<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 10, 1997
REGISTRATION NO. 333-22063
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
AMENDMENT NO. 1
TO
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
(441) 295-2244
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------------------
ERIC J. ZAHLER, ESQ.
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 a Copy to:
BRUCE R. KRAUS, ESQ.
WILLKIE FARR & GALLAGHER
One Citicorp Center
153 East 53rd Street
New York, New York 10022
(212) 821-8000
------------------------------------
APPROXIMATE DATE OF THE COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable 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. [ ]
------------------------
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
EXPLANATORY NOTE
This registration statement contains two forms of prospectus: one to be
used in connection with the distribution by the registrant of rights to purchase
up to 1,131,168 shares of the registrant's common stock, and the registration of
such rights and their underlying shares (the "Rights Offering Prospectus"), and
the other to be used in connection with the registration of 4,185,318 shares of
the registrant's common stock to be resold by certain shareholders after
exercise of certain outstanding warrants to purchase such shares (the "Warrant
Share Offering Prospectus" and, together with the Rights Offering Prospectus,
the "Prospectuses").
The two Prospectuses are substantially the same, except that (i) the front
and back cover pages and the sections entitled "Summary," "Use of Proceeds,"
"Taxation," "Plan of Distribution" and "Legal Opinions" are different, (ii) the
Rights Offering Prospectus contains the sections entitled "The Rights Offering,"
"Subscription Agent" and "Information Agent", which sections are not included in
the Warrant Share Offering Prospectus, and (iii) the Warrant Share Offering
Prospectus contains the section entitled "Selling Holders" which section is not
included in the Rights Offering Prospectus. Each Prospectus refers to the other
on the front cover and in the section entitled "Summary." The Rights Offering
Prospectus begins on the following page, and the Warrant Share Offering
Prospectus begins after the back cover page of the Rights Offering Prospectus
and is labeled "Warrant Share Offering Prospectus."
<PAGE> 3
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 March 10, 1997
PROSPECTUS [LOGO]
1,131,168 SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF RIGHTS TO SUBSCRIBE FOR SUCH SHARES
GLOBALSTAR TELECOMMUNICATIONS LIMITED
---------------------------
Globalstar Telecommunications Limited, a Bermuda company (the "Company" or
"GTL"), is distributing to holders of record (the "Shareholders") of its common
stock, par value $1.00 per share (the "Common Stock"), outstanding as of March
, 1997 (the "Record Date"), transferable subscription rights (the "Rights") to
subscribe for and purchase in the aggregate 1,131,168 additional shares of
Common Stock (the "Rights Shares") for a price of $26.50 per share (the
"Subscription Price"). In conjunction with the issuance of the Rights, GTL and
Globalstar have agreed to accelerate the exercise date of outstanding warrants
(the "Guaranty Warrants") to purchase 4,185,318 shares of GTL Common Stock (the
"Warrant Shares") at $26.50 per share, in exchange for the commitment of the
holders of the Guaranty Warrants to exercise their warrants. The Guaranty
Warrants were issued to certain parties in consideration for their guaranties of
a $250 million bank credit agreement of Globalstar L.P. ("Globalstar"). The
resale of the Warrant Shares by the holders thereof (the "Warrant Share
Offering") is being effected by means of a separate prospectus.
GTL holds warrants (the "Partnership Warrants") to purchase 5,316,486
partnership interests in Globalstar at $26.50 per interest, of which 4,185,318
are associated with the Guaranty Warrants. The distribution by the Company of
the Rights to purchase the Rights Shares is intended to enable the GTL
shareholders to benefit directly from the appreciation in the value of the
1,131,168 Partnership Warrants not related to the Guaranty Warrants (which
appreciation is reflected by the difference between the recent market price of
the Common Stock and the exercise price of the Partnership Warrants) and to
enable GTL to obtain the funds necessary for it to exercise such Partnership
Warrants. Accordingly, the Company will utilize the net proceeds from the
exercise of the Rights and of the Guaranty Warrants to exercise the Partnership
Warrants for an aggregate exercise price of approximately $140.9 million, which
proceeds Globalstar will in turn use to continue the construction and deployment
of Globalstar's satellite communications system. The Company is a general
partner in Globalstar. This Prospectus relates to the offer and sale by GTL of
the Rights Shares (the "Rights Offering"). See "Rights Offering."
The Company will distribute to each Shareholder one Right to purchase one
Rights Share for each 8.84042 shares of Common Stock held by such Shareholder on
the Record Date. Holders of Rights will be entitled to purchase for the
Subscription Price one Rights Share for each Right held. The number of Rights
distributed to each Shareholder will be rounded down to the nearest whole number
and no fractional Rights or cash in lieu thereof will be issued or paid. Once a
holder of Rights has exercised such Rights, such exercise may not be revoked.
The Rights will be evidenced by transferable subscription certificates (the
"Subscription Certificates"). See "The Rights Offering."
THE RIGHTS WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON APRIL , 1997
(AS EXTENDED, THE "EXPIRATION DATE").
Shareholders are encouraged to consider carefully the exercise or sale of
Rights by the Expiration Date. After the Expiration Date, unexercised Rights
will be null and void. See "The Rights Offering."
Pursuant to a standby agreement entered into by the Company (the "Standby
Agreement") and Loral Space & Communications Ltd., a Bermuda company ("Loral"),
Loral has agreed to subscribe for and purchase at the Subscription Price all
Rights Shares not otherwise subscribed for on or prior to the Expiration Date.
The Common Stock is listed on the Nasdaq National Market (the "NNM") under
the symbol "GSTRF." On March 7, 1997, the last reported sale price of the Common
Stock on the NNM was $58 5/8 per share.
---------------------------
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER
"RISK FACTORS" BEGINNING ON PAGE 8.
---------------------------
THESE 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.
<TABLE>
<CAPTION>
===============================================================================================
Subscription Price to Proceeds to
Price Public Company(1)
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Per Rights Share............................ $26.50 -- $26.50
- -----------------------------------------------------------------------------------------------
Total of Rights Offering.................... $29,975,952 -- $29,975,952
===============================================================================================
</TABLE>
(1) Expenses of the Rights Offering and the related Warrant Share Offering being
effected under a different prospectus, estimated at $220,000, are to be paid
by Globalstar.
March , 1997
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with 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 Commission maintains
a Web site that contains reports, proxy and information statements and other
information regarding the Company. The address of such Web site is
http://www.sec.gov. 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 Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
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 securities offered hereby. 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 securities offered hereby,
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> 5
INCORPORATION 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, 1996;
(b) the Company's Proxy Statement relating to the 1997 Annual Meeting
of Stockholders; and
(c) 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 Shares 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, Cedar House, 41 Cedar Avenue,
Hamilton HM12, Bermuda, Attention: Secretary (Telephone (441) 295-2244).
ii
<PAGE> 6
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this Prospectus that are not historical facts
are "forward-looking statements" (as such term is defined in the Private
Securities Litigation Reform Act of 1995), which can be identified by the use of
forward-looking terminology such as "believes", "expects", "may", "will",
"should", or "anticipates" or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategy that involve risks and
uncertainties. From time to time, GTL, Loral and Globalstar or their
representatives have made or may make forward-looking statements, orally or in
writing. Furthermore, such forward-looking statements may be included in, but
are not limited to, various filings made by GTL, Loral or Globalstar with the
Commission, or press releases or oral statements made by or with the approval of
an authorized executive officer of GTL, Loral or Globalstar.
Management wishes to caution the reader that these forward-looking
statements, such as the statements regarding Globalstar's planned timetable for
launching and operating the Globalstar System, the extent of the market
opportunity for Globalstar's services and products presented by the growing
demand for telecommunications services worldwide, its anticipation of enabling
local service providers to extend low-cost, high-quality telecommunications
services to millions of people, its anticipated future revenues and capital
expenditures and other statements contained above and herein in this Prospectus
regarding matters that are not historical facts involve predictions. No
assurance can be given that the future results will be achieved; actual events
or results may differ materially as a result of risks facing Globalstar. Such
risks include, but are not limited to, problems related to technical development
and launch of the Globalstar System, the competitive environment in which the
system will operate, doing business in developing markets, obtaining the
necessary financing while being substantially leveraged, obtaining any required
U.S. and foreign government authorizations, licenses and permits, all in a
timely manner, at reasonable costs and on satisfactory terms and conditions, as
well as regulatory, legislative and judicial developments that could cause
actual results to vary materially from the future results indicated, expressed
or implied, in such forward-looking statements. See "Risk Factors."
iii
<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements and the notes thereto included elsewhere in
this Prospectus. Unless otherwise indicated, the information contained herein
gives effect to the issuance of an aggregate of 5.3 million shares of Common
Stock and 5.3 million underlying Globalstar partnership interests upon (i) the
exercise of the Rights and the Partnership Warrants underlying such rights and
(ii) the exercise of the Guaranty Warrants and the Partnership Warrants
underlying such warrants. Unless otherwise indicated, information contained
herein regarding the number of outstanding partnership interests of Globalstar
or shares of Common Stock of GTL and the beneficial ownership thereof does not
give effect to the issuance of Common Stock by GTL or the issuance of
partnership interests by Globalstar upon (i) the conversion of the CPEOs and the
purchase of underlying Globalstar partnership interests and (ii) the exercise of
the warrants issued as part of the Units and the underlying rights to purchase
Globalstar partnership interests. Unless otherwise specified or the context
otherwise requires, references in this Prospectus to "dollars," "$" and "U.S.$"
are to United States dollars. Certain capitalized terms used herein are defined
in the Glossary.
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 the
Globalstar System 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. Globalstar's designated service providers have
agreed to offer service and seek to obtain all necessary local regulatory
approvals in more than 100 nations, accounting for about 88% of the world's
population. The Company's sole asset is its interest in Globalstar.
The Globalstar System's worldwide coverage is designed to extend affordable
modern telecommunications services to millions of people who lack basic
telephone service and to enhance wireless telecommunications in areas
underserved or not served by cellular systems, providing a telecommunications
solution in parts of the world where terrestrial systems cannot be economically
justified. The Globalstar System has been designed to provide services at prices
comparable to today's cellular service and substantially lower than the prices
announced by Globalstar's anticipated satellite-based competitors. Globalstar
service providers will set their own retail pricing in their territories and
will pay Globalstar about $0.35 to $0.55 per minute on a wholesale basis.
Globalstar customers will use 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. Dual-mode and tri-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.
The elements of the Globalstar System -- space and ground segments, digital
communications technology, handset supply, service provider arrangements and
licensing -- are on schedule to begin launching satellites in the second half of
1997, to commence commercial operations in the second half of 1998 and to have a
full constellation of 48 operational satellites, plus eight in-orbit spares,
launched by the end of 1998:
Space Segment. The first Globalstar satellite has been assembled and
is now in pre-flight testing, and another four satellites are currently
being assembled. Production is on schedule for the remaining satellites.
Three different launch providers have signed agreements for the launch of
the satellite constellation, providing a variety of launch options and
considerable flexibility. Mission operations preparations and launch
vehicle production and dispenser development are on schedule.
Ground Segment. The first four gateways, which are to be in
Australia, France, South Korea and the United States, are under
construction. These gateways will support Globalstar's data network,
monitor the initial launch and orbital placement of Globalstar's first
satellites, and will serve as prototypes
<PAGE> 8
for production gateways that will support Globalstar service. Globalstar's
SOCC facility has been completed.
Digital Communications Technology. Qualcomm's CDMA technology has
been successfully deployed in South Korea, Hong Kong and cities in the
United States supporting terrestrial PCS and digital cellular service.
Qualcomm's CDMA implementation for Globalstar has been successfully
demonstrated in a simulated satellite environment. This demonstration
validated Globalstar's encoding, modulation, control software, time and
frequency distribution and up/down links between satellites and handsets.
Handset Supply. Qualcomm and two other manufacturers, Ericsson and
TELITAL, are on schedule in their design and development of Globalstar's
handset.
Service Providers. Globalstar and its partners have been seeking
alliances with service providers throughout the world and have entered into
agreements in a number of territories. For example, in November 1996,
ChinaSat, a subsidiary of China's Ministry of Posts and Telecommunications,
agreed to act as the exclusive distributor of Globalstar services in China,
and to support four Globalstar gateways, the first of which is expected to
be operational by 1998. Globalstar has also formed a joint venture with the
principal Russian long distance carrier, Rostelecom, to provide Globalstar
service in that country and is negotiating a service provider agreement
with that joint venture. Globalstar believes that these relationships with
in-country service providers will facilitate the granting of local
regulatory approvals--particularly where, as is the case in China, the
service provider and the licensing authority are the same--as well as
providing local marketing and technical expertise.
Licensing. In January 1995, the FCC granted authority for the
construction, launch and operation of the Globalstar System and assigned
spectrum for its user links. Later that year, WRC'95 allocated feeder link
spectrum on an international basis for MSS systems such as Globalstar, and
in November 1996 the FCC authorized Globalstar's feeder links.
As a result of several recent decisions designed to assure and upgrade
system performance and maintain schedule--including procurement of three
launches on the Starsem Soyuz launch vehicle, additional testing procedures,
development of additional and enhanced service features, cost growth and other
factors--Globalstar currently estimates the cost for the design, construction
and deployment of the Globalstar System, including working capital, cash
interest on anticipated borrowings and operating expenses, to be approximately
$2.5 billion. In addition, Globalstar has agreed to purchase from SS/L eight
additional spare satellites at a cost estimated at $175 million. After giving
effect to the exercise of the Rights and the Guaranty Warrants, Globalstar will
have raised or received commitments for approximately $2.0 billion in equity,
debt and vendor financing, representing about 78% of the total financing
expected to complete the Globalstar System and achieve worldwide operations.
The Globalstar System has been designed to address the substantial and
growing demand for telecommunications services worldwide, particularly in
developing countries. More than three billion people today live without
residential telephone service, many in rural areas where the cost of wireline
service 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 469 million in 1988 to 753 million in 1996 and is
projected to increase to 1.2 billion by 2002. Nonetheless, during the same
period, waiting lists for fixed service have increased from 30 million to 45
million, resulting in an average waiting time before installation of about one
and a half years. Similarly, the cellular market has grown from four million
worldwide subscribers in 1988 to an estimated 123 million in 1996 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's population will have access to wireless
telephone service principally through satellite-based systems like the
Globalstar System. Globalstar believes that its potential market exceeds 30
million people.
The Globalstar System has been designed with attributes which Globalstar
believes compare favorably to other proposed global mobile satellite service
systems including: (i) Globalstar's unique combination of
2
<PAGE> 9
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 is a principal founder of Globalstar and is its managing general
partner. Following exercise by Loral of its Guaranty Warrants, Loral will have
invested $269 million in Globalstar, and will own effectively 33.8% 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 have invested an
additional $210 million in equity and, together with Loral, committed or
obtained $310 million in vendor financing.
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
and its telephone number is (441) 295-2244.
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. Globalstar's founding partners are Loral and Qualcomm, the leading
supplier of CDMA digital telecommunications technology. Globalstar's other
strategic partners are:
<TABLE>
<CAPTION>
TELECOMMUNICATIONS EQUIPMENT
TELECOMMUNICATIONS AND AEROSPACE GLOBALSTAR SYSTEMS
SERVICE PROVIDERS MANUFACTURERS
----------------------------------------------- ---------------------------------------
<S> <C>
- AirTouch - Alcatel
- Dacom - Alenia
- France Telecom - DASA
- Vodafone - Finmeccanica
- Hyundai
- SS/L
</TABLE>
SS/L is providing 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, gateways and certain ground
support equipment.
3
<PAGE> 10
[The chart, which cannot be transmitted electronically, may be summarized as
follows:
Globalstar's managing general partner is LQSS which owns 38.3% of
Globalstar and which will own 34.4% of Globalstar after the issuance of
5,316,486 shares of Common Stock constituting the Rights Shares and the Warrant
Shares and the issuance of 5,316,486 underlying Globalstar partnership interests
upon the exercise of the Partnership Warrants (collectively, the "Issuances").
LQSS's general partner is LQP. LQP's general partner is Loral and LQP's
limited partners are Loral and Qualcomm.
Globalstar's other general partner is GTL which owns 21.3% of Globalstar
and which will own 29.3% of Globalstar after the Issuances. Public shareholders
own 85.4% of GTL and will own 62.4% of GTL after the Issuances. Loral and its
affiliates own 14.9% of GTL and will own 17.7% of GTL after the Issuances. DASA,
Lockheed Martin and Qualcomm presently do not own any shares of GTL but will own
19.9% of GTL after the Issuances.
Globalstar's limited partners are Air Touch, Alcatel, Dacom, DASA,
Finmeccanica, France Telecom, Hyundai, Loral and Vodafone; they together own
40.4% of Globalstar and will own 36.3% of Globalstar after the Issuances.]
<PAGE> 11
BACKGROUND OF THE RIGHTS OFFERING
On December 15, 1995, Globalstar entered into the Credit Agreement
providing for a $250 million credit facility, which was guaranteed by certain
Globalstar strategic partners. In connection with such guaranties and a guaranty
support provided by Loral, GTL issued to these parties the Guaranty Warrants to
purchase 4,185,318 shares of GTL common stock. In connection with the issuance
of the Guaranty Warrants, GTL received (i) rights to acquire 4,185,318 ordinary
partnership interests in Globalstar and (ii) rights to purchase an additional
1,131,168 ordinary partnership interests, on terms and conditions generally
similar to those of the Guaranty Warrants.
Globalstar and GTL have entered into an agreement pursuant to which GTL and
Globalstar have agreed that upon the exercise of any Guaranty Warrant, GTL will
purchase from Globalstar, and Globalstar will sell to GTL, a number of ordinary
partnership interests equal to the number of shares of Common Stock issuable
upon such exercise for a purchase price equal to the exercise price of the
Guaranty Warrant.
The Guaranty Warrants have an exercise price of $26.50 per share expiring
on April 19, 2003 and originally were not exercisable until six months after the
In-Service Date, subject to acceleration by LQSS in its sole discretion. The
Guaranty Warrants may not be transferred to third parties prior to such exercise
date.
GTL, LQSS and the holders of the Guaranty Warrants have entered into an
agreement under which GTL and LQSS have agreed to accelerate the vesting and
exercisability of the Guaranty Warrants to purchase 4,185,318 shares of Common
Stock at $26.50 per share and the holders have agreed to exercise such warrants.
GTL also has agreed to register for resale the GTL shares issuable upon exercise
of the Guaranty Warrants. In conjunction with the Rights Offering, and in
satisfaction of its agreement with the holders of the Guaranty Warrants, the
Company is currently registering the Warrant Shares for resale by means of a
separate prospectus. In addition, in order to enable the Shareholders to benefit
directly from the appreciation in the value of the Partnership Warrants and to
obtain the funds necessary to exercise the 1,131,168 Partnership Warrants GTL
holds that are not associated with the Guaranty Warrants, GTL is distributing to
the holders of its Common Stock Rights to subscribe for and purchase 1,131,168
shares of Common Stock for a price of $26.50 per share. Loral has agreed to
purchase all Rights Shares not purchased upon exercise of the Rights. Upon the
exercise of the Guaranty Warrants and the Rights, GTL will receive proceeds of
approximately $140.9 million, which it will use to exercise the Partnership
Warrants to purchase 5,316,486 Globalstar partnership interests at $26.50 per
interest. Globalstar will use such proceeds to continue the construction and
deployment of the Globalstar System.
THE RIGHTS OFFERING
Rights..................... Each Shareholder will receive one Right for each
8.84042 shares of Common Stock registered in the
name of such Shareholder on the Record Date. An
aggregate of 1,131,168 Rights will be distributed
pursuant to the Rights Offering. An aggregate of
1,131,168 shares of Common Stock will be sold if
all Rights are exercised. The exercise of Rights is
irrevocable once made, and no Rights Shares will be
issued until the closing following the Expiration
Date.
Shareholders and transferees of the Rights will be
entitled to purchase at the Subscription Price one
share of Common Stock for each Right held. See "The
Rights Offering."
Subscription Price......... $26.50 in cash per Rights Share.
Shares of Common Stock
Outstanding after Rights
Offering................. Assuming that all Rights are fully exercised,
15,316,486 shares of Common Stock will be
outstanding after the Rights Offering, based on
10,000,000 shares outstanding on the Record Date
and 4,185,318 shares to be issued upon the exercise
of the Guaranty Warrants.
Transferability of
Rights..................... The Rights are transferable, but will not be listed
to trade on any securities exchange. There can be
no assurance that any market for
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Rights will develop. See "The Rights
Offering -- Method of Transferring Rights."
Record Date................ March , 1997.
Expiration Date............ April , 1997, unless extended by the Company from
time to time. See "The Rights
Offering -- Expiration Date." If the Company elects
to extend the terms of the Rights, it will issue a
press release to such effect not later than the
first day on which the NNM is open for trading
following the most recently announced Expiration
Date. In the event the Company elects to extend the
term of the Rights Offering by more than 14
calendar days, it will, in addition, cause written
notice of such extension to be sent promptly to all
Shareholders. Rights not exercised on or prior to
the Expiration Date shall expire and be null and
void.
Procedure for Exercising
Rights................... Rights may be exercised by properly completing the
Subscription Certificate evidencing such Rights and
forwarding such Subscription Certificate (or
following the Guaranteed Delivery Procedures
described under "The Rights Offering -- Exercise of
Rights") to the Subscription Agent on or prior to
the Expiration Date, together with payment in full
of the Subscription Price for each Rights Share
subscribed for. If the mail is used to forward
Subscription Certificates, it is recommended that
insured, registered mail be used. The exercise of a
Right may not be revoked or amended. If time does
not permit a Shareholder or transferee of a Right
to deliver its Subscription Certificate to the
Subscription Agent on or before the Expiration
Date, such subscriber should make use of the
Guaranteed Delivery Procedures. If paying by
uncertified personal check, please note that the
funds paid thereby may take at least five business
days to clear. Accordingly, any subscriber who
wishes to pay the Subscription Price by means of
uncertified personal check is urged to make payment
sufficiently in advance of the Expiration Date to
ensure that such payment is received and clears by
such date and is urged to consider payment by means
of certified or cashier's check, money order or
wire transfer of funds.
Persons Holding Shares
Through Others............. Shareholders holding shares of Common Stock, and
receiving the Rights distributable with respect
thereto, through a broker, dealer, commercial bank,
trust company or other nominee, as well as
Shareholders holding certificates representing
Common Stock personally who would prefer to have
such institutions effect transactions relating to
the Rights on their behalf, should contact the
appropriate institution or nominee and request it
to effect the transactions for them. See "The
Rights Offering -- Exercise of Rights."
Standby Agreement.......... Pursuant to the Standby Agreement entered into with
the Company, Loral has agreed to subscribe for and
purchase for cash at the Subscription Price all
Rights Shares not subscribed for by the holders of
the Rights.
Loral and its affiliates own effectively 17.7% of
the Company's outstanding Common Stock after giving
effect to the Rights Offering, the exercise of the
Guaranty Warrants but prior to any purchase of
Rights Shares pursuant to the Standby Agreement.
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Closing.................... The closing will occur and certificates
representing the Rights Shares will be delivered to
subscribers as soon as practicable after the
Expiration Date. See "The Rights Offering." No
Rights Shares will be issued until the closing.
Funds delivered to the Subscription Agent for the
exercise of Rights will be held in escrow by the
Subscription Agent until the closing. No interest
will accrue or be payable to subscribers on funds
held by the Subscription Agent.
Subscription Agent......... The Bank of New York. The Subscription Agent's
toll-free telephone number is (800) 507-9357.
Information Agent.......... W. F. Doring & Co., Inc. The Information Agent's
toll-free telephone number is (888) 330-5511.
Nasdaq Symbol.............. The Common Stock currently trades, and the Common
Stock issued upon exercise of the Rights will
trade, on the NNM under the symbol GSTRF.
EXAMPLE OF EXERCISE OF RIGHTS
The following sets forth an example of how a Shareholder's receipt and
exercise of Rights would transpire. A GTL Shareholder beneficially owning as of
the Record Date 1,000 shares of Common Stock, for example, will receive 113
Rights free of charge. The number of Rights is obtained by dividing the number
of shares of Common Stock held, 1,000 in this case, by 8.84042, which equals
approximately 113.1. This result is then rounded down to 113, the nearest whole
number. This Shareholder would then be entitled to exercise, on or prior to
April , 1997 (unless the Expiration Date is extended), such Shareholder's 113
Rights to acquire 113 shares of Common Stock in exchange for payment of the
Subscription Price of $26.50 per share, for an aggregate exercise price of
$2,994.50 in this example. The 113 shares of Common Stock so acquired will be
freely tradeable by such Shareholder on the NNM at the then current market price
of the Company's Common Stock. The last reported sale price of the Company's
Common Stock at the close of business on March 7, 1997 was $58 5/8.
USE OF PROCEEDS
It is anticipated that the proceeds to the Company from the Rights Offering
will be approximately $30 million. The Company also expects to obtain
approximately $110.9 million in proceeds from the exercise of the Guaranty
Warrants as contemplated in the concurrent Warrant Share Offering being effected
by means of a separate prospectus. The Company intends to use the aggregate
proceeds from such transactions, expected to be approximately $140.9 million, to
exercise the Partnership Warrants it holds to purchase additional general
partnership interests in Globalstar. Globalstar will use the proceeds of the
exercise of the Partnership Warrants to continue the construction and deployment
of the Globalstar System. See "Use of Proceeds."
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RISK FACTORS
Investors should consider the following risk factors, in addition to the
other information contained in this Prospectus, in evaluating whether to
exercise Rights to subscribe for and purchase Rights Shares. The following
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. It has no operating history.
Globalstar has incurred net losses and expects them to continue. It will require
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 begin operations before the second
half of 1998 or to have positive cash flow before 1999. There can be no
assurance that Globalstar will achieve its objectives by the targeted dates.
Additional Financing Requirements. Globalstar estimates the cost for the
design, construction and deployment of the Globalstar System, including working
capital, interest on borrowings and operating expenses, to be about $2.5
billion. Actual amounts may vary from this estimate. Additional funds would be
required upon unforeseen delays, cost overruns, launch failures, technological
disappointments, adverse regulatory developments, for system enhancements and
measures to assure system performance and readiness for the space and ground
segments. As of March 6, 1997, Globalstar had raised or received commitments for
approximately $2.0 billion. Globalstar believes that its current capital, vendor
financing commitments, the availability of the Credit Agreement and the proceeds
from the exercise of the Partnership Warrants are enough to fund its needs into
the first quarter of 1998. Globalstar intends to raise the remaining
requirements from a combination of sources including borrowing (which may
include an equity component), support from the Globalstar partners, service
provider payments, revenues from initial operations, payments from the sale of
gateways and Globalstar Phones and placement of partnership interests. If there
are unforeseen delays, if technical or regulatory developments result in a need
to modify the design of the Globalstar System, if service provider agreements
for additional territories are not entered into when or on the terms anticipated
or if other additional costs are incurred, the risk of which is substantial,
additional capital will be needed. The ability of Globalstar to achieve positive
cash flow will depend upon the successful and timely deployment of the
Globalstar System, its successful marketing 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 begin commercial operations in the second half of 1998 or achieve
positive cash flow in 1999, additional capital will be needed.
