<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
BERMUDA 13-3795510
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
------------------------
Cedar House
41 Cedar Avenue
Hamilton HM12, Bermuda
(809) 295-2244
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ERIC J. ZAHLER
600 Third Avenue
New York, New York 10016
(212) 697-1105
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
BRUCE R. KRAUS, ESQ. ROBERT ROSENMAN, ESQ.
WILLKIE FARR & GALLAGHER CRAVATH SWAINE & MOORE
One Citicorp Center Worldwide Plaza
153 East 53rd Street 825 Eighth Avenue
New York, New York 10022 New York, New York 10019
(212) 821-8000 (212) 474-1000
</TABLE>
------------------------
APPROXIMATE DATE OF THE COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
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: / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE
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6 1/2% Convertible Preferred Equivalent
Obligations............................... $310,000,000 100% $310,000,000 $106,897(1)(2)
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Common Stock, $1.00 par value................ 4,769,230(3) $ -- $ -- $ --(4)
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457 under the Securities Act of 1933, as amended (the
"Securities Act"). The price shown for the Convertible Preferred Equivalent
Obligations (the "Securities") is based on the offering price on February 29,
1996.
(2) $106,897 was wired to the Securities and Exchange Commission's account
at Mellon Bank in payment of the required registration fee due in connection
with this Registration Statement.
(3) The shares of Common Stock being registered hereunder include the number
of shares of Common Stock initially issuable upon conversion of the Securities
(4,769,230 shares) plus such indeterminate number of additional shares as may
become issuable upon conversion of the Securities as a result of adjustments in
the conversion price thereof or upon redemption payments, interest payments and
certain other payments made on the Securities by the delivery of Common Stock in
accordance with the terms of the Securities.
(4) Pursuant to Rule 457(i) under the Securities Act, no registration fee is
required for the Common Stock issuable upon conversion of the Securities because
no additional consideration will be required in connection with the issuance of
such shares.
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A) MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 20, 1996
$310,000,000
6 1/2% CONVERTIBLE PREFERRED EQUIVALENT OBLIGATIONS DUE 2006
AND
4,769,230 SHARES OF COMMON STOCK
GLOBALSTAR TELECOMMUNICATIONS LIMITED
------------------------
This Prospectus relates to the 6 1/2% Convertible Preferred Equivalent
Obligations due 2006 (the "Securities") of Globalstar Telecommunications
Limited, a Bermuda company ("GTL" or the "Company"), and the shares of Common
Stock, par value $1.00 per share (the "Common Stock"), issuable upon conversion
of the Securities (the "Conversion Shares"). The Securities are convertible at
any time prior to redemption or maturity, at a conversion price of $65.00 per
share, which represents a conversion ratio of 0.7692 shares per Security,
subject to adjustment under certain conditions (the "Conversion Price"). The
Securities were issued and sold by the Company (the "Original Offering") in
March and April 1996, to the Initial Purchasers (as defined herein, see "Selling
Holders") in a private placement and were resold by the Initial Purchasers in
transactions exempt from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"), in the United States to qualified
institutional buyers (as defined in Rule 144A under the Securities Act), to
certain accredited investors (as defined in Rule 501(a) under the Securities
Act) and outside the United States to non-U.S. persons in offshore transactions
in reliance on Regulation S under the Securities Act.
The Securities and the Conversion Shares (together, the "Offered
Securities") may be offered and sold from time to time by the holders named
herein or by their transferees, pledgees, donees or their successors
(collectively, the "Selling Holders") pursuant to this Prospectus. The Offered
Securities may be sold by the Selling Holders from time to time directly to
purchasers or through agents, underwriters or dealers. See "Plan of
Distribution" and "Selling Holders." If required, the names of any such agents
or underwriters involved in the sale of the Offered Securities and the
applicable agent's commission, dealer's purchase price or underwriter's
discount, if any, will be set forth in an accompanying supplement to this
Prospectus (the "Prospectus Supplement"). The Selling Holders will receive all
of the net proceeds from the sale of the Offered Securities and will pay all
underwriting discounts, selling commissions and related fees, if any, applicable
to any such sale. The Company is responsible for payment of all other expenses
incident to the offer and sale of the Offered Securities. The Selling Holders
and any broker-dealers, agents or underwriters which participate in the
distribution of the Offered Securities may be deemed to be "underwriters" within
the meaning of the Securities Act, and any commission received by them and any
profit on the resale of the Offered Securities purchased by them may be deemed
to be underwriting commissions or discounts under the Securities Act. See "Plan
of Distribution" for a description of indemnification arrangements.
The Common Stock is listed on the Nasdaq National Market (the "NNM") under
the symbol "GSTRF." On June 19, 1996, the last reported sale price of the Common
Stock on the NNM was $51.00 per share.
Interest on the Securities is payable quarterly in arrears on March 1, June
1, September 1, and December 1, commencing on June 1, 1996, subject to deferral
without compound interest or penalty as described herein. The Securities will be
general unsecured obligations of the Company and will be subordinated in right
of payment to all Debt Obligations (as defined herein) of the Company. See
"Description of Securities -- Ranking." The Securities will not limit the amount
of Debt Obligations that the Company may incur. Although the Securities are not
equity securities under applicable Bermuda law, the Securities are the
substantial equivalent of convertible preferred stock and will be treated as
such for U.S. tax purposes. The Company may make any payments due on the
Securities, including redemption and interest payments, (i) in cash, (ii) by
delivery of Common Stock (in the manner described herein) or (iii) through any
combination of the foregoing. The Company utilized the proceeds of the Original
Offering to purchase convertible preferred general partnership interests (the
"Preferred Partnership Interests") of Globalstar, L.P., a Delaware limited
partnership ("Globalstar"), the terms of which are generally similar to those of
the Securities, and which will provide the principal source of payments for the
Securities. Globalstar will use substantially all the proceeds from the sale of
Preferred Partnership Interests to the Company for the design, construction and
deployment of the Globalstar System. The Company is a general partner of
Globalstar; its sole asset consists of its partnership interests in Globalstar.
As a result, the obligations of the Company in respect of the Securities will be
structurally subordinate to all indebtedness and other liabilities of
Globalstar. See "Description of Securities."
The Securities are subject to mandatory redemption on March 1, 2006 (the
"Mandatory Redemption Date") and are not redeemable by the Company before March
2, 1999 unless the market price of the Common Stock exceeds certain thresholds.
In such event, the Securities will be redeemable, in whole or in part, by the
Company upon payment of the principal of and premium (including an interest
make-whole payment) and accrued interest, if any, on the Securities. See
"Description of Securities."
The Securities are eligible for trading by qualified institutional buyers on
the PORTAL market.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER
"RISK FACTORS" BEGINNING ON PAGE 13.
THE OFFERED SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
June 20, 1996
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company can be inspected and copied at public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549; Seven World Trade Center, 13th Floor, New York, New York 10048; and
Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of
such material can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549 at prescribed rates. The Common Stock is
quoted on the NNM, and copies of the reports, proxy statements and other
information filed by the Company with the Commission may also be inspected at
the offices of Nasdaq Operation, 1735 K Street, N.W., Washington, D.C. 20006.
Globalstar is not currently subject to the periodic reporting and other
informational requirements of the Exchange Act, except those applicable as a
result of the Company's significant investment in Globalstar. The Company has
agreed that, whether or not it is required to do so by the rules and regulations
of the Commission, for so long as any of the Securities remain outstanding, it
will furnish to the trustee and the holders of the Securities and file with the
Commission, or cause to be so filed as part of the financial statements of the
Company (i) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and 10-K
if Globalstar were required to file such forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and,
with respect to the annual information only, a report thereon by Globalstar's
independent public accountants and (ii) all reports that would be required to be
filed with the Commission on Form 8-K if Globalstar were required to file such
reports. In addition, for so long as any of the Securities remain outstanding,
the Company has agreed to make available to any prospective purchaser of the
Securities or beneficial owner of the Securities in connection with any sale
thereof the information required by Rule 144A(d)(4) under the Securities Act.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all exhibits and amendments, the "Registration Statement")
under the Securities Act, with respect to the Offered Securities. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto, certain portions of which are
omitted as permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Offered Securities, reference is
made to the Registration Statement, including the exhibits and schedules. The
Registration Statement may be inspected, without charge, at the Commission's
principal office at 450 Fifth Street, NW, Washington, D.C. 20549, and also at
the regional offices of the Commission listed above. Copies of such material may
also be obtained from the Commission upon the payment of prescribed rates.
Statements contained in the Prospectus as to any contracts, agreements or
other documents filed as an exhibit to the Registration Statement are not
necessarily complete, and in each instance reference is hereby made to the copy
of such contract, agreement or other document filed as an exhibit to the
Registration Statement for a full statement of the provisions thereof, and each
such statement in the Prospectus is qualified in all respects by such reference.
i
<PAGE> 4
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company with the Commission
pursuant to the Exchange Act and are hereby incorporated by reference into this
Prospectus:
(a) the Company's Annual Report on Form 10-K for the year ended
December 31, 1995;
(b) the Company's Proxy Statement relating to the 1996 Annual Meeting
of Stockholders;
(c) the Company's Quarterly Report on Form 10-Q for the three months
ended March 31, 1996 (as amended by the Form 10-Q/A filed with the
Commission on May 21, 1996); and
(d) the description of the Company's Common Stock contained in the
Company's registration statement on Form 8-A filed under the Exchange Act
and any amendments or reports filed for the purpose of updating such
description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Offered Securities offered hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing such documents (provided, however, that the
information referred to in item 402(a)(8) of Regulation S-K of the Commission
shall not be deemed specifically incorporated by reference herein).
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement as modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered, upon the
written or oral request of any such person, a copy of any or all of the
documents incorporated by reference in this Prospectus (other than exhibits and
schedules thereto, unless such exhibits or schedules are specifically
incorporated by reference into the information that this Prospectus
incorporates). Written or oral requests for copies of these documents should be
directed to Globalstar Telecommunications Limited, 600 Third Avenue, New York,
New York 10016, Attention: Secretary (Telephone (212) 697-1105).
ii
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) incorporated
by reference in this Prospectus.
THE COMPANY
The Company is a Bermuda company that acts as a general partner of
Globalstar. Globalstar is building and preparing to launch and operate a
worldwide, low-earth orbit ("LEO") satellite-based digital telecommunications
system (the "Globalstar(TM) System"). The Globalstar System is designed to
enable local service providers to offer low-cost, high quality wireless voice
telephony and data services in virtually every populated area of the world. To
date, Globalstar service providers have agreed to offer Globalstar service and
seek to obtain all necessary local regulatory approvals in nations accounting
for 67% of the world's population.
The Globalstar System's worldwide coverage is designed to enable its
service providers to extend modern telecommunications services rapidly and
economically to millions of people who currently lack basic telephone service
and to enhance wireless telecommunications in areas underserved or not served by
existing or future cellular systems, providing a telecommunications solution in
parts of the world where the build-out of terrestrial systems cannot be
economically justified. The Globalstar System has been designed to provide
services at prices comparable to today's cellular services and substantially
lower than the prices announced by Globalstar's anticipated principal
competitors.
Globalstar users will make and receive calls through a variety of
Globalstar phones, including hand-held and vehicle-mounted units similar to
today's cellular telephones, fixed telephones similar either to phone booths or
ordinary wireline telephones, and data terminals and facsimile machines
(collectively, the "Globalstar Phones"). Dual-mode Globalstar Phones will
provide access to both the Globalstar System and the subscriber's land-based
cellular service. Each Globalstar Phone will communicate through one or more
satellites to a local Globalstar service provider's interconnection point (known
as a gateway) which will, in turn, connect into existing telecommunications
networks.
Globalstar is on schedule to begin launching satellites in the second half
of 1997, to commence commercial operations in the second half of 1998 (the
"In-Service Date") and to have its full constellation of 48 satellites, plus
eight in-orbit spare satellites, launched by the end of 1998 (the "Full
Constellation Date"). Significant regulatory and licensing milestones have been
achieved for the Globalstar System, including allocation of required frequencies
by the Federal Communications Commission ("FCC") and the 1995 World
Radiocommunication Conference ("WRC '95"). To date, Globalstar has raised or
received commitments for approximately $1.4 billion in equity, debt and vendor
financing, representing over 75% of the total external financing expected to be
required to complete the system and to achieve worldwide operations. Globalstar
intends to raise the balance of its external financing needs in the capital
markets and may also seek financing support from its strategic partners. See
"-- Sources and Uses of Capital by Globalstar."
Full satellite critical design review was successfully completed in January
1996. Manufacturing of long-lead time components of the Globalstar satellites
has commenced, engineering models are under construction and the non-recurring
design phase of the satellite contract is close to completion. Definitive
agreements have been reached with three launch providers for the launch of the
full Globalstar satellite constellation. These agreements provide for a variety
of launch options, giving Globalstar considerable launch flexibility.
Internationally, Globalstar's partners have been seeking alliances in their
assigned territories with service providers and have entered into such
agreements in certain territories. Globalstar believes these relationships with
in-country service providers may facilitate the granting of local regulatory
approval for operation of the Globalstar System and provide local marketing and
technical expertise.
The Globalstar System has been designed to address the substantial and
growing demand for telecommunications services worldwide, particularly in
developing countries. More than 3 billion people today live without residential
telephone service, many of them in rural areas where the cost of installing
wireline service
<PAGE> 6
is prohibitively high. Moreover, even where telephone infrastructure is
available in developing countries, outdated equipment often leads to unreliable
local service and limited international access. The number of worldwide fixed
phone lines has increased from 473 million to 647 million since 1988 and is
projected to increase to one billion by 2002. Nonetheless, since 1988, waiting
lists for fixed service have increased from 36 million to 46 million, resulting
in an average waiting time before installation of approximately one and a half
years. Similarly, the cellular market has grown from 4 million worldwide
subscribers in 1988 to an estimated 87 million in 1995 and is projected to
increase to 334 million by 2001. At that time, it is projected that only 40% of
the world's population will live in areas with cellular coverage. The remaining
60% of the world population will have access to wireless telephone service
principally through satellite-based systems like the Globalstar System.
Globalstar's business plan requires penetration of only a small fraction of
these potential markets to achieve its objectives.
The Globalstar System has been designed with attributes which the Company
believes compare favorably to other proposed global mobile satellite service
("MSS") systems (two of which have also been licensed by the FCC; the
applications of three others have been deferred), including: (i) Globalstar's
unique combination of code division multiple access ("CDMA") technology and path
diversity through multiple satellite coverage, which will reduce call
interruptions and signal blockage from obstructions and will use satellite power
more efficiently; (ii) a proven space segment design without complex
intersatellite links or on-board call processing and a ground segment with
flexible, low-cost gateways and competitively priced Globalstar Phones; (iii)
lower average wholesale prices than other proposed MSS systems; and (iv)
gateways installed in most major countries, minimizing tail charges (i.e.
amounts charged by carriers other than the Globalstar service provider for
connecting a Globalstar call through its network), resulting in low costs for
domestic and regional calls, which will account for the vast majority of
Globalstar's anticipated usage.
Loral Space & Communications Ltd. ("Loral SpaceCom") is a principal founder
of Globalstar and, through a subsidiary, is its managing general partner. Loral
SpaceCom has invested $238 million directly and indirectly in Globalstar. Loral
SpaceCom owns, directly or indirectly, 32.6% of Globalstar, on a fully diluted
basis.
Other Globalstar strategic partners include leading domestic and
international telecommunications service providers and space and
telecommunications equipment manufacturers who, together with Loral SpaceCom,
have invested $425 million in equity and committed $310 million in vendor
financing for Globalstar. In addition, Loral SpaceCom, Lockheed Martin
Corporation ("Lockheed Martin") and certain strategic partners have guaranteed,
or provided indemnification with respect to, Globalstar's obligations under a
$250 million credit facility. See "-- Recent Developments."
GLOBALSTAR STRATEGIC PARTNERS
Globalstar has selected strategic partners whose marketing, operating and
technical expertise will enhance Globalstar's capabilities. These partners are
playing key roles in the construction, operation and marketing of the Globalstar
System. In addition to Globalstar's founding partners, Loral SpaceCom and
QUALCOMM Incorporated ("Qualcomm"), the leading supplier of CDMA digital
telecommunications technology, Globalstar's strategic partners are:
<TABLE>
<CAPTION>
TELECOMMUNICATIONS EQUIPMENT
TELECOMMUNICATIONS SERVICE PROVIDERS AND AEROSPACE SYSTEMS MANUFACTURERS
- ----------------------------------------------- --------------------------------------------------------
<S> <C>
- - AirTouch Communications, Inc. ("AirTouch") - Alcatel Espace ("Alcatel")
- - DACOM Corporation ("Dacom") - Alenia Spazio S.p.A. ("Alenia")
- - France Telecom - Daimler-Benz Aerospace AG ("DASA")
- - Vodafone Group Plc ("Vodafone") - Finmeccanica S.p.A. ("Finmeccanica")
- Hyundai Electronics Industries Co. Ltd. ("Hyundai")
- Space Systems/Loral, Inc. ("SS/L")
</TABLE>
Loral SpaceCom, through a subsidiary, has overall management responsibility
for the design, construction, deployment and operation of the Globalstar System.
SS/L, an affiliate of Loral SpaceCom, is providing
2
<PAGE> 7
the system's satellites under a fixed-price contract that also requires SS/L to
obtain launch services and launch insurance. Qualcomm is designing and will
manufacture Globalstar Phones and gateways and certain ground support equipment.
The Company was organized as a Bermuda company on November 23, 1994 and has
its principal offices at Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda
((809) 295-2244). The Company's sole business is to act as a general partner of
Globalstar.
BUSINESS STRATEGY
Globalstar's strategy for successful operation is based upon: (i) providing
potential users worldwide with high quality telecommunications services; (ii)
employing a system architecture designed to minimize cost and technological
risks; and (iii) leveraging the marketing, operating and technical capabilities
of its strategic partners.
PROVIDING HIGH QUALITY, WORLDWIDE SERVICE
To achieve rapid and sustained customer acceptance of the system,
Globalstar has been designed to provide a high quality, worldwide service that
combines the best of existing cellular service with the technological advantages
of the Globalstar System described below to meet the needs of individual end
users.
Worldwide Coverage and Access. The Globalstar System's worldwide coverage
has been designed to enable its service providers to extend modern
telecommunications services rapidly and economically to millions of people who
currently lack basic telephone services and to enhance wireless
telecommunications in areas underserved or not served by existing or future
cellular systems. Globalstar expects to provide a communications solution in
parts of the world where the build-out of terrestrial systems cannot be
economically justified. The Globalstar System has also been designed to enable
international travelers to make and receive calls at a unique telephone number
through their mobile Globalstar Phone anywhere in the world where Globalstar
service is authorized by local regulatory authorities.
Multiple Satellite Coverage; Soft Handoff. CDMA digital communications
technology combined with continuous multiple satellite coverage and signal path
diversity (a patented SS/L method of signal reception not available to competing
systems) will enable the Globalstar System to provide service to a wide variety
of locations, with less potential for signal blockage from buildings, terrain or
other natural features. Globalstar Phones have been designed to operate with a
single satellite in view, although typically signals from two to four satellites
overhead will be combined to provide service. Therefore, the loss of an
individual satellite is not expected to result in any gap in global coverage.
Each Globalstar Phone has been designed to communicate with as many as three
satellites simultaneously, combining the signals received to ensure maximum
service quality. As satellites are constantly moving in and out of view, they
will be seamlessly added to and removed from the calls in progress, thereby
reducing the risk of call interruption.
Superior Call Quality; Increased Privacy. Based on terrestrial simulations
of the Globalstar System, Globalstar expects that Qualcomm's CDMA digital
technology will enable Globalstar to provide digital voice services which will
have better overall clarity, quality and privacy than those of analog land-based
cellular systems currently in use. Qualcomm's CDMA technology, which is
available to Globalstar on an exclusive basis for commercial MSS applications,
has also been selected for digital cellular service by 12 of the 15 largest U.S.
cellular service providers and the two largest holders of personal
communications services ("PCS") licenses in the U.S. (by population served).
Efficient Use of Satellite Resources. The Globalstar System's use of
multiple satellites to communicate with each Globalstar Phone (a patented SS/L
method of signal reception not available to competing systems) has been designed
to allow its communications signals to bypass obstructions. Path diversity is
expected to permit Globalstar to maintain its desired level of service quality
while using less power and satellite resources than would be required in a
system using single path satellites, which attempt to penetrate obstructions by
using higher single satellite power and overall higher link margins.
3
<PAGE> 8
No Voice Delay. Globalstar satellites' low-earth orbit of 750 nautical
miles is expected to result in no perceptible voice delay, as compared with the
noticeable time delay of calls utilizing geosynchronous satellites, which orbit
at an altitude of 22,500 nautical miles. Globalstar believes that its system
will also entail noticeably less voice delay than mid-earth orbit ("MEO") MSS
systems and, in many cases, than LEO systems requiring on-board satellite call
processing to support satellite-to-satellite switching systems.
EMPLOYING A SYSTEM ARCHITECTURE DESIGNED TO MINIMIZE COST AND RISK
Low-Cost Service. Globalstar intends to offer its service providers
effective average prices substantially lower than those announced by its
anticipated principal competitors. Globalstar's service providers will set their
own retail pricing and will pay to Globalstar wholesale prices generally
expected to range between $0.35 and $0.55 per minute. Other proposed
satellite-based systems have proposed retail pricing ranging from under $1.00 to
$3.00 per minute plus monthly charges for some of the systems. As a result of
its pricing commitments to its service providers or as a result of competitive
pressures, Globalstar may not be in a position to pass on to its service
providers unexpected increases in the cost of constructing the Globalstar
System. However, Globalstar believes that its low system and operating costs and
high gross margins at target pricing and usage levels provide it with
substantial additional pricing flexibility if necessary to meet competition. See
"Business -- Competition."
Simple Space Segment of Proven Design. Globalstar believes its system will
cost less to design and construct and may be the first of the proposed worldwide
systems to provide commercial service. To achieve low cost, reduce technological
risk and accelerate deployment of the Globalstar System, Globalstar's system
architecture uses small satellites incorporating a well-established repeater
design that acts essentially as a simple "bent pipe," relaying signals received
directly to the ground. All of the system's call processing and switching
operations are on the ground, where they are accessible for maintenance and can
benefit from continuing technological advances. The Globalstar space segment is
being manufactured under a fixed-price contract with SS/L. The contract provides
for the construction of 56 satellites meeting designated performance
specifications and for SS/L to obtain launch and launch insurance services.
Flexible, Low-Cost Ground Segment. Globalstar has been designed to offer
local governments and service providers affordable telephone infrastructure
where the cost of build-out of land-based wireline or wireless telephone systems
is either too great or not economically justifiable. By purchasing a single
gateway for approximately $3 million to $8 million (depending on the capacity
desired), a service provider can extend basic telephone service to fixed
terminals on a national basis in countries as large as Saudi Arabia and mobile
service to cover an area almost as large as Western Europe. As a result of the
low cost of its gateways, Globalstar expects that its service providers will
install gateways in most of the major countries in which they offer service.
Each country with a Globalstar gateway will have access to domestic service
without the imposition of international tail charges on in-country calls,
thereby offering subscribers the lowest possible cost for domestic calls, which
account for the vast majority of all cellular calls today.
Competitively Priced Globalstar Phones. Hand-held and vehicle-mounted
Globalstar Phones are anticipated to be priced comparably and will be similar in
size and function to current digital cellular telephones. Dual-mode Globalstar
Phones will be able to access both Globalstar and a variety of local land-based
analog and digital cellular services, where available. Mobile and fixed
Globalstar Phones are expected to cost less than $750 each, and Globalstar
public telephone booths are expected to cost between $1,000 and $2,500,
depending upon desired capacity and the number of units sharing a fixed antenna.
Qualcomm is required to license three additional manufacturers of Globalstar
Phones. Qualcomm has granted a license to Orbitel Mobile Communications Ltd.
("Orbitel"), an affiliate of L.M. Ericsson, to manufacture Globalstar Phones and
has contracted with Orbitel to develop a dual-mode GSM/Globalstar CDMA phone.
Globalstar believes that licensing multiple manufacturers will spur competition,
which will reduce prices. As is the case with many cellular systems today,
service providers may subsidize the cost of Globalstar Phones to generate
additional usage revenue. In addition, national and local governments may
subsidize some or all elements of system cost, particularly in rural areas,
thereby reducing the cost of access to subscribers.
4
<PAGE> 9
LEVERAGING THE CAPABILITIES OF GLOBALSTAR'S STRATEGIC PARTNERS
Loral SpaceCom, through a subsidiary, has overall management responsibility
for the design, construction, deployment and operation of the Globalstar System.
Globalstar's strategic partners will play key roles in the design, construction,
operation and marketing of the Globalstar System.
Telecommunications service providers. AirTouch, Dacom, France Telecom and
Vodafone will provide in-country marketing and telephony expertise to
Globalstar. Globalstar's strategic partner service providers (the "Strategic
Service Providers") have been granted exclusive rights to provide Globalstar
service in countries around the world in which they have particular marketing
strength and experience and access to an established customer base of 60 million
subscribers. To maintain their service provider rights on an exclusive basis,
these Strategic Service Providers and additional service providers are required
to make minimum payments to Globalstar equal to 50% of target revenues. Based
upon current targets (which are subject to adjustment in 1998 based upon an
updated market analysis), such minimum payments total approximately $5.0 billion
through 2005. Globalstar anticipates that these service providers will place
orders of approximately $500 million (for 50 gateways and 250,000 Globalstar
Phones) within six to nine months. In order to accelerate the deployment of
gateways around the world prior to the In-Service Date, Globalstar and the
Strategic Service Providers intend to jointly finance the procurement of 25
gateways and long-lead parts for 25 additional gateways for resale to service
providers. Globalstar expects to recover its investment in this gateway
financing program from such resales. There can be no assurance that the service
providers will elect to retain their exclusivity and make such payments or place
such orders for Globalstar Phones and gateways.
Globalstar expects to add additional service providers in order to provide
coverage throughout the world. Each service provider will, subject to obtaining
required local regulatory approvals, market and distribute Globalstar service in
its designated territories and own and operate the gateways necessary to serve
its markets.
Telecommunications equipment and aerospace systems manufacturers. SS/L,
Alcatel, Alenia, DASA, Finmeccanica and Hyundai have contracted to design, build
and deploy the Globalstar System. Qualcomm, using its CDMA technology, is
designing and will manufacture Globalstar Phones and gateways and has primary
responsibility, along with Globalstar, for the design and implementation of the
ground operations control centers ("GOCCs"). Qualcomm's CDMA technology is
available to Globalstar on an exclusive basis for commercial MSS satellite
applications. SS/L is performing under a fixed-price contract for the
construction of Globalstar's satellites in conjunction with its alliance
partners, Aerospatiale Societe Nationale Industrielle ("Aerospatiale"), Alcatel,
DASA and Finmeccanica (collectively, the "Strategic Alliance"), and with
Hyundai.
RECENT DEVELOPMENTS
Globalstar remains on schedule to begin launching satellites in the second
half of 1997 and to commence operations in the second half of 1998. Globalstar's
recommended feeder link allocations were adopted at WRC '95, and Globalstar is
currently pursuing the final assignment of such feeder links before the FCC.
On December 15, 1995, Globalstar entered into a credit agreement with a
bank syndicate providing for a $250 million credit facility (the "Globalstar
Credit Agreement").
On January 7, 1996, Loral Corporation ("Loral"), the former parent of Loral
SpaceCom, entered into a merger agreement (the "Merger Agreement") with Lockheed
Martin and its subsidiary pursuant to which Lockheed Martin agreed, upon
satisfaction of certain conditions, to consummate a tender offer (the "Tender
Offer") for all outstanding shares of common stock of Loral. Pursuant to the
Restructuring, Financing and Distribution Agreement, dated as of January 7,
1996, among Loral, Lockheed Martin and certain subsidiaries of Loral (the
"Distribution Agreement"), Loral agreed to contribute its space and
telecommunications businesses, including all of its direct and indirect interest
in Globalstar, to Loral SpaceCom, a newly-formed Bermuda company, the shares of
which were distributed to Loral shareholders of record immediately prior to
Loral's acquisition by Lockheed Martin. The Tender Offer and the Distribution
were consummated in April 1996.
5
<PAGE> 10
Following the consummation of the Tender Offer, Loral merged with a
subsidiary of Lockheed Martin. As a result of such merger, Globalstar now has,
through its relationship with Loral SpaceCom, the benefit of technical support
from Lockheed Martin. Upon the merger, Lockheed Martin guaranteed $206.3 million
of Globalstar's obligations under the Globalstar Credit Agreement, and SS/L and
certain other Globalstar strategic partners guaranteed $11.7 million and $32
million of Globalstar's obligations under the Globalstar Credit Agreement,
respectively. In addition, Loral SpaceCom has agreed to indemnify Lockheed
Martin for liability in excess of $150 million under its guarantee of the
Globalstar Credit Agreement.
In connection with such guarantees and indemnity of the Globalstar Credit
Agreement, the Company issued to Loral SpaceCom, Lockheed Martin, SS/L and the
other strategic partners participating in such guarantee or indemnity, warrants
(the "GTL Guarantee Warrants") to purchase 4,185,318 shares of Common Stock. The
GTL Guarantee Warrants have an exercise price of $26.50, are subject to certain
vesting requirements, expire on April 19, 2003, are not exercisable until six
months after Globalstar commences initial operations unless accelerated at the
sole discretion of the managing general partner of Globalstar and may not be
transferred to third parties prior to such exercise date. In connection with the
issuance of GTL Guarantee Warrants, the Company received (i) warrants to acquire
4,185,318 ordinary partnership interests in Globalstar ("Ordinary Partnership
Interests") plus (ii) additional warrants (the "Additional Warrants") to
purchase an additional 1,131,168 Ordinary Partnership Interests, on terms and
conditions generally similar to those of the GTL Guarantee Warrants. As a
result, the Company will not incur any dilution of the Company's interest in
Globalstar resulting from the issuance of the GTL Guarantee Warrants. In
addition, Globalstar has also agreed to pay to Loral SpaceCom and the other
guaranteeing partners a fee equal to 1.5% per annum of the average quarterly
amount outstanding under the Globalstar Credit Agreement (the "Guarantee Fee").
6
<PAGE> 11
SOURCES AND USES OF CAPITAL BY GLOBALSTAR
(In millions)
The net proceeds of the Original Offering to the Company were approximately
$300 million (after deducting discounts and commissions and expenses).
Globalstar has received commitments for financing which, together with projected
Service Provider Payments (defined in footnote (1) below), anticipated payments
from the sale of gateways and Globalstar Phones and projected net service
revenues from initial operations, will account for approximately $1.8 billion of
the approximately $2.2 billion that Globalstar expects to require to fully fund
the Globalstar System through the Full Constellation Date. See "Risk Factors."
The net proceeds of the Original Offering were used to acquire 4,769,230
Preferred Partnership Interests in Globalstar representing (on a fully converted
basis) an 8.4% equity interest in Globalstar on a fully diluted basis after
giving effect to the exercise of GTL Guarantee Warrants and the Additional
Warrants. Globalstar will in turn use substantially all of the proceeds from the
sale of the Preferred Partnership Interests to the Company towards the design,
construction and launch of the Globalstar System, including the procurement of
launch insurance and ground segment components, as well as related operating and
development expenses. Pending such use, the net proceeds will be invested in
short-term investment grade securities.
The following table summarizes the estimated sources and uses of capital by
Globalstar for the period from inception through the Full Constellation Date:
<TABLE>
<CAPTION>
SOURCES
<S> <C>
Funds Committed to Date:
Initial Equity Investments............... $ 294
Vendor Financing......................... 310
GTL Initial Public Offering Proceeds..... 186
Bank Financing........................... 250
Service Provider Payments(1)............. 33
Net Proceeds of the Original
Offering(2)............................ 300
-------
Total Funds to Date.................... 1,373
-------
Future Funds(3)(5):
Net Service Revenues from Initial
Operations............................. 162
Resale of Gateways(4).................... 88
Service Provider and Other Payments(1)... 164
Future Financing......................... 414
-------
Total Future Funds..................... 828
-------
Total Sources.......................... $ 2,201
=======
USES
Globalstar System:
Satellite Constellation(5)............... $ 998
Launch Services and Insurance............ 394
Ground Segment........................... 416
System Engineering....................... 20
-------
Total System Cost...................... 1,828
Operating Expenses and Working Capital..... 172
Net Cash Interest Expense and Preferred
Distributions............................ 64
Purchase of Gateways for Resale(4)......... 80
Repayment of Vendor Financing.............. 57
-------
Total Uses............................. $ 2,201
=======
</TABLE>
- ---------------
(1) Service Provider Payments are amounts to be paid to Globalstar for services
to be rendered by Globalstar to each service provider exclusively within a
particular territory (subject to certain limitations). Service providers
making such payments will be eligible for certain pricing concessions that
are subject to cumulative limitations. Other payments reflect amounts
anticipated to be received in connection with the sale of gateways and
Globalstar Phones. Globalstar has received commitments for $33 million, of
which $24 million has been paid through March 31, 1996, and expects that
future service provider agreements for territories not yet assigned will
provide an additional $120 million of Service Provider Payments through the
Full Constellation Date.
(2) Represents $310 million of gross proceeds from the sale of the Securities
less discounts and commissions and other expenses of the Original Offering
of $10 million.
(3) Additional funds to complete the Globalstar System are expected to be
obtained from a combination of sources, including the issuance of debt,
projected Service Provider Payments, projected net service revenues from
initial operations, anticipated payments from the sale of gateways and
Globalstar Phones and placements of limited partnership interests with new
and existing strategic investors. There can be no assurance that the future
financing will be available on favorable terms or on a timely basis, if at
all, or that Service Provider Payments and other payments from service
providers or cash flow from operations will be realized as anticipated. See
"Risk Factors -- Development Stage Company -- Additional Financing
Requirements."
(4) Globalstar and the Strategic Service Providers intend to jointly finance the
procurement of 25 gateways and long-lead parts for 25 additional gateways
for resale to service providers, thereby accelerating the deployment of
gateways around the world prior to the In-Service Date.
(5) Globalstar is presently evaluating a plan to purchase long-lead-time
component parts for possible use in constructing 6 to 12 additional
satellites. The current estimated additional cost for these components is
approximately $75 to $120 million, depending upon the quantity purchased.
The plan has two purposes: (i) to enable Globalstar to have on-orbit at
least 38 to 44 satellites during 1999, even in the event of launch failures
of up to two launches of 12 satellites each, and (ii) to provide ground
spares that would be readily available to replenish the satellite
constellation in the event of satellite attrition during the first
generation or if there are opportunities for increasing capacity. If
Globalstar were to experience a launch failure, the long-lead-time
components would be used to build replacement satellites and the cost
associated with the construction and launch of such satellites would be
reimbursed through insurance. See "Risk Factors -- Development Stage
Company -- Sources of Possible Delay and Increased Cost" and "Risk
Factors -- Technological Risks -- Satellite Launch Risks -- Limited Life of
Satellites."
7
<PAGE> 12
THE SECURITIES
Securities................. 6 1/2% Convertible Preferred Equivalent Obligations
due 2006 (the "Securities") of Globalstar
Telecommunications Limited. Although the Securities
are not equity securities under applicable Bermuda
law, the Securities are the substantial equivalent
of convertible preferred stock and will be treated
as such for U.S. tax purposes.
The Securities are convertible at a conversion
price of $65.00 per share into an aggregate of
4,769,230 shares of Common Stock, representing
approximately 25% of the Common Stock outstanding
on a fully diluted basis, and an indirect
beneficial interest in 4,769,230 units of Ordinary
Partnership Interests upon conversion of the
Preferred Partnership Interests, representing
approximately 8.4% of the total units of Ordinary
Partnership Interests outstanding on a fully
diluted basis after giving effect to the GTL
Guarantee Warrants and the Additional Warrants.
Principal Amount........... $310 million.
Mandatory Redemption
Date....................... March 1, 2006 (the "Mandatory Redemption Date").
Coupon..................... The Securities accrue interest at the rate of
6 1/2% per annum. Interest will be computed on the
basis of a 360-day year of twelve 30-day months and
will be payable quarterly in arrears on March 1,
June 1, September 1 and December 1 of each year
(each an "Interest Payment Date"), commencing on
June 1, 1996. The Company may make such payments in
(i) cash, (ii) by delivery of Common Stock to
Holders (based upon 90% of the Average Market Value
(as defined below)), or (iii) through any
combination of the foregoing; provided however,
that if Globalstar shall have paid the scheduled
distribution with respect to the Preferred
Partnership Interests corresponding to such payment
in cash, the Company shall make such payment in
cash.
The Company may elect to defer interest payments on
any Interest Payment Date if Globalstar shall have
deferred payment of the scheduled distribution in
respect of the Preferred Partnership Interests
corresponding to such interest payment. Arrearages
of deferred but unpaid interest accruals ("Interest
Arrearages") will not themselves bear interest, but
so long as any Interest Arrearage remains
outstanding, the Company will be prohibited from
paying (i) dividends on its Common Stock, (ii)
dividends on any preferred stock or (iii) interest
on debt ranking pari passu with or junior to the
Securities from time to time outstanding, except
with respect to such pari passu debt, on a pro rata
basis based on the aggregate principal amount of
such debt. Preferred distributions equal to the
aggregate amount of interest payable by the Company
on the Securities will be payable to the Company by
Globalstar in respect of the Preferred Partnership
Interests if, as and when declared by Globalstar's
General Partners' Committee. The Company may not
elect to defer any interest payment if Globalstar
has paid the scheduled distribution in respect of
the Preferred Partnership Interests corresponding
to such interest payment. In the event that
interest payments are deferred by the Company for
an aggregate of six quarterly interest payments,
the holders of the Securities (the "Holders") will
have the rights described under "Voting Rights"
below.
8
<PAGE> 13
Provisional Redemption by
Company.................. The Securities may be redeemed (the "Provisional
Redemption") by the Company, in whole or in part,
at any time prior to March 2, 1999, at a redemption
price of 103% of the aggregate principal amount of
the Securities to be redeemed plus accrued and
unpaid interest, if any, to the date of redemption
(the "Provisional Redemption Date"), in the event
that the Current Market Value (as defined below) of
the Common Stock equals or exceeds the following
Trigger Percentages of the Conversion Price then in
effect for at least 20 trading days in any
consecutive 30-day trading period ending on the
trading day prior to the date of mailing of the
notice of Provisional Redemption (the "Notice
Date"), if called for redemption in the 12-month
period ending on March 1 of the following years:
<TABLE>
<CAPTION>
YEAR TRIGGER PERCENTAGES
----- -------------------
<S> <C>
1997.. 170%
1998.. 160%
1999.. 150%
</TABLE>
Upon any Provisional Redemption, the Company will
make an additional payment (the "Interest
Make-Whole Payment") with respect to the Securities
called for redemption in an amount equal to the
present value of the aggregate value of the
interest payments thereafter payable on such
Securities from the Provisional Redemption Date to
the third anniversary of the Issue Date (the
"Interest Make-Whole Period"). Such present value
shall be calculated using the bond equivalent yield
on U.S. Treasury notes or bills having a term
nearest in length to that of the Interest
Make-Whole Period as of the Notice Date. THE
COMPANY SHALL BE OBLIGATED TO MAKE THE INTEREST
MAKE-WHOLE PAYMENT ON ALL SECURITIES CALLED FOR
PROVISIONAL REDEMPTION, REGARDLESS OF WHETHER SUCH
SECURITIES ARE CONVERTED PRIOR TO THE PROVISIONAL
REDEMPTION DATE.
Optional Redemption by
Company.................. Commencing March 2, 1999, the Securities will be
redeemable at any time, in whole or in part, at the
election of the Company (the "Optional
Redemption"), at a redemption price equal to the
percentage of the principal amount set forth below
plus accrued and unpaid interest, if any, to the
date of redemption (the "Optional Redemption
Date"), if redeemed in the 12-month period ending
on March 1 of the following years:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
----- ----------------
<S> <C>
2000.. 103%
2001.. 102%
2002.. 101%
</TABLE>
and thereafter at a redemption price equal to 100%
of the principal amount plus accrued and unpaid
interest, if any, to the Optional Redemption Date.
Mandatory Redemption by
Company.................. The Securities are subject to mandatory redemption
(the "Mandatory Redemption") by the Company on the
Mandatory Redemption Date, at a redemption price of
100% of the principal amount plus accrued and
9
<PAGE> 14
unpaid interest, if any (including all Interest
Arrearages), to the Mandatory Redemption Date.
Method of Payments......... Globalstar may make any payments due on the
Preferred Partnership Interests (i) in cash, (ii)
by delivery of Ordinary Partnership Interests to
the Company (as described below) or (iii) through
any combination of the foregoing. Likewise, the
Company may make any payments due on the
Securities, including redemption payments, interest
payments and the Interest Make-Whole Payment: (i)
in cash; (ii) by delivery of Common Stock (based
upon 90% of the Average Market Value (as defined
below) in the case of interest payments, including
Interest Make-Whole Payments, and 100% of the
Average Market Value in the case of all other
payments); or (iii) through any combination of the
foregoing, provided, however, that if Globalstar
shall have paid the scheduled distribution with
respect to the Preferred Partnership Interests
corresponding to any such payments in cash, the
Company shall make such payment in cash.
If Globalstar shall have made any payment on the
Preferred Partnership Interests by delivery of
Ordinary Partnership Interests, the Company may
make payments by delivery of Common Stock or a cash
payment from the proceeds of a sale of Common
Stock. The Company also reserves the right to make
interest payments notwithstanding the fact that it
shall not have received a distribution on the
Preferred Partnership Interests for the
corresponding Interest Payment Date.
If the Company elects to make a cash payment from
the proceeds of any issuance of Common Stock and
Globalstar shall have previously declared its
intent to pay its corresponding distribution in
Ordinary Partnership Interests, the valuation of
the Ordinary Partnership Interests to be delivered
to the Company underlying the Common Stock to be
issued shall be based upon the price at which such
Common Stock is sold. If the Company elects to
deliver Common Stock to the Holders in lieu of a
cash payment and Globalstar shall have previously
declared its intent to pay its corresponding
distribution in Ordinary Partnership Interests, the
valuation of the Ordinary Partnership Interests to
be delivered to the Company underlying such Common
Stock shall be based upon 90% of the Average Market
Value of the Common Stock, in the case of an
interest payment, including Interest Make-Whole
Payments, and 100% of the Average Market Value of
the Common Stock, in the case of all other
payments.
The Indenture (as defined below) for the Securities
and the agreement governing the Preferred
Partnership Interests will contain certain notice
procedures to provide the Company adequate time to
make all payments due on the applicable payment
date. Holders will receive notice, as described in
"Description of Securities -- Method of Payments",
stating (i) in the case of a Provisional or
Optional Redemption, the date of any such
Provisional or Optional Redemption and (ii) in the
case of all non-cash payments, the form of
consideration that the Company will make on the
applicable payment date.
"Average Market Value" of the Common Stock will
mean the arithmetic average of the Current Market
Value for the ten trading days ending on the second
business day prior to the applicable date of
payment.
10
<PAGE> 15
"Current Market Value" of the Common Stock will
mean the average of the high and low sale prices of
the Common Stock as reported on the NNM or any
national securities exchange upon which the Common
Stock is then listed, for the trading day in
question.
Optional Conversion
by Holders............... The Securities are convertible, in whole or in
part, at the option of the Holders at any time
after 60 days from the Issue Date and prior to the
Mandatory Redemption Date (unless earlier redeemed
by the Company), initially at the conversion price
of $65.00 per share (equivalent to 0.7692 shares of
Common Stock for each $50.00 principal amount of
Securities). Holders will not be entitled to any
Interest Arrearage upon conversion. The Conversion
Price is subject to adjustment upon the occurrence
of certain dilutive events.
Upon an optional conversion of Securities into
Common Stock, the Company will convert a
proportionate number of Preferred Partnership
Interests into Ordinary Partnership Interests.
References in this Offering Memorandum to
Globalstar partnership interests shall refer
collectively to the Preferred Partnership Interests
and the Ordinary Partnership Interests.
Voting Rights.............. Except as required by law, the Holders of the
Securities are not entitled to any voting rights
unless the Company has deferred interest payments
for an aggregate of six quarterly interest payments
(a "Deferral Trigger Event"), in which case the
number of members of the General Partners'
Committee of Globalstar will be increased by one
and the Holders of the Securities, voting
separately as a class with the holders of any other
securities upon which similar voting rights have
been conferred and are exercisable, will be
entitled to elect one representative to such
General Partners' Committee (the "CPE
Representative"). In addition, upon a Deferral
Trigger Event, Loral SpaceCom has agreed to use its
best efforts to cause the shareholders of the
Company to approve and elect a nominee to the Board
of Directors of the Company designated by the
Holders of the Securities (the "CPE Nominee"). If
the shareholders shall fail to approve such CPE
Nominee, Loral SpaceCom will seek the resignation
of a Loral SpaceCom designee director from the
Board of Directors of the Company and will use its
best efforts to cause the Board of Directors of the
Company to appoint the CPE Nominee to the Board of
Directors of the Company until the next annual
meeting of shareholders, at which time such
appointment will be submitted to the shareholders
of the Company for their approval; provided,
however, that if such shareholder approval is not
obtained, the above-described mechanics shall
continue to be in effect. The CPE Representative
and the CPE Nominee, if appointed to the Board,
will promptly resign their offices upon receipt of
notice from the Company that all Interest
Arrearages with respect to the Securities have been
paid.
Restrictive Covenants...... None.
Registration Rights........ Pursuant to a registration rights agreement (the
"Registration Rights Agreement") among the Company,
Globalstar and the Initial Purchasers, the Company
has agreed for the benefit of the Holders of
Securities that it will: (i) within 120 days after
the Issue Date, file a shelf registration statement
(the "Shelf Registration Statement") with the
11
<PAGE> 16
Commission with respect to resales of the
Securities and the Common Stock issuable upon
conversion thereof; (ii) use its best efforts to
cause such Shelf Registration Statement to be
declared effective by the Commission within 180
days after the Issue Date; and (iii) maintain such
Shelf Registration Statement continuously effective
under the Securities Act until the third
anniversary of the Issue Date or such earlier date
as of which the Securities shall no longer
constitute restricted securities pursuant to Rule
144(k) or until all the Securities or the Common
Stock issuable upon conversion thereof have been
sold pursuant to such Shelf Registration Statement.
Listing.................... The Securities are eligible for trading by
qualified institutional buyers on the PORTAL
Market. The Common Stock is listed on the NNM and
the Company has applied for listing the Conversion
Shares on the NNM.
Ranking of Securities...... The Securities will be subordinated to all existing
and future Debt Obligations (as defined herein) of
the Company and rank senior to preferred stock and
the Common Stock with respect to the payment of
dividends, payments on redemption and payments of
amounts distributable upon dissolution, liquidation
or winding up of the Company. The Securities will
be structurally subordinate to all existing and
future obligations of Globalstar. See "Ranking of
Preferred Partnership Interests" below.
Preferred Partnership
Interests.................. In connection with the Original Offering,
Globalstar and the Company amended the partnership
agreement to provide for the Company's purchase of
4,769,230 Preferred Partnership Interests. The
Preferred Partnership Interests have generally the
same terms and conditions as the Securities, except
that they will not be subject to any registration
rights, will be subordinate not just to the debt
obligations of Globalstar, but to all existing and
future liabilities of Globalstar, and cash
distributions thereon will be limited to the amount
of the partnership capital accounts that are
maintained for such interests and that reflect a
preferred allocation of Globalstar profits to such
accounts. The Preferred Partnership Interests will
have no voting rights, except as provided by law.
See "Governance of Globalstar -- Preferred
Partnership Interests" and "-- Allocations and
Distributions."
Ranking of Preferred
Partnership Interests...... The Preferred Partnership Interests are
subordinated to all existing and future liabilities
of Globalstar including without limitation: (i)
certain distributions made to partners in respect
of taxes levied upon the operations of Globalstar;
(ii) distribution of the Managing Partner's
Allocation (as defined below) to Loral/Qualcomm
Satellite Services, L.P. ("LQSS"), the managing
general partner of Globalstar; and (iii) the
Guarantee Fee or notes that may be issued to the
partners of Globalstar in lieu of such Guarantee
Fee. The Preferred Partnership Interests will,
however, rank senior to the Ordinary Partnership
Interests with respect to the payment of
distributions and otherwise receive certain
preferred allocation of profits and losses. See
"Risk Factors -- Risks Relating to the
Securities -- Subordination of Securities" and
"Governance of Globalstar -- Allocations and
Distributions."
12
<PAGE> 17
RISK FACTORS
Prospective investors should carefully consider the following risk factors,
in addition to the other information contained elsewhere in this Prospectus, in
evaluating whether to purchase the Offered Securities. The following risk
factors relate to the Company and Globalstar.
DEVELOPMENT STAGE COMPANY
Development Stage Company; Expectation of Continued Losses; Negative Cash
Flow. Globalstar is a development stage company and has no operating history.
From its inception, Globalstar has incurred net losses and expects such losses
to continue. Globalstar will require expenditures of significant funds for
development, construction, testing and deployment before commercialization of
the Globalstar System. Globalstar does not expect to launch satellites until the
second half of 1997, to commence operations before the second half of 1998 or to
achieve positive cash flow before 1999. There can be no assurance that
Globalstar will achieve its objectives by the targeted dates. In addition, upon
deployment and commencement of operations, any failure on the part of management
to manage effectively the growth of Globalstar may have an adverse effect on the
business of Globalstar.
Additional Financing Requirements. Globalstar expects to require total
capital of approximately $2.2 billion for capital expenditures, development and
operating costs of the system through 1998. To date, Globalstar has raised or
received commitments for approximately $1.4 billion in equity, debt and vendor
financing. Globalstar believes that its current equity, debt and vendor
financing commitments and the net proceeds of the Original Offering are
sufficient to fund Globalstar's requirements into the first quarter of 1997.
Additional funds to complete the Globalstar System are expected to be obtained
from a combination of sources, including the issuance of debt, projected Service
Provider Payments, projected net service revenues from initial operations,
anticipated payments from the sale of gateways and Globalstar Phones and
placements of limited partnership interests with new and existing strategic
investors. There can be no assurance that additional funds required to complete
the Globalstar System will be available or realized as anticipated. If there are
unforeseen delays, if technical or regulatory developments result in a need to
modify the design of all or a portion of the Globalstar System, if service
provider agreements for additional territories are not entered into at the times
or on the terms anticipated by Globalstar or if other additional costs are
incurred, the risk of which is substantial in view of the early stage of
Globalstar's development, additional capital will be required. The ability of
Globalstar to achieve positive cash flow will depend upon the successful and
timely design, construction and deployment of the Globalstar System, the
successful marketing of its services by service providers and the ability of the
Globalstar System to successfully compete against other satellite-based
telecommunications systems, as to which there can be no assurance. If Globalstar
fails to commence commercial operations in the second half of 1998 or achieve
positive cash flow in 1999, additional capital will be needed.
