred
Stock Due 2008 of Global Crossing Holdings Ltd. dated December 1, 1998
(incorporated by reference to Schedule A to Exhibit 3.2 to the Global
Crossing Holdings Ltd. Registration Statement on Form S-4 filed on
December 22, 1998.)
4.2 Indenture, dated as of May 18, 1998, between Global Crossing Holdings
Ltd. and United States Trust Company of New York, as Trustee
(incorporated by reference to Exhibit 4.2 to the Global Crossing
Holdings Ltd. Registration Statement on Form S-4 filed on December 22,
1998).
4.3 Supplemental Indenture, dated as of June 25, 1999, between Global
Crossing Holdings Ltd. and United States Trust Company of New York, to
the Indenture dated as of May 18, 1998 (incorporated by reference to
Exhibit 4.4 to the Registrant's Registration Statement on Form S-4
filed on July 12, 1999).
4.4 Credit Agreement, dated as of July 2, 1999, among the Registrant,
Global Crossing Holdings Ltd., the Lenders party thereto and The Chase
Manhattan Bank as Administrative Agent (incorporated by reference to
Exhibit 10.7 to the Registrant's Registration Statement on Form S-4/A
filed on August 5, 1999).
4.5 Indenture, dated as of November 19, 1999, among Global Crossing Ltd.,
Global Crossing Holdings Ltd. and United States Trust Company of New
York (incorporated by reference to Exhibit 4.5 to the Global Crossing
Holdings Ltd. Registration Statement on Form S-4 filed on January 11,
2000 (File No. 333-94449)).
Except as hereinabove provided, there is no instrument with respect to
long-term debt of the Registrant and its consolidated subsidiaries
under which the total authorized amount exceeds 10 percent of the
total consolidated assets of the Registrant. The Registrant agrees to
furnish to the SEC upon its request a copy of any instrument relating
to long-term debt.
5.1 Opinion of Appleby, Spurling & Kempe (previously filed).
10.1 Project Development and Construction Contract, dated as of March 18,
1997, among AT&T Submarine Systems, Inc. and Atlantic Crossing Ltd.
(formerly Global Telesystems Ltd.) (incorporated by reference to
Exhibit 10.2 to the July 23, 1998 S-1/A).
10.2 Project Development and Construction Contract, dated as of April 21,
1998, among Tyco Submarine Systems, Ltd. and Pacific Crossing Ltd.
(incorporated by reference to Exhibit 10.3 to the July 23, 1998 S-
1/A).
10.3 Project Development and Construction Contract, dated as of June 2,
1998, among Alcatel Submarine Networks and Mid-Atlantic Crossing Ltd.
(incorporated by reference to Exhibit 10.4 to the July 23, 1998 S-
1/A).
10.4 Project Development and Construction Contract, dated as of July 21,
1998, among Tyco Submarine Systems, Ltd. and Pan American Crossing
Ltd. (incorporated by reference to Exhibit 10.5 to the Registrant's
Quarterly Report on Form 10-Q filed on November 16, 1998).
10.5 Project Development and Construction Contract, dated as of July 30,
1999, among Alcatel Submarine Networks and South American Crossing
Ltd. (incorporated by reference to Exhibit 10.5 to the Global Crossing
Holdings Ltd. Registration Statement on Form S-4 filed on January 11,
2000 (File No. 333-94449)).
10.6 Lease made as of October 1, 1999 between North Crescent Realty V, LLC
and Global Crossing Development Company (incorporated by reference to
Exhibit 10.1 to the November 15, 1999 10-Q).
10.7 Form of Stockholders Agreement dated as of August 12, 1998 among the
Registrant and the investors named therein (incorporated by reference
to Exhibit 9.1 to the July 23, 1998 S-1/A).
Exhibit
Number Exhibit Description
------- -------------------
10.8 Form of Registration Rights Agreement dated as of August 12, 1998
among the Registrant and the investors named therein (incorporated by
reference to Exhibit 4.4 to the July 23, 1998 S-1/A).