Globalstar believes it will be able to obtain the additional financing it
requires, but there can be no assurance that the capital required to complete
the Globalstar System will be available from 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.
Sources of Possible Delay and Increased Cost. Many of the problems, delays
and expenses that may be encountered by an enterprise in Globalstar's stage of
development may be beyond its control. These may include those 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 that may exceed estimates.
As a result of measures designed to assure and upgrade performance and maintain
schedule, Globalstar's total cost is now estimated to be $2.5 billion, as
compared with $2.2 billion estimated at December 31, 1995. The increase is due
to a decision to launch 12 satellites on the Starsem Soyuz launch vehicle and to
Qualcomm's estimates indicating an increase in costs under its contracts to $545
million. The Qualcomm estimates are subject to review. In addition, Globalstar
has agreed to purchase from SS/L eight additional spare satellites at a cost of
$175 million in order to have at least 40 in service in 1999, even if there are
launch failures. Delay in the design, construction, deployment, commercial
operation and achievement of positive cash flow of the Globalstar System could
result from a variety of causes. These include delays in regulatory processes in
various jurisdictions, the integration of the Globalstar System into the
land-based network, changes in the technical specifications of the Globalstar
System made to enhance
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its features, performance or marketability or in response to regulatory
developments or otherwise, delays encountered in the construction, integration
or testing of the Globalstar System by Globalstar vendors, delays in or
unsuccessful launches, delays in financing, weak service provider marketing
efforts, slower-than-anticipated consumer acceptance and other events beyond
Globalstar's control. Substantial delays in any of the foregoing would delay
Globalstar's achievement of profitable operations.
REGULATION
Licensing Risks. The operations of the Globalstar System are and will
continue to be subject to United States and foreign regulation. The Globalstar
System must be authorized to provide MSS in each of the markets in which its
service providers intend to operate. Even though a Globalstar affiliate 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 soon enough or in the form necessary to implement
Globalstar's proposed operations. Globalstar's business may also be 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.
Globalstar's FCC license, as modified on November 19, 1996, authorizes the
construction, launch and operation of the satellite constellation and assigns
the Globalstar System user links and feeder links in the United States.
Globalstar's feeder link frequencies were allocated internationally at WRC '95,
and have been assigned by the FCC for use in the United States in accordance
with the international allocation. However, use of the feeder link frequencies
remains subject to restrictions that may be adopted in a potential FCC
proceeding to adopt the international allocations into the U.S. Table of
Frequency Allocations. The FCC recently adopted rules for the use of a portion
of the frequencies allocated at WRC '95 for MSS feeder links (such as
Globalstar's) to a proposed high-speed wireless data service. Although these
rules are intended to preclude harmful interference with other uses of these
bands, they may ultimately permit uses of these frequencies that could diminish
their usefulness for MSS feeder links. Separate licenses must also be obtained
from the FCC for operation of gateways and Globalstar Phones in the United
States.
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. In addition,
Globalstar's FCC license is subject to two pending judicial appeals. While
Globalstar believes that these appeals are without merit, there can be no
assurance that these appeals would not result in either reversal or stay of the
FCC's decision to grant Globalstar's FCC license to LQP or ultimately result in
the granting of additional licenses by the FCC or its adoption of an auction
procedure to award licenses, which might materially increase the cost of
obtaining such licenses.
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,
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, and if they are not, 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 markets
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.
Glonass operates worldwide in a portion of the frequency band proposed to
be used by Globalstar and other MSS systems for user uplinks. Although Glonass
has proposed to migrate to lower frequencies, interference protection
requirements for Glonass receivers are under consideration, which, if adopted,
may render a segment of the MSS spectrum unusable for MSS user uplinks. While
this is not expected to have an
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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, could reduce Globalstar's effective
system capacity in such markets.
European Union Regulatory Matters. European Union competition law
proscribes agreements that restrict or distort competition in the Union.
Globalstar and others have responded to an inquiry from the Commission of the
European Union requesting information regarding their activities. A violation of
European Union competition law could subject Globalstar to fines or enforcement
actions that could delay 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 which, if adopted, would give the Commission broad regulatory
authority over satellite telecommunications media such as the Globalstar System.
TECHNOLOGICAL RISKS
General. The Globalstar System is a large-scale complex telecommunications
system employing advanced technologies which must be adapted to the Globalstar
application and which have never before been used as a commercial whole.
Deployment of the Globalstar 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 successful. 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 Globalstar
System, or any of its diverse and dispersed elements, could delay the In-Service
or Full Constellation Date of the Globalstar System or render it unable to
perform at the levels required for commercial 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, suffered a launch failure on January
17, 1997. The United States government is investigating the cause, the second in
this rocket's last 62 launches. Globalstar's first launch, which is scheduled
for September 1997 aboard a Delta II rocket, could be delayed by this
investigation. Nevertheless, Globalstar does not expect that such delay, if any,
in the initial launch date would result in a delay in the In-Service Date or the
Full Constellation Date. The Ukrainian Zenit launch vehicle, which is proposed
to launch 36 Globalstar satellites (12 per launch), has never been used in
commercial applications. Satellite launches of groups of more than eight
commercial satellites have not been attempted before. Globalstar intends to
launch the last 12 satellites of its constellation in groups of four on three
separate launches of the Russian Starsem Soyuz rocket. There is no assurance
that Globalstar satellite launches will succeed or that its launch failure rate
will not exceed the industry average.
Globalstar's Zenit launch contracts provide for relaunches at no additional
charge upon a hot failure. However, the launch provider may, for financial
reasons or otherwise, be unable to provide such relaunches. A single launch
failure would result in a loss of either four or 12 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.
SS/L has agreed to obtain launch vehicles for Globalstar and arrange for
the launch of all 56 satellites, subject to pricing adjustments 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.
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Two of Globalstar's launch operators are subject to U.S. export control
regulations. Yuzhnoye, based in Ukraine, has ties with Russia and intends to
launch the Zenit rocket from the Baikonur launch site in Kazakhstan.
Arianespace, which will be providing the Soyuz rockets, also intends to launch
from Baikonur. Changes in governmental policies or political leadership in the
United States, Ukraine, Russia or Kazakhstan could affect these launch
providers. While there is no assurance that the necessary export licenses will
be obtained, Globalstar has provided against the risk that they 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 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 developments in U.S.
relations with these countries, the cost of launching its satellite
constellation would be significantly increased.
Limited Life of Satellites. A number of factors will affect the useful
lives of satellites, including the quality of construction, 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"). Satellites could also be damaged by electrostatic
storms or collisions. As a result of these factors, the first-generation
Globalstar System 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 if the useful life of the satellites were significantly
shorter than 7 1/2 years. Globalstar anticipates developing a second generation
of satellites. If enough funds are not available and Globalstar is unable to
obtain external financing for the second-generation, it will not be able to
deploy the second-generation 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.
Insurance Risks. 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.
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, in certain circumstances subject to
pricing adjustments 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 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.
However, there can be no assurance that additional satellites and launches will
not be required. If so, in addition to the replacement costs incurred by
Globalstar, Globalstar's In-Service or Full Constellation Date may be delayed.
In addition, unless otherwise required by the Indenture, Globalstar does not
currently intend to purchase insurance to cover cold failures that may occur
once the satellites have been successfully deployed from the launch vehicle.
Risks Associated with Changing Technology. The space and communications
industries are characterized by rapid technological advances and innovations.
Technologies utilized or under development by Globalstar may become obsolete, or
its services may not be in demand by the time they are offered. Globalstar will
be dependent upon technologies developed by third parties to implement key
aspects of its strategy to integrate its satellite systems with terrestrial
networks, and there can be no assurance that such technologies will be available
to Globalstar in time or on reasonable terms.
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 there. The willingness of
companies to become service providers will depend upon a variety of factors,
including pricing, local regulations and Globalstar's competitiveness.
Globalstar believes that enlisting the support of established telecommunications
service providers, some of which are dominant carriers in their markets, will be
essential both to obtaining necessary
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local regulatory approvals and to reaching a broad market of potential users.
Globalstar's strategic service providers have agreed to act as exclusive
providers in 71 countries although it is anticipated that in many cases these
partners will enter into alliances with local entities to provide Globalstar
service in these countries. In addition, Globalstar expects to raise additional
funds before the Full Constellation Date in the form of payments from service
providers in other territories throughout the world. Globalstar's business plan
assumes that Globalstar will contract with service providers for the remaining
territories of the world, in certain cases, on terms more favorable to
Globalstar than those contained in its founding service provider agreements.
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
alternative 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 System 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. In the event such
parties are unable to perform their obligations, Globalstar's In-Service and
Full Constellation Date may be delayed and its costs may be increased.
Risks Inherent in Foreign Operations. A substantial portion of
Globalstar's business will be outside of the United States. Such operations are
subject to certain risks such as changes in government regulations and
telecommunications standards, tariffs or taxes and other trade barriers.
Accordingly, government actions in foreign countries could have a significant
effect on operations. Political, economic or social instability or other
developments including currency fluctuations, could also adversely affect
operations. In addition, Globalstar's agreements relating to local operations
may be governed by foreign law or enforceable only in foreign jurisdictions. As
a result it may be difficult for Globalstar to enforce its rights under such
agreements.
In addition, the majority of Globalstar System satellites are scheduled to
be launched by Ukrainian and Russian launch vehicles from the Russian-operated
cosmodrome in Kazakhstan. Disputes between any of these former Soviet Republics,
whether concerning Globalstar, their space operations generally or otherwise, or
internal political, social or economic instability in any of them could
adversely affect Globalstar's launch schedule and costs.
Risks of Doing Business in Developing Markets; Currency
Risks. Globalstar's largest potential markets are in developing countries or
regions that are underserved and not expected to be served by existing
telecommunications systems. 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 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, exchange rate fluctuations may affect the price Globalstar
will be entitled to receive for its services.
Pricing Risk. Globalstar's pricing will, under certain circumstances, not
be automatically adjusted for inflation; in such cases, Globalstar will be able
to increase its pricing only if the service provider increases its prices to
subscribers, and Globalstar 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 prices to compensate for inflation.
Although Globalstar expects future service provider agreements to contain
pricing terms more favorable than those contained in its agreements with
founding service providers, there can be no assurance that such terms will be
achieved.
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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. The Credit
Agreement permits Globalstar to incur up to $950 million of indebtedness on a
senior basis, including $500,000,000 aggregate principal amount of the notes
issued pursuant to the Indenture, to finance the Globalstar System; an unlimited
amount of subordinated indebtedness may be incurred. Additional debt is expected
to be incurred in the future; 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 operations will adversely affect
Globalstar's ability to service debt. The discretion of management with respect
to certain business matters will be limited by covenants contained in the Credit
Agreement, the Indenture and future debt instruments. Among other things, the
covenants contained in the Credit Agreement and the Indenture restrict
Globalstar from paying cash distributions on its ordinary partnership interests,
creating liens on its assets, making certain asset dispositions, conducting
certain other business and entering into transactions with affiliates and
related persons. In addition, the Indenture contains certain financial covenants
limiting the ability of Globalstar to incur additional indebtedness unless
certain financial ratios are met. If the Credit Agreement ceases to be
guaranteed, it will also contain certain financial covenants limiting additional
indebtedness. There can be no assurance that Globalstar's leverage and such
restrictions will not adversely affect Globalstar's ability to finance future
operations or capital needs or to engage in other business activities. Moreover,
a failure to comply with the obligations contained in the Credit Agreement and
the Indenture 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.
Competition. Competition in telecommunications is intense, fueled by rapid
and continuous technological advances and alliances between industry
participants on an international scale. Although no present participant is
providing the same global personal 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 others. 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, the 2 GHz band for an MEO system.
Globalstar's most immediate competitors are the two MSS applicants which
have received FCC licenses, Iridium and Odyssey. 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, the
U.S. signatory to 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 government 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 two pending MSS applicants will demonstrate financial qualification
sufficient to obtain an FCC license and become an additional competitor of
Globalstar.
The MSS systems, including Globalstar, also compete with each other for the
limited frequency 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
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<PAGE> 20
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.
The FCC has no authorization 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 AMSC, APMT, ASC, 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 their subscriber bases,
thereby increasing the competition to Globalstar. For example, Comsat has
announced a global mobile satellite service (Planet-1) using existing Inmarsat
satellites, a six-pound, laptop-size phone, costing $3,000 with an expected
per-minute usage rate of $3.00.
Some of these potential competitors have financial, personnel and other
resources substantially greater than Globalstar's. Many of them 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 better
service. However, Globalstar believes, based upon the public statements and
other publicly available information of the other MSS applicants, that
Globalstar will be a low-cost provider. However, competition could require
Globalstar to reduce pricing to service providers, thus adversely affecting
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 be known until such systems are operational. If the capacity of
Globalstar and any competing systems exceeds demand, price competition could be
particularly intense. See "-- Regulation -- Licensing Risks."
Risk of Accelerated Build-Out and Competing Technological Advances. 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, the demand for Globalstar service may be reduced
faster than is assumed in Globalstar's market analysis. Globalstar may also face
future competition from 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 usage) will depend upon a
number of factors, including price, demand and the availability of alternative
systems. If the level of actual subscriber demand is below that expected by
Globalstar, its 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
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 Globalstar satellites. Obstacles such as
buildings, trees or mountainous terrain may degrade service quality, more than
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 hurt demand for Globalstar service.
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<PAGE> 21
Product Liability; Alleged Health Risks. There has been publicity
concerning alleged health risks associated with the use of portable hand-held
telephones with transmitting antennas integrated into handsets. Because
hand-held Globalstar Phones will use on average lower power to transmit signals
than traditional cellular units, Globalstar does not believe that proposed FCC
new guidelines will require any significant modifications of the Globalstar
System or of the mobile hand-held Globalstar Phones. 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.
Reliance on Key Personnel. The success of Globalstar's business will be
partially dependent upon the ability of Globalstar to attract and retain
technical and management personnel. No employee of Globalstar has an employment
contract with Globalstar nor does Globalstar expect to maintain "key man"
insurance. The loss of any such individuals could have a material adverse effect
on Globalstar's business.
STRUCTURAL AND MARKET RISKS
Potential Conflicts of Interest. Partners of LQSS or their affiliates are
principal suppliers of the major components of the Globalstar System, and are
also expected to manufacture system elements contracted to be sold to service
providers and subscribers. Much of the proceeds of the offering of the Shares
and the exercise of the Guaranty Warrants will fund such obligations. During the
design, development and deployment of the Globalstar System, Globalstar will
depend upon Loral's management skills and technologies, Qualcomm and SS/L to
design and manufacture the satellite constellation, SOCCs, GOCCs, gateways and
Globalstar Phones. Globalstar has contracted the design of 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. Contracts with partners of
Globalstar or LQSS promote conflicts of interests.
Partners and affiliates of Globalstar, including companies affiliated with
Loral, will be among the principal service provider customers and as such may
have conflicts of interest. If Globalstar is unable to offer service on
competitive terms in a particular country or region, a service provider there,
which may be a partner of Globalstar, can act as a service provider to a
competing MSS system in that area while serving as a Globalstar service provider
in other markets.
Controlling Person. Globalstar is managed by a committee, a majority of
whose members are Loral designated. The Independent Representatives on the
committee, however, have the right to pass upon certain matters before any
decision to submit them to a vote of the partners and will have certain
authority over the employment of senior officers of Globalstar.
Change of Control of GTL and Reduction in Interest; Investment Company Act
Considerations. If there is (i) a change of control of GTL when GTL owns less
than 50% of the Globalstar partnership interests outstanding or (ii) a sale or
other disposition of partnership interests by which the equity interest of GTL
in Globalstar is reduced to less than 5%, which has not been approved by LQSS or
by the partners of Globalstar, GTL will become a limited partner in Globalstar
and will no longer appoint representatives to serve on the General Partners'
committee. Certain other governance rights granted to GTL under Globalstar's
partnership agreement will also be revoked, and GTL will enjoy only the rights
of a limited partner in Globalstar. If GTL were to cease participation in the
management of Globalstar, which would result if GTL were to undergo a change of
control or a reduction in interest, its interest in Globalstar could be deemed
an "investment security" for purposes of the Investment Company Act. In general,
an entity is an "investment company" if, 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). GTL's sole asset is its partnership
interest in Globalstar. A determination that such investment was an investment
security could result in GTL's being deemed to be an investment company under
the Act and subject to its registration and other requirements. In order to
register, GTL might be required to reincorporate in the U.S. and would be
subject to U.S. tax on its worldwide income, subject to any applicable foreign
tax credits. Globalstar intends to conduct its operations so as to avoid
becoming an investment company under that Act.
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<PAGE> 22
No Dividends; Holding Company Structure; General Partner Liability. GTL
has not paid any dividends on its Common Stock, and Globalstar has not made any
distributions to its partners. Except for interest payments by GTL on the CPEOs
and distribution payments by Globalstar on the Preferred Partnership Interests,
GTL and Globalstar do not anticipate any such dividends or distributions before
Globalstar's Full Constellation Date and positive cash flow, which is not
expected before 1999. GTL may not pay dividends on its Common Stock while
interest arrearages remain outstanding on its CPEOs. GTL's sole asset is its
partnership interest in Globalstar. GTL has no independent means of generating
revenues. Globalstar will pay GTL's operating expenses related to Globalstar;
such expenses are not expected to be material. As a general partner of
Globalstar, GTL is jointly and severally liable with the other general partner
for its obligations to the extent Globalstar is unable to pay. To the extent
permitted by law and agreements relating to indebtedness, Globalstar intends to
distribute to its partners, including GTL, 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). GTL intends to promptly distribute as dividends on its Common
Stock the distributions made by Globalstar, less any amounts required for taxes,
liabilities and contingencies.
Rights of Shareholders under Bermuda Law. GTL 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 GTL's management,
directors and controlling shareholders, and the rights of its shareholders are
governed by Bermuda law and GTL's Memorandum of Association and Bye-Laws. Such
principles may differ from those that would apply if GTL were incorporated in
the United States. There is uncertainty as to whether the courts of Bermuda
would enforce (i) United States court judgments obtained against GTL or its
officers and directors resident in foreign countries predicated upon the civil
liability provisions of United States securities laws or (ii) in original
actions brought in Bermuda, liabilities against GTL or such persons predicated
upon United States securities laws.
Tax Considerations. Special U.S. tax rules apply to U.S. taxpayers who own
stock in a "passive foreign investment company ("PFIC")." Although GTL believes
that it will not become a PFIC, there is a risk that in the future it could.
Then 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 shares of the Common Stock (which will
be taxed as ordinary income).
GTL expects that a significant portion of its income will not be subject to
tax by the United States, Bermuda or by the countries from which it derives
income. However, the extent to which certain foreign jurisdictions may require
GTL 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. On January 31, 1997, GTL had outstanding
10,000,000 shares of Common Stock. An additional 4,769,230 shares are issuable
upon conversions of GTL's CPEOs (subject to anti-dilution adjustment to be
effected upon consummation of the Rights Offering). There will be 1,032,250
shares of Common Stock issuable upon exercise of the warrants issued as part of
the Units. In addition, 37,000,000 shares are issuable upon exercise by the
other partners in Globalstar of their rights to exchange their ordinary
partnership interests for shares of Common Stock. As of December 31, 1996, an
aggregate of 250,000 shares of Common Stock were reserved for issuance under a
stock option plan and a proposal to increase this number by 375,000 is being
submitted to shareholders for their approval at GTL's next annual meeting.
Pursuant to the Warrant Acceleration and Registration Rights Agreement, the
Company has agreed to use its reasonable efforts to register the Warrant Shares
under the Securities Act and to effect an underwritten public offering of the
Warrant Shares by April 15, 1997. Sales of substantial amounts of Common Stock
in the public market or the perception that such sales could occur, could
adversely affect the market price of the Common Stock. GTL has an effective
registration statement relating to the shares of Common Stock issuable upon
conversion of the CPEOs.
Volatility. The market price of the Common Stock has been volatile. In
particular, the trading prices of the common stock of many technology companies
have reflected extreme price and volume fluctuations,
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<PAGE> 23
which have at times been unrelated to operating performance. The trading price
of the Shares could be subject to significant fluctuations in response to
variations in Globalstar's prospects and operating results which could 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. Such factors may have an
adverse effect on the trading price of the Common Stock from time to time.
Dilution. Globalstar expects to fund its remaining capital requirement of
approximately $500 million from a combination of sources including debt issuance
(which may include an equity component), exercise of warrants, financial support
from the partners, service provider payments, service revenues from operations,
payments from the sale of gateways and Globalstar Phones and additional
placements of partnership interests. Globalstar may, subject to certain
preemptive and approval rights of its other partners, sell equity interests
(either directly or through the issuance of warrants, or convertible debt
securities), diluting the percentage ownership in Globalstar represented by the
Shares. Issuing additional partnership interests to new or existing partners,
would dilute the ownership of other partners. The issuance of additional
partnership interests at prices lower than the price at which GTL may purchase
them would further dilute GTL. 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 Common Stock, subject to certain restrictions, on a one-for-one basis,
subject to adjustment.
Certain Rights Offering Considerations. Shareholders who do not exercise
their Rights in full will realize a dilution in their percentage voting rights
and ownership interests in future net earnings, if any, of the Company to the
extent that Rights are exercised by other shareholders. The Rights subscription
price represents a ( )% discount from the market price as of the date of this
Prospectus and could result in a reduction in the market price for the Company's
Common Stock. Although the Company reserves the right to extend the period
during which Rights may be exercised, absent any such extension the Rights will
expire on April , 1997, and therefore have a limited life. While the Rights
will be transferable, they will not be listed for trading on NNM or any
exchange, and there can be no assurance that a market for the Rights will
develop or, if developed, be maintained, especially considering their limited
life.
USE OF PROCEEDS
It is anticipated that the proceeds to the Company from the Rights Offering
will be approximately $30 million. The Company also expects to obtain $110.9
million in proceeds from the exercise of the Guaranty Warrants as contemplated
in the concurrent Warrant Share Offering being effected by means of a separate
prospectus. The Company intends to use the aggregate proceeds from such
transactions, expected to be approximately $140.9 million, to exercise the
Partnership Warrants it holds to purchase additional ordinary general
partnership interests in Globalstar. The expenses of the Company in connection
with the Rights Offering and the Warrant Share Offering will be paid by
Globalstar, which will receive the proceeds of the issuance of the Rights Shares
and the Warrant Shares upon exercise of the Partnership Warrants. The net
proceeds to Globalstar of the exercise of the Partnership Warrants, estimated to
be $140.7 million, will be used by Globalstar towards the construction and
deployment of the Globalstar System.
DIVIDEND POLICY
GTL has not declared or paid any cash dividends on its Common Stock, and
Globalstar has not made any distributions to its partners. Except for interest
payments by GTL on the CPEOs and distribution payments by Globalstar on the
Preferred Partnership Interests, GTL and Globalstar do not currently anticipate
paying any such dividends or making such distributions (other than to the extent
that Globalstar's payment of GTL's operating expenses related to Globalstar
would be treated as a distribution) prior to Globalstar's Full Constellation
Date and achievement of positive cash flow. Cash distributions by Globalstar may
also be restricted by covenants relating to Globalstar's present and future debt
obligations. In addition, GTL is prohibited from paying dividends on its Common
Stock as long as any interest arrearages remain outstanding
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<PAGE> 24
on its CPEOs. GTL is a holding company, the sole asset of which is its interest
in Globalstar. GTL has no independent means of generating revenues. Globalstar
will pay the GTL'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 GTL, its net cash received from operations, less amounts
required to repay outstanding indebtedness, satisfy other liabilities and fund
capital expenditures and contingencies (including funds required for design,
construction and deployment of the second-generation satellite constellation).
The Globalstar Credit Agreement and the Indenture restrict the ability of
Globalstar to pay cash distributions on its ordinary partnership interests. GTL
intends to promptly distribute as dividends to its shareholders the
distributions made to it by Globalstar, less any amounts reasonably required to
be retained for payment of taxes, for repayment of liabilities and to fund
contingencies.
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THE COMPANY
GTL was organized as a Bermuda company on November 23, 1994 and has its
principal offices at Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda
(441-295-2244). GTL's sole business is to act as a general partner of
Globalstar. Globalstar is a Delaware limited partnership whose managing general
partner is LQSS; the general partner of LQSS is LQP, a Delaware limited
partnership comprised of subsidiaries of Loral and Qualcomm. The general partner
of LQP is LGP, a Loral subsidiary. Globalstar, LQSS and LQP are collectively
referred to as the Globalstar Partnerships. GTL serves as the other general
partner of Globalstar. Globalstar Capital Corporation was organized as a
Delaware corporation on July 24, 1995, and other than serving as issuer of
certain notes, does not conduct any business. The principal offices of
Globalstar and Globalstar Capital Corporation are located at 3200 Zanker Road,
San Jose, California 95164 (408-473-5550).
Matters relating to the FCC License for the Globalstar System, including
compliance requirements and other regulatory matters related thereto, are under
the exclusive control of LQP. Such FCC License is held by L/Q Licensee, a
wholly-owned subsidiary of LQP.
BUSINESS
BUSINESS OVERVIEW
The Company is a Bermuda company that acts as a general partner of
Globalstar. Globalstar is building and preparing to launch and operate the
Globalstar System 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. Globalstar's designated service providers have
agreed to offer service and seek to obtain all necessary local regulatory
approvals in more than 100 nations, accounting for about 88% of the world's
population. The Company's sole asset is its interest in Globalstar.
The Globalstar System's worldwide coverage is designed to extend affordable
modern telecommunications services to millions who lack basic telephone service
and to enhance wireless telecommunications in areas underserved or not served by
cellular systems, providing a telecommunications solution in parts of the world
where terrestrial systems cannot be economically justified. The Globalstar
System has been designed to provide services at prices comparable to today's
cellular service and substantially lower than the prices announced by
Globalstar's anticipated satellite-based competitors. Globalstar service
providers will set their own retail pricing in their territories and will pay
Globalstar about $0.35 to $0.55 per minute on a wholesale basis.
Globalstar customers will use 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. Dual-mode and tri-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.
The elements of the Globalstar System -- space and ground segments, digital
communications technology, handset supply, service provider arrangements and
licensing -- are on schedule to begin launching satellites in the second half of
1997, to commence commercial operations in the second half of 1998 and to have a
full constellation of 48 operational satellites, plus eight in-orbit spares,
launched by the end of 1998:
Space Segment. The first Globalstar satellite has been assembled and
is now in pre-flight testing, and another four are currently being
assembled. Production is on schedule for the remaining satellites. Three
different launch providers have signed agreements for the launch of the
satellite constellation, providing a variety of launch options and
considerable flexibility. Mission operations preparations and launch
vehicle production and dispenser development are on schedule.