Although Globalstar believes it will be able to obtain the additional
financing it requires, there can be no assurance that the capital required to
complete the Globalstar System will be available from the public or private
capital markets or from its existing partners on favorable terms or on a timely
basis, if at all. A substantial shortfall in meeting its capital needs would
prevent completion of the Globalstar System. See "Summary -- Sources and Uses of
Capital by Globalstar."
Sources of Possible Delay and Increased Cost. Potential investors should
be aware of the problems, delays and expenses that may be encountered by an
enterprise in Globalstar's stage of development, many of which may be beyond
Globalstar's control. These may include, but are not limited to, problems
related to technical development of the system, testing, regulatory compliance,
manufacturing and assembly, the competitive and regulatory environment in which
Globalstar will operate, marketing problems and costs and expenses that may
exceed current estimates. Delay in the timely design, construction, deployment,
commercial operation and achievement of positive cash flow of the Globalstar
System could result from a variety of causes, including delays associated with
the regulatory process in various jurisdictions, delay in the integration of the
Globalstar System into the land-based network, changes in the technical
specifications of the Globalstar System due to regulatory developments or
otherwise, delays encountered in the construction, integration or
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testing of the Globalstar System by Globalstar vendors, delayed or unsuccessful
launches, delays in financing, insufficient or ineffective service provider
marketing efforts, slower-than-anticipated consumer acceptance of Globalstar
service and other events beyond Globalstar's control. Substantial delays in any
of the foregoing matters would delay Globalstar's achievement of profitable
operations.
REGULATION
Licensing Risks; Impact of Multiple FCC Licensees; Impact on System
Capacity. The operations of the Globalstar System are and will continue to be
subject to United States and foreign regulation. In order to operate in the
United States and on an international basis, the Globalstar System must be
authorized to provide MSS in each of the jurisdictions in which its service
providers intend to operate. On January 31, 1995, the FCC authorized
Loral/Qualcomm Partnership, L.P. ("LQP"), the general partner of Globalstar's
managing general partner, to construct, launch and operate the Globalstar System
for the purpose of providing MSS in the United States (the "FCC License"). The
FCC License was subsequently assigned to L/Q Licensee, Inc. ("L/Q Licensee"), a
wholly owned subsidiary of LQP. Even though Globalstar has received an FCC
authorization, there can be no assurance that the further regulatory approvals
required for worldwide operations will be obtained, or that they will be
obtained in a timely manner or in the form necessary to implement Globalstar's
proposed operations. Globalstar's business may also be significantly affected by
regulatory changes resulting from judicial decisions and/or adoption of
treaties, legislation or regulation by the national authorities where the
Globalstar System plans to operate. The FCC License authorizes the construction,
launch and operation of the satellite constellation and assigns the system's
user links in the United States. Globalstar must still receive unconditional
authorization for its feeder links. Separate licenses must also be obtained from
the FCC for operation of gateways and Globalstar Phones in the United States.
Failure to obtain, or delay in obtaining, any such authorization would adversely
affect implementation of the system. As discussed below, the feeder link
spectrum proposed for use with the Globalstar System has been allocated
internationally but has not yet been allocated in the United States for MSS
feeder links.
The MSS applications of LQP and five other companies (the "MSS applicants")
were considered concurrently at the FCC (the "MSS Proceeding") for authority to
construct, launch and operate MSS systems in the United States capable of
operating within the MSS user links. The FCC has stated that it could grant up
to five licenses for systems in the MSS user link spectrum. On January 31, 1995,
LQP and two other applicants (one a time division multiple access ("TDMA")
system and the other a CDMA system) were granted authorizations to construct,
launch and operate their proposed MSS systems. The three remaining applicants
have been given until 60 days after FCC action on a pending appeal (challenging
the application of the financial standard to one of the deferred applicants) to
demonstrate that they meet the FCC's financial qualification standard for MSS
systems. The FCC has stated that it will not consider additional applications
for these user links until the processing of these first six applications has
been completed.
To the extent that additional MSS systems are authorized by the FCC or
other national regulatory bodies to use the spectrum for which Globalstar has
been authorized, the Globalstar System's capacity would be reduced. The FCC
licensees, and any others that may be licensed from the three pending
applications, will compete with Globalstar for investment capital, subscribers
and service providers in markets all over the world. See
"-- Demand -- Competition." In addition, the decision to grant LQP's application
is subject to pending petitions for reconsideration and an application for
review at the FCC and remains subject to further appeals at the FCC or judicial
appeals. An application for review was filed by one of the deferred MSS
applicants requesting a rescission of the FCC License. While Globalstar believes
that this appeal is without merit, there can be no assurance that such
application for review would not result in reversal or stay of the grant of
LQP's application. Unsuccessful applicants have sought to appeal adverse FCC
decisions on their applications as well as the award of licenses to other
applicants, which may result in the grant of additional licenses.
In the event that the FCC were to be judicially required to reconsider its
licensing procedures as a result of judicial appeals, there is a risk that the
FCC could reprocess the MSS applicants and adopt a different licensing
procedure. Under these circumstances, there can be no assurance that the FCC
would not use an auction procedure to award licenses. There is also no assurance
that licensing authorities in other jurisdictions
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would not adopt auction procedures. If an applicable regulatory authority were
to adopt an auction procedure, there can be no assurance that L/Q Licensee or
the applicable Globalstar service providers in such territories would be willing
or able to compete therein as successfully as other MSS applicants. In addition,
even if L/Q Licensee or the applicable Globalstar service providers were
successful in obtaining MSS licenses as a result of such spectrum auctions, the
increased cost and expenses incurred for such licenses could adversely affect
Globalstar's prospects.
Authorization will be required in each country in which Globalstar Phones
are used and in which Globalstar's gateways are located. Local regulatory
approval for operation of the Globalstar System is the responsibility of the
service providers in each territory. Although many countries have moved to
privatize the provision of telecommunications service and to permit competition
in the provision of such service, some countries continue to require that all
telecommunications service be provided by a government-owned entity. While
service providers have been selected, in part, based upon their perceived
qualifications to obtain the requisite local approvals, there can be no
assurance that they will be successful in doing so, and if they are not
successful, Globalstar service will not be available in such territories. In
that event, depending upon geographical and market considerations, Globalstar
may or may not have the ability to redirect the system capacity that such
territories would have otherwise used to serve territories in which service is
authorized.
Regulatory schemes in countries in which Globalstar or its service
providers seek to operate may impose impediments on Globalstar's operations.
There can be no assurance that such restrictions would not be unduly burdensome.
Availability of Requested Feeder Link Spectrum. The frequencies in which
Globalstar proposes to operate its feeder links were allocated internationally
at the International Telecommunication Union's ("ITU") WRC '95 for
non-geostationary MSS feeder links. The FCC has granted LQP conditional
authority to construct a system at its own risk capable of operating in a
similar set of frequencies, and L/Q Licensee has filed a request at the FCC for
unconditional assignment of feeder links consistent with WRC '95 allocations.
Potential Interference with Glonass. A segment of the Russian Global
Navigation Satellite System ("Glonass") currently operates worldwide in a
portion of the frequency band proposed to be used by Globalstar and other MSS
systems for the user uplinks, resulting in potential difficulty in meeting
protection requirements for Glonass in the lower portion of the MSS band. An
agreement has been secured to move Glonass to a lower frequency band by 1998,
thereby providing additional separation between MSS and Glonass operations to
MSS systems. Negotiations are ongoing between U.S. government officials and
officials from the Russian Federation to move Glonass to an even lower frequency
band, thereby facilitating full use of the 1610-1626.5 MHz band for MSS. Pending
this frequency modification, a segment of the MSS spectrum may not be useable
for MSS user uplinks so as to create a protective band of spectrum for Glonass.
This is not expected to have an adverse effect on Globalstar's capacity in the
United States. A decision to protect Glonass on the part of regulatory
authorities in nations making extensive use of Globalstar fixed services,
however, could reduce Globalstar's effective system capacity in such
jurisdictions.
European Union Regulatory Matters. European Union competition law
proscribes agreements that have the effect of appreciably restricting or
distorting competition in the European Union. Globalstar and others have
received an inquiry from the Commission of the European Union requesting
information regarding its activities. A violation of European Union competition
law could subject Globalstar to fines or enforcement actions that could result
in expenses to Globalstar, delay the commencement of Globalstar service in
western Europe, and/or depending on the circumstances, adversely affect
Globalstar's contractual rights vis-a-vis its European strategic partners. In
addition, the Commission has proposed legislation at the European Union level
which, if adopted, would give the Commission broad regulatory authority over
"satellite PCS" systems such as Globalstar.
TECHNOLOGICAL RISKS
Technological Risks. The Globalstar System is exposed to the risks
inherent in a large-scale complex telecommunications system employing advanced
technologies which must be adapted to the Globalstar application and which have
never been tested or used as a commercial whole. Deployment of the Globalstar
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satellite constellation will involve volume production and testing of satellites
in quantities significantly higher than those previously prevailing in the
industry. The integration of a worldwide LEO satellite-based system like
Globalstar has never occurred; there is no assurance that such integration will
be successfully implemented. The operation of the Globalstar System will require
the detailed design and integration of advanced digital communications
technologies in devices from personal handsets and public telephone networks to
gateways in remote regions of the globe and satellites operating in space. The
failure to develop, produce and implement the system, or any of its diverse and
dispersed elements, as required, could delay the In-Service or Full
Constellation Date of the Globalstar System or render it unable to perform at
the quality and capacity levels required for success.
Satellite Launch Risks. Satellite launches are subject to significant
risks, including disabling damage to or loss of the satellites. Historically,
launch failure ("hot failure") rates on low-earth orbit and geostationary
satellite launches have been approximately 10%. However, launch failure rates
may vary depending on the particular launch vehicle. The McDonnell-Douglas Delta
launch vehicle, scheduled to launch the first eight satellites (four per launch)
of the Globalstar satellite constellation, recently suffered a partial launch
failure on one out of its last fifty launches. The Ukrainian Zenit launch
vehicle, which is proposed to launch 36 Globalstar satellites (twelve per
launch), has never been used in commercial applications. The Chinese Long March
2E, which is currently scheduled to be used as the vehicle to launch the last
twelve satellites of the Globalstar satellite constellation (twelve per launch),
has experienced two failures in its last five attempts. In addition, a Long
March 3B recently suffered a failure on its maiden launch attempt. These
failures are being studied to assess their implications for the deployment of
Globalstar satellites. Globalstar currently anticipates launching satellites in
groups of either four or 12 satellites in each launch. Satellite launches of
more than eight commercial satellites have not been attempted before. There is
no assurance that Globalstar satellite launches will be successful or that its
launch failure rate will not exceed the industry average.
Globalstar's contract with SS/L for the construction and launch of its
satellite constellation requires SS/L to procure insurance covering the
replacement cost of satellites lost in the event of hot failure. There is no
assurance, however, that launch insurance will be available or that, if
available, would be at a cost or on terms acceptable to Globalstar. Globalstar's
launch contracts for 64% of its satellite constellation provide for relaunches
at no additional charge in the event of a hot failure. However, the launch
provider may, because of financial reasons or otherwise, be unable to provide
such relaunches. A single launch failure would result in a loss of either four
or 12 Globalstar satellites. Although the cost of replacing such satellites and
launch vehicles will in most cases be covered by insurance, a launch failure
could result in delays in the In-Service or the Full Constellation Date. See
"-- Limited Insurance."
SS/L has agreed to obtain launch vehicles on behalf of Globalstar and
arrange for the launch of Globalstar satellites at an estimated total cost of
$302 million for all 56 satellites, subject to an equitable adjustment in light
of future market conditions, which may, in turn, be influenced by international
political developments. An adverse change in launch vehicle market conditions
which prohibits Globalstar from utilizing the launch vehicles for which it has
contracted could result in an increase in the launch cost payable by Globalstar,
which may be substantial. In addition, there can be no assurance that
replacement launch vehicles will be available in the future at a cost or on
terms acceptable to Globalstar.
Two of Globalstar's launch operators are subject to export control
regulations. China Great Wall Industry Corporation ("China Great Wall"), the
manufacturer of the Long March 2E and 3B, is located in China. NPO Yuzhnoye
("Yuzhnoye"), based in Ukraine, has certain ties with Russia and intends to
launch the Zenit rocket from a launch site in Kazakhstan. Changes in
governmental policies or political leadership in the United States, China,
Ukraine, Russia or Kazakhstan could affect the cost, availability, timing and/or
overall advisability of utilizing these launch providers. While there is no
assurance that the necessary export licenses will be obtained, Globalstar has
provided against the risk that such licenses will not be granted or that the
deterioration in the relationships between the United States and these countries
may make the use of such launch providers inadvisable by procuring options on
sufficient launches with a U.S.-based launch provider to launch all the
remaining satellites of the Globalstar constellation. If Globalstar were to
exercise these options for U.S. launches in the wake of the failure to obtain
any necessary export licenses or as a result of adverse
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developments in U.S. relations with these countries, the cost of launching the
Globalstar satellite constellation would be significantly increased.
Limited Life of Satellites. A number of factors will affect the useful
lives of Globalstar's satellites, including the quality of construction,
expected gradual environmental degradation of solar panels and the durability of
component parts. Random failure of satellite components could result in damage
to or loss of a satellite ("cold failures"). In rare cases, satellites could
also be damaged or destroyed by electrostatic storms or collisions with other
objects. As a result of these factors, the first-generation satellite
constellation (including spares) is designed to operate at full performance for
a minimum of 7 1/2 years, after which performance is expected to gradually
decline. However, there can be no assurance of the constellation's specific
longevity. Globalstar's operating results would be adversely affected in the
event the useful life of the satellites were significantly shorter than 7 1/2
years. Globalstar anticipates using funds generated from operations to develop a
second generation of satellites. If sufficient funds from operations are not
available and Globalstar is unable to obtain external financing for the
second-generation constellation, Globalstar will not be able to deploy a
second-generation satellite constellation to replace first-generation satellites
at the end of their useful lives. In that event, the Globalstar System would
cease operations at that time.
Limited Insurance. Globalstar intends to obtain insurance against launch
failure which would cover the cost of relaunch and the replacement cost of lost
satellites in the event of hot failures for 56 satellites in its constellation.
However, Globalstar may self-insure for hot failures for up to 12 such
satellites. Globalstar's contract with SS/L provides for the construction and
launch of eight spare satellites to minimize the effect of any launch or orbital
failures. Globalstar currently does not intend to purchase insurance to cover
any cold failures that may occur once the satellites have been successfully
deployed from the launch vehicle. Globalstar's management believes that this
quantity of spare satellites will be sufficient for full commercial operation.
However, there can be no assurance that additional satellites and launches will
not be required. In such an event, in addition to the replacement costs incurred
by Globalstar, the date for commencement of full commercial operations may be
delayed.
SS/L has agreed to obtain on Globalstar's behalf insurance for the cost of
replacing satellites lost in hot failures, and for any relaunch costs not
covered by the applicable launch contract, for an estimated premium of $92
million, in certain circumstances subject to an equitable adjustment in light of
future market conditions. An adverse change in insurance market conditions may
result in an increase in the insurance premium paid by Globalstar, which may be
substantial. In addition, there is no assurance that launch insurance will be
available or that, if available, would be at a cost or on terms acceptable to
Globalstar. Globalstar's contract with SS/L provides for the construction and
launch of eight spare satellites to minimize the effect of any launch or orbital
failures. Globalstar's management believes that this quantity of spare
satellites will be sufficient for initial operation. However, there can be no
assurance that additional satellites and launches will not be required. In such
an event, in addition to the replacement costs incurred by Globalstar,
Globalstar's In-Service or Full Constellation Date may be delayed.
FUTURE OPERATING RISKS
Dependence on Service Providers and Other Third Parties. The availability
of Globalstar service in each region or country will depend upon the
cooperation, operational and marketing efficiency, competitiveness, finances and
regulatory status of Globalstar's service provider in that region or country.
The willingness of companies to become service providers will depend upon a
variety of factors, including pricing, local regulations and Globalstar's
competitiveness with other satellite-based telecommunications systems.
Globalstar believes that enlisting the support of established telecommunications
service providers, some of which are the dominant carriers in their markets,
will be essential both to obtaining necessary local regulatory approvals and to
rapidly accessing a broad market of potential users. Globalstar's Strategic
Service Providers have agreed to act as exclusive service providers in 70
countries although it is anticipated that in many cases these partners will
enter into strategic alliance with local service providers to provide Globalstar
service in these countries. In addition, Globalstar expects to raise additional
funds prior to the Full Constellation Date in the form of Service Provider
Payments from prospective service providers in other territories throughout the
world. Globalstar's business plan assumes that Globalstar will contract with
service providers to provide
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service in the remaining territories of the world, in certain cases, on terms
more favorable to Globalstar than those contained in its founding service
provider agreements, and that such agreements will provide for Service Provider
Payments due prior to the Full Constellation Date aggregating $120 million.
There can be no assurance that additional service provider agreements will be
entered into in the future or that this plan will be achieved. If such Service
Provider Payments are not realized, Globalstar will be required to obtain other
sources of financing in order to complete the Globalstar System.
If the service providers fail to obtain the necessary local regulatory
approval or to adequately market and distribute Globalstar's services,
Globalstar's business could be adversely affected. There can be no assurance
that enough service providers will contract for Globalstar service and procure
and install the gateways and obtain the regulatory licenses necessary for
complete global service. Failure to offer service in any particular region will
eliminate that area's market potential and reduce Globalstar's ability to
service its global roamer market.
Certain strategic partners and other third parties are designing and
constructing the component parts of the Globalstar System and launching the
Globalstar satellites. In the event such parties are unable to perform their
obligations or are unable or not permitted due to political considerations to
provide Globalstar with a launch vehicle to launch its satellites, Globalstar's
In-Service and Full Constellation Date may be delayed and its costs may be
increased.
Risks of Doing Business in Developing Markets; Currency
Risks. Globalstar's largest potential markets are in developing countries or
regions that are substantially underserved and not expected to be served by
existing telecommunications systems. In doing business in such markets,
Globalstar and its local service providers may face market, inflation, interest
rate and currency fluctuation, government policy, price and wage, exchange
control, taxation and social instability, expropriation and other economic,
political or diplomatic conditions that are significantly more volatile than
those commonly experienced in the United States and other industrialized
countries. Although Globalstar anticipates that it will receive payments from
its service providers in U.S. dollars, limited availability of U.S. currency in
these local markets may prevent a service provider from making payments in U.S.
dollars. Moreover, under certain pricing arrangements that Globalstar will offer
to its service providers, exchange rate fluctuations may affect the price
Globalstar will be entitled to receive for its services. There can be no
assurance that, in connection with entering into agreements with additional
service providers, or in connection with any agreements with its present service
providers, Globalstar will not incur any additional risks relating to currency
fluctuations.
Pricing Risk. Globalstar's pricing to service providers will, under
certain circumstances, not be automatically adjusted for inflation; in such
cases, Globalstar will be able to increase its pricing to service providers only
if the service provider increases its prices to subscribers, and it may be
required to lower its pricing if the service provider lowers its prices to
subscribers. In recent years, pricing in the telecommunications industry has
trended downward, in some cases making it difficult for service providers to
raise their prices to compensate for cost inflation. In the event that
Globalstar is unable to offset any increased costs resulting from inflation with
efficiency advances in its technology, Globalstar's business may be adversely
affected.
Although Globalstar expects future service provider agreements to contain
pricing terms more favorable to Globalstar than those contained in its
agreements with founding service providers, there can be no assurance that such
terms will be achieved or that such terms will, on the one hand, be high enough
to provide an attractive return on Globalstar's costs of designing, constructing
and operating the Globalstar System or, on the other hand, be attractive enough
to service providers to induce them to provide service, including, where
applicable, to make Service Provider Payments and, further, to permit them to
offer the service to end users at rates which will attract adequate subscriber
volume. In the event that Globalstar reduces its standard pricing, Globalstar's
revenues at given levels of usage will be lower than the revenue levels
currently anticipated.
Substantial Leverage. Globalstar has entered into an agreement with a bank
syndicate for a $250 million credit facility expiring December 15, 2000, and
also expects to utilize $310 million of committed vendor financing (of which $62
million was outstanding as of March 31, 1996) which is scheduled to mature
earlier than the Mandatory Redemption Date. The Globalstar Credit Agreement
permits Globalstar to incur up to $950 million of indebtedness on a senior basis
to finance the buildout of the Globalstar System; an
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unlimited amount of indebtedness may be incurred by Globalstar on a subordinated
basis. The Preferred Partnership Interests also do not limit the amount of
indebtedness that Globalstar may incur. Significant additional debt is expected
to be incurred in the future. As a result, Globalstar is expected to become
highly leveraged. Globalstar will be dependent on its cash flow from operations
to service this debt. Any delay in the commencement of Globalstar operations
will adversely affect Globalstar's ability to service its debt obligations.
Globalstar's current and future debt service requirements could have important
consequences to holders of the Offered Securities, including the following: (i)
limiting Globalstar's ability to obtain additional financing for future working
capital needs or financing for deployment, development and operation of the
Globalstar System or other purposes; (ii) dedicating a substantial portion of
Globalstar's cash flow from operations to the payment of principal and interest
on its indebtedness, thereby reducing funds available for operations and
distributions on its Preferred Partnership Interests; and (iii) increasing
Globalstar's vulnerability to adverse economic conditions than less leveraged
competitors and, thus, limiting its ability to withstand competitive pressures.
The discretion of Globalstar's management with respect to certain business
matters will be limited by covenants contained in the Globalstar Credit
Agreement and future debt instruments. Among other things, the covenants
contained in the Globalstar Credit Agreement restrict, condition or prohibit
Globalstar from paying cash distributions on its partnership interests, creating
liens on its assets, making certain asset dispositions, conducting certain other
business and entering into transactions with affiliates and related persons.
There can be no assurance that Globalstar's leverage and such restrictions will
not materially and adversely affect Globalstar's ability to finance its future
operations or capital needs or to engage in other business activities. Moreover,
a failure to comply with the obligations contained in the Globalstar Credit
Agreement or any agreements with respect to additional financing could result in
an event of default under such agreements, which could permit acceleration of
the related debt and acceleration of debt under future debt agreements that may
contain cross-acceleration or cross-default provisions. See "Summary -- Sources
and Uses of Capital by Globalstar" and "-- Development Stage
Company -- Additional Financing Requirements."
Product Liability; Alleged Health Risks. There has been adverse publicity
concerning alleged health risks associated with the use of portable hand-held
telephones with transmitting antennas integrated into handsets. On March 11,
1993, the FCC proposed amending and updating its guidelines for evaluating
environmental radio frequency radiation from FCC-regulated transmitters.
Comments on the proposed guidelines were filed on January 25, 1994, and reply
comments were filed on April 25, 1994. The FCC has not yet made any decisions
concerning the proposed guidelines. The handsets Globalstar has contracted with
Qualcomm to develop for use by mobile subscribers will have antennas for
communication with the satellites and, in the case of the dual-mode hand-held
Globalstar Phones, with the land-based cellular system. Because hand-held
Globalstar Phones will use on average lower power to transmit signals than
traditional cellular units, Globalstar does not believe that the proposed new
guidelines will require any significant modifications of the Globalstar System
or of the mobile hand-held Globalstar Phones designed to be used with the
Globalstar System. There can, however, be no assurance that the guidelines, as
adopted, or any associated health concerns, would not have an adverse effect on
Globalstar's mobile handset business.
Effect of Loss of Key Personnel. The success of Globalstar's business will
be partially dependent upon the ability of Globalstar to attract and retain
highly qualified technical and management personnel. None of Globalstar's
existing employees has an employment contract with Globalstar nor does
Globalstar maintain "key man" insurance with respect to any of such individuals.
There can be no assurance that Globalstar will be able to retain such persons or
attract other highly qualified personnel. Globalstar is dependent upon officers
of Loral SpaceCom or subsidiaries thereof for senior management services.
Although one such officer has an employment agreement with Loral SpaceCom, there
can be no assurance that such person will continue to be employed by Loral
SpaceCom and thus continue to be available to Globalstar. The loss of any of
these individuals and the subsequent effect on business relationships could have
an adverse effect on Globalstar's business.
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DEMAND
Competition. Competition in the telecommunications industry is intense,
fueled by rapid and continuous technological advances and alliances between
industry participants on an international scale. Although no present participant
is currently providing the same global personal telecommunications service
proposed by Globalstar, it is anticipated that one or more additional competing
MSS systems will be launched and that the success, or anticipated success, of
Globalstar and its competitors could attract other entrants. If any of
Globalstar's competitors succeeds in marketing and deploying its system
substantially earlier than Globalstar, Globalstar's ability to compete in areas
served by such competitor may be adversely affected. A number of satellite-based
telecommunications systems not involved in the MSS Proceeding have also been
proposed using geostationary satellites and, in one case, a MEO system.
Globalstar's most direct competitors are the two other FCC-licensed MSS
applicants, Motorola, Inc.'s ("Motorola") IRIDIUM system ("Iridium") and TRW,
Inc.'s ODYSSEY system ("Odyssey"), and ICO Global Communications' global
satellite system ("ICO"). ICO was not an applicant or a licensee in the MSS
Proceeding or any other proceedings before the FCC; it is seeking to operate in
a different frequency band not available for use by MSS systems under current
international guidelines in place until 2000. Comsat Corporation ("Comsat"), the
U.S. signatory to the International Maritime Satellite Organization
("Inmarsat"), has applied to the FCC to participate in the procurement of
facilities of the system proposed by ICO. It has also sought FCC approval of a
proposal to extend the scope of services provided by Inmarsat, currently limited
to maritime services, to include telecommunications services to land-based
mobile units. These applications are currently pending before the FCC. Comsat
has been instructed in the past by the U.S. government to seek to ensure that
ICO does not receive preferred access to any market and that non-discriminatory
access to such areas for all mobile satellite communications networks be
established, subject to spectrum coordination and availability. Nonetheless,
because ICO is affiliated with Inmarsat and because its investors include
state-owned telecommunications monopolies in a number of countries, there can be
no assurance that ICO might not be given preferential treatment in the local
licensing process in those countries. It is also possible that one or more of
the three pending MSS applicants will demonstrate financial qualification
sufficient to obtain an FCC license and become a competitor of Globalstar.
In addition to competing for investment capital, subscribers and service
providers in markets all over the world, the MSS systems, including Globalstar,
also compete with each other for the limited spectrum available for MSS
operations. Unlike CDMA systems such as Globalstar and Odyssey, which permit
multiple systems to operate within the same band, the design of Iridium's TDMA
system requires a separate frequency segment dedicated specifically for its use.
If more than two CDMA systems become operational, CDMA systems like Globalstar
will effectively have a smaller spectrum segment within which to operate their
user uplinks in the U.S. While CDMA does permit spectrum sharing among competing
systems, the capacity of the systems operating within that spectrum will
decrease as the number of systems operating in the band increases. For example,
Globalstar's capacity over a given area would decrease by approximately 25% if
the total number of licensed MSS systems increased from three to four, assuming
that Iridium is one of the licensed systems and the two other CDMA systems
receiving licenses have technical characteristics similar to Globalstar's and
are experiencing the same level of usage.
The FCC has declined to make efforts to extend the U.S. band plan for CDMA
and TDMA Big LEO systems to other countries. However, it has stated that it
plans to express the view in discussions with other administrations that global
satellite systems are more likely to succeed if individual administrations adopt
complementary systems for licensing them.
Geostationary-based satellite systems, including American Mobile Satellite
Corporation ("AMSC"), Asia Pacific Mobile Telecom ("APMT"), Afro-Asian Satellite
("ASC"), PT Asia Cellular Satellite ("ACES"), Lockheed Martin's Satphone and
Comsat's Planet-1 plan to provide satellite-based telecommunications services in
areas proposed to be serviced by Globalstar. Because some of these systems
involve relatively simple ground control requirements and are expected to deploy
no more than two satellites, they may succeed in deploying and marketing their
systems before Globalstar. In addition, coordination of standards among regional
geostationary systems could enable these systems to provide worldwide service to
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their subscriber base, thereby increasing the competition to Globalstar. For
example, Comsat has announced a global mobile satellite service (Planet-1) to
commence in 1996 using existing Inmarsat satellites, a six-pound, laptop-size
phone, costing $3,000 with an expected per-minute usage rate of $3.00. Comsat
has announced plans to offer Planet-1 services on a regional basis in Asia,
Africa and the Middle East in the summer of 1996 and in Europe and the Americas
in the fourth quarter of 1996.
Some of these potential competitors have financial, personnel and other
resources substantially greater than those of Globalstar. Many of these
competitors are raising capital and may compete with Globalstar for service
providers and financing. Technological advances and a continuing trend toward
strategic alliances in the telecommunications industry could give rise to
significant new competitors. There can be no assurance that some of these
competitors will not provide a more efficient or less expensive service.
However, Globalstar believes that based upon the public statements and other
publicly available information of the other MSS applicants, Globalstar will be a
low-cost provider. Depending on the competitive environment, however, pricing
competition could require Globalstar to reduce its anticipated pricing to
service providers, thus adversely affecting its financial performance.
Satellite-based telecommunications systems are characterized by high
up-front costs and relatively low marginal costs of providing service. Several
systems are being proposed, and, while the proponents of these systems foresee
substantial demand for the services they will provide, the actual level of
demand will not become known until such systems are constructed, launched and
begin operations. If the capacity of Globalstar and any competing systems
exceeds demand, price competition could be particularly intense. See
"-- Regulation -- Licensing Risks; Impact of Multiple FCC Licensees; Impact on
System Capacity."
TELEDESIC(R) ("Teledesic"), GM Hughes Electronics Corp.'s Spaceway(R)
("Spaceway") and Loral SpaceCom's Cyberstar ("Cyberstar") have each applied to
the FCC for licenses to operate satellite-based telecommunications and video
transmission systems in the 28GHz Ka-band. Certain MSS applicants, not including
Globalstar, have applied to use this band for their feeder uplinks, as have
proponents of land-based Local Multipoint Distribution Services ("LMDS") for
cellular television services. The FCC is in the process of developing a
band-width allocation plan for use of the available Ka-band spectrum by these
services. Globalstar's primary business will be voice telephony, and its data
transmission business will be focused on small data packet services such as
paging and messaging. It therefore does not regard the television or broadband
data services to fixed terminals proposed by Teledesic, Spaceway and Cyberstar
or the wireless cable and fixed telephony services proposed by the LMDS
applicants as competing services.
Risk of Accelerated Build-Out and Competing Technological Advances. It is
expected that as land-based telecommunications services expand to regions
currently underserved or not served by wireline or cellular services, demand for
Globalstar service in those regions may be reduced. If such systems are
constructed at a more rapid rate than that anticipated by Globalstar, the demand
for Globalstar service may be reduced at rates higher than those assumed in
Globalstar's market analysis. Globalstar may also face competition in the future
from companies using new technologies and new satellite systems. New technology
could render Globalstar obsolete or less competitive by satisfying consumer
demand in alternative ways or through the introduction of incompatible
telecommunications standards. A number of these new technologies, even if they
are not ultimately successful, could have an adverse effect on Globalstar as a
result of their initial marketing efforts. Globalstar's business would be
adversely affected if competitors begin operations or existing or new
telecommunications service providers penetrate Globalstar's target markets
before completion of the Globalstar System.
Subscriber Acceptance. Subscriber acceptance of the Globalstar System
(both in terms of placement of Globalstar Phones and subscriber usage thereof)
will depend upon a number of factors, including price, demand for service and
the extent of availability of alternative telecommunications systems. If the
level of actual subscriber demand and usage for Globalstar service is below that
expected by Globalstar, Globalstar's cash flow will be adversely affected.
Globalstar's hand-held phone is expected to be larger and heavier for the same
talk time than today's smallest and lightest pocket-sized, hand-held cellular
telephones and is expected to have a significantly longer and thicker antenna
than hand-held cellular telephones. The Globalstar System will function best
when there is an unobstructed line-of-sight between the user and one or more of
the
21
<PAGE> 26
Globalstar satellites overhead. Obstacles such as buildings, trees or
mountainous terrain may degrade service quality, more so than would be the case
with terrestrial cellular systems, and service may not be available in the core
of high-rise buildings. There is no assurance that these characteristics of the
hand-held Globalstar Phone will not adversely affect subscriber demand for
Globalstar service.
STRUCTURAL AND MARKET RISKS
Potential Conflicts of Interest. Partners of LQSS, the managing general
partner of Globalstar, or their affiliates are principal suppliers to Globalstar
of the major components of the Globalstar System, and are also expected to
engage in the manufacture of system elements to be sold to service providers and
subscribers. A substantial portion of the proceeds of the Original Offering will
be used to fund Globalstar's obligations under these contracts. During the
design, development and deployment of the Globalstar System, Globalstar will be
substantially dependent upon the management skills of Loral SpaceCom and certain
technologies developed by affiliates of Loral, Qualcomm and SS/L to design and
manufacture the Globalstar satellite constellation, satellite operations control
centers ("SOCCs"), GOCCs, gateways and Globalstar Phones. Globalstar has entered
into contracts for the design of various segments of the Globalstar System with
affiliates of LQSS, including a fixed-price satellite production contract with
SS/L and a cost-plus-fee contract with Qualcomm to design the gateways, GOCCs
and Globalstar Phones. To the extent that such contracts have been or will be
awarded to partners of Globalstar or LQSS or their affiliates, such parties will
have a conflict of interest with respect to the terms thereof.
Partners and affiliates of Globalstar, including companies affiliated with
or controlled by Loral SpaceCom, will be among Globalstar's principal service
provider customers and may therefore have conflicts of interest with respect to
the terms of Globalstar's service provider agreements and any proposed
amendments thereto. In addition, if Globalstar is unable to offer Globalstar
service to a service provider on competitive terms in a particular country or
region, such a service provider, which may be a partner of Globalstar, can act
as a service provider to a competing MSS system in such region or country while
at the same time serving as a Globalstar service provider in other markets.
Controlling Person. Globalstar is currently managed by a General Partners'
Committee, a majority of the representatives on which are designated directly or
indirectly by Loral SpaceCom. Representatives on the General Partners' Committee
not affiliated with Loral SpaceCom (the "Independent Representatives") will,
however, have the right to pass upon certain matters prior to any decision to
submit such matters to a vote of the partners and will have certain authority
over the hiring or dismissal of senior officers of Globalstar.
Change of Control of GTL and Reduction in Interest; Investment Company Act
Considerations. In the event of (i) a change of control of the Company at a
time when the Company owns less than 50% of the Globalstar partnership interests
outstanding, including certain changes in the Company's Board of Directors, or
(ii) a sale or other disposition of partnership interests following which the
equity interest of the Company in Globalstar has been reduced to an interest of
less than 5% (a "Reduction in Interest"), which, in the event of either clause
(i) or (ii) above has not been approved by LQSS or by the partners of
Globalstar, the Company will become a limited partner in Globalstar and will no
longer appoint representatives to serve on Globalstar's General Partners'
Committee. Certain other governance rights granted to the Company under
Globalstar's partnership agreement will also be revoked, and the Company will
enjoy only the rights of a limited partner in Globalstar. If the Company were to
cease participation in the management of Globalstar, which would result if the
Company were to undergo a change of control or a Reduction in Interest shall
have occurred, its interest in Globalstar could be deemed an "investment
security" for purposes of the Investment Company Act of 1940, as amended (the
"Investment Company Act"). In general, a person is an "investment company" if,
subject to certain exceptions, it owns investment securities having a value
exceeding 40% of the value of its total assets (exclusive of U.S. government
securities and cash items). The Company's sole asset is its partnership
interests in Globalstar. A determination that such investment was an investment
security could result in the Company's being deemed to be an investment company
under the Investment Company Act and its becoming subject to the registration
and other requirements of the Investment Company Act. In order to register, the
Company might be required to reincorporate as a domestic U.S. corporation and
would thereafter be subject to U.S. tax on its worldwide income, subject to any
applicable foreign tax credits. Absent a change of control or a
22
<PAGE> 27
Reduction in Interest, Globalstar intends to conduct its operations so as to
avoid being deemed an investment company under the Investment Company Act.
No Dividends; Holding Company Structure; General Partner Liability. GTL
has not declared or paid any dividends on its Common Stock, and Globalstar has
not made any distributions to its partners, since their respective dates of
inception. Except for interest payments by the Company on the Securities and
distribution payments by Globalstar on the Preferred Partnership Interests, the
Company and Globalstar do not currently anticipate paying any such dividends or
distributions prior to Globalstar's Full Constellation Date and achievement of
positive cash flow, which is not expected to occur until 1999. GTL is a holding
company, the sole asset of which is its partnership interests in Globalstar. The
Company has no independent means of generating revenues. Globalstar will pay the
Company's operating expenses related to Globalstar; such expenses are not
expected to be material. As a general partner of Globalstar, the Company is
jointly and severally liable with the other general partner for the debts and
other obligations of Globalstar to the extent Globalstar is unable to pay such
debts. To the extent permitted by applicable law and agreements relating to
indebtedness, Globalstar intends to distribute to its partners, including the
Company, its net cash received from operations, less amounts required to repay
outstanding indebtedness, pay distributions on the Preferred Partnership
Interests, satisfy other liabilities and fund capital expenditures and
contingencies (including funds required for design, construction and deployment
of the second-generation satellite constellation). The Company intends to
promptly distribute as dividends to holders of its Common Stock the
distributions made to it by Globalstar, less any amounts required for the
payment of taxes, for repayment of any liabilities, including payments on the
Securities, and to fund contingencies.
Rights of Shareholders under Bermuda Law. The Company is incorporated
under the laws of the Islands of Bermuda. Principles of law relating to such
matters as the validity of corporate procedures, the fiduciary duties of the
Company's management, directors and controlling shareholders, and the rights of
its shareholders are governed by Bermuda law and the Company's Memorandum of
Association and Bye-Laws. Such principles of law may differ from those that
would apply if the Company were incorporated in a jurisdiction in the United
States. In addition, there is uncertainty as to whether the courts of Bermuda
would enforce (i) judgments of United States courts obtained against the Company
or its officers and directors resident in foreign countries predicated upon the
civil liability provisions of the securities laws of the United States or any
state or (ii) in original actions brought in Bermuda, liabilities against the
Company or such persons predicated upon the securities laws of the United States
or any state.
Tax Considerations. Special U.S. tax rules apply to U.S. taxpayers who own
stock in a "passive foreign investment company" (a "PFIC"). Although the Company
believes that it will not become a PFIC, there is a risk that in the future it
may become one. In such an event, a U.S. shareholder would be subject at his
election either to (i) a current tax on undistributed earnings or (ii) a tax
deferral charge on certain distributions and on gains from a sale of the
Securities or Common Stock (which will be taxed as ordinary income).
The Company expects that a significant portion of its worldwide income will
not be subject to tax by the United States, Bermuda or by the countries from
which it derives its income. However, the extent to which certain foreign
jurisdictions may require the Company to pay tax or to make payments in lieu of
tax cannot be determined in advance. See "-- Investment Company Act
Considerations" and "Taxation."
Shares Eligible for Future Sale. As of May 31, 1996, the Company had
outstanding 10,000,000 shares of Common Stock and GTL Guarantee Warrants
entitling the holders thereof, subject to vesting requirements, to purchase
4,185,318 additional shares of Common Stock. In addition, the existing partners
of Globalstar will have the right, following the satisfaction of certain
performance criteria by the Globalstar System and after at least two consecutive
reported fiscal quarters of positive net income, to exchange their Ordinary
Partnership Interests for an equal number of shares of Common Stock of the
Company, subject to certain limitations on the amount of Ordinary Partnership
Interests that may be so exchanged in any twelve-month period (the "Exchange
Right"). This Exchange Right may be accelerated upon the occurrence of certain
events, including a change of control of the Company. As of May 31, 1996, an
aggregate of 250,000 shares of Common Stock were reserved for issuance under the
Company's stock option plan. Sales of substantial amounts of Common Stock in the
public market could adversely affect the market price of the Common Stock. The
Company agreed to file, within 120 days after the Issue Date (as defined below),
the
23
<PAGE> 28
Registration Statement with the Commission covering the resale of the Securities
and the Conversion Shares. See "-- Dilution."
Volatility. The trading price of the Common Stock has been highly
volatile, and the trading price for the Securities may also be highly volatile.
Factors such as announcements of fluctuations in the Company's or its
competitors' operating results and market conditions for growth stocks or
technology stocks in general could have a significant impact on the future
trading price of the Common Stock and the Securities. In particular, the trading
price of the common stock of many technology companies has experienced extreme
price and volume fluctuations, which have at times been unrelated to the
operating performance of such companies whose stocks were affected. In addition,
the trading price of the Common Stock and the Securities could be subject to
significant fluctuations in response to variations in Globalstar's prospects and
operating results which will in turn be affected by delays in the design,
construction, deployment, customer acceptance and commercial operation of the
Globalstar System, delays in obtaining service providers or regulatory approvals
in particular countries, launch failures, general conditions in the
telecommunications industry, regulation, international events, changes in
interest rates and other factors. There can be no assurance that these factors
will not have an adverse effect on the trading price of the Common Stock or the
Securities.
Dilution. Globalstar expects to fund its remaining capital requirement of
approximately $828 million from a combination of sources, including the issuance
of debt, projected Service Provider Payments, projected net service revenues
from initial operations, anticipated payments from the sale of gateways and
Globalstar Phones and placements of limited partnership interests with new and
existing strategic investors. Globalstar may, subject to certain preemptive and
approval rights of Globalstar's other partners, sell additional equity interests
(either directly or through the issuance of warrants to purchase, or debt
securities convertible into, partnership interests), diluting the indirect
percentage ownership in Globalstar represented by the shares issuable upon
conversion of the Securities. Issuing additional partnership interests to new or
existing partners would dilute, pro rata, the percentage ownership in Globalstar
of the other Globalstar partners. The issuance of additional partnership
interests at prices lower than the Conversion Price would result in further
dilution to the Company.
The Company has issued the GTL Guarantee Warrants to purchase 4,185,318
shares of Common Stock of the Company. In connection with the issuance of the
GTL Guarantee Warrants, Globalstar issued to the Company warrants to purchase
4,185,318 Ordinary Partnership Interests plus Additional Warrants to purchase
1,131,168 Ordinary Partnership Interests. In order to raise proceeds sufficient
to exercise the Additional Warrants, GTL may be required to issue additional
shares of Common Stock. Furthermore, Ordinary Partnership Interests in
Globalstar are convertible, over a period of years following the Full
Constellation Date and after at least two consecutive reported fiscal quarters
of positive net income, into shares of Common Stock, subject to certain
restrictions, on a one-for-one basis, subject to adjustment in certain events.
RISKS RELATING TO THE SECURITIES
Subordination of Securities. Although the Securities are not equity
securities under applicable Bermuda law, the Securities are the substantial
equivalent of convertible preferred stock. The Securities will be subordinated
to all Debt Obligations with respect to the payments of interest and amounts
distributable upon dissolution, liquidation or winding up of the Company. The
Indenture (as defined herein) governing the Securities will not limit the amount
of indebtedness or other obligations that the Company may incur. The Company may
incur additional indebtedness in order to finance the completion of the
Globalstar System. Such indebtedness in all likelihood will rank senior to the
Securities. The Indenture does not provide the Holders with any rights to
accelerate the payment of the Securities. See "-- Development Stage Company --
Additional Financing Requirements."
In addition, because the Company is a holding company, the sole asset of
which is its partnership interests in Globalstar, its obligations on the
Securities will be structurally subordinate to all liabilities of Globalstar,
including, without limitation (i) the distribution of Globalstar's Managing
Partner's Allocation (the "Managing Partner's Allocation"); (ii) the Guarantee
Fee or notes that may be issued to the partners of Globalstar in lieu of such
Guarantee Fee; and (iii) certain distributions made to partners in respect of
taxes
24
<PAGE> 29
levied upon the operations of Globalstar. At March 31, 1996, Globalstar had
approximately $62 million of outstanding indebtedness in the form of vendor
financing.
There can be no assurance that, in the event of a dissolution, liquidation,
reorganization or winding up of the Company, the purchasers of Securities will
receive any portion of their initial investment.
Absence of Existing Market for the Securities. The Company does not intend
to list the Securities on any national securities exchange or to seek the
admission thereof for trading on any automated dealer quotation system. The
Securities have been and may continue to be traded in the PORTAL market, the
National Association of Securities Dealers' screen-based automated market for
trading of securities eligible for resale under Rule 144A; however, no assurance
can be given as to the liquidity of, or trading market for, the Securities. The
Company has been advised by the Initial Purchasers that they are making and
currently intend to continue to make a market in the Securities. However, the
Initial Purchasers are not obligated to do so and any market-making activities
with respect to the Securities may be discontinued at any time without notice.
Notwithstanding the effectiveness of the Registration Statement of which this
Prospectus is a part, no assurance can be given as to the liquidity of the
trading market for the Securities.
The liquidity of, and trading market for, the Securities also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for the Company.
Dependence on Globalstar for Payments; Conflict of Interest. The Company
will be dependent in large part upon the distributions on the Preferred
Partnership Interests to service its cash payments on the Securities. The
payment of the scheduled distribution from Globalstar to the Company
corresponding to the interest payment due on the Securities and the redemption
payments corresponding to the Provisional Redemption and Optional Redemption are
at the sole discretion of Globalstar. To the extent that Globalstar defers
payment on the Preferred Partnership Interests in order to finance the buildout
of the Globalstar System or otherwise, the Company and Globalstar may be deemed
to have a conflict of interest. In addition, Globalstar may defer any scheduled
distribution with respect to interest payments on the Securities without
compound interest or penalty. As a result, whether the Company makes any of
these payments to Holders is primarily controlled by Globalstar.
Interest Deferral; Payments in Common Stock. Interest payments on the
Securities are subject to deferral by the Company without compound interest or
penalty. The Holders will not have any rights to accelerate payment following
such deferral and will only be entitled to certain voting rights described
herein. See "Description of Securities--Voting Rights." If any scheduled
distribution from Globalstar is made by delivery of Ordinary Partnership
Interests, the Company may make the corresponding interest payment by delivering
Common Stock or by selling Common Stock and using the proceeds from such sale to
make such payment. There is no assurance that the liquidity of, or trading
market for, the Common Stock will be sufficient to allow a Holder of Securities
to fully realize the value of Common Stock received in payment therefor. See
"Description of Securities -- Method of Payments."
In addition, the Company may deliver Common Stock or sell Common Stock and
use the proceeds from such sale to make a payment on the Securities, even if
Globalstar has elected not to make the corresponding payment with respect
thereto. To the extent that the Company sells Common Stock in such a manner, the
interest of the Holders of the Securities in the Company and in Globalstar will
be diluted.
Dependence on Globalstar Capital Accounts for Cash Distributions to the
Company. The amount of cash that Globalstar can pay to the Company in
redemption of its Preferred Partnership Interests will be limited to the balance
in the capital account maintained by Globalstar with respect to such Preferred
Partnership Interests. Such capital account balance initially will equal the net
proceeds of the Original Offering (approximately $300 million); subsequently,
such capital account balance will be increased by the amount of adjusted income
allocated to, and decreased by the amount of losses allocated and cash
distributed to, the Company with respect to such Preferred Partnership
Interests. Adjusted income for this purpose is computed by adding amortization
and depreciation expense to profits and will include increases in the fair
25
<PAGE> 30
market value of Globalstar's assets that will be recognized as income when
partnership interests are issued or redeemed. Losses would be allocated to the
Preferred Partnership Interests only after losses have first been allocated to
reduce the capital accounts for all Ordinary Partnership Interests to zero. To
the extent the aggregate cash distributions made by Globalstar to the Company
with respect to the Preferred Partnership Interests plus the Original Offering
expenses exceed the aggregate amount of adjusted income allocated to the
Preferred Partnership Interests of the Company, the balance in the capital
account will be less than the full amount of the redemption price for the
Preferred Partnership Interests at the Mandatory Redemption Date. In such case,
Globalstar will pay the excess of the redemption price over the balance in the
capital account by issuing additional Ordinary Partnership Interests to the
Company.
To the extent the Company receives some or all of the redemption price of
the Preferred Partnership Interests in Ordinary Partnership Interests, the
Company will pay the redemption price of the Securities, to the extent in excess
of cash received, by issuing shares of Common Stock to Holders of the Securities
or by selling Common Stock and using the net proceeds therefrom to make such
payment.
Effect on Common Stock of Globalstar Liquidation. In the absence of
sufficient Globalstar adjusted income, under certain circumstances involving a
liquidation of Globalstar (including a disposition of all its assets), payments
with respect to the Securities could exceed Globalstar's liquidating
distributions with respect to the Preferred Partnership Interests and would then
reduce the payment that otherwise would be made with respect to the Common
Stock. In such event, the amount received by the holders of the Common Stock
would be less than the amount that they would have otherwise received and would
be less than the amount they would have received if they had owned Ordinary
Partnership Interests in Globalstar directly.
26
<PAGE> 31
GLOBALSTAR TELECOMMUNICATIONS LIMITED
RATIO OF EARNINGS TO FIXED CHARGES(1)
The ratio of earnings to fixed charges presented below should be read in
conjunction with the Financial Statements and the notes thereto and
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" found in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 and the Company's Quarterly Report on Form 10-Q for the three
months ended March 31, 1996 (as amended by the Form 10-Q/A filed with the
Commission on May 21, 1996) incorporated herein by reference.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, 1995 ENDED MARCH 31, 1996
----------------------------------------------------------------------------
<S> <C>
N/A 1x
</TABLE>
- ---------------
(1) The earnings of the Company available to cover fixed charges consist solely
of dividends from Globalstar on the Redeemable Preferred Partnership
Interests held by the Company.
GLOBALSTAR, L.P.
DEFICIENCY OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(In thousands)
The deficiency of earnings to fixed charges and preferred stock dividends
presented below should be read in conjunction with the Financial Statements and
the notes thereto and "Management's Discussion and Analysis of Results of
Operations and Financial Condition" found in the Company's Annual Report on Form
10-K for the year ended December 31, 1995 and the Company's Quarterly Report on
Form 10-Q for the three months ended March 31, 1996 (as amended by the Form
10-Q/A filed with the Commission on May 21, 1996) incorporated herein by
reference.
<TABLE>
<CAPTION>
CUMULATIVE
MARCH 23, 1994 MARCH 23, 1994
(COMMENCEMENT OF THREE MONTHS (COMMENCEMENT OF
OPERATIONS) TO YEAR ENDED ENDED OPERATIONS) TO
DECEMBER 31, 1994 DECEMBER 31, 1995 MARCH 31, 1996 MARCH 31, 1996
- ------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C>
$26,244 $68,237 $15,376 $109,857
</TABLE>
USE OF PROCEEDS
The Securities and the Conversion Shares offered by the Selling Holders are
not being sold by the Company, and the Company will not receive any proceeds
from the sale thereof.