10.9 Voting Agreement, dated as of March 16, 1999, among certain
shareholders of the Registrant parties thereto, Frontier Corporation
and, for certain purposes only, the Registrant (incorporated by
reference to Exhibit 10.2 to the March 19, 1999 8-K).
10.10 Second Reaffirmation of Voting Agreement and Share Transfer
Restriction Agreement, dated as of September 2, 1999 (incorporated by
reference to Annex S-B to the joint proxy statement/prospectus
supplement included in the Registrant's Registration Statement on Form
S-4 filed on September 8, 1999 (the "September 8, 1999 S-4").
10.11 Share Transfer Restriction Agreement, dated as of September 2, 1999,
among certain shareholders of Global Crossing Ltd., certain
shareholders of Frontier Corporation and Global Crossing Ltd.
(incorporated by reference to Annex S-C to the joint proxy
statement/prospectus supplement included in the September 8, 1999 S-
4).
10.12 Tender Offer and Purchase Agreement, dated as of May 16, 1999, between
the Registrant and U S WEST, Inc. (incorporated by reference to
Exhibit (c)(2) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21,
1999).
10.13 Standstill Agreement dated as of May 16, 1999 between U S WEST, Inc.
and the Registrant (incorporated by reference to Exhibit (c)(4) to U S
WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).
10.14 Voting Agreement dated as of May 16, 1999 between U S WEST, Inc. and
the Registrant (incorporated by reference to Exhibit (c)(3) to U S
WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).
10.15 Tender and Voting Agreement dated as of May 16, 1999 among U S WEST,
Inc., the Registrant and the shareholders party thereto (incorporated
by reference to Exhibit (c)(5) to U S WEST, Inc.'s Schedule 14D-1
filed on May 21, 1999).
10.16 Agreement dated as of May 16, 1999 among the Registrant and the
shareholders party thereto (incorporated by reference to Exhibit
(c)(6) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).
10.17 Transfer Agreement dated as of May 16, 1999 among the Registrant and
the shareholders party thereto (incorporated by reference to Exhibit
(c)(8) to U S WEST, Inc.'s Schedule 14D-1 filed on May 21, 1999).
10.18 Amendment No. 1 dated as of July 18, 1999 to Tender Offer and Purchase
Agreement dated as of May 16 1999 between the Registrant and U S WEST,
Inc. (incorporated by reference to Exhibit 10.2 to the July 20, 1999
8-K).
10.19 Agreement, dated as of July 18, 1999, between Qwest Communications
International Inc. and the Registrant (incorporated by reference to
Exhibit 10.3 to the July 20, 1999 8-K).
10.20 Agreement, dated as of July 18, 1999, between Global Crossing Holdings
Ltd. and Qwest Communications International Inc. (incorporated by
reference to Exhibit 10.4 to the July 20, 1999 8-K).
10.21 Registration Rights Agreement, dated as of December 15, 1999, among
the Registrant and the initial purchasers of the Registrant's 7%
Cumulative Convertible Preferred Stock named therein (previously filed
with this Registration Statement).
10.22 1998 Global Crossing Ltd. Stock Incentive Plan, as amended and
restated effective December 7, 1999 (incorporated by reference to
Exhibit 10.21 to the Global Crossing Holdings Ltd. Registration
Statement on Form S-4 filed on January 11, 2000 (File No. 333-94449)).
Exhibit
Number Exhibit Description
------- -------------------
10.23 Form of Non-Qualified Stock Option Agreement as in effect on September
30, 1999 (incorporated by reference to Exhibit 10.2 to the November
15, 1999 10-Q).
10.24 Frontier Corporation Supplemental Retirement Savings Plan as amended
and restated effective January 1, 1996 (incorporated by reference to
Exhibit 10.13 to Frontier Corporation's Annual Report on Form 10-K
filed March 28, 1997).