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Ground Segment. The first four gateways, which are to be in
Australia, France, South Korea and the United States, are under
construction. These will support Globalstar's data network, monitor the
initial launch and orbital placement of Globalstar's first satellites, and
will serve as prototypes for production gateways that will support
Globalstar service. Globalstar's SOCC facility has been completed.
Digital Communications Technology. Qualcomm's CDMA technology has
been successfully deployed in South Korea, Hong Kong and cities in the
United States supporting terrestrial PCS and digital cellular service. Its
CDMA implementation for Globalstar has been successfully demonstrated in a
simulated satellite environment. This demonstration validated Globalstar's
encoding, modulation, control software, time and frequency distribution and
up/down links between satellites and handsets.
Handset Supply. Qualcomm and two other manufacturers, Ericsson and
TELITAL, are on schedule in their design and development of Globalstar's
handset.
Service Providers. Globalstar and its partners have been seeking
alliances with service providers throughout the world and have entered into
agreements in a number of territories. For example, in November 1996,
ChinaSat, a subsidiary of China's Ministry of Posts and Telecommunications,
agreed to act as the exclusive distributor of Globalstar services in China,
and to support four Globalstar gateways, the first of which is expected to
be operational by 1998. Globalstar has also formed a joint venture with the
principal Russian long distance carrier, Rostelecom, to provide Globalstar
service in that country and is negotiating a service provider agreement
with that joint venture. Globalstar believes that these relationships with
in-country service providers will facilitate the granting of local
regulatory approvals -- particularly where, as is the case in China, the
service provider and the licensing authority are the same -- as well as
providing local marketing and technical expertise.
Licensing. In January 1995, the FCC granted authority for the
construction, launch and operation of the Globalstar System and assigned
spectrum for its user links. Later that year, WRC'95 allocated feeder link
spectrum on an international basis for MSS systems such as Globalstar, and
in November 1996 the FCC authorized Globalstar's feeder links.
As a result of several recent decisions designed to assure and upgrade
system performance and maintain schedule -- including procurement of three
launches on the Starsem Soyuz launch vehicle, additional testing procedures,
development of additional and enhanced service features, cost growth and other
factors -- Globalstar currently estimates the cost for the design, construction
and deployment of the Globalstar System, including working capital, cash
interest on anticipated borrowings and operating expenses, to be approximately
$2.5 billion. In addition, Globalstar has agreed to purchase from SS/L eight
additional spare satellites at a cost estimated at $175 million. After giving
effect to the exercise of the Rights and the Guaranty Warrants, Globalstar will
have raised or received commitments for approximately $2.0 billion in equity,
debt and vendor financing, representing about 78% of the total financing
expected to complete the Globalstar System and achieve worldwide operations.
The Globalstar System has been designed to address the substantial and
growing demand for telecommunications services worldwide, particularly in
developing countries. More than three billion people today live without
residential telephone service, many in rural areas where the cost of wireline
service is prohibitively high. Moreover, even where telephone infrastructure is
available in developing countries, outdated equipment often leads to unreliable
service and limited international access. The number of worldwide fixed phone
lines has increased from 469 million in 1988 to 753 million in 1996 and is
projected to increase to 1.2 billion by 2002. Nonetheless, during the same
period, waiting lists for fixed service have increased from 30 million to 45
million, resulting in an average waiting time before installation of about one
and a half years. Similarly, the cellular market has grown from four million
worldwide subscribers in 1988 to an estimated 123 million in 1996 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's population will have access to wireless
telephone service principally through satellite-based systems like the
Globalstar System. Globalstar believes that its potential market exceeds 30
million people.
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The Globalstar System has been designed with attributes which Globalstar
believes compare favorably to other proposed global mobile satellite service
systems including: (i) Globalstar's unique combination of 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 is a principal founder of Globalstar and is its managing general
partner. Loral has invested $269 million in Globalstar. Loral owns effectively
33.8% 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 have
invested an additional $210 million in equity and, together with Loral,
committed or obtained $310 million in vendor financing.
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. Globalstar's founding partners are Loral and Qualcomm, the leading
supplier of CDMA digital telecommunications technology. Globalstar's other
strategic partners are:
<TABLE>
<CAPTION>
TELECOMMUNICATIONS EQUIPMENT
TELECOMMUNICATIONS AND AEROSPACE GLOBALSTAR SYSTEMS
SERVICE PROVIDERS MANUFACTURERS
----------------------------------------------- ---------------------------------------
<S> <C>
- AirTouch - Alcatel
- Dacom - Alenia
- France Telecom - DASA
- Vodafone - Finmeccanica
- Hyundai
- SS/L
</TABLE>
SS/L is providing 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, gateways and certain ground
support equipment.
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.
WORLDWIDE HIGH QUALITY SERVICE
To achieve rapid and sustained customer acceptance of the system, the
Globalstar System 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 as described herein 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 significant numbers of
people who currently lack basic telephone services and to enhance wireless
telecommunications in areas underserved or not served by existing or
contemplated cellular systems. Globalstar expects to
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<PAGE> 28
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 Phones 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 mobile 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 clarity, quality and privacy similar to those of existing digital
land-based cellular systems. 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 PCS licences 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.
No Voice Delay. Globalstar satellites' low-earth orbits of 750 nautical
miles are 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 medium orbit 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
Simple, Cost-Effective System Architecture. To achieve low cost, reduce
technological risk and accelerate its deployment, Globalstar has devised a
system architecture using small satellites incorporating well-established design
features, and located the system's call processing and switching operations on
the ground, where they are accessible for maintenance and can benefit from
continuing technological advances. 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 and tri-mode
Globalstar Phones will be able to access both Globalstar and a variety of local
land-based analog and digital cellular services, where available. Multiple
manufacturers will be licensed to manufacture Globalstar Phones in order to
promote competition and reduce prices. Globalstar gateways have been
competitively priced in order to encourage the placement of one or more gateways
in each country served, thus reducing tail charges for the terrestrial portion
of each call.
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. Another proposed
satellite-based system has proposed retail pricing of more than $3.00 per
minute. 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
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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.
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, its 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 services and launch insurance.
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
function to current digital cellular telephones. Moreover, mobile Globalstar
Phones will use less power on average than conventional analog cellular
telephones and are therefore expected to enjoy longer battery life. Dual-mode
and tri-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 and has granted a license to each of Ericsson
and TELITAL for such purpose; 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.
LEVERAGING THE CAPABILITIES OF GLOBALSTAR'S STRATEGIC PARTNERS
Loral 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 are providing in-country marketing and telephony expertise to
Globalstar. Globalstar's strategic partner service providers have been granted
exclusive rights to provide Globalstar service in 71 countries around the world
in which they have particular marketing strength and experience and access to an
established customer base of 60 million subscribers. Six additional service
providers have agreed to offer Globalstar service in 32 additional countries. To
maintain their service provider rights on an exclusive basis, these 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. In order to
accelerate the deployment of gateways around the world prior to the In-Service
Date, Globalstar, Qualcomm and the service providers
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intend to jointly finance the procurement of 33 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
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, Alcatel, DASA and
Finmeccanica, and with Hyundai.
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REGULATION
UNITED STATES FCC REGULATION
The FCC is the United States agency with jurisdiction over commercial uses
of the radio frequency 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 from time to time
rules applicable to MSS systems, which may impose constraints on the operation
of Globalstar satellites, subscriber terminals and/or gateway earth stations.
The Globalstar System requires regulatory authorization for two pairs of
frequencies: user links (from the user to the satellites, and vice versa) and
feeder links (from the gateways to the satellites, and vice versa). On January
31, 1995, the FCC authorized the construction, launch and operation of the
Globalstar System and assigned bands of the radio frequency spectrum for the
user links. A modification of this authorization on November 19, 1996 assigned
feeder link frequencies. This license is held by L/Q Licensee, a subsidiary of
LQP which has agreed to use the FCC license exclusively for the benefit of
Globalstar. The FCC license grants authority to construct, launch and operate
the Globalstar System with user links in the 1.6 and 2.4 GHz bands, consistent
with the United States band plan for MSS Above 1 GHz Globalstar Systems, and
feeder link frequencies in the 5 and 7 GHz bands. These feeder link frequencies
were allocated internationally for non-geostationary MSS feeder links at WRC
'95, and the FCC assigned them for use by Globalstar in the United States in
accordance with this international allocation. However, use of the feeder link
frequencies remains subject to any applicable restrictions which may be
promulgated in an FCC proceeding to adopt the international allocations into the
U.S. Table of Frequency Allocations.
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.
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. In addition, use and operation of Globalstar's feeder
and user links are subject to FCC regulations regarding interference protection
and coordination with other systems which may have an adverse effect on the
usefulness of such frequencies.
LQP's MSS application was one of six considered concurrently by the FCC. On
January 31, 1995, Motorola Satellite Communications, Inc. and TRW Inc. also were
granted FCC licenses for systems providing MSS Above 1 GHz Service.
Consideration of three other applications was deferred for over a year in order
to give the applicants time to establish their financial qualification to
receive an MSS license. As of September 16, 1996, one applicant withdrew its
application, one amended its application with information on new financial
arrangements for review by the FCC, and one amended its application without
providing the details of any new financial arrangements. Subsequently, both
applicants have provided additional information for the FCC to consider. Action
on the two remaining applications is pending at the FCC.
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 Globalstar Phones in the
United States. Globalstar's authorized service provider in the U.S., AirTouch,
will apply for the required regulatory authorizations for gateways and
Globalstar Phones, and the manufacturer will apply for equipment authorization
for Globalstar Phones. Failure to obtain, or delay in obtaining, such licenses
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
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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 the operation of Globalstar.
The operation of Globalstar in the assigned user links and feeder links
must be coordinated with licensees of other existing radio services operating in
these bands in accordance with FCC and international rules and policies. Such
coordination may adversely affect the usefulness of the frequencies for
Globalstar operations. On January 9, 1997, the FCC adopted rules which would
make available 300 MHz of bandwidth in the 5 GHz band, including frequencies
from 5150 to 5250 MHz, for use by unlicensed devices for wireless high speed
data services. The FCC adopted rules which are designed to ensure that these
devices do not cause harmful interference with licensed services using these
bands, such as MSS feeder links. In the November 1996 order modifying the
Globalstar license, the FCC stated that Globalstar gateway earth station
licenses may be subject to sharing with unlicensed transmitters in accordance
with rules adopted in this proceeding. This proceeding is not yet final. There
can be no assurance that adoption of these rules as initially promulgated or 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 at 5 GHz or on the usefulness of these bands for
MSS feeder links.
As a CDMA system, Globalstar must coordinate its operations in the United
States with other licensed MSS 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 1.6
GHz and 2.4 GHz user links, but the FCC did not adopt specific guidelines for
coordination among CDMA systems. There may be an adverse effect on the
implementation of Globalstar depending upon the number of CDMA systems with
which it must coordinate and their willingness to coordinate in good faith and
in a timely manner. The CDMA systems must also coordinate with the TDMA system,
and there can be no assurance that such intersystem coordination would not have
an adverse effect on Globalstar operations. 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 were authorized to operate in the United States on
frequencies assigned to Globalstar, additional coordination obligations may be
required.
In its Order adopting rules and policies for MSS Above 1 GHz Service, the
FCC stated that a license for MSS Above 1 GHz Service would impose
implementation milestones on licensed systems. In the November 1996 order
modifying the Globalstar license to assign feeder links, the FCC also imposed
these implementation milestones on Globalstar. 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. 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 Service in the Order
have been challenged in a judicial appeal and were the subject of petitions for
reconsideration 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 the Order on reconsideration have
been filed and remain pending. Judicial appeals regarding the FCC's decision 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 Globalstar or its affiliates would be willing or able to outbid other
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applicants to obtain a license for the spectrum needed to operate the Globalstar
System. In addition, even if Globalstar or its affiliates 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
order granting the FCC license were filed and have been denied. Two judicial
appeals of the order resolving these petitions have been filed and remain
pending. There can be no assurance that such appeals will not be granted, or
that 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 the
application for the Globalstar System, or that on remand the FCC would take
action on the 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 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 transfers of technology, including rocket technology, to certain
republics of the former Soviet Union. Because Globalstar's launch strategy
contemplates using Russian and Ukrainian launch providers with launch sites
located in Kazakhstan, special export licenses are required to be obtained by
SS/L in connection with these launches.
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 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 that 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. Globalstar does not believe that these regulations will have a
material adverse effect on its operations.
INTERNATIONAL COORDINATION
The Globalstar System proposes to operate in frequencies which were
allocated on an international basis for MSS user links at WARC '92 and for MSS
feeder links at WRC '95. Globalstar is required to engage in international
coordination procedures with other proposed MSS systems under the aegis of the
ITU. Globalstar and the two other U.S. MSS licensees have entered into an
agreement pursuant to which they have
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agreed to promote the FCC's spectrum allocation plan before other governmental
and international bodies and to seek authorization for "landing rights" based on
that plan.
Because Globalstar's proposed feeder link bands are allocated on an
international basis for LEO MSS feeder links, foreign LEO MSS systems may also
seek to use these bands for MSS feeder links. ICO has filed with the ITU its
plans to use the same feeder link spectrum as Globalstar. Globalstar will be
required to coordinate the use of its feeder links with ICO and any other
foreign system which has similar plans. Both a Russian and a Brazilian LEO MSS
system have filed with the ITU their intention to use the same feeder link
spectrum as Globalstar. There can be no assurance that such coordination will
not adversely affect the use of these bands by Globalstar.
Pursuant to the Intelsat and Inmarsat treaties, international satellite
operators are required to demonstrate that they will not cause economic or
technical harm to Inmarsat or Intelsat and to coordinate with Intelsat and
Inmarsat under obligations imposed on United States satellite systems by
international treaties. Globalstar will engage in technical coordination of its
feeder downlinks with Intelsat, which uses the same frequency band for an
uplink. Globalstar believes that the proposed provision of competitive MSS
service by ICO, in which Inmarsat is a significant investor, may effectively
eliminate the requirement to demonstrate lack of economic harm. Globalstar
expects such coordination to be successful.
EUROPEAN UNION
European Union competition law proscribes agreements that have the effect
of appreciably restricting or distorting competition in the European Union.
Globalstar and others have responded to an inquiry from the Commission of the
European Union requesting information regarding their activities. On December
18, 1996, the Commission issued a decision concluding that the Iridium system is
not inconsistent with European Union competition law and policy. 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 telecommunications systems such as the
Globalstar System. The legislation proposed by the Commission of the European
Union is under reconsideration at the direction of the European Union ministers,
and Globalstar is unable to predict what effect, if any, the results of any
inquiry or proposed legislation may have on Globalstar's operations.
REGULATION OF SERVICE PROVIDERS
In order to operate gateway earth stations, including the user uplink
frequency, the Globalstar service provider in each country will be required to
obtain a license from that country's telecommunications authority. In addition,
the Globalstar service provider will need to enter into appropriate
interconnection and financial settlement agreements with local and interexchange
telecommunications providers. Globalstar intends to use in-country service
providers to facilitate the obtaining of such licenses and agreements. In
October 1996 the ITU's Policy Forum on Global Mobile Personal Communications by
Satellite adopted a set of voluntary principles which, if enacted or adopted by
individual countries, would help facilitate the licensing of in-country service
providers.
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. If a service provider does not obtain a license,
Globalstar will have the right to substitute another service provider to attempt
to obtain such a license, but if no service provider in a territory is
successful in obtaining the requisite local authorization, Globalstar service
will not be available in such territory. 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.
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THE RIGHTS OFFERING
THE RIGHTS
The Company is distributing, at no cost, to each record holder of its
outstanding Common Stock as of March , 1997, transferable Rights to purchase
one share of Common Stock for each 8.84042 shares of Common Stock then held of
record by such Shareholder. The Rights will be exercisable at a price of $26.50
per share. The Rights will be evidenced by transferable Subscription
Certificates. An aggregate of 1,131,168 shares of Common Stock will be sold if
all Rights are exercised.
No fractional Rights Shares, or cash in lieu thereof, will be issued or
paid. The number of Rights Shares distributed to each Shareholder will be
rounded down to the nearest whole share in connection with the exercise of the
Rights.
EXERCISE
Each Right will entitle the holder thereof to receive, upon payment of the
Subscription Price, one share of Common Stock. Certificates representing Rights
Shares will be delivered to subscribers as soon as practicable after the
Expiration Date, irrespective of whether the Rights held by any such subscriber
are exercised immediately prior to the Expiration Date or earlier. Subscribers
exercising their Rights will not be the holders of record with respect to the
Rights Shares issuable pursuant to such Rights until the closing, which it is
anticipated will occur three business days after the Expiration Date.
EXPIRATION DATE
The Rights will expire at 5:00 p.m., New York City time, on April , 1997,
unless extended by the Company from time to time. After the Expiration Date,
unexercised Rights will be null and void. All Rights Shares not duly subscribed
for prior to the close of business on the Expiration Date will be purchased by
Loral pursuant to the Standby Agreement. The Company will not be obligated to
honor any purported exercise of Rights received by the Subscription Agent after
the Expiration Date, regardless of when the documents relating to such exercise
were sent, except pursuant to the Guaranteed Delivery Procedures described
below.
EXERCISE OF RIGHTS
General. Rights may be exercised by delivering to the Subscription Agent,
on or prior to 5:00 p.m., New York City time, on the Expiration Date, the
properly completed and executed Subscription Certificate evidencing such Rights
with any required signatures guaranteed, together with payment in full of the
Subscription Price for each Rights Share subscribed for (except as permitted
pursuant to clause (iii) of the next sentence). Such payment in full must be by:
(i) check or bank draft drawn upon a U.S. bank or postal telegraphic or express
money order payable to The Bank of New York, as Subscription Agent; or (ii) wire
transfer of funds to the account maintained by the Subscription Agent for such
purpose; or (iii) such other means as the Company may approve in writing in the
case of persons acquiring Rights Shares at an aggregate Subscription Price of
$500,000 or more, provided in each case that the full amount of such
Subscription Price is received by the Subscription Agent in currently available
funds within three NNM trading days following the Expiration Date (the payment
method under (iii) being an "Approved Payment Method"). Payment of the
Subscription Price will be deemed to have been received by the Subscription
Agent only upon (a) clearance of any uncertified check, (b) receipt by the
Subscription Agent of any certified check or bank draft drawn upon a United
States bank or of any postal, telegraphic or express money order, (c) receipt of
good funds in the Subscription Agent's account designated above, or (d) receipt
of good funds by the Subscription Agent through an Approved Payment Method.
If paying by uncertified personal check, please note that the funds paid
thereby may take at least five business days to clear. Accordingly, subscribers
who wish to pay the Subscription Price by means of uncertified personal check
are urged to make payment sufficiently in advance of the Expiration Date to
ensure that such payment is received and clears by such date and are urged to
consider payment by means of certified or cashier's check, money order or wire
transfer of funds.
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The address to which the Subscription Certificates and payment of the
Subscription Price should be delivered is:
THE BANK OF NEW YORK
101 BARCLAY STREET
NEW YORK, NEW YORK 10286
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
(for Eligible Institutions
Only)
Tender & Exchange Department (212) 815-6213 Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
FOR INFORMATION TELEPHONE:
(800) 507-9357
</TABLE>
Guaranteed Delivery Procedures. If a holder of Rights wishes to exercise
any or all of such Rights, but time will not permit such holder to cause the
Subscription Certificate or Subscription Certificates evidencing such Rights to
reach the Subscription Agent on or prior to the Expiration Date, such Rights may
nevertheless be exercised if all of the following Guaranteed Delivery Procedures
are met:
(i) such holder has caused payment in full of the Subscription Price
for each Rights Share being subscribed for pursuant to the Rights to be
received (in the manner set forth above) by the Subscription Agent on or
prior to the Expiration Date;
(ii) the Subscription Agent receives, on or prior to the Expiration
Date, a guaranteed notice (a "Notice of Guaranteed Delivery"),
substantially in the form provided with the Instructions as to Use of
Globalstar Telecommunications Limited Subscription Certificates (the
"Instructions") distributed with the Subscription Certificates, from an
"Eligible Institution" (as defined in Rule 17Ad-15 under the Exchange Act),
stating the name of the exercising Shareholder, the number of Rights
represented by the Subscription Certificate(s) held by such exercising
Shareholder, the number of Rights Shares being subscribed for and
guaranteeing the delivery to the Subscription Agent of any Subscription
Certificate(s) evidencing such Rights within three NNM trading days
following the date of the Notice of Guaranteed Delivery; and
(iii) the properly completed Subscription Certificate(s), with any
required signatures guaranteed, is received by the Subscription Agent
within three NNM trading days following the date of the Notice of
Guaranteed Delivery relating thereto. The Notice of Guaranteed Delivery may
be delivered to the Subscription Agent in the same manner as Subscription
Certificates at the addresses set forth above, or may be transmitted to the
Subscription Agent by facsimile transmission (telecopy number ( )
). Additional copies of the form of the Notice of Guaranteed
Delivery are available from the Subscription Agent, whose address and
telephone number are set forth under "Subscription Agent" below.
A holder who holds shares of Common Stock for the account of others, such
as a broker, a trustee or a depository for securities, should notify the
respective beneficial owners of such shares as soon as possible to ascertain
such beneficial owner's intentions and to obtain instructions with respect to
the Rights. If the beneficial owner so instructs, the record holder of such
Rights should complete the Subscription Certificate and submit it to the
Subscription Agent with the proper payment. In addition, the beneficial owner of
Common Stock or Rights held through such a holder of record should contact the
record holder and request the record holder to effect transactions in accordance
with the beneficial owner's instructions.
Unless a Subscription Certificate (i) provides that the shares of Common
Stock to be issued pursuant to the exercise of Rights represented thereby are to
be delivered to the holder or (ii) is submitted for the account of an Eligible
Institution, signatures on such Subscription Certificate must be guaranteed by
an Eligible Institution.
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<PAGE> 37
If either the number of Rights Shares being subscribed for is not specified
on the Subscription Certificate, or the amount delivered is not enough to pay
the Subscription Price for all Rights Shares stated to be subscribed for, the
number of Rights Shares subscribed for will be assumed to be the maximum amount
that could be subscribed for upon payment of such amount, after allowance for
the Subscription Price of any specified Rights Shares. If the number of Rights
Shares being subscribed for is not specified, or payment of the Subscription
Price for the indicated number of Rights that are being exercised exceeds the
required Subscription Price, the payment will be applied, until depleted, to
subscribe for Rights Shares in the following order: (i) to subscribe for the
number of Rights Shares indicated, if any, pursuant to the Subscription
Certificate and (ii) to subscribe for Rights Shares until the Rights evidenced
by the Subscription Certificate have been fully exercised.
The Instructions accompanying the Subscription Certificates should be read
carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO THE
COMPANY.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK OF
THE RIGHTS HOLDER, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH CERTIFICATES
AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO
THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE
AT LEAST FIVE BUSINESS DAYS TO CLEAR, THE RIGHTS HOLDER IS STRONGLY URGED TO
PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK, MONEY
ORDER OR WIRE TRANSFER OF FUNDS.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Company, whose determinations
will be final and binding. The Company, in its sole discretion, may waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as it may determine, or reject the purported exercise of any
Right. Subscriptions will not be deemed to have been received or accepted until
all irregularities have been waived or cured within such time as the Company
determines in its sole discretion. Neither the Company nor the Subscription
Agent will (1) be under any obligation to cure or waive any defect or
irregularity or (2) incur any liability for failure to give notification of any
defect or irregularity.
Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Prospectus or the
Instructions or the Notice of Guaranteed Delivery should be directed to the
Information Agent at its toll-free telephone number (888) 330-5111.
NO REVOCATION
ONCE A HOLDER OF RIGHTS HAS EXERCISED SUCH RIGHTS, SUCH HOLDER'S ELECTION
TO EXERCISE MAY NOT BE REVOKED.
METHOD OF TRANSFERRING RIGHTS
The Rights will be transferable, but will not be listed for trading on any
securities exchange.
The Rights evidenced by a single Subscription Certificate may be
transferred in whole by endorsing the Subscription Certificate for transfer in
accordance with the accompanying instructions. A portion of the Rights evidenced
by a single Subscription Certificate may be transferred by delivering to the
Subscription Agent a Subscription Certificate properly endorsed for transfer,
with instructions to register such portion of the Rights evidenced thereby in
the name of the transferee (and to issue a new Subscription Certificate to the
transferee evidencing such transferred Rights). In such event, a new
Subscription Certificate evidencing the balance of the Rights will be issued to
the Shareholder or, if the Shareholder so instructs, to an additional
transferee.
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<PAGE> 38
Shareholders wishing to transfer all or a portion of their Rights should
allow a sufficient amount of time prior to the Expiration Date for (i) the
transfer instructions to be received and processed by the Subscription Agent,
(ii) a new Subscription Certificate to be issued and transmitted to the
transferee or transferees with respect to transferred Rights, and to the
transferor with respect to retained Rights, if any, and (iii) the Rights
evidenced by such new Subscription Certificates to be exercised or sold by the
recipients thereof. If time does not permit a transferee of a Right who wishes
to exercise its Right to deliver its Subscription Certificate to the
Subscription Agent on or before the Expiration Date, such transferee should make
use of the Guaranteed Delivery Procedure described under "-- Exercise of
Rights." Neither the Company nor the Subscription Agent shall have any liability
to a transferee or transferor of Rights if Subscription Certificates or new
Subscription Certificates are not received in time for exercise or sale prior to
the Expiration Date.
All commissions, fees and other expenses (including brokerage commissions
and transfer taxes) incurred in connection with the purchase, sale or exercise
of Rights will be for the account of the transferor or subscriber of the Rights,
and none of such commissions, fees or expenses will be paid by the Company or
the Subscription Agent.
STANDBY COMMITMENT
Loral has agreed to subscribe for and purchase all of the Rights Shares not
subscribed for by the holders of the Rights pursuant to the Standby Commitment.
Loral owns effectively 2,656,025 shares of the Common Stock of the Company as of
January 31, 1997. Assuming that no Rights are exercised by the holders thereof
but that Loral exercises its Rights and purchases all of the unsubscribed Rights
Shares, and after giving effect to the exercise of the Guaranty Warrants, Loral
would own 3,628,048 shares of the Common Stock of the Company after the Rights
Offering.
TAXATION
This discussion of certain tax considerations is based upon applicable
laws, treaties, regulations and interpretations thereof as currently in effect,
and is limited to persons who hold the Common Stock as a "capital asset" within
the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986 (the
"Code"). This discussion does not consider all aspects of taxation which may be
relevant to a particular investor and which may depend upon the investor's
particular circumstances.
Prospective investors should consult with their own professional advisors
about the tax consequences to them of an investment in the Company under the
laws of the jurisdictions in which they are subject to taxation.
The following discussion of U.S. tax laws 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.