DIVIDEND POLICY
Except for payment by the Company on the Securities and payment by
Globalstar on the Preferred Partnership Interests, the Company and Globalstar do
not currently anticipate paying any such dividends or distributions prior to
Globalstar's Full Constellation Date and achievement of positive cash flow,
which is not expected to occur until 1999. The Company is a holding company, the
sole asset of which is its partnership interests in Globalstar; the Company has
no independent means of generating revenues. Globalstar will pay the Company's
operating expenses related to Globalstar; such expenses are not expected to be
material. To the extent permitted by applicable law and agreements relating to
indebtedness, Globalstar intends to distribute to its partners, including the
Company, its net cash received from operations, less amounts required to repay
outstanding indebtedness, pay distributions on the Preferred Partnership
Interests, satisfy other liabilities and fund capital expenditures and
contingencies (including funds required for design, construction and deployment
of the second-generation satellite constellation). Cash distributions by
Globalstar may be restricted by future debt covenants. The Company intends to
promptly distribute as dividends to the holders of its Common Stock
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<PAGE> 32
the distributions made to it by Globalstar, less any amounts required to be
retained for the payment of taxes, for repayment of any liabilities, including
payments on the Securities, and to fund contingencies. See "Risk
Factors -- Structural and Market Risks -- No Dividends; Holding Company
Structure; General Partner Liability."
REGULATION
UNITED STATES FCC REGULATION
On January 31, 1995, LQP was granted authority by the FCC to construct,
launch and operate the Globalstar System in assigned bands of the radio
frequency spectrum for the user links. The authorization was subsequently
assigned to L/Q Licensee, Inc. The FCC is the United States agency with
jurisdiction over commercial uses of the radio spectrum. All commercial MSS
systems such as Globalstar must obtain an authorization from the FCC to
construct and launch their satellites and to operate the satellites to provide
MSS services in assigned spectrum segments in the United States. The FCC may
also adopt rules from time to time applicable to MSS systems which may impose
constraints on the operation of Globalstar satellites, subscriber terminals
and/or gateway earth stations.
In November 1994, LQP requested that the FCC grant it authority to
construct, launch and operate the Globalstar System using four separate segments
of the radio frequency spectrum. The four segments proposed for Globalstar MSS
operations were:
<TABLE>
<S> <C>
User links: 1610-1626.5 MHz (user-to-satellite)
2483.5-2500 MHz (satellite-to-user)
Feeder links: 5025-5225 MHz (gateway-to-satellite)
6875-7075 MHz (satellite-to-gateway)
</TABLE>
The FCC License grants authority to construct the Globalstar System capable
of operating in the 1610-1626.5 MHz and 2483.5-2500 MHz bands, but authorizes
launch and operation in the 1610-1621.35 MHz and 2483.5-2500 MHz bands,
consistent with the United States band plan for MSS Above 1 GHz systems. While
the FCC granted LQP authority to construct the system at its own risk using the
requested feeder link bands, it deferred action on grant of launch and operation
authority for specific feeder link assignments until after WRC '95. L/Q Licensee
has filed an application requesting assignment of feeder links in the 5 GHz and
7GHz bands consistent with the international allocation for non-geostationary
MSS feeder links in these bands adopted at WRC '95. As described below, the WRC
'95 allocation for the feeder uplinks was different from the initial Globalstar
proposal. Accordingly, L/Q Licensee has also filed a request for the FCC to
modify its construction authority related to feeder links to conform to the WRC
'95 allocation for MSS feeder links in the 5 GHz band.
The authorization granted by the FCC to LQP for Globalstar requires that
construction, launch and operation of the system must be accomplished in
accordance with the technical specifications set forth in the Globalstar FCC
application, as amended, and consistent with the FCC's rules unless specifically
waived. During the process of constructing the Globalstar System, there may be
certain modifications to the design set forth in the application on file with
the FCC which may require filing an application to modify the authorization,
such as the application for feeder link assignments. There can be no assurance
that the FCC will grant these requests or do so in a timely manner. Denial of
such requests or delay in grant of such requests could adversely affect the
performance of the Globalstar System or result in schedule delays or cost
increases.
LQP's MSS application was one of six considered concurrently by the FCC. On
January 31, 1995, Motorola and TRW also were granted FCC licenses for MSS above
1 GHz systems. The applications of three other applicants were deferred, and
these three applicants were given until January 1996 to establish that they are
financially qualified to receive an MSS license. In January 1996, at the request
of two of the deferred applicants, the FCC granted an extension of the deadline
for demonstrating such financial qualification for all three deferred
applicants.
The FCC License only authorizes the construction, launch and operation of
the Globalstar System's satellite constellation. Separate authorizations must be
obtained from the FCC for operation of gateways and
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<PAGE> 33
Globalstar Phones in the United States. Globalstar's authorized United States
service provider, AirTouch, will apply for the required regulatory
authorizations for operation of gateways and Globalstar Phones, and the
manufacturer will apply for equipment authorization for Globalstar Phones.
Failure to obtain, or delay in obtaining, such licenses and authorizations would
adversely affect the implementation of the Globalstar System. Similar procedures
are expected to apply internationally.
Globalstar proposes to operate on an international basis, but the FCC
License only authorizes construction and launch of the system for operation in
the United States. Even though the Globalstar System is licensed to operate in
the United States by the FCC, in order to provide MSS service in other
countries, Globalstar or its service providers must obtain the required
regulatory authorizations in those countries. There can be no assurance that the
required regulatory authorizations will be obtained in any other country in
which Globalstar proposes to operate, or that they will be obtained in a timely
manner, or that, if granted, they will authorize MSS service on the same terms
as the U.S. license. Failure or delay in obtaining licenses for the Globalstar
System in other countries or grant of licenses on substantially different terms
and conditions would have an adverse effect on Globalstar.
User links. "User link" refers to frequencies used for links between the
satellites and Globalstar Phones. The Globalstar System has been licensed to
operate with its user uplinks (earth-to-satellite) in the 1610-1621.35 segment
of the 1610-1626.5 MHz band and with its user downlinks (satellite-to-earth) in
the 2483.5-2500 MHz band. The 1610-1626.5 MHz and 2483.5-2500 MHz bands have
been allocated in both the United States and internationally for MSS user links.
These two frequency bands are also allocated in the United States for the
Radio-Determination Satellite Service ("RDSS") on a co-primary basis with MSS
systems. RDSS is a service which provides radio location through one or more
satellites. Co-primary status requires systems in the relevant services to
coordinate operations as specified by the FCC. "Coordination" generally refers
to development of operational standards which allow two or more transmitting
radio frequency stations to share the same frequency band so that neither causes
or is subject to interfering emissions greater than a specified permissible
level.
The 1610-1626.5 MHz band is also allocated in the United States on a
co-primary basis with MSS for the Aeronautical Radio-Navigation Service
("ARNS"), and the 1610.6-1613.8 MHz segment is also allocated on a co-primary
basis with MSS for the Radio-Astronomy Service ("RAS"). ARNS is a radio-
navigation service intended for the benefit and for the safe operation of
aircraft. RAS involves reception of radio waves of cosmic origin. Operation of
Globalstar user links for MSS in the United States will be constrained to the
extent that the FCC requires L/Q Licensee to coordinate its operations with and
to provide interference protection for authorized systems in the RDSS, RAS or
ARNS services in these bands. "Interference protection" refers to protection for
a radio frequency receiver and is generally stated as a ratio, usually expressed
in decibels, at the receiver input determined under specified conditions such
that a specified reception quality of the wanted (or desired) signal is achieved
at the receiver input.
The FCC recently concluded that the Russian Glonass system is unlikely to
be used for ARNS in the United States prior to the year 2005 when Glonass is
scheduled to operate outside Russia only below 1605 MHz. There is now a petition
for reconsideration of this decision pending at the FCC, which requests the FCC
to require MSS Above 1 GHz systems to protect Glonass operations above 1605 MHz
through 2005. Moreover, the aviation community is seeking stringent protection
levels for Glonass operations below 1605 MHz. There can be no assurance that the
FCC would not impose requirements for protection of Glonass operations below or
above 1605 MHz which may adversely effect the usefulness of a segment of the
1610-1626.5 MHz band for Globalstar user links.
As a CDMA system, Globalstar must coordinate its operations in the United
States with other licensed Big LEO CDMA systems and the TDMA system. The FCC's
band plan provides that up to four CDMA systems may be licensed to operate in
the 1610-1621.35 MHz and 2483.5-2500 MHz bands, but the FCC did not adopt
specific guidelines for coordination among CDMA systems. There may be an adverse
effect on the implementation of the Globalstar System as a result of this
intersystem coordination process, depending upon the number of CDMA systems with
which it must coordinate operations, their relative stages of development and
readiness to coordinate, and their willingness to coordinate in good faith and
in a timely
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manner. While the FCC has stated that authorized CDMA systems may request relief
at the FCC in the event that this CDMA coordination process is delayed, there
can be no assurance that, if LQP sought such relief, the FCC would take
favorable action or that it would act in a timely manner. The FCC has also
encouraged the CDMA Big LEO systems to coordinate operations with the TDMA
system to resolve any potential interference issues. Again, there can be no
assurance that such intersystem coordination would not have an adverse effect on
Globalstar operations.
Feeder links. "Feeder link" refers to frequencies used for links between
the satellites and gateway earth stations. The feeder links in which Globalstar
applied to operate in November 1994 consist of the 5025-5225 MHz band for feeder
uplinks and the 6875-7075 MHz band for feeder downlinks. L/Q Licensee has been
granted conditional authorization to construct the Globalstar System with these
feeder link frequencies at its own risk. In March 1996, L/Q Licensee submitted a
modification application to the FCC, requesting that it be assigned the
5091-5250 MHz and 6875-7055 MHz bands for use as feeder links for the Globalstar
System to conform to action taken at WRC '95.
At WRC '95, the ITU adopted modifications to the International Table of
Frequency Allocations to allocate the 5091-5250 MHz band (earth-to-space) and
6875-7075 MHz (space-to-earth) for non-geostationary MSS feeder links.
Generally, in order to adopt an allocation into the U.S. Table of Frequency
Allocations, the FCC initiates a notice-and-comment rulemaking proceeding. The
FCC has not yet initiated such a proceeding to adopt the WRC '95 MSS feeder link
allocations for the United States. There can be no assurance that the FCC will
initiate and complete such a rulemaking on a timely basis, or that the U.S.
allocation would be identical to the international allocation. Although
Globalstar has requested a waiver of the U.S. Table to expedite the FCC's
assignment of its feeder links, there can be no assurance that an unconditional
assignment would be made before the conclusion of such a rulemaking proceeding.
There can also be no assurance that third parties would not object to the
allocation and/or the proposed feeder link assignment to Globalstar. In April
1996, the FCC initiated a notice-and-comment rulemaking to adopt rules which
would make available 350 MHz in the 5 GHz band, including 5150-5250 MHz, for use
by unlicensed devices for wireless high speed data services. In 1995, LQP
opposed the petitions for rulemaking which sought promulgation of such rules on
the grounds that the proposals were inconsistent with the U.S. recommendations
for the 5000-5250 MHz band at WRC '95 and that the petitioners had not
demonstrated the feasibility of sharing with MSS feeder links or the need for
the bandwidth requested. In its rulemaking notice, the FCC has proposed rules
which are designed to ensure that these devices do not cause harmful
interference into licensed services using these bands, such as MSS feeder links.
However, there can be no assurance that adoption of the rules proposed by the
FCC, as they may be modified during the rulemaking process, would not have an
adverse effect on the timing or the adoption in the United States of the WRC '95
allocation for MSS feeder links or on the usefulness of these bands for MSS
feeder links.
The 5000-5250 MHz band, which includes Globalstar's proposed feeder
uplinks, is allocated on an international basis and in the United States for
ARNS. Use of the 5 GHz band for MSS feeder links may be subject to stringent
interference protection criteria and coordination requirements with ARNS
systems. The 6875-7075 MHz band is allocated on a co-primary basis in the United
States to Fixed-Satellite Service uplinks and to terrestrial fixed and mobile
microwave systems, with which Globalstar may also be required to coordinate.
Such coordination requirements may adversely affect the usefulness of these
bands for MSS feeder links. Although both Motorola and TRW have requested feeder
links in the 20/30 GHz band, other U.S. Big LEO systems have requested feeder
links in the same bands as Globalstar. If such systems are licensed and are
assigned feeder links in the same bands as Globalstar, Globalstar would be
required to coordinate its use of the feeder links with such systems. Such
inter-system coordination may adversely affect the usefulness of these bands for
Globalstar feeder links.
In May 1996, the FCC initiated a notice-and-comment rulemaking to adopt
rules governing procedures to authorize service in the United States by
satellite systems licensed by foreign countries. If a foreign satellite system
was authorized to operate in the United States on the frequencies assigned as
Globalstar user links or feeder links, additional coordination obligations may
be imposed upon the Globalstar System.
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In its order adopting rules and policies for MSS above 1 GHz (the "Order"),
the FCC stated that an MSS above 1 GHz license would impose implementation
milestones on licensed systems. If these milestones are not met, the FCC has
stated that the license would be deemed null and void. Globalstar's current
estimated implementation schedule falls within the milestones adopted by the
FCC. However, the milestone schedule does not become effective until Globalstar
is granted an unconditional authorization which includes feeder link
frequencies. Delays in construction, launch or commencing operations of the
Globalstar System could result in loss of the FCC License. The FCC License will
be effective for 10 years from the date on which the licensee certifies to the
FCC that its initial satellite has been successfully placed into orbit and that
the operations of that satellite conform to the terms and conditions of its MSS
license. While a licensee may apply to replace its MSS license to continue
operations beyond the initial 10-year license term, there can be no assurance
that, if applied for, such a replacement license would be granted.
The rules and policies adopted for MSS above 1 GHz in the Order have been
challenged in a judicial appeal and were the subject of petitions for
reconsiderations at the FCC. On February 15, 1996, the FCC released an order
resolving petitions for reconsideration of the Order. Three petitions seeking
further reconsideration or clarification of this order have been filed. Judicial
appeals regarding the FCC's decisions on the petitions for reconsideration may
also be filed. In the event that the FCC were to be judicially required to
reconsider its licensing procedures as a result of the pending judicial appeal,
or an appeal of the orders on reconsideration, there is a risk that the FCC
would reprocess the MSS applicants and adopt a different licensing procedure.
Under these circumstances, there can be no assurance that the FCC would not use
an auction procedure to award licenses. If the FCC were to use an auction
procedure, there can be no assurance that L/Q Licensee would be willing or able
to outbid other applicants to obtain a license for the spectrum needed to
operate the Globalstar System. In addition, even if L/Q Licensee were successful
in obtaining an MSS license in the spectrum auction, the increased cost and
expenses incurred in bidding for the license would adversely affect Globalstar.
Applicable statutes and regulations permit a judicial appeal of the grant
of the FCC License in order to seek reversal of the FCC's decision to grant the
license. Petitions for reconsideration and an application for review of the
grant of the FCC License to Globalstar were filed and remain pending. A judicial
appeal of the order resolving these petitions and application is possible. There
can be no assurance that such appeals will not be filed, or, if filed, that such
appeals will not be granted. Furthermore, there can be no assurance that if such
appeals are filed, the court will take timely action. If such an appeal were
successful, there can be no assurance that on remand the FCC would not decide to
deny L/Q Licensee's application, or that on remand the FCC would take action on
L/Q Licensee's application in a timely manner.
UNITED STATES INTERNATIONAL TRAFFIC IN ARMS REGULATIONS
The United States International Traffic in Arms Regulations under the
United States Arms Export Control Act authorize the President of the United
States to control the export and import of articles and services that can be
used in the production of arms. Among other things, these regulations limit the
ability to export certain articles and related technical data to certain
nations. The scope of these regulations is very broad and extends to certain
spacecraft, including certain satellites. Certain information involved in the
performance of Globalstar's operations will fall within the scope of these
regulations. As a result, Globalstar may not be able to make such information
available to some investors or may have to restrict access to that information.
EXPORT REGULATION
From time to time, Globalstar requires import licenses and general
destination export licenses to receive and deliver components of the Globalstar
System.
The United States Department of Commerce has imposed restrictions on
certain transfer of technology, including rocket technology, to China and
certain republics of the former Soviet Union. Because Globalstar's launch
strategy contemplates using Chinese and Ukrainian launch providers with launch
sites located in China and Kazakhstan, special export licenses are required to
be obtained by SS/L in connection with these launches.
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While Globalstar and SS/L have received informal confirmations from various
governmental officials that all necessary permits should be forthcoming, and
Globalstar has no reason to believe such permits will not be obtained, there can
be no assurance that such export licenses will be granted, or, once granted,
that the United States will not impose additional restrictions or trade
sanctions against China or republics of the former Soviet Union in the future
that would adversely affect the planned launches of the Globalstar satellite
constellation.
The Export Administration Act and the regulations thereunder control the
export and re-export of United States-origin technology and commodities capable
of both civilian and military applications (so-called "dual use" items). These
regulations may prohibit or limit export and re-export of certain
telecommunications equipment and related technology which are not affected by
the International Traffic in Arms Regulations by requiring a license from the
Department of Commerce before controlled items may be exported or re-exported to
certain destinations. Although these regulations should not affect Globalstar's
ability to deploy the satellite constellation, the export or re-export of
Globalstar Phones, as well as gateways and related equipment and technical data,
may be subject to these regulations, if such equipment is manufactured in the
United States and then exported or re-exported. These regulations may also
affect the export, from one country outside the United States to another, of
United States-origin technical data or the direct products of such technical
data. As a result, Globalstar may not be able to ensure the unrestricted
availability of such equipment or technical data to certain customers and
suppliers. The Company does not believe that these regulations will have a
material adverse effect on Globalstar's operations.
PRINCIPAL PARTNERS OF GLOBALSTAR
The following table sets forth, as of May 31, 1996, certain information
regarding the beneficial ownership of ordinary partnership interests in
Globalstar. Globalstar has been involved in ongoing discussions with certain
potential strategic partners and other strategic investors regarding
transactions involving, among other things, possible investments in Globalstar
Ordinary Partnership Interests.
GLOBALSTAR, L.P.(1)
<TABLE>
<CAPTION>
INTEREST PARTNERSHIP INTERESTS PERCENTAGE
-------------------------------------------------------- --------------------- ----------
<S> <C> <C>
Loral SpaceCom(2)....................................... 17,412,783 35.8%
Public Stockholders of GTL(3)........................... 11,517,907 22.9
Qualcomm................................................ 3,726,000 7.9
Vodafone................................................ 3,540,000 7.5
AirTouch................................................ 3,000,000 6.4
Finmeccanica............................................ 2,800,000 6.0
Hyundai(4).............................................. 2,400,000 5.1
Alcatel(5).............................................. 2,190,000 4.7
DASA(6)................................................. 1,720,000 3.7
France Telecom(7)....................................... 1,530,000 3.2
SS/L(8)................................................. 1,332,540 2.8
Dacom(9)................................................ 600,000 1.3
</TABLE>
- ---------------
(1) Includes impact of the conversion of the Securities and Preferred
Partnership Interests issuable in connection therewith and excludes the
issuance of the GTL Guarantee Warrants and the Additional Warrants, as such
warrants are not exercisable within 60 days. Beneficial ownership of
partnership interests has been calculated pursuant to Regulation 13d-3
under the Securities Exchange Act of 1934, as amended, which provides that:
"Any securities not outstanding which are subject to such options,
warrants, rights or conversion privileges shall be deemed to be outstanding
for the purpose of computing the percentage of outstanding securities of
the class owned by such person but shall not be deemed to be outstanding
for the purpose of computing the percentage of the class by any other
person."
(2) Of the amount held by Loral SpaceCom (i) 2,000,000 partnership interests
represent Loral SpaceCom's allocable share of the 3,000,000 partnership
interests held by Loral/DASA Globalstar, L.P., a joint venture between
Loral SpaceCom and DASA which is 66.7% owned by Loral SpaceCom and 33.3%
owned by DASA, (ii) 647,460 partnership interests represent Loral
SpaceCom's indirect interest in 1,980,000 partnership interests held by
SS/L, (iii) 1,674,400 partnership interests represent Loral SpaceCom's
holdings of Common Stock of the Company, without giving effect to the grant
by Loral SpaceCom to certain of its executive
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<PAGE> 37
officers and directors of options to acquire an aggregate of 340,000 shares
of Common Stock (none of such options have yet been exercised) and (iv)
1,576,923 partnership interests represent the conversion of the Securities
and Preferred Partnership Interests.
(3) Includes 3,192,307 partnership interests which represent the conversion of
the Securities and Preferred Partnership Interests. Does not include
partnership interests attributed to Loral SpaceCom described in note
(2)(iii) and (iv) above.
(4) Represents Hyundai's allocable share of the 3,000,000 partnership interests
held by Hyundai/Dacom, a joint venture which is 80% owned by Hyundai and
20% owned by Dacom.
(5) Of the amount held by Alcatel, 1,470,000 partnership interests represent
Alcatel's allocable share of the 3,000,000 partnership interests held by
TESAM, which is 51% owned by France Telecom and 49% owned by Alcatel.
(6) Of the amount held by DASA, 1,000,000 partnership interests represent
DASA's allocable share of the 3,000,000 partnership interests held by
Loral/DASA Globalstar, L.P.
(7) Represents France Telecom's allocable share of the 3,000,000 partnership
interests held by TESAM.
(8) Excludes 647,460 partnership interests attributable to Loral's 32.7%
interest in SS/L.
(9) Represents Dacom's allocable share of the 3,000,000 partnership interests
held by Hyundai/Dacom.
GOVERNANCE OF GLOBALSTAR
The following discussion summarizes certain provisions of the Globalstar
partnership agreement. This summary is qualified in its entirety by reference to
the Globalstar partnership agreement, a copy of which has been filed as an
exhibit to the Company's Annual Report on Form 10-K for the year ended December
31, 1995 which is incorporated by reference into this Prospectus.
GENERAL PARTNERS' COMMITTEE
Globalstar has two general partners, LQSS and GTL. LQSS is the managing
general partner of Globalstar. Globalstar is governed by the Globalstar General
Partners' Committee (the "Committee" or the "General Partners' Committee"),
consisting of four members who are appointed by LQSS and two members not
affiliated with the Company. The day-to-day activities of Globalstar are managed
by its officers, subject to the supervision of the Committee. However, LQSS has
agreed that certain material partnership decisions will not be put to a vote of
the partners as described below without the consent of at least one of the
Independent Representatives on the Committee. See "-- Certain Actions." In
addition, personnel decisions involving Globalstar officers of the rank of
senior vice president or above cannot be made without the approval of at least
one of the Independent Representatives, provided that LQSS retains the right to
appoint provisional candidates and, under certain circumstances, may override
the veto of the Independent Representatives. GTL directors not affiliated with
Loral SpaceCom, including the Independent Representatives, will determine the
vote of Ordinary Partnership Interests held by GTL in votes submitted to the
partners in Globalstar as to the approval or disapproval of the financial terms
and conditions of material transactions between Globalstar and the Loral
SpaceCom or any of its affiliates (or which are deemed to be transactions in
which the Loral SpaceCom is an interested party pursuant to the Globalstar
partnership agreement). In addition, Globalstar has agreed with GTL that for so
long as GTL remains a general partner of Globalstar, Globalstar will not issue
more than 5,000,000 additional partnership interests without either the consent
of at least one of GTL's Independent Representatives or the vote of a majority
in interest of the Globalstar partners. The Independent Representatives will
determine the vote of Globalstar partnership interests held by GTL with respect
to any such vote submitted to the partners. Loral SpaceCom through its majority
representation on the Board of Directors of GTL controls GTL's votes in all
other matters.
Matters relating to the FCC License for the Globalstar System, including
compliance and other regulatory matters related thereto, will be under the
exclusive control of L/Q Licensee. L/Q Licensee has agreed to use such license
exclusively for the benefit of Globalstar.
Actions by the Committee may be taken only with the concurrence of a
majority of the members whether present in person at a meeting or by written
consent. Written notice of all proposed Committee action will be given to all
members prior to the taking of any such action, unless notice has been waived by
any such member. The Committee may delegate any or all of its powers to officers
of Globalstar except for transactions involving amounts in excess of $100,000
other than transactions taken in the ordinary course of business or actions
taken to implement any business plan previously approved by the Committee.
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CERTAIN ACTIONS
The Committee will not take any action that would result in Globalstar
being engaged in a business other than the development and operation of the
Globalstar System without the prior written consent of all the partners of
Globalstar. Certain decisions by the Committee not to construct and launch
satellites in addition to the satellites for the 48-satellite constellation and
the eight spare satellites will be subject to the approval by a majority in
interest of the partners if such construction and launch could be made without
additional contributions from the partners and satisfy certain thresholds
relating to rates of return on investment. In addition, Globalstar will not,
absent the consent of the affected partner, enter into any agreements with any
persons that would conflict with or prejudice in any material respects the
rights of such partner under either the Globalstar partnership agreement or any
agreement entered into between such partner or its affiliate and Globalstar. The
Committee may also not undertake the following actions unless it shall have
first received the consent of a majority of votes cast at a meeting at which
only those Globalstar partners without a financial interest, whether direct or
indirect, in such transaction would be qualified to vote, where each Ordinary
Partnership Interest would equal one vote and a majority of the qualified
Ordinary Partnership Interests outstanding would constitute a quorum ("Consent
of the Disinterested Partners"):
(i) Enter into any agreements involving amounts in excess of
$1,000,000 with any partner, any strategic partner (including any direct or
indirect corporate parent of any such partner or strategic partner), any
Alliance Partner or any of their respective affiliates;
(ii) Enter into loans by a general partner or its affiliate to
Globalstar; and
(iii) Consent to a limited partner acquiring more than 20% of
Globalstar's outstanding partnership interests.
The following actions may not be undertaken by the Committee unless it
shall have first received the consent described below and, in the case of the
items described in clauses (i) through (iv), will not be put to a vote of the
partners without the consent of at least one of the Independent Representatives:
(i) Make any material amendments to the Globalstar partnership
agreement or adopt any business plan that would materially change
Globalstar's business purpose;
(ii) Acquire either a controlling interest in, or a majority of the
voting stock or equity of, any corporation or other entity, or assets not
in the ordinary course of business, in either case if the aggregate fair
market value is greater than $10 million;
(iii) Sell, lease, exchange or dispose of Globalstar's material assets
(other than to an entity controlled by Globalstar);
(iv) Cause or permit the dissolution and/or liquidation of Globalstar
or file bankruptcy proceedings or consent to such filing;
(v) Adopt any increase in capital expenditures or operating expenses
of more than 10% of the amount set forth in Globalstar's business plan
dated March 1994 (or any revised business plan as approved by a majority in
interest of the partners) and any subsequent increases in such expenditures
or expenses (except as required to account for increases in the Consumer
Price Index);
(vi) Commence any litigation or arbitration, or settle any pending or
threatened litigation, by or against Globalstar, if the damages sought are
in excess of $100,000 or if such litigation or arbitration is against, or
names as an adverse party, a partner;
(vii) Adopt any modification to the specification of the Globalstar
System that would change any major parameter by more than 10% or otherwise
result in a material adverse effect on any service provider;
(viii) Enter into any material business outside the scope of the
partnership agreement;
(ix) Undertake material commitments with respect to Globalstar's
launch strategy, provided that Globalstar may nevertheless undertake
material commitments with respect to its launch strategy absent
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<PAGE> 39
such consent if Globalstar undertakes a detailed review of such strategy
and submits a written report of its analysis to the partners;
(x) Appoint a successor to the office of President of Globalstar;
(xi) Issue any equity interests other than partnership interests or
issue or reserve for issuance more than 8,198,837 additional partnership
interests plus the partnership interests issuable in connection with the
Original Offering and the GTL Guarantee Warrants and the Additional
Warrants; and
(xii) Incur any indebtedness, including certain sale and leaseback
transactions, if immediately after the incurrence thereof Globalstar's
outstanding indebtedness would exceed 110% of the maximum amount of debt
obligations contemplated by the then-current Globalstar business plan. See
"Risk Factors -- Risks Relating to Securities -- Effect on Common Stock of
Globalstar Liquidation."
In order to take the actions described above, Globalstar must receive the
consent of a majority of votes cast at a meeting of Globalstar partners where
each Ordinary Partnership Interest would equal one vote and a majority of the
Ordinary Partnership Interests outstanding would constitute a quorum for the
meeting provided that there has been no veto by partners casting 9,000,000 or
more qualifying votes. All Ordinary Partnership Interests held on behalf of a
partner may cast one qualifying vote, provided that no more than 6,000,000
qualifying votes may be cast on behalf of any single partner regardless of the
total number of Ordinary Partnership Interests held, and, provided further, that
no more than 3,000,000 qualifying votes may be cast on behalf of GTL in respect
of Ordinary Partnership Interests acquired using the proceeds from GTL's initial
public offering or pursuant to the exercise of a partner's Exchange Right
("Consent of the Partners"). For purposes solely of determining the number of
qualifying votes LQSS or a limited partner may cast against an action as
described above, a partner will be deemed to continue to own the number of
Ordinary Partnership Interests equal to the shares of Common Stock acquired by
such partner pursuant to the Exchange Rights and which have not been disposed
of.
Except as otherwise described above, each partner has the right to cast one
vote for each Ordinary Partnership Interest held by such partner with respect to
the matters set forth above and for which it is qualified to vote. GTL, together
with the limited partners not affiliated with Loral SpaceCom, hold more than 50%
of Globalstar's outstanding Ordinary Partnership Interests. LQSS will cast its
vote with respect to the above matters in accordance with the instructions of
its partners, weighted to reflect the amount of partnership interests held by
such partners in LQSS. LQSS will cast against any proposal the number of votes
equal to the amount of Ordinary Partnership Interests held by it in Globalstar
multiplied by the total percentage interests in LQSS held by all of its partners
who oppose the proposal. The number of votes equal in amount to the remainder of
LQSS's Ordinary Partnership Interests in Globalstar will be cast in favor of any
such proposal.
The Preferred Partnership Interests have no voting rights, other than as
may be required by law.
Each partner has agreed not to acquire any direct or indirect interest in
any MSS applicant other than Globalstar until after the third anniversary of the
In-Service Date, although each reserves the right, on behalf of itself and its
affiliates, to conduct other business activities. Under certain circumstances,
this restriction may not apply.
COUNCIL OF SERVICE OPERATORS
Globalstar has established a Council of Service Operators (the "Council of
Service Operators" or "CSO"), made up initially of the chief executive officer
of Globalstar, two representatives appointed by the Committee, two
representatives appointed by each of the limited partners (other than
Finmeccanica) who have committed to act, whether directly or indirectly, as
service providers of Globalstar service and one representative appointed by
Finmeccanica. Thereafter, the Committee may nominate three representatives of
service providers not otherwise represented on the CSO, subject to approval by a
majority of the members of the CSO. In addition, any new service provider who
has irrevocably committed to make a capital commitment of $37.5 million to
Globalstar will also be allowed to designate two representatives to the CSO. The
role of the CSO is to give advice to the Committee regarding the practical
implementation of the Globalstar System, thereby allowing the service providers
a voice in the design and operation of Globalstar. Globalstar believes
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<PAGE> 40
that this arrangement benefits both Globalstar and the service providers.
Globalstar will benefit from the service providers' expertise and practical
on-the-ground knowledge while at the same time giving the service providers an
active role in the design and coordination of the system that they will
ultimately be using. The CSO will make recommendations to the Committee on
matters such as tariffs, system architecture for the Globalstar System, capacity
allocation among Globalstar service providers and administration of the Qualcomm
agreement and the SS/L agreement. The Committee has agreed to consider in good
faith any recommendations made by the CSO. In certain cases where the interests
of the service providers and Globalstar are not adverse to each other, as
determined by the Committee, or where the Company or its affiliate is the
service provider in question, as made by those members who are not affiliated
with the Company, the recommendations made by the CSO will be binding on
Globalstar.
INDEMNIFICATION AND FIDUCIARY STANDARDS
Globalstar has agreed to indemnify its partners, the partners in LQSS and
LQP, their respective affiliates and all of their respective officers,
directors, partners, controlling shareholders, employees, and agents (each an
"Indemnitee") from and against any and all losses and liabilities arising out of
or incidental to the business of Globalstar so long as such Indemnitee's conduct
did not constitute actual fraud, gross negligence, knowing breach of specific
provisions of the Globalstar partnership agreement or willful or wanton
misconduct. The Globalstar partnership agreement further provides that LQSS,
GTL, the partners in LQSS and LQP, their respective affiliates and all of their
respective officers, directors, partners, controlling shareholders, employees
and agents (each a "General Partner Person") will not be liable to Globalstar or
the limited partners for any losses sustained or liabilities incurred as a
result of any act or omission of a General Partner Person, if such person or
entity acted in good faith and in a manner it or he reasonably believed to be
in, or not opposed to, the best interest of Globalstar and the conduct did not
constitute gross negligence or non-performance. LQSS and GTL, as applicable,
will indemnify the limited partners for losses and liabilities resulting from
conduct of their respective General Partner Person that is found to have
constituted bad faith, gross negligence or non-performance.
PREFERRED PARTNERSHIP INTERESTS
The Company will purchase at a purchase price equal to the net proceeds of
the offering, 4,769,230 Preferred Partnership Interests. The Preferred
Partnership Interests have generally similar terms and conditions to the
Securities, except that they are not subject to any registration rights, will be
subordinate, not just to the debt obligations of Globalstar, but to all existing
and future liabilities of Globalstar, and cash distributions thereon will be
limited to the amount of the partnership capital accounts that are maintained
for such interests and that reflect a preferred allocation of Globalstar profit
to such accounts. Preferred distributions equal to the aggregate amount of
interest payable by the Company in respect of the Securities are payable, if as
and when declared by the Globalstar General Partners' Committee, to the Company
by Globalstar in respect of the Preferred Partnership Interests, which
declaration shall be made no later than 20 business days before each Interest
Payment Date. All payments due on the Preferred Partnership Interests, may be
made (i) in cash, (ii) by delivery of Ordinary Partnership Interests to the
Company or (iii) any combination of the foregoing. The partnership agreement
provides that upon any optional conversion of Securities into Common Stock, the
Company will convert a proportionate amount of Preferred Partnership Interests
into Ordinary Partnership Interests. The Preferred Partnership Interests held by
the Company have redemption provisions substantially similar to the Provisional
Redemption, Optional Redemption and Mandatory Redemption provisions described
under "Description of the Securities."
ALLOCATIONS AND DISTRIBUTIONS
Allocations. Adjusted income will be allocated first to the Preferred
Partnership Interests (after the Managing Partner's Allocation and any
allocation necessary to bring all partners' capital accounts up to zero) to
bring their capital account to an amount equal to the principal amount of the
Securities and unpaid distributions on the Preferred Partnership Interests.
Adjusted income for this purpose is computed by adding amortization and
depreciation expenses to profits and will include increases in the fair market
value of
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<PAGE> 41
Globalstar's assets that will be recognized as income when partnership interests
are issued or redeemed. The preferred allocation will be increased by the amount
of the U.S. regular and branch profits taxes that are imposed at a rate of
approximately 60% on the Company's U.S. source income. Losses will be allocated
to the Ordinary Partnership Interests until the capital accounts for such
interests have been reduced to zero. Thereafter losses will be allocated to the
Preferred Partnership Interests until their capital accounts have been reduced
to zero and then to the general partners. The Company expects that U.S. source
income will be a minor portion of its total profit allocation.
Distributions. Globalstar intends to distribute to its partners, including
the Company, its net cash received from operations, less amounts required to
repay outstanding indebtedness, satisfy other liabilities and fund capital
expenditures and contingencies. Distributions after the distribution of the
Managing Partner's Allocation and the Preferred Partnership Interests will
generally be made in accordance with the partners' percentage interests in
Globalstar. Distributions on liquidation will be made in accordance with capital
account balances.
Dependence on Globalstar Capital Accounts.
The amount of cash that Globalstar can pay to the Company in redemption of
its Preferred Partnership Interests will be limited to the balance in the
capital account maintained by Globalstar with respect to such Preferred
Partnership Interests. Such capital account balance initially will equal the net
proceeds of the Original Offering (approximately $300 million); subsequently,
such capital account balance will be increased by the amount of adjusted income
allocated to, and decreased by the amount of losses allocated and cash
distributed to, the Company with respect to such Preferred Partnership
Interests. Adjusted income for this purpose is computed by adding amortization
and depreciation expense to profits and will include increases in the fair
market value of Globalstar's assets that would be recognized as income when
partnership interests are issued or redeemed. Losses would be allocated to the
Preferred Partnership Interests only after losses have first been allocated to
reduce the capital accounts for all Ordinary Partnership Interests to zero. To
the extent the aggregate cash distributions made by Globalstar to the Company
with respect to the Preferred Partnership Interests plus the Offering expenses
plus the amount of losses allocated to such interests exceed the aggregate
amount of adjusted income allocated to the Company with respect to the Preferred
Partnership Interests, the balance in the capital account will be less than the
full amount of the redemption price for the Preferred Partnership Interests at
the Mandatory Redemption Date. In such case, Globalstar will pay the excess of
the redemption price over the balance in the capital account by issuing
additional Ordinary Partnership Interests to the Company.
Based upon the current trading value of the Company, the Company expects
that the capital accounts for the Ordinary Partnership Interests, after giving
effect to the Offering, would be in excess of $2 billion and the capital
accounts for the Preferred Partnership Interests would be eroded by losses only
if future losses exceeded such amount.
In computing capital accounts, Globalstar's profits and losses are computed
in accordance with the principles of the United States Treasury Regulations
governing the valid allocation of taxable income and loss for U.S. tax purposes.
The Treasury Regulations differ from generally accepted accounting principles in
several ways, including permitting increases (or decreases) in the book value of
partnership assets to reflect their fair market value upon the issuance or
redemption of a partnership interest. Under the Globalstar partnership agreement
and the Treasury Regulations, increases or decreases in the book value of
Globalstar assets (which should reflect changes in the market value of the
Company's stock and Securities) will be treated as an item of profit or loss to
be allocated to the capital accounts of the Globalstar partners.
To the extent the Company receives some or all of the redemption price of
the Preferred Partnership Interests in Ordinary Partnership Interests, the
Company will pay the redemption price of the Securities, to the extent in excess
of the cash received, by issuing shares of Common Stock to Holders of the
Securities or by selling Common Stock and using the net proceeds therefrom to
make such payment.
Effect on Common Stock of Globalstar Liquidation. In the absence of
sufficient Globalstar adjusted income, under certain circumstances involving a
liquidation of Globalstar (including a disposition of all its
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<PAGE> 42
assets), payments with respect to the Securities could exceed Globalstar's
liquidating distributions with respect to the Preferred Partnership Interests
and would then reduce the payment that otherwise would be made with respect to
the Common Stock. In such event, the amount received by the holders of the
Common Stock would be less than the amount that they would have otherwise
received and would be less than the amount they would have received if they had
owned Ordinary Partnership Interests in Globalstar directly.
DISSOLUTION OF GLOBALSTAR
Globalstar will continue until December 31, 2044, unless sooner dissolved
upon the occurrence of any of the following: (i) the withdrawal of a general
partner, or any other event that results in its ceasing to be a general partner
(i.e., removal, bankruptcy or dissolution) unless at the time LQSS or a
successor to LQSS remains a general partner; (ii) a sale of all or substantially
all of the assets of Globalstar; (iii) the bankruptcy or the dissolution of LQSS
or any successor managing general partner; (iv) upon the Consent of the
Partners; or (v) any other event under Delaware law that would cause its
dissolution. Globalstar will be reconstituted if a majority in interest of the
partners (or remaining partners, in the event of a dissolution resulting from
the withdrawal, bankruptcy or dissolution of LQSS or any successor managing
general partner) vote to form a new partnership and, in the case of a
dissolution resulting from the withdrawal, bankruptcy or dissolution of LQSS or
any successor managing general partner, to appoint a successor managing general
partner.
ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS
Additional Ordinary Partnership Interests may be offered by Globalstar from
time to time as determined by the Committee, but no additional partner will be
admitted without the Consent of the Partners. Such consent to the admittance of
an additional partner, however, will not be unreasonably withheld. Issuances of
partnership interests are, however, subject to preemptive rights by the partners
except for issuances of partnership interests in connection with the execution
of a service provider agreement or in connection with an underwritten public
offering. Any issuance of partnership interests at a price below the price per
partnership interest paid by Globalstar's strategic partners at the March 23,
1994 closing, or resulting in the issuance of more than 8,198,837 additional
partnership interests plus the partnership interest issuable in connection with
the conversion of the Preferred Partnership Interests, the GTL Guarantee
Warrants and the Additional Warrants, will be subject to the Consent of the
Partners. In addition, Globalstar has agreed with GTL that for so long as GTL
remains a general partner of Globalstar, Globalstar will not issue more than
5,000,000 additional partnership interests without either the consent of at
least one of GTL's Independent Representatives or the vote of a majority in
interest of the Globalstar partners. The Independent Representatives will
determine the vote of Ordinary Partnership Interests held by GTL with respect to
any such vote submitted to the partners.
LIMITATIONS OF TRANSFER OF PARTNERSHIP INTERESTS
Transfer by General Partners. Under the Globalstar partnership agreement,
any transfer of partnership interests by a general partner would be subject to
the Consent of the Disinterested Partners. A general partner may transfer any or
all of its partnership interests to an affiliate without requiring the Consent
of the Disinterested Partners. In the case of GTL, however, a transfer may be
made only to a 100%-owned affiliate and is subject to the consent of LQSS. In
addition, any transfer of partnership interests by GTL would be subject to a
right of first offer to the other partners of Globalstar and to Globalstar
itself. Any successor to a general partner must be found by a Consent of the
Disinterested Partners to have the financial, technical and managerial
capabilities to permit it to perform the duties under the Globalstar partnership
agreement. For the three-year period following the Full Constellation Date,
Loral SpaceCom will not withdraw as a general partner or otherwise permit
Globalstar to be managed by any entity other than Loral SpaceCom. Following such
three-year period, Loral SpaceCom will be required to hold, through a general
partner, at least 15% of the total number of Globalstar partnership interests
outstanding, unless it shall have received the Consent of the Disinterested
Partners.
Transfer by the Limited Partners. Transfers of partnership interests by a
Globalstar limited partner made before March 24, 1997 are subject to the consent
of the Committee, which will not be unreasonably
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<PAGE> 43
withheld or delayed. In addition, any transfer of partnership interests by a
limited partner will be subject to a right of first offer to the other partners
of Globalstar and to Globalstar itself. The limited partners may, subject to the
provision set forth below, freely transfer their partnership interests under the
following circumstances: (i) the transfer is made to an affiliate; (ii)
Globalstar is no longer managed, directly or indirectly, by the Company; or
(iii) the Company shall itself have undergone a change of control.
The limitations on transfers described above (other than Loral SpaceCom's
required 15% minimum ownership, described above) will not apply to an exchange
of Ordinary Partnership Interest by a partner electing to exercise its Exchange
Right.
Neither LQSS, GTL nor any limited partner of Globalstar will transfer any
or all of their respective partnership interests in Globalstar if such transfer
will adversely affect Globalstar's tax status.
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<PAGE> 44
DESCRIPTION OF CAPITAL STOCK
The authorized capital of the Company consists of 60,000,000 shares of
Common Stock, par value $1.00 per share. As of May 31, 1996, there were
10,000,000 shares of Common Stock outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the shareholders. The holders of
Common Stock are entitled to receive ratably the dividends, if any, that may be
declared from time to time by the Board of Directors out of funds legally
available for such dividends. The holders of Common Stock are entitled to share
ratably in all assets remaining after payment of liabilities. Holders of Common
Stock have no preemptive rights and no right to convert their Common Stock into
any other securities. There are no redemption or sinking fund provisions
applicable to the Common Stock. All the outstanding shares of Common Stock are,
and the Conversion Shares, when issued and paid for as described herein, will
be, validly issued, fully paid and nonassessable.
BERMUDA LAW
The following discussion is based upon the advice of Appleby, Spurling &
Kempe, Bermuda counsel for the Company.
The Company was incorporated as an exempted company under The Companies Act
1981 of Bermuda (the "Act") and the rights of its shareholders are governed by
Bermuda law and the Company's Memorandum of Association and Bye-Laws. The
following is a summary of certain provisions of Bermuda law and the Company's
organizational documents. This summary is not a comprehensive description of
such laws and documents and is qualified in its entirety by appropriate
reference to Bermuda law and to the organizational documents of the Company.
Dividends. Under Bermuda law, a company may pay such dividends as are
declared from time to time by its board of directors unless there are reasonable
grounds for believing that the company is or would, after the payment, be unable
to pay its liabilities as they become due or that the realizable value of its
assets would thereby be less than the aggregate of its liabilities and issued
share capital and share premium accounts.
Voting Rights. Under Bermuda law, questions brought before a general
meeting of shareholders are decided by a majority vote of shareholders present
at the meeting (or by such majority as the Act or the Bye-Laws of the company
prescribe), each shareholder having one vote, irrespective of the number of
shares held, unless a poll is requested. The Company's Bye-Laws provide that,
subject to the provisions of the Act, any questions proposed for the
consideration of the shareholders will be decided by a simple majority of the
votes cast, with each shareholder present, or person holding proxies for any
shareholder, entitled to one vote. If a poll is requested, each shareholder
present in person or by proxy has one vote for each share held. A poll may only
be requested under the Company's Bye-Laws by (i) the Chairman of the meeting,
(ii) at least three shareholders present in person or by proxy, (iii) any
shareholder or shareholders, present in person or by proxy, holding between them
not less than 10% of the total voting rights of all shareholders having the
right to vote at such meeting or (iv) a shareholder or shareholders present in
person or by proxy holding voting shares in the company on which an aggregate
sum has been paid up equal to not less than 10% of the total sum paid up on all
such voting shares.
Rights in Liquidation. Under Bermuda law, in the event of liquidation,
dissolution or winding up of a company, after satisfaction in full of all claims
of creditors and subject to the preferential rights accorded to any series of
preferred stock, the proceeds of such liquidation, dissolution or winding up are
distributed pro rata among the holders of common stock.
Meetings of Shareholders. Under Bermuda law, a company is required to
convene at least one general shareholders' meeting per calendar year. Bermuda
law provides that a special general meeting may be called by the board of
directors and must be called upon the request of shareholders holding not less
than 10% of such of the paid-up capital of the company carrying the right to
vote. Bermuda law also requires that shareholders be given at least five days'
advance notice of a general meeting but the accidental omission of notice to any
person does not invalidate the proceedings at a meeting. Under the Bye-Laws of
the Company, at
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least ten days' notice of the annual general meeting and of any special general
meeting must be given to each shareholder.
Under Bermuda law, the number of shareholders constituting a quorum at any
general meeting of shareholders is determined by the bye-laws of a company. The
Company's Bye-Laws provide that the presence in person or by proxy of the
holders of more than 50% of the voting capital stock of the Company constitute a
quorum.
Access to Books and Records and Dissemination of Information. Members of
the general public have the right to inspect the public documents of a company
available at the office of the Registrar of Companies in Bermuda. These
documents include the company's Certificate of Incorporation, its Memorandum of
Association (including its objects and powers) and any alteration to the
company's Memorandum of Association. The shareholders have the additional right
to inspect the Bye-Laws of the company, minutes of general meetings and the
company's audited financial statements, which must be presented at the annual
general meeting. The register of shareholders of a company is also open to
inspection by shareholders without charge and to members of the general public
on the payment of a fee. A company is required to maintain its share register in
Bermuda but may, subject to the provisions of the Act, establish a branch
register outside Bermuda. A company is required to keep at its registered office
a register of its directors and officers which is open for inspection for not
less than two hours in each day by members of the public without charge. Bermuda
law does not, however, provide a general right for shareholders to inspect or
obtain copies of any other corporate records.
Election or Removal of Directors. Under Bermuda law and the Company's
Bye-Laws, directors are elected at the annual general meeting or until their
successors are elected or appointed, unless they are earlier removed or resign.
Under Bermuda law and the Bye-Laws of the Company, a director may be
removed at a special general meeting of shareholders specifically called for
that purpose, provided that the director was served with at least 14 days'
notice. The director has a right to be heard at the meeting. Any vacancy created
by the removal of a director at a special general meeting may be filled at such
meeting by the election of another director in his or her place or, in the
absence of any such election, by the Board of Directors.
Amendment of Memorandum of Association and Bye-Laws. Bermuda law provides
that the Memorandum of Association of a company may be amended by a resolution
passed at a general meeting of shareholders of which due notice has been given.
An amendment to the Memorandum of Association other than an amendment which
alters or reduces a company's share capital as provided in the Act also requires
the approval of the Bermuda Minister of Finance, who may grant or withhold
approval at his discretion. The Bye-Laws may be amended by a resolution passed
by a majority of shares cast at a general meeting.
Under Bermuda law, the holders of an aggregate of no less than 20% in par
value of a company's issued share capital have the right to apply to the Bermuda
Court for an annulment of any amendment of the Memorandum of Association adopted
by shareholders at any general meeting, other than an amendment which alters or
reduces a company's share capital as provided in the Act. Where such an
application is made, the amendment becomes effective only to the extent that it
is confirmed by the Bermuda Court. An application for amendment of the
Memorandum of Association must be made within 21 days after the date on which
the resolution altering the company's memorandum is passed and may be made on
behalf of the persons entitled to make the application by one or more of their
number as they may appoint in writing for the purpose. No such application may
be made by persons voting in favour of the amendment.
Appraisal Rights and Shareholder Suits. Under Bermuda law, in the event of
an amalgamation of two Bermuda companies, a shareholder who is not satisfied
that fair value has been paid for his shares may apply to the Bermuda Court to
appraise the fair value of his shares. The amalgamation of a company with
another company requires the amalgamation agreement to be approved by the board
of directors and by a meeting of the holders of shares of the amalgamating
company of which they are directors and of the holders of each class of such
shares. Under Bermuda law, an amalgamation also requires the consent of the
Bermuda Minister of Finance, who may grant or withhold consent at his
discretion.
Class actions and derivative actions are generally not available to
shareholders under Bermuda law. The Bermuda courts, however, would ordinarily be
expected to permit a shareholder to commence an action in the
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<PAGE> 46
name of a company to remedy a wrong done to the company where the act complained
of is alleged to be beyond the corporate power of the company or is illegal or
would result in the violation of the company's Memorandum of Association or
Bye-Laws. Furthermore, consideration would be given by the Court to acts that
are alleged to constitute a fraud against the minority shareholders or, for
instance, where an act requires the approval of a greater percentage of the
company's shareholders than those who actually approved it.
When the affairs of a company are being conducted in a manner oppressive or
prejudicial to the interests of some part of the shareholders, one or more
shareholders may apply to the Bermuda Court for an order regulating the
company's conduct of affairs in the future or ordering the purchase of the
shares by any shareholder, by other shareholders or by the company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for GTL's Common Stock is The Bank of New
York.
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<PAGE> 47
CERTAIN FOREIGN ISSUER CONSIDERATIONS
The following discussion is based on the advice of Appleby, Spurling &
Kempe, Bermuda counsel to the Company.
The Company has been designated as a non-resident for exchange control
purposes by the Bermuda Monetary Authority ("BMA").
There are no limitations on the rights of non-Bermuda owners of the
Company's Common Stock to hold or vote their shares. Because the Company has
been designated as a non-resident for Bermuda exchange control purposes, there
are no restrictions on its ability to transfer funds in and out of Bermuda or to
pay dividends to United States residents who are holders of the Company's Common
Stock, other than in respect of local Bermuda currency.