10.25 Amendment No. 1, effective March 16, 1999, to Frontier Corporation
Supplemental Retirement Savings Plan (incorporated by reference to
Exhibit 10.2 to Frontier Corporation's Quarterly Report on Form 10-Q
filed August 3, 1999).
10.26 Amendment No. 2, dated September 21, 1999, to Frontier Corporation
Supplemental Retirement Savings Plan (incorporated by reference to
Exhibit 10.5 to the November 15, 1999 10-Q).
10.27 Employment Agreement dated as of February 19, 1999 between the
Registrant and Robert Annunziata (incorporated by reference to Exhibit
10.8 to the Registrant's Quarterly Report on Form 10-Q filed on May
10, 1999).
10.28 Executive Contract dated January 1, 1998 between Joseph P. Clayton and
Frontier Corporation (incorporated by reference to Exhibit 10.22 to
Frontier Corporation's Annual Report on Form 10-K filed March 26,
1998).
10.29 Amendment dated May 1, 1999 to Executive Contract between Joseph P.
Clayton and Frontier Corporation (incorporated by reference to Exhibit
10.9 to the November 15, 1999 10-Q).
10.30 Sale Agreement, dated October 10, 1999, among Controls and
Communications Limited, The Racal Corporation, Racal Electronics plc
and the Registrant (incorporated by reference to Exhibit 2.1 of the
Registrant's Current Report on Form 8-K filed on October 21, 1999).
10.31 Subscription and Sale and Purchase Agreement, dated November 15, 1999,
among Hutchison Whampoa Limited, Hutchison Telecommunications Limited,
the Registrant and HCL Holdings Limited (incorporated by reference to
Exhibit 10.33 to the Global Crossing Holdings Ltd. Registration
Statement on Form S-4 filed on January 11, 2000 (File No. 333-94449)).
10.32 Registration Rights Agreement, dated as of December 15, 1999, among
the Registrant and the initial purchasers of the Registrant's 7%
Cumulative Convertible Preferred Stock named therein (incorporated by
reference to Exhibit 10.21 to the Registrant's Registration Statement
on Form S-3 (File No. 333-94803) filed on January 18, 2000).
10.33 Employment Agreement, dated as of December 5, 1999, between the
Registrant and Leo J. Hindery, Jr. (incorporated by reference to
Exhibit 10.32 to the Registrant's annual report on Form 10-K for the
year ended December 31, 1999).
10.34 Form of Change of Control Agreement between the Registrant and
Executive Officers of the Registrant approved by the Board of
Directors in January 2000 (incorporated by reference to Exhibit 10.33
to the Registrant's annual report on Form 10-K for the year ended
December 31, 1999).
10.35 Employment Agreement, dated as of December 3, 1999, between the
Registrant and John A. Scarpati (incorporated by reference to Exhibit
10.36 to Registrant's annual report on Form 10-K for the year ended
December 31, 1999).
12.1 Statement of Computation of Earnings to Fixed Charges (incorporated by
reference to Exhibit 12.1 to Registrant's annual report on Form 10-K
for the year ended December 31, 1999).
21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit
21.1 to Registrant's annual report on Form 10-K for the year ended
December 31, 1999).
23.1 Consent of Arthur Andersen (previously filed).
23.2 Consent of PricewaterhouseCoopers LLP (previously filed).
Exhibit
Number Exhibit Description
- ------- -------------------
23.3 Consent of KPMG Audit Plc (previously filed).
23.4 Consent of Deloitte & Touche (previously filed).
23.5 Consent of PricewaterhouseCoopers (previously filed).
23.6 Consent of Appleby, Spurling & Kempe (included in Exhibit 5.1).
24.1 Power of Attorney of the Registrant (previously filed with this Registration Statement).
24.2 Power of Attorney of Leo J. Hindery, Jr. (filed herewith).