DISTRIBUTION AND OWNERSHIP OF RIGHTS
Issuance, Basis and Holding Period of the Rights. Under Sections 305(b)(2)
and 305(c) of the Code, the U.S. Internal Revenue Service ("IRS") is likely to
contend that the distribution of the Rights constitutes a distribution of
"property" within the meaning of Section 317(a) of the Code. If the IRS were to
prevail in such a contention, a shareholder of the Company would be viewed as
receiving a distribution equal to the fair market value of the Rights, which
would be taxable as a dividend to such shareholder to the extent of the
Company's current and accumulated earnings and profits. The determination of a
corporation's earnings and profits is complex, and, in the case of current
earnings and profits, cannot be determined until the close of its taxable year.
Nonetheless, the Company believes that it will have no current or accumulated
earnings and profits in the year of the distribution. Accordingly, rather than
treating any portion of the Rights as a dividend, a shareholder would reduce his
basis in the Common Stock by the fair market value of the Rights received with
respect thereto, treating any excess of value over basis as gain from the sale
of exchange of the Common Stock. Such gain will be long-term capital gain if
such shareholder's holding period in the Common Stock
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<PAGE> 39
exceeds one year. The basis of the Rights received will equal their fair market
value on the date of the distribution and the holding period of the Rights will
commence on the day after the date of the distribution.
Notwithstanding the foregoing, the Rights Offering may qualify as a
tax-free distribution under Section 305(a) of the Code, regardless of whether
the Company has current or accumulated earnings and profits for the year of the
distribution. In that event, a shareholder of Common Stock would not recognize
taxable income in connection with the receipt of the Rights, would "tack" the
holding period of the Common Stock to the holding period of the Rights received
with respect thereto, and, except as provided below, would assign no tax basis
to the Rights. If, however, either (i) the fair market value of the Rights on
the date of commencement of the Rights Offering is 15% or more of the fair
market value of the Common Stock with respect to which they are received; or
(ii) the shareholder elects, in his or her federal income tax return for the
taxable year in which the Rights are received, to allocate part of the basis of
such Common Stock to the Rights, then, upon exercise or transfer of the Rights,
the shareholder's basis in such Common Stock will be allocated between the
Common Stock and the Rights in proportion to their relative fair market values.
Transfer of the Rights. A shareholder who sells Rights received in the
Rights Offering prior to exercise will recognize gain or loss equal to the
difference between the sale proceeds and such shareholder's basis (if any) in
the Rights sold. Such gain or loss will be long-term capital gain or loss if
such shareholder's holding period in the Rights (as discussed above) exceeds one
year.
Lapse of Rights. If the distribution of the Rights qualifies under Section
305(a) of the Code, shareholders who allow the Rights received by them in the
Rights Offering to lapse will not recognize any gain or loss, and no adjustment
will be made to the basis of the Common Stock, if any, owned by such holders of
the Rights. If Section 305(a) does not apply to the distribution of the Rights,
a shareholder will recognize a short-term capital loss equal to its tax basis in
the Rights (as discussed above).
Exercise of the Rights; Basis and Holding Period of Common Stock. Holders
of Rights will not recognize any gain or loss upon the exercise of such Rights.
The basis of the Common Stock acquired through exercise of the Rights will be
equal to the sum of the Subscription Price therefor and the holder's basis in
such Rights (if any) as described above. The holding period of the Common Stock
acquired through exercise of the Rights will begin on the date the Rights are
exercised.
Tax Consequences to the Company. The Company should not recognize any gain
or loss upon the issuance or exercise of the Rights or upon the use of the
proceeds of such exercise to purchase additional partnership interests in
Globalstar.
OTHER UNITED STATES TAX CONSIDERATIONS
Taxation of the Company. The Company is a foreign corporation established
for the sole purpose of acquiring and holding a partnership interest in
Globalstar, a Delaware limited partnership. The Company's tax consequences will
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 pro rata 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. This requirement to distribute to
non-U.S. partners for federal
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<PAGE> 40
income taxes may be satisfied by a withholding tax payment made by Globalstar to
the U.S. Treasury. The amount withheld may exceed the 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.
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 shares of Common
Stock unless the sale of such shares 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 shares of Common Stock 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 United States Investors in the Company. Special rules apply to
the taxation of 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 and will not become a PFIC. In particular, the
Company expects to earn, through Globalstar, sufficient active business income
to avoid PFIC status. However, Globalstar may earn passive income such as
interest on working capital and royalties on certain intangibles. Furthermore,
the extent and timing of Globalstar's active business income cannot be predicted
with certainty.
If the Company is or were to become a PFIC, a U.S. shareholder would be
subject to a tax-deferral charge on gains on a sale of shares of Common Stock
and on certain "excess distributions" received from the Company, and such gains
and excess distributions will be taxable at ordinary income rates, unless the
shareholder makes the QEF election described below. The amount of the charges
will depend, in part, on the period during which the shareholders held their
shares of Common Stock.
If a shareholder makes the qualified electing fund ("QEF") election
provided in Section 1295 of the Code, the shareholder will be required to
include its pro rata share of the Company's ordinary earnings and net capital
gain in income for tax purposes 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 IRS. In the event the Company is characterized
as a PFIC for federal income tax purposes, the Company will undertake to comply
with the IRS information requirements necessary to permit shareholders to make
the election, and provide to each U.S. shareholder information needed for the
determination of such shareholder's pro rata share of the Company's ordinary
earnings and net capital gain.
BERMUDA TAX CONSIDERATIONS
At the present time, there is no Bermuda income or profits tax, withholding
tax, capital gains tax, capital transfer tax, estate duty or inheritance tax
payable by a Bermuda company or its shareholders, other than shareholders
ordinarily resident in Bermuda. The Company has obtained an assurance from the
Minister of Finance under the Exempted Undertakings Tax Protection Act 1966
that, in the event that any legislation is enacted in Bermuda imposing any tax
computed on profits or income, or computed on any capital asset, gain
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<PAGE> 41
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 to the shares, debentures or other obligations of the
Company except insofar as such tax applies to persons ordinarily resident in
Bermuda and holding such shares, debentures or other obligations of the Company
or any land leased or let to the Company. Therefore, there will be no Bermuda
tax consequences with respect to the sale or exchange of the Common Stock or
with respect to distributions in respect of the Common Stock. As an exempted
company, the Company is liable to pay in Bermuda a registration fee based upon
its authorized share capital and the premium on its issued shares.
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 particular partner
(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 to such partner by
Globalstar.
PLAN OF DISTRIBUTION
The Rights Shares being offered hereby are being offered by the Company
pursuant to the issuance of Rights directly to the holders of the Company's
Common Stock as of the Record Date. The Rights are freely transferable, but will
not be listed to trade on any securities exchange. The Company intends to
distribute Rights and copies of this Prospectus to the Shareholders promptly
following the effective date of the Registration Statement of which this
Prospectus forms a part.
Shareholders or transferees of Rights who desire to subscribe for the
purchase of the Rights Shares in this Rights Offering are urged to complete,
date and sign the Subscription Certificate and return it to the Subscription
Agent on or before the Expiration Date, together with payment in full for the
Rights Shares.
The outstanding Common Stock currently trades, and the Common Stock issued
upon exercise of the Rights will trade, on the NNM under the symbol GSTRF. There
is no assurance as to the development or liquidity of any trading market that
may develop for the Rights.
SUBSCRIPTION AGENT
The Company has appointed The Bank of New York as Subscription Agent for
the Rights Offering. The Subscription Agent's address, which is the address to
which the Subscription Certificates and payment of the Subscription Price should
be delivered, as well as the address to which Notice of Guaranteed Delivery must
be delivered, and the Subscription Agent's facsimile number, are:
THE BANK OF NEW YORK
101 BARCLAY STREET
NEW YORK, NEW YORK 10286
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
(for Eligible Institutions
Only)
Tender & Exchange Department Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
</TABLE>
Globalstar will pay the fees and expenses of the Subscription Agent. The
Company has agreed to indemnify the Subscription Agent from any liability which
it may incur in connection with the Rights Offering.
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<PAGE> 42
INFORMATION AGENT
The Company has appointed W.F. Doring & Co., Inc. as Information Agent for
the Rights Offering. Any questions or requests for additional copies of this
Prospectus, the Instructions or the Notice of Guaranteed Delivery may be
directed to the Information Agent at the toll-free telephone number and address
below.
W.F. DORING & CO., INC.
150 BAY STREET
8TH FLOOR
JERSEY CITY, NEW JERSEY 07302
(888) 330-5111
Globalstar will pay the fees and expenses of the Information Agent. The
Company has agreed to indemnify the Information Agent from certain liabilities
in connection with the Rights Offering.
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. Certain Bermuda tax matters described under "Taxation"
and the validity of the Rights and the Rights Shares offered hereby will be
passed upon for the Company by Appleby, Spurling & Kempe, Hamilton, Bermuda. As
of January 31, 1997, partners and counsel in Willkie Farr & Gallagher
beneficially owned 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 and a member of the Audit and Executive Committees of the
Boards of Directors of both the Company and Loral.
EXPERTS
The financial statements of the Company and Globalstar incorporated in this
Prospectus by reference from the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 have been audited by Deloitte & Touche LLP
as stated in their reports, which are incorporated herein by reference, and have
been so incorporated in reliance on the reports of said firm given upon their
authority as experts in auditing and accounting.
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<PAGE> 43
GLOSSARY OF TERMS
ACeS -- PT Asia Cellular Satellite, a GEO satellite-based telephony system
proposed for Asia.
ACS -- Afro-Asian Satellite.
AMPS -- see Advanced Mobile Phone System.
AMSC -- American Mobile Satellite Corporation.
APMT -- Asia Pacific Mobile Telecom, a GEO satellite-based telephony system
proposed for Asia.
ADVANCED MOBILE PHONE SYSTEM (AMPS) -- the analog cellular modulation in general
use in the United States today.
AEROSPATIALE -- Aerospatiale SNI.
AIRTOUCH -- AirTouch Communications, Inc., a Delaware corporation. AirTouch is a
leading wireless telecommunications company with 1.6 million cellular customers
worldwide.
ALCATEL -- Alcatel, N.V., a Netherlands company. Alcatel is the world's largest
manufacturer of telecommunications equipment, with operations in 32 countries.
ALENIA -- Alenia S.p.A., a subsidiary of Finmeccanica. Alenia is Italy's largest
aerospace company and has broad experience in complete space systems,
telecommunications, remote sensing, weather and scientific satellites, manned
space systems, launch and re-entry systems, and fixed and mobile ground systems
for spacecraft support.
ALLIANCE PARTNERS -- four major European companies involved in aerospace,
telecommunications and space communications (Aerospatiale, Alcatel, DASA and
Finmeccanica), which currently hold a 49% equity interest in SS/L.
ANALOG -- a method of storing, processing and transmitting information through
the use of a continuous (rather than pulsed or digital) electrical signal that
varies in amplitude or frequency.
APPROVED PAYMENT METHOD -- such payment method for the Rights Shares as the
Company may approve in writing in the case of persons acquiring the Rights
Shares at an aggregate Subscription Price of $500,000 or more.
BANDWIDTH -- the range of frequencies, expressed in hertz (Hz), that can pass
over a given transmission channel. The bandwidth determines the rate at which
information can be transmitted through the circuit. The greater the bandwidth,
the more information that can be sent through the circuit in a given amount of
time.
CDMA -- see Code Division Multiple Access.
CPEOs -- GTL's outstanding 6 1/2% Convertible Preferred Equivalent Obligations
due 2006.
CELLULAR -- domestic public cellular radio telecommunications service authorized
by the FCC in the 824-893 MHz band, in which each of two licensees per market
employ 25 MHz of spectrum to provide service to the public.
CHINASAT -- Chinese Telecommunications Broadcast Satellite Corp., which is
operated by the Chinese Ministry of Posts and Telecommunications.
CODE -- the Internal Revenue Code of 1986, as amended.
CODE DIVISION MULTIPLE ACCESS (CDMA) -- a digital transmission system that
superimposes audio signals or data onto a specified coded address waveform. CDMA
allows a large number of wireless users simultaneously to access a single radio
frequency band without interference. As each wireless telephone gains access,
its gateway assigns it a unique sequence of frequency shifts that serve as a
code to distinguish that particular telephone call from others on the air.
COLD FAILURE -- failure of satellite components resulting in partial or total
failure of the satellite.
G-1
<PAGE> 44
COMMISSION -- the Securities and Exchange Commission.
COMMON STOCK -- common stock, par value $1.00 per share, of GTL.
COMMUNICATIONS ACT -- Act of Congress passed in 1934, as amended, which
established the Federal Communications Commission and regulates the
communication industries, including radio, telephone and cable, in the United
States.
COMSAT -- Comsat Corporation, the U.S. signatory to Intelsat and Inmarsat.
CREDIT AGREEMENT -- Agreement by and between Globalstar and a bank syndicate for
a $250 million credit facility expiring December 15, 2000.
DASA -- Daimler-Benz Aerospace A.G., and its subsidiaries and affiliates. DASA
is a leader in the development and production of aerospace, defense technology
and propulsion systems, and the manufacture of military and commercial aircraft,
satellites, space transportation and propulsion systems.
DACOM -- DACOM, or an affiliate thereof. Dacom is a leading South Korean
telecommunications company which provides a broad range of services, including
international telephone service connection to 169 countries with South Korea.
DIGITAL -- a method of storing, processing and transmitting information through
the use of distinct electronic or optical pulses that represent the binary
digits 0 and 1. Digital transmission/switching technologies employ a sequence of
discrete, distinct pulses to represent information, as opposed to the
continuously variable analog signal. Digital cellular networks will utilize
digital transmission.
DOWNLINK -- the receiving portion of a satellite circuit extending from the
satellite to the Earth (compare to uplink).
DUAL-MODE -- handsets designed to operate on both a land-based cellular system
and the Globalstar System.
DUAL USE ITEMS -- technology and commodities designated under the Export
Administration Act as capable of both civilian and military applications.
EARTH STATION -- the antennas, receivers, transmitters and other equipment
needed on the ground to transmit and receive satellite communications signals.
ELECTROMAGNETIC SPECTRUM -- entire range of wavelengths or frequencies of
electromagnetic radiation extending from gamma rays to the longest radio wave,
and including visible light. See also radio frequency.
ERICSSON -- L.M. Ericsson, parent of Orbitel.
EXCHANGE ACT -- the Securities and Exchange Act of 1934, as amended.
EXPIRATION DATE -- 5:00 p.m. New York City time on April , 1997.
FCC -- see Federal Communications Commission.
FEDERAL COMMUNICATIONS COMMISSION (FCC) -- regulatory agency established by the
Communications Act, charged with regulating all electrical and radio
communications within the United States.
FEEDER LINK -- the path by which information flows when traveling from a
satellite to a gateway and from a gateway to a satellite. Globalstar feeder
links are in the C-band region of the frequency spectrum.
FINMECCANICA -- Finmeccanica S.p.A., or an affiliate thereof. Finmeccanica owns
Alenia. See above.
FOOTPRINT -- the geographic areas served by a radio transmission device, such as
a communications satellite.
FRANCE TELECOM -- France Telecom, or an affiliate thereof. France Telecom is the
world's fourth largest telecommunications operator with 30 million subscribers
and operations in over 19 countries.
FREQUENCY -- an expression of how frequently a periodic (repetitious) wave form
or signal regenerates itself at a given amplitude.
G-2
<PAGE> 45
FULL CONSTELLATION DATE -- the date on which Globalstar commences full
operations via a 48-satellite constellation, which is expected to occur by the
end of 1998.
GEO -- see geosynchronous orbit.
GHz -- see gigahertz.
GOCC -- see Ground Operations Control Center.
GTL -- Globalstar Telecommunications Limited, a Bermuda company quoted on the
NNM, which acts as one of two general partners of Globalstar.
GATEWAY -- the earth terminal which connects the Globalstar satellite
constellation to PSTN through the land-based switching equipment of
telecommunications service providers.
GENERAL PARTNERS -- GTL and LQSS.
GEOSYNCHRONOUS ORBIT (GEO) -- the orbit directly over the equator, about 22,300
nautical miles above the Earth, also known as synchronous, geostationary,
stationary and Clarke orbits. When positioned in this orbit, a satellite appears
to hover over the same spot on the Earth because it is moving at a rate that
matches the speed of the Earth's rotation on its axis.
GIGAHERTZ (GHz) -- a measure of frequency equal to one billion cycles per
second.
GLOBAL ROAMING -- the ability of a Globalstar subscriber to travel worldwide and
make and receive Globalstar telephone calls outside the service area of the
subscriber's communications service wherever Globalstar service is authorized.
GLOBALSTAR(TM) -- Globalstar, L.P., a Delaware limited partnership that is
building and preparing to launch an MSS system comprised of 56 LEO satellites
designed to provide worldwide wireless telephony and other services.
"Globalstar" is a trademark of Globalstar, L.P.
GLOBALSTAR PHONES -- hand-held and vehicle-mounted units similar to today's
cellular telephones and fixed telephones similar to ordinary wireline telephones
through which Globalstar users will make and receive calls.
GLOBALSTAR SERVICE -- the transmission and/or reception of voice, data,
messaging, facsimile, paging, position, location or other information through
the Globalstar System using the service providers' gateways.
GLOBALSTAR SYSTEM -- a low-earth orbit satellite-based telecommunications system
proposed by Globalstar to operate in the MSS Above 1 GHz Service frequencies.
See MSS applicant.
GLONASS -- a segment of the Russian Global Navigation Satellite System currently
operating worldwide in a portion of the frequency band proposed to be used by
Globalstar and other MSS systems for user uplinks.
GROUND OPERATIONS CONTROL CENTER (GOCC) -- regional Globalstar
telecommunications control centers designed to communicate and coordinate
information on resource availability, time of day, frequency assignments, and
connectivity and sequence schedules to the pathways and SOCCs which comprise the
Globalstar ground segment.
GROUND SEGMENT -- the ground-based portion of the Globalstar System. The ground
segment consists of the SOCCs, the GOCCs, the gateways, TCUs located at selected
gateways, and the Globalstar Data Network which interconnects all of the
ground-based elements.
GUARANTY FEE -- the fee equal to 1.5% per annum of the average quarterly amount
outstanding under the Credit Agreement, paid by Globalstar to Loral and the
other guaranteeing partners.
GUARANTY WARRANTS -- Warrants to purchase 4,185,318 shares of Common Stock, at a
price of $26.50 per share, issued by GTL to DASA, Loral, Lockheed Martin,
Qualcomm and SS/L.
HAND-HELD SERVICE -- Globalstar voice service to a hand-held, portable terminal.
HOT FAILURE -- launch failure resulting in damage to or loss of a satellite.
G-3
<PAGE> 46
HYUNDAI -- Hyundai Electronics Industries Co. Ltd. Hyundai is a leading South
Korean manufacturer of telecommunications equipment, including the development
and production of portable and mobile cellular telephones, and multimedia
systems.
ICO(TM) -- Global Communications' MEO satellite telecommunications service that
would operate in the 2 GHz band.
INDENTURE -- the indenture pursuant to which the notes comprising a part of the
Units are issued.
INFORMATION AGENT -- W.F. Doring & Co., Inc.
ITU -- see International Telecommunication Union.
IN-SERVICE DATE -- the date on which Globalstar expects to commence initial
commercial operations via a 32-satellite constellation.
INDEPENDENT REPRESENTATIVES -- representatives on the General Partners'
committee not affiliated with Loral.
INMARSAT -- International Maritime Satellite Organization, which has formed an
affiliate, Global Communications, Inc., which is a proponent of ICO.
INTELSAT -- International Telecommunications Satellite Organization, a
consortium of 135 member nations and the world's largest operator of
communications satellites.
INTERNATIONAL TELECOMMUNICATION UNION (ITU) -- telecommunications agency of the
United Nations, established to provide standardized communication procedures and
practices, including frequency allocation and radio regulations on a worldwide
basis.
INVESTMENT COMPANY ACT -- the Investment Company Act of 1940, as amended.
IRIDIUM(TM) -- a low-earth orbit satellite-based telecommunications system
proposed by a consortium headed by Motorola to operate in the MSS Above 1 GHz
Service frequencies. See MSS applicant.
KHz -- see kilohertz.
KILOHERTZ (KHz) -- a unit of frequency equal to one thousand cycles per second.
LEO -- low-earth orbit between 500 and 1,500 nautical miles in altitude.
LGP -- Loral General Partner, Inc., general partner of LQP.
LMDS -- Local Multipoint Distribution Services.
L/Q LICENSEE -- a wholly owned subsidiary of LQP to which LQP assigned its FCC
license granting authority to construct, launch and operate the Globalstar
System for the purposes of providing MSS in the United States.
LQP -- see Loral/Qualcomm Partnership, L.P.
LQSS -- see Loral/Qualcomm Satellite Services, L.P.
LOCKHEED MARTIN -- Lockheed Martin Corporation, a Maryland corporation, and its
subsidiaries and affiliates. Lockheed Martin acquired Old Loral pursuant to an
Agreement and Plan of Merger, dated as of January 7, 1996.
LORAL -- Loral Space & Communications Ltd., a Bermuda company. Loral is a
principal founder of Globalstar and, through a subsidiary, its managing partner.
LORAL/QUALCOMM PARTNERSHIP, L.P. (LQP) -- a Delaware limited partnership
comprised of subsidiaries of Loral and Qualcomm. LQP is the general partner of
LQSS, and was an MSS applicant for the FCC license to construct, launch and
operate the Globalstar System.
LORAL/QUALCOMM SATELLITE SERVICES, L.P. (LQSS) -- a Delaware limited partnership
which is the managing general partner of Globalstar.
G-4
<PAGE> 47
MEO -- Medium-earth orbit, between 2,000 and 18,000 nautical miles in altitude.
MHz -- see megahertz.
MSS -- see Mobile Satellite Services.
MSS ABOVE 1 GHz SERVICE -- an MSS service regulated by the FCC in the United
States which has been allocated spectrum in 1610-1626.5 MHz for the user uplink
and in 2483.5-2500 MHz for the user downlink.
MSS APPLICANTS -- six companies that have applied to the FCC for licenses to
provide LEO satellite-based telecommunications services in the United States in
the 1610-1626.5/2483.5-2500 MHz portions of the radio frequency spectrum.
MSS PROCEEDING -- FCC proceeding for considering applications for authorization
to construct, launch and operate MSS systems in the United States.
MEGAHERTZ (MHz) -- a unit of frequency equal to one million cycles per second.
MOBILE SATELLITE SERVICES (MSS) -- services transmitted via satellites to
provide mobile telephone, fixed telephone, paging, messaging, facsimile, data
and position location services directly to users.
MOTOROLA -- Motorola, Inc.
NNM -- Nasdaq National Market.
ODYSSEY(TM) -- a medium-earth orbit satellite-based telecommunications system
proposed by TRW, Inc., to operate in the MSS Above 1 GHz Service frequencies.
See MSS applicant.
OLD LORAL -- Loral Corporation, a New York corporation which merged into a
subsidiary of Lockheed Martin pursuant to an Agreement and Plan of Merger, dated
as of January 7, 1996.
OMNITRACS -- an international satellite-based truck fleet and position location
service, owned and operated by Qualcomm.
ORBITAL PLANE -- the flight path of a satellite.
ORBITEL -- Orbitel Mobile Communications Ltd., a subsidiary of L.M. Ericsson.
ORDER -- FCC order adopting rules and policies for MSS Above 1 GHz Service.
PCS -- see personal communications service.
PFIC -- a passive foreign investment company within the meaning of the Code.
PSTN -- see Public Switched Telephone Network.
PAGING -- a service designed to deliver a message to a person whose location is
unknown; messages may be received via an alphanumeric display or small speaker.
PARTNERSHIP WARRANTS -- the rights to purchase 5,316,486 Globalstar partnership
interests, at a price of $26.50 each, upon the exercise of the Guaranty Warrants
and of the Rights.
PATH DIVERSITY -- the character of the angles of view formed by the 48 LEO
satellites orbiting the Earth to facilitate continuous overlapping global
coverage.
PENETRATION RATE -- the percentage of total population in a national or regional
area subscribing to a given telecommunications service.
PERSONAL COMMUNICATIONS SERVICES (PCS) -- terrestrial wireless telecommunication
service similar to cellular telephone service but operating in a different set
of frequencies.
PREFERRED PARTNERSHIP INTERESTS -- Interests in Globalstar acquired by GTL in
connection with its issuance of CPEOs. The Preferred Partnership Interests
represent (on a fully diluted basis) an 8.4% equity interest in Globalstar.
G-5
<PAGE> 48
QUALCOMM -- QUALCOMM Incorporated, a Delaware corporation, and its subsidiaries
and affiliates. Qualcomm, a leader in CDMA technology, has successfully
implemented CDMA in multi-user cellular communications applications and owns and
operates OmniTRACS, an international satellite-based truck fleet and position
location service.
RADIO FREQUENCY SPECTRUM -- a portion of the electromagnetic spectrum that
includes electromagnetic waves at frequencies below the infrared frequencies and
usually above 20 KHz. See also electromagnetic spectrum.
RECORD DATE -- March , 1997.
RIGHTS SHARES -- 1,131,168 shares of Common Stock available for purchase
pursuant to the exercise of Rights.
RIGHTS -- rights to subscribe for and purchase 1,131,168 shares of Common Stock
for a price of $26.50 per share, distributed by GTL to the holders of Common
Stock.
RIGHTS OFFERING -- the offering of the Rights Shares issuable upon exercise of
the Rights.
SOCCs -- see Satellite Operations Control Center.
SS/L -- Space Systems/Loral, Inc., a Delaware corporation, in which Loral holds
a 51% equity interest, is a leading manufacturer of commercial communications
satellites. Loral is contractually obligated to increase this interest to 75.5%.
SATELLITE OPERATIONS CONTROL CENTER (SOCC) -- monitors and controls the
satellite after it is launched. There are no antennas or radio frequency
equipment located at the SOCC. Radio frequency links to and from the satellite
are via telemetry and command units that are physically located at selected
gateways. The SOCC coordinates with other elements of the Globalstar Ground
Segments.
SECURITIES ACT -- the Securities Act of 1933, as amended.
SELLING HOLDERS -- the holders of the Guaranty Warrants.
SERVICE (OR GLOBALSTAR SERVICE) -- the transmission and reception of voice,
data, messaging, paging, position, location or other information through the
Globalstar System using a service provider's gateway(s).
SERVICE PROVIDER -- Globalstar's partners and other entities that will act as
local intermediaries between Globalstar and the subscribers. Service providers
will build and own the gateways, obtain the necessary regulatory approvals and
market and distribute Globalstar service in their respective markets.
SHAREHOLDERS -- holders of record of Common Stock outstanding as of the Record
Date.
SHARES -- Warrant Shares and Rights Shares.
SPACE SEGMENT -- the space-based portion of the Globalstar System.
SPECTRUM -- the radio frequency spectrum.
STANDBY AGREEMENT -- the agreement between GTL and Loral, pursuant to which
Loral has agreed to subscribe for and purchase at the Subscription Price all
Rights Shares not otherwise subscribed for on or prior to the Expiration Date.