In the case of an applicant acting in a special capacity (for example, as
an executor or trustee), certificates may, at the request of the applicant,
record the capacity in which the applicant is acting. Notwithstanding the
recording of any such special capacity, the Company is not bound to investigate
or incur any responsibility in respect of the proper administration of any such
estate or trust. The Company will take no notice of any trust applicable to any
of its shares whether or not it had notice of such trust.
Under Bermuda law, the Company is an exempted company (that is, it is
exempted from the provisions of Bermuda law which stipulate that at least 60% of
the equity must be beneficially owned by Bermudians). Consents under The
Exchange Control Act 1972 of Bermuda and the regulations made thereunder have
been obtained for the issue and subsequent transfer of the Conversion Shares to
and among persons not resident in Bermuda for exchange control purposes. Persons
regarded as residents of Bermuda for exchange control purposes require specific
consent under The Exchange Control Act 1972 to purchase such shares of Common
Stock into which the Securities are convertible (the "Conversion Shares"). The
Act permits companies to adopt bye-law provisions relating to the transfer of
shares of its Common Stock. Neither Bermuda law, the Memorandum of Association
nor the Bye-Laws of the Company impose limitations on the right of foreign
nationals or non-residents of Bermuda to hold or vote shares of Common Stock of
the Company. Pursuant to the provisions of Section 28 of the Company Act 1981 of
Bermuda, there is no minimum subscription which must be raised by the issue of
the Securities to provide the funds required to be provided in respect of the
matters set forth in that section.
As an exempted company, the Company is exempt from Bermuda laws which
restrict the percentage of share capital that may be held by non-Bermudians, but
as an exempted company the Company may not participate in certain business
transactions, including: (1) the acquisition or holding of land in Bermuda
(except that required for its business and held by way of lease or tenancy for
terms of not more than 21 years) without the express authorization of the
Bermuda legislature; (2) the taking of mortgages on land in Bermuda to secure an
amount in excess of $50,000 without the consent of the Bermuda Minister of
Finance; (3) the acquisition of securities created or issued by, or any interest
in, any local company or business, other than certain types of Bermuda
government securities or securities of another exempted company, partnership or
other corporation resident in Bermuda but incorporated abroad; or (4) the
carrying on of business of any kind in Bermuda, except in furtherance of the
business of the Company carried on outside Bermuda or under a license granted by
the Bermuda Minister of Finance.
The Bermuda government actively encourages foreign investment in exempted
entities like the Company that are based in Bermuda but do not operate in
competition with local business. In addition to having no restrictions on the
degree of foreign ownership, the Company is subject neither to taxes on its
income or dividends nor to any foreign exchange controls in Bermuda. In
addition, there is no capital gains tax in Bermuda, and profits can be
accumulated by the Company, as required, without limitation.
The consent of the BMA Exchange Control has been obtained for the issue of
the Securities and the Conversion Shares. Approvals or permissions received from
the BMA do not constitute a guarantee by the BMA as to the performance of the
scheme or creditworthiness of the company involved. Furthermore, in giving such
approvals or permissions, the BMA shall not be liable for the performance or
default of the scheme or for the correctness of any opinions or statements
expressed.
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<PAGE> 48
DESCRIPTION OF SECURITIES
GENERAL
The Securities were issued under an Indenture, dated as of March 6, 1996
(the "Indenture"), between the Company and The Bank of New York, as Trustee (the
"Trustee"). Section references in parentheses below are to sections in the
Indenture. The following summarizes the material provisions of the Indenture and
is subject to, and qualified in its entirety by reference to, all the provisions
of the Indenture, including the definition therein of certain terms, a copy of
which has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. Capitalized terms that are used but not otherwise defined
herein have the meanings assigned to them in the Indenture.
The Securities are limited to $310,000,000 aggregate principal amount and
are unsecured obligations of the Company subordinated to all Debt Obligations
(as defined below) of the Company. Although the Securities are not equity
securities under applicable Bermuda law, the Securities are the substantial
equivalent of convertible preferred stock and will be treated as such for U.S.
tax purposes. See "Taxation."
The Company is a holding company, the sole asset of which is its
partnership interests in Globalstar. Consequently, the Securities will be
effectively subordinated to all existing and future indebtedness and other
liabilities and commitments of Globalstar. The Company has no independent means
of generating revenue, and, therefore, the Company is dependent in large part
upon the revenues and cash flow of Globalstar to meet its obligations, including
its obligations under the Securities. The Indenture does not provide the Holders
with any rights to accelerate the payment of the Securities. See "Risk
Factors -- Risks Relating to the Securities."
The specific terms of the Globalstar partnership agreement as it relates
to, and affects, the Securities are summarized below. Such summary is qualified
in its entirety by reference to the Globalstar partnership agreement, a copy of
which has been filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1995 which is incorporated by reference into
this Prospectus. The terms of the Company's Preferred Partnership Interests in
Globalstar are intended generally to match the terms of the Securities, so that
the Company's interest in Globalstar will be generally similar to the interests
that the holders of the Securities (the "Holders") have in the Company. See
"Risk Factors -- Risks Relating to the Securities -- Dependence on Globalstar
Capital Accounts for Cash Distributions to the Company."
The Securities are eligible for trading in the PORTAL market, a
screen-based automated market for trading of securities eligible for resale
under Rule 144A.
INTEREST PAYMENTS
The Securities will bear interest from March 6, 1996 at the rate per annum
of 6 1/2% and will mature on March 1, 2006 (the "Mandatory Redemption Date").
Interest will be computed on the basis of a 360-day year of twelve 30-day months
and will be payable quarterly in arrears on March 1, June 1, September 1 and
December 1 of each year (each an "Interest Payment Date"), commencing on June 1,
1996, to the person in whose name the Security is registered at the close of
business on the day of February 15, May 15, August 15, or November 15, as the
case may be (each a "Regular Record Date"), next preceding such Interest Payment
Date. (Section 3.07).
The Company may elect to defer interest payments on any Interest Payment
Date if Globalstar shall have deferred payment of the scheduled distribution in
respect of the Preferred Partnership Interests corresponding to such interest
payment. Arrearages of deferred but unpaid interest accruals ("Interest
Arrearages") will not themselves bear interest, but so long as any Interest
Arrearage remains outstanding, the Company will be prohibited from paying (i)
dividends on its Common Stock, (ii) dividends on any preferred stock or (iii)
interest on debt ranking pari passu with or junior to the Securities from time
to time outstanding except on a pro rata basis with respect to any such pari
passu debt based on the aggregate principal amount of such debt. Preferred
distributions equal to the aggregate amount of interest payable by the Company
on the Securities will be payable to the Company by Globalstar in respect of the
Preferred Partnership Interests on each Interest Payment Date, if, as and when
declared by the Globalstar General Partners' Committee. The
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<PAGE> 49
Company may not elect to defer any interest payment if Globalstar has paid the
scheduled distribution in respect of Preferred Partnership Interests
corresponding to such interest payment. In the event that the Company fails to
pay the interest due for an aggregate of six quarterly interest payments, the
Holders will have the rights and remedies described herein under "-- Voting
Rights."
OPTIONAL REDEMPTION
Provisional Redemption. The Company may redeem, in whole or in part (the
"Provisional Redemption"), at any time prior to March 2, 1999, at the redemption
price of 103% of the aggregate principal amount of the Securities to be redeemed
plus accrued and unpaid interest, if any, to the date of redemption (the
"Optional Redemption Date"), in the event that the Current Market Value (as
defined below) of the Common Stock equals or exceeds the following Trigger
Percentages of the prevailing Conversion Price (as defined below) then in effect
for at least 20 trading days in any consecutive 30-day trading day period ending
on the trading day prior to the date of mailing of the notice of Provisional
Redemption (the "Notice Date"), if called for Redemption in the 12-month period
ending on March 1 of the following years:
<TABLE>
<CAPTION>
TRIGGER
YEAR PERCENTAGE
- --------- --------------
<S> <C>
1997 170%
1998 160%
1999 150%
</TABLE>
UPON ANY PROVISIONAL REDEMPTION, THE COMPANY WILL MAKE AN ADDITIONAL
PAYMENT (THE "INTEREST MAKE-WHOLE PAYMENT") WITH RESPECT TO THE SECURITIES
CALLED FOR REDEMPTION, INCLUDING THOSE SECURITIES CONVERTED INTO COMMON STOCK
BETWEEN THE NOTICE DATE AND THE PROVISIONAL REDEMPTION DATE, IN AN AMOUNT EQUAL
TO THE PRESENT VALUE OF THE AGGREGATE AMOUNT OF INTEREST PAYMENTS THEREAFTER
PAYABLE ON SUCH SECURITIES FROM THE PROVISIONAL REDEMPTION DATE TO THE THIRD
ANNIVERSARY OF THE ISSUE DATE (THE "INTEREST MAKE-WHOLE PERIOD"). Such present
value shall be calculated using the bond equivalent yield on U.S. Treasury notes
or bills having a term nearest in length to that of the Interest Make-Whole
Period as of the Notice Date.
Subsequent Optional Redemption. Commencing March 2, 1999, the Securities
will be redeemable at any time, in whole or in part, at the election of the
Company (the "Optional Redemption"), at a redemption price equal to the
percentage set forth below of the principal amount to be redeemed plus accrued
and unpaid interest, if any, to the date of redemption (the "Optional Redemption
Date") if redeemed in the 12-month period ending on March 1 of the following
years:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- --------------
<S> <C>
2000 103%
2001 102%
2002 101%
</TABLE>
and thereafter at a redemption price equal to 100% of the principal amount to be
redeemed plus accrued and unpaid interest, if any, to the Optional Date of
Redemption.
MANDATORY REDEMPTION
Each Security (if not earlier redeemed or converted) will be mandatorily
redeemed by the Company on the Mandatory Redemption Date at a redemption price
of 100% of the principal amount per Security plus accrued and unpaid interest,
if any (including all Interest Arrearages), to the Mandatory Redemption Date.
METHOD OF PAYMENTS
Globalstar may make any payments due on the Preferred Partnership Interests
(i) in cash, (ii) by delivery of Ordinary Partnership Interests to the Company
(as described below) or (iii) through any combination of the foregoing.
Likewise, the Company may make any payments due on the Securities, including
redemption payments, interest payments and the Interest Make-Whole Payment, (i)
in cash; (ii) by
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delivery of Common Stock (based upon 90% of the Average Market Value in the case
of interest payments, including the Interest Make-Whole Payment, and 100% of the
Average Market Value in the case of all other payments); or (iii) through any
combination of the foregoing, provided, however, if Globalstar shall have paid
the scheduled distribution or redemption payment on the Preferred Partnership
Interests corresponding to such payment in cash, the Company shall make such
payment in cash. The Company intends to use the same form of consideration as
Globalstar used with respect to the Preferred Partnership Interests, except that
the Company will deliver Common Stock instead of Ordinary Partnership Interests;
however, the Company reserves the right to make a cash payment from the proceeds
of an issuance of Common Stock following a payment by Globalstar through a
delivery of Ordinary Partnership Interests. In the event that Globalstar pays a
scheduled distribution to the Company in cash, the Company shall pay the
corresponding interest payment in cash. The Company also reserves the right to
make interest payments notwithstanding the fact that it shall not have received
a distribution on the Preferred Partnership Interests for the corresponding
Interest Payment Date. See "Risk Factors -- Risks Relating to the
Securities -- Dependence on Globalstar for Payments; Conflicts of Interest" and
"Risk Factors -- Risks Relating to the Securities -- Interest Deferral; Payments
in Common Stock."
If the Company elects to make a cash payment from the proceeds of any
issuance of Common Stock, the valuation of the Ordinary Partnership Interests to
be delivered to the Company underlying the Common Stock to be issued shall be
based upon the price at which such Common Stock is sold, which sale shall occur
no later than the fifth business day prior to the applicable payment date. If
the Company elects to deliver Common Stock to the Holders in lieu of a cash
payment, the valuation of the Ordinary Partnership Interests to be delivered to
the Company underlying such Common Stock shall be based upon the 90% of the
Average Market Value of the Common Stock in the case of interest payments,
including the Interest Make-Whole Payment, and 100% of the Average Market Value
of the Common Stock in the case of all other payments. No fractional shares of
Common Stock will be delivered to the Holders, but the Company shall instead pay
a cash adjustment determined as described under "-- Adjustment for Fractional
Shares." Any portion of a redemption that is declared and not paid through the
delivery of shares of Common Stock will be paid in cash.
Globalstar will be required to deliver to the Company, no later than 20
business days prior to each Interest Payment Date, a notice stating (i) whether
it will pay the applicable preferred distribution and (ii) if so, the form of
consideration in which it will make such distribution. In addition, Globalstar
will deliver to the Company a notice, no later than 20 business days prior to
any Provisional Redemption Date, any Optional Redemption Date and the Mandatory
Redemption Date, stating (i) in the case of a Provisional or Optional
Redemption, that it has initiated such Redemption and (ii) the form of
consideration which it will make on the applicable Redemption Date. The Company
shall (i) in the case of a Provisional or Optional Redemption, notify the
Holders, within one business day of receipt of the notice described above from
Globalstar, of its intention to make such redemption, if such election shall
have been made by the Company, and the date of any such Provisional or Optional
Redemption and (ii) notify Globalstar, at least 12 business days prior to each
Interest Payment Date or any applicable Redemption Date, as the case may be, of
whether it has elected to pay the interest or redemption payment on the
Securities in cash or in Common Stock. The Company shall also deliver notice
described in clause (ii) above to the Holders but only if the form of payment
includes Common Stock.
"Average Market Value" of the Common Stock will mean the arithmetic average
of the Current Market Value of the Common Stock for the ten trading days ending
on the second business day prior to the applicable date of payment.
"Current Market Value" of the Common Stock will mean the average of the
high and low sale prices of the Common Stock as reported on the NNM or any
national securities exchange upon which the Common Stock is then listed, for the
trading day in question.
CONVERSION RIGHTS
The Securities are convertible into Common Stock at the option of the
Holder at any time prior to the Mandatory Redemption Date (unless earlier
redeemed by the Company), initially at the conversion price (the
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"Conversion Price") of $65.00 per share (equivalent to 0.7692 shares of Common
Stock for each $50 principal amount of Securities). The Securities are initially
convertible into an aggregate of 4,769,230 shares of Common Stock, representing
approximately 25% of the Common Stock outstanding on a fully diluted basis, and
an indirect beneficial interest in 4,769,230 Ordinary Partnership Interests upon
conversion, representing approximately 8.4% of the total units of Ordinary
Partnership Interests outstanding after giving effect to the GTL Guarantee
Warrants and the Additional Warrants. Upon a conversion of any Securities, a
corresponding number of the Company's Preferred Partnership Interests in
Globalstar will be converted into Ordinary Partnership Interests.
Securities surrendered for conversion during the period from the close of
business on any Regular Record Date next preceding any Interest Payment Date to
the opening of business on such Interest Payment Date (except Securities called
for redemption on a Redemption Date within such period) must be accompanied by
payment in cash of an amount equal to the interest thereon which the registered
Holder is to receive; provided, that no payment shall be owed or payable to any
converting Holder if the Board of Directors of the Company shall have elected to
defer the interest payment to be made on such Interest Payment Date. No other
adjustment for interest or dividends, including for any Interest Arrearages, is
to be made upon conversion. Fractional shares of Common Stock will not be issued
upon conversion, but in lieu thereof the Company will pay a cash adjustment in
the manner described under "-- Adjustment for Fractional Shares."
The right of conversion attaching to any Security may be exercised by a
Holder by delivering the Security at the specified office of a conversion agent
(as described under "-- Payments, Paying Agents and Conversion Agents" below)
accompanied by a duly signed and completed notice of conversion. The conversion
date shall be the date on which the Security and the duly signed and completed
notice of conversion shall have been so delivered. A Holder delivering a
Security for conversion will not be required to pay any taxes or duties payable
in respect of the issue or delivery of Common Stock on conversion, but will be
required to pay any tax or duty which may be payable in respect of any transfer
involved in the issue or delivery of the Common Stock in a name other than that
of the Holder. Certificates representing shares of Common Stock will not be
issued or delivered unless all taxes and duties, if any, payable by the Holder
have been paid.
The Conversion Price is subject to adjustment (under formulae set forth in
the Indenture) under certain circumstances, including: (i) the issuance of
Common Stock as a dividend or distribution on Common Stock (other than the
issuance of Common Stock in connection with the conversion of Securities); (ii)
the issuance to all holders of Common Stock of rights or warrants entitling them
to subscribe for or purchase Common Stock at a price per share less than the
Current Market Price (other than the Guarantee Warrants and the Additional
Warrants); (iii) certain subdivisions and combinations of Common Stock; (iv) the
issuance as a dividend or distribution to all holders of Common Stock of shares
of capital stock of the Company (other than Common Stock) or evidences of
indebtedness, cash or other assets of the Company (including securities, but
excluding those rights, warrants, dividends and distributions referred to above
and dividends and distributions in connection with the liquidation, dissolution
or winding up of the Company or paid exclusively in cash); (v) dividends or
other distributions consisting exclusively of cash (excluding any cash portion
of distributions referred to in clause (iv)) to all holders of Common Stock to
the extent such distributions, combined with (A) all such all-cash distributions
made within the preceding 12 months in respect of which no adjustment has been
made plus (B) any cash and the fair market value of other consideration payable
in respect of any tender offers by the Company for Common Stock concluded within
the preceding 12 months in respect of which no adjustment has been made, exceeds
10% of the Company's market capitalization (being the product of the then
current market price of the Common Stock times the number of shares of Common
Stock then outstanding) on the record date for such distribution; and (vi) the
purchase of Common Stock pursuant to a tender offer made by the Company to the
extent that the aggregate consideration, together with (X) any cash and the fair
market value of any other consideration payable in any other tender offer
expiring within the 12 months preceding such tender offer in respect of which no
adjustment has been made plus (Y) the aggregate amount of any such all-cash
distributions referred to in clause (v) above to all holders of Common Stock
within the 12 months preceding the expiration of such tender offer in respect of
which no adjustments have been made, exceeds 10% of the Company's market
capitalization on the expiration of such tender offer.
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In the case of certain consolidations or mergers to which the Company is a
party or the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, each Security then outstanding would, without the
consent of any Holders of Securities, become convertible only into the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance or transfer by a holder of the number of
shares of Common Stock into which the Security might have been converted
immediately prior to such consolidation, merger, conveyance or transfer,
assuming such holder of Common Stock failed to exercise his rights of election,
if any, as to the kind or amount of securities, cash and other property
receivable upon the consolidation, merger, conveyance or transfer (provided that
if the kind of amount of securities, cash or other property so receivable is not
the same for each non-electing share, the kind and amount so receivable by each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). The Company may not become a
party to any such consolidation or merger unless the terms thereof are
consistent with the foregoing. (Section 12.06)
RANKING
The Securities will be subordinated and subject, to the extent and in the
manner set forth in the Indenture, to the prior payment in full of all Debt
Obligations of the Company (Section 13.01). "Debt Obligations" will mean the
principal of, premium, if any, interest and other amounts due on any
indebtedness, whether now outstanding or hereafter created, incurred, assumed or
guaranteed by the Company, for money borrowed from others (including obligations
under capitalized leases, purchase money indebtedness or any trade credit),
liabilities incurred in the ordinary course of business, commitment, standby and
other fees due and payable to financial institutions with respect to credit
facilities that may be maintained by the Company or in connection with the
acquisition by the Company of any other business or entity, or in respect of
letters of credit or bid, performance or surety bonds issued for the account or
on the credit of the Company, and, in each case, all renewals, extensions and
refundings thereof, other than (i) any such indebtedness as to which, in the
instrument creating or evidencing the same, it is provided that such
indebtedness is pari passu or junior in right of payment to the Securities and
(ii) the Securities. In addition, the Securities will rank senior to the
Company's preferred stock and Common Stock with respect to the payment of
dividends, payments on redemption and payments of amounts distributable upon
dissolution, liquidation or winding up of the Company. The Indenture does not
limit the amount of indebtedness or other obligations that the Company may
incur. See "Risk Factors -- Risks Related to the Securities -- Subordination of
Securities."
No cash payments of principal of, premium, if any, or interest on, the
Securities may be made and no Securities may be redeemed, retired or purchased
for cash (excepting payment for fractional shares) if the Company is then in
default in the payment of any Debt Obligations or if at the time any other Event
of Default under the terms of any Debt Obligations exists permitting
acceleration thereof. Upon any payment or distribution of assets of the Company
in the event of any insolvency, reorganization, liquidation or similar
proceeding, all Debt Obligations must be repaid in full (including any interest
thereon accruing after the commencement of any proceeding) before the Holders
will be entitled to receive or retain any payment. The Securities may not be
declared due and payable prior to the Mandatory Redemption Date because of the
failure to make interest payments when due or to make payments with respect to
any applicable redemption or under the terms of any Debt Obligations. By reason
of such subordination, in the event of insolvency, creditors of the Company who
are holders of Debt Obligations may recover more, ratably, than Holders.
(Section 13.02)
The priority provisions of the Preferred Partnership Interests are
generally similar to the subordination provisions of the Securities. The
Company's Preferred Partnership Interests will be subordinated to the existing
and future liabilities of Globalstar, and the Preferred Partnership Interests
will rank senior only to the Ordinary Partnership Interests with respect to
payment of distributions. The Preferred Partnership Interests also will be
subordinated to (i) the distribution of the Managing Partner's Allocation which
equals 2.5% of Globalstar's revenues up to $500 million plus 3.5% of revenues in
excess of $500 million, which will be reduced by 50% in any year in which
Globalstar incurs a net loss; (ii) the Guarantee Fee and the notes that may be
issued in lieu of such Guarantee Fee; and (iii) certain distributions made to
partners in respect of taxes levied upon the operations of Globalstar. Because
the Company is a holding company, the sole asset of
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which is its partnership interests in Globalstar, the obligations of the Company
in respect of the Securities will be structurally subordinated to all
obligations of Globalstar, including the Managing Partner's Allocation, the
Guarantee Fee and tax distributions of Globalstar. At March 31, 1996, Globalstar
had approximately $62 million of outstanding indebtedness in the form of accrued
vendor financing. See "Risk Factors -- Risks Relating to the
Securities -- Subordination of Securities."
DENOMINATION, REGISTRATION AND TRANSFER
The certificates representing the Securities have been issued in fully
registered form, without coupons. Except as described in the next paragraph, the
Securities have been deposited with, or on behalf of, The Depository Trust
Company, New York, New York ("DTC"), and registered in the name of Cede & Co.,
as DTC's nominee in the form of a global Securities certificate (the "Global
Certificate") or will remain in the custody of the Trustee pursuant to a FAST
Balance Certificate Agreement between DTC and the Trustee.
Securities originally purchased by or transferred to "accredited investors"
(as defined in Rule 501(a) under the Securities Act) who are not "qualified
institutional buyers" (as defined in Rule 144A under the Securities Act and
referred to as "QIBs") have been issued and registered in certificated form
without coupons (the "Restricted Certificated Securities"). Securities
originally purchased by or transferred to persons outside of the United States
pursuant to sales in accordance with Regulation S have been issued and
registered in certificated form without coupons (the "Certificated Securities")
or in the form of a temporary certificate as described more fully below.
Restricted Certificated Securities are not eligible to be exchanged for an
interest in a global Securities certificate.
Securities originally purchased by persons outside the United States
pursuant to sales in accordance with Regulation S under the Securities Act were
represented upon issuance by a temporary Security certificate (the "Temporary
Certificate") which were not exchangeable for an interest in the Global
Certificate or Certificated Securities until the expiration of the "40-day
restricted period" within the meaning of Rule 903(c)(3) of Regulation S under
the Securities Act. Each Temporary Certificate was registered in the name of,
and held by, a temporary certificate holder until the expiration of such 40-day
period, at which time the Temporary Certificate may have been delivered to the
Trustee in exchange for an interest in a Global Certificate or a Certificated
Security.
Ownership of beneficial interests in a Global Certificate will be limited
to persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a Global
Certificate will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC or its nominee (with respect to
interests of participants) and the records of participants (with respect to
interests of persons other than participants). Qualified institutional buyers
may hold their interests in a Global Certificate directly through DTC if they
are participants in such system, or indirectly through organizations which are
participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Certificate, DTC or such nominee, as the case may be, will be considered
the sole owner or holder of the Securities represented by such Global
Certificate for all purposes under the Indenture and the Securities. No
beneficial owner of an interest in a Global Certificate will be able to transfer
the interest except in accordance with DTC's applicable procedures, in addition
to those provided for under the Indenture or described above.
Payments of the principal of, premium, if any, and interest on, a Global
Certificate will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. Neither the Company, the Trustee nor any Paying Agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in a Global
Certificate or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest on a Global Certificate, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Certificate as shown on the
records of DTC or its nominee. The Company also expects that payments by
participants to owners of beneficial interests in such Global Certificate held
through such participants will be governed by standing instructions and
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customary practices, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules. If a Holder requires physical delivery of a
Certificated Security for any reason, including to sell Securities to persons in
jurisdictions which require such delivery of such Securities or to pledge such
Securities, such Holder must transfer its interest in a Global Certificate in
accordance with the normal procedures of DTC and the procedures set forth in the
Indenture. Once an interest in a Global Certificate is delivered as a
Certificated Security to an Accredited Investor, such Certificated Security may
not be exchanged for an interest in a global Securities certificate.
The Company expects that DTC will take any action permitted to be taken by
a Holder of Securities (including the presentation of Securities for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interests in a Global Certificate is credited and only in
respect of such portion of the aggregate principal amount of the Securities as
to which such participant or participants has or have given such direction.
DTC has advised the Company as follows: 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
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system is available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
Although the Company expects that DTC will agree to the foregoing
procedures in order to facilitate transfers of interests in a Global
Certificate, among participants of DTC, it is under no obligation to perform or
continue to perform such procedures, and such procedures may be discontinued at
any time. Neither the Company nor the Trustee will have any responsibility for
the performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
If DTC is at any time unwilling or unable to continue as depositary for a
Global Certificate and a successor depositary is not appointed by the Company
within 90 days, the Company will issue Certificated Securities in exchange for a
Global Certificate which will bear the legend referred to under "Notice to
Investors" subject to the provisions of such legend.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Securities in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Securities selected for redemption. Also, the Company is not required to
transfer or exchange any Securities for a period of 15 days before a selection
of Securities to be redeemed.
The registered Holder of Securities will be treated as the owner of such
Securities for all purposes.
The transfer of Securities may be registered, and Securities may be
presented in exchange for other Securities of different authorized
denominations, at the office of Trustee or agency maintained by the Company for
such purpose in New York City and any other office or agency maintained by the
Company for such purpose, without service charge (other than the cost of
delivery) and upon payment of any taxes or other governmental charges.
Securities may also be presented for purposes of such exchange (but not
registration) at the offices of the Trustee in London, or such other paying
agents as may be specified in notices to the Holders of Securities in accordance
with "Notices" below. The Company shall not be required, in the event of
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a redemption in part, (i) to register the transfer of Securities for a period of
15 days immediately preceding the date notice is given identifying the serial
numbers of the Securities called for such redemption; or (ii) to register the
transfer of or exchange of, any such Securities, or portion thereof, called for
redemption. (Section 3.05)
PAYMENTS, PAYING AGENTS AND CONVERSION AGENTS
The principal or Redemption Price of and interest, including any Interest
Make-Whole Payment, on the Securities will be payable (whether such payments are
in cash or Common Stock), and the Securities will be convertible and
exchangeable and transfers thereof will be registrable, at the office of the
Trustee or the office or agency of the Company maintained for such purpose in
The City of New York and at any other office or agency maintained by the Company
for such purpose, provided that, at the option of the Company, payment of
interest in cash may be made by check mailed to the address of the person
entitled thereto as it appears in the Security Register. All payments of cash
will be made in United States Dollars.
Payments (whether in cash or Common Stock) of the principal or Redemption
Price of the Securities will be made at the corporate trust office of the
Trustee or agency maintained by the Company for such purpose in New York City or
any office or agency maintained for such purpose. If the payments are made in
cash, such payments shall be made by United States dollar check drawn on, or
wire transfer to a United States dollar account maintained by the Holder with, a
bank located in New York City mailed to the Holder at such Holder's registered
address or (if arrangements satisfactory to the Company are made by the agent of
the Holder) by wire transfer to a dollar account maintained by the Holder with a
bank in New York City. Payment of interest on any Interest Payment Date will be
made to the person in whose name such Securities is registered at the close of
business on the Regular Record Date prior to the relevant Interest Payment Date.
Accrued interest payable on any Securities that are redeemed in cash will be
payable in the manner described above with respect to payments of the Redemption
Price of the Securities, except Securities that are redeemed on a date after the
close of business on the Regular Record Date immediately preceding such Interest
Payment Date and on or before the Interest Payment Date, on which interest will
be paid to the Holder of record on the Interest Record Date. Any Interest
Make-Whole Payment will be paid to the Holder of Record on the date of
conversion or date of redemption, as the case may be.
The Securities may be surrendered for conversion or exchange at the
corporate trust office of the Trustee or agency maintained by the Company for
such purpose in New York City or, at the option of the Holder and subject to
applicable laws and regulations, at the office of any of the conversion agents.
The paying agents and conversion agents may be terminated at any time and
additional or other paying and conversion agents may be appointed, provided that
until the Securities have been delivered for cancellation, or monies and/or
Common Stock sufficient to pay the principal of and interest on the Securities
have been made available for payment and either paid or returned to the Company,
a paying, conversion and transfer agent will be maintained (i) in New York City
for the payment of the principal or Redemption Price of and interest, including
any Interest Make-Whole Payment, on Securities and for the surrender of
Securities for conversion or redemption and (ii) in a European city for the
payment of the principal or Redemption Price of and interest, including any
Interest Make-Whole Payment, on Securities and for the surrender of Securities
for conversion or redemption. Notice of any such termination or appointment and
of any change in the office through which any paying, conversion or transfer
agent will act will be given in accordance with "Notices" below.
All monies paid and all Common Stock delivered by the Company to a paying
agent for the payment of principal or Redemption Price of or interest, including
any Interest Make-Whole Payment, on any Securities that remain unclaimed at the
end of two years after such principal or interest shall have become due and
payable will be repaid or returned, as the case may be, to the Company, and the
Holder of such Securities will thereafter look only to the Company for payment
or delivery thereof.
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VOTING RIGHTS
Except as required by law, the Holders will not be entitled to any voting
rights unless the Company has deferred scheduled interest payments for an
aggregate of six quarterly interest payments (a "Deferral Trigger Event"). In
such case, the number of members of the General Partners' Committee of
Globalstar will be increased by one and the Holders of the Securities, voting
separately as a class with the Holders of any other securities upon which
similar voting rights have been conferred and are exercisable, will be entitled
to elect one representative to such General Partners' Committee (the "CPE
Representative"). In addition, upon a Deferral Trigger Event, Loral SpaceCom has
agreed to use its best efforts to cause the shareholders of the Company to
approve and elect a nominee to the Board of Directors of the Company designated
by the Holders of the Securities (the "CPE Nominee"). If the shareholders shall
fail to approve such CPE Nominee, Loral SpaceCom will seek the resignation of a
Loral SpaceCom designee director from the Board of Directors of the Company and
will use its best efforts to cause the Board of Directors of the Company to
appoint the CPE Nominee to the Board of Directors of the Company until the next
annual meeting of shareholders, at which time such appointment will be submitted
to the shareholders of the Company for their approval; provided, however, that
if such shareholder approval is not obtained, the above-described mechanics
shall continue to be in effect. The CPE Representative and the CPE Nominee, if
appointed to the Board, will promptly resign upon receipt of notice from the
Company that all Interest Arrearages with respect to the Securities have been
paid. See "Risk Factors -- Structural and Market Risks.
REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement among the Company, Globalstar
and the Initial Purchasers ("the Registration Rights Agreement"), the Company
agreed for the benefit of the Holders of the Securities that it would: (i)
within 120 days after the date the Securities were initially issued (the "Issue
Date"), file a shelf registration statement (the "Shelf Registration Statement")
with the Commission with respect to resales of the Securities and the Conversion
Shares; (ii) use its best efforts to cause such Shelf Registration Statement to
be declared effective by the Commission within 180 days after the Issue Date;
and (iii) maintain such Shelf Registration Statement continuously effective
under the Securities Act until the third anniversary of the Issue Date or such
earlier date as of which the Securities shall no longer be restricted securities
pursuant to Rule 144(k) or all the Securities or the Common Stock issuable upon
conversion thereof have been sold pursuant to such Shelf Registration Statement.
THE INTEREST RATE DUE ON THE SECURITIES DOES NOT INCREASE IN THE EVENT THAT
THE COMPANY BREACHES ANY OF ITS OBLIGATIONS UNDER THE REGISTRATION RIGHTS
AGREEMENT.
The Company will provide to each Holder copies of the prospectus, which
will be a part of such Shelf Registration Statement, notify each such Holder
when such Shelf Registration Statement has become effective and take certain
other actions as are required to permit unrestricted resales of the Securities
and the Conversion Shares. A Holder of Offered Securities that sells such
securities pursuant to a Shelf Registration Statement generally will be required
to be named as a selling security holder in the related prospectus and to
deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Rights Agreement that are
applicable to such a Holder (including certain indemnification and contribution
rights and obligations). The Preferred Partnership Interests will not be subject
to any registration rights.
REPORTS
Whether or not required by the rules and regulations of the Commission, so
long as any Securities are outstanding, the Company will file with the
Commission and furnish to the Holders of Securities all quarterly and annual
financial information required to be contained in a filing with the Commission
on Forms 10-Q and 10-K including a "Management's Discussion and Analysis of
Results of Operations and Financial Condition" and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants.
SINKING FUND
There will be no sinking fund established for the retirement of the
Securities.
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MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of two-thirds in principal
amount of the Outstanding Securities; provided, that no such modification or
amendment may, without the consent of the Holder of each Outstanding Security
affected thereby, (i) change the Mandatory Redemption Date of the principal of,
or the due date of any installment of interest on, the Securities, (ii) reduce
the principal amount or Redemption Price of, the rate of interest thereon, or
any Interest Make-Whole Payment payable on, any Securities, (iii) change the
place of payment where, or the coin or currency in which, any Security or any
payment thereon is payable, (iv) impair the right to institute suit for the
enforcement of any such payment when due, (v) adversely affect the conversion
rights of the Holders, (vi) modify the provisions of the Indenture with respect
to the subordination of the Securities in a manner adverse to the Holders, (vii)
adversely affect the right to require the Company to redeem Securities or (viii)
reduce the percentage in principal amount of Securities the consent of whose
Holders is required for modification or amendment of the Indenture or for waiver
of compliance with certain provisions of the Indenture or for waiver of certain
defaults. (Section 9.02)
ADJUSTMENT FOR FRACTIONAL SHARES
No fractional shares of Common Stock will be delivered upon the redemption
or conversion of any Securities. Whether or not a fractional share would be
delivered to a Holder of Securities shall be based upon the total number of
Securities at the time held by such Holder and the total number of shares of
Common Stock otherwise deliverable in respect thereof. In lieu of the issuance
of a fraction of a share of Common Stock, the Company shall pay instead an
amount in cash (rounded to the nearest whole cent) equal to the same fraction of
the closing sales price of a share of Common Stock on the trading day
immediately preceding the redemption or conversion date. (Section 12.03)
CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER
The Indenture provides that the Company shall not consolidate with or merge
into any other corporation or convey or transfer its properties and assets
substantially as an entirety to any person, unless (i) any such successor
assumes the Company's obligations under the Securities and the Indenture, (ii)
after giving effect thereto, no Event of Default shall have occurred and be
continuing and (iii) certain other conditions under the Indenture are met.
(Section 8.01) Upon any such consolidation or merger, or any such conveyance or
transfer of the properties and assets of the Company substantially as an
entirety, the successor corporation formed by such consolidation, or into which
the Company is merged, or to which such conveyance or transfer is made, shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture with the same effect as if such successor
corporation had been named as the Company. The Company as the predecessor
corporation shall be relieved of all obligations and covenants under the
Indenture. (Section 8.02)
NOTICES
Notice to Holders of Securities will be given by mail to the registered
addresses of such Holders. (Section 1.06)
REPLACEMENT OF SECURITIES
Securities that become mutilated, destroyed, stolen or lost will be
replaced by the Company at the expense of the Holder upon delivery to the
Trustee of the Securities or evidence of the loss, theft or destruction thereof
satisfactory to the Company and the Trustee. In the case of a lost, stolen or
destroyed Security, an indemnity satisfactory to the Company and the Trustee may
be required at the expense of the Holder of such Security before a replacement
Security will be issued. (Section 3.06)
GOVERNING LAW
The Indenture will provide that the Securities will be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
(Section 1.12)
THE TRUSTEE
The Bank of New York will be the Trustee under the Indenture.
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<PAGE> 58
TAXATION
This summary of certain tax considerations is based upon current (as of the
date of this Prospectus) laws, treaties, cases, regulations and rulings. It does
not consider all the tax issues that might be relevant to an investor or that
depend upon an investor's particular circumstances.
Prospective investors should consult their own professional advisors about
the tax consequences of an investment in the Company under the laws of the
jurisdictions in which they are subject to taxation.
The discussion of U.S. tax law is based upon the opinion of Willkie Farr &
Gallagher, special U.S. counsel to the Company. The summary of certain Bermuda
tax consequences is based upon the opinion of Appleby, Spurling & Kempe, Bermuda
counsel to the Company.
UNITED STATES TAX CONSIDERATIONS
Taxation of United States Investors in the Company. For U.S. tax purposes
the Securities will be classified as preferred stock and not as debt
obligations. Interest payments will be taxed as dividends. A payment will be
taxable as ordinary dividend income to the extent it is paid out of the
Company's current or accumulated earnings and profits. Payments in excess of
such earnings and profits will be treated as a tax-free return of capital to the
extent of the Holder's tax basis in the Securities. Such payments will reduce
the tax basis at which the Security is held. The Company expects that payments
during at least the first two years will not be covered by earnings and profits
and will constitute a tax-free return of capital. Subject to the discussion
below, and assuming that the holder holds the Security as a capital asset,
payments in excess of the Holder's tax basis will be a capital gain that is
long-term or short-term depending on the holding period for the Security.
Interest paid with Common Stock will be taxed in the same manner as a cash
distribution in an amount equal to the fair market value of such stock. Certain
adjustments to the Conversion Price also would be taxed as if they were cash
distributions, generally equal in amount to the fair market value of the
increased proportionate interest in the Company affected by the adjustment.
Because the Company is a foreign corporation, the dividend payments will
not be eligible for the inter-corporate dividends-received deduction.
Subject to the discussion below on PFICs and assuming the Holder holds the
Security as a capital asset, any gain or loss recognized by a U.S. holder on the
sale or other disposition (other than a redemption by the Company) of a Security
will be capital gain or loss. Such capital gain or loss will be long-term or
short-term depending on the holding period for the Security. A Holder will also
generally recognize capital gain or loss upon a redemption of Securities for
cash.
Notwithstanding the foregoing, on a redemption of Securities, in certain
limited circumstances (primarily those involving Holders whose proportionate
interests in the Company remain the same or increases after the redemption, or
in the case of Holders with significant interests in the Company, whose
interests in the Company are not materially reduced as a result of the
redemption), such Holders may be required to treat any payments received with
respect to such redemption as a dividend (taxable as described above) in whole
or in part, without offset for such holder's basis in the Securities, and may
not be entitled to recognize a loss.
Subject to the discussion below on PFICs, the conversion of Securities into
Common Stock or the receipt of solely Common Stock on a Provisional, Optional or
Mandatory Redemption would not be a taxable event. If both cash and Common Stock
are received in a redemption, the Holder would realize a gain (which under
certain limited circumstances may be taxed as ordinary dividend income) equal to
the amount by which the fair market value of the Common Stock and the cash
received exceeded his tax basis in the Security surrendered. However, the gain
recognized for tax purposes would be the lesser of (x) the gain realized or (y)
the cash received.
Special rules apply to the taxation of a U.S. shareholder in a "passive
foreign investment company" (a "PFIC"). A PFIC is a foreign corporation (i) 75%
or more of whose income is passive or (ii) 50% or more of whose assets produce
or are held to produce passive income. The Company believes that it has not been
a PFIC and will not become one. The Company expects to earn, through Globalstar,
sufficient active income to avoid PFIC status. However, Globalstar may earn
passive income such as interest on working capital and
54
<PAGE> 59
royalties on certain intangibles. Furthermore, the extent and timing of
Globalstar's active business income cannot be predicted with certainty.
If the Company were a PFIC, unless a U.S. holder of Securities in Common
Stock makes the QEF election described below, he would be subject to a
tax-deferral charge on gain on a disposition of and on certain "excess
distributions" received from the Company. Any such gains or excess distributions
would be taxable at ordinary income rates. Under currently proposed, but not yet
adopted, Treasury Regulations, the exchange of the Securities for Common Stock
(either on conversion or on redemption of the Securities) would not be a
"disposition" if the Company was a PFIC for the taxable year in which the
conversion occurred. If the Company had been a PFIC but was no longer, the
exchange would appear to be considered a taxable event.
If a shareholder makes the qualified electing fund ("QEF") election, he
would be required to include in his taxable income his pro rata share of the
Company's ordinary earnings and net capital gain for each taxable year
(regardless of when or whether cash attributable to such income is actually
distributed to such shareholder by the Company). If the shareholder makes a QEF
election, the tax-deferral charge and ordinary income rules described in the
preceding paragraph will not apply. Actual distributions out of amounts so
included in income will not be taxable to the shareholder. A shareholder's tax
basis in its shares of Common Stock will be increased by the amount so included
and decreased by the amount of nontaxable distributions.
The QEF election is effective only if certain required information is made
available by the Company to the U.S. Internal Revenue Service ("IRS"). In the
event the Company is characterized as a PFIC for federal income tax purposes,
the Company will undertake to provide to each U.S. shareholder the information
needed to comply with the IRS information requirements and to determine each
U.S. holder of Securities or Common Stock's pro rata share of the Company's
ordinary earnings and net capital gain.
Taxation of Non-U.S. Investors in the Company. The Company expects that
most of its income will be from sources outside the United States and will not
be effectively connected with a U.S. trade or business. Thus, a non-U.S.
resident alien individual, a non-U.S. corporation, a non-U.S. trust or a
non-U.S. estate will not be subject to U.S. federal taxation on distributions
received from the Company unless those distributions are effectively connected
with the conduct by the investor of a trade or business in the United States. In
addition, such a non-U.S. investor will not be subject to U.S. federal taxation
on gains realized by the investor on a sale or exchange of Securities or Common
Stock unless the sale of such securities is attributable to an office or fixed
place of business maintained by the investor in the United States. The
determination of whether an investor is engaged in the conduct of a trade or
business in the United States or whether the sale of an investor's Securities is
attributable to an office or fixed place of business of the investor in the
United States depends on the facts and circumstances of each investor's case.
Each prospective investor should consult with his own tax advisor to determine
whether his distributions or gains will be subject to U.S. federal taxation.
Taxation of the Company. The Company's tax consequences result from its
status as a partner in Globalstar. As a partnership, Globalstar itself will not
be subject to federal income taxation. Generally, its partners will be taxed as
if they directly expended their share of Globalstar expenditures and directly
realized their share of Globalstar income. The Company expects, based on
Globalstar's description of its proposed activities, that most of the Company's
income will be from sources outside the United States and that such income will
not be effectively connected with the conduct of a trade or business within the
United States ("Foreign Income"). Thus, there generally will be no U.S. taxes on
the Company's share of Globalstar's Foreign Income.
The Company will be subject to U.S. tax at regular U.S. federal, state and
local corporate rates on the Company's share of Globalstar's income which is
effectively connected with the conduct of a trade or business in the United
States ("U.S. Income"), and will be required to file federal, state and local
income tax returns with respect to such U.S. Income. Globalstar is obligated to
provide the information required for the Company to prepare its federal, state
and local income tax returns. Globalstar intends to make cash distributions, to
the extent of available funds, to all partners until the non-U.S. partners, such
as the Company, have been distributed an amount sufficient to enable them to pay
the federal, state and local income taxes on their share of Globalstar's U.S.
Income. The distribution to non-U.S. partners for federal income taxes may be
made by a withholding tax payment made by Globalstar to the U.S. Treasury. The
amount withheld may exceed the
55
<PAGE> 60
amount of the Company's federal income tax liability and the Company would then
be entitled to seek a refund from the U.S. Treasury for the excess amount. In
addition to the regular U.S. taxes, the Company will be subject to a United
States branch profits tax (currently 30%) on actual or deemed withdrawals of its
share of Globalstar's U.S. Income. A portion of each distribution by Globalstar
to the Company will be a taxable withdrawal of U.S. income and, to the extent
that it has cash available, Globalstar is required to make a distribution to the
Company to enable it to pay its regular U.S. tax liability.
BERMUDA TAX CONSIDERATIONS
At the date of this Prospectus, there is no Bermuda income tax, corporation
or profits tax, withholding tax, capital gains tax, capital transfer tax, estate
or stamp duty or inheritance tax payable by the Company or the Holders (other
than Holders ordinarily resident in Bermuda) in respect of their investment in
the Securities.
The Company has obtained from the Minister of Finance under the Exempted
Undertakings Tax Protection Act 1966, as amended, a certificate confirming that,
in the event of there being enacted in Bermuda, any legislation imposing tax
computed on profits or income, or computed on any capital asset, gain or
appreciation or any tax in the nature of estate duty or inheritance tax, such
tax shall not until March 28, 2016 be applicable to the Company or to any of its
operations, or other obligations of the Company except insofar as such tax
applies to persons ordinarily resident in Bermuda and holding such Securities or
other obligations, or to any land in Bermuda leased or let to the Company.
The Company is liable to pay the Bermuda government an annual registration
fee calculated on a sliding scale based upon the assessable capital of the
Company which fee will not exceed BD$25,000.00.
The Company has been classified as non-resident of the Bermuda exchange
control area by the Bermuda Monetary Authority, whose permission for the issue
of the Securities has been sought. The transfer of Securities between persons
regarded as non-resident of Bermuda for exchange control purposes and the issue
and redemption of Securities to and by such persons may be effective without
specific consents under the Exchange Control Act 1972 of Bermuda and Regulations
made thereunder. Transfers involving any person regarded as resident in Bermuda
for exchange control purposes requires specific authorization under that Act.
The Company by virtue of being a non-resident of Bermuda for exchange control
purposes, is free to acquire, hold and sell any foreign currency, securities and
other investments without restrictions.
Purchasers of Securities may be required to pay stamp taxes and other
charges in accordance with the laws and practices of the country of purchase.
Prospective purchasers should consult their tax advisers as to the tax laws of
applicable jurisdictions and the specific tax consequences of acquiring, holding
and disposing of the Securities.
The Securities do not provide for additional payments by the Company
following a change in the tax laws or rules of Bermuda that is adverse to the
Holders.
TAX CONSIDERATIONS IN OTHER JURISDICTIONS
Based upon its review of current tax laws, including applicable
international tax treaties of certain countries that Globalstar believes to be
among its significant potential markets, the Company expects that a significant
portion of its worldwide income will not be subject to tax by the United States,
Bermuda or by the countries from which it derives its income. However, to the
extent that Globalstar bears a higher foreign tax because any holder of Ordinary
Partnership Interests (including the Company) is not subject to United States
tax on its share of Globalstar's foreign income, the additional foreign tax will
be specifically allocated to such partner and will reduce amounts distributed by
Globalstar to such partner with respect to its Ordinary Partnership Interests.
56
<PAGE> 61
SELLING HOLDERS
The Securities were originally issued and sold by the Company in March and
April, 1996, to Lehman Brothers Inc., Bear, Stearns & Co. Inc., Donaldson,
Lufkin & Jenrette Securities Corporation and Unterberg Harris (the "Initial
Purchasers") in a private placement, and were resold by the Initial Purchasers
in transactions exempt from the registration requirements of the Securities Act
in the United States to qualified institutional buyers (as defined in Rule 144A
under the Securities Act), to certain accredited investors (as defined in Rule
501(a) under the Securities Act) and outside the United States to non-U.S.
persons in offshore transactions in reliance on Regulation S under the
Securities Act. The Selling Holders may from time to time offer and sell the
Offered Securities set forth below pursuant to this Prospectus.
The following table sets forth information with respect to the Selling
Holders (as of May 15, 1996) and the respective number of Securities and
Conversion Shares beneficially owned by each Selling Holder. The term Selling
Holders includes the holders listed below and the beneficial owners of the
Offered Securities and their transferees, pledgees, donees or other successors.
With the exception of Loral SpaceCom, other than as a result of the ownership of
the Securities, none of the Selling Holders has, or within the past three years
has had, any position, office or material relationship with the Company or any
of its predecessors or affiliates. The table has been prepared based upon
information furnished to the Company by the Trustee under the Indenture, by DTC
and by or on behalf of the Selling Holders.
<TABLE>
<CAPTION>
OFFERED SECURITIES
-------------------------
PRINCIPAL NUMBER OF
SELLING AMOUNT OF CONVERSION
HOLDERS SECURITIES SHARES
- --------------------------------------------------------------------- ------------ ----------
<S> <C> <C>
Loral SpaceCom(1).................................................... $102,500,000 1,576,923
Hull Capital Corp. .................................................. 50,000,000 769,230
Ardsley Partners..................................................... 33,250,000 511,538
Snyder Capital Management(2)......................................... 13,305,000 204,692
EDS Partners, L.P. .................................................. 12,500,000 192,307
Oaktree Capital Management, LLC...................................... 10,150,000 156,153
Pecks Management Partners LTD........................................ 8,200,000 126,153
John A. Levin & Co., Inc. ........................................... 6,620,000 101,846
Kayne, Anderson Investment(3)........................................ 5,000,000 76,923
Allstate Insurance Co. .............................................. 4,500,000 69,230
Glusken Sheff & Associates........................................... 4,500,000 69,230
Laterman Companies................................................... 4,500,000 69,230
Gruber & McBaine Capital(4).......................................... 3,200,000 49,230
HPB Associates....................................................... 2,500,000 38,461
Warburg, Pincus Counsellors, Inc.(5)................................. 2,000,000 30,768
Libertyview Capital Management....................................... 1,000,000 15,384
Gabelli & Company(6)................................................. 250,000 3,846
Bentley Capital Management, Inc. .................................... 150,000 2,307
</TABLE>
- ---------------
(1) Does not include 1,674,400 shares of Common Stock which are beneficially
owned, but which are not being offered hereby.
(2) Does not include 8,500 shares of Common Stock which are beneficially owned,
but which are not being offered hereby.
(3) Does not include 2,000 shares of Common Stock which are beneficially owned,
but which are not being offered hereby.
(4) Does not include 149,300 shares of Common Stock which are beneficially
owned, but which are not being offered hereby.
(5) Does not include 261,300 shares of Common Stock which are beneficially
owned, but which are not being offered hereby.
(6) Does not include 66,000 shares of Common Stock which are beneficially owned,
but which are not being offered hereby.