STRATEGIC PARTNER -- Globalstar's direct and indirect partners which will play
key roles in the design, construction, operation and marketing of the Globalstar
System.
SUBSCRIPTION AGENT -- The Bank of New York.
SUBSCRIPTION CERTIFICATES -- transferable subscription certificates underlying
the Rights.
SUBSCRIPTION PRICE -- $26.50 per share of Common Stock.
SWITCH -- a device that opens or closes circuits or selects the paths or
circuits to be used for transmission of information; switching is the process of
interconnecting circuits to form a transmission path between users.
G-6
<PAGE> 49
TCUs -- telemetry and command units, self-contained units installed in selected
gateways which use the gateway antennas. They include the ground-based telemetry
receiver and the ground-based command transmitters. They interface with and are
directly controlled by SOCCs via the Globalstar data network.
TDMA -- see Time Division Multiple Access.
TELITAL -- TELITAL S.r.L., a private company organized under the laws of Italy,
which designs, develops and produces telephony products for European and
international markets.
TIME DIVISION MULTIPLE ACCESS (TDMA) -- a digital method of multiplexing that
combines a number of signals through a common point by organizing them
sequentially and transmitting each in bursts at different instants of time.
Communicating devices at different geographical locations share a multipoint or
broadcast channel by means of a technique that allocates different time slots to
different users.
UNIT OFFERING -- the offering of the Units.
UNITS -- the 500,000 units issued on February 19, 1997, consisting of
$500,000,000 11 3/8% Senior Notes due 2004 of Globalstar and its subsidiary,
Globalstar Capital Corporation, and warrants to purchase 1,032,250 shares of
Common Stock.
UPLINK -- the transmitting of a satellite circuit extending from the Earth to
the satellite. Compare to downlink.
USER LINK -- the path by which information flows when traveling from a
Subscriber Terminal to a satellite and from a satellite to a Subscriber
Terminal. LQP has applied for user uplinks in the L-band and user downlinks in
the S-bank regions of the frequency spectrum.
VODAFONE -- Vodafone Group Plc, a U.K. company. Vodafone is one of the largest
providers of mobile telecommunications services in the world, with 1.4 million
cellular subscribers worldwide.
WARC -- see World Administrative Radio Conference.
WARC '92 -- the 1992 WARC.
WRC -- see World Radiocommunication Conference.
WRC '95 -- the 1995 World Radiocommunication Conference.
WARRANT ACCELERATION AND REGISTRATION RIGHTS AGREEMENT -- the agreement by and
among GTL, LQSS and the Warrant Holders pursuant to which GTL and LQSS agreed to
accelerate the vesting and exercisability of the Guaranty Warrants.
WARRANT SHARES -- 4,185,318 shares of Common Stock issuable upon exercise of the
Guaranty Warrants.
WORLD ADMINISTRATIVE RADIO CONFERENCE (WARC) -- an ITU conference for adopting
international allocations for radio frequencies and satellite orbit locations.
WORLD RADIOCOMMUNICATION CONFERENCE (WRC) -- since 1993, the successor to the
World Administrative Radio Conference.
YUZHNOYE -- YUZHNOYE NPO YUZHNOYE, A UKRAINE LAUNCH VEHICLE MANUFACTURER.
References to corporate entities include their subsidiaries unless
otherwise specified.
G-7
<PAGE> 50
======================================================
NO DEALER, SALESPERSON OR OTHER 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 RIGHTS OR THE RIGHTS
SHARES 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.......................... 8
Use of Proceeds....................... 17
Dividend Policy....................... 17
The Company........................... 19
Business.............................. 19
Regulation............................ 25
The Rights Offering................... 29
Taxation.............................. 32
Plan of Distribution.................. 35
Subscription Agent.................... 36
Information Agent..................... 36
Legal Opinions........................ 36
Experts............................... 36
Glossary of Terms..................... G-1
</TABLE>
======================================================
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[LOGO]
GLOBALSTAR
TELECOMMUNICATIONS LIMITED
1,131,168 SHARES
OF COMMON STOCK
ISSUABLE UPON EXERCISE
OF RIGHTS TO SUBSCRIBE FOR
SUCH SHARES
---------------------------
PROSPECTUS
MARCH , 1997
---------------------------
======================================================
<PAGE> 51
[Warrant Share Offering Prospectus]
Subject to Completion, dated March 10, 1997
PROSPECTUS
4,185,318 SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF WARRANTS TO PURCHASE SUCH SHARES
GLOBALSTAR TELECOMMUNICATIONS LIMITED
---------------------------
Globalstar Telecommunications Limited, a Bermuda company (the "Company" or
"GTL"), holds warrants (the "Partnership Warrants") to purchase 5,316,486
partnership interests in Globalstar, L.P. ("Globalstar") at $26.50 per interest,
of which 4,185,318 partnership interests are associated with outstanding
warrants (the "Guaranty Warrants") to purchase 4,185,318 shares of GTL common
stock, par value $1.00 per share (the "Common Stock"). The Guaranty Warrants
were issued to certain parties in consideration for their guaranties of
Globalstar's $250 million bank credit agreement. GTL and Globalstar have agreed
to accelerate the exercise date of the Guaranty Warrants and the Partnership
Warrants in exchange for the commitment of the holders of the Guaranty Warrants
to exercise their warrants to purchase 4,185,318 shares of Common Stock (the
"Warrant Shares").
In conjunction with the foregoing, the Company is distributing to holders
of record of its Common Stock outstanding as of March , 1997, transferable
subscription rights (the "Rights") to subscribe for and purchase in the
aggregate 1,131,168 additional shares of Common Stock (the "Rights Shares") for
a price of $26.50 per share. The distribution by the Company of the Rights to
purchase the Rights Shares is intended to enable the GTL shareholders to benefit
directly from the appreciation in the value of the 1,131,168 Partnership
Warrants not related to the Guaranty Warrants (which appreciation is reflected
by the difference between the recent market price of the Common Stock and the
exercise price of the Partnership Warrants) and to enable GTL to obtain the
funds necessary for it to exercise such Partnership Warrants. Accordingly, the
Company will utilize the net proceeds from the exercise of the Guaranty Warrants
and of the Rights to exercise the Partnership Warrants for an aggregate exercise
price of approximately $140.9 million, which proceeds Globalstar will in turn
use to continue the construction and deployment of Globalstar's satellite
communications system. The Company is a general partner in Globalstar. This
Prospectus relates to the resale by the selling holders of the Warrant Shares
(the "Warrant Share Offering"). See "Warrant Share Offering" and "Selling
Holders."
The offer and sale by GTL of the Rights Shares (the "Rights Offering") is
being effected by means of a separate prospectus.
The Common Stock is listed on the Nasdaq National Market (the "NNM") under
the symbol "GSTRF." On March 7, 1997, the last reported sale price of the Common
Stock on the NNM was $58 5/8 per share.
---------------------------
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER
"RISK FACTORS" BEGINNING ON PAGE 6.
---------------------------
THESE 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.
<TABLE>
<CAPTION>
======================================================================================================
Proceeds to
Price to Proceeds to Selling
Public Company(1) Holders(1)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
Per Warrant Share.................................. $ -- (2) $
- ------------------------------------------------------------------------------------------------------
Total of Warrant Share Offering.................... $ -- (2) $
======================================================================================================
</TABLE>
(1) Expenses of the Warrant Share Offering and the related Rights Offering to be
effected under a different prospectus, estimated at $220,000, are to be paid
by Globalstar.
(2) The Company will receive $110,910,927 from the holders of the Guaranty
Warrants upon exercise thereof, but the Company will not receive any
proceeds from the subsequent sale by the holders of the Guaranty Warrants of
the Warrant Shares.
March , 1997
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.
<PAGE> 52
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and in accordance therewith files reports, proxy statements and other
information with 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 Commission maintains
a Web site that contains reports, proxy and information statements and other
information regarding the Company. The address of such Web site is
http://www.sec.gov. 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 Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
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 securities offered hereby. 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 securities offered hereby,
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> 53
INCORPORATION 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, 1996;
(b) the Company's Proxy Statement relating to the 1997 Annual Meeting
of Stockholders; and
(c) 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 Shares 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, Cedar House, 41 Cedar Avenue,
Hamilton HM12, Bermuda, Attention: Secretary (Telephone (441) 295-2244).
ii
<PAGE> 54
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The statements contained in this Prospectus that are not historical facts
are "forward-looking statements" (as such term is defined in the Private
Securities Litigation Reform Act of 1995), which can be identified by the use of
forward-looking terminology such as "believes", "expects", "may", "will",
"should", or "anticipates" or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategy that involve risks and
uncertainties. From time to time, GTL, Loral and Globalstar or their
representatives have made or may make forward-looking statements, orally or in
writing. Furthermore, such forward-looking statements may be included in, but
are not limited to, various filings made by GTL, Loral or Globalstar with the
Commission, or press releases or oral statements made by or with the approval of
an authorized executive officer of GTL, Loral or Globalstar.
Management wishes to caution the reader that these forward-looking
statements, such as the statements regarding Globalstar's planned timetable for
launching and operating the Globalstar System, the extent of the market
opportunity for Globalstar's services and products presented by the growing
demand for telecommunications services worldwide, its anticipation of enabling
local service providers to extend low-cost, high-quality telecommunications
services to millions of people, its anticipated future revenues and capital
expenditures and other statements contained above and herein in this Prospectus
regarding matters that are not historical facts involve predictions. No
assurance can be given that the future results will be achieved; actual events
or results may differ materially as a result of risks facing Globalstar. Such
risks include, but are not limited to, problems related to technical development
and launch of the Globalstar System, the competitive environment in which the
system will operate, doing business in developing markets, obtaining the
necessary financing while being substantially leveraged, obtaining any required
U.S. and foreign government authorizations, licenses and permits, all in a
timely manner, at reasonable costs and on satisfactory terms and conditions, as
well as regulatory, legislative and judicial developments that could cause
actual results to vary materially from the future results indicated, expressed
or implied, in such forward-looking statements. See "Risk Factors."
iii
<PAGE> 55
SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements and the notes thereto included elsewhere in
this Prospectus. Unless otherwise indicated, the information contained herein
gives effect to the issuance of an aggregate of 5.3 million shares of Common
Stock and 5.3 million underlying Globalstar partnership interests upon (i) the
exercise of the Rights and the Partnership Warrants underlying such rights and
(ii) the exercise of the Guaranty Warrants and the Partnership Warrants
underlying such warrants. Unless otherwise indicated, information contained
herein regarding the number of outstanding partnership interests of Globalstar
or shares of Common Stock of GTL and the beneficial ownership thereof does not
give effect to the issuance of Common Stock by GTL or the issuance of
partnership interests by Globalstar upon (i) the conversion of the CPEOs and the
purchase of underlying Globalstar partnership interests and (ii) the exercise of
the warrants issued as part of the Units and the underlying rights to purchase
Globalstar partnership interests. Unless otherwise specified or the context
otherwise requires, references in this Prospectus to "dollars," "$" and "U.S.$"
are to United States dollars. Certain capitalized terms used herein are defined
in the Glossary.
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 the
Globalstar System 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. Globalstar's designated service providers have
agreed to offer service and seek to obtain all necessary local regulatory
approvals in more than 100 nations, accounting for about 88% of the world's
population. The Company's sole asset is its interest in Globalstar.
The Globalstar System's worldwide coverage is designed to extend affordable
modern telecommunications services to millions of people who lack basic
telephone service and to enhance wireless telecommunications in areas
underserved or not served by cellular systems, providing a telecommunications
solution in parts of the world where terrestrial systems cannot be economically
justified. The Globalstar System has been designed to provide services at prices
comparable to today's cellular service and substantially lower than the prices
announced by Globalstar's anticipated satellite-based competitors. Globalstar
service providers will set their own retail pricing in their territories and
will pay Globalstar about $0.35 to $0.55 per minute on a wholesale basis.
Globalstar customers will use 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. Dual-mode and tri-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.
The elements of the Globalstar System -- space and ground segments, digital
communications technology, handset supply, service provider arrangements and
licensing -- are on schedule to begin launching satellites in the second half of
1997, to commence commercial operations in the second half of 1998 and to have a
full constellation of 48 operational satellites, plus eight in-orbit spares,
launched by the end of 1998:
Space Segment. The first Globalstar satellite has been assembled and
is now in pre-flight testing, and another four satellites are currently
being assembled. Production is on schedule for the remaining satellites.
Three different launch providers have signed agreements for the launch of
the satellite constellation, providing a variety of launch options and
considerable flexibility. Mission operations preparations and launch
vehicle production and dispenser development are on schedule.
Ground Segment. The first four gateways, which are to be in
Australia, France, South Korea and the United States, are under
construction. These gateways will support Globalstar's data network,
monitor the initial launch and orbital placement of Globalstar's first
satellites, and will serve as prototypes
<PAGE> 56
for production gateways that will support Globalstar service. Globalstar's
SOCC facility has been completed.
Digital Communications Technology. Qualcomm's CDMA technology has
been successfully deployed in South Korea, Hong Kong and cities in the
United States supporting terrestrial PCS and digital cellular service.
Qualcomm's CDMA implementation for Globalstar has been successfully
demonstrated in a simulated satellite environment. This demonstration
validated Globalstar's encoding, modulation, control software, time and
frequency distribution and up/down links between satellites and handsets.
Handset Supply. Qualcomm and two other manufacturers, Ericsson and
TELITAL, are on schedule in their design and development of Globalstar's
handset.
Service Providers. Globalstar and its partners have been seeking
alliances with service providers throughout the world and have entered into
agreements in a number of territories. For example, in November 1996,
ChinaSat, a subsidiary of China's Ministry of Posts and Telecommunications,
agreed to act as the exclusive distributor of Globalstar services in China,
and to support four Globalstar gateways, the first of which is expected to
be operational by 1998. Globalstar has also formed a joint venture with the
principal Russian long distance carrier, Rostelecom, to provide Globalstar
service in that country and is negotiating a service provider agreement
with that joint venture. Globalstar believes that these relationships with
in-country service providers will facilitate the granting of local
regulatory approvals--particularly where, as is the case in China, the
service provider and the licensing authority are the same--as well as
providing local marketing and technical expertise.
Licensing. In January 1995, the FCC granted authority for the
construction, launch and operation of the Globalstar System and assigned
spectrum for its user links. Later that year, WRC'95 allocated feeder link
spectrum on an international basis for MSS systems such as Globalstar, and
in November 1996 the FCC authorized Globalstar's feeder links.
As a result of several recent decisions designed to assure and upgrade
system performance and maintain schedule--including procurement of three
launches on the Starsem Soyuz launch vehicle, additional testing procedures,
development of additional and enhanced service features, cost growth and other
factors--Globalstar currently estimates the cost for the design, construction
and deployment of the Globalstar System, including working capital, cash
interest on anticipated borrowings and operating expenses, to be approximately
$2.5 billion. In addition, Globalstar has agreed to purchase from SS/L eight
additional spare satellites at a cost estimated at $175 million. After giving
effect to the exercise of the Rights and the Guaranty Warrants, Globalstar will
have raised or received commitments for approximately $2.0 billion in equity,
debt and vendor financing, representing about 78% of the total financing
expected to complete the Globalstar System and achieve worldwide operations.
The Globalstar System has been designed to address the substantial and
growing demand for telecommunications services worldwide, particularly in
developing countries. More than three billion people today live without
residential telephone service, many in rural areas where the cost of wireline
service 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 469 million in 1988 to 753 million in 1996 and is
projected to increase to 1.2 billion by 2002. Nonetheless, during the same
period, waiting lists for fixed service have increased from 30 million to 45
million, resulting in an average waiting time before installation of about one
and a half years. Similarly, the cellular market has grown from four million
worldwide subscribers in 1988 to an estimated 123 million in 1996 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's population will have access to wireless
telephone service principally through satellite-based systems like the
Globalstar System. Globalstar believes that its potential market exceeds 30
million people.
The Globalstar System has been designed with attributes which Globalstar
believes compare favorably to other proposed global mobile satellite service
systems including: (i) Globalstar's unique combination of
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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 is a principal founder of Globalstar and is its managing general
partner. Following exercise by Loral of its Guaranty Warrants, Loral will have
invested $269 million in Globalstar, and will own effectively 33.8% 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 have invested an
additional $210 million in equity and, together with Loral, committed or
obtained $310 million in vendor financing.
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
and its telephone number is (441) 295-2244.
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. Globalstar's founding partners are Loral and Qualcomm, the leading
supplier of CDMA digital telecommunications technology. Globalstar's other
strategic partners are:
<TABLE>
<CAPTION>
TELECOMMUNICATIONS EQUIPMENT
TELECOMMUNICATIONS AND AEROSPACE GLOBALSTAR SYSTEMS
SERVICE PROVIDERS MANUFACTURERS
----------------------------------------------- ---------------------------------------
<S> <C>
- AirTouch - Alcatel
- Dacom - Alenia
- France Telecom - DASA
- Vodafone - Finmeccanica
- Hyundai
- SS/L
</TABLE>
SS/L is providing 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, gateways and certain ground
support equipment.
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GLOBALSTAR OWNERSHIP
The following is a chart depicting Globalstar's ownership. The ownership
percentages in parentheses reflect the ownership of GTL and Globalstar prior to
the issuance of 5,316,486 shares of Common Stock constituting the Rights Shares
and the Warrant Shares and the issuance by Globalstar of 5,316,486 underlying
Globalstar partnership interests upon the exercise of the Partnership Warrants.
The ownership percentages without parentheses reflect the ownership of GTL and
Globalstar after issuance of the Common Stock constituting the Rights Shares and
the Warrant Shares and the underlying Globalstar partnership interests referred
to in the prior sentence assuming that all Shareholders exercise all of their
Rights and that none of Loral, its affiliates or the other holders of the
Warrant Shares sell their Warrant Shares. Prior to the issuance of the Rights
Shares and the Warrant Shares, the Shareholders other than Loral and its
affiliates owned 85.9% of GTL which represented an indirect beneficial ownership
of 18.3% of Globalstar. After the issuance of the Rights Shares and the Warrant
Shares, the Shareholders other than Loral, its affiliates and the other holders
of the Warrant Shares will own 62.4% of GTL which represents an indirect
beneficial ownership of 18.3% of Globalstar. Accordingly, if all of the Rights
and the Guaranty Warrants are exercised, the public shareholders of GTL will
individually and in the aggregate retain the same indirect beneficial interest
in Globalstar that existed prior to the issuance of the Rights Shares and the
Warrant Shares.
[GLOBALSTAR STRUCTURE CHART]
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[The chart, which cannot be transmitted electronically, may be summarized as
follows:
Globalstar's managing general partner is LQSS which owns 38.3% of
Globalstar and which will own 34.4% of Globalstar after the issuance of
5,316,486 shares of Common Stock constituting the Rights Shares and the Warrant
Shares and the issuance of 5,316,486 underlying Globalstar partnership interests
upon the exercise of the Partnership Warrants (collectively, the "Issuances").
LQSS's general partner is LQP. LQP's general partner is Loral and LQP's
limited partners are Loral and Qualcomm.
Globalstar's other general partner is GTL which owns 21.3% of Globalstar
and which will own 29.3% of Globalstar after the Issuances. Public shareholders
own 85.4% of GTL and will own 62.4% of GTL after the Issuances. Loral and its
affiliates own 14.9% of GTL and will own 17.7% of GTL after the Issuances. DASA,
Lockheed Martin and Qualcomm presently do not own any shares of GTL but will own
19.9% of GTL after the Issuances.
Globalstar's limited partners are Air Touch, Alcatel, Dacom, DASA,
Finmeccanica, France Telecom, Hyundai, Loral and Vodafone; they together own
40.4% of Globalstar and will own 36.3% of Globalstar after the Issuances.]
<PAGE> 60
RISK FACTORS
Investors should consider the following risk factors, in addition to the
other information contained in this Prospectus, in evaluating whether to
purchase Warrant Shares. The following 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. It has no operating history.
Globalstar has incurred net losses and expects them to continue. It will require
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 begin operations before the second
half of 1998 or to have positive cash flow before 1999. There can be no
assurance that Globalstar will achieve its objectives by the targeted dates.
Additional Financing Requirements. Globalstar estimates the cost for the
design, construction and deployment of the Globalstar System, including working
capital, interest on borrowings and operating expenses, to be about $2.5
billion. Actual amounts may vary from this estimate. Additional funds would be
required upon unforeseen delays, cost overruns, launch failures, technological
disappointments, adverse regulatory developments, for system enhancements and
measures to assure system performance and readiness for the space and ground
segments. As of March 6, 1997, Globalstar had raised or received commitments for
approximately $2.0 billion. Globalstar believes that its current capital, vendor
financing commitments, the availability of the Credit Agreement and the proceeds
from the exercise of the Partnership Warrants are enough to fund its needs into
the first quarter of 1998. Globalstar intends to raise the remaining
requirements from a combination of sources including borrowing (which may
include an equity component), support from the Globalstar partners, service
provider payments, revenues from initial operations, payments from the sale of
gateways and Globalstar Phones and placement of partnership interests. If there
are unforeseen delays, if technical or regulatory developments result in a need
to modify the design of the Globalstar System, if service provider agreements
for additional territories are not entered into when or on the terms anticipated
or if other additional costs are incurred, the risk of which is substantial,
additional capital will be needed. The ability of Globalstar to achieve positive
cash flow will depend upon the successful and timely deployment of the
Globalstar System, its successful marketing 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 begin commercial operations in the second half of 1998 or achieve
positive cash flow in 1999, additional capital will be needed.
Globalstar believes it will be able to obtain the additional financing it
requires, but there can be no assurance that the capital required to complete
the Globalstar System will be available from 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.
Sources of Possible Delay and Increased Cost. Many of the problems, delays
and expenses that may be encountered by an enterprise in Globalstar's stage of
development may be beyond its control. These may include those 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 that may exceed estimates.
As a result of measures designed to assure and upgrade performance and maintain
schedule, Globalstar's total cost is now estimated to be $2.5 billion, as
compared with $2.2 billion estimated at December 31, 1995. The increase is due
to a decision to launch 12 satellites on the Starsem Soyuz launch vehicle and to
Qualcomm's estimates indicating an increase in costs under its contracts to $545
million. The Qualcomm estimates are subject to review. In addition, Globalstar
has agreed to purchase from SS/L eight additional spare satellites at a cost of
$175 million in order to have at least 40 in service in 1999, even if there are
launch failures. Delay in the design, construction, deployment, commercial
operation and achievement of positive cash flow of the Globalstar System could
result from a variety of causes. These include delays in regulatory processes in
various jurisdictions, the integration of the Globalstar System into the
land-based network, changes in the technical specifications of the Globalstar
System made to enhance
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its features, performance or marketability or in response to regulatory
developments or otherwise, delays encountered in the construction, integration
or testing of the Globalstar System by Globalstar vendors, delays in or
unsuccessful launches, delays in financing, weak service provider marketing
efforts, slower-than-anticipated consumer acceptance and other events beyond
Globalstar's control. Substantial delays in any of the foregoing would delay
Globalstar's achievement of profitable operations.
REGULATION
Licensing Risks. The operations of the Globalstar System are and will
continue to be subject to United States and foreign regulation. The Globalstar
System must be authorized to provide MSS in each of the markets in which its
service providers intend to operate. Even though a Globalstar affiliate 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 soon enough or in the form necessary to implement
Globalstar's proposed operations. Globalstar's business may also be 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.
Globalstar's FCC license, as modified on November 19, 1996, authorizes the
construction, launch and operation of the satellite constellation and assigns
the Globalstar System user links and feeder links in the United States.
Globalstar's feeder link frequencies were allocated internationally at WRC '95,
and have been assigned by the FCC for use in the United States in accordance
with the international allocation. However, use of the feeder link frequencies
remains subject to restrictions that may be adopted in a potential FCC
proceeding to adopt the international allocations into the U.S. Table of
Frequency Allocations. The FCC recently adopted rules for the use of a portion
of the frequencies allocated at WRC '95 for MSS feeder links (such as
Globalstar's) to a proposed high-speed wireless data service. Although these
rules are intended to preclude harmful interference with other uses of these
bands, they may ultimately permit uses of these frequencies that could diminish
their usefulness for MSS feeder links. Separate licenses must also be obtained
from the FCC for operation of gateways and Globalstar Phones in the United
States.
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. In addition,
Globalstar's FCC license is subject to two pending judicial appeals. While
Globalstar believes that these appeals are without merit, there can be no
assurance that these appeals would not result in either reversal or stay of the
FCC's decision to grant Globalstar's FCC license to LQP or ultimately result in
the granting of additional licenses by the FCC or its adoption of an auction
procedure to award licenses, which might materially increase the cost of
obtaining such licenses.
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,
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, and if they are not, 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 markets
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.
Glonass operates worldwide in a portion of the frequency band proposed to
be used by Globalstar and other MSS systems for user uplinks. Although Glonass
has proposed to migrate to lower frequencies, interference protection
requirements for Glonass receivers are under consideration, which, if adopted,
may render a segment of the MSS spectrum unusable for MSS user uplinks. While
this is not expected to have an
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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, could reduce Globalstar's effective
system capacity in such markets.
European Union Regulatory Matters. European Union competition law
proscribes agreements that restrict or distort competition in the Union.
Globalstar and others have responded to an inquiry from the Commission of the
European Union requesting information regarding their activities. A violation of
European Union competition law could subject Globalstar to fines or enforcement
actions that could delay 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 which, if adopted, would give the Commission broad regulatory
authority over satellite telecommunications media such as the Globalstar System.
TECHNOLOGICAL RISKS
General. The Globalstar System is a large-scale complex telecommunications
system employing advanced technologies which must be adapted to the Globalstar
application and which have never before been used as a commercial whole.
Deployment of the Globalstar 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 successful. 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 Globalstar
System, or any of its diverse and dispersed elements, could delay the In-Service
or Full Constellation Date of the Globalstar System or render it unable to
perform at the levels required for commercial 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, suffered a launch failure on January
17, 1997. The United States government is investigating the cause, the second in
this rocket's last 62 launches. Globalstar's first launch, which is scheduled
for September 1997 aboard a Delta II rocket, could be delayed by this
investigation. Nevertheless, Globalstar does not expect that such delay, if any,
in the initial launch date would result in a delay in the In-Service Date or the
Full Constellation Date. The Ukrainian Zenit launch vehicle, which is proposed
to launch 36 Globalstar satellites (12 per launch), has never been used in
commercial applications. Satellite launches of groups of more than eight
commercial satellites have not been attempted before. Globalstar intends to
launch the last 12 satellites of its constellation in groups of four on three
separate launches of the Russian Starsem Soyuz rocket. There is no assurance
that Globalstar satellite launches will succeed or that its launch failure rate
will not exceed the industry average.
Globalstar's Zenit launch contracts provide for relaunches at no additional
charge upon a hot failure. However, the launch provider may, for financial
reasons or otherwise, be unable to provide such relaunches. A single launch
failure would result in a loss of either four or 12 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.