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<PAGE> 62
The information concerning the Selling Holders may change from time to
time. If required, such changes will be set forth in Prospectus Supplements. The
per share conversion price and, therefore, the number of shares of Common Stock
issuable upon conversion of the Securities, are subject to adjustment under
certain circumstances. Accordingly, the number of shares of Common Stock
issuable upon conversion of Securities may increase or decrease. Because the
Selling Holders may offer all or some portion of the Securities or Conversion
Shares pursuant to this Prospectus, and because there are currently no
agreements, arrangements or understandings with respect to the sale of
Securities or Conversion Shares, no estimate can be given as to the amount of
Securities or Conversion Shares that will be held by the Selling Holders upon
termination of this offering.
PLAN OF DISTRIBUTION
The Offered Securities offered hereby may be sold from time to time to
purchasers directly by the Selling Holders. Alternatively, the Selling Holders
may from time to time offer the Offered Securities to or through underwriters,
broker-dealers or agents, who may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling Holders or
the purchasers of Offered Securities, for whom they may act as agent. The
Selling Holders and any underwriters, broker-dealers or agents that participate
in the distribution of the Offered Securities may be deemed to be "underwriters"
within the meaning of the Securities Act and any profit on the sale of Offered
Securities by them and any discounts, commissions, concessions or other
compensation received by any such underwriter, broker-dealer or agent may be
deemed to be underwriting discounts and commissions under the Securities Act.
The Offered Securities offered hereby may be sold from time to time in one
or more transactions at fixed prices, at prevailing market prices at the time of
sale, at varying prices determined at the time of sale or at negotiated prices.
Such prices will be determined by the Selling Holders or by agreement between
the Selling Holders and underwriters and dealers who may receive fees or
commissions in connection therewith. The sale of the Offered Securities may be
effected in transactions (which may involve crosses or block transactions) (i)
on any national securities exchange or quotation service on which the Securities
or the Common Stock may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such exchanges
or in the over-the-counter market or (iv) through the writing of options. At the
time a particular offering of Offered Securities is made, a Prospectus
Supplement, if required, will be distributed which will set forth the aggregate
amount and type of Offered Securities being offered and the terms of the
offering, including the name or names of any underwriters, broker-dealers or
agents, any discounts, commissions and other terms constituting compensation
from the Selling Holders and any discounts, commissions or concessions allowed
or reallowed or paid to broker-dealers.
The outstanding Common Stock is listed on the NNM, and the Company has
applied for listing the Conversion Shares on the NNM. There is no assurance as
to the development or liquidity of any trading market that may develop for the
Securities. Certain of the Initial Purchasers have engaged in transactions with
and performed certain investment banking and other services for the Company in
the past and received customary fees in connection therewith, and may do so from
time to time in the future.
To comply with the securities laws of certain jurisdictions, if applicable,
the Offered Securities will be offered or sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in certain
jurisdictions the Offered Securities may not be offered or sold (unless they
have been registered or qualified for sale) in such jurisdictions or an
exemption from registration or qualification is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Securities or the Common Stock may not
simultaneously engage in market-making activities with respect to such
securities for a period of two (with respect to the Conversion Shares) or nine
(with respect to the Securities) business days prior to the commencement of such
distribution. In addition to and without limiting the foregoing, each Selling
Holder and any other person participating in a distribution will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation Rules 10b-6 and 10b-7, which provisions
may limit the timing of purchases and sales of any of the
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<PAGE> 63
Offered Securities by the Selling Holders or any such other person. All of the
foregoing may affect the marketability of the Securities and the Common Stock
and brokers' and dealers' ability to engage in market-making activities with
respect to these securities.
Pursuant to the Registration Rights Agreement, all expenses of the
registration of the Offered Securities will be paid by the Company, including,
without limitation, Commission filing fees and expenses of compliance with state
securities or "blue sky" laws; provided, however, that the Selling Holders will
pay all underwriting discounts, selling commissions and related fees, if any.
The Selling Holders and the Company have agreed to indemnify each other against
certain liabilities, including certain liabilities arising under the Securities
Act, or will be entitled to contribution in connection therewith.
This offering will terminate upon the earlier of (i) March 6, 1999, (ii)
the date that the Securities no longer constitute restricted securities under
Rule 144(k) of the Securities Act, or (iii) the date that all of the Securities
or Conversion Shares covered by the Registration Statement have been sold
pursuant to the Registration Statement.
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<PAGE> 64
LEGAL OPINIONS
Certain United States tax matters described under "Taxation" will be passed
upon for the Company by Willkie Farr & Gallagher, New York, New York, general
counsel to the Company. The validity of the Securities and Conversion Shares
offered hereby will be passed upon for the Company by Appleby, Spurling & Kempe,
Hamilton, Bermuda. As of June 14, 1996, partners and counsel in Willkie Farr &
Gallagher beneficially own 22,400 shares of the Common Stock. Mr. Robert B.
Hodes is of counsel to the law firm of Willkie Farr & Gallagher, and a Director
of the Company and Loral SpaceCom and a member of the Audit, Compensation and
Executive Committees of the Boards of Directors of both the Company and Loral
SpaceCom.
EXPERTS
The financial statements of the Company and Globalstar, L.P. have been
incorporated in this Prospectus by reference from the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of said firm given upon their authority as experts in auditing
and accounting.
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<PAGE> 65
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS, IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER, DEALER OR AGENT. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, THE OFFERED SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO
WHOM, IT WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY OR GLOBALSTAR SINCE THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Summary.............................. 1
Risk Factors......................... 14
Deficiency of Earnings to Cover Fixed
Charges and Preferred Stock
Dividends.......................... 27
Use of Proceeds...................... 27
Dividend Policy...................... 27
Principal Partners of Globalstar..... 28
Governance of Globalstar............. 29
Description of Capital Stock......... 35
Certain Foreign Issuer
Considerations..................... 38
Description of Securities............ 39
Taxation............................. 39
Selling Holders...................... 52
Plan of Distribution................. 53
Legal Opinions....................... 55
Experts.............................. 55
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
GLOBALSTAR
TELECOMMUNICATIONS LIMITED
$310,000,000
6 1/2% CONVERTIBLE
PREFERRED EQUIVALENT
OBLIGATIONS DUE 2006
AND
4,769,230 SHARES
OF COMMON STOCK
-------------------------
PROSPECTUS
JUNE 20, 1996
-------------------------
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 66
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses payable by the
Registrant in connection with this offering, other than underwriting discounts
and commissions. All the amounts shown are estimates, except the SEC
registration fee:
<TABLE>
<S> <C>
SEC registration fee...................................... $106,897
Nasdaq National Market listing fee........................ 17,500
Legal fees and expenses................................... 35,000
Accounting fees and expenses.............................. 5,000
Miscellaneous fees and expenses........................... 10,603
--------
Total................................................ $175,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Bermuda law permits a company to indemnify its directors and officers,
except for any act of willful negligence, willful default, fraud or dishonesty.
The Registrant has provided in its Bye-Laws that its directors and officers will
be indemnified and held harmless against any expenses, judgments, fines,
settlements and other amounts incurred by reason of any act or omission in the
discharge of their duty, other than in the case of willful negligence, willful
default, fraud or dishonesty.
Bermuda law and the Bye-Laws of the Registrant also permit the Registrant
to purchase insurance for the benefit of its directors and officers against any
liability incurred by them for the failure to exercise the requisite care,
diligence and skill in the exercise of their powers and the discharge of their
duties, or indemnifying them in respect of any loss arising or liability
incurred by them by reason of negligence, default, breach of duty or breach of
trust.
The Registrant intends to enter into indemnification agreements with its
officers and directors. To the extent permitted by law, the indemnification
agreements may require the Registrant, among other things, to indemnify such
officers and directors against certain liabilities that may arise by reason of
their status or service as directors (other than liabilities arising from
willful misconduct of a culpable nature) and to advance their expenses incurred
as a result of any proceedings against them as to which they could be
indemnified.
The Registrant maintains a directors' and officers' liability insurance
policy.
II-1
<PAGE> 67
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------- ----------------------------------------------------------------------------------
<S> <C>
4.1 -- Indenture, dated as of March 6, 1996, by and between the Company and the Bank of
New York, as trustee, including form of security.
4.2 -- Registration Rights Agreement, dated March 6, 1996, by and among the Company,
Globalstar and the Initial Purchasers.
5 -- Opinion of Appleby, Spurling & Kempe.
8.1 -- Tax Opinion of Willkie Farr & Gallagher.
8.2 -- Tax Opinion of Appleby, Spurling & Kempe (included as part of their opinion filed
as Exhibit 5).
12 -- Statement Regarding Computation of Ratios.
23.1 -- Consent of Deloitte & Touche LLP.
23.2 -- Consent of Appleby, Spurling & Kempe (included in their opinion filed as Exhibit
5).
23.3 -- Consent of Willkie Farr & Gallagher (included in their opinion filed as Exhibit
8.1).
24 -- Powers of Attorney (included on signature page).
25 -- Statement on Form T-1 of Eligibility of Trustee.
</TABLE>
II-2
<PAGE> 68
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 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 that time shall be deemed to be the initial bona fide offering thereof.
(c) 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 provisions described under item 15 above, 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-3
<PAGE> 69
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 NEW YORK, STATE OF NEW YORK, ON JUNE 20, 1996.
GLOBALSTAR TELECOMMUNICATIONS LIMITED
By: /s/ BERNARD L. SCHWARTZ
------------------------------------
Bernard L. Schwartz
Chairman of the Board and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS BERNARD L. SCHWARTZ AND MICHAEL B. TARGOFF AND
EACH OF THEM, WITH FULL POWER TO ACT WITHOUT THE OTHER, HIS TRUE AND LAWFUL
ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION,
FOR HIM AND IN HIS NAME, PLACE AND STEAD, AND ANY AND ALL CAPACITIES, TO SIGN
ANY AND ALL AMENDMENTS TO THIS REGISTRATION STATEMENT (INCLUDING POST-EFFECTIVE
AMENDMENTS), AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER
DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION,
GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER
AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND
NECESSARY FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON
THEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR
ANY OF THEM, OR THEIR OR HIS SUBSTITUTES OR SUBSTITUTE, MAY LAWFULLY DO OR CAUSE
TO BE DONE BY VIRTUE THEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ ---------------------------------------------------
<C> <S> <C>
/s/ BERNARD L. SCHWARTZ Chairman of the Board and Chief June 20, 1996
- ------------------------------------------ Executive Officer (Principal
BERNARD L. SCHWARTZ Executive Officer)
/s/ MICHAEL B. TARGOFF President, Chief Operating Officer June 20, 1996
- ------------------------------------------ and Director
MICHAEL B. TARGOFF
/s/ ROBERT B. HODES Director June 20, 1996
- ------------------------------------------
ROBERT B. HODES
/s/ A. ROBERT TOWBIN Director June 20, 1996
- ------------------------------------------
A. ROBERT TOWBIN
/s/ MICHAEL P. DEBLASIO Senior Vice President, Chief June 20, 1996
- ------------------------------------------ Officer (Principal Financial
MICHAEL P. DEBLASIO Officer) and Director
/s/ NICHOLAS C. MOREN Vice President and Treasurer June 20, 1996
- ------------------------------------------ (Principal Accounting Officer)
NICHOLAS C. MOREN
</TABLE>
II-4
<PAGE> 70
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------- ----------------------------------------------------------------------------------
<S> <C>
4.1 -- Indenture, dated as of March 6, 1996, by and between the Company and the Bank of
New York, as trustee, including form of security.
4.2 -- Registration Rights Agreement, dated March 6, 1996, by and among the Company,
Globalstar and the Initial Purchasers.
5 -- Opinion of Appleby, Spurling & Kempe.
8.1 -- Tax Opinion of Willkie Farr & Gallagher.
8.2 -- Tax Opinion of Appleby, Spurling & Kempe (included as part of their opinion filed
as Exhibit 5).
12 -- Statement Regarding Computation of Ratios.
23.1 -- Consent of Deloitte & Touche LLP.
23.2 -- Consent of Appleby, Spurling & Kempe (included in their opinion filed as Exhibit
5).
23.3 -- Consent of Willkie Farr & Gallagher (included in their opinion filed as Exhibit
8.1).
24 -- Powers of Attorney (included on signature page).
25 -- Statement on Form T-1 of Eligibility of Trustee.
</TABLE>
II-5
<PAGE> 1
Exhibit 4.1
EXECUTION COPY
================================================================================
INDENTURE
Between
GLOBALSTAR TELECOMMUNICATIONS LIMITED
and
THE BANK OF NEW YORK,
as Trustee
Dated as of March 6, 1996
6 1/2% Convertible Preferred Equivalent Obligations
due 2006
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
Definitions and Other Provisions
of General Application
SECTION 1.01. Definitions ............................................... 1
SECTION 1.02. Compliance Certificates and
Opinions .............................................. 12
SECTION 1.03. Form of Documents Delivered to
Trustee ............................................... 13
SECTION 1.04. Acts of Holders ........................................... 14
SECTION 1.05. Notices, etc., to Trustee and
Company ............................................... 15
SECTION 1.06. Notice to Holders; Waiver ................................. 15
SECTION 1.07. Conflict with Trust Indenture Act ......................... 16
SECTION 1.08. Effect of Headings and Table of
Contents .............................................. 16
SECTION 1.09. Successors and Assigns .................................... 16
SECTION 1.10. Separability Clause ....................................... 16
SECTION 1.11. Benefits of Indenture ..................................... 16
SECTION 1.12. Governing Law ............................................. 17
SECTION 1.13. Legal Holidays ............................................ 17
ARTICLE II
Security Forms
SECTION 2.01. Forms Generally ........................................... 17
SECTION 2.02. Global Securities; Book Entry
Provisions; Certificated
Securities ............................................ 17
</TABLE>
- --------------------
Note: This table of contents shall not, for any purpose, be deemed to be part
of the Indenture.
<PAGE> 3
2
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE III
The Securities
SECTION 3.01. Title and Terms ........................................... 19
SECTION 3.02. Denominations ............................................. 21
SECTION 3.03. Execution, Authentication, Delivery
and Dating ............................................ 21
SECTION 3.04. Temporary Securities ...................................... 21
SECTION 3.05. Registrar, Paying Agent and Conversion
Agent ................................................. 22
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen
Securities ............................................ 27
SECTION 3.07. Payment of Interest; Mechanics of
Payment, Interest Rights
Preserved ............................................. 28
SECTION 3.08. Persons Deemed Owners ..................................... 30
SECTION 3.09. Cancellation .............................................. 30
SECTION 3.10. Computation of Interest ................................... 31
SECTION 3.11. CUSIP Number .............................................. 31
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of
Indenture ............................................. 31
SECTION 4.02. Application of Trust Money ................................ 33
ARTICLE V
Remedies
SECTION 5.01. Collection of Obligations and Suits
for Enforcement by Trustee ............................ 33
SECTION 5.02. Trustee May File Proofs of Claim .......................... 34
SECTION 5.03. Trustee May Enforce Claims Without
Possession of Securities .............................. 35
SECTION 5.04. Application of Money Collected ............................ 35
SECTION 5.05. Limitation on Suits ....................................... 36
SECTION 5.06. Right of Holders To Receive
Principal, Premium and Interest
and To Convert ........................................ 36
SECTION 5.07. Restoration of Rights and Remedies ........................ 37
SECTION 5.08. Rights and Remedies Cumulative ............................ 37
</TABLE>
<PAGE> 4
3
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 5.09. Delay or Omission Not Waiver .............................. 37
SECTION 5.10. Control by Holders ........................................ 37
SECTION 5.11. Waiver of Past Defaults ................................... 38
SECTION 5.12. Undertaking for Costs ..................................... 38
SECTION 5.13. Waiver of Stay, Usury or Extension
Laws .................................................. 39
SECTION 5.14. Voting Rights Upon a Deferral Trigger
Event ................................................. 39
ARTICLE VI
The Trustee
SECTION 6.01. Certain Duties and Responsibilities ....................... 40
SECTION 6.02. Certain Rights of Trustee ................................. 41
SECTION 6.03. Not Responsible for Recitals or
Issuance of Securities ................................ 42
SECTION 6.04. May Hold Securities ....................................... 43
SECTION 6.05. Money Held in Trust ....................................... 43
SECTION 6.06. Compensation and Reimbursement ............................ 43
SECTION 6.07. Corporate Trustee Required;
Eligibility ........................................... 44
SECTION 6.08. Resignation and Removal; Appointment
of Successor .......................................... 45
SECTION 6.09. Acceptance of Appointment
by Successor .......................................... 46
SECTION 6.10. Merger, Conversion, Consolidation or
Succession to Business ................................ 47
SECTION 6.11. Preferential Collection of Claims
Against Company ....................................... 47
SECTION 6.12. Appointment of Authenticating Agent ....................... 48
ARTICLE VII
Holders' List and Reports
by Trustee and Company
SECTION 7.01. Company To Furnish Trustee Names and
Addresses of Holders .................................. 50
SECTION 7.02. Preservation of Information;
Communications to Holders ............................. 50
SECTION 7.03. Reports by Trustee ........................................ 52
SECTION 7.04. SEC Reports; Reports by Company ........................... 52
SECTION 7.05. Compliance Certificate .................................... 53
</TABLE>
<PAGE> 5
4
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII
Consolidation, Merger, Conveyance
or Transfer
SECTION 8.01. Company May Consolidate, etc., Only on
Certain Terms ......................................... 53
SECTION 8.02. Successor Corporation Substituted ......................... 54
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without
Consent of Holders .................................... 54
SECTION 9.02. Supplemental Indentures with Consent
of Holders ............................................ 55
SECTION 9.03. Execution of Supplemental Indentures ...................... 56
SECTION 9.04. Effect of Supplemental Indentures ......................... 56
SECTION 9.05. Conformity with Trust Indenture Act ....................... 57
SECTION 9.06. Reference in Securities to
Supplemental Indentures ............................... 57
ARTICLE X
Covenants
SECTION 10.01. Payment of Principal, Premium and
Interest .............................................. 57
SECTION 10.02. Maintenance of Office or Agency .......................... 58
SECTION 10.03. Security Payments To Be Held
in Trust .............................................. 59
SECTION 10.04. Corporate Existence ...................................... 61
SECTION 10.05. Waiver of Certain Covenants .............................. 61
ARTICLE XI
Redemption of Securities
SECTION 11.01. Right of Redemption; Mechanics of
Redemption ............................................ 61
SECTION 11.02. Applicability of Article ................................. 62
SECTION 11.03. Election To Redeem ....................................... 62
</TABLE>
<PAGE> 6
5
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 11.04. Selection by Trustee of Securities To
Be Redeemed ........................................... 63
SECTION 11.05. Notice of Redemption ..................................... 63
SECTION 11.06. Deposit of Redemption Price .............................. 64
SECTION 11.07. Securities Payable on
Redemption Date ....................................... 65
SECTION 11.08. Securities Redeemed in Part .............................. 65
ARTICLE XII
Conversion of Securities
SECTION 12.01. Conversion Privilege and Conversion
Price ................................................. 65
SECTION 12.02. Exercise of Conversion Privilege ......................... 66
SECTION 12.03. Fractions of Shares ...................................... 67
SECTION 12.04. Adjustment of Conversion Price ........................... 68
SECTION 12.05. Notice of Adjustment of Conversion
Price ................................................. 80
SECTION 12.06. Provisions in Case of Consolidation,
Merger or Conveyance or Transfer of
Properties and Assets ................................. 80
SECTION 12.07. Notice of Certain Corporate Action ....................... 82
SECTION 12.08. Company To Reserve Common Stock .......................... 83
SECTION 12.09. Taxes on Conversions ..................................... 83
SECTION 12.10. Covenant as to Common Stock .............................. 83
SECTION 12.11. Responsibility of Trustee ................................ 83
ARTICLE XIII
Subordination of Securities
SECTION 13.01. Securities Subordinate to Debt
Obligations ........................................... 84
SECTION 13.02. No Payments When Debt Obligations in
Default; Payment Over of Proceeds
upon Dissolution, etc ................................. 84
SECTION 13.03. Trustee To Effectuate
Subordination ......................................... 87
SECTION 13.04. Trustee Not Charged with Knowledge of
Prohibition ........................................... 87
SECTION 13.05. Rights of Trustee as Holder of Debt
Obligations ........................................... 88
SECTION 13.06. Article Applicable to Paying Agent ....................... 88
SECTION 13.07. Trustee Not Fiduciary for Holders of
Debt Obligations ...................................... 88
</TABLE>
<PAGE> 7
6
EXHIBIT A FORM OF SECURITY
EXHIBIT B FORM OF TRANSFER CERTIFICATE
EXHIBIT C FORM OF ACCREDITED INVESTOR
TRANSFEREE CERTIFICATE
<PAGE> 8
7
GLOBALSTAR TELECOMMUNICATIONS LIMITED
Reconciliation and Tie Between the Trust Indenture Act
of 1939 and Indenture dated as of March 5, 1996
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
- --------------- -----------------
<S> <C>
Section 310(a)(1) ........................................................ 6.07
(a)(2) ................................................................. 6.07
(a)(3) ................................................................. Not Applicable
(a)(4) ................................................................. Not Applicable
(a)(5) ................................................................. 6.07
(b) .................................................................... 6.07
6.08
Section 311(a) ........................................................... 6.11
(b) .................................................................... 6.11
(b)(2) ................................................................. 7.03(a)(2)
7.03(b)
Section 312(a) ........................................................... 7.01
7.02(a)
(b) .................................................................... 7.02(b)
(c) .................................................................... 7.02(c)
Section 313(a) ........................................................... 7.03(a)
(b) .................................................................... 7.03(b)
(c) .................................................................... 7.03(a)
(d) .................................................................... 7.03(c)
Section 314(a) ........................................................... 7.04
(b) .................................................................... Not Applicable
(c)(1) ................................................................. 1.02
(c)(2) ................................................................. 1.02
(c)(3) ................................................................. Not Applicable
(d) .................................................................... Not Applicable
(e) .................................................................... 1.02
Section 315(a) ........................................................... 6.01(a)
(b) .................................................................... 6.02
7.03(a)(6)
(c) .................................................................... 6.01(b)
(d) .................................................................... 6.01(c)
(d)(1) ................................................................. 6.01(a)(1)
(d)(2) ................................................................. 6.01(c)(2)
(d)(3) ................................................................. 6.01(c)(3)
(e) .................................................................... 5.14
Section 316(a) ........................................................... 1.01
(a)(1)(A) .............................................................. 5.02
5.12
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
- --------------- -----------------
<S> <C>
(a)(1)(B) .............................................................. 5.13
(a)(2) ................................................................. Not Applicable
(b) .................................................................... 5.08
Section 317(a)(1) ........................................................ 5.03
(a)(2) ................................................................. 5.04
(b) .................................................................... 10.03
Section 318(a) ........................................................... 1.07
</TABLE>
- --------------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE> 10
INDENTURE dated as of March 6, 1996, between
GLOBALSTAR TELECOMMUNICATIONS LIMITED, a corporation
duly organized and existing under the laws of Bermuda
(herein called the "Company"), having its principal
office at Cedar House, 41 Cedar Avenue, Hamilton
HM12, Bermuda, and THE BANK OF NEW YORK, a New York
banking corporation, as Trustee (herein called the
"Trustee").
The Company has duly authorized the creation of an issue of
its 6 1/2% Convertible Preferred Equivalent Obligations due 2006 (herein called
the "Securities") of substantially the tenor and amount hereinafter set forth
and to provide therefor the Company has duly authorized the execution and
delivery of this Indenture.
All things necessary to make the Securities, when executed by
the Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company, and to make this Indenture a
valid agreement of the Company, in accordance with their and its terms, have
been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders (as hereinafter defined) thereof, it is mutually
covenanted and agreed, for the equal and proportionate benefit of all Holders of
the Securities, as follows:
ARTICLE I
Definitions and Other Provisions
of General Application
SECTION 1.01. Definitions. For all purposes of
this Indenture, except as otherwise expressly provided or
unless the context otherwise requires:
(a) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
<PAGE> 11
2
(b) all other terms used herein which are defined in the Trust
Indenture Act (as hereinafter defined), either directly or by reference
therein, have the meanings assigned to them therein; and
(c) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"Act" when used with respect to any Holder has the
meaning specified in Section 1.04.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition
of Affiliate, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Authenticating Agent" means any Person authorized
by the Trustee to act on behalf of the Trustee to
authenticate Securities.
"Average Market Value" means the arithmetic average of the
Current Market Value of the Common Stock for the ten Trading Days ending on the
second Business Day prior to the applicable date of payment.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in The City of New
York are authorized or obligated by law or executive order to be closed.
<PAGE> 12
3
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Securities Exchange Act of
1934, or, if at any time after the execution of this instrument such Commission
is not existing and performing the duties now assigned to it under the Trust
Indenture Act, then the body performing such duties at such time.
"Common Stock", as applied to the capital stock of any
corporation other than the Company, shall mean the capital stock of any class
which has no preference in respect of dividends or other distributions of assets
or of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of such corporation and which is not subject to
redemption by such corporation; and as applied to the Company, shall mean the
Common Stock of the Company, par value $1.00; provided, however, that, subject
to the provisions of Section 12.06, shares issuable on conversion of Securities
shall include only shares of the class designated as Common Stock of the Company
at the date of the execution of this instrument or shares of any class or
classes resulting from any reclassification or reclassification thereof which
have no preference in respect of dividends or other distributions of assets or
of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which are not subject to redemption
by the Company; provided further, that if at any time there shall be more than
one such resulting class, the shares of each such class then so issuable shall
be substantially in the proportion which the total number of shares of such
class resulting from all such reclassifications bears to the total number of
shares of all such classes resulting from all such reclassifications.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor corporation.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman of the Board, its
President or a Vice President and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary and delivered to the Trustee; provided,
however, that any person duly designated by the Chairman of the Board, the
President, a Vice President or any
<PAGE> 13
4
other officer of the Company may sign or execute on behalf of any or all such
persons listed above.
"Conversion Agent" has the meaning specified in
Section 3.05(a).
"Conversion Price" has the meaning specified in
Section 12.01.
"Corporate Trust Office" means the principal office of the
Trustee in The City of New York at which at any particular time its corporate
trust business shall be administered, which office at the time of the execution
of this indenture is located at 101 Barclay Street, Floor 21 West, New York, New
York 10286, Attention of Corporate Trust Trustee Administration.
"Corporation" includes corporations, associations,
companies and business trusts.
"CPE Nominee" has the meaning specified in Section 5.14.
"CPE Representative" has the meaning specified in Section
5.14.
"Current Market Price" has the meaning specified in Section
12.04.
"Current Market Value" means the average of the high and low
sales prices of the Common Stock as reported on the Nasdaq National Market or
any national securities exchange upon which the Common Stock is then listed for
the Trading Day in question.
"Debt Obligations" will mean the principal of, premium, if
any, interest and other amounts due on any indebtedness, whether now outstanding
or hereafter created, incurred, assumed or guaranteed by the Company, for money
borrowed from others (including obligations under capitalized leases, purchase
money indebtedness or trade credit), liabilities incurred in the ordinary course
of business, commitment, standby and other forms due and payable to financial
institutions with respect to credit facilities that may be maintained by the
Company or in connection with the acquisition by the Company of any other
business or entity, or in respect of letters of credit or bid, performance or
surety bonds issued for the account or on the credit of the
<PAGE> 14
5
Company, and, in each case, all renewals, extensions and refundings thereof,
other than (i) any such indebtedness as to which, in the instrument creating or
evidencing the same, it is provided that such indebtedness is pari passu or
junior in right of payment to the Securities and (ii) the Securities.
"Deferral Election" means the election of the Board of
Directors to defer the payment of an installment of interest due on an Interest
Payment Date, or any portion due thereof.
"Deferral Trigger Event" means the Company has deferred the
payment of interest due under the Securities in an aggregate equal to six
quarterly interest payments.
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Dilution Trigger Event" has the meaning specified in Section
12.04.
"Exchange Act" means the Securities Exchange Act of 1934.
"General Partners' Committee" has the meaning specified in the
Globalstar Amended Partnership Agreement.
"Globalstar Amended Partnership Agreement" means the Amended
and Restated Agreement of Limited Partnership dated as of December 31, 1994,
among the Company and certain general partners and limited partners named
therein as amended as of March 6, 1996, pursuant to which the Preferred
Partnership Interests were issued to the Company.
"Globalstar Corresponding Redemption" means the
redemption payments set forth in the Globalstar Amended Partnership Agreement
corresponding to Provisional Redemption, Optional Redemption or Mandatory
Redemption, as
the case may be.
"Globalstar Interest Payment Notice" means written notice
delivered to the Company, with a copy to the Trustee, by Globalstar L.P.
notifying the Company of (i) whether Globalstar L.P. has elected to defer the
payment of a Scheduled Distribution pursuant to the provisions of the Globalstar
Amended Partnership Agreement and (ii) if it has not elected to defer such
Scheduled Distribution, whether it
<PAGE> 15
6
will pay such Scheduled Distribution (A) in cash, (B) by delivery of Ordinary
Partnership Interests or (C) through any combination of the foregoing. Such
Notice shall be delivered at least 20 Business Days prior to the applicable
Interest Payment Date and shall contain any other information required by the
Globalstar Amended Partnership Agreement.
"Globalstar L.P." means Globalstar, L.P., a registered
Delaware limited partnership, and any successor entities.
"Globalstar Partnership Interests" means Ordinary
Partnership Interests and Preferred Partnership Interests.
"Globalstar Redemption Notice" means written notice delivered
to the Company by Globalstar notifying the Company of (i) in the case of a
Provisional or Optional Redemption, Globalstar L.P.'s election to redeem any
Preferred Partnership Interests pursuant to the provisions of the Globalstar
Amended Partnership Agreement and (ii) whether it will make such redemption (A)
in cash, (B) by delivery of Ordinary Partnership Interests or (C) through any
combination of the foregoing. Such Notice shall be delivered at least 20
Business Days prior to the applicable Redemption Date and shall contain any
other information required by the Globalstar Amended Partnership Agreement.
"GTL Interest Payment Notice" means written notice delivered
to the Holders and Globalstar L.P., with a copy to the Trustee, notifying them
(i) whether the Company has elected to defer the payment of an interest payment
pursuant to a Deferral Election, and (ii) if it has not elected to defer such
interest, whether the Company is paying the installment of interest due on the
applicable Interest Payment Date in (A) cash, (B) Common Stock or (C) through
any combination of the foregoing. Such Notice shall be delivered at least 12
Business Days prior to the applicable Interest Payment Date and shall contain
any information pertinent to such payment. The Company shall only deliver such
Notice to the Holders if the form of payment includes Common Stock.
"GTL Redemption Notice" means written notice delivered to the
Holders, with a copy to the Trustee, notifying the Holders of the Company's
election to redeem the Securities pursuant to a Provisional Redemption or
Optional Redemption, as the case may be. Such Notice shall be delivered no later
than one Business Day following receipt of the Globalstar Redemption Notice.
<PAGE> 16
7
"GTL Response Redemption Notice" means written notice
delivered to the Holders and Globalstar L.P., with a copy to the Trustee,
notifying them of whether the Company is paying the applicable Redemption Price
on such Securities in (i) cash, (ii) Common Stock or (iii) through any
combination of the foregoing. Such Notice shall be delivered at least 12
Business Days prior to the applicable Redemption Date and shall contain any
information pertinent to such redemption. The Company shall only deliver such
Notice to the Holders if the form of payment includes Common Stock.
"Holder" means a Person in whose name a Security is
registered in the Security Register.
"Indenture" means this instrument as originally executed or as
it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Initial Purchasers" has the meaning specified in
the Purchase Agreement.
"Interest Arrearages" means the amount of interest payments
that the Company has elected to defer pursuant to a Deferral Election that
remains unpaid.
"Interest Make-Whole Payment" means payment due to Holders
whose Securities have been called for redemption pursuant to a Provisional
Redemption, which shall be equal to the present value of the aggregate amount of
interest payments thereafter payable on such Securities during the Interest
Make-Whole Period, which shall be calculated using the bond equivalent yield on
United States treasury notes or bills having a term nearest in length to that of
the Interest Make-Whole Period as of the Notice Date.
"Interest Make-Whole Period" means the period of time from
Provisional Redemption Date to the third anniversary of March 6, 1996.
"Interest Payment Date" means the date specified in a Security
as the fixed dates on which any installment of interest is due and payable;
provided, however, that if such date shall not be a Business Day, then such date
shall be the next Business Day.
"Lock-Up Agreement" means the letter agreement delivered to
the Initial Purchasers by Loral SpaceCom dated
<PAGE> 17
8
March 6, 1996, relating to the lock-up of the Securities and Common Stock.
"Loral SpaceCom" means Loral Space & Communications
Ltd. and any successor entities.
"Loral SpaceCom Designee" means any member of the Board of
Directors designated by Loral SpaceCom.
"Mandatory Redemption Date" means the date specified in the
Security as the fixed date on which the principal of such Security is due and
payable; provided, however, that, if such date shall not be a Business Day, then
the Mandatory Redemption Date shall be the next Business Day.
"Notice Date" means the date of mailing of a notice of
Provisional Redemption of Securities by the Company to the Holders.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, the President or a Vice President and by the Treasurer,
an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company
and delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel
acceptable to the Trustee, who may be counsel for, or employed by, the Company.
"Optional Redemption" has the meaning specified in
Section 6 of the Security.
"Optional Redemption Date" means the Redemption Date for an
Optional Redemption as specified in Section 6 of the Security.
"Ordinary Partnership Interest" has the meaning
specified in the Globalstar Amended Partnership Agreement.
"Outstanding" when used with respect to Securities means, as
of the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore canceled by the Trustee
or delivered to the Trustee for cancellation;
<PAGE> 18
9
(ii) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities; provided, that, if
such Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made; and
(iii) Securities paid pursuant to the third paragraph of Section
3.06 or in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture;
provided, however, that, in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver or taken any other action
hereunder, Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent, waiver or other action, only
Securities which the Trustee has actual knowledge of being so owned shall be so
disregarded. Securities so owned which have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
"Paying Agent" has the meaning specified in Section 3.05(a).
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political subdivision
thereof.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security
<PAGE> 19
10
authenticated and delivered under Section 3.06 in exchange for or in lieu of all
or a portion of a mutilated, destroyed, lost or stolen Security shall be deemed
to evidence the same debt as such mutilated, destroyed, lost or stolen Security
or portion thereof.
"Preferred Partnership Interests" has the meaning
specified in the Globalstar Amended Partnership Agreement.
"Preferred Stock" means capital stock of the Company
designated by the Board of Directors having a preference in respect of dividends
or other distributions of assets or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company.
"Provisional Redemption" has the meaning specified
in Section 5 of the Security.
"Provisional Redemption Date" means the Redemption Date for a
Provisional Redemption as specified in Section 5 of the Security.
"Purchase Agreement" means the purchase agreement dated
February 29, 1996, between the Company and the Initial Purchasers in connection
with the Securities, as amended from time to time.
"Redemption Date", when used with respect to any Security to
be redeemed, means the date fixed for such redemption by or pursuant to this
Indenture and includes the Provisional Redemption Date, the Optional Redemption
Date and Mandatory Redemption Date, as the case may be.
"Redemption Price", when used with respect to any Security to
be redeemed, means the price at which it is to be redeemed pursuant to this
Indenture and, in the case of a Provisional Redemption, includes the applicable
Interest Make-Whole Payment as specified in Section 5 of the Security.
"Registrar" has the meaning specified in Section 3.05(a).
"Registration Rights Agreement" means the Registration Rights
Agreement relating to the Securities dated March 6, 1996, between the Company
and the Initial Purchaser.
<PAGE> 20
11
"Regular Record Date" for the interest payable on any Interest
Payment Date means the February 15, May 15, August 15 or November 15 (whether or
not a Business Day), as the case may be, next preceding such Interest Payment
Date.
"Responsible Officer", when used with respect to the Trustee,
means any officer within the corporate trust department (or any successor
department) of the Trustee, including, without limitation, any Vice President,
any Assistant Vice President, any Assistant Treasurer, any Assistant Secretary
or any other officer of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Scheduled Distribution" means the distribution required to be
made in respect of the Preferred Partnership Interests pursuant to the
Globalstar Amended Partnership Agreement corresponding to the installments of
interest due
pursuant to this Indenture.
"Securities" means the 6 1/2% Convertible Preferred Equivalent
Obligations due 2006 issued pursuant to this Indenture.
"Security Register" has the meaning specified in Section
3.05(a).
"Shelf Registration Statement" has the meaning specified in
the Registration Rights Agreement.
"Stock Transfer Agent" means The Bank of New York or any other
entity named as the stock transfer agent of the Company.
"Trading Day" means (a) if the applicable security is listed
or admitted for trading on the New York Stock Exchange or another national
securities exchange, a day on which such security actually trades on the New
York Stock Exchange or another national securities exchange, (b) if the
applicable security is quoted on The Nasdaq National Market, a day on which such
security actually trades or (c) if the applicable security is not so listed,
admitted for trading or quoted, any Business Day on which such security actually
trades.
<PAGE> 21
12
"Trigger Percentages" means the percentages set forth in
Section 5 of the Security that triggers the Company's option to redeem the
Securities pursuant to a Provisional Redemption.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended by the Trust Indenture Reform Act of 1990 and as in force at the date
as of which this instrument was executed, except as provided in Section 9.05.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
are pledged and which are not callable or redeemable at the issuer's option.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
SECTION 1.02. Compliance Certificates and Opinions. Upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that, in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
<PAGE> 22
13
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(c) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.03. Form of Documents Delivered to Trustee. In any
case where several matters are required to be certified by, or covered by an
opinion of, any specified Person, it is not necessary that all such matters be
certified by, or covered by the opinion of, only one such Person, or that they
be so certified or covered by only one document, but one such Person may certify
or give an opinion with respect to some matters and one or more other such
Persons as to other matters, and any such Person may certify or give an opinion
as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
<PAGE> 23
14
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 1.04. Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Holders
in person or by an agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Holders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Indenture and (subject to Section 6.01)
conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the
Security Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Security shall bind every
future Holder of the same Security
<PAGE> 24
15
and the Holder of every Security issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
SECTION 1.05. Notices, etc., to Trustee and Company. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Holders or other document provided or permitted by this Indenture to be made
upon, given or furnished to, or filed with,
(a) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing and mailed, first-class, postage prepaid, to the
Trustee at its Corporate Trust Office, Attention of Corporate Trust
Trustee Administration, or
(b) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this instrument or at any
other address previously furnished in writing to the Trustee by the
Company, or
(c) the Company by the Trustee or the Trustee by the Company
shall be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if transmitted by facsimile transmission to
the Company at (212) 867-5248 or to the Trustee at (212) 815-5915 (or
to such other facsimile transmission number previously furnished in
writing to the Company by the Trustee or to the Trustee by the Company)
and in each case confirmed by a copy sent to the Company or to the
Trustee, as the case may be, by guaranteed overnight courier.
SECTION 1.06. Notice to Holders; Waiver. Where this Indenture
provides for notice to Holders of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at his
address as it appears in the Security Register, not later than the latest date
and not earlier than the
<PAGE> 25
16
earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice nor
any defect in any notice so mailed to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Where this Indenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
SECTION 1.07. Conflict with Trust Indenture Act. If and to the
extent that any provision hereof limits, qualifies or conflicts with the duties
imposed by, or with another provision (an "incorporated provision") included in
this Indenture by operation of, any of Sections 3.10 to 3.18, inclusive, of the
Trust Indenture Act, such imposed duties or incorporated provision shall
control.
SECTION 1.08. Effect of Headings and Table of Contents. The
Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 1.09. Successors and Assigns. All covenants and
agreements in this Indenture by the Company shall bind its successors and
assigns, whether so expressed or not.
SECTION 1.10. Separability Clause. In case any provision in
this Indenture or in the Securities shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture. Nothing in this Indenture
or in the Securities, express or implied, shall give to any Person, other than
the parties hereto and their successors hereunder, the holders of Debt
Obligations
<PAGE> 26
17
and the Holders of Securities, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 1.12. Governing Law. This Indenture and the Securities
shall be governed by and construed in accordance with the laws of the State of
New York but without giving effect to applicable principles of conflicts of law
to the extent that the application of the law of another jurisdiction would be
required thereby.
SECTION 1.13. Legal Holidays. In any case where any Interest
Payment Date or any Redemption Date of any Security or the last date on which a
Holder has the right to convert his Securities shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of principal or Redemption Price of or payment of interest on or
conversion of the Securities need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
such Interest Payment Date or such Redemption Date or on such last day for
conversion; provided, that no interest shall accrue for the period from and
after such Interest Payment Date or such Redemption Date, as the case may be.
ARTICLE II
Security Forms
SECTION 2.01. Forms Generally. The Securities and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A which is hereby incorporated in and expressly made a part of this
Indenture. The Securities may have notations, legends or endorsements required
by law, stock exchange rule, agreements to which the Company is subject, if any,
or usage (provided that any such notation, legend or endorsement is in a form
acceptable to the Company). The Company shall furnish any such legend not
contained in Exhibit A to the Trustee in writing. Each Security shall be dated
the date of its authentication. The terms and provisions of the Securities set
forth in Exhibit A are part of the terms of this Indenture and, to the extent
applicable, the Company and the Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
SECTION 2.02. Global Securities; Book-Entry Provisions;
Certificated Securities. (a) The Securities are
<PAGE> 27
18
being offered and sold by the Company pursuant to a Purchase Agreement.
Securities offered and sold to Qualified Institutional Buyers
("QIBs") in reliance on Rule 144A under the Securities Act ("Rule 144A"), as
provided in the Purchase Agreement, shall be issued in the form of one or more
permanent global Securities in definitive, fully registered form without
interest coupons with the Global Securities Legend and Restricted Securities
Legend set forth in Exhibit A hereto (each, a "Global Security"), which shall be
deposited on behalf of the purchasers of the Securities represented thereby with
the Trustee, at its New York office, as custodian for the Depositary, and
registered in the name of the Depositary or a nominee of the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Global Security may from time to
time be increased or decreased by adjustments made on the records of the Trustee
and the Depositary or its nominee as hereinafter provided.
(b) This Section shall apply only to a Global Security
deposited with or on behalf of the Depositary.
The Company shall execute and the Trustee shall, in accordance
with this Section, authenticate and deliver initially one or more Global
Securities that (i) shall be registered in the name of Cede & Co. or other
nominee of such Depositary and (ii) shall be delivered by the Trustee to such
Depositary or pursuant to such Depositary's instructions or held by the Trustee
as custodian for the Depositary pursuant to a FAST Balance Certificate Agreement
between the Depositary and the Trustee.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Security held on their behalf by the Depositary or by the Trustee as the
custodian of the Depositary or under such Global Security, and the Depositary
may be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of such Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices of such Depositary governing the
<PAGE> 28
19
exercise of the rights of a Holder of a beneficial interest in any Global
Security.
Except as provided in Section 3.05(b), owners of beneficial
interests in Global Securities will not be entitled to receive physical delivery
of certificated Securities.
(c) Purchasers of Securities who are not QIBs will receive
certificated Securities bearing the Restricted Securities Legend set forth in
Exhibit A hereto ("Restricted Securities"). Restricted Securities will bear the
Restricted Securities Legend set forth on Exhibit A unless removed in accordance
with Section 3.05(c) and may not be exchanged for a Global Security, or interest
therein, at any time, except as set forth in paragraph (d) of this Section.
(d) Purchasers of Restricted Securities in reliance of
Regulation S under the Securities Act ("Regulation S") may exchange such
Restricted Securities for a beneficial interest in a Global Security following
the expiration of the "40-day restricted period" within the meaning of
Regulation S by delivering (1) any such Restricted Securities, duly endorsed as
provided herein; (2) instructions from such Holder directing the Trustee to
create a beneficial interest in such Global Security and the authorized
denomination or denominations of such beneficial interest to be created; and (3)
such other certificates, legal opinions or other information as the Company may
reasonably require.
(e) After a transfer of any Securities during the period of
the effectiveness of a Shelf Registration Statement with respect to the
Securities, all requirements pertaining to legends on such Security will cease
to apply, the requirements requiring any such Security issued to certain Holders
be issued in global form will cease to apply, and a certificated Security
without legends will be available to the Holder of such Securities.
ARTICLE III
The Securities
SECTION 3.01. Title and Terms. The aggregate principal
amount of Securities which may be authenticated and delivered under this
Indenture is limited to (a) $275,000,000
<PAGE> 29
20
plus (b) such aggregate principal amount (which may not exceed $55,000,000
principal amount) of Securities as shall be purchased pursuant to the
overallotment option provided in the Purchase Agreement, except for Securities
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, other Securities pursuant to Section 3.04, 3.05, 3.06, 9.06,
11.08 or 12.02.
The Securities shall be known and designated as the "6 1/2%
Convertible Preferred Equivalent Obligations due 2006" of the Company. Their
Mandatory Redemption Date shall be March 1, 2006, and the Securities shall bear
interest at the rate of 6 1/2% per annum, from March 6, 1996, or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, as the case may be, payable quarterly on March 1, June 1, September 1 and
December 1, commencing June 1, 1996, until the principal thereof is paid or made
available for payment.
Payments (whether in cash or Common Stock) due on the
Securities shall be payable at the office or agency of the Company maintained
for such purpose in The City of New York and at any other office or agency
maintained by the Company for such purpose. If any such payment is in cash, it
shall be payable by United States dollar check drawn on, or wire transfer
(provided that appropriate wire instructions have been received by the Trustee
at least 15 days prior to the applicable date of payment) to a United States
dollar account maintained by the Holder with, a bank located in New York City;
provided, however, that at the option of the Company payment of interest in cash
may be made by check mailed to the address of the Person entitled thereto as
such address shall appear in the Security Register. Any Interest Make-Whole
Payment will be paid to the Holder of record on the date of conversion or
Redemption Date, as the case may be.
The Securities shall be redeemable as provided in Article XI.
The Securities shall be convertible into Common Stock of the
Company as provided in Article XII.
The Securities shall be subordinated in right of payment to
Debt Obligations as provided in Article XIII.
Payments on the Securities shall be made in the form described
in Section 10.01.
<PAGE> 30
21
SECTION 3.02. Denominations. The Securities shall be issuable
only in registered form without coupons and only in denominations of $50.00 and
any integral multiple thereof.
SECTION 3.03. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman of the
Board, its President or one of its Vice Presidents, under its corporate seal
reproduced thereon attested by its Secretary or one of its Assistant Secretaries
except no corporate seal shall be required for Temporary Securities issued
pursuant to Section 3.04; provided, further, that any person duly designated by
the Chairman of the Board, the President, a Vice-President or any other officer
of the Company may execute the securities on behalf of any or all such persons
listed above. The signature of any of these officers on the Securities may be
manual or facsimile.
Securities bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Securities or
did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company order shall authenticate and deliver such Securities as in
this Indenture provided and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form provided for
herein executed by the Trustee by manual signature, and such certificate upon
any Security shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder.
<PAGE> 31
22
SECTION 3.04. Temporary Securities. Pending the preparation of
definitive Securities, the Company may execute, and upon Company Order the
Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities, at any office or agency of the Company designated pursuant to
Section 10.02, without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Securities, the Company shall execute and the Trustee
shall authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of authorized denominations. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities.
SECTION 3.05. Registrar, Paying Agent and Conversion Agent.
(a) The Company shall maintain in the Borough of Manhattan, City of New York,
State of New York and in a European city (only in connection with clauses (ii)
and (iii) below) (i) an office or agency where Securities may be presented for
registration of transfer or for exchange ("Registrar"), (ii) an office or agency
where Securities may be presented for payment ("Paying Agent") and (iii) an
office or agency where Securities may be presented for conversion ("Conversion
Agent"). The Registrar shall keep a register of the Securities and of their
transfer and exchange (the "Security Register"). The Company may appoint the
Registrar, the Paying Agent and the Conversion Agent and may appoint one or more
co-registrars, one or more additional paying agents and one or more additional
conversion agents in such other locations as it shall determine. The term
"Paying Agent" includes any additional paying agent and, with respect to
payments hereunder by delivery of Common Stock, may include the Stock Transfer
Agent, and the term "Conversion Agent" includes any additional conversion agent.
The Company may change any Paying Agent, Registrar, co-registrar or
<PAGE> 32
23
Conversion Agent without prior notice to any Holder. The Company shall notify
the Trustee of the name and address of any Agent not a party to this Indenture.
If the Company fails to appoint or maintain another entity as Registrar, Paying
Agent or Conversion Agent, the Trustee shall act as such. The Company or any of
its Affiliates may act as Paying Agent, Registrar, co-registrar or Conversion
Agent.
Upon surrender for registration of transfer of any Security at
an office or agency of the Company, the Company shall execute, and the Trustee
shall register on the Security Register and shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Securities
of any authorized denominations, of a like aggregate principal amount.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denominations, of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Securities
which the Holder making the exchange is entitled to receive.
All Securities issued upon any registration of transfer or
exchange of Securities shall be the valid obligations of the Company, evidencing
the same obligation and entitled to the same benefits under this Indenture, as
the Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company, the Trustee and the Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 3.04, 9.06, 11.08, 12.01 or 12.02 not
involving any transfer.
<PAGE> 33
24
Neither the Company nor the Trustee or Registrar shall be
required (a) to issue, authenticate or register the transfer of or exchange any
Security during a period beginning at the opening of business 15 days before the
day of the mailing of a notice of redemption of Securities selected for
redemption under Section 11.04 and ending at the close of business on the day of
such mailing or (b) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
(b) Notwithstanding any provision to the contrary herein, so
long as a Global Security remains outstanding and is held by or on behalf of the
Depositary, transfers of a Global Security, in whole or in part, or of any
beneficial interest therein, shall only be made in accordance with Section 2.02
and this Section; provided, however, that beneficial interests in a Global
Security may be transferred to persons who take delivery thereof in the form of
a beneficial interest in the same Global Security in accordance with the
transfer restrictions set forth in the Restricted Securities Legend and under
the heading "Notice to Investors" in the Offering Memorandum.
(i) Except for transfers or exchanges made in accordance with
any of clauses (b)(ii) through (iv) of this Section, transfers of a
Global Security shall be limited to transfers of such Global Security
in whole, but not in part, to nominees of the Depositary or to a
successor of the Depositary or such successor's nominee.
(ii) Global Security to Restricted Security. If an owner of a
beneficial interest in a Global Security deposited with the Depositary
or with the Trustee as custodian for the Depositary wishes at any time
to transfer its interest in such Global Security to a person who is
required to take delivery thereof in the form of a Restricted Security,
such owner may, subject to the rules and procedures of the Depositary,
cause the exchange of such interest for one or more Restricted
Securities of any authorized denomination or denominations and of the
same aggregate principal amount. Upon receipt by the Trustee, as
Registrar, at its office in The City of New York of (1) instructions
from the Depositary directing the Trustee, as Registrar, to
authenticate and deliver one or more Restricted Securities of the same
aggregate principal amount as the beneficial interest in the Global
Security to be
<PAGE> 34
25
exchanged, such instructions to contain the name or names of the
designated transferee or transferees, the authorized denomination or
denominations of the Restricted Securities to be so issued and
appropriate delivery instructions, (2) a certificate in the form of
Exhibit B attached hereto given by the owner of such beneficial
interest and stating that the person transferring such interest in such
Global Security reasonably believes that the person acquiring the
Restricted Securities for which such interest is being exchanged is an
"accredited investor" (as defined in Rule 501(a) of Regulation D under
the Securities Act) and is acquiring such Restricted Securities having
an aggregate principal amount of not less than $250,000 for its own
account or for one or more accounts as to which the transferee
exercises sole investment discretion, (3) a certificate in the form of
Exhibit C attached hereto given by the person acquiring the Restricted
Securities for which such interest is being exchanged, to the effect
set forth therein, and (4) such other certifications, legal opinions or
other information as the Company may reasonably require to confirm that
such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act, then the Trustee, as Registrar, as the case may be,
will instruct the Depositary to reduce or cause to be reduced such
Global Security by the aggregate principal amount of the beneficial
interest therein to be exchanged and to debit or cause to be debited
from the account of the person making such transfer the beneficial
interest in the Global Security that is being transferred, and
concurrently with such reduction and debit the Company shall execute,
and the Trustee shall authenticate and deliver, one or more Restricted
Securities of the same aggregate principal amount in accordance with
the instructions referred to above.
(iii) Restricted Security to Restricted Security. If a Holder of a
Restricted Security wishes at any time to transfer such Restricted
Security to a person who is required to take delivery thereof in the
form of a Restricted Security, such Holder may, subject to the
restrictions on transfer set forth herein and in such Restricted
Security, cause the exchange of such Restricted Security for one or
more Restricted Securities of any authorized denomination or
denominations and of the same aggregate principal
<PAGE> 35
26
amount. Upon receipt by the Trustee, as Registrar, at its office in The
City of New York of (1) such Restricted Security, duly endorsed as
provided herein, (2) instructions from such Holder directing the
Trustee, as Registrar, to authenticate and deliver one or more
Restricted Securities of the same aggregate principal amount as the
Restricted Security to be exchanged, such instructions to contain the
name of the transferee and the authorized denomination or denominations
of the Restricted Securities to be so issued and appropriate delivery
instructions, (3) a certificate from the Holder of the Restricted
Security to be exchanged in the form of Exhibit B attached hereto, (4)
a certificate in the form of Exhibit C attached hereto given by the
person acquiring the Restricted Securities for which such interest is
being exchanged, to the effect set forth therein, and (5) such other
certifications, legal opinions or other information as the Company may
reasonably require to confirm that such transfer is being made pursuant
to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act, then the Trustee, as
Registrar, shall cancel or cause to be cancelled such Restricted
Security and concurrently therewith, the Company shall execute, and the
Trustee shall authenticate and deliver, one or more Restricted
Securities of the same aggregate principal amount, in accordance with
the instructions referred to above.
(iv) Other Exchanges. In the event that a Global Security is
exchanged for Securities in definitive registered form pursuant to this
Section, prior to the effectiveness of a Shelf Registration Statement
with respect to such Securities, such Securities may be exchanged only
in accordance with such procedures as are substantially consistent with
the provisions of clauses (ii) and (iii) above (including the
certification requirements intended to ensure that such transfers
comply with Rule 144A or Regulation S under the Securities Act, as the
case may be) and such other procedures as may from time to time be
adopted by the Company.
(c) Except in connection with a Shelf Registration Statement
contemplated by and in accordance with the terms of the Registration Rights
Agreement, if Securities are issued upon the transfer, exchange or replacement
of Securities bearing the Restricted Securities Legend set forth in
<PAGE> 36
27
Exhibit A hereto, or if a request is made to remove such Restricted Securities
Legend on Securities, the Securities so issued shall bear the Restricted
Securities Legend, or the Restricted Securities Legend shall not be removed, as
the case may be, unless there is delivered to the Company such satisfactory
evidence, which may include an opinion of counsel licensed to practice law in
the State of New York, as may be reasonably required by the Company, that
neither the legend nor the restrictions on transfer set forth therein are
required to ensure that transfers thereof comply with the provisions of Rule
144A, Rule 144 or Regulation S under the Securities Act or, with respect to
Restricted Securities, that such Securities are not "restricted" within the
meaning of Rule 144 under the Securities Act. Upon provision of such
satisfactory evidence, the Trustee, at the direction of the Company, shall
authenticate and deliver Securities that do not bear the legend.
(d) The Trustee shall have no responsibility for any actions
taken or not taken by the Depositary.
(e) Each Holder of a Security agrees to indemnify the Company
and the Trustee against any liability that may result from the transfer,
exchange or assignment of such Holder's Security in violation of any provision
of this Indenture and/or applicable U.S. Federal or State securities law;
provided, however, that such indemnity shall not apply to acts of wilful
misconduct or gross negligence on the part of the Company or the Trustee, as the
case may be.
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen
Securities. If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (a)
evidence to their satisfaction of the destruction, loss or theft of any Security
and (b) such security or indemnity as may be required by them to save each of
them and any agent of either of them harmless, then, in the absence of notice to
the Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of like tenor and
<PAGE> 37
28
principal amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of
any destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.07. Payment of Interest; Mechanics of Payment;
Interest Rights Preserved. (a) Interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment Date shall be paid
to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest; provided, however, that the Company may make a Deferral
Election on any Interest Payment Date in the event that Globalstar L.P. shall
have deferred payment of the Scheduled Distribution in respect of the Preferred
Partnership Interest corresponding to such interest payment. Interest Arrearages
will not themselves bear interest, but so long as any Interest Arrearage remains
outstanding, the Company will be prohibited from paying (i) dividends on its
Common Stock, (ii) dividends on any Preferred Stock or (iii) interest on debt
ranking pari passu with or junior to the Securities from time to time
outstanding, except with respect to any such
<PAGE> 38
29
pari passu debt, on a pro rata basis based on the aggregate principal amount of
such debt.
(b) Pursuant to the Globalstar Amended Partnership Agreement,
Globalstar L.P. shall deliver the Globalstar Interest Payment Notice to the
Company not later than 20 Business Days prior to each Interest Payment Date, and
in the event such Notice states the Scheduled Distribution due on such Interest
Payment Date will include the delivery of Ordinary Partnership Interests, the
Company shall deliver to Holders and Globalstar L.P. the GTL Interest Payment
Notice not later than 12 Business Days prior to each applicable Interest Payment
Date; provided, however, that the Company will only deliver the GTL Interest
Payment Notice to the Holders if the form of consideration to be used on the
applicable Interest Payment Date includes Common Stock.
(c) In the event Globalstar elects to, pursuant to the
Globalstar Amended Partnership Agreement, make the Scheduled Distribution due on
the Interest Payment Date in cash, the Company shall pay, to the extent such
Scheduled Distribution was paid in cash, the applicable interest payment due on
such Interest Payment Date in cash.
(d) In the event Globalstar elects to, pursuant to the
Globalstar Amended Partnership Agreement, make the Scheduled Distribution due on
the Interest Payment Date by delivering to the Company Ordinary Partnership
Interests, the Company may either (A) issue Common Stock in the manner set forth
in paragraph (e) of this Section and pay the applicable amount of interest due
in cash from the proceeds of such issuance or (B) deliver shares of Common Stock
in the manner set forth in Section 10.01(c).
(e) In the event the Company elects to issue Common Stock, the
proceeds of which will be used to pay the applicable interest payment due on the
Interest Payment Date, the Company shall issue such Common Stock not later than
five Business Days prior to the Interest Payment Date.
(f) Any Interest Arrearage on any Security may be paid by the
Company in any lawful manner not inconsistent with the requirements of the
Nasdaq National Market or any securities exchange on which the Securities may be
listed, and upon such notice as may be required by such exchange, if, after
notice given by the Company to the Trustee of the proposed payment pursuant to
this clause, such manner of payment shall be deemed practicable by the Trustee.
<PAGE> 39
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(g) Subject to the foregoing provisions of this Section, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
(h) Securities surrendered for conversion during the period
from the close of business on any Regular Record Date next preceding any
Interest Payment Date to the opening of business on such Interest Payment Date
(except Securities called for redemption on a Redemption Date within such
period) must be accompanied by payment in cash of an amount equal to the
interest thereon which the registered Holder is to receive; provided, that no
payment shall be owed or payable to any converting Holder if the Board of
Directors of the Company shall have elected to defer the interest payment to be
made on such Interest Payment Date pursuant to paragraph (a) of this Section. No
other adjustment for interest or dividends, including for any Interest
Arrearages, is to be made upon conversion. Fractional shares of Common Stock
will not be issued upon conversion, but in lieu thereof the Company will pay a
cash adjustment in the manner set forth in Section 12.03.
(i) In no event shall the Company make a Deferral Election if
Globalstar L.P. has made the applicable Scheduled Distribution.
SECTION 3.08. Persons Deemed Owners. Prior to due presentment
of a Security for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the Person in whose name such
Security is registered as the owner of such Security for the purpose of
receiving payment of the principal or Redemption Price of and (subject to
Section 3.07) interest on such Security and for all other purposes whatsoever,
whether or not such Security is overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary.
SECTION 3.09. Cancellation. All Securities surrendered for
payment, redemption, registration of transfer or exchange or conversion shall,
if surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by it. The Company may at any time deliver to the
Trustee for cancellation any Securities previously authenticated and delivered
hereunder which the
<PAGE> 40
31
Company may have acquired in any manner whatsoever, and all Securities so
delivered shall be promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section, except as expressly permitted by this Indenture. All canceled
Securities held by the Trustee shall be delivered to the Company by the Trustee.
SECTION 3.10. Computation of Interest. Interest on the
Securities shall be computed on the basis of a 360-day year of twelve 30-day
months.
SECTION 3.11. CUSIP Number. The Company in issuing Securities
may use a "CUSIP" number, and if so, the Trustee may use the CUSIP number in
notices of redemption or exchange as a convenience to Holders; provided that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Securities, and
that reliance may be placed only on the other identification numbers printed on
the Securities. The Company will promptly notify the Trustee of any change in
the CUSIP number.
ARTICLE IV
Satisfaction and Discharge
SECTION 4.01. Satisfaction and Discharge of Indenture. This
Indenture shall cease to be of further effect (except as to any surviving rights
of conversion, registration of transfer or exchange of Securities herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(a) either
(i) all Securities theretofore authenticated and
delivered (other than (A) Securities which have been
destroyed, lost or stolen and which have been replaced or paid
as provided in Section 3.06 and (B) Securities for whose
payment money and/or Common Stock has theretofore been
deposited in trust or segregated and held in trust by the
Company and thereafter repaid or redelivered to the Company or
discharged from such trust, as provided
<PAGE> 41
32
in Section 10.03) have been delivered to the Trustee for
cancellation; or
(ii) all such Securities not theretofore delivered to
the Trustee for cancellation
(A) have become due and payable, or
(B) will become due and payable at their
Mandatory Redemption Date within one year, or
(C) are to be called for redemption within
one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (A), (B) or (C) above, has
deposited or caused to be deposited with the Trustee as trust
funds in trust for that purpose (I) money in an amount, or
(II) U.S. Government Obligations that, through the scheduled
payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one
day before the due date of any payment, money in an amount or
(III) a combination thereof in each case sufficient to pay and
discharge the entire obligation on such Securities not
theretofore delivered to the Trustee for cancellation to the
date of such deposit (in the case of Securities which have
become due and payable) or to the Redemption Date, as the case
may be and, in the case of (B) or (C) above, has delivered to
the Trustee an Opinion of Counsel stating that (1) the Company
has received from, or there has been published by, the
Internal Revenue Service a ruling or (2) since the date of the
Indenture, there has been a change in the applicable United
States Federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall confirm
that, the Holders of the Securities will not recognize income,
gain or loss for United States Federal income tax purposes as
a result of such satisfaction and discharge and will be
subject to United States Federal income tax on the same
amounts, in the same manner and at the same times
<PAGE> 42
33
as would have been the case if such satisfaction
and discharge had not occurred;
(b) the Company has paid or caused to be paid all
other sums payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.06 and the obligations
of the Company to any Authenticating Agent under Section 6.13 shall survive.
SECTION 4.02. Application of Trust Money. All money deposited
with the Trustee pursuant to Section 4.01 shall be held in trust and applied by
it, in accordance with the provisions of the Securities and this Indenture, to
the payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the Persons
entitled thereto, of the principal, Redemption Price and interest for whose
payment such money has been deposited with the Trustee. All moneys and U.S.
Government Obligations deposited with the Trustee pursuant to Section 4.01 (and
held by it or any Paying Agent) for the payment of Securities subsequently
converted shall be returned to the Company upon receipt by the Trustee of an
Officers' Certificate.
ARTICLE V
Remedies
SECTION 5.01. Collection of Obligations and Suits
for Enforcement by Trustee. The Company covenants that if:
(a) default is made with respect to any payment due
on (including any Interest Arrearage) any Security at
the Mandatory Redemption Date thereof; or
(b) there is a failure to redeem any Security required to be
redeemed on a Provisional Redemption Date or an Optional Redemption
Date pursuant to the provisions of this Indenture;
<PAGE> 43
34
the Company will, upon demand of the Trustee, pay to it (in cash and/or Common
Stock, as elsewhere herein provided), for the benefit of the Holders of such
Securities, the whole amount then due and payable on such Securities for the
principal or Redemption Price of and interest with interest upon the overdue
principal or Redemption Price, (but excluding any Interest Make-Whole Payment),
at the rate borne by the Securities; and, in addition thereto, such further
amount (payable in cash) as shall be sufficient to cover the costs and expenses
of collection, including the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts and/or deliver such
Common Stock forthwith upon such demand, the Trustee, in its own name and as
trustee of an express trust, may institute a judicial proceeding for the
collection of sums so due and unpaid (including the delivery of such Common
Stock), may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Securities
and collect the moneys adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other obligor upon the
Securities, wherever situated.
SECTION 5.02. Trustee May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or the property of the Company or of such
other obligor or their creditors, the Trustee (irrespective of whether the
principal or Redemption Price of the Securities shall then be due and payable as
therein expressed and irrespective of whether the Trustee shall have made any
demand on the Company for the payment thereof) shall be entitled and empowered,
by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of
principal or Redemption Price and interest owing and unpaid in respect
of the Securities and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and
of the Holders allowed in such judicial proceeding; and
<PAGE> 44
35
(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same
after deduction of its charges and expenses;
and any receiver, assignee, trustee, liquidator, sequestrator or other similar
official in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.06.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan or reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 5.03. Trustee May Enforce Claims Without Possession of
Securities. All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 5.04. Application of Money Collected. Subject to
Article XIII, any money collected by the Trustee pursuant to this Article shall
be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal or
Redemption Price or interest upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
(a) to the payment of all amounts due the Trustee
under Section 6.06;
<PAGE> 45
36
(b) to the payment of the amounts then due and unpaid for
principal or Redemption Price of and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Securities for
principal or Redemption Price and interest respectively; and
(c) to the payment of the remainder, if any, to the Company,
its successors or assigns, or to whomsoever may be lawfully entitled to
the same, or as a court of competent jurisdiction may determine.
SECTION 5.05. Limitation on Suits. No Holder of
any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless
(a) the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written request to the
Trustee to institute proceedings in its own name as Trustee hereunder;
(b) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(c) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(d) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in principal amount of the outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
<PAGE> 46
37
SECTION 5.06. Right of Holders To Receive Principal, Premium
and Interest and To Convert. Notwithstanding any other provision in this
Indenture, but subject to Article XIII, the Holder of any Security shall have
the right to receive payment of the principal or Redemption Price of and
(subject to Section 3.07) interest on such Security on the Mandatory Redemption
Date expressed in such Security (or on any other Redemption Date) and to convert
such Security in accordance with Article XII and to institute suit for the
enforcement of any such payment and right to convert, and such rights shall not
be impaired without the consent of such Holder.
SECTION 5.07. Restoration of Rights and Remedies. If the
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 5.08. Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.09. Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder of any Security to exercise any right
or remedy accruing upon any default shall impair any such right or remedy or
constitute a waiver of any such default or an acquiescence therein. Every right
and remedy given by this Article or by law to the Trustee or to the Holders may
be exercised from time to time, and as often as may be deemed expedient, by the
Trustee or by the Holders, as the case may be.
SECTION 5.10. Control by Holders. The Holders of a majority in
principal amount of the Outstanding Securities
<PAGE> 47
38
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided that:
(a) such direction shall not be in conflict with
any rule of law or with this Indenture;
(b) such direction is not unduly prejudicial to the other
Holders or may involve the Trustee in personal liability or if the
Trustee determines that it does not have sufficient indemnity against
any loss or expense connected to such action; and
(c) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 5.11. Waiver of Past Defaults. The Holders of not less
than a majority in principal amount of the Outstanding Securities may on behalf
of the Holders of all the Securities waive any past default hereunder and its
consequences, except a default:
(a) in the payment of the principal or Redemption
Price of or interest on any Security; or
(b) in respect of a covenant or provision hereof which under
Article IX cannot be modified or amended without the consent of the
Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and
shall be deemed to have been cured, for every purpose of this Indenture but no
such waiver shall extend to any subsequent or other default or impair any right
consequent thereon.
SECTION 5.12. Undertaking for Costs. All parties to this
Indenture agree, and each Holder of any Security by such Holder's acceptance
thereof shall be deemed to have agreed, that any court may in its discretion
require, in any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees
<PAGE> 48
39
and expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in principal
amount of the Outstanding Securities or to any suit instituted by any Holder for
the enforcement of the payment of the principal or Redemption Price of or
interest on any Security on or after the Mandatory Redemption Date expressed in
such Security (or on or after any other Redemption Date) or for the enforcement
of the right to convert any Security in accordance with Article XII.
SECTION 5.13. Waiver of Stay, Usury or Extension Laws. The
Company covenants (to the extent that it may lawfully do so) that it will not at
any time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, usury or extension law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 5.14. Voting Rights Upon a Deferral Trigger Event. (a)
Upon a Deferral Trigger Event, (i) as provided in the Globalstar Amended
Partnership Agreement, the number of members of the General Partners' Committee
of Globalstar L.P. will be increased by one and the Holders of the Securities,
voting separately as a class with the holders of any other securities upon which
similar voting rights have been conferred and are exercisable, will be entitled
to elect one representative to the General Partners' Committee (the "CPE
Representative") and (ii) as provided in the Lock-Up Agreement, Loral SpaceCom
shall use its best efforts to cause the shareholders of the Company to approve
and elect a nominee to the Board of Directors of the Company designated by the
Holders of the Securities (the "CPE Nominee"). If the shareholders shall fail to
approve such CPE Nominee, Loral SpaceCom will seek the resignation of a Loral
SpaceCom Designee director from the Board of Directors and will use its best
efforts to cause the Board of Directors to appoint the CPE Nominee to the Board
of Directors until the next
<PAGE> 49
40
annual meeting of shareholders of the Company, at which time such appointment
will be submitted to the shareholders of the Company for their approval;
provided, however, that if such shareholder approval is not obtained, the
procedures described in clause (ii) above shall continue to be in effect.
(b) The CPE Representative and the CPE Nominee, if appointed
to the Board of Directors, will promptly resign upon receipt of notice from the
Company that all Interest Arrearages with respect to the Securities have been
paid.
ARTICLE VI
The Trustee
SECTION 6.01. Certain Duties and Responsibilities. (a) The
Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Indenture, and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
(b) In the absence of wilful misconduct on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture,
but, in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether they conform to
the requirements of this Indenture.
(c) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act or its own wilful misconduct, except that:
(i) this subsection shall not be construed to limit
the effect of subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
<PAGE> 50
41
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in accordance with the direction of
the Holders of a majority in principal amount of the Outstanding
Securities relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Indenture; and
(iv) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the liability
of or affording protection to the Trustee shall be subject to the provisions of
this Section.
SECTION 6.02. Certain Rights of Trustee. Except as otherwise
provided in Section 6.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party
or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
<PAGE> 51
42
(d) the Trustee may consult with counsel of its selection and
the advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note or other paper or document, but
the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation,
it shall be entitled to examine the books, records and premises of the
Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(h) the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Indenture.
SECTION 6.03. Not Responsible for Recitals or Issuance of
Securities. The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the
<PAGE> 52
43
Securities. The Trustee shall not be accountable for the use or application by
the Company or any Paying Agent other than the Trustee of Securities or the
proceeds thereof.
SECTION 6.04. May Hold Securities. The Trustee, any
Authenticating Agent, any Paying Agent, any Registrar or any other agent of the
Company, in its individual or any other capacity, may become the owner of
Securities and, subject to Section 6.11 and to Section 310(b) of the Trust
Indenture Act, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Registrar or
such other agent.
Subject to Section 310(b) of the Trust Indenture Act, the
Trustee may become and act as trustee under other indentures under which other
securities, or certificates of interest or participation in other securities, of
the Company are outstanding in the same manner as if it were not Trustee.
SECTION 6.05. Money Held in Trust. Money held by the Trustee
in trust hereunder need not be segregated from other funds except to the extent
required by law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed in writing with the
Company.
SECTION 6.06. Compensation and Reimbursement. The Company
agrees:
(a) to pay to the Trustee from time to time such compensation
as may be agreed upon by the Trustee and the Company from time to time
for all services rendered by it hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(b) to reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Indenture (including
the reasonable compensation and the expenses and disbursements of its
agents, counsel and other persons not regularly in its employ), except
to the extent any such expense,, disbursement or advance may be
attributable to its negligence or bad faith; and
<PAGE> 53
44
(c) to indemnify the Trustee (in its individual capacity and
as Trustee), its officers, directors, attorneys-in-fact and agents for,
and to hold each such person harmless against, any and all loss, claim,
damage, liability or expense, including taxes (other than taxes based
on the income of such person) incurred without negligence or bad faith
on such person's part, arising out of or in connection with the
acceptance or administration of this trust, including the costs and
expenses of defending itself against or investigating any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder.
The obligations of the Company under this Section 6.06 to
compensate and indemnify the Trustee and to pay or reimburse the
Trustee for expenses, disbursements and advances shall constitute
additional obligations hereunder and shall survive the satisfaction and
discharge of this Indenture. To secure the Company's payment
obligations in this Section 6.06, the Trustee shall have a lien prior
to the Securities on all money or property held or collected by the
Trustee except money or property held in trust to pay the principal of
or Redemption Price of or interest on particular Securities and such
lien shall survive the satisfaction and discharge of the Indenture and
any other termination of the Indenture including any termination under
any bankruptcy law. When the Trustee incurs expenses or renders
services in connection herewith, the Holders by their acceptance of the
Securities hereby agree that such expenses and the compensation for
such services are intended to constitute expenses of administration
under any bankruptcy law. "Trustee" for the purposes of this Section
6.06 shall include any predecessor Trustee, but the negligence or
willful misconduct of any Trustee shall not affect the indemnification
of any other Trustee.
SECTION 6.07. Corporate Trustee Required; Eligibility. The
Trustee shall at all times satisfy the requirements of Section 310 of the Trust
Indenture Act and together with its immediate parent maintain a combined capital
and surplus of at least $50,000,000, be subject to supervision or examination by
Federal or State authority and have its Corporate Trust Office in The City of
New York. If such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of said
<PAGE> 54
45
supervising or examining authority, then for the purposes of this Section, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
SECTION 6.08. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.09. If an
instrument of acceptance by a successor Trustee shall not have been delivered to
the Trustee within 30 days after the giving of notice of resignation or removal,
the Trustee resigning or being removed may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company.
(c) The Trustee may be removed at any time by Act of the
Holders of a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company.
(d) If at any time:
(i) the Trustee shall cease to be eligible under Section 6.07
and shall fail to resign after written request therefor by the Company
or by any such Holder; or
(ii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee, or (B) subject to Section 5.14, any Holder who has been a bona fide
Holder of a Security for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent
<PAGE> 55
46
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, the Trustee or any Holder who has been a bona fide Holder of a
Security for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by mailing
written notice of such event by first class mail, postage prepaid, to all
Holders as their names and addresses appear in the Security Register. Each
notice shall include the name of the successor Trustee and the address of its
Corporate Trust Office.
SECTION 6.09. Acceptance of Appointment by Successor. Every
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Company and to the retiring Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or the successor
Trustee, such retiring Trustee shall, upon payment of its charges pursuant to
Section 6.06, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder. Upon request of any such successor
Trustee, the
<PAGE> 56
47
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts. Any retiring Trustee shall, nevertheless, retain a lien on all property
or funds held or collected by such Trustee (except money or property held in
trust to pay the principal or Redemption Price or interest on particular
Securities) to secure any amounts then due pursuant to the provisions of Section
6.06.
Upon acceptance of appointment by a successor Trustee as
provided in this Section, the Company shall cause such successor Trustee to mail
notice of succession of such Trustee hereunder to all Holders of Securities as
the names and addresses of such Holders appear on the Security Register.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be eligible under this
Article and qualified under Section 310 of the Trust Indenture Act.
SECTION 6.10. Merger, Conversion, Consolidation or Succession
to Business. Any trust company, banking corporation or national banking
association into which the Trustee may be merged or converted or with which it
may be consolidated, or any trust company, banking corporation or national
banking association resulting from any merger, conversion or consolidation to
which the Trustee shall be a party, or any trust company, banking corporation or
national banking association succeeding to all or substantially all the
corporate trust business of the Trustee, shall be the successor of the Trustee
hereunder; provided, that such trust company, banking corporation or national
banking association shall be otherwise eligible under this Article and qualified
under Section 310 of the Trust Indenture Act, without the execution or filing of
any paper or any further act on the part of any of the parties hereto. In case
any Securities shall have been authenticated, but not delivered, by the Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Securities
so authenticated with the same effect as if such successor Trustee had itself
authenticated such Securities.
SECTION 6.11. Preferential Collection of Claims Against
Company. The Trustee is subject to Section 311(a) and (b) of the Trust Indenture
Act. Any Trustee that has resigned or been removed shall be subject to Section
311(a)
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and (b) of the Trust Indenture Act to the extent indicated therein.
SECTION 6.12. Appointment of Authenticating Agent. The Trustee
may appoint an Authenticating Agent or Agents which shall be authorized to act
on behalf of the Trustee to authenticate Securities issued upon exchange,
registration of transfer or partial redemption thereof or pursuant to Section
3.06, and Securities so authenticated shall be entitled to the benefits of this
Indenture and shall be valid and obligatory for all purposes as if authenticated
by the Trustee hereunder. Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the Trustee's
certificate of authentication, such reference shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be acceptable to the
Company and shall at all times be a corporation organized and doing business
under the laws of the United States of America, any State thereof or the
District of Columbia, authorized under such laws to act as Authenticating Agent,
having a combined capital and surplus of not less than $50,000,000 and subject
to supervision or examination by Federal or State authority. If such
Authenticating Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any trust company, banking corporation or national banking
association into which an Authenticating Agent may be merged or converted or
with which it may be consolidated or any trust company, banking corporation or
national banking association resulting from any merger, conversion or
consolidation to which such Authenticating Agent shall be a party, or any trust
company, banking corporation or national banking association succeeding to all
or substantially all the corporate trust business of an Authenticating Agent,
shall continue to be an Authenticating Agent; provided, that such trust company,
banking corporation or national banking
<PAGE> 58
49
association shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the Trustee
or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and to the Company. The Trustee may at any
time terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall mail written notice of
such appointment by first class mail, postage prepaid, to all Holders as their
names and addresses appear in the Security Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent herein. No
successor Authenticating Agent shall be appointed unless eligible under the
provisions of his Section.
The Company agrees to pay to each Authenticating Agent from
time to time reasonable compensation for its services under this Section.
If an appointment is made pursuant to this Section, the
Securities may have endorsed thereon, in addition to the Trustee's certificate
of authentication, an alternate certificate of authentication in the following
form:
This is one of the Securities referred to in the
within-mentioned Indenture.
Dated:
THE BANK OF NEW YORK, as
Trustee,
by
--------------------------
As Authenticating Agent
by
<PAGE> 59
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--------------------------
Authorized Signatory
ARTICLE VII
Holders' Lists and Reports by Trustee and Company
SECTION 7.01. Company To Furnish Trustee Names and
Addresses of Holders. The Company will furnish or cause to
be furnished to the Trustee:
(a) quarterly, not more than 15 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of
the names and addresses of the Holders as of such Regular Record Date,
and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Registrar.
SECTION 7.02. Preservation of Information; Communications to
Holders. (a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.01 and the names and
addresses of Holders received by the Trustee in its capacity as Registrar. The
Trustee may destroy any list furnished to it as provided in Section 7.01 upon
receipt of a new list so furnished.
(b) If three or more Holders (herein referred to as
"applicants") apply in writing to the Trustee, and furnish to the Trustee
reasonable proof that each such applicant has owned a Security for a period of
at least six months preceding the date of such application, and such application
states that the applicants desire to communicate with other Holders with respect
to their rights under this Indenture or under the Securities and is accompanied
by a copy of the form of proxy or other communication which such applicants
propose to transmit, then the Trustee shall, within five Business
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Days after the receipt of such application, at its election, either:
(i) afford such applicants access to the information
preserved at the time by the Trustee in accordance with Section
7.02(a), or
(ii) inform such applicants as to the approximate number of
Holders whose names and addresses appear in the information preserved
at the time by the Trustee in accordance with Section 7.02(a), and as
to the approximate cost of mailing to such Holders the form of proxy or
other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants
access to such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder whose name and address appear in the information
preserved at the time by the Trustee in accordance with Section 7.02(a) a copy
of the form of proxy or other communication which is specified in such request,
with reasonable promptness after a tender to the Trustee of the material to be
mailed and of payment, or provision for the payment, of the reasonable expenses
of mailing, unless within five days after such tender the Trustee shall mail to
such applicants and file with the Commission, together with a copy of the
material to be mailed, a written statement to the effect that, in the opinion of
the Trustee, such mailing would be contrary to the best interest of the Holders
or would be in violation of applicable law. Such written statement shall specify
the basis of such opinion. If the Commission, after opportunity for a hearing
upon the objections specified in the written statement so filed, shall enter an
order refusing to sustain any of such objections or if, after the entry of an
order sustaining one or more of such objections, the Commission shall find,
after notice and opportunity for hearing, that all the objections so sustained
have been met and shall enter an order so declaring, the Trustee shall mail
copies of such material to all such Holders with reasonable promptness after the
entry of such order and the renewal of such tender; otherwise the Trustee shall
be relieved of any obligation or duty to such applicants respecting their
application.
(c) Every Holder of Securities, by receiving and holding the
same, agrees with the Company and the Trustee that neither the Company nor the
Trustee nor any agent of
<PAGE> 61
52
either of them shall be held accountable by reason of the disclosure of any such
information as to the names and addresses of the Holders in accordance with
Section 7.02(b), regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under Section 7.02(b).
SECTION 7.03. Reports by Trustee. (a) The Trustee shall
transmit to Holders such reports concerning the Trustee and its actions under
this Indenture as may be required pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant hereto. If required by Section 313(a)
of the Trust Indenture Act, the Trustee shall, within 60 days after each May 15
following the date of this Indenture, deliver to Holders a brief report, dated
as of such May 15, which complies with the provisions of such Section 313(a).
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange, if
any, upon which the Securities are listed, with the Commission and with the
Company. The Company will promptly notify the Trustee when, if ever, the
Securities are listed on any stock exchange.
SECTION 7.04. SEC Reports; Reports by Company. (a) Whether or
not required by the rules and regulations of the SEC, so long as any Securities
are outstanding, the Company shall file with the Commission and, if requested,
furnish to the Trustee and to the Holders all quarterly and annual financial
information required to be contained in a filing with the Commission on Forms
10-Q and 10-K, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to annual information
only, a report thereon by the Company's certified independent accountants;
(b) The Company shall also (1) file with the Trustee and the
Commission, in accordance with rules and regulations prescribed from time to
time by the Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants of this
Indenture as may be required from time to time by such rules and regulations;
and (2) transmit by mail to all Holders, as their names and addresses appear in
the Security Register, within 30 days after the filing thereof with the Trustee,
such summaries of any information,
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documents and reports required to be filed by the Company pursuant to paragraphs
(b)(1) of this Section as may be required by rules and regulations prescribed
from time to time by the Commission.
(c) Delivery of such reports, information and documents to the
Trustee is for informational purposes only and the Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 7.05. Compliance Certificate. The Company shall
deliver to the Trustee, within 120 days after the end of each fiscal year of the
Company, an Officers' Certificate stating that a review of the activities of the
Company and its subsidiaries during the preceding fiscal year has been made
under the supervision of the signing Officers with a view to determining whether
the Company has kept, observed, performed and fulfilled its obligations under,
and complied with the covenants and conditions contained in, this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his knowledge the Company has kept, observed, performed and fulfilled
each and every covenant, and complied with the covenants and conditions
contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions hereof and that to the
best of his knowledge no event has occurred and remains in existence by reason
of which any payments on account of the Securities are prohibited.
One of the Officers signing such Officers' Certificate shall
be either the Company's principal executive officer, principal financial officer
or principal accounting officer.
ARTICLE VIII
Consolidation, Merger, Conveyance or Transfer
SECTION 8.01. Company May Consolidate, etc., Only on Certain
Terms. The Company shall not consolidate with or merge into any other
corporation or convey or transfer its
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properties and assets substantially as an entirety to any Person, unless:
(a) the corporation formed by such consolidation or into which
the Company is merged or the Person which acquires by conveyance or
transfer the properties and assets of the Company substantially as an
entirety shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the
Trustee, the due and punctual payment of the principal or Redemption
Price of and interest on all the Securities and the performance of
every covenant of this Indenture on the part of the Company to be
performed or observed and shall have provided for conversion rights in
accordance with Section 12.10; and
(b) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance or transfer and such supplemental
indenture comply with this Article and that all conditions precedent
herein provided for relating to such transaction have been complied
with.
SECTION 8.02. Successor Corporation Substituted. Upon any
consolidation or merger or any conveyance or transfer of the properties and
assets of the Company substantially as an entirety in accordance with Section
8.01, the successor corporation formed by such consolidation or into which the
Company is merged or to which such conveyance or transfer is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under this Indenture with the same effect as if such successor
corporation had been named as the Company herein, and thereafter the predecessor
corporation shall be relieved of all obligations and covenants under this
Indenture and the Securities.
ARTICLE IX
Supplemental Indentures
SECTION 9.01. Supplemental Indentures Without Consent of
Holders. Without the consent of any Holders, when authorized by a Board
Resolution, the Company may and the Trustee, at any time and from time to time,
shall enter into
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one or more indentures supplemental hereto, in form satisfactory to the Trustee,
for any of the following purposes:
(a) to evidence the succession of another corporation to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Securities; or
(b) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon
the Company; or
(c) to make provision with respect to the conversion rights of
Holders pursuant to the requirements of Section 12.06; or
(d) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture; provided, that such action
shall not adversely affect the interests of the Holders in any material
respect; or
(e) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect or maintain
the qualification of this Indenture under the Trust Indenture Act, or
under any similar Federal statute hereafter enacted.
SECTION 9.02. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than two-thirds in principal amount
of the Outstanding Securities, by Act of said Holders delivered to the Company
and the Trustee, the Company, when authorized by a Board Resolution, may and the
Trustee shall enter into an indenture or indentures supplemental hereto for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of modifying in any manner the rights of
the Holders under this Indenture; provided, however, that no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Security
affected thereby,
(a) change the Mandatory Redemption Date of any Security, or
the due date of any installment of interest on, any Security, or reduce
the principal amount or
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Redemption Price thereof or the rate of interest thereon or the amount
of any Interest Make-Whole Payment, or change the place of payment
where, or the coin or currency in which, any Security or any payment
thereon is payable, or impair the right to institute suit for the
enforcement of any such payment on or after the Mandatory Redemption
Date (or on or after other Redemption Dates), or adversely affect the
right to convert any Security as provided in Article XII, or adversely
affect the right to require the Company to redeem the Securities as
provided in Article XI or modify the provisions of this Indenture with
respect to the subordination of the Securities in a manner adverse to
the Holders, or
(b) reduce the percentage in principal amount of the
Outstanding Securities the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is
required for any waiver (of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture, or
(c) modify any of the provisions of this Section or Section
5.11, except to increase any such percentage or to provide that certain
other provisions of this Indenture cannot be modified or waived without
the consent of the Holder of each Outstanding Security affected
thereby.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 9.03. Execution of Supplemental Indentures. In
executing, or accepting the additional trusts created by, any supplemental
indenture permitted by this Article or the modifications thereby of the trusts
created by this Indenture, the Trustee shall be entitled to receive, and
(subject to Section 6.01) shall be fully protected in relying upon, an Opinion
of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
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SECTION 9.04. Effect of Supplemental Indentures. Upon the
execution of any supplemental indenture under this Article, this Indenture shall
be, and shall be deemed to be, modified in accordance therewith, and such
supplemental indenture shall form a part of this Indenture for all purposes; and
every Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 9.05. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act as then in effect.
SECTION 9.06. Reference in Securities to Supplemental
Indentures. Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company or the Trustee shall
so determine, new Securities so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any such supplemental indenture may be
prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities.
ARTICLE X
Covenants
SECTION 10.01. Payment of Principal, Premium and Interest. The
Company will duly and punctually pay or cause to be paid by no later than one
Business Day prior to the date such payment is due the principal or Redemption
Price of and interest on the Securities in accordance with the terms of the
Securities and this Indenture; provided, however, that the Company may defer
paying interest on any Interest Payment Date to the extent provided in Section
3.07.
(b) The Company may make any payments due on the Securities,
including redemption payments, interest payments and the Interest Make-Whole
Payment, (i) in cash, (ii) by delivery of Common Stock (in the manner described
in paragraph (c) of this Section); or (iii) through any combination of the
foregoing; provided, however, that if Globalstar L.P. shall have paid the
Scheduled Distribution or
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the Globalstar Corresponding Redemption on the Preferred Partnership Interests
in cash, the Company shall make the corresponding payment in cash. The Company
may make a cash payment from the proceeds of an issuance of Common Stock
following a payment by Globalstar L.P. through a delivery of Ordinary
Partnership Interests. The Company also may make any interest payments
notwithstanding the fact that it shall not have received a Scheduled
Distribution on the Preferred Partnership Interests for the corresponding
Interest Payment Date.
(c) If the Company elects to deliver any Common Stock in lieu
of a cash payment on any applicable date of payment, the Company shall deliver,
in the aggregate, the number of shares of Common Stock equal to (i) the amount
of payment that is not being paid in cash divided (ii) by: (A) in the case of
interest payments and any Interest Make-Whole Payment, 90% of the Average Market
Value of the Common Stock; or (B) in the case of all other payments, 100% of the
Average Market Value of the Common Stock. No fractional shares of Common Stock
will be delivered to a Holder, but the Company shall instead pay a cash
adjustment determined as set forth in Section 12.03. Any portion of principal
that is declared and not paid through the delivery of shares of Common Stock
shall be paid in cash.
SECTION 10.02. Maintenance of Office or Agency. The Company
will maintain in The City of New York and in a European city an office or agency
where Securities may be presented or surrendered for payment or repurchase where
Securities may be surrendered for registration of transfer or exchange, where
Securities may be surrendered for conversion and where notices and demands to or
upon the Company in respect of the Securities and this Indenture may be served.
The Company will give prompt written notice to the Trustee of the location, and
any change in the location, of such offices or agencies. If at any time the
Company shall fail to maintain any such required offices or agencies or shall
fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and the Company hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside The City of New York) where the
Securities may be presented or surrendered for any or all such purposes and may
from time to
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time rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in The City of New York for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
SECTION 10.03. Security Payments To Be Held in Trust. If the
Company shall at any time act as its own Paying Agent it will, on or before each
due date with respect to any of the Securities, segregate and hold in trust for
the benefit of the Persons entitled thereto the applicable amount of cash or
Common Stock, as the case may be, sufficient to pay, in the case of a cash
payment, or deliver, in the case of delivery of Common Stock, the amount so
becoming due and not deferred pursuant to a Deferral Election until such cash
shall be paid or such Common Stock shall be delivered to such Persons or
otherwise disposed of as herein provided and will promptly notify the Trustee of
its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it
will prior to each due date with respect to any Securities, deposit with a
Paying Agent the applicable amount of cash or Common Stock, as the case may be,
sufficient to pay, in the case of a cash payment, or deliver, in the case of
delivery of Common Stock, the amount so becoming due and not deferred pursuant
to a Deferred Election, to be held in trust for the benefit of the Persons
entitled to such payment or delivery, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its action or failure
so to act.
The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent will:
(a) hold all cash or Common Stock, as the case may be, held by
it for payment or delivery with respect to Securities in trust for the
benefit of the Persons entitled thereto until such sums shall be paid
or delivered to such Persons or otherwise disposed of as herein
provided;
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(b) give the Trustee notice of any default by the Company (or
any other obligor upon the Securities) in the making of any payment or
delivery that has not been deferred pursuant to a Deferral Election;
and
(c) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay, in the case of
cash, or deliver, in the case of Common Stock, to the Trustee all such
cash or Common Stock so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, in
the case of cash, or deliver, in the case of Common Stock, or by Company Order
direct any Paying Agent to pay, in the case of cash, or deliver, in the case of
Common Stock, to the Trustee all such cash or Common Stock held in trust by the
Company or such Paying Agent, to be held by the Trustee upon the same trusts as
those upon which such cash or Common Stock were held by the Company or such
Paying Agent; and, upon such payment or delivery, as the case may be, by the
Company or any Paying Agent to the Trustee, the Company or such Paying Agent
shall be released from all further liability with respect to such cash or Common
Stock.
The Company may use, with respect to Security payments by
delivery of Common Stock, its then current transfer agent to act as a Paying
Agent.
Any cash or Common Stock deposited with the Trustee or any
Paying Agent, or then held by the Company, in trust for payment or delivery with
respect to any Security and remaining unclaimed for two years after the
applicable due date shall be returned to the Company on Company Request, or (if
then held by the Company) shall be discharged from such trust; and the Holder of
such Security shall thereafter, as an unsecured general creditor, look only to
the Company for payment or delivery thereof, and all liability of the Trustee or
such Paying Agent with respect to such cash or Common Stock, and all liability
of the Company as trustee thereof, shall thereupon cease; provided, however,
that the Trustee or such Paying Agent, before being required to make any such
return, may at the expense of the Company cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in the Borough of Manhattan, The City of
New York, notice that such cash or Common Stock remains
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unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such publication, any unclaimed balance of such cash or
Common Stock then remaining will be returned to the Company.
SECTION 10.04. Corporate Existence. Subject to Article VIII,
the Company will do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate existence, rights (charter and
statutory) and franchises; provided, however, that the Company shall not be
required to preserve any such right or franchise if the Company shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and that the loss thereof is not disadvantageous in any
material respect to the Holders.
SECTION 10.05. Waiver of Certain Covenants. The Company may
omit in any particular instance to comply with any covenant or condition set
forth in Section 10.04, if before the time for such compliance the Holders of at
least a majority in principal amount of the Outstanding Securities shall, by Act
of such Holders, either waive such compliance in such instance or generally
waive compliance with such covenant or condition, but no such waiver shall
extend to or affect such covenant or condition except to the extent so expressly
waived, and, until such waiver shall become effective, the obligations of the
Company and the duties of the Trustee in respect of any such covenant or
condition shall remain in full force and effect.
ARTICLE XI
Redemption of Securities
SECTION 11.01. Right of Redemption; Mechanics of Redemption.
(a) The Securities (i) may be redeemed, pursuant to either a Provisional
Redemption (as described in Section 5 of the Security, any such Provisional
Redemption shall include any Interest Make-Whole Payment) or Optional Redemption
(as described in Section 6 of the Security), at the election of the Company, as
a whole or from time to time in part, at any time permitted under the terms of
such Sections of the Securities, and (ii) shall be redeemed at the Mandatory
Redemption Date, any such Redemption at the Redemption Prices specified in the
Security set forth for redemptions, together with accrued interest to the
applicable Redemption Date.
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(b) Pursuant to the Globalstar Amended Partnership Agreement,
Globalstar L.P. shall deliver a Globalstar Redemption Notice to the Company not
later than 20 Business Days prior to each such Redemption Date. The Company
shall deliver the GTL Redemption Notice no later than one Business Day following
receipt of the Globalstar Redemption Notice, and in the event the Globalstar
Redemption Notice states the Globalstar Corresponding Redemption due on such
Redemption Date will include the delivery of Ordinary Partnership Interests, the
Company shall deliver to the Holders and Globalstar L.P. a GTL Response
Redemption Notice not later than 12 Business Days prior to such Redemption Date;
provided, however, the Company will only deliver the GTL Response Redemption
Notice to the Holders if the form of consideration to be used includes Common
Stock.
(c) In the event Globalstar elects to, pursuant to the
Globalstar Amended Partnership Agreement, make the Globalstar Corresponding
Redemption on the Redemption Date in cash, the Company shall, to the extent such
Corresponding Globalstar Redemption was paid in cash, make the applicable
redemption payment due on such Redemption Date in cash.
(d) In the event Globalstar elects to, pursuant to the
Globalstar Amended Partnership Agreement, make the Globalstar Corresponding
Redemption due on the Redemption Date by delivering to the Company Ordinary
Partnership Interests, the Company may either (A) issue Common Stock in the
manner set forth in paragraph (e) of this Section and pay the applicable
redemption payment in cash from the proceeds of such issuance or (B) deliver
shares of Common Stock in the manner set forth in Section 10.01(c).
(e) In the event the Company elects to issue Common Stock, the
proceeds of which will be used to pay the applicable redemption payment due on
such Redemption Date, the Company shall issue such Common Stock not later than
five Business Days prior to such Redemption Date.
(f) The Company may not initiate either a Provisional
Redemption or an Optional Redemption unless and until it receives the Globalstar
Redemption Notice.
SECTION 11.02. Applicability of Article. Redemption of
Securities at the election of the Company or otherwise as permitted or required
by any provision of this Indenture, shall be made in accordance with such
provision and this Article.
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SECTION 11.03. Election To Redeem. The election of the Company
to redeem any Securities pursuant to Section 11.01 shall be evidenced by a Board
Resolution.
SECTION 11.04. Selection by Trustee of Securities To Be
Redeemed. If less than all the Securities are to be redeemed the particular
Securities to be redeemed shall be selected not more than 20 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, pro rata or by lot or by such other method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of portions (equal to $50.00 or any integral multiple thereof) of the
principal amount of Securities of a denomination larger than $50.00.
If any Security selected for partial redemption is converted
in part before termination of the conversion right with respect to the portion
of the Security so selected, the converted portion of such Security shall be
deemed (so far as may be) to be the portion selected for redemption. Securities
which have been converted during a selection of Securities to be redeemed shall
be treated by the Trustee as Outstanding for the purpose of such selection but
not for the purpose of the payment of the Redemption Price.
The Trustee shall promptly notify the Company and the
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected for partial redemption, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Securities
shall relate, in the case of any Securities redeemed or to be redeemed only in
part, to the portion of the principal amount of such Security which has been or
is to be redeemed.
SECTION 11.05. Notice of Redemption. Whenever a GTL Redemption
Notice or GTL Response Redemption Notice is required to be delivered to the
Holders, such Notice shall provide the information set forth in the definition
thereof and be given by first class mail, postage prepaid to each Holder of
Securities to be redeemed, at his address appearing in the Security Register.
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In addition, all GTL Redemption Notices shall identify the
Securities to be redeemed (including CUSIP number) and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) if less than all the Outstanding Securities are to be
redeemed, the identification (and, in the case of partial redemption,
the principal amounts) of the particular Securities to be redeemed;
(4) that on the Redemption Date the Redemption Price, together
with (unless the Redemption Date shall be an Interest Payment Date)
interest accrued and unpaid to the Redemption Date, will become due and
payable upon each such Security to be redeemed and that interest
thereon will cease to accrue on and after said date;
(5) the conversion price, the date on which the right to
convert the principal of the Securities to be redeemed will terminate
and the place or places where such Securities may be surrendered for
conversion; and
(6) the place or places where such Securities are to be
surrendered for payment of the Redemption Price.
The GTL Redemption Notice and the GTL Response Redemption
Notice shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company; provided, however, that
if the Company so requests, it shall provide the Trustee adequate time, as
reasonably determined by the Trustee, to deliver such notices in a timely
fashion.
SECTION 11.06. Deposit of Redemption Price. Prior to any
Redemption Date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust) an amount of consideration sufficient to pay, in the case of a cash
payment, or deliver, in the case of delivery of Common Stock, the Redemption
Price of and (except if the Redemption Date shall be an Interest Payment Date)
accrued interest on all the Securities which are to be redeemed on that date
other than any Securities called for redemption on that date which have been
converted prior to the date of such deposit.
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If any Security called for redemption is converted, any cash
or Common Stock deposited with the Trustee or with any Paying Agent or so
segregated and held in trust for the redemption of such Security shall (subject
to any right of the Holder of such Security or any Predecessor Security to
receive interest as provided in Section 3.07(h)) be paid or delivered to the
Company upon Company Request or, if then held by the Company, shall be
discharged from such trust. Any Interest Make-Whole Payment will be paid to the
Holder of Record on the date of conversion or Redemption Date, as the case may
be.
SECTION 11.07. Securities Payable on Redemption Date. Notice
of redemption having been given as aforesaid, the Securities so to be redeemed
shall, on the Redemption Date, become due and payable at the Redemption Price
therein specified, and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest, including
any Interest Make-Whole Payment) such Securities shall cease to bear interest.
Upon surrender of any such Security for redemption in accordance with said
notice, such Security shall be paid, subject to Section 3.07(h), by the Company
at the Redemption Price, together with accrued interest to the Redemption Date.
If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the Redemption Price thereof, exclusive
of accrued interest and including any Interest Make-Whole Payment, shall, until
paid, bear interest from the Redemption Date at the rate borne by the Security.
SECTION 11.08. Securities Redeemed in Part. Any Security which
is to be redeemed only in part shall be surrendered at any office or agency of
the Company designated for that purpose (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company, the Trustee and the Registrar duly executed by, the
Holder thereof or his attorney duly authorized in writing), and the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder of
such Security without service charge, a new Security or Securities, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
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ARTICLE XII
Conversion of Securities
SECTION 12.01. Conversion Privilege and Conversion Price.
Subject to and upon compliance with the provisions of this Article, at the
option of the Holder thereof, any Security or any portion of the principal
amount thereof which is $50.00 or an integral multiple thereof may be converted
at the principal amount thereof, or of such portion thereof, into fully paid and
nonassessable shares (calculated as to each conversion to the nearest 1/100 of a
share) of Common Stock of the Company, at the conversion price, determined as
hereinafter provided, in effect at the time of conversion. Such conversion right
shall expire at the close of business on the Business Day preceding the
Mandatory Redemption Date. In case a Security or portion thereof is called for
redemption, such conversion right in respect of the Security or portion so
called shall expire at the close of business on the Business Day preceding the
Redemption Date, unless the Company defaults in making the payment due upon
redemption.
The price at which shares of Common Stock shall be delivered
upon conversion (herein called the "Conversion Price") shall be initially $65.00
per share of Common Stock. The Conversion Price shall be adjusted in certain
instances as provided in Section 12.04 and Section 12.06.