SS/L has agreed to obtain launch vehicles for Globalstar and arrange for
the launch of all 56 satellites, subject to pricing adjustments 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.
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Two of Globalstar's launch operators are subject to U.S. export control
regulations. Yuzhnoye, based in Ukraine, has ties with Russia and intends to
launch the Zenit rocket from the Baikonur launch site in Kazakhstan.
Arianespace, which will be providing the Soyuz rockets, also intends to launch
from Baikonur. Changes in governmental policies or political leadership in the
United States, Ukraine, Russia or Kazakhstan could affect these launch
providers. While there is no assurance that the necessary export licenses will
be obtained, Globalstar has provided against the risk that they 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 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 developments in U.S.
relations with these countries, the cost of launching its satellite
constellation would be significantly increased.
Limited Life of Satellites. A number of factors will affect the useful
lives of satellites, including the quality of construction, 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"). Satellites could also be damaged by electrostatic
storms or collisions. As a result of these factors, the first-generation
Globalstar System 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 if the useful life of the satellites were significantly
shorter than 7 1/2 years. Globalstar anticipates developing a second generation
of satellites. If enough funds are not available and Globalstar is unable to
obtain external financing for the second-generation, it will not be able to
deploy the second-generation 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.
Insurance Risks. 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.
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, in certain circumstances subject to
pricing adjustments 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 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.
However, there can be no assurance that additional satellites and launches will
not be required. If so, in addition to the replacement costs incurred by
Globalstar, Globalstar's In-Service or Full Constellation Date may be delayed.
In addition, unless otherwise required by the Indenture, Globalstar does not
currently intend to purchase insurance to cover cold failures that may occur
once the satellites have been successfully deployed from the launch vehicle.
Risks Associated with Changing Technology. The space and communications
industries are characterized by rapid technological advances and innovations.
Technologies utilized or under development by Globalstar may become obsolete, or
its services may not be in demand by the time they are offered. Globalstar will
be dependent upon technologies developed by third parties to implement key
aspects of its strategy to integrate its satellite systems with terrestrial
networks, and there can be no assurance that such technologies will be available
to Globalstar in time or on reasonable terms.
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 there. The willingness of
companies to become service providers will depend upon a variety of factors,
including pricing, local regulations and Globalstar's competitiveness.
Globalstar believes that enlisting the support of established telecommunications
service providers, some of which are dominant carriers in their markets, will be
essential both to obtaining necessary
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local regulatory approvals and to reaching a broad market of potential users.
Globalstar's strategic service providers have agreed to act as exclusive
providers in 71 countries although it is anticipated that in many cases these
partners will enter into alliances with local entities to provide Globalstar
service in these countries. In addition, Globalstar expects to raise additional
funds before the Full Constellation Date in the form of payments from service
providers in other territories throughout the world. Globalstar's business plan
assumes that Globalstar will contract with service providers for the remaining
territories of the world, in certain cases, on terms more favorable to
Globalstar than those contained in its founding service provider agreements.
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
alternative 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 System 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. In the event such
parties are unable to perform their obligations, Globalstar's In-Service and
Full Constellation Date may be delayed and its costs may be increased.
Risks Inherent in Foreign Operations. A substantial portion of
Globalstar's business will be outside of the United States. Such operations are
subject to certain risks such as changes in government regulations and
telecommunications standards, tariffs or taxes and other trade barriers.
Accordingly, government actions in foreign countries could have a significant
effect on operations. Political, economic or social instability or other
developments including currency fluctuations, could also adversely affect
operations. In addition, Globalstar's agreements relating to local operations
may be governed by foreign law or enforceable only in foreign jurisdictions. As
a result it may be difficult for Globalstar to enforce its rights under such
agreements.
In addition, the majority of Globalstar System satellites are scheduled to
be launched by Ukrainian and Russian launch vehicles from the Russian-operated
cosmodrome in Kazakhstan. Disputes between any of these former Soviet Republics,
whether concerning Globalstar, their space operations generally or otherwise, or
internal political, social or economic instability in any of them could
adversely affect Globalstar's launch schedule and costs.
Risks of Doing Business in Developing Markets; Currency
Risks. Globalstar's largest potential markets are in developing countries or
regions that are underserved and not expected to be served by existing
telecommunications systems. 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 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, exchange rate fluctuations may affect the price Globalstar
will be entitled to receive for its services.
Pricing Risk. Globalstar's pricing will, under certain circumstances, not
be automatically adjusted for inflation; in such cases, Globalstar will be able
to increase its pricing only if the service provider increases its prices to
subscribers, and Globalstar 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 prices to compensate for inflation.
Although Globalstar expects future service provider agreements to contain
pricing terms more favorable than those contained in its agreements with
founding service providers, there can be no assurance that such terms will be
achieved.
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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. The Credit
Agreement permits Globalstar to incur up to $950 million of indebtedness on a
senior basis, including $500,000,000 aggregate principal amount of the notes
issued pursuant to the Indenture, to finance the Globalstar System; an unlimited
amount of subordinated indebtedness may be incurred. Additional debt is expected
to be incurred in the future; 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 operations will adversely affect
Globalstar's ability to service debt. The discretion of management with respect
to certain business matters will be limited by covenants contained in the Credit
Agreement, the Indenture and future debt instruments. Among other things, the
covenants contained in the Credit Agreement and the Indenture restrict
Globalstar from paying cash distributions on its ordinary partnership interests,
creating liens on its assets, making certain asset dispositions, conducting
certain other business and entering into transactions with affiliates and
related persons. In addition, the Indenture contains certain financial covenants
limiting the ability of Globalstar to incur additional indebtedness unless
certain financial ratios are met. If the Credit Agreement ceases to be
guaranteed, it will also contain certain financial covenants limiting additional
indebtedness. There can be no assurance that Globalstar's leverage and such
restrictions will not adversely affect Globalstar's ability to finance future
operations or capital needs or to engage in other business activities. Moreover,
a failure to comply with the obligations contained in the Credit Agreement and
the Indenture 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.
Competition. Competition in telecommunications is intense, fueled by rapid
and continuous technological advances and alliances between industry
participants on an international scale. Although no present participant is
providing the same global personal 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 others. 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, the 2 GHz band for an MEO system.
Globalstar's most immediate competitors are the two MSS applicants which
have received FCC licenses, Iridium and Odyssey. 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, the
U.S. signatory to 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 government 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 two pending MSS applicants will demonstrate financial qualification
sufficient to obtain an FCC license and become an additional competitor of
Globalstar.
The MSS systems, including Globalstar, also compete with each other for the
limited frequency 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
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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.
The FCC has no authorization 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 AMSC, APMT, ASC, 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 their subscriber bases,
thereby increasing the competition to Globalstar. For example, Comsat has
announced a global mobile satellite service (Planet-1) using existing Inmarsat
satellites, a six-pound, laptop-size phone, costing $3,000 with an expected
per-minute usage rate of $3.00.
Some of these potential competitors have financial, personnel and other
resources substantially greater than Globalstar's. Many of them 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 better
service. However, Globalstar believes, based upon the public statements and
other publicly available information of the other MSS applicants, that
Globalstar will be a low-cost provider. However, competition could require
Globalstar to reduce pricing to service providers, thus adversely affecting
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 be known until such systems are operational. If the capacity of
Globalstar and any competing systems exceeds demand, price competition could be
particularly intense. See "-- Regulation -- Licensing Risks."
Risk of Accelerated Build-Out and Competing Technological Advances. 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, the demand for Globalstar service may be reduced
faster than is assumed in Globalstar's market analysis. Globalstar may also face
future competition from 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 usage) will depend upon a
number of factors, including price, demand and the availability of alternative
systems. If the level of actual subscriber demand is below that expected by
Globalstar, its 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
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 Globalstar satellites. Obstacles such as
buildings, trees or mountainous terrain may degrade service quality, more than
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 hurt demand for Globalstar service.
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Product Liability; Alleged Health Risks. There has been publicity
concerning alleged health risks associated with the use of portable hand-held
telephones with transmitting antennas integrated into handsets. Because
hand-held Globalstar Phones will use on average lower power to transmit signals
than traditional cellular units, Globalstar does not believe that proposed FCC
new guidelines will require any significant modifications of the Globalstar
System or of the mobile hand-held Globalstar Phones. 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.
Reliance on Key Personnel. The success of Globalstar's business will be
partially dependent upon the ability of Globalstar to attract and retain
technical and management personnel. No employee of Globalstar has an employment
contract with Globalstar nor does Globalstar expect to maintain "key man"
insurance. The loss of any such individuals could have a material adverse effect
on Globalstar's business.
STRUCTURAL AND MARKET RISKS
Potential Conflicts of Interest. Partners of LQSS or their affiliates are
principal suppliers of the major components of the Globalstar System, and are
also expected to manufacture system elements contracted to be sold to service
providers and subscribers. Much of the proceeds of the offering of the Shares
and the exercise of the Guaranty Warrants will fund such obligations. During the
design, development and deployment of the Globalstar System, Globalstar will
depend upon Loral's management skills and technologies, Qualcomm and SS/L to
design and manufacture the satellite constellation, SOCCs, GOCCs, gateways and
Globalstar Phones. Globalstar has contracted the design of 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. Contracts with partners of
Globalstar or LQSS promote conflicts of interests.
Partners and affiliates of Globalstar, including companies affiliated with
Loral, will be among the principal service provider customers and as such may
have conflicts of interest. If Globalstar is unable to offer service on
competitive terms in a particular country or region, a service provider there,
which may be a partner of Globalstar, can act as a service provider to a
competing MSS system in that area while serving as a Globalstar service provider
in other markets.
Controlling Person. Globalstar is managed by a committee, a majority of
whose members are Loral designated. The Independent Representatives on the
committee, however, have the right to pass upon certain matters before any
decision to submit them to a vote of the partners and will have certain
authority over the employment of senior officers of Globalstar.
Change of Control of GTL and Reduction in Interest; Investment Company Act
Considerations. If there is (i) a change of control of GTL when GTL owns less
than 50% of the Globalstar partnership interests outstanding or (ii) a sale or
other disposition of partnership interests by which the equity interest of GTL
in Globalstar is reduced to less than 5%, which has not been approved by LQSS or
by the partners of Globalstar, GTL will become a limited partner in Globalstar
and will no longer appoint representatives to serve on the General Partners'
committee. Certain other governance rights granted to GTL under Globalstar's
partnership agreement will also be revoked, and GTL will enjoy only the rights
of a limited partner in Globalstar. If GTL were to cease participation in the
management of Globalstar, which would result if GTL were to undergo a change of
control or a reduction in interest, its interest in Globalstar could be deemed
an "investment security" for purposes of the Investment Company Act. In general,
an entity is an "investment company" if, 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). GTL's sole asset is its partnership
interest in Globalstar. A determination that such investment was an investment
security could result in GTL's being deemed to be an investment company under
the Act and subject to its registration and other requirements. In order to
register, GTL might be required to reincorporate in the U.S. and would be
subject to U.S. tax on its worldwide income, subject to any applicable foreign
tax credits. Globalstar intends to conduct its operations so as to avoid
becoming an investment company under that Act.
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No Dividends; Holding Company Structure; General Partner Liability. GTL
has not paid any dividends on its Common Stock, and Globalstar has not made any
distributions to its partners. Except for interest payments by GTL on the CPEOs
and distribution payments by Globalstar on the Preferred Partnership Interests,
GTL and Globalstar do not anticipate any such dividends or distributions before
Globalstar's Full Constellation Date and positive cash flow, which is not
expected before 1999. GTL may not pay dividends on its Common Stock while
interest arrearages remain outstanding on its CPEOs. GTL's sole asset is its
partnership interest in Globalstar. GTL has no independent means of generating
revenues. Globalstar will pay GTL's operating expenses related to Globalstar;
such expenses are not expected to be material. As a general partner of
Globalstar, GTL is jointly and severally liable with the other general partner
for its obligations to the extent Globalstar is unable to pay. To the extent
permitted by law and agreements relating to indebtedness, Globalstar intends to
distribute to its partners, including GTL, 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). GTL intends to promptly distribute as dividends on its Common
Stock the distributions made by Globalstar, less any amounts required for taxes,
liabilities and contingencies.
Rights of Shareholders under Bermuda Law. GTL 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 GTL's management,
directors and controlling shareholders, and the rights of its shareholders are
governed by Bermuda law and GTL's Memorandum of Association and Bye-Laws. Such
principles may differ from those that would apply if GTL were incorporated in
the United States. There is uncertainty as to whether the courts of Bermuda
would enforce (i) United States court judgments obtained against GTL or its
officers and directors resident in foreign countries predicated upon the civil
liability provisions of United States securities laws or (ii) in original
actions brought in Bermuda, liabilities against GTL or such persons predicated
upon United States securities laws.
Tax Considerations. Special U.S. tax rules apply to U.S. taxpayers who own
stock in a "passive foreign investment company ("PFIC")." Although GTL believes
that it will not become a PFIC, there is a risk that in the future it could.
Then 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 shares of the Common Stock (which will
be taxed as ordinary income).
GTL expects that a significant portion of its income will not be subject to
tax by the United States, Bermuda or by the countries from which it derives
income. However, the extent to which certain foreign jurisdictions may require
GTL 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. On January 31, 1997, GTL had outstanding
10,000,000 shares of Common Stock. An additional 4,769,230 shares are issuable
upon conversions of GTL's CPEOs (subject to anti-dilution adjustment to be
effected upon consummation of the Rights Offering). There will be 1,032,250
shares of Common Stock issuable upon exercise of the warrants issued as part of
the Units. In addition, 37,000,000 shares are issuable upon exercise by the
other partners in Globalstar of their rights to exchange their ordinary
partnership interests for shares of Common Stock. As of December 31, 1996, an
aggregate of 250,000 shares of Common Stock were reserved for issuance under a
stock option plan and a proposal to increase this number by 375,000 is being
submitted to shareholders for their approval at GTL's next annual meeting.
Pursuant to the Warrant Acceleration and Registration Rights Agreement, the
Company has agreed to use its reasonable efforts to register the Warrant Shares
under the Securities Act and to effect an underwritten public offering of the
Warrant Shares by April 15, 1997. Sales of substantial amounts of Common Stock
in the public market or the perception that such sales could occur, could
adversely affect the market price of the Common Stock. GTL has an effective
registration statement relating to the shares of Common Stock issuable upon
conversion of the CPEOs.
Volatility. The market price of the Common Stock has been volatile. In
particular, the trading prices of the common stock of many technology companies
have reflected extreme price and volume fluctuations,
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which have at times been unrelated to operating performance. The trading price
of the Shares could be subject to significant fluctuations in response to
variations in Globalstar's prospects and operating results which could 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. Such factors may have an
adverse effect on the trading price of the Common Stock from time to time.
Dilution. Globalstar expects to fund its remaining capital requirement of
approximately $500 million from a combination of sources including debt issuance
(which may include an equity component), exercise of warrants, financial support
from the partners, service provider payments, service revenues from operations,
payments from the sale of gateways and Globalstar Phones and additional
placements of partnership interests. Globalstar may, subject to certain
preemptive and approval rights of its other partners, sell equity interests
(either directly or through the issuance of warrants, or convertible debt
securities), diluting the percentage ownership in Globalstar represented by the
Shares. Issuing additional partnership interests to new or existing partners,
would dilute the ownership of other partners. The issuance of additional
partnership interests at prices lower than the price at which GTL may purchase
them would further dilute GTL. 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 Common Stock, subject to certain restrictions, on a one-for-one basis,
subject to adjustment.
Certain Rights Offering Considerations. Shareholders who do not exercise
their Rights in full will realize a dilution in their percentage voting rights
and ownership interests in future net earnings, if any, of the Company to the
extent that Rights are exercised by other shareholders. The Rights subscription
price represents a ( )% discount from the market price as of the date of this
Prospectus and could result in a reduction in the market price for the Company's
Common Stock. Although the Company reserves the right to extend the period
during which Rights may be exercised, absent any such extension the Rights will
expire on April , 1997, and therefore have a limited life. While the Rights
will be transferable, they will not be listed for trading on NNM or any
exchange, and there can be no assurance that a market for the Rights will
develop or, if developed, be maintained, especially considering their limited
life.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Warrant
Shares by the Selling Holders. The Company will, however, receive proceeds of
approximately $110.9 million assuming all the Guaranty Warrants are exercised.
The Company also expects to obtain approximately $30 million in proceeds from
the concurrent Rights Share Offering being effected by means of a separate
prospectus. The Company intends to use the aggregate proceeds from such
transactions, expected to be approximately $140.9 million, to exercise the
Partnership Warrants it holds to purchase additional ordinary general
partnership interests in Globalstar. The expenses of the Company in connection
with the Rights Offering and the Warrant Share Offering will be paid by
Globalstar, which will receive the proceeds of the issuance of the Rights Shares
and the Warrant Shares upon exercise of the Partnership Warrants. The net
proceeds to Globalstar of the exercise of the Partnership Warrants, estimated to
be $140.7 million, will be used by Globalstar towards the construction and
deployment of the Globalstar System.
DIVIDEND POLICY
GTL has not declared or paid any cash dividends on its Common Stock, and
Globalstar has not made any distributions to its partners. Except for interest
payments by GTL on the CPEOs and distribution payments by Globalstar on the
Preferred Partnership Interests, GTL and Globalstar do not currently anticipate
paying any such dividends or making such distributions (other than to the extent
that Globalstar's payment of GTL's operating expenses related to Globalstar
would be treated as a distribution) prior to Globalstar's Full Constellation
Date and achievement of positive cash flow. Cash distributions by Globalstar may
also be restricted by covenants relating to Globalstar's present and future debt
obligations. In addition, GTL is
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prohibited from paying dividends on its Common Stock as long as any interest
arrearages remain outstanding on its CPEOs. GTL is a holding company, the sole
asset of which is its interest in Globalstar. GTL has no independent means of
generating revenues. Globalstar will pay the GTL'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 GTL, its net cash received from
operations, less amounts required to repay outstanding indebtedness, satisfy
other liabilities and fund capital expenditures and contingencies (including
funds required for design, construction and deployment of the second-generation
satellite constellation). The Globalstar Credit Agreement and the Indenture
restrict the ability of Globalstar to pay cash distributions on its ordinary
partnership interests. GTL intends to promptly distribute as dividends to its
shareholders the distributions made to it by Globalstar, less any amounts
reasonably required to be retained for payment of taxes, for repayment of
liabilities and to fund contingencies.
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THE COMPANY
GTL was organized as a Bermuda company on November 23, 1994 and has its
principal offices at Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda
(441-295-2244). GTL's sole business is to act as a general partner of
Globalstar. Globalstar is a Delaware limited partnership whose managing general
partner is LQSS; the general partner of LQSS is LQP, a Delaware limited
partnership comprised of subsidiaries of Loral and Qualcomm. The general partner
of LQP is LGP, a Loral subsidiary. Globalstar, LQSS and LQP are collectively
referred to as the Globalstar Partnerships. GTL serves as the other general
partner of Globalstar. Globalstar Capital Corporation was organized as a
Delaware corporation on July 24, 1995, and other than serving as issuer of
certain notes, does not conduct any business. The principal offices of
Globalstar and Globalstar Capital Corporation are located at 3200 Zanker Road,
San Jose, California 95164 (408-473-5550).
Matters relating to the FCC License for the Globalstar System, including
compliance requirements and other regulatory matters related thereto, are under
the exclusive control of LQP. Such FCC License is held by L/Q Licensee, a
wholly-owned subsidiary of LQP.
BUSINESS
BUSINESS OVERVIEW
The Company is a Bermuda company that acts as a general partner of
Globalstar. Globalstar is building and preparing to launch and operate the
Globalstar System 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. Globalstar's designated service providers have
agreed to offer service and seek to obtain all necessary local regulatory
approvals in more than 100 nations, accounting for about 88% of the world's
population. The Company's sole asset is its interest in Globalstar.
The Globalstar System's worldwide coverage is designed to extend affordable
modern telecommunications services to millions who lack basic telephone service
and to enhance wireless telecommunications in areas underserved or not served by
cellular systems, providing a telecommunications solution in parts of the world
where terrestrial systems cannot be economically justified. The Globalstar
System has been designed to provide services at prices comparable to today's
cellular service and substantially lower than the prices announced by
Globalstar's anticipated satellite-based competitors. Globalstar service
providers will set their own retail pricing in their territories and will pay
Globalstar about $0.35 to $0.55 per minute on a wholesale basis.
Globalstar customers will use 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. Dual-mode and tri-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.
The elements of the Globalstar System -- space and ground segments, digital
communications technology, handset supply, service provider arrangements and
licensing -- are on schedule to begin launching satellites in the second half of
1997, to commence commercial operations in the second half of 1998 and to have a
full constellation of 48 operational satellites, plus eight in-orbit spares,
launched by the end of 1998:
Space Segment. The first Globalstar satellite has been assembled and
is now in pre-flight testing, and another four are currently being
assembled. Production is on schedule for the remaining satellites. Three
different launch providers have signed agreements for the launch of the
satellite constellation, providing a variety of launch options and
considerable flexibility. Mission operations preparations and launch
vehicle production and dispenser development are on schedule.
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Ground Segment. The first four gateways, which are to be in
Australia, France, South Korea and the United States, are under
construction. These will support Globalstar's data network, monitor the
initial launch and orbital placement of Globalstar's first satellites, and
will serve as prototypes for production gateways that will support
Globalstar service. Globalstar's SOCC facility has been completed.
Digital Communications Technology. Qualcomm's CDMA technology has
been successfully deployed in South Korea, Hong Kong and cities in the
United States supporting terrestrial PCS and digital cellular service. Its
CDMA implementation for Globalstar has been successfully demonstrated in a
simulated satellite environment. This demonstration validated Globalstar's
encoding, modulation, control software, time and frequency distribution and
up/down links between satellites and handsets.
Handset Supply. Qualcomm and two other manufacturers, Ericsson and
TELITAL, are on schedule in their design and development of Globalstar's
handset.
Service Providers. Globalstar and its partners have been seeking
alliances with service providers throughout the world and have entered into
agreements in a number of territories. For example, in November 1996,
ChinaSat, a subsidiary of China's Ministry of Posts and Telecommunications,
agreed to act as the exclusive distributor of Globalstar services in China,
and to support four Globalstar gateways, the first of which is expected to
be operational by 1998. Globalstar has also formed a joint venture with the
principal Russian long distance carrier, Rostelecom, to provide Globalstar
service in that country and is negotiating a service provider agreement
with that joint venture. Globalstar believes that these relationships with
in-country service providers will facilitate the granting of local
regulatory approvals -- particularly where, as is the case in China, the
service provider and the licensing authority are the same -- as well as
providing local marketing and technical expertise.
Licensing. In January 1995, the FCC granted authority for the
construction, launch and operation of the Globalstar System and assigned
spectrum for its user links. Later that year, WRC'95 allocated feeder link
spectrum on an international basis for MSS systems such as Globalstar, and
in November 1996 the FCC authorized Globalstar's feeder links.
As a result of several recent decisions designed to assure and upgrade
system performance and maintain schedule -- including procurement of three
launches on the Starsem Soyuz launch vehicle, additional testing procedures,
development of additional and enhanced service features, cost growth and other
factors -- Globalstar currently estimates the cost for the design, construction
and deployment of the Globalstar System, including working capital, cash
interest on anticipated borrowings and operating expenses, to be approximately
$2.5 billion. In addition, Globalstar has agreed to purchase from SS/L eight
additional spare satellites at a cost estimated at $175 million. After giving
effect to the exercise of the Rights and the Guaranty Warrants, Globalstar will
have raised or received commitments for approximately $2.0 billion in equity,
debt and vendor financing, representing about 78% of the total financing
expected to complete the Globalstar System and achieve worldwide operations.
The Globalstar System has been designed to address the substantial and
growing demand for telecommunications services worldwide, particularly in
developing countries. More than three billion people today live without
residential telephone service, many in rural areas where the cost of wireline
service is prohibitively high. Moreover, even where telephone infrastructure is
available in developing countries, outdated equipment often leads to unreliable
service and limited international access. The number of worldwide fixed phone
lines has increased from 469 million in 1988 to 753 million in 1996 and is
projected to increase to 1.2 billion by 2002. Nonetheless, during the same
period, waiting lists for fixed service have increased from 30 million to 45
million, resulting in an average waiting time before installation of about one
and a half years. Similarly, the cellular market has grown from four million
worldwide subscribers in 1988 to an estimated 123 million in 1996 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's population will have access to wireless
telephone service principally through satellite-based systems like the
Globalstar System. Globalstar believes that its potential market exceeds 30
million people.
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The Globalstar System has been designed with attributes which Globalstar
believes compare favorably to other proposed global mobile satellite service
systems including: (i) Globalstar's unique combination of 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 is a principal founder of Globalstar and is its managing general
partner. Loral has invested $269 million in Globalstar. Loral owns effectively
33.8% 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 have
invested an additional $210 million in equity and, together with Loral,
committed or obtained $310 million in vendor financing.
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. Globalstar's founding partners are Loral and Qualcomm, the leading
supplier of CDMA digital telecommunications technology. Globalstar's other
strategic partners are:
<TABLE>
<CAPTION>
TELECOMMUNICATIONS EQUIPMENT
TELECOMMUNICATIONS AND AEROSPACE GLOBALSTAR SYSTEMS
SERVICE PROVIDERS MANUFACTURERS
----------------------------------------------- ---------------------------------------
<S> <C>
- AirTouch - Alcatel
- Dacom - Alenia
- France Telecom - DASA
- Vodafone - Finmeccanica
- Hyundai
- SS/L
</TABLE>
SS/L is providing 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, gateways and certain ground
support equipment.
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.
WORLDWIDE HIGH QUALITY SERVICE
To achieve rapid and sustained customer acceptance of the system, the
Globalstar System 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 as described herein 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 significant numbers of
people who currently lack basic telephone services and to enhance wireless
telecommunications in areas underserved or not served by existing or
contemplated cellular systems. Globalstar expects to
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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 Phones 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 mobile 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 clarity, quality and privacy similar to those of existing digital
land-based cellular systems. 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 PCS licences 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.
No Voice Delay. Globalstar satellites' low-earth orbits of 750 nautical
miles are 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 medium orbit 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
Simple, Cost-Effective System Architecture. To achieve low cost, reduce
technological risk and accelerate its deployment, Globalstar has devised a
system architecture using small satellites incorporating well-established design
features, and located the system's call processing and switching operations on
the ground, where they are accessible for maintenance and can benefit from
continuing technological advances. 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 and tri-mode
Globalstar Phones will be able to access both Globalstar and a variety of local
land-based analog and digital cellular services, where available. Multiple
manufacturers will be licensed to manufacture Globalstar Phones in order to
promote competition and reduce prices. Globalstar gateways have been
competitively priced in order to encourage the placement of one or more gateways
in each country served, thus reducing tail charges for the terrestrial portion
of each call.