SECTION 12.02. Exercise of Conversion Privilege. In order to
exercise the conversion privilege, the Holder of any Security to be converted
shall surrender such Security, duly endorsed or assigned to the Company or in
blank, at any office or agency of the Company maintained for that purpose,
accompanied by written notice to the Company at such office or agency that the
Holder elects to convert such Security or, if less than the entire principal
amount thereof is to be converted, the portion thereof to be converted. In
connection with the exercise of the conversion privilege by a Holder prior to a
Redemption Date, a Holder's right to exercise his conversion privilege shall
terminate at the close of business on the Business Day prior to the Redemption
Date. Securities surrendered for conversion during the period from the close of
business on any Regular Record Date next preceding any Interest Payment Date to
the opening of business on such Interest Payment Date shall (except in the case
of Securities or portions thereof which have been called for redemption on a
Redemption Date within such period) be accompanied by payment in New York
Clearing House funds or
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other funds acceptable to the Company of an amount in cash equal to the interest
payable on such Interest Payment Date on the principal amount of Securities
being surrendered for conversion. Except as provided in the preceding sentence
and subject to Section 3.07(h), no payment or adjustment shall be made upon any
conversion on account of any interest accrued on the Securities surrendered for
conversion or on account of any dividends on the Common Stock issued upon
conversion. In no event shall the Company be obligated to pay any converting
Holder any unpaid Interest Arrearages upon conversion.
Securities shall be deemed to have been converted immediately
prior to the close of business on the day of surrender of such Securities for
conversion in accordance with the foregoing provisions, and at such time the
rights of the Holders of such Securities as Holders shall cease, and the person
or persons entitled to receive the Common Stock issuable upon conversion shall
be treated for all purposes as the record holder or holders of such Common Stock
at such time. As promptly as practicable on or after the conversion date, the
Company shall issue and shall deliver at such office or agency a certificate or
certificates for the number of full shares of Common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share, as
provided in Section 12.03.
In the case of any Security which is converted in part only,
upon such conversion the Company shall execute and the Trustee shall
authenticate and deliver to the Holder thereof, at the expense of the Company, a
new Security or Securities of authorized denominations in aggregate principal
amount equal to the unconverted portion of the principal amount of such
Security.
SECTION 12.03. Fractions of Shares. No fractional shares of
Common Stock shall be issued upon the conversion of Securities. If more than one
Security shall be surrendered for conversion at one time by the same Holder, the
number of full shares which shall be issuable upon conversion thereof shall be
computed on the basis of the aggregate principal amount of Securities (or
specified portions thereof) so surrendered. Instead of any fractional share of
Common Stock which would otherwise be issuable upon conversion of any Security
or Securities (or specified portions thereof), the Company shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction
of the closing price (as defined in Section 12.04(g)(i)) per share
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of Common Stock at the close of business on the Business Day prior to the day of
conversion.
SECTION 12.04. Adjustment of Conversion Price. The Conversion
Price shall be adjusted from time to time by the Company as follows:
(a) If the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding Common Stock in shares
of Common Stock, the Conversion Price in effect at the opening of
business on the date following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution
shall be reduced by multiplying such Conversion Price by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the Record Date (as defined in
Section 12.04(g)) fixed for such determination and the denominator
shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such reduction
to become effective immediately after the opening of business on the
day following the Record Date. If any dividend or distribution of the
type described in this Section 12.04(a) is declared but not so paid or
made, the Conversion Price shall again be adjusted to the Conversion
Price which would then be in effect if such dividend or distribution
had not been declared.
(b) If the Company shall issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share
less than the Current Market Price (as defined in Section 12.04 (g))
(other than the GTL Guarantee Warrants) on the Record Date fixed for
the determination of stockholders entitled to receive such rights or
warrants, the Conversion Price shall be adjusted so that the same shall
equal the price determined by multiplying the Conversion Price in
effect at the opening of business on the date after such Record Date by
a fraction of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the Record Date
plus the number of shares of Common Stock which the aggregate offering
price of the total number of shares so offered would purchase at such
Current Market Price and of which the denominator shall be the number
of shares of Common
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69
Stock outstanding at the close of business on the Record Date plus the
total number of additional shares of Common Stock so offered for
subscription or purchase. Such adjustment shall become effective
immediately after the opening of business on the day following the
Record Date fixed for determination of stockholders entitled to receive
such rights or warrants. To the extent that shares of Common Stock are
not delivered pursuant to such rights or warrants, upon the expiration
or termination of such rights or warrants the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in
effect had the adjustments made upon the issuance of such rights or
warrants been made on the basis of delivery of only the number of
shares of Common Stock actually delivered. If such rights or warrants
are not so issued, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such date fixed
for the determination of stockholders entitled to receive such rights
or warrants had not been fixed. In determining whether any rights or
warrants entitle the holders to subscribe for or purchase shares of
Common Stock at less than such Current Market Price, and in determining
the aggregate offering price of such shares of Common Stock, there
shall be taken into account any consideration received for such rights
or warrants, with the value of such consideration, if other than cash,
to be determined by the Board of Directors.
(c) If the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and, conversely, if the outstanding shares
of Common Stock shall be combined into a smaller number of shares of
Common Stock, the Conversion Price in effect at the opening of business
on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(d) If the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock shares of any class of capital stock
of the Company
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70
(other than any dividends or distributions to which Section 12.04(a)
applies) or evidences of its indebtedness, cash or other assets
(including securities, but excluding any rights or warrants of a type
referred to in Section 12.04(b) and dividends and distributions paid
exclusively in cash and excluding any capital stock, evidences of
indebtedness, cash or assets distributed upon a merger or consolidation
to which Section 12.10 applies) (the foregoing hereinafter in this
Section 12.04(d) called the "Distributed Securities"), then, in each
such case, the Conversion Price shall be reduced so that the same shall
be equal to the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on the Record Date
(as defined in Section 12.04(g)) with respect to such distribution by a
fraction of which the numerator shall be the Current Market Price
(determined as provided in Section 12.04(g)) on such date less the fair
market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the
Board of Directors) on such date of the portion of the Distributed
Securities so distributed applicable to one share of Common Stock and
the denominator shall be such Current Market Price, such reduction to
become effective immediately prior to the opening of business on the
day following the Record Date; provided, however, that, in the event
the then fair market value (as so determined) of the portion of the
Distributed Securities so distributed applicable to one share of Common
Stock is equal to or greater than the Current Market Price on the
Record Date, in lieu of the foregoing adjustment, adequate provision
shall be made so that each Holder of Securities shall have the right to
receive upon conversion of a Security (or any portion thereof) the
amount of Distributed Securities such Holder would have received had
such Holder converted such Security (or portion thereof) immediately
prior to such Record Date. If such dividend or distribution is not so
paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such dividend or
distribution had not been declared. If the Board of Directors
determines the fair market value of any distribution for purposes of
this Section 12.04(d) by reference to the actual or when issued trading
market for any securities comprising all or part of such distribution,
it must in doing so consider the prices in
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such market over the same period used in computing the Current Market
Price pursuant to Section 12.04(g) to the extent possible.
Rights or warrants distributed by the Company to all holders
of Common Stock entitling the holders thereof to subscribe for or
purchase shares of the Company's capital stock (either initially or
under certain circumstances), which rights or warrants, until the
occurrence of a specified event or events ("Dilution Trigger Event"):
(i) are deemed to be transferred with such shares of Common Stock; (ii)
are not exercisable; and (iii) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been distributed
for purposes of this Section 12.04(d) (and no adjustment to the
Conversion Price under this Section 12.04(d) shall be required) until
the occurrence of the earliest Dilution Trigger Event, whereupon such
rights and warrants shall be deemed to have been distributed and an
appropriate adjustment to the Conversion Price under this Section
12.04(d) shall be made. If any such rights or warrants, including any
such existing rights or warrants distributed prior to the date of this
Indenture, are subject to subsequent events, upon the occurrence of
each of which such rights or warrants shall become exercisable to
purchase different securities, evidences of indebtedness or other
assets, then the occurrence of each such event shall be deemed to be
such date of issuance and record date with respect to new rights or
warrants (and a termination or expiration of the existing rights or
warrants without exercise by the holder thereof). In addition, in the
event of any distribution (or deemed distribution) of rights or
warrants, or any Dilution Trigger Event with respect thereto, that was
counted for purposes of calculating a distribution amount for which an
adjustment to the Conversion Price under this Section 12.04 was made,
(1) in the case of any such rights or warrants which shall all have
been redeemed or repurchased without exercise by any holders thereof,
the Conversion Price shall be readjusted upon such final redemption or
repurchase to give effect to such distribution or Dilution Trigger
Event, as the case may be, as though it were a cash distribution, equal
to the per share redemption or repurchase price received by a holder or
holders of Common Stock with respect to such rights or warrants
(assuming such holder had retained such rights or warrants), made to
all holders of Common
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Stock as of the date of such redemption or repurchase, and (2) in the
case of such rights or warrants which shall have expired or been
terminated without exercise by any holders thereof, the Conversion
Price shall be readjusted as if such rights and warrants had not been
issued.
Notwithstanding any other provision of this Section 12.04(d)
to the contrary, rights, warrants, evidences of indebtedness, other
securities, cash or other assets (including, without limitation, any
rights distributed pursuant to any stockholder rights plan) shall be
deemed not to have been distributed for purposes of this Section
12.04(d) if the Company makes proper provision so that each Holder of
Securities who converts a Security (or any portion thereof) after the
date fixed for determination of stockholders entitled to receive such
distribution shall be entitled to receive upon such conversion, in
addition to the shares of Common Stock issuable upon such conversion,
the amount and kind of such distributions that such Holder would have
been entitled to receive if such Holder had, immediately prior to such
determination date, converted such Security into Common Stock.
For purposes of this Section 12.04(d) and Sections 12.04(a)
and (b), any dividend or distribution to which this Section 12.04(d) is
applicable that also includes shares of Common Stock, or rights or
warrants to subscribe for or purchase shares of Common Stock to which
Section 12.04(b) applies (or both), shall be deemed instead to be (1) a
dividend or distribution of the evidences of indebtedness, assets,
shares of capital stock, rights or warrants other than such shares of
Common Stock or rights or warrants to which Section 12.04(b) applies
(and any Conversion Price reduction required by this Section 12.04(d)
with respect to such dividend or distribution shall then be made)
immediately followed by (2) a dividend or distribution of such shares
of Common Stock or such rights or warrants (and any further Conversion
Price reduction required by Sections 12.04(a) and (b) with respect to
such dividend or distribution shall then be made), except that (a) the
Record Date of such dividend or distribution shall be substituted as
"the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution", "Record Date fixed for
such determination" and "Record Date" within the
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meaning of Section 12.04(a) and as "the date fixed for the
determination of stockholders entitled to receive such rights or
warrants", "the Record Date fixed for the determination of the
stockholders entitled to receive such rights or warrants" and "such
Record Date" within the meaning of Section 12.04(b), and (b) any shares
of Common Stock included in such dividend or distribution shall not be
deemed "outstanding at the close of business on the date fixed for such
determination" within the meaning of Section 12.04(a).
(e) If the Company shall, by dividend or otherwise, distribute
to all holders of its Common Stock cash (excluding any cash that is
distributed upon a merger or consolidation to which Section 12.10
applies or as part of a distribution referred to in Section 12.04(d))
in an aggregate amount that, combined together with (1) the aggregate
amount of any other such distributions to all holders of its Common
Stock made exclusively in cash within the 12 months preceding the date
of payment of such distribution, and in respect of which no adjustment
pursuant to this Section 12.04(e) has been made, and (2) the aggregate
of any cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors) of consideration payable in
respect of any tender offer by the Company for all or any portion of
the Common Stock concluded within the 12 months preceding the date of
payment of such distribution, and in respect of which no adjustment
pursuant to Section 12.04(f) has been made, exceeds 10% of the product
of the Current Market Price (determined as provided in Section
12.04(g)) on the Record Date with respect to such distribution times
the number of shares of Common Stock outstanding on such date, then,
and in each such case, immediately after the close of business on such
date, the Conversion Price shall be reduced so that the same shall
equal the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on such Record Date
by a fraction (i) the numerator of which shall be equal to the Current
Market Price on the Record Date less an amount equal to the quotient of
(x) the excess of such combined amount over such 10% and (y) the number
of shares of Common Stock outstanding on the Record Date and (ii) the
denominator of which shall be equal to the Current Market Price on such
Record Date; provided, however, that, if the portion of the cash so
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74
distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price of the Common Stock on the Record
Date, in lieu of the foregoing adjustment, adequate provision shall be
made so that each Holder of Securities shall have the right to receive
upon conversion of a Security (or any portion thereof) the amount of
cash such Holder would have received had such Holder converted such
Security (or portion thereof) immediately prior to such Record Date. If
such dividend or distribution is not so paid or made, the Conversion
Price shall again be adjusted to be the Conversion Price which would
then be in effect if such dividend or distribution had not been
declared. Any cash distribution to all holders of Common Stock as to
which the Company makes the election permitted by Section 12.04(m) and
as to which the Company has complied with the requirements of such
Section shall be treated as not having been made for all purposes of
this Section 12.04(e).
(f) If a tender offer made by the Company or any of its
subsidiaries for all or any portion of the Common Stock expires and
such tender offer (as amended upon the expiration thereof) requires the
payment to stockholders (based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased Shares (as
defined below)) of an aggregate consideration having a fair market
value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of
Directors) that, combined together with (1) the aggregate of the cash
plus the fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a resolution
of the Board of Directors), as of the expiration of such tender offer,
of consideration payable in respect of any other tender offers, by the
Company or any of its subsidiaries for all or any portion of the Common
Stock expiring within the 12 months preceding the expiration of such
tender offer and in respect of which no adjustment pursuant to this
Section 12.04(f) has been made and (2) the aggregate amount of any
distributions to all holders of the Common Stock made exclusively in
cash within 12 months preceding the expiration of such tender offer and
in respect of which no adjustment pursuant to Section 12.04(e) has been
made, exceeds 10% of the product of the Current Market Price
(determined as provided in Section 12.04(g)) as of the last time (the
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75
"Expiration Time") tenders could have been made pursuant to such tender
offer (as it may be amended) times the number of shares of Common Stock
outstanding (including any tendered shares) at the Expiration Time,
then, and in each such case, immediately prior to the opening of
business on the day after the date of the Expiration Time, the
Conversion Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the date of the
Expiration Time by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding (including any tendered
shares) at the Expiration Time multiplied by the Current Market Price
of the Common Stock on the Trading Day next succeeding the Expiration
Time and the denominator shall be the sum of (x) the fair market value
(determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in
the terms of the tender offer) of all shares validly tendered and not
withdrawn as of the Expiration Time (the shares deemed so accepted, up
to any such maximum, being referred to as the "Purchased Shares") and
(y) the product of the number of shares of Common Stock outstanding
(less any Purchased Shares) at the Expiration Time and the Current
Market Price of the Common Stock on the Trading Day next succeeding the
Expiration Time, such reduction (if any) to become effective
immediately prior to the opening of business on the day following the
Expiration Time. If the Company is obligated to purchase shares
pursuant to any such tender offer, but the Company is permanently
prevented by applicable law from effecting any such purchases or all
such purchases are rescinded, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if
such tender offer had not been made. If the application of this Section
12.04(f) to any tender offer would result in an increase in the
Conversion Price, no adjustment shall be made for such tender offer
under this Section 12.04(f).
(g) For purposes of this Section 12.04, the following terms
shall have the meaning indicated:
(i) "closing price" with respect to any securities on
any day means the closing price on such day or, if no such
sale takes place on such day, the average of the reported high
and low
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prices on such day, in each case on The Nasdaq National Market
or the New York Stock Exchange, as applicable, or, if such
security is not listed or admitted to trading on such national
market or exchange, on the principal national securities
exchange or quotation system on which such security is quoted
or listed or admitted to trading, or, if not quoted or listed
or admitted to trading on any national securities exchange or
quotation system, the average of the high and low prices of
such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau
Incorporated or a similar generally accepted reporting
service, or, if not so available, in such manner as furnished
by any New York Stock Exchange member firm selected from time
to time by the Board of Directors for that purpose, or a price
determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a
resolution of the Board of Directors.
(ii) "Current Market Price" means the average of the
daily closing prices per share of Common Stock for the 10
consecutive trading days immediately prior to the date in
question; provided, however, that (A) if the "ex" date (as
hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an
adjustment to the Conversion Price pursuant to Section
12.04(a), (b), (c), (d), (e) or (f) occurs during such 10
consecutive trading days, the closing price for each trading
day prior to the "ex" date for such other event shall be
adjusted by multiplying such closing price by the same
fraction by which the Conversion Price is so required to be
adjusted as a result of such other event, (B) if the "ex" date
for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 12.04(a), (b), (c), (d),
(e) or (f) occurs on or after the "ex" date for the issuance
or distribution requiring such computation and prior to the
day in question, the closing price for each trading day on and
after the "ex" date for such other event shall be adjusted by
multiplying such closing price by the reciprocal of the
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fraction by which the Conversion Price is so required to be
adjusted as a result of such other event and (C) if the "ex"
date for the issuance or distribution requiring such
computation is prior to the day in question, after taking into
account any adjustment required pursuant to clause (A) or (B)
of this proviso, the closing price for each trading day on or
after such "ex" date shall be adjusted by adding thereto the
amount of any cash and the fair market value (as determined by
the Board of Directors in a manner consistent with any
determination of such value for purposes of Section 12.04(d)
or (f), whose determination shall be conclusive and described
in a resolution of the Board of Directors) of the evidences of
indebtedness, shares of capital stock or assets being
distributed applicable to one share of Common Stock as of the
close of business on the day before such "ex" date. For
purposes of any computation under Section 12.04(f), the
Current Market Price on any date shall be deemed to be the
average of the daily closing prices per share of Common Stock
for such day and the next two succeeding trading days;
provided, however, that, if the "ex" date for any event (other
than the tender offer requiring such computation) that
requires an adjustment to the Conversion Price pursuant to
Section 12.04(a), (b), (c), (d), (e) or (f) occurs on or after
the Expiration Time for the tender or exchange offer requiring
such computation and prior to the day in question, the closing
price for each trading day on and after the "ex" date for such
other event shall be adjusted by multiplying such closing
price by the reciprocal of the fraction by which the
Conversion Price is so required to be adjusted as a result of
such other event. For purposes of this paragraph, the term
"ex" date (I) when used with respect to any issuance or
distribution, means the first date on which the Common Stock
trades regular way on the relevant exchange or in the relevant
market from which the closing price was obtained without the
right to receive such issuance or distribution, (II) when used
with respect to any subdivision or combination of shares of
Common Stock, means the first date on which the Common Stock
trades regular way on such exchange or in such market after
the time at which such subdivision or combination becomes
effective and
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(III) when used with respect to any tender or exchange offer
means the first date on which the Common Stock trades regular
way on such exchange or in such market after the Expiration
Time of such offer. Notwithstanding the foregoing, whenever
successive adjustments to the Conversion Price are called for
pursuant to this Section 12.04, such adjustments shall be made
to the Current Market Price as may be necessary or appropriate
to effectuate the intent of this Section 12.04 and to avoid
unjust or inequitable results, as determined in good faith by
the Board of Directors.
(iii) "fair market value" shall mean the amount which a
willing buyer would pay a willing seller in an arm's-length
transaction.
(iv) "Record Date" shall mean, with respect to any
dividend, distribution or other transaction or event in which
the holders of Common Stock have the right to receive any
cash, securities or other property or in which the Common
Stock (or other applicable security) is exchanged for or
converted into any combination of cash, securities or other
property, the date fixed for determination of stockholders
entitled to receive such cash, securities or other property
(whether such date is fixed by the Board of Directors or by
statute, contract or otherwise).
(h) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least 1% in such price; provided, however, that any adjustments which
by reason of this Section 12.04(i) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
All calculations under this Article 12 shall be made by the Company and
shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be.
No adjustment need be made for a change in the par value or no
par value of the Common Stock.
(i) Whenever the Conversion Price is adjusted as herein
provided, the Company shall promptly file with the Trustee an Officers'
Certificate setting forth the Conversion Price after such adjustment
and setting forth
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a brief statement of the facts requiring such adjustment. Promptly
after delivery of such certificate, the Company shall prepare a notice
of such adjustment of the Conversion Price setting forth the adjusted
Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the
Conversion Price to each Holder of Securities at such Holder's last
address appearing on the register of Holders maintained for that
purpose within 20 days of the effective date of such adjustment.
Failure to deliver such notice shall not affect the legality or
validity of any such adjustment.
(j) In any case in which this Section 12.04 provides that an
adjustment shall become effective immediately after a Record Date for
an event, the Company may defer until the occurrence of such event
issuing to the Holder of any Security converted after such Record Date
and before the occurrence of such event the additional shares of common
Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon
such conversion before giving effect to such adjustment.
(k) For purposes of this Section 12.04, the number of shares
of Common Stock at any time outstanding shall not include shares held
in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of
Common Stock. The Company shall not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the
Company.
(l) In lieu of making any adjustment to the Conversion Price
pursuant to Section 12.04(e), the Company may elect to reserve an
amount of cash for distribution to the Holders of Securities upon the
conversion of the Securities so that any such Holder converting
Securities will receive upon such conversion, in addition to the shares
of Common Stock and other items to which such Holder is entitled, the
full amount of cash which such Holder would have received if such
Holder had, immediately prior to the Record Date for such distribution
of cash, converted its Securities into Common Stock, together with any
interest accrued with respect to such amount, in accordance with this
Section 12.04(m). The Company may make such election by providing an
Officers' Certificate to the Trustee to
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such effect on or prior to the payment date for any such distribution
and depositing with the Trustee on or prior to such date an amount of
cash equal to the aggregate amount that the Holders of Securities would
have received if such Holders had, immediately prior to the Record Date
for such distribution, converted all the Securities into Common Stock.
Any such funds so deposited by the Company with the Trustee shall be
invested by the Trustee in U.S. Government Obligations with a maturity
not more than three months from the date of issuance. Upon conversion
of Securities by a Holder thereof, such Holder shall be entitled to
receive, in addition to the Common Stock issuable upon conversion, an
amount of cash equal to the amount such Holder would have received if
such Holder had, immediately prior to the Record Date for such
distribution, converted its Securities into Common Stock, along with
such Holder's pro rata share of any accrued interest earned as a
consequence of the investment of such funds. Promptly after making an
election pursuant to this Section 12.04(m), the Company shall give or
shall cause to be given notice to all Holders of Securities of such
election, which notice shall state the amount of cash per $100
principal amount of Securities such Holders shall be entitled to
receive (excluding interest) upon conversion of the Securities as a
consequence of the Company having made such election.
SECTION 12.05. Notice of Adjustment of Conversion Price.
Whenever the conversion price is adjusted as provided in Section 12.04:
(a) the Company shall compute the adjusted conversion price in
accordance with Section 12.04 and shall prepare a certificate signed by
any Vice President or the Treasurer of the Company setting forth the
adjusted conversion price and showing in reasonable detail the facts
upon which such adjustment is based and the effective date of such
adjustment, and such certificate shall forthwith be filed at each
office or agency maintained for the purpose of conversion of
Securities; and
(b) a notice stating that the conversion price has been
adjusted and setting forth the adjusted conversion price shall, as soon
as practicable, be mailed by the Company to all Holders at their last
addresses as they shall appear in the Security Register.
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SECTION 12.06. Provisions in Case of Consolidation, Merger or
Conveyance or Transfer of Properties and Assets. In case of any consolidation of
the Company with, or merger of the Company into, any other corporation, or in
case of any merger of another corporation into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the Company), or in case
of any conveyance or transfer of the properties and assets of the Company
substantially as an entirety, the corporation formed by such consolidation or
resulting from such merger or which acquires by conveyance or transfer such
properties and assets, as the case may be, shall execute and deliver to the
Trustee a supplemental indenture providing that the Holder of each Security then
outstanding shall have the right thereafter, during the period such Security
shall be convertible as specified in Section 12.01, to convert such Security
only into the kind and amount of securities, cash and other property receivable
upon such consolidation, merger, conveyance or transfer by a holder of the
number of shares of Common Stock of the Company into which such Security might
have been converted immediately prior to such consolidation, merger, conveyance
or transfer, assuming such holder of Common Stock of the Company failed to
exercise his rights of election, if any, as to the kind or amount of securities,
cash and other property receivable upon such consolidation, merger, conveyance
or transfer (provided that, if the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance or transfer is
not the same for each share of Common Stock of the Company in respect of which
such rights of election shall not have been exercised ("nonelecting share"),
then for the purpose of this Section the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, conveyance or
transfer by each nonelecting share shall be deemed to be the kind and amount so
receivable per share by a plurality of the nonelecting shares). Such
supplemental indenture shall provide for adjustments which, for events
subsequent to the effective date of such supplemental indenture, shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Article. The above provisions of this Section shall similarly apply to
successive consolidations, mergers, conveyances or transfers. The Company will
not become a party to any consolidation or merger unless the terms of such
consolidation or merger are consistent with this Section.
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SECTION 12.07. Notice of Certain Corporate Action. In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash out of
its earned surplus; or
(b) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any other rights; or
(c) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding shares of
Common Stock), or of any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company is
required, or the sale or transfer of all or substantially all the
assets of the Company; or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be filed with the Trustee and at each office or
agency maintained for the purpose of conversion of Securities, and shall cause
to be mailed to all Holders at their last addresses as they shall appear in the
Security Register, at least 20 days (or 10 days in any case specified in clause
(a) or (b) above) prior to the applicable date hereinafter specified, a notice
stating (x) the date on which a record is to be taken for the purpose of such
dividend, distribution, rights or warrants, or, if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up. Failure to give the notice
requested by this Section or any defect therein shall not affect the legality or
validity of any dividend, distribution, right, warrant, reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up,
or the vote upon any such action.
<PAGE> 92
83
SECTION 12.08. Company To Reserve Common Stock. The Company
shall at all times reserve and keep available, free from preemptive rights, out
of its authorized but unissued Common Stock, for the purpose of effecting the
conversion of Securities, the full number of shares of Common Stock then
issuable upon the conversion of all outstanding Securities.
SECTION 12.09. Taxes on Conversions. The Company will pay any
and all taxes that may be payable in respect of the issue or delivery of shares
of Common Stock on conversion of Securities pursuant hereto. The Company shall
not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that of the Holder of the Security or Securities to be converted, and
no such issue or delivery shall be made unless and until the Person requesting
such issue has paid to the Company the amount of any such tax, or has
established to the satisfaction of the Company that such tax has been paid.
SECTION 12.10. Covenant as to Common Stock. The Company
covenants that all shares of Common Stock which may be issued upon conversion of
Securities will upon issue be duly and validly issued and fully paid and
nonassessable and, except as provided in Section 12.08, the Company will pay all
taxes, liens and charges with respect to the issue thereof.
SECTION 12.11. Responsibility of Trustee. The Trustee, subject
to the provisions of Section 6.01, and any conversion agent shall not at any
time be under any duty or responsibility to any Holder to determine whether any
facts exist which may require any adjustment of the Conversion Price, or with
respect to the nature or extent of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture,
provided to be employed, in making the same. The Trustee has no duty to
determine whether a supplemental indenture under this Article need be entered
into or whether any provisions of any supplemental indenture are correct.
Neither the Trustee nor any conversion agent shall be accountable with respect
to the validity or value (or the kind or amount) of any shares of Common Stock,
or of any other securities or property, which may at any time be issued or
delivered upon the conversion of any Security; and it or they do not make any
representation with respect thereto. Neither the Trustee nor any conversion
agent shall be responsible for any failure of the Company to make any cash
payment or to issue, transfer or deliver any
<PAGE> 93
84
shares of Common Stock or stock certificates or other securities or property
upon the surrender of any Security for the purpose of conversion; and the
Trustee, subject to the provisions of Section 6.01, and any conversion agent
shall not be responsible for any failure of the Company to comply with any of
the covenants of the Company contained in this Article.
ARTICLE XIII
Subordination of Securities
SECTION 13.01. Securities Subordinate to Debt Obligations. The
Company, for itself, its successors and assigns, covenants and agrees, and each
Holder of Securities, by his acceptance thereof likewise covenants and agrees,
that all Securities issued hereunder shall be subordinated and subject, to the
extent and in the manner herein set forth, in right of payment to the prior
payment in full of all Debt Obligations.
SECTION 13.02. No Payments When Debt Obligations in Default;
Payment Over of Proceeds upon Dissolution, etc. In the event the Company shall
default in the payment of any Debt Obligation when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by declaration
or otherwise, then, unless and until such default shall have been cured or
waived or shall have ceased to exist, no direct or indirect payment (in cash or
property, by setoff or otherwise) shall be made or agreed to be made on account
of the principal of or Redemption Price of or interest on the Securities
(excepting cash payment for fractional shares).
Upon the happening of an event of default with respect to any
Debt Obligation, as defined therein or in the instrument under which the same is
outstanding, permitting the holders thereof to accelerate the maturity thereof
(under circumstances when the terms of the preceding paragraph are not
applicable), unless and until such event of default shall have been cured or
waived or shall have ceased to exist, no direct or indirect payment (in cash or
property by setoff or otherwise) shall be made or agreed to be made on account
of the principal of or Redemption of or interest on the Securities (excepting
cash payment for fractional shares).
<PAGE> 94
85
In the event of:
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to the Company or its property;
(b) any proceeding for the liquidation, dissolution or other
winding up of the Company or its property;
(c) any assignment by the Company for the benefit of
creditors; or
(d) any other marshalling of the assets of the Company;
all Debt Obligations (including any interest thereon accruing after the
commencement of any such proceedings) shall first be paid in full before any
payment or distribution (direct or indirect), whether in cash, property or
securities, by setoff or otherwise, shall be made to any Holder on account of
any Securities, and to that end any payment or distribution, whether in cash,
property or securities (other than securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment the payment
of which is subordinate, at least to the extent provided in this Article with
respect to the Securities, to the payment of all Debt Obligations at the time
outstanding and to any securities issued in respect thereof under any such plan
of reorganization or readjustment) which would otherwise (but for the
subordination provisions contained in this Article) be payable or deliverable in
respect of the Securities shall be paid or delivered directly to the holders of
Debt Obligations, as their respective interests may appear, until all Debt
Obligations (including any interest thereon accruing after the commencement of
any such proceedings) shall have been paid in full.
If any payment or distribution (other than securities of the
Company or any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in this Article with respect to the Securities, to the payment of all
Debt Obligations at the time outstanding and to any securities issued in respect
thereof under any such plan of reorganization or readjustment) shall be received
by the Trustee or the Holders in contravention of any of the terms of this
Article and before all the Debt Obligations have been
<PAGE> 95
86
paid in full, such payment or distribution shall be held in trust for the
benefit of, and shall be paid over or delivered and transferred to, the holders
of such Debt Obligations at the time outstanding as their respective interests
may appear for application to the payment of Debt Obligations until all Debt
Obligations (including any interest thereon accruing after the commencement of
any such proceeding referred to in paragraph (a), (b), (c) or (d) above) shall
have been paid in full. If the Trustee or any such Holder fails to endorse or
assign any such payment or distribution as required by this Article, the Trustee
and the Holder of each Security by his acceptance thereof authorizes each holder
of Debt Obligations, any representative or representatives of holders of Debt
Obligations and the trustee or trustees under any indenture pursuant to which
any instrument evidencing such Debt Obligations may have been issued so to
endorse or assign the same.
No holder of Debt Obligations shall be prejudiced in the right
to enforce subordination of the Securities by any act or failure to act on the
part of the Company.
Subject to the payment in full of all Debt Obligations, the
Holders shall be subrogated (equally and ratably with the holders of all
obligations of the Company which rank on a parity with the Securities and are
entitled to like rights of subrogation) to the rights of the holders of Debt
Obligations to receive payments or distributions applicable to the Debt
Obligations until the Securities shall be paid in full, and no such payments or
distributions shall, as between the Company, its creditors other than the
holders of Debt Obligations and the Holders of the Securities, be deemed to be a
payment by the Company to or on account of the Securities. The provisions of
this Article are and are intended solely for the purpose of defining the
relative rights of the Holders of the Securities, on the one hand, and the
holders of Debt Obligations, on the other hand, and nothing contained in this
Article or elsewhere in this Indenture or in the Securities is intended to or
shall impair, as between the Company, its creditors other than the holders of
Debt Obligations and the Holders of the Securities, the obligation of the
Company to pay the Holders the principal of or Redemption Price of and interest
on the Securities as and when the same shall become due and payable in
accordance with the terms thereof, or prevent the Trustee or the Holders from
exercising all rights, powers and remedies otherwise permitted by applicable law
or under this Indenture, upon a default hereunder, all subject to the
<PAGE> 96
87
rights of the holders of Debt Obligations to receive cash, property or
securities otherwise payable or deliverable to the Trustee or the Holders.
Upon any payment or distribution pursuant to this Section, the
Trustee shall be entitled to rely upon any order or decree of a court of
competent jurisdiction in which any proceedings of the nature referred to in
this Section are pending, and the Trustee, subject as between the Trustee and
the Holders to the provisions of Section 6.01, shall be entitled to rely upon a
certificate of the liquidating trustee or agent or other person making such
payment or distribution to the Trustee or to the Holders for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Debt Obligations and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Section. In
the event that the Trustee determines, in good faith, that evidence is required
with respect to the right of any Person as a holder of Debt Obligations to
participate in any payment or distribution pursuant to this Section, the Trustee
may request such Person to furnish evidence to the reasonable satisfaction of
the Trustee as to the amount of Debt Obligations held by such Person, as to the
extent to which such Person is entitled to participate in such payment or
distribution, and as to other facts pertinent to the rights of such Person under
this Section, and if such evidence is not furnished, the Trustee may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment.
SECTION 13.03. Trustee To Effectuate Subordination. The Holder
of each Security by his acceptance thereof authorizes and directs the Trustee in
his behalf to take such action as may be necessary or appropriate to acknowledge
or effectuate the subordination as provided in this Article and appoints the
Trustee as attorney-in-fact for any and all such purposes.
SECTION 13.04. Trustee Not Charged with Knowledge of
Prohibition. The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article or any other provision of this Indenture, but subject as between
the Trustee and the Holders to the provisions of Section 6.01, the Trustee shall
not be charged
<PAGE> 97
88
with knowledge of the existence of any Debt Obligations, or of any default in
the payment of any Debt Obligations, or of any facts which would prohibit the
making of any payment of moneys to or by the Trustee, unless and until three
Business Days after the Trustee shall have received written notice thereof from
the Company or any holder of Debt Obligations or the representative or
representatives of such holder, and the Trustee may conclusively rely on any
writing purporting to be from a holder of Debt Obligations, or a representative
of such holder, as being genuine; nor shall the Trustee be charged with
knowledge of the curing of any such default or of the elimination of the act or
condition preventing any such payment unless and until the Trustee shall have
received an Officers' Certificate to such effect. The provisions of this Section
shall not limit any rights of holders of Debt Obligations under this Article to
recover from the Holders of Securities any payment made to any such Holder.
SECTION 13.05. Rights of Trustee as Holder of Debt
Obligations. The Trustee shall be entitled to all the rights set forth in this
Article with respect to any Debt Obligations which may at any time be held by
it, to the same extent as any other holder of Debt Obligations; and nothing in
Section 6.12, or elsewhere in this Indenture, shall deprive the Trustee of any
of its rights as such holder. Nothing in this Article XIII shall apply to the
claims of, or payments to, the Trustee under or pursuant to Section 6.06.
SECTION 13.06. Article Applicable to Paying Agent. In case at
any time any Paying Agent other than the Trustee shall have been appointed by
the Company and be then acting hereunder, the term "Trustee" as used in this
Article shall in such case (unless the context shall otherwise require) be
construed as extending to and including such Paying Agent within its meaning as
fully for all intents and purposes as if such Paying Agent were named in this
Article in addition to or in place of the Trustee; provided, however, that
Sections 13.04 and 13.05 shall not apply to the Company or any Affiliate of the
Company if the Company or such Affiliate acts as Paying Agent.
SECTION 13.07. Trustee Not Fiduciary for Holders of Debt
Obligations. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Debt Obligations and shall not be liable to any such holders if the
Trustee shall in good faith mistakenly pay over or distribute to Holders of
Securities or to the Company or to any other person cash or property to which
any holders of Debt Obligations shall be entitled by virtue of this Article XIII
or otherwise. The Trustee shall not be charged with knowledge of the existence
<PAGE> 98
89
of Debt Obligations or of any facts that would prohibit any payment hereunder
unless a Trust Officer of the Trustee shall have received notice to that effect
at the address of the Trustee set forth in Section 1.05. With respect to the
holders of Debt Obligations, the Trustee undertakes to perform or to observe
only such of its covenants or obligations as are specifically set forth in this
Article XIII and no implied covenants or obligations with respect to holders of
Debt Obligations shall be read into this Indenture against the Trustee.
* * *
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the day and year first above written.
GLOBALSTAR TELECOMMUNICATIONS
LIMITED,
by
--------------------------
Name:
Title:
THE BANK OF NEW YORK, as
Trustee,
by
--------------------------
Name:
Title:
<PAGE> 99
EXHIBIT A
[FORM OF FACE OF SECURITY]
[Global Securities Legend]
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"),
NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE REFERRED TO ON THE REVERSE HEREOF.
[Restricted Securities Legend]
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD ANNIVERSARY OF
THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER
THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS
PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED
BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER
THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), AND, IF SUCH TRANSFER
IS BEING EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED
BELOW) PRIOR TO THE EXPIRATION
<PAGE> 100
OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(C)(3) OF
REGULATION S UNDER THE SECURITIES ACT), A CERTIFICATE WHICH MAY BE OBTAINED FROM
THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE
TRUSTEE, (4) TO AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(A) UNDER THE
SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE IN
THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE TRANSFEREE TO THE COMPANY
AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS MAY NOT TRANSFER THIS SECURITY
PURSUANT TO THIS CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED
PERIOD" (WITHIN THE MEANING OF RULE 903(C)(3) OF REGULATION S UNDER THE
SECURITIES ACT), (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR
(6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN
EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES. AN ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT WILL
FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION
AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS
SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY
THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
OR (2) AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(A) UNDER THE SECURITIES
ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR
DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (0)(2) OF
RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT."
<PAGE> 101
No. R-
---------------------
CUSIP No.
GLOBALSTAR TELECOMMUNICATIONS LIMITED
6 1/2% CONVERTIBLE PREFERRED EQUIVALENT OBLIGATIONS
DUE 2006
GLOBALSTAR TELECOMMUNICATIONS LIMITED
Globalstar Telecommunications Limited, a Bermuda corporation (the
"Company") promises to pay to __________________________________________________
________________ or registered assigns, the principal sum [indicated on Schedule
A hereof]*[of _________________________________ United States Dollars]** on
March 1, 2006 (the "Mandatory Redemption Date").
Interest Payment Dates: March 1, June 1, September 1 and
December 1, commencing June 1,
1996.
Record Dates: February 15, May 15, August 15
and November 15
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be
- ---------------------
* Applicable to Global Securities only.
** Applicable to certificated Securities only.
<PAGE> 102
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, Globalstar Telecommunications Limited has
caused this Security to be signed manually or by facsimile by its duly
authorized officers and a facsimile of its corporate seal to be affixed hereto
or imprinted hereon.
GLOBALSTAR TELECOMMUNICATIONS
LIMITED,
by
--------------------------
by
--------------------------
[Seal]
Dated: March 6, 1996
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
This is one of the 6 1/2%
Convertible Preferred
Equivalent Obligation due 2006
described in the
within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee,
by
--------------------------
Authorized Signatory
<PAGE> 103
GLOBALSTAR TELECOMMUNICATIONS LIMITED
6 1/2% Convertible Preferred Equivalent Obligations due 2006
1. Interest. GLOBALSTAR TELECOMMUNICATIONS LIMITED, a Bermuda
corporation (hereinafter called the "Company", which term includes any successor
corporation under the Indenture hereinafter referred to) is the issuer of this 6
1/2% Convertible Preferred Equivalent Obligation due 2006 (the "Security"). The
Company promises to pay interest thereon from March 6, 1996, or from the most
recent Interest Payment Date to which interest has been paid or duly provided
for, quarterly on March 1, June 1, September 1 and December 1 in each year,
commencing June 1, 1996, at the rate of 6 1/2% per annum, until the principal
hereof is paid or made available for payment. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest, which shall be the February 15,
May 15, August 15, or November 15 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.
The Company may elect to defer interest payments on any
Interest Payment Date if Globalstar L.P. shall have deferred payment of the
Scheduled Distribution in respect of the Preferred Partnership Interests
corresponding to such interest payment. Arrearages of deferred but unpaid
interest accruals ("Interest Arrearages") will not themselves bear interest, but
so long as any Interest Arrearage remains outstanding, the Company will be
prohibited from paying (i) dividends on its Common Stock, (ii) dividends on any
Preferred Stock or (iii) interest on debt ranking pari passu with or junior to
the Securities from time to time outstanding, except on a pro rata basis with
respect to any such pari passu debt based on the aggregate principal amount of
such debt. Preferred distributions equal to the aggregate amount of interest
payable by the Company on the Securities will be payable to the Company by
Globalstar L.P. in respect of the Preferred Partnership Interests on each
Interest Payment Date, if, as and when declared by the Globalstar General
Partners' Committee. The Company may not elect to defer any interest payment if
Globalstar L.P. has paid the Scheduled Distribution in respect of Preferred
Partnership Interest
<PAGE> 104
corresponding to such interest payment. In the event that the Company fails to
pay the interest due for an aggregate of six quarterly interest payments, the
Holders will have the rights and remedies described in Section 15 of this
Security. The Indenture does not provide the Holders with any rights to
accelerate the payment of the Securities.
Payment of the principal or Redemption Price of and interest
on this Security shall be payable at the office or agency of the Company
maintained for that purpose in The City of New York or at any other office or
agency maintained by the Company for such purpose. If any such payment is in
cash, it shall be payable by United States dollar check drawn on, or wire
transfer (provided that appropriate wire instructions have been received by the
Trustee at least 15 days prior to the applicable date of payment) to a United
States dollar account maintained by the Holder with, a bank located in New York
City; provided, however, that at the option of the Company payment of interest
in cash may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register.
2. Method of Payments. The Company may make any payments due
on the Securities, including redemption payments, interest payments and the
Interest Make-Whole Payment, (i) in cash, (ii) by delivery of Common Stock
(based upon 90% of the Average Market Value of the Common Stock in the case of
interest payments and any Interest Make-Whole Payment, and 100% of the Average
Market Value of the Common Stock in the case of all other payments) or (iii)
through any combination of the foregoing; provided, however, if Globalstar L.P.
shall have paid the Scheduled Distribution or Globalstar Corresponding
Redemption on the Preferred Partnership Interests in cash, the Company shall
make the corresponding payment in cash. The Company may make a cash payment from
the proceeds of an issuance of Common Stock following a payment by Globalstar
L.P. through a delivery of Ordinary Partnership Interests. The Company also may
make interest payments notwithstanding the fact that it shall not have received
a Scheduled Distribution on the Preferred Partnership Interests for the
corresponding Interest Payment Date.
3. Paying Agent and Registrar. The Trustee will act as Paying
Agent, Registrar and Conversion Agent. The Company may change any Paying Agent,
Registrar, co-registrar or Conversion Agent without prior notice. The Company or
any of its Affiliates may act in any such capacity.
<PAGE> 105
4. Indenture. The Company issued the Securities under an
indenture, dated as of March 6, 1996 (the "Indenture"), between the Company and
The Bank of New York, as Trustee. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by the Trust
Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the
date of the Indenture. The Securities are subject to, and qualified by, all such
terms, certain of which are summarized herein, and Holders are referred to the
Indenture and such Act for a statement of such terms. The Securities are
unsecured obligations of the Company limited to (except as otherwise provided in
the Indenture) up to an aggregate principal amount of $275,000,000 (plus up to
$55,000,000 aggregate principal amount of Securities that may be sold by the
Company pursuant to the over-allotment option granted pursuant to the Purchase
Agreement), and are subordinated in right of payment to all existing and future
Debt Obligations of the Company as provided in the Indenture. Any Holder of this
Security shall be deemed to have agreed to and be bound by all the terms and
conditions contained in the Indenture applicable to a holder of a Security.
5. Provisional Redemption. The Company may redeem, in whole or
in part (a "Provisional Redemption"), at any time prior to March 2, 1999, at the
redemption price of 103% of the aggregate principal amount of the Securities to
be redeemed plus accrued and unpaid interest, if any, to the date of Redemption
(the "Provisional Redemption Date"), in the event that the Current Market Value
of the Common Stock equals or exceeds the following Trigger Percentages of the
Conversion Price for at least 20 Trading Days in any consecutive 30 Trading Day
period ending on the Trading Day prior to the date of mailing of the Globalstar
Redemption Notice if called for Provision Redemption in the 12-month period
ending March 1 of the following years:
<TABLE>
<CAPTION>
Year Trigger Percentage
---- ------------------
<S> <C>
1997 170%
1998 160%
1999 150%
</TABLE>
Upon any Provisional Redemption, the Company shall make the
Interest Make-Whole Payment with respect to the Securities called for
Provisional Redemption. THE COMPANY SHALL MAKE THE INTEREST MAKE-WHOLE PAYMENT
ON ALL SECURITIES CALLED FOR PROVISIONAL REDEMPTION, REGARDLESS OF WHETHER SUCH
SECURITIES ARE CONVERTED PRIOR TO THE PROVISIONAL REDEMPTION DATE.
<PAGE> 106
6. Optional Redemption. Commencing March 2, 1999, the
Securities will be redeemable at any time, in whole or in part, at the election
of the Company (the "Optional Redemption"), at a Redemption Price equal to the
percentage of the principal amount set forth below plus accrued and unpaid
interest, if any, to the date of Redemption (the "Optional Redemption Date") if
redeemed in the 12-month period ending March 1 of the following years:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2000 103%
2001 102%
2002 101%
</TABLE>
and thereafter at a Redemption Price equal to 100% of the principal amount plus
accrued and unpaid interest, if any, to the Optional Redemption Date.
The Company may not initiate either a Provisional Redemption
or an Optional Redemption unless and until it receives the Globalstar Redemption
Notice. Following the receipt thereof, the Company shall initiate the
Provisional Redemption or Optional Redemption, as the case may be, by
delivering the GTL Redemption Notice.
In the event of redemption or conversion of this Security in
part only, a new Security or Securities for the unredeemed or unconverted
portion hereof will be issued in the name of the Holder hereof upon the
cancellation hereof.
7. Notice of Redemption. Notice of redemption will be mailed
at least 19 days before the Redemption Date to each Holder of the Security to be
redeemed at his address of record. The Securities in denominations larger than
$50.00 may be redeemed in part but only in integral multiples of $50.00. In the
event of a redemption of less than all of the Securities, the Securities will be
chosen for redemption by the Trustee in accordance with the Indenture. Unless
the Company defaults in making such redemption payment, or the Paying Agent is
prohibited from making such payment pursuant to the Indenture, interest ceases
to accrue on the Securities or portions of them called for redemption on and
after the redemption date.
If this Security is redeemed subsequent to a record date with
respect to any interest payment date specified above and on or prior to such
interest payment date, then any accrued interest will be paid to the person in
whose name this Security is registered at the close of
<PAGE> 107
business on such record date. Any Interest Make-Whole Payment will be paid to
the Holder of record on the date of conversion or Redemption Date, as the case
may be.
8. Mandatory Redemption. Each Security (if not earlier
redeemed or converted) will be mandatorily redeemed by the Company on the
Mandatory Redemption Date at a Redemption Price of 100% of the principal amount
per Security plus accrued and unpaid interest, if any (including all Interest
Arrearages), to the Mandatory Redemption Date.
9. Subordination. The indebtedness evidenced by the Securities
is, to the extent and in the manner set forth in the Indenture, expressly
subordinated and subject in right of payment to the prior payment in full of all
Debt Obligations, as defined in the Indenture, and this Security is issued
subject to such provisions of the Indenture, and each Holder of this Security,
by accepting the same, agrees to and shall be bound by such provisions and
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination as
provided in the Indenture and appoints the Trustee his attorney-in-fact for any
and all such purposes.
10. Conversion. Subject to and upon compliance with the
provisions of the Indenture, the Holder of this Security is entitled, at such
Holder's option, at any time on or before the close of business on the Business
Day prior to the Mandatory Redemption Date, or, in case this Security or a
portion hereof is called for redemption, then in respect of this Security or
such portion hereof until and including, but (unless the Company defaults in
making the payment due upon redemption) not after, the close of business on the
Business Day prior to the Redemption Date, to convert this Security (or any
portion of the principal amount hereof which is $50.00 or any integral multiple
thereof), at the principal amount hereof, or of such portion, into fully paid
and nonassessable shares (calculated as to each conversion to the nearest 1/100
of a share) of Common Stock of the Company at a conversion price equal to $65.00
aggregate principal amount of Securities for each share of Common Stock (or at
the current adjusted conversion price if an adjustment has been made as provided
in the Indenture) (the "Conversion Price") by surrender of this Security, duly
endorsed or assigned to the Company or in blank, at the office or agency of the
Company maintained for that purpose in The City of New York or at any other
office or agency maintained by the Company for such purpose, accompanied by
written notice to the Company that the Holder hereof elects to convert this
Security or, if less than the
<PAGE> 108
entire principal amount hereof is to be converted, the portion hereof to be
converted, and, in case such surrender shall be made during the period from the
close of business on any Regular Record Date next preceding any Interest Payment
Date to the opening of business on such Interest Payment Date (unless this
Security or the portion hereof being converted has been called for redemption on
a Redemption Date within such period), also accompanied by payment in New York
Clearing House or other funds acceptable to the Company of an amount equal in
cash to the interest payable on such Interest Payment Date on the principal
amount of this Security then being converted; provided, that no payment shall be
owed or payable to any converting Holder if the Board of Directors of the
Company shall have elected to defer the interest payment to be made on such
Interest Payment Date. Subject to the aforesaid requirement for payment and, in
the case of a conversion after the Regular Record Date next preceding any
Interest Payment Date and on or before such Interest Payment Date, to the right
of the Holder of this Security (or any Predecessor Security) of record at such
Regular Record Date to receive an installment of interest (with certain
exceptions provided in the Indenture), no payment or adjustment is to be made on
conversion for interest accrued hereon, including any Interest Arrearages, or
for dividends on the Common Stock issued on conversion. In no event shall the
Company be obligated to pay any unpaid Interest Arrearages upon conversion. No
fractions of shares will be issued on conversion, but instead of any fractional
interest, the Company shall pay a cash adjustment as provided in the Indenture.
The Conversion Price is subject to adjustment as provided in the Indenture. In
addition, the Indenture provides that, in case of certain consolidations or
mergers to which the Company is a party or the conveyance or transfer of the
properties and assets of the Company substantially as an entirety, the Indenture
shall be amended, without the consent of any Holders of Securities, so that this
Security, if then outstanding, will be convertible thereafter, during the period
this Security shall be convertible as specified above, only into the kind and
amount of securities, cash and other property receivable upon the consolidation,
merger, conveyance or transfer by a holder of the number of shares of Common
Stock of the Company into which this Security might have been converted
immediately prior to such consolidation, merger, conveyance or transfer,
assuming such holder of Common Stock of the Company failed to exercise his
rights of election, if any, as to the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, conveyance or
transfer (provided that, if the kind or amount
<PAGE> 109
of securities, cash and other property so receivable is not the same for each
nonelecting share of Common Stock of the Company, then the kind and amount of
securities, cash and other property so receivable by each nonelecting share
shall be deemed to be the kind and amount so receivable per share by a plurality
of the nonelecting shares).
11. Registration Rights. The Holder of this Security is entitled
to the benefits of a Registration Rights Agreement, dated March 6, 1996, between
the Company and the Initial Purchasers (the "Registration Rights Agreement").
Pursuant to the Registration Rights Agreement the Company has agreed for the
benefit of the Holders, that (i) it will within 120 days after the closing of
the sale of the Securities (the "Closing"), file a shelf registration statement
(the "Shelf Registration Statement") with the Securities and Exchange Commission
(the "Commission") with respect to resales of the Securities and the Common
Stock issuable upon conversion thereof; (ii) will use its best efforts to cause,
within 180 days after the Closing, such Shelf Registration Statement shall be
declared effective by the Commission; and (iii) the Company will maintain such
Shelf Registration Statement continuously effective under the Securities Act
until the third anniversary of the date of the Closing or such earlier date as
of which the Securities shall no longer be restricted securities pursuant to
Rule 144(k) under the Securities Act of 1933 or all the Securities or the Common
Stock issuable upon conversion thereof have been sold pursuant to such Shelf
Registration Statement.
12. Denominations, Transfer, Exchange. The Securities are in
registered form, without coupons, in denominations of $50.00 and integral
multiples of $50.00. The transfer of Securities may be registered, and
Securities may be exchanged, as provided in the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted by
the Indenture. The Registrar need not exchange or register the transfer of any
Security or portion of a Security selected for redemption (except the unredeemed
portion of any Security being redeemed in part). Also, it need not exchange or
register the transfer of any Security for a period of 15 days before a selection
of Securities to be redeemed. No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith. Prior to due presentment of this Security for registration
<PAGE> 110
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Security is registered as the
owner hereof for all purposes, whether or not this Security be overdue, and
neither the Company, the Trustee nor any such agent shall be affected by notice
to the contrary. The Indenture and the Securities contain certain limitations
with respect to the transfer of the Securities, which shall be in effect until
the effectiveness of the Shelf Registration Statement.
13. Persons Deemed Owners. Except as provided in the
Indenture, the registered Holder of a Security may be treated as its owner for
all purposes.
14. Unclaimed Money. If money or Common Stock for the payment of
amounts due on the Securities remains unclaimed for two years, the Trustee and
the Paying Agent shall pay the money or deliver the Securities, as the case may
be, back to the Company at its written request. After that, Holders of
Securities entitled to the money or the Common Stock must look to the Company
for payment unless an abandoned property law designates another person and all
liability of the Trustee and such Paying Agent with respect to such money or
Common Stock shall cease.
15. Voting Rights. Except as required by law, the Holders will
not be entitled to any voting rights unless the Company has deferred interest
payments for an aggregate of six quarterly interest payments (a "Deferral
Trigger Event"). As provided in the Globalstar Amended Partnership Agreement,
upon a Deferral Trigger Event, (i) the number of members of the General
Partners' Committee of Globalstar will be increased by one and the Holders of
the Securities, voting separately as a class with the holders of any other
securities upon which similar voting rights have been conferred and are
exercisable, will be entitled to elect one representative to such General
Partners' Committee (the "CPE Representative") and (ii) Loral SpaceCom shall use
its best efforts to cause the shareholders of the Company to approve and elect a
nominee to the Board of Directors of the Company designated by the Holders of
the Securities (the "CPE Nominee"). If the shareholders shall fail to approve
such CPE Nominee, Loral SpaceCom will seek, pursuant to Section of the Amended
Partnership Agreement, the resignation of a Loral SpaceCom Designee director
from the Board of Directors of the Company and will use its best efforts to
cause the Board of Directors of the Company to appoint the CPE Nominee to the
Board of Directors of the Company until the next annual meeting of shareholders,
at which time such appointment will be submitted to the shareholders of the
<PAGE> 111
Company for their approval; provided, however, that if such shareholder approval
is not obtained, the procedures described in clause (ii) above shall continue to
be in effect. The CPE Representative and the CPE Nominee, if appointed to the
Board, will promptly resign upon receipt of notice from the Company that all
Interest Arrearages with respect to the Securities have been paid.
16. Amendments, Supplements and Waivers. The Indenture permits,
with certain exceptions as therein provided, the amendment thereof and the
modification of the rights and obligations of the Company and the rights of the
Holders of the Securities under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of not less than two-thirds in aggregate
principal amount of the Securities at the time Outstanding. The Indenture also
contains provisions permitting the Holders of a majority in aggregate principal
amount of the Securities at the time Outstanding, on behalf of the Holders of
all the Securities, to waive compliance by the Company with certain provisions
of the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Security.
17. Trustee Dealings with the Company. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of Securities
and may otherwise deal with the Company or an Affiliate with the same rights it
would have if it were not Trustee, subject to certain limitations provided for
in the Indenture and in the TIA. Any Paying, Transfer or Conversion Agent may do
the same with similar rights.
18. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder, by accepting a Security, waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Securities.
19. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE
<PAGE> 112
WITH THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
20. Authentication. The Securities shall not be valid until
authenticated by the manual signature of an authorized signatory of the Trustee
or an authenticating agent.
21. Abbreviations. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (for tenants in common), TEN
ENT (for tenants by the entireties), JT TEN (for joint tenants with right of
survivorship and not as tenants in common), CUST (for Custodian), and U/G/M/A
(for Uniform Gifts to Minors Act).
22. Definitions. Capitalized terms not defined in this
Security have the meaning given to them in the Indenture.
Except with respect to the rights of the holders of Debt
Obligations set forth in the Indenture and in this Security, no reference herein
to the Indenture and no provision of this Security or of the Indenture shall
alter or impair the obligation of the Company, which is absolute and
unconditional, to pay the principal or Redemption Price of and interest on this
Security at the times, place and rate, and in the coin or currency, herein
prescribed or to convert this Security as provided in the Indenture.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is registrable in
the Security Register, upon surrender of this Security for registration of
transfer at the office or agency of the Company maintained for that purpose in
The City of New York or at any other office or agency maintained by the Company
for such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company, the Trustee and the Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations and for the
<PAGE> 113
same aggregate principal amount, will be issued to the designated transferee or
transferees.
The Company will furnish to any Holder of the Securities upon
written request and without charge a copy of the Indenture. Request may be made
to:
Globalstar Telecommunications Limited
600 Third Avenue
New York, New York 10016
Attention of: General Counsel
<PAGE> 114
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint _______________________________ agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
Your Signature:
---------------------------------------
(Sign exactly as your name appears on
the other side of this Security)
Date:
------------------
Signature Guarantee:*
------------------------------
In connection with any transfer of any of the Securities evidenced by this
certificate occurring prior to the date that is three years after the later of
the date of original issuance of such Securities and the last date, if any, on
which such Securities were owned by the Company or any
- ------------------------
*Signatures must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE> 115
Affiliate of the Company, the undersigned confirms that such Securities are
being transferred:
CHECK ONE BOX BELOW
(1) / / to the Company; or
(2) / / pursuant to and in compliance with Rule 144A
under the Securities Act of 1933; or
(3) / / pursuant to and in compliance with
Regulation S under the Securities Act of
1933; or
(4) / / to an "accredited investor" (as defined in
Rule 501(a) under the Securities Act of 1933
that has furnished to the Trustee a signed
letter containing certain representations and
agreements (the form of which letter can be
obtained from the Trustee); or
(5) / / pursuant to another available exemption from
the registration requirements of the
Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to register
any of the Securities evidenced by this certificate in the name of any
person other than the registered holder thereof; provided, however,
that if box (2), (3), (4) or (5) is checked, the Trustee may require,
prior to registering any such transfer of the Securities such legal
opinions, certifications and other information as the Company has
reasonably requested to confirm that such transfer is being made
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the
<PAGE> 116
Securities Act of 1933, such as the exemption provided by Rule 144
under such Act.
------------------------
Signature
Signature Guarantee:*
- --------------------- --------------------------
Signature must be guaranteed Signature
- --------------------------------------------------------------------------------
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
this Security for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the
Securities Act of 1933, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding the Company as the undersigned has requested pursuant to Rule 144A or
has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:
---------------- ------------------------------
NOTICE: To be executed by
an executive officer
- --------------------
*Signatures must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE> 117
[TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE A
The initial principal amount at the Mandatory Redemption Date
of this Global Security shall be $275,000,000. The following increases or
decreases in the principal amount of this Global Security have been made:
<TABLE>
<CAPTION>
=======================================================================
Amount of
increase in
Principal Principal
Amount of this Amount of Amount of Signature of
Global Security decrease in this Global authorized
including upon Principal Security signatory of
exercise of the Amount of following Trustee or
over-allotment this Global such decrease Securities
Date Made option Security or increase Custodian
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
=======================================================================
</TABLE>
<PAGE> 118
ELECTION TO CONVERT
To Globalstar Telecommunications Limited:
The undersigned owner of this Security hereby irrevocably
exercises the option to convert this Security, or the portion below designated,
into Common Stock of GLOBALSTAR TELECOMMUNICATIONS LIMITED in accordance with
the terms of the Indenture referred to in this Security, and directs that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Any Holder, upon the exercise of its conversion rights in
accordance with the terms of the Indenture and the Security, agrees to be bound
by the terms of the Registration Rights
<PAGE> 119
Agreement relating to the Common Stock issuable upon conversion of the Security.
Date:
in whole
-- Portions of Security to be
converted ($50.00 or integral
multiples thereof):
$
----------------
-------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name
and Address, Including Zip
Code, and Social Security or
Other Identifying Number
Signature Guarantee:*
---------------------
- ---------------------
*Signatures must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
<PAGE> 120
EXHIBIT B
FORM OF TRANSFER CERTIFICATE FOR TRANSFER
FROM GLOBAL SECURITY OR RESTRICTED
SECURITY TO RESTRICTED SECURITY
(Transfers pursuant to Section 3.05(b)(ii)
or Section 3.05(b)(iii) of the Indenture)
The Bank of New York, as Trustee
101 Barclay Street, Floor 21 West
New York, New York 10286
Attn: Corporate Trust Trustee
Administration
Re: Globalstar Telecommunications Limited
6 1/2% Convertible Preferred Equivalent
Obligations due 2006 (the "Securities")
Reference is hereby made to the Indenture dated as of March 6,
1996 (the "Indenture") between Globalstar Telecommunications Limited, as Issuer,
and The Bank of New York, as Trustee. Capitalized terms used but not defined
herein shall have the meanings given them in the Indenture.
This letter relates to U.S. $__________ aggregate principal
amount of Securities which are held [in the form of the [Restricted] [Global]
Security (CUSIP No. ) with the Depositary]*in the name of [name of transferor]
(the "Transferor") to effect the transfer of the Securities.
In connection with such request, and in respect of such
Securities, the Transferor does hereby certify that such Securities are being
transferred in accordance with (i) the transfer restrictions set forth in the
Securities and (ii) to a transferee that the Transferor reasonably believes is
an "accredited investor" (as defined in Rule 501(a) of Regulation D under the
Securities Act of 1933) and is acquiring at least $250,000 principal amount of
Securities for its own account or for one or more accounts as to which the
transferee exercises sole investment discretion and (iii) in accordance with
applicable
- --------------------
*Insert, if appropriate.
<PAGE> 121
securities laws of any state of the United States or any other jurisdiction.
[Name of Transferor],
by
--------------------------------
Name:
Title:
Dated:
cc: Globalstar Telecommunications Limited
600 Third Avenue
New York, New York 10016
Attn: General Counsel
<PAGE> 122
EXHIBIT C
FORM OF ACCREDITED INVESTOR TRANSFEREE CERTIFICATE
(Transfers pursuant to Section 3.05(b)(ii) and
Section 3.05(b)(iii) of the Indenture)
The Bank of New York, as Trustee
101 Barclay Street, Floor 21 West
New York, New York 10286
Attn: Corporate Trust Trustee
Trust Administration
Re: Globalstar Telecommunications Limited
6 1/2% Convertible Preferred Obligations
due 2006 (the "Securities")
Reference is hereby made to the Indenture dated as of March 6,
1996 (the "Indenture") between Globalstar Telecommunications Limited, as Issuer,
and The Bank of New York, as Trustee. Capitalized terms used but not defined
herein shall have the meanings given them in the
Indenture.
This letter relates to U.S. $__________ aggregate principal
amount of Securities which are held [in the form of the [Restricted] [Global]
Security (CUSIP No. ___) with the Depositary] in the name of [name of
transferor] (the "Transferor") to effect the transfer of the Securities to the
undersigned.
In connection with such request, and in respect of such
Securities we confirm that:
1. We understand that the Securities have not been registered
under the U.S. Securities Act of 1933 (the "Securities Act"), and are
being sold to us in a transaction that is exempt from the registration
requirements of the Securities Act.
2. We are a corporation, partnership or other entity having
such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of an investment in the
Securities, and we are (or any account for which we are purchasing
under paragraph 4 below is) an accredited investor as defined in Rule
501(a) under the Securities Act, able to bear the economic risk of our
proposed investment in the Securities.
<PAGE> 123
3. We are acquiring the Securities for our own account (or for
accounts as to which we exercise sole investment discretion and have
authority to make, and do make, the statements contained in this
letter) and not with a view to any distribution of the Securities,
subject, nevertheless, to the understanding that the disposition of our
property shall at all times be and remain within our control.
4. We are, and each account (if any) for which we are
purchasing Securities is, purchasing Securities having an aggregate
principal amount of not less than $250,000.
5. We understand that (a) the Securities will be delivered to
us in registered form only and that the certificate delivered to with
respect to the Securities will bear a legend substantially to the
following effect:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING
THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT
BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD ANNIVERSARY
OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER
THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS
PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE
COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED
BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS
SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER
THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), AND, IF SUCH TRANSFER
IS BEING EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED
BELOW) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE
MEANING OF RULE 903(C)(3) OF REGULATION S UNDER THE SECURITIES ACT), A
CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED
BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (4) TO AN "ACCREDITED
INVESTOR" AS DEFINED IN RULE 501(A) UNDER THE
<PAGE> 124
SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE
CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS
SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE IN
THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE TRANSFEREE TO THE COMPANY
AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS SPECIFIED IN THE INDENTURE MAY
NOT TRANSFER THIS SECURITY PURSUANT TO THIS CLAUSE (4) PRIOR TO THE EXPIRATION
OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(C)(3) OF
REGULATION S UNDER THE SECURITIES ACT), (5) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER
THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. AN ACCREDITED INVESTOR HOLDING THIS
SECURITY AGREES IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES
AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY
TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE
HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE
BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT
IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3)
A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT
SATISFYING THE REQUIREMENTS OF PARAGRAPH (0)(2) OF RULE 902 UNDER) REGULATION S
UNDER THE SECURITIES ACT."
and (b) such certificates will be reissued without the foregoing legend
only in accordance with the terms of the Indenture.
6. We agree that in the event that at some future time we wish
to dispose of any of the Securities, we will not do so unless:
(a) the Securities are sold to the Company or
any Subsidiary thereof;
(b) the Securities are sold to a qualified
institutional buyer in compliance with Rule 144A
under the Securities Act;
(c) the Securities are sold to an accredited
investor, as defined in Rule 501(a) under the
Securities Act, acquiring at least $250,000
<PAGE> 125
principal amount of the Securities that, prior to such
transfer, furnishes to the Trustee a signed letter containing
certain representations and agreements relating to the
restrictions on transfer of the Securities (the form of which
letter can be obtained from such Trustee);
(d) the Securities are sold outside the
United States in compliance with Rule 903 or
Rule 904 under the Securities Act;
(e) the Securities are sold by us pursuant to
Rule 144 under the Securities Act; or
(f) the Securities are sold pursuant to an
effective registration statement under the
Securities Act.
Very truly yours,
[PURCHASER]
by
------------------------
Name:
Title:
Dated:
cc: Globalstar Telecommunications Limited
600 Third Avenue
New York, New York 10016
<PAGE> 1
Exhibit 4.2
EXECUTION COPY
GLOBALSTAR TELECOMMUNICATIONS LIMITED
$275,000,000
6.5% Convertible Preferred Equivalent Obligations
due 2006
REGISTRATION RIGHTS AGREEMENT
New York, New York
March 6, 1996
Lehman Brothers Inc.
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
Unterberg Harris
Dear Sirs:
Globalstar Telecommunications Limited, a Bermuda company (the
"Company"), proposes to issue and sell to you (the "Purchasers"), upon the terms
set forth in the Purchase Agreement dated February 29, 1996 (as amended prior to
the date hereof, the "Purchase Agreement"), among the Company, Globalstar, L.P.,
a Delaware limited partnership ("Globalstar"), and the Purchasers, $275,000,000
aggregate principal amount (plus an additional $55,000,000 principal amount to
cover over-allotments, if any) of its 6.5% Convertible Preferred Equivalent
Obligations due 2006 (the "Securities") (the "Initial Placement"). The
Securities will be convertible into shares of Common Stock, $1.00 par value per
share, of the Company (the "Common Stock") at the conversion price set forth in
the Final Memorandum (as defined below). In satisfaction of a condition to your
obligations under the Purchase Agreement, the Company agrees with you (i) for
your benefit and (ii) for the benefit of the holders of the Securities or the
Common Stock issuable upon conversion of the Securities (including you) from
time to time until such-time as such Securities shall no longer constitute
restricted securities pursuant to Rule 144(k) of the Securities Act (as defined
herein) or all such Securities or Common Stock issued upon conversion of such
Securities have been sold pursuant to the Shelf Registration
<PAGE> 2
2
Statement (as defined below) (each of the foregoing a "Holder" and together the
"Holders"), as follows:
1. Definitions. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
"Affiliate" of any specified person means any other person
that, directly or indirectly, is in control of, is controlled by, or is under
common control with, such specified person. For purposes of this definition,
control of a person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such person whether by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Closing Date" has the meaning set forth in the Purchase
Agreement.
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Final Memorandum" has the meaning set forth in the Purchase
Agreement.
"First Closing Date" has the meaning set forth in the Purchase
Agreement.
"Holder" has the meaning set forth in the preamble hereto.
"Indenture" means the indenture relating to the Securities, to
be entered into by the Company and The Bank of New York, as trustee, as the same
may be amended from time to time in accordance with the terms thereof.
<PAGE> 3
3
"Initial Placement" has the meaning set forth in the preamble
hereto.
"Majority Holders" means the Holders of a majority of the
aggregate principal amount of Securities registered under a Shelf Registration
Statement; provided, however, that Holders of Common Stock issued upon
conversion of Securities shall be deemed to be Holders of the aggregate
principal amount of Securities from which such Common Stock was converted.
"Managing Underwriters" means the investment banker or
investment bankers and manager or managers that shall administer an underwritten
offering of the securities covered by the Shelf Registration Statement.
"Prospectus" means the prospectus included in any Shelf
Registration Statement (including, without limitation, a prospectus that
discloses information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Securities or Common Stock issuable upon
conversion thereof covered by such Shelf Registration Statement, and all
amendments and supplements to the Prospectus, including post-effective
amendments.
"Securities" has the meaning set forth in the preamble hereto.
"Shelf Registration" means a registration effected pursuant to
Section 2 hereof.
"Shelf Registration Period" has the meaning set forth in
Section 2(b) hereof.
"Shelf Registration Statement" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 2 hereof which
covers some or all of the Securities and the Common Stock issuable upon
conversion thereof, as applicable, on an appropriate form under Rule 415 under
the Act or any similar rule that may be adopted by the Commission, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
<PAGE> 4
4
"Trustee" means the trustee with respect to the Securities
under the Indenture.
"underwriter" means any underwriter of Securities or Common
Stock issuable upon conversion thereof in connection with an offering thereof
under a Shelf Registration Statement.
2. Shelf Registration; Suspension of Use of Prospectus.
(a) The Company shall prepare and, not later than 120 days
following the First Closing Date, shall file with the Commission and thereafter,
but no later than 180 days following the First Closing Date, shall use its best
efforts to cause to be declared effective under the Act a Shelf Registration
Statement relating to the offer and sale of the Securities and the Common Stock
issuable upon conversion thereof by the Holders from time to time in accordance
with the methods of distribution elected by such Holders and set forth in such
Shelf Registration Statement.
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the Prospectus
forming part thereof to be usable by Holders until the third anniversary of the
First Closing Date or such earlier date as of which the Securities shall no
longer constitute restricted securities under Rule 144(k) of the Securities Act
or all the Securities or Common Stock issuable upon conversion thereof covered
by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement (in any such case, such period being called the "Shelf
Registration Period"). The Company shall be deemed not to have used its best
efforts to keep the Shelf Registration Statement effective during the requisite
period if it voluntarily takes any action that would result in Holders of
securities covered thereby not being able to offer and sell such securities
during that period, unless such action is (i) required by applicable law or (ii)
pursuant to Section 2(c) hereof, and, in either case, so long as the Company
promptly thereafter complies with the requirements of Section 3(i) hereof, if
applicable.
(c) The Company may suspend the use of the Prospectus for a
period not to exceed 15 days in any three month period for valid business
reasons (not including avoidance of the Company's obligations hereunder),
including the acquisition or divestiture of assets, public filings
<PAGE> 5
5
with the Commission, pending corporate developments and similar events.
3. Registration Procedures. In connection with any Shelf
Registration Statement, the following provisions shall apply:
(a) The Company shall furnish to you, prior to the filing
thereof with the Commission, a copy of any Shelf Registration
Statement, and each amendment thereof and each amendment or supplement,
if any, to the Prospectus included therein and shall use its best
efforts to reflect in each such document, when so filed with the
Commission, such comments as you reasonably may propose.
(b) The Company shall ensure that (i) any Shelf Registration
Statement and any amendment thereto and any Prospectus forming part
thereof and any amendment or supplement thereto complies in all
material respects with the Act and the rules and regulations
thereunder, (ii) any Shelf Registration Statement and any amendment
thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading and (iii) any Prospectus forming part of any Shelf
Registration Statement, and any amendment or supplement to such
Prospectus, does not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(c) (1) The Company shall advise you and the Holders and, if
requested by you or any such Holder, confirm such advice in writing:
(i) when a Shelf Registration Statement and any
amendment thereto has been filed with the Commission and when
the Shelf Registration Statement or any post-effective
amendment thereto has become effective; and
(ii) of any request by the Commission for amendments or
supplements to the Shelf Registration Statement or the
Prospectus included therein or for additional information.
<PAGE> 6
6
(2) The Company shall advise you and the Holders and, if
requested by you or any such Holder, confirm such advice in writing:
(i) of the issuance by the Commission of any
stop order suspending the effectiveness of the
Shelf Registration Statement or the initiation of
any proceedings for that purpose;
(ii) of the receipt by the Company of any notification
with respect to the suspension of the qualification of the
securities included in any Shelf Registration Statement for
sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and
(iii) of the suspension of the use of the Prospectus
pursuant to Section 2(c) hereof or of the happening of any
event that requires the making of any changes in the Shelf
Registration Statement or the Prospectus so that, as of such
date, the statements therein are not misleading and do not
omit to state a material fact required to be stated therein or
necessary to make the statements therein (in the case of the
Prospectus, in light of the circumstances under which they
were made) not misleading (which advice shall be accompanied
by an instruction to suspend the use of the Prospectus until
the requisite changes have been made); provided that such
notice shall not be required to specify the nature of the
event giving rise to the notice requirement hereunder.
(d) The Company shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of any Shelf
Registration Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of securities
included within the coverage of any Shelf Registration Statement,
without charge, at least one copy of such Shelf Registration Statement
and any post-effective amendment thereto, including financial
statements and schedules, and, if the Holder so requests in writing,
all exhibits (including those incorporated by reference).
<PAGE> 7
7
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of securities included within the coverage of
any Shelf Registration Statement, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) included in such
Shelf Registration Statement and any amendment or supplement thereto as
such Holder may reasonably request; and the Company consents to the use
of the Prospectus or any amendment or supplement thereto by each of the
selling Holders of securities in connection with the offering and sale
of the securities covered by the Prospectus or any amendment or
supplement thereto.
(g) Prior to any offering of securities pursuant to any Shelf
Registration Statement, the Company shall register or qualify or
cooperate with the Holders of securities included therein and their
respective counsel in connection with the registration or qualification
of such securities for offer and sale under the securities or blue sky
laws of such jurisdictions as any such Holders reasonably request in
writing and do any and all other acts or things reasonably necessary or
advisable to enable the offer and sale in such jurisdictions of the
securities covered by such Shelf Registration Statement; provided,
however, that the Company will not be required to qualify generally to
do business in any jurisdiction where it is not then so qualified or to
take any action which would subject it to general service of process or
to taxation in any such jurisdiction where it is not then so subject.
(h) The Company shall cooperate with the Holders of Securities
or the Common Stock issued upon conversion thereof to facilitate the
timely preparation and delivery of certificates representing Securities
or the Common Stock issued upon conversion thereof to be sold pursuant
to any Shelf Registration Statement free of any restrictive legends and
in such denominations and registered in such names as Holders may
request prior to sales of securities pursuant to such Shelf
Registration Statement.
(i) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) above, the Company shall, if required pursuant to the Act
or paragraph (c)(2)(iii) above, promptly prepare a post-effective
amendment to
<PAGE> 8
8
any Shelf Registration Statement or an amendment or supplement to the
related Prospectus or file any other required document so that, as
thereafter delivered to purchasers of the securities included therein,
the Prospectus will not include an untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading.
(j) Not later than the effective date of any Shelf
Registration Statement hereunder, the Company shall provide a CUSIP
number for the Securities registered under such Shelf Registration
Statement, and provide the Trustee with printed certificates for such
Securities, in a form eligible for deposit with The Depository Trust
Company.
(k) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make
generally available to its security holders as soon as practicable
after the effective date of the applicable Shelf Registration Statement
an earnings statement satisfying the provisions of Section 11(a) of the
Act.
(1) The Company shall cause the Indenture to be qualified
under the Trust Indenture Act in a timely manner.
(m) The Company may require each Holder of securities to be
sold pursuant to any Shelf Registration Statement to furnish to the
Company such information regarding the Holder and the distribution of
such securities as the Company may from time to time reasonably require
for inclusion in such Shelf Registration Statement. Any Holder who
fails to provide such information shall not be entitled to use the
Prospectus.
(n) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or posteffective amendment to a Shelf
Registration Statement, such information as the Managing Underwriters
and Majority Holders reasonably agree should be included therein and
shall make all required filings of such Prospectus supplement or
post-effective amendment as soon as
<PAGE> 9
9
notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment.
(o) The Company shall enter into such agreements (including
underwriting agreements) and take all other appropriate actions in
order to expedite or facilitate the registration or the disposition of
the Securities or the Common Stock issuable upon conversion thereof,
and in connection therewith, if an underwriting agreement is entered
into, cause the same to contain indemnification provisions and
procedures no less favorable than those set forth in Section 5 (or such
other provisions and procedures acceptable to the Majority Holders and
the Managing Underwriters, if any), with respect to all parties to be
indemnified pursuant to Section 5 by Holders of Securities or the
Common Stock issuable upon conversion thereof to the Company, it being
understood that all underwriting discounts and commissions, and all
other underwriting fees, associated with such agreement in connection
with such offering of the Securities and Common Stock issuable upon
conversion thereof shall, except as otherwise expressly agreed herein
(including, without limitation, those expenses covered by Section 4),
be for the account of the Holders or the underwriters.
(p) The Company shall (i) make reasonably available for
inspection by the Holders of securities to be registered thereunder,
any underwriter participating in any disposition pursuant to such Shelf
Registration Statement, and any attorney, accountant or other agent
retained by the Holders or any such underwriter all relevant financial
and other records, pertinent corporate documents and properties of the
Company and its subsidiaries; (ii) cause the Company's officers,
directors and employees to supply all relevant information reasonably
requested by the Holders or any such underwriter, attorney, accountant
or agent in connection with such Shelf Registration Statement as is
customary for similar due diligence examinations; provided, however,
that any information that is designated in writing by the Company, in
good faith, as confidential at the time of delivery of such information
shall be kept confidential by the Holders or any such underwriter,
attorney, accountant or agent, unless disclosure thereof is made in
connection with a court proceeding or required by law, or such
information has become available (not in violation of
<PAGE> 10
10
this agreement) to the public generally or through a third party
without an accompanying obligation of confidentiality; (iii) make such
representations and warranties to the Holders of securities registered
thereunder and the underwriters, if any, in form, substance and scope
as are customarily made by issuers to underwriters in primary
underwritten offerings and covering matters including, but not limited
to, those set forth in the Purchase Agreement; (iv) obtain opinions of
counsel to the Company and updates thereof (which counsel and opinions
(in form, scope and substance) shall be reasonably satisfactory to the
Managing Underwriters, if any) addressed to each selling Holder and the
underwriters, if any, covering such matters as are customarily covered
in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by such Holders and underwriters; (v)
obtain "cold comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in
the Shelf Registration Statement), addressed to each selling Holder of
securities registered thereunder and the underwriters, if any, in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with primary underwritten
offerings; and (vi) deliver such documents and certificates as may be
reasonably requested by the Majority Holders and the Managing
Underwriters, if any, including those to evidence compliance with
Section 3(i) and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company.
The foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of
this Section 3(p) shall be performed at (A) the effectiveness of such
Shelf Registration Statement and each post-effective amendment thereto
and (B) each closing under any underwriting or similar agreement as and
to the extent required thereunder.
4. Registration Expenses. Globalstar shall bear all expenses
incurred in connection with the performance of the Company's obligations under
Sections 2 and 3 hereof and shall reimburse the Holders for the reasonable and
duly documented fees and disbursements of (i) counsel designated
<PAGE> 11
11
by the Majority Holders to act as counsel for the Holders in connection
therewith or (ii) in the absence of such selection of counsel by the Majority
Holders, one firm designated by the underwriters to act as counsel for the
Holders in connection therewith.
5. Indemnification and Contribution. (a) In connection with
any Shelf Registration Statement, the Company agrees to indemnify and hold
harmless each Holder of securities covered thereby (including the Purchasers),
the directors, officers, employees and agents of each such Holder and each
person who controls any such Holder within the meaning of either the Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in the Shelf
Registration Statement as originally filed or in any amendment thereof, or in
any preliminary Prospectus or Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and agrees to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that (i) the
Company will not be liable in any case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any such Holder or underwriter or Managing
Underwriter specifically for inclusion therein, (ii) the Company shall not be
liable to any indemnified party under this indemnity agreement with respect to
any Shelf Registration Statement or Prospectus to the extent that any such loss,
claim, damage or liability of such indemnified party results solely from an
untrue statement of a material fact contained in, or the omission of a material
fact from, the Shelf Registration Statement or Prospectus which untrue statement
or omission was corrected in an amended or supplemented Shelf Registration
Statement or Prospectus, if the person alleging such loss, claim,
<PAGE> 12
12
damage or liability was not sent or given, at or prior to the written
confirmation of such sale, a copy of the amended or supplemented Shelf
Registration Statement or Prospectus if the Company had previously furnished
copies thereof to such indemnified party and if such delivery of a prospectus is
finally judicially determined to be required by the Act and was not so made and
(iii) the Company will not be liable to any indemnified party under this
indemnity agreement with respect to any Shelf Registration Statement or
Prospectus to the extent that any such loss, claim, damage or liability of such
indemnified party results (a) from the use of a Shelf Registration Statement
during a period when a stop order has been issued in respect thereof or any
proceedings for that purpose have been initiated or (b) from the use of the
Prospectus during a period when the use of the Prospectus has been suspended in
accordance with Section 2(c) hereof, provided, in each case, that Holders
received prior notice of such stop order, initiation of proceedings or
suspension. This indemnity agreement will be in addition to any liability which
the Company may otherwise have.
The Company also agrees to indemnify or contribute to Losses,
as provided in Section 5(d), of any underwriters of Securities or the Common
Stock issued upon conversion thereof registered under a Shelf Registration
Statement, their officers and directors and each person who controls such
underwriters on substantially the same basis as that of the indemnification of
the Purchasers and the selling Holders provided in this Section 5(a) and shall,
if requested by any Holder, enter into an underwriting agreement reflecting such
agreement, as provided in Section 3(o) hereof.
(b) Each Holder of securities covered by a Shelf Registration
Statement (including the Purchasers) severally agrees to indemnify and hold
harmless (i) the Company, (ii) each of its directors, (iii) each of its officers
who signs such Shelf Registration Statement and (iv) each person who controls
the Company within the meaning of either the Act or the Exchange Act to the same
extent as the foregoing indemnity from the Company to each such Holder, but only
with reference to written information relating to such Holder furnished to the
Company by or on behalf of such Holder specifically for inclusion in the
documents referred to in the foregoing indemnity. This indemnity agreement will
be in addition to any liability which any such Holder may otherwise have.
<PAGE> 13
13
(c) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 5, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party will
not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding in respect of which
indemnification or
<PAGE> 14
14
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 5 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Initial Placement and the
Shelf Registration Statement which resulted in such Losses; provided, however,
that in no case shall the Purchasers of any Security or the Common Stock issued
upon conversion thereof be responsible, in the aggregate, for any amount in
excess of the purchase discount or commission applicable to such Security, as
set forth on the cover page of the Final Memorandum, nor shall any underwriter
be responsible for any amount in excess of the underwriting discount or
commission applicable to the securities purchased by such underwriter under the
Shelf Registration Statement which resulted in such Losses. If the allocation
provided by the immediately preceding sentence is unavailable for any reason,
the indemnifying party and the indemnified party shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Company shall be deemed to be equal to
the total net proceeds from the Initial Placement (before deducting expenses) as
set forth on the cover page of the Final Memorandum. Benefits received by the
Purchasers shall be deemed to be equal to the total purchase discounts and
commissions as set forth on the cover page of the Final Memorandum, and benefits
received by any other Holders shall be deemed to be equal to the value of
receiving Securities
<PAGE> 15
15
or the Common Stock issuable upon conversion thereof registered under the Act.
Benefits received by any underwriter shall be deemed to be equal to the total
underwriting discounts and commissions, as set forth on the cover page of the
Prospectus forming a part of the Shelf Registration Statement which resulted in
such Losses. Relative fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information provided by the
indemnifying party, on the one hand, or by the indemnified party, on the other
hand. The parties agree that it would not be just and equitable if contribution
were determined by pro rata allocation or any other method of allocation which
does not take account of the equitable considerations referred to above.
Notwithstanding the provisions of this paragraph (d), no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 5, each person who
controls a Holder within the meaning of either the Act or the Exchange Act and
each director, officer, employee and agent of such Holder shall have the same
rights to contribution as such Holder, and each person who controls the Company
within the meaning of either the Act or the Exchange Act, each officer of the
Company who shall have signed the Shelf Registration Statement and each director
of the Company shall have the same rights to contribution as the Company,
subject in each case to the applicable terms and conditions of this paragraph
(d).
(e) The provisions of this Section 5 will remain in full force
and effect, regardless of any investigation made by or on behalf of any Holder
or the Company or any of the officers, directors or controlling persons referred
to in Section 5 hereof, and will survive the sale by a Holder of securities
covered by a Shelf Registration Statement.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not, as of the
date hereof, entered into, nor shall it, on or after the date hereof,
enter into, any agreement with respect to its securities that is
inconsistent with the rights granted to the Holders herein or otherwise
conflicts with the provisions hereof.
<PAGE> 16
16
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended,
qualified, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of the Holders of at least a
majority of the then outstanding aggregate principal amount of
Securities or the Common Stock issued upon conversion thereof; provided
that, with respect to any matter that directly or indirectly affects
the rights of the Purchasers hereunder, the Company shall obtain the
written consent of the Purchasers against which such amendment,
qualification, supplement, waiver or consent is to be effective.
Notwithstanding the foregoing (except the foregoing proviso), a waiver
or consent to departure from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders whose
securities are being sold pursuant to a Shelf Registration Statement
and that does not directly or indirectly affect the rights of other
Holders may be given by the Majority Holders, determined on the basis
of securities being sold rather than registered under such Shelf
Registration Statement.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery,
first-class mail, telex, telecopier, or air courier guaranteeing
overnight delivery:
(1) if to a Holder, at the most current address given
by such holder to the Company in accordance with the
provisions of this Section 6(c), which address initially is,
with respect to each Holder, the address of such Holder
maintained by the Registrar under the Indenture, with a copy
in like manner to Lehman Brothers Inc.;
(2) if to you, initially at the address set forth in
the Purchase Agreement; and
(3) if to the Company, initially at its address set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have
been duly given when received.
<PAGE> 17
17
The Purchasers or the Company by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of
the parties, including, without the need for an express assignment or
any consent by the Company thereto, subsequent Holders of Securities or
the Common Stock issuable upon conversion thereof. The Company hereby
agrees to extend the benefits of this Agreement to any Holder of
Securities and any such Holder may specifically enforce the provisions
of this Agreement as if an original party hereto.
(e) Counterparts. This agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and
all of which taken together shall constitute one and the same
agreement.
(f) Headings. The headings in this agreement are for
convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
(g) Governing Law. This agreement shall be governed by and
construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed in said State.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect
for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions hereof
shall not be in any way impaired or affected thereby, it being intended
that all of the rights and privileges of the parties shall be
enforceable to the fullest extent permitted by law.
(i) Securities Held by the Company, etc. Whenever the consent
or approval of Holders of a specified percentage of principal amount of
Securities or the Common Stock issued upon conversion thereof is
required hereunder, Securities or the Common Stock
<PAGE> 18
18
issued upon conversion thereof held by the Company or its Affiliates
(other than subsequent Holders of Securities or the Common Stock
issuable upon conversion thereof if such subsequent Holders are deemed
to be Affiliates solely by reason of their holdings of such Securities)
shall not be counted in determining whether such consent or approval
was given by the Holders of such required percentage.
<PAGE> 19
19
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
GLOBALSTAR TELECOMMUNICATIONS
LIMITED,
by
--------------------------
Name:
Title:
GLOBALSTAR, L.P.
by LORAL/QUALCOMM SATELLITE
SERVICES, L.P., its
general partner, by
LORAL/QUALCOMM
PARTNERSHIP, L.P., its
general partner, by LORAL
GENERAL PARTNER, INC.,
its general partner,
by
-----------------------
Name:
Title:
Accepted in New York, New York
March, 1996
<PAGE> 20
20
LEHMAN BROTHERS INC.
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
UNTERBERG HARRIS
by LEHMAN BROTHERS INC.
by
-----------------------
Name:
Title:
<PAGE> 1
Exhibit 5/8.2
[Letterhead of Appleby, Spurling & Kemp]
20 June, 1996
Globalstar Telecommunications Limited
Cedar House
41 Cedar Avenue
Hamilton, HM 12
Bermuda
Dear Sirs,
We have acted as counsel to Globalstar Telecommunications Limited, a
Bermuda company (the "Company"), in connection with its registration for resale
of $310,000,000 Convertible Preferred Equivalent Obligations (the "Convertible
Obligations") and the 4,769,230 shares of Common Stock issuable upon conversion
thereof, subject to adjustment in certain circumstances (the "Conversion
Shares"), as described in the Company's Prospectus (the "Prospectus") contained
in the Form S-3 Registration Statement (the "Registration Statement"), filed
with the United States Securities and Exchange Commission under the Securities
Act of 1933, as amended.
For the purposes of this opinion, we have been supplied with and
reviewed a copy of the Registration Statement, and have relied upon the
Memorandum of Association and Bye-Laws of the Company and such other documents,
certificates and records and have made such investigations as we deem necessary
or appropriate in order to give the opinion expressed herein.
We have assumed:
(i) The genuineness of all signatures on the documents which
we have examined.
(ii) The conformity to original documents of all documents
produced to us as copies and the authenticity of all
original documents which, or copies of which, have been
submitted to us.
Based upon and subject to the foregoing and subject to the reservations
mentioned below and to any matters not disclosed to us, we are of the opinion
that:
(i) the Convertible Obligations have been duly
authorised and validly issued by the Company and that
the Conversion Shares, when issued in accordance with
the terms of the Convertible Obligations, will be duly
authorised, validly issued, fully paid and subject to
no further calls; and
<PAGE> 2
(ii) the statements set forth in the Prospectus under the
headings "Description of Capital Stock", "Certain Foreign Issuer
Considerations" and "Taxation - Bermuda Tax Considerations", to
the extent that they constitute matters of Bermuda law, or legal
conclusions with respect thereto, have been reviewed by us and
are accurate in all material respects and fairly present the
information disclosed therein in all material respects.
Our reservations are as follows:
(A) We express no opinion as to any law other than Bermuda law and none of the
opinions expressed herein relates to compliance with or matters governed by
the laws of any jurisdiction other than Bermuda. Where an obligation is to
be performed in a jurisdiction other than Bermuda, a Bermuda court may
decline to enforce it to the extent that such performance would be illegal
or contrary to public policy under the laws of such other jurisdiction.
(B) We express no opinion as to the availability of equitable remedies, such as
specific performance or injunctive relief, or as to any matters which are
within the discretion of the Bermuda courts, such as the award of costs, or
questions related to jurisdiction. Further, we express no opinion as to the
validity or binding effect in Bermuda of any waiver of or obligation to
waive any provision of law (whether substantive or procedural) or any right
or remedy arising through circumstances not known at the time of the filing
of the Registration Statement.
(C) Section 9 of the Interest and Credit Charges (Regulation) Act 1975
provides that the Bermuda courts have discretion as to the amount of
interest if any payable on the amount of a judgment after date of
judgment. If the court does not exercise that discretion, then interest
will accrue at the statutory rate which is currently seven per cent per
annum.
Where a party is vested with a discretion or may determine a matter in its
opinion, such discretion may have to be exercised reasonably or such an opinion
may have to be based on reasonable grounds.
We consent to the filing of this opinion as Exhibit 5 to the Registration
Statement and to the reference to our firm under the caption "Legal Opinions",
"Description of Capital Stock", "Certain Foreign Issuer Considerations" and
"Taxation" in the Prospectus which is a part of the Registration Statement. This
opinion is issued on the basis that it will be construed in accordance with the
provisions of Bermuda law. It is issued
-2-
<PAGE> 3
solely for the benefit of the addressee in relation to the transaction
described above and is not to be made available to or relied upon by any other
person, firm or entity.
Yours faithfully,
Appleby, Spurling & Kempe
-3-
<PAGE> 1
Exhibit 8.1
[Letterhead of WILLKIE FARR & GALLAGHER]
June 20, 1996
Globalstar Telecommunications Limited
Cedar House
41 Cedar Avenue
Hamilton HM 12 Bermuda
Re: Globalstar Telecommunications Limited
$310,000,000 Convertible Preferred Equivalent
Obligations due 2006
Ladies and Gentlemen:
We have acted as counsel for Globalstar Telecommunications Limited, a
Bermuda corporation (the "Company"), in connection with its registration for
resale of $310,000,000 Convertible Preferred Equivalent Obligations due 2006
(the "Securities") and the 4,769,230 shares of Common Stock issuable upon
conversion thereof, subject to adjustment in certain circumstances (the
"Conversion Shares"), as described in the Company's Prospectus (the
"Prospectus"), contained in the Form S-3 Registration Statement (the
"Registration Statement") filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended. The Securities have been issued
pursuant to an Indenture, dated as of March 6, 1996 (the "Indenture"),
between the Company and The Bank of New York, as Trustee.
As counsel for the Company, we have examined copies of the Registration
Statement and the Amended and Restated Agreement of Limited Partnership, dated
as of December 31, 1994 (the "Partnership Agreement"), of Globalstar, L.P.
("Globalstar"). We have examined originals, certified copies or photocopies of
such records of Globalstar, the Company and its subsidiaries and such other
certificates and documents as we have deemed relevant and necessary for the
opinions hereinafter set forth. In such examination, we have assumed the
genuineness of all
<PAGE> 2
June 20, 1996
Page 2
signatures, the authenticity of all documents submitted to us as originals and
the conformity to originals of all documents submitted to us as certified
copies or photocopies. As to various questions of fact material to such
opinions, we have relied upon certificates of officers of the Company and of
Globalstar and public officials.
Based upon the foregoing and having regard for such legal questions as
we have deemed relevant, it is our opinion that:
The statements set forth in the Prospectus under "Taxation--United
States Tax Considerations", insofar as such statements constitute a summary of
the legal matters, documents or proceedings referred to therein relating to the
laws of the United States fairly present the information referred to therein
with respect to such legal matters, documents and proceedings; the statements
set forth under the heading "Governance of Globalstar," insofar as such
statements purport to summarize provisions of the Partnership Agreement,
provide a fair summary of such provisions; and the statements set forth under
the heading "Description of Securities" in the Prospectus, insofar as such
statements purport to summarize provisions of the Securities and Indenture,
provide a fair summary of such provisions.
We call to your attention that we are members of the Bar of the State
of New York and do not purport to be experts in, or to render any opinions with
respect to, the laws of jurisdictions other than the State of New York, except
for the federal laws of the United States of America and the Revised Uniform
Limited Partnership Act of the State of Delaware.
Very truly yours,
Willkie Farr & Gallagher
<PAGE> 1
EXHIBIT 12
STATEMENT REGARDING COMPUTATION OF RATIOS
(In thousands, except ratios)
GLOBALSTAR TELECOMMUNICATIONS LIMITED
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1995 1996
-------------- --------------
<S> <C> <C>
Earnings:
Net loss...................................................... $(12,632) $ (3,282)
Add:
Equity in loss of Globalstar, L.P........................ 12,632 3,282
Interest expense......................................... -- 1,424
-------------- --------------
Earnings available to cover fixed charges(1).................... $ -- $ 1,424
============== ==============
Fixed charges --interest expense................................ $ -- $ 1,424
============== ==============
Ratio of earnings to fixed charges.............................. N/A 1x
============== ==============
</TABLE>
- ---------------
(1) The earnings of GTL available to cover fixed charges, consist solely of
dividends from Globalstar, L.P. on the Redeemable Preferred Partnership
Interests held by GTL.
GLOBALSTAR, L.P.
DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES
<TABLE>
<CAPTION>
CUMULATIVE
MARCH 23 MARCH 23, 1994
(COMMENCEMENT OF THREE MONTHS (COMMENCEMENT OF
OPERATIONS) TO YEAR ENDED ENDED OPERATIONS) TO
DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1994 1995 1996 1996
---------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C>
Net loss............................ $(26,244) $(68,237) $(13,952) $ (108,433)
Dividends on Redeemable Preferred
Partnership Interests............. -- -- (1,424) (1,424)
------- ------- ------- --------
Deficiency of earnings to cover
fixed charges..................... $(26,244) $(68,237) $(15,376) $ (109,857)
======= ======= ======= ========
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF DELOITTE & TOUCHE LLP
We consent to the incorporation by reference in this Registration Statement
of Globalstar Telecommunications Limited on Form S-3 of our reports dated
January 26, 1996 (March 6, 1996 as to Notes 4 and 11 of Globalstar
Telecommunications Limited and Globalstar, L.P., respectively), appearing in the
Annual Report on Form 10-K of Globalstar Telecommunications Limited for the year
ended December 31, 1995 and to the reference to us under the heading "Experts"
in the Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
San Jose, California
June 19, 1996
<PAGE> 1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
===============================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
--------------------
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(Exact name of obligor as specified in its charter)
Bermuda 13-3795510
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Cedar House
41 Cedar Avenue
Hamilton HM12, Bermuda
(Address of principal executive offices) (Zip code)
--------------------
6 % Convertible Preferred Equivalent Obligations Due 2006
(Title of the indenture securities)
===============================================================================
<PAGE> 2
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Name Address
- -------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 3.)
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the
Commission's Rules of Practice.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
</TABLE>
-2-
<PAGE> 3
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
- 3 -
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 5th day of June, 1996.
THE BANK OF NEW YORK
By: /S/MARY JANE MORRISSEY
--------------------------
Name: MARY JANE MORRISSEY
Title: VICE PRESIDENT
-4-
<PAGE> 5
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business
December 31, 1995, published in accordance with a call made by the
Federal Reserve Bank of this District pursuant to the provisions of
the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
ASSETS in Thousands
<S> <C>
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin .................. $ 4,500,312
Interest-bearing balances .......... 643,938
Securities:
Held-to-maturity securities ........ 806,221
Available-for-sale securities ...... 2,036,768
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold ................... 4,166,720
Securities purchased under agreements
to resell........................... 50,413
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ........................... 27,068,535
LESS: Allowance for loan and
lease losses ..................... 520,024
LESS: Allocated transfer risk
reserve........................... 1,000
Loans and leases, net of unearned
income and allowance, and reserve 26,547,511
Assets held in trading accounts ...... 758,462
Premises and fixed assets (including
capitalized leases) ................ 615,330
Other real estate owned .............. 63,769
Investments in unconsolidated
subsidiaries and associated
companies .......................... 223,174
Customers' liability to this bank on
acceptances outstanding ............ 900,795
Intangible assets .................... 212,220
Other assets ......................... 1,186,274
-----------
Total assets ......................... $42,711,907
===========
LIABILITIES
Deposits:
In domestic offices ................ $21,248,127
Noninterest-bearing ................ 9,172,079
Interest-bearing ................... 12,076,048
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 9,535,088
Noninterest-bearing ................ 64,417
Interest-bearing ................... 9,470,671
Federal funds purchased and secu-
rities sold under agreements to re-
purchase in domestic offices of
the bank and of its Edge and
Agreement subsidiaries, and in
IBFs:
Federal funds purchased ............ 2,095,668
Securities sold under agreements
to repurchase .................... 69,212
Demand notes issued to the U.S.
Treasury ........................... 107,340
Trading liabilities .................. 615,718
Other borrowed money:
With original maturity of one year
or less .......................... 1,638,744
With original maturity of more than
one year ......................... 120,863
Bank's liability on acceptances exe-
cuted and outstanding .............. 909,527
Subordinated notes and debentures .... 1,047,860
Other liabilities .................... 1,836,573
-----------
Total liabilities .................... 39,224,720
-----------
EQUITY CAPITAL
Common stock ........................ 942,284
Surplus ............................. 525,666
Undivided profits and capital
reserves .......................... 1,995,316
Net unrealized holding gains
(losses) on available-for-sale
securities ........................ 29,668
Cumulative foreign currency transla-
tion adjustments .................. ( 5,747)
-----------
Total equity capital ................ 3,487,187
-----------
Total liabilities and equity
capital ........................... $42,711,907
===========
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has
been prepared in conformance with the instructions issued by the Board
of Governors of the Federal Reserve System and is true to the best of
my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it has been examined by us and to
the best of our knowledge and belief has been prepared in conformance
with the instructions issued by the Board of Governors of the Federal
Reserve System and is true and correct.
J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )