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. Another proposed
satellite-based system has proposed retail pricing of more than $3.00 per
minute. 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
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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.
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, its 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 services and launch insurance.
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
function to current digital cellular telephones. Moreover, mobile Globalstar
Phones will use less power on average than conventional analog cellular
telephones and are therefore expected to enjoy longer battery life. Dual-mode
and tri-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 and has granted a license to each of Ericsson
and TELITAL for such purpose; 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.
LEVERAGING THE CAPABILITIES OF GLOBALSTAR'S STRATEGIC PARTNERS
Loral 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 are providing in-country marketing and telephony expertise to
Globalstar. Globalstar's strategic partner service providers have been granted
exclusive rights to provide Globalstar service in 71 countries around the world
in which they have particular marketing strength and experience and access to an
established customer base of 60 million subscribers. Six additional service
providers have agreed to offer Globalstar service in 32 additional countries. To
maintain their service provider rights on an exclusive basis, these 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. In order to
accelerate the deployment of gateways around the world prior to the In-Service
Date, Globalstar, Qualcomm and the service providers
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intend to jointly finance the procurement of 33 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
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, Alcatel, DASA and
Finmeccanica, and with Hyundai.
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REGULATION
UNITED STATES FCC REGULATION
The FCC is the United States agency with jurisdiction over commercial uses
of the radio frequency 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 from time to time
rules applicable to MSS systems, which may impose constraints on the operation
of Globalstar satellites, subscriber terminals and/or gateway earth stations.
The Globalstar System requires regulatory authorization for two pairs of
frequencies: user links (from the user to the satellites, and vice versa) and
feeder links (from the gateways to the satellites, and vice versa). On January
31, 1995, the FCC authorized the construction, launch and operation of the
Globalstar System and assigned bands of the radio frequency spectrum for the
user links. A modification of this authorization on November 19, 1996 assigned
feeder link frequencies. This license is held by L/Q Licensee, a subsidiary of
LQP which has agreed to use the FCC license exclusively for the benefit of
Globalstar. The FCC license grants authority to construct, launch and operate
the Globalstar System with user links in the 1.6 and 2.4 GHz bands, consistent
with the United States band plan for MSS Above 1 GHz Globalstar Systems, and
feeder link frequencies in the 5 and 7 GHz bands. These feeder link frequencies
were allocated internationally for non-geostationary MSS feeder links at WRC
'95, and the FCC assigned them for use by Globalstar in the United States in
accordance with this international allocation. However, use of the feeder link
frequencies remains subject to any applicable restrictions which may be
promulgated in an FCC proceeding to adopt the international allocations into the
U.S. Table of Frequency Allocations.
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.
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. In addition, use and operation of Globalstar's feeder
and user links are subject to FCC regulations regarding interference protection
and coordination with other systems which may have an adverse effect on the
usefulness of such frequencies.
LQP's MSS application was one of six considered concurrently by the FCC. On
January 31, 1995, Motorola Satellite Communications, Inc. and TRW Inc. also were
granted FCC licenses for systems providing MSS Above 1 GHz Service.
Consideration of three other applications was deferred for over a year in order
to give the applicants time to establish their financial qualification to
receive an MSS license. As of September 16, 1996, one applicant withdrew its
application, one amended its application with information on new financial
arrangements for review by the FCC, and one amended its application without
providing the details of any new financial arrangements. Subsequently, both
applicants have provided additional information for the FCC to consider. Action
on the two remaining applications is pending at the FCC.
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 Globalstar Phones in the
United States. Globalstar's authorized service provider in the U.S., AirTouch,
will apply for the required regulatory authorizations for gateways and
Globalstar Phones, and the manufacturer will apply for equipment authorization
for Globalstar Phones. Failure to obtain, or delay in obtaining, such licenses
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
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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 the operation of Globalstar.
The operation of Globalstar in the assigned user links and feeder links
must be coordinated with licensees of other existing radio services operating in
these bands in accordance with FCC and international rules and policies. Such
coordination may adversely affect the usefulness of the frequencies for
Globalstar operations. On January 9, 1997, the FCC adopted rules which would
make available 300 MHz of bandwidth in the 5 GHz band, including frequencies
from 5150 to 5250 MHz, for use by unlicensed devices for wireless high speed
data services. The FCC adopted rules which are designed to ensure that these
devices do not cause harmful interference with licensed services using these
bands, such as MSS feeder links. In the November 1996 order modifying the
Globalstar license, the FCC stated that Globalstar gateway earth station
licenses may be subject to sharing with unlicensed transmitters in accordance
with rules adopted in this proceeding. This proceeding is not yet final. There
can be no assurance that adoption of these rules as initially promulgated or 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 at 5 GHz or on the usefulness of these bands for
MSS feeder links.
As a CDMA system, Globalstar must coordinate its operations in the United
States with other licensed MSS 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 1.6
GHz and 2.4 GHz user links, but the FCC did not adopt specific guidelines for
coordination among CDMA systems. There may be an adverse effect on the
implementation of Globalstar depending upon the number of CDMA systems with
which it must coordinate and their willingness to coordinate in good faith and
in a timely manner. The CDMA systems must also coordinate with the TDMA system,
and there can be no assurance that such intersystem coordination would not have
an adverse effect on Globalstar operations. 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 were authorized to operate in the United States on
frequencies assigned to Globalstar, additional coordination obligations may be
required.
In its Order adopting rules and policies for MSS Above 1 GHz Service, the
FCC stated that a license for MSS Above 1 GHz Service would impose
implementation milestones on licensed systems. In the November 1996 order
modifying the Globalstar license to assign feeder links, the FCC also imposed
these implementation milestones on Globalstar. 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. 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 Service in the Order
have been challenged in a judicial appeal and were the subject of petitions for
reconsideration 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 the Order on reconsideration have
been filed and remain pending. Judicial appeals regarding the FCC's decision 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 Globalstar or its affiliates would be willing or able to outbid other
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applicants to obtain a license for the spectrum needed to operate the Globalstar
System. In addition, even if Globalstar or its affiliates 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
order granting the FCC license were filed and have been denied. Two judicial
appeals of the order resolving these petitions have been filed and remain
pending. There can be no assurance that such appeals will not be granted, or
that 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 the
application for the Globalstar System, or that on remand the FCC would take
action on the 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 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 transfers of technology, including rocket technology, to certain
republics of the former Soviet Union. Because Globalstar's launch strategy
contemplates using Russian and Ukrainian launch providers with launch sites
located in Kazakhstan, special export licenses are required to be obtained by
SS/L in connection with these launches.
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 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 that 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. Globalstar does not believe that these regulations will have a
material adverse effect on its operations.
INTERNATIONAL COORDINATION
The Globalstar System proposes to operate in frequencies which were
allocated on an international basis for MSS user links at WARC '92 and for MSS
feeder links at WRC '95. Globalstar is required to engage in
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international coordination procedures with other proposed MSS systems under the
aegis of the ITU. Globalstar and the two other U.S. MSS licensees have entered
into an agreement pursuant to which they have agreed to promote the FCC's
spectrum allocation plan before other governmental and international bodies and
to seek authorization for "landing rights" based on that plan.
Because Globalstar's proposed feeder link bands are allocated on an
international basis for LEO MSS feeder links, foreign LEO MSS systems may also
seek to use these bands for MSS feeder links. ICO has filed with the ITU its
plans to use the same feeder link spectrum as Globalstar. Globalstar will be
required to coordinate the use of its feeder links with ICO and any other
foreign system which has similar plans. Both a Russian and a Brazilian LEO MSS
system have filed with the ITU their intention to use the same feeder link
spectrum as Globalstar. There can be no assurance that such coordination will
not adversely affect the use of these bands by Globalstar.
Pursuant to the Intelsat and Inmarsat treaties, international satellite
operators are required to demonstrate that they will not cause economic or
technical harm to Inmarsat or Intelsat and to coordinate with Intelsat and
Inmarsat under obligations imposed on United States satellite systems by
international treaties. Globalstar will engage in technical coordination of its
feeder downlinks with Intelsat, which uses the same frequency band for an
uplink. Globalstar believes that the proposed provision of competitive MSS
service by ICO, in which Inmarsat is a significant investor, may effectively
eliminate the requirement to demonstrate lack of economic harm. Globalstar
expects such coordination to be successful.
EUROPEAN UNION
European Union competition law proscribes agreements that have the effect
of appreciably restricting or distorting competition in the European Union.
Globalstar and others have responded to an inquiry from the Commission of the
European Union requesting information regarding their activities. On December
18, 1996, the Commission issued a decision concluding that the Iridium system is
not inconsistent with European Union competition law and policy. 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 telecommunications systems such as the
Globalstar System. The legislation proposed by the Commission of the European
Union is under reconsideration at the direction of the European Union ministers,
and Globalstar is unable to predict what effect, if any, the results of any
inquiry or proposed legislation may have on Globalstar's operations.
REGULATION OF SERVICE PROVIDERS
In order to operate gateway earth stations, including the user uplink
frequency, the Globalstar service provider in each country will be required to
obtain a license from that country's telecommunications authority. In addition,
the Globalstar service provider will need to enter into appropriate
interconnection and financial settlement agreements with local and interexchange
telecommunications providers. Globalstar intends to use in-country service
providers to facilitate the obtaining of such licenses and agreements. In
October 1996 the ITU's Policy Forum on Global Mobile Personal Communications by
Satellite adopted a set of voluntary principles which, if enacted or adopted by
individual countries, would help facilitate the licensing of in-country service
providers.
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. If a service provider does not obtain a license,
Globalstar will have the right to substitute another service provider to attempt
to obtain such a license, but if no service provider in a territory is
successful in obtaining the requisite local authorization, Globalstar service
will not be available in such territory. In that event, depending upon
geographical and market considerations, Globalstar may or may
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not have the ability to redirect the system capacity that such territories would
have otherwise used to serve territories in which service is authorized.
TAXATION
This discussion of certain tax considerations is based upon applicable
laws, treaties, regulations and interpretations thereof as currently in effect,
and is limited to persons who hold the Common Stock as a "capital asset" within
the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986 (the
"Code"). This discussion does not address the consequences to holders of the
Guaranty Warrants of the exercise of such warrants in exchange for the Warrant
Shares. This discussion does not consider all aspects of taxation which may be
relevant to a particular investor and which may depend upon the investor's
particular circumstances.
Prospective investors should consult with their own professional advisors
about the tax consequences to them of an investment in the Company under the
laws of the jurisdictions in which they are subject to taxation.
The following discussion of U.S. tax laws 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.
CERTAIN UNITED STATES TAX CONSIDERATIONS
Taxation of the Company. The Company is a foreign corporation established
for the sole purpose of acquiring and holding a partnership interest in
Globalstar, a Delaware limited partnership. The Company's tax consequences will
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 pro rata 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. This requirement to distribute to
non-U.S. partners for federal income taxes may be satisfied by a withholding tax
payment made by Globalstar to the U.S. Treasury. The amount withheld may exceed
the 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.
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 shares of Common
Stock unless the sale of such shares 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
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investor's shares of Common Stock 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 United States Investors in the Company. Special rules apply to
the taxation of 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 and will not become a PFIC. In particular, the
Company expects to earn, through Globalstar, sufficient active business income
to avoid PFIC status. However, Globalstar may earn passive income such as
interest on working capital and royalties on certain intangibles. Furthermore,
the extent and timing of Globalstar's active business income cannot be predicted
with certainty.
If the Company is or were to become a PFIC, a U.S. shareholder would be
subject to a tax-deferral charge on gains on a sale of shares of Common Stock
and on certain "excess distributions" received from the Company, and such gains
and excess distributions will be taxable at ordinary income rates, unless the
shareholder makes the QEF election described below. The amount of the charges
will depend, in part, on the period during which the shareholders held their
shares of Common Stock.
If a shareholder makes the qualified electing fund ("QEF") election
provided in Section 1295 of the Code, the shareholder will be required to
include its pro rata share of the Company's ordinary earnings and net capital
gain in income for tax purposes 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 IRS. In the event the Company is characterized
as a PFIC for federal income tax purposes, the Company will undertake to comply
with the IRS information requirements necessary to permit shareholders to make
the election, and provide to each U.S. shareholder information needed for the
determination of such shareholder's pro rata share of the Company's ordinary
earnings and net capital gain.
BERMUDA TAX CONSIDERATIONS
At the present time, there is no Bermuda income or profits tax, withholding
tax, capital gains tax, capital transfer tax, estate duty or inheritance tax
payable by a Bermuda company or its shareholders, other than shareholders
ordinarily resident in Bermuda. The Company has obtained an assurance from the
Minister of Finance under the Exempted Undertakings Tax Protection Act 1966
that, in the event that any legislation is enacted in Bermuda imposing any 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 to the shares, debentures or other obligations of the Company
except insofar as such tax applies to persons ordinarily resident in Bermuda and
holding such shares, debentures or other obligations of the Company or any land
leased or let to the Company. Therefore, there will be no Bermuda tax
consequences with respect to the sale or exchange of the Common Stock or with
respect to distributions in respect of the Common Stock. As an exempted company,
the Company is liable to pay in Bermuda a registration fee based upon its
authorized share capital and the premium on its issued shares.
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
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because any particular partner (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 to such partner by Globalstar.
SELLING HOLDERS
The Guaranty Warrants were issued by the Company to Lockheed Martin
Tactical Systems, Inc., Qualcomm China, Inc. (f/k/a Qualcomm Limited Partner,
Inc.), DASA Globalstar Limited Partner, Inc., Loral Space & Communications Ltd.
and Space Systems/Loral, Inc. (collectively, the "Selling Holders") in a private
placement in April 1996 in connection with the Selling Holders' agreement to
guaranty Globalstar's obligations under a $250 million credit facility. See
"Summary -- Background of the Rights Offering."
The following table sets forth as of March 6, 1997, the respective number
of shares of Common Stock to be beneficially owned by each of the Selling
Holders prior to the Warrant Share Offering, after giving effect to the exercise
of the Guaranty Warrants, all of which Warrant Shares are expected to be sold in
connection with the Warrant Share Offering, together with the number of shares
to be beneficially owned after the Warrant Share Offering. See "Plan of
Distribution."
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO SHARES BENEFICIALLY
WARRANT SHARE OWNED AFTER WARRANT
OFFERING(1) SHARES TO BE SHARE OFFERING
--------------------- SOLD IN WARRANT ---------------------
NAME NUMBER PERCENT SHARE OFFERING NUMBER PERCENT
- ------------------------------------ --------- ------- --------------- --------- -------
<S> <C> <C> <C> <C> <C>
Lockheed Martin Tactical Systems,
Inc............................... 2,511,190 16.4% 2,511,190 0 0%
Qualcomm China, Inc................. 367,131 2.4 367,131 0 0
DASA Globalstar Limited Partner,
Inc............................... 169,475 1.1 169,475 0 0
--------- ------- --------------- --------- -------
Total..................... 3,047,796 19.9% 3,047,796 0 0%
======== ===== =========== ======== =====
</TABLE>
- ---------------
(1) After giving effect to the full exercise of the Guaranty Warrants and of the
Rights.
The Company is registering the Warrant Shares by means of the Registration
Statement pursuant to Rule 415 of the Securities Act of which this Prospectus
forms a part, in fulfillment of its obligations under the Warrant Acceleration
and Registration Rights Agreement. Such agreement also requires the Company to
use its reasonable efforts to effect an underwritten public offering of the
Warrant Shares by April 15, 1997, and the Selling Holders have agreed not to
transfer their Warrant Shares until such date, except pursuant to Rule 144 of
the Securities Act. However, if the Selling Holders determine not to sell their
Warrant Shares under such underwritten public offering, the Company has agreed
to cause the Registration Statement of which this Prospectus forms a part to be
declared and to remain effective until the earlier of the date on which all the
Warrant Shares have been sold or December 31, 1997, subject to extension under
certain circumstances. The information concerning the Selling Holders may change
from time to time. If required, such changes will be set forth in Prospectus
Supplements.
Loral and SS/L do not presently intend to sell any Warrant Shares in the
Warrant Share Offering. Loral and SS/L may seek to increase their total direct
and indirect ownership in Globalstar and, in connection therewith, may sell
Warrant Shares to fund the purchase of Globalstar partnership interests held by
other Globalstar strategic partners. If required, any such transaction would be
described in a supplement to this Prospectus. Loral and SS/L do not intend to
sell any Rights Shares they acquire in the Rights Offering, whether by virtue of
the Rights distribution or pursuant to Loral's standby commitment to purchase
all Rights Shares relating to unexercised Rights. Accordingly, none of the
Rights Shares that may be acquired by Loral or SS/L in connection with the
Rights Offering will be offered for resale by means of the Registration
Statement of which this Prospectus forms a part.
The following summarizes the material relationships among the Selling
Holders, Loral or SS/L and GTL and its affiliates, and is qualified in its
entirety by the agreements which are available to investors upon request.
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<PAGE> 84
SS/L Agreement and Subcontracts. Globalstar has entered into an agreement
with SS/L to design, manufacture, test and launch its satellite constellation.
The price of the contract consists of three parts, the first for non-recurring
work at a price not to exceed $117.1 million, the second for recurring work at a
fixed price of approximately $15.6 million per satellite (including certain
performance incentives of up to approximately $1.9 million per satellite) and
the third for launch services and insurance. SS/L will design, build and obtain
launch vehicles for the 56 satellites in Globalstar's constellation, which are
designed to have a minimum life-span of 7 1/2 years. SS/L has agreed to obtain
insurance on Globalstar's behalf for the cost of replacing satellites lost in
hot failures and any relaunch costs not covered by the applicable launch
contract in certain circumstances subject to pricing adjustments in light of
future market conditions. SS/L has also agreed pursuant to the agreement to
obtain launch vehicles and arrange for the launch of all 56 satellites on
Globalstar's behalf, subject to pricing adjustments in light of future market
conditions, which may, in turn, be influenced by international political
developments. Termination by Globalstar of this agreement will result in
termination fees, which may be substantial. Such termination fees are generally
limited to SS/L's cost incurred and uncancellable obligations under subcontracts
and outstanding orders for satellite materials at the time of termination plus a
reasonable fee.
Globalstar has also authorized SS/L to procure three launches of the
Starsem Soyuz launch vehicle, which will launch four Globalstar satellites each.
As a result of this decision, total costs for launch vehicles and insurance are
expected to be approximately $455 million.
Globalstar has granted to SS/L an irrevocable, royalty-free, non-exclusive
license to use certain intellectual property expressly developed in connection
with the SS/L agreement provided that SS/L will not use, or permit others to
use, such license for the purpose of engaging in any business activity that
would be in material competition with Globalstar. Globalstar has similarly
agreed that it will not license such intellectual property if it will be used
for the purpose of designing or building satellites that would be in competition
with SS/L.
SS/L has subcontracted the design and integration of the payload modules to
Alcatel who will manufacture Globalstar's satellite communication equipment at a
fixed price of approximately $208 million, subject to certain adjustments.
Subcontracts have also been awarded to Alenia ($175 million) for final assembly,
integration and testing of the Globalstar satellites, DASA ($178 million) for
providing Globalstar's satellite power propulsion elements and solar arrays, and
Aerospatiale ($41 million) for designing and manufacturing the satellite bus
structure and communication support panels. Globalstar, SS/L and Hyundai have
also entered into a subcontract ($44 million) under which Hyundai will provide
certain electronic components for the Globalstar satellites. Globalstar and SS/L
have further agreed to support Hyundai in its efforts as a satellite vendor,
including providing training and transferring certain technological know-how to
Hyundai at a compensation to be agreed upon among the parties.
The agreement provides for liquidated damages to Globalstar in the event
SS/L fails to supply the satellites at the times specified in the contract.
Liquidated damages of approximately $45,000 are payable by SS/L for each day of
delay, subject to an overall cap of approximately $33 million. Such liquidated
damages are Globalstar's exclusive remedies in the face of any delay by SS/L in
the delivery of the satellites or for any events of default specified in the
agreement.
SS/L and its subcontractors have committed $310 million of vendor financing
to Globalstar, of which $220 million will be non-interest bearing. Globalstar
will repay the non-interest bearing portions as follows: $49 million following
the launch and acceptance of 24 or more satellites, $61 million upon the launch
and acceptance of 48 or more satellites, and the remainder in equal installments
over the five-year period following acceptance of the preliminary and final
Globalstar constellations. The remaining $90 million will bear interest, the
payment of which will be deferred until the Full Constellation Date or December
31, 1998, whichever is earlier. Thereafter, interest and principal will be
repaid in equal quarterly installments during the next five years.
In addition, Globalstar has agreed to purchase from SS/L eight additional
spare satellites which increases Globalstar's ability to have at least 40
satellites in service during 1999, even in the event of the failure of as many
as two 12-satellite launches. If Globalstar were to experience a launch failure,
the costs associated with the construction and launch of replacements would be
substantially covered by insurance, and
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<PAGE> 85
in that event the cost of the additional satellites used as replacements,
currently estimated at $175 million, would be reimbursed to Globalstar.
Qualcomm Agreement. Globalstar and Qualcomm have entered into an agreement
providing for the design, development, manufacture, installation, testing and
maintenance by Qualcomm of four gateways, two ground operations control centers
and 100 pre-production Globalstar Phones (the "Qualcomm Segment"). A portion of
the GOCC is being developed and manufactured by Globalstar. The contract is a
cost-plus-fee contract that provides for payment to Qualcomm of a 12% fee, along
with reimbursement for costs incurred in performing such contract, such as
labor, material, travel, license fees, royalties and general administrative
expenses. The contract also includes a cost sharing arrangement for certain
technologies being developed by Qualcomm.
Qualcomm is currently preparing a revised estimate of costs under its
contract with Globalstar and has given Globalstar a preliminary indication that,
due to additional integration testing procedures to support system readiness on
schedule, scope changes to add features, capabilities and functions, cost growth
and other factors, those costs may increase to $545 million. The Qualcomm
estimate is still subject to further review by Globalstar. In addition,
Globalstar has authorized the expenditure of $25 million for the development of
additional service features and $30 million to fund development efforts by
additional handset suppliers.
Except for the intellectual property contained in certain software relating
to the public switched networks and the GOCCs (excluding any software or
technical data contained in Qualcomm's CDMA technology) which will be owned by
Globalstar, Qualcomm retains all intellectual property in the Qualcomm Segment.
However, Qualcomm has granted Globalstar an exclusive license to use its CDMA
technology for MSS commercial applications.
Globalstar has granted to Qualcomm an irrevocable, non-exclusive, worldwide
perpetual license to intellectual property owned by Globalstar in the Qualcomm
Segment and developed pursuant to the Qualcomm agreement. Qualcomm may, pursuant
to such grant, use the intellectual property for applications other than the
Globalstar System provided that Qualcomm may not for a period of three years
after its withdrawal as a strategic partner or prior to the third anniversary of
the Full Constellation Date, whichever is earlier, engage in any business
activity that would be in competition with the Globalstar System. The grant of
intellectual property to Qualcomm described above is generally royalty free.
Under certain specified circumstances, however, Qualcomm will be required to pay
a 3% royalty fee on such intellectual property.
Qualcomm has agreed to grant at least one vendor a nonexclusive worldwide
license to use Qualcomm's intellectual property to manufacture and sell gateways
to Globalstar's service providers. The foregoing licenses will be granted by
Qualcomm to one or more such vendors on reasonable terms and conditions, which
will in any event not provide for royalty fees in excess of 7% of a gateway's
sales price (not including the approximately $400,000 in recoupment expenses
payable to Globalstar). Qualcomm has granted a license to manufacture Globalstar
Phones to each of Ericsson and TELITAL and has also agreed to grant similar
licenses to at least one additional qualified manufacturer to enable it to
manufacture and sell the Globalstar Phones to service providers. On March 23,
1994, a letter agreement was entered into among Qualcomm, Globalstar and Hyundai
pursuant to which Hyundai may elect to become a licensee authorized to
manufacture and sell Globalstar Phones to service providers. Should Hyundai so
elect, it would, for a five-year period following Globalstar's In-Service Date,
be the exclusive licensee authorized to manufacture and sell such units in South
and North Korea.
Globalstar will receive a payment of approximately $400,000 on each
installed gateway sold to a Globalstar service provider. Globalstar will also
receive up to $10 on each Globalstar Phone, which will be payable until
Globalstar's funding of that design has been recovered.
The agreement provides for liquidated damages to Globalstar in the event
Qualcomm fails to supply the Qualcomm Segment at the times specified in the
contract. Liquidated damages of approximately $29,000 are payable by Qualcomm
for each day of delay, subject to an overall cap of approximately $11 million.
Such liquidated damages are Globalstar's exclusive remedies in the face of any
delay by Qualcomm in the delivery
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<PAGE> 86
of the Qualcomm Segment or for any other events of default specified in the
agreement. Qualcomm's obligation to license the intellectual property necessary
to manufacture gateways and Globalstar Phones to Globalstar or a third-party
manufacturer will continue even upon a default or breach by Qualcomm under the
agreement. Termination by Globalstar of this agreement will result in
termination fees, which may be substantial.
Gateway Program. Globalstar, Qualcomm and the service provider partners
intend to jointly finance the procurement of 33 gateways for resale to service
providers, thereby accelerating the deployment of gateways around the world
prior to the In-Service Date. Globalstar has agreed to finance approximately $80
million of the cost of this program, which cost it expects to recover from such
resales.
Qualcomm Support Agreement. A support agreement was entered into among
Qualcomm, Loral and Globalstar pursuant to which Qualcomm agreed to (i) assist
Globalstar and SS/L with Globalstar's system design, (ii) support Globalstar and
Loral with respect to various regulatory matters, including the FCC application
and (iii) assist Globalstar and Loral in their marketing efforts with respect to
Globalstar. As compensation for its efforts, Qualcomm would be paid an amount
equal to the costs incurred in rendering such support and assistance.
Contract for the Development of Satellite Operations Control
Centers. Globalstar has entered into an agreement with a subsidiary of Lockheed
Martin for the development and delivery of two SOCCs and 33 Telemetry and
Command units for the Globalstar System. This contract is a cost-plus-fee
contract with a maximum price of $25.1 million which includes a fee of 12% under
the contract, 6% of which would be payable at the time the costs are incurred
with the remainder payable upon achievement of certain milestones. Globalstar
will own any intellectual property produced under the contract.
Contract for S-Band Beam Forming Network Engineering Model. Globalstar
entered into an agreement with a subsidiary of Lockheed Martin for an S-Band
Beam Forming Network Engineering Model. The contract is a firm fixed-price
contract for approximately $463,000.
Consulting Contracts. Globalstar has entered into consulting agreements
with Vodafone for approximately $700,000 under which Vodafone will develop
Globalstar's security architecture design and billing system requirements. Under
a consulting contract estimated at $980,000, a joint venture formed by France
Telecom and Alcatel is providing Globalstar with various services including
engineering support at WRC '95, quality of services studies and European
regulatory support services.
OmniTRACS Services Agreement. Globalstar has granted Qualcomm the
worldwide exclusive right to utilize the Globalstar System to provide
OmniTRACS-like services, including certain data-messaging and
position-determination services offered by Qualcomm, primarily to fleets of
motor vehicles and rail cars and/or vessels and supervisory control and data
acquisition services. Qualcomm will utilize the Globalstar System in particular
territories to provide its OmniTRACS-like services if the Globalstar service
provider in such region or country offers pricing that is the most favorable
rate charged by it for a comparable service and that is at least as favorable as
the pricing then charged to Qualcomm for geostationary satellite capacity in the
United States. In the event Qualcomm and the service provider fail to reach an
agreement with respect to such access, Globalstar has agreed to provide Qualcomm
with access to the Globalstar System at Globalstar's most favorable rates. To
the extent consistent with Qualcomm's prior commitments, Qualcomm has also
agreed to offer each Globalstar service provider certain rights of first refusal
to participate with Qualcomm in the provision of OmniTRACS-like services using
the Globalstar System in the service provider's territory.
Office Leases. Globalstar currently leases office space from Lockheed
Martin at a cost of approximately $72,000 per month. This space is leased
pursuant to an agreement that expires in August 2000 (with an option to extend
for two additional five year periods). Globalstar paid a total of $650,000 and
$275,000, for the calendar years 1995 and 1994, respectively, under such lease.
Conflicts of Interest. The Globalstar partnership agreement provides that
Globalstar cannot enter into any agreement involving amounts in excess of
$1,000,000 with any partner, any strategic partner (including any direct or
indirect corporate parent of such partner or strategic partner), any Alliance
Partner or any of
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<PAGE> 87
their respective affiliates unless the terms and conditions of such transaction
have been first approved by a vote of the disinterested partners.
Guaranty Fee and Warrants. On December 15, 1995, Globalstar entered into
the Credit Agreement providing for a $250 million credit facility. Following the
consummation of a merger between Old Loral and a subsidiary of Lockheed Martin,
Lockheed Martin guaranteed $206.3 million of Globalstar's obligation under the
Credit Agreement, and SS/L and the other Selling Holders guaranteed $11.7
million and $32 million, respectively, of Globalstar's obligation. In addition,
Loral has agreed to indemnify Lockheed Martin for liability in excess of $150
million under Lockheed Martin's guaranty of the Credit Agreement.
In connection with such guaranties and indemnity of the Credit Agreement,
GTL issued to Loral, Lockheed Martin, SS/L and the other Selling Holders, the
Guaranty Warrants to purchase 4,185,318 shares of GTL common stock. In
connection with the issuance of Guaranty Warrants, GTL received (i) rights to
acquire 4,185,318 ordinary partnership interests in Globalstar plus (ii) rights
to purchase an additional 1,131,168 ordinary partnership interests, on terms and
conditions generally similar to those of the Guaranty Warrants. In addition,
Globalstar has also agreed to pay to Loral and the other Selling Holders a fee
equal to 1.5% per annum of the average quarterly amount outstanding under the
Credit Agreement (the "Guaranty Fee"). Payment of the Guaranty Fee will be
deferred and subordinated, with interest at LIBOR plus 3%, until after the
termination date of the Credit Agreement. LQSS may also defer payment of such
fee if it determines that such deferral is necessary to comply with the terms of
any applicable credit agreement or indenture.
Globalstar and GTL have entered into an agreement pursuant to which GTL and
Globalstar have agreed that upon the exercise of any Guaranty Warrant, GTL will
purchase from Globalstar, and Globalstar will sell to GTL, a number of ordinary
partnership interests equal to the number of shares of Common Stock issuable
upon such exercise for a purchase price equal to the exercise price of the
Guaranty Warrant.
The Guaranty Warrants have an exercise price of $26.50 per share expiring
on April 19, 2003 and originally were not exercisable until six months after the
In-Service Date, subject to acceleration by LQSS in its sole discretion. The
Guaranty Warrants may not be transferred to third parties prior to such exercise
date.
GTL and the holders of the Guaranty Warrants have entered into an agreement
under which GTL has agreed to accelerate the vesting and exercisability of the
Guaranty Warrants to purchase 4,185,318 shares of Common Stock at $26.50 per
share and the holders have committed to exercise such warrants. GTL also has
agreed to register for resale the GTL shares issuable upon exercise of the
Guaranty Warrants. In addition, GTL is distributing to the holders of its Common
Stock Rights to subscribe for and purchase 1,131,168 Rights Shares for a price
of $26.50 per share. Loral has agreed to purchase all Rights Shares not
purchased upon exercise of the Rights. Upon the exercise of the Guaranty
Warrants and the Rights, GTL will receive proceeds of about $140.9 million,
which it will use to exercise the Partnership Warrants to purchase 5,316,486
Globalstar partnership interests at $26.50 per interest. Globalstar will use
such proceeds to continue the design, construction and deployment of the
Globalstar System.
Globalstar Managing Partner's Allocation and Distribution. Commencing on
the In-Service Date, Globalstar will make distributions to LQSS equal to 2.5% of
Globalstar's revenues up to $500 million plus 3.5% of revenues in excess of $500
million. Loral and Qualcomm ultimately will receive 80% and 20% of such
distribution, respectively. Should Globalstar incur a net loss in any year
following commencement of operations, the distribution for that year will be
reduced by 50% and Globalstar will be reimbursed for managing partner's
allocations, if any, made in any prior quarter of such year, sufficient to
reduce the managing partner's allocation for such year by 50%. Any managing
partner's allocation may be deferred (with interest at 4% per annum) in any
quarter in which Globalstar would report negative cash flow from operations if
the managing partner's allocation were made.
LQSS has a right to a preferred allocation of gross operating revenue until
such allocated revenue cumulatively equals LQSS's distributions payable (whether
or not deferred for a shortfall in cash flow from operations). To the extent
that distributions exceed such allocated profit, they will be charged against
LQSS's capital account and will not be allocated among the Globalstar partners
as a Globalstar expense.
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<PAGE> 88
Lockheed Martin's Relationship with Loral. As a result of a merger between
Old Loral and a subsidiary of Lockheed Martin, Lockheed Martin holds Series A
Preferred Stock of Loral representing an approximate 17% fully-diluted equity
interest in Loral. Loral and an affiliate of Lockheed Martin are parties to a
Shareholders Agreement which, among other matters, regulates the voting rights
of Lockheed Martin and its affiliates and limits their ability to acquire
additional voting securities or assets of, or solicit proxies or make a public
announcement of a proposal of any extraordinary transaction with respect to
Loral. The Shareholders Agreement also provides that under certain circumstances
and subject to certain conditions, Lockheed Martin and its affiliates may
require Loral to register under the Securities Act any Loral securities held by
them. Bernard L. Schwartz, Chairman and Chief Executive Officer of Loral, serves
on the Board of Directors of Lockheed Martin.
Agreements with DASA. DASA is an affiliate of DASA Globalstar Limited
Partner, Inc. Loral has agreed to purchase DASA's 12 1/4% interest in SS/L in
exchange for approximately $93.5 million in cash or marketable securities.
Pursuant to a Stockholders Agreement among Loral, DASA and the other Alliance
Partners, DASA is entitled to appoint one representative to the SS/L Board of
Directors, and DASA, when acting together with at least one other Alliance
Partner, has certain limited veto rights regarding SS/L's corporate decisions.
DASA, the other Alliance Partners, and SS/L are parties to an Operational
Agreement, which regulates certain matters relating to the submission of bids
for space program contracts and the subsequent allocation of contracting duties
among the parties. Upon consummation of Loral's purchase of DASA's interest in
SS/L, DASA's rights under the Stockholders Agreement and Operational Agreement
shall terminate. Loral and DASA have formed a partnership to act as the
exclusive Globalstar service provider in Brazil.
PLAN OF DISTRIBUTION
The Warrant Shares 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 Warrant Shares 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 Warrant Shares, for whom they may act as agent. The Selling
Holders and any underwriters, broker-dealers or agents that participate in the
distribution of the Warrant Shares may be deemed to be "underwriters" within the
meaning of the Securities Act and any profit on the sale of Warrant Shares 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 Warrant Shares 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 Warrant Shares may be
effected in transactions (which may involve crosses or block transactions) (i)
on any national securities exchange or quotation service on which 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 Warrant Shares is made, a Prospectus Supplement, if
required, will be distributed which will set forth the aggregate amount and type
of Warrant Shares 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 Company is registering the Warrant Shares by means of the Registration
Statement pursuant to Rule 415 of the Securities Act of which this Prospectus
forms a part, in fulfillment of its obligations under the Warrant Acceleration
and Registration Rights Agreement. Such agreement also requires the Company to
use its reasonable efforts to effect an underwritten public offering of the
Warrant Shares by April 15, 1997, and the Selling Holders have agreed not to
transfer their Warrant Shares until such date, except pursuant to Rule 144 of
the Securities Act. However, if the Selling Holders determine not to sell their
Warrant Shares under such underwritten public offering, the Company has agreed
to cause the Registration Statement of which this
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<PAGE> 89
Prospectus forms a part to be declared and to remain effective until the earlier
of the date on which all the Warrant Shares have been sold or December 31, 1997,
subject to extension under certain circumstances.
The outstanding Common Stock currently trades, and the Common Stock
representing the Warrant Shares will trade, on the NNM under the symbol GSTRF.
To comply with the securities laws of certain jurisdictions, if applicable,
the Warrant Shares will be offered or sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain jurisdictions
the Warrant Shares 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 Common Stock may not simultaneously engage in
market-making activities with respect to such securities for a period of two
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 Warrant Shares by the Selling Holders or any
such other person. All of the foregoing may affect the marketability of the
Common Stock and brokers' and dealers' ability to engage in market-making
activities with respect to these securities.
Pursuant to the Warrant Acceleration and Registration Rights Agreement with
respect to the Warrant Shares, all expenses of the registration of the Warrant
Shares will be paid by Globalstar, 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. Holders of Warrant Shares 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) the date on which all
Warrant Shares have been disposed of by the Selling Holders or (ii) December 31,
1997 (subject to extension under certain circumstances).
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. Certain Bermuda tax matters described under "Taxation"
and the validity of the Warrant Shares offered hereby will be passed upon for
the Company by Appleby, Spurling & Kempe, Hamilton, Bermuda. As of January 31,
1997, partners and counsel in Willkie Farr & Gallagher beneficially owned 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 and a member
of the Audit and Executive Committees of the Boards of Directors of both the
Company and Loral.
EXPERTS
The financial statements of the Company and Globalstar incorporated in this
Prospectus by reference from the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 have been audited by Deloitte & Touche LLP
as stated in their reports, which are incorporated herein by reference, and have
been so incorporated in reliance on the reports of said firm given upon their
authority as experts in auditing and accounting.
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GLOSSARY OF TERMS
ACeS -- PT Asia Cellular Satellite, a GEO satellite-based telephony system
proposed for Asia.
ACS -- Afro-Asian Satellite.
AMPS -- see Advanced Mobile Phone System.
AMSC -- American Mobile Satellite Corporation.
APMT -- Asia Pacific Mobile Telecom, a GEO satellite-based telephony system
proposed for Asia.
ADVANCED MOBILE PHONE SYSTEM (AMPS) -- the analog cellular modulation in general
use in the United States today.
AEROSPATIALE -- Aerospatiale SNI.
AIRTOUCH -- AirTouch Communications, Inc., a Delaware corporation. AirTouch is a
leading wireless telecommunications company with 1.6 million cellular customers
worldwide.
ALCATEL -- Alcatel, N.V., a Netherlands company. Alcatel is the world's largest
manufacturer of telecommunications equipment, with operations in 32 countries.
ALENIA -- Alenia S.p.A., a subsidiary of Finmeccanica. Alenia is Italy's largest
aerospace company and has broad experience in complete space systems,
telecommunications, remote sensing, weather and scientific satellites, manned
space systems, launch and re-entry systems, and fixed and mobile ground systems
for spacecraft support.
ALLIANCE PARTNERS -- four major European companies involved in aerospace,
telecommunications and space communications (Aerospatiale, Alcatel, DASA and
Finmeccanica), which currently hold a 49% equity interest in SS/L.
ANALOG -- a method of storing, processing and transmitting information through
the use of a continuous (rather than pulsed or digital) electrical signal that
varies in amplitude or frequency.
APPROVED PAYMENT METHOD -- such payment method for the Rights Shares as the
Company may approve in writing in the case of persons acquiring the Rights
Shares at an aggregate Subscription Price of $500,000 or more.
BANDWIDTH -- the range of frequencies, expressed in hertz (Hz), that can pass
over a given transmission channel. The bandwidth determines the rate at which
information can be transmitted through the circuit. The greater the bandwidth,
the more information that can be sent through the circuit in a given amount of
time.
CDMA -- see Code Division Multiple Access.
CPEOs -- GTL's outstanding 6 1/2% Convertible Preferred Equivalent Obligations
due 2006.
CELLULAR -- domestic public cellular radio telecommunications service authorized
by the FCC in the 824-893 MHz band, in which each of two licensees per market
employ 25 MHz of spectrum to provide service to the public.
CHINASAT -- Chinese Telecommunications Broadcast Satellite Corp., which is
operated by the Chinese Ministry of Posts and Telecommunications.
CODE -- the Internal Revenue Code of 1986, as amended.
CODE DIVISION MULTIPLE ACCESS (CDMA) -- a digital transmission system that
superimposes audio signals or data onto a specified coded address waveform. CDMA
allows a large number of wireless users simultaneously to access a single radio
frequency band without interference. As each wireless telephone gains access,
its gateway assigns it a unique sequence of frequency shifts that serve as a
code to distinguish that particular telephone call from others on the air.
COLD FAILURE -- failure of satellite components resulting in partial or total
failure of the satellite.
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<PAGE> 91
COMMISSION -- the Securities and Exchange Commission.
COMMON STOCK -- common stock, par value $1.00 per share, of GTL.
COMMUNICATIONS ACT -- Act of Congress passed in 1934, as amended, which
established the Federal Communications Commission and regulates the
communication industries, including radio, telephone and cable, in the United
States.
COMSAT -- Comsat Corporation, the U.S. signatory to Intelsat and Inmarsat.
CREDIT AGREEMENT -- Agreement by and between Globalstar and a bank syndicate for
a $250 million credit facility expiring December 15, 2000.
DASA -- Daimler-Benz Aerospace A.G., and its subsidiaries and affiliates. DASA
is a leader in the development and production of aerospace, defense technology
and propulsion systems, and the manufacture of military and commercial aircraft,
satellites, space transportation and propulsion systems.
DACOM -- DACOM, or an affiliate thereof. Dacom is a leading South Korean
telecommunications company which provides a broad range of services, including
international telephone service connection to 169 countries with South Korea.
DIGITAL -- a method of storing, processing and transmitting information through
the use of distinct electronic or optical pulses that represent the binary
digits 0 and 1. Digital transmission/switching technologies employ a sequence of
discrete, distinct pulses to represent information, as opposed to the
continuously variable analog signal. Digital cellular networks will utilize
digital transmission.
DOWNLINK -- the receiving portion of a satellite circuit extending from the
satellite to the Earth (compare to uplink).
DUAL-MODE -- handsets designed to operate on both a land-based cellular system
and the Globalstar System.
DUAL USE ITEMS -- technology and commodities designated under the Export
Administration Act as capable of both civilian and military applications.
EARTH STATION -- the antennas, receivers, transmitters and other equipment
needed on the ground to transmit and receive satellite communications signals.
ELECTROMAGNETIC SPECTRUM -- entire range of wavelengths or frequencies of
electromagnetic radiation extending from gamma rays to the longest radio wave,
and including visible light. See also radio frequency.
ERICSSON -- L.M. Ericsson, parent of Orbitel.
EXCHANGE ACT -- the Securities and Exchange Act of 1934, as amended.
EXPIRATION DATE -- 5:00 p.m. New York City time on April , 1997.
FCC -- see Federal Communications Commission.
FEDERAL COMMUNICATIONS COMMISSION (FCC) -- regulatory agency established by the
Communications Act, charged with regulating all electrical and radio
communications within the United States.
FEEDER LINK -- the path by which information flows when traveling from a
satellite to a gateway and from a gateway to a satellite. Globalstar feeder
links are in the C-band region of the frequency spectrum.
FINMECCANICA -- Finmeccanica S.p.A., or an affiliate thereof. Finmeccanica owns
Alenia. See above.
FOOTPRINT -- the geographic areas served by a radio transmission device, such as
a communications satellite.
FRANCE TELECOM -- France Telecom, or an affiliate thereof. France Telecom is the
world's fourth largest telecommunications operator with 30 million subscribers
and operations in over 19 countries.
FREQUENCY -- an expression of how frequently a periodic (repetitious) wave form
or signal regenerates itself at a given amplitude.
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FULL CONSTELLATION DATE -- the date on which Globalstar commences full
operations via a 48-satellite constellation, which is expected to occur by the
end of 1998.
GEO -- see geosynchronous orbit.
GHz -- see gigahertz.
GOCC -- see Ground Operations Control Center.
GTL -- Globalstar Telecommunications Limited, a Bermuda company quoted on the
NNM, which acts as one of two general partners of Globalstar.
GATEWAY -- the earth terminal which connects the Globalstar satellite
constellation to PSTN through the land-based switching equipment of
telecommunications service providers.
GENERAL PARTNERS -- GTL and LQSS.
GEOSYNCHRONOUS ORBIT (GEO) -- the orbit directly over the equator, about 22,300
nautical miles above the Earth, also known as synchronous, geostationary,
stationary and Clarke orbits. When positioned in this orbit, a satellite appears
to hover over the same spot on the Earth because it is moving at a rate that
matches the speed of the Earth's rotation on its axis.
GIGAHERTZ (GHz) -- a measure of frequency equal to one billion cycles per
second.
GLOBAL ROAMING -- the ability of a Globalstar subscriber to travel worldwide and
make and receive Globalstar telephone calls outside the service area of the
subscriber's communications service wherever Globalstar service is authorized.
GLOBALSTAR(TM) -- Globalstar, L.P., a Delaware limited partnership that is
building and preparing to launch an MSS system comprised of 56 LEO satellites
designed to provide worldwide wireless telephony and other services.
"Globalstar" is a trademark of Globalstar, L.P.
GLOBALSTAR PHONES -- hand-held and vehicle-mounted units similar to today's
cellular telephones and fixed telephones similar to ordinary wireline telephones
through which Globalstar users will make and receive calls.
GLOBALSTAR SERVICE -- the transmission and/or reception of voice, data,
messaging, facsimile, paging, position, location or other information through
the Globalstar System using the service providers' gateways.
GLOBALSTAR SYSTEM -- a low-earth orbit satellite-based telecommunications system
proposed by Globalstar to operate in the MSS Above 1 GHz Service frequencies.
See MSS applicant.
GLONASS -- a segment of the Russian Global Navigation Satellite System currently
operating worldwide in a portion of the frequency band proposed to be used by
Globalstar and other MSS systems for user uplinks.
GROUND OPERATIONS CONTROL CENTER (GOCC) -- regional Globalstar
telecommunications control centers designed to communicate and coordinate
information on resource availability, time of day, frequency assignments, and
connectivity and sequence schedules to the pathways and SOCCs which comprise the
Globalstar ground segment.
GROUND SEGMENT -- the ground-based portion of the Globalstar System. The ground
segment consists of the SOCCs, the GOCCs, the gateways, TCUs located at selected
gateways, and the Globalstar Data Network which interconnects all of the
ground-based elements.
GUARANTY FEE -- the fee equal to 1.5% per annum of the average quarterly amount
outstanding under the Credit Agreement, paid by Globalstar to Loral and the
other guaranteeing partners.
GUARANTY WARRANTS -- Warrants to purchase 4,185,318 shares of Common Stock, at a
price of $26.50 per share, issued by GTL to DASA, Loral, Lockheed Martin,
Qualcomm and SS/L.
HAND-HELD SERVICE -- Globalstar voice service to a hand-held, portable terminal.
HOT FAILURE -- launch failure resulting in damage to or loss of a satellite.
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HYUNDAI -- Hyundai Electronics Industries Co. Ltd. Hyundai is a leading South
Korean manufacturer of telecommunications equipment, including the development
and production of portable and mobile cellular telephones, and multimedia
systems.
ICO(TM) -- Global Communications' MEO satellite telecommunications service that
would operate in the 2 GHz band.
INDENTURE -- the indenture pursuant to which the notes comprising a part of the
Units are issued.
INFORMATION AGENT -- W.F. Doring & Co., Inc.
ITU -- see International Telecommunication Union.
IN-SERVICE DATE -- the date on which Globalstar expects to commence initial
commercial operations via a 32-satellite constellation.
INDEPENDENT REPRESENTATIVES -- representatives on the General Partners'
committee not affiliated with Loral.
INMARSAT -- International Maritime Satellite Organization, which has formed an
affiliate, Global Communications, Inc., which is a proponent of ICO.
INTELSAT -- International Telecommunications Satellite Organization, a
consortium of 135 member nations and the world's largest operator of
communications satellites.
INTERNATIONAL TELECOMMUNICATION UNION (ITU) -- telecommunications agency of the
United Nations, established to provide standardized communication procedures and
practices, including frequency allocation and radio regulations on a worldwide
basis.
INVESTMENT COMPANY ACT -- the Investment Company Act of 1940, as amended.
IRIDIUM(TM) -- a low-earth orbit satellite-based telecommunications system
proposed by a consortium headed by Motorola to operate in the MSS Above 1 GHz
Service frequencies. See MSS applicant.
KHz -- see kilohertz.
KILOHERTZ (KHz) -- a unit of frequency equal to one thousand cycles per second.
LEO -- low-earth orbit between 500 and 1,500 nautical miles in altitude.
LGP -- Loral General Partner, Inc., general partner of LQP.
LMDS -- Local Multipoint Distribution Services.
L/Q LICENSEE -- a wholly owned subsidiary of LQP to which LQP assigned its FCC
license granting authority to construct, launch and operate the Globalstar
System for the purposes of providing MSS in the United States.
LQP -- see Loral/Qualcomm Partnership, L.P.
LQSS -- see Loral/Qualcomm Satellite Services, L.P.
LOCKHEED MARTIN -- Lockheed Martin Corporation, a Maryland corporation, and its
subsidiaries and affiliates. Lockheed Martin acquired Old Loral pursuant to an
Agreement and Plan of Merger, dated as of January 7, 1996.
LORAL -- Loral Space & Communications Ltd., a Bermuda company. Loral is a
principal founder of Globalstar and, through a subsidiary, its managing partner.
LORAL/QUALCOMM PARTNERSHIP, L.P. (LQP) -- a Delaware limited partnership
comprised of subsidiaries of Loral and Qualcomm. LQP is the general partner of
LQSS, and was an MSS applicant for the FCC license to construct, launch and
operate the Globalstar System.
LORAL/QUALCOMM SATELLITE SERVICES, L.P. (LQSS) -- a Delaware limited partnership
which is the managing general partner of Globalstar.
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MEO -- Medium-earth orbit, between 2,000 and 18,000 nautical miles in altitude.
MHz -- see megahertz.
MSS -- see Mobile Satellite Services.
MSS ABOVE 1 GHz SERVICE -- an MSS service regulated by the FCC in the United
States which has been allocated spectrum in 1610-1626.5 MHz for the user uplink
and in 2483.5-2500 MHz for the user downlink.
MSS APPLICANTS -- six companies that have applied to the FCC for licenses to
provide LEO satellite-based telecommunications services in the United States in
the 1610-1626.5/2483.5-2500 MHz portions of the radio frequency spectrum.
MSS PROCEEDING -- FCC proceeding for considering applications for authorization
to construct, launch and operate MSS systems in the United States.
MEGAHERTZ (MHz) -- a unit of frequency equal to one million cycles per second.
MOBILE SATELLITE SERVICES (MSS) -- services transmitted via satellites to
provide mobile telephone, fixed telephone, paging, messaging, facsimile, data
and position location services directly to users.
MOTOROLA -- Motorola, Inc.
NNM -- Nasdaq National Market.
ODYSSEY(TM) -- a medium-earth orbit satellite-based telecommunications system
proposed by TRW, Inc., to operate in the MSS Above 1 GHz Service frequencies.
See MSS applicant.
OLD LORAL -- Loral Corporation, a New York corporation which merged into a
subsidiary of Lockheed Martin pursuant to an Agreement and Plan of Merger, dated
as of January 7, 1996.
OMNITRACS -- an international satellite-based truck fleet and position location
service, owned and operated by Qualcomm.
ORBITAL PLANE -- the flight path of a satellite.
ORBITEL -- Orbitel Mobile Communications Ltd., a subsidiary of L.M. Ericsson.
ORDER -- FCC order adopting rules and policies for MSS Above 1 GHz Service.
PCS -- see personal communications service.
PFIC -- a passive foreign investment company within the meaning of the Code.
PSTN -- see Public Switched Telephone Network.
PAGING -- a service designed to deliver a message to a person whose location is
unknown; messages may be received via an alphanumeric display or small speaker.
PARTNERSHIP WARRANTS -- the rights to purchase 5,316,486 Globalstar partnership
interests, at a price of $26.50 each, upon the exercise of the Guaranty Warrants
and of the Rights.
PATH DIVERSITY -- the character of the angles of view formed by the 48 LEO
satellites orbiting the Earth to facilitate continuous overlapping global
coverage.
PENETRATION RATE -- the percentage of total population in a national or regional
area subscribing to a given telecommunications service.
PERSONAL COMMUNICATIONS SERVICES (PCS) -- terrestrial wireless telecommunication
service similar to cellular telephone service but operating in a different set
of frequencies.
PREFERRED PARTNERSHIP INTERESTS -- Interests in Globalstar acquired by GTL in
connection with its issuance of CPEOs. The Preferred Partnership Interests
represent (on a fully diluted basis) an 8.4% equity interest in Globalstar.
G-5
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QUALCOMM -- QUALCOMM Incorporated, a Delaware corporation, and its subsidiaries
and affiliates. Qualcomm, a leader in CDMA technology, has successfully
implemented CDMA in multi-user cellular communications applications and owns and
operates OmniTRACS, an international satellite-based truck fleet and position
location service.
RADIO FREQUENCY SPECTRUM -- a portion of the electromagnetic spectrum that
includes electromagnetic waves at frequencies below the infrared frequencies and
usually above 20 KHz. See also electromagnetic spectrum.
RECORD DATE -- March , 1997.
RIGHTS SHARES -- 1,131,168 shares of Common Stock available for purchase
pursuant to the exercise of Rights.
RIGHTS -- rights to subscribe for and purchase 1,131,168 shares of Common Stock
for a price of $26.50 per share, distributed by GTL to the holders of Common
Stock.
RIGHTS OFFERING -- the offering of the Rights Shares issuable upon exercise of
the Rights.
SOCCs -- see Satellite Operations Control Center.
SS/L -- Space Systems/Loral, Inc., a Delaware corporation, in which Loral holds
a 51% equity interest, is a leading manufacturer of commercial communications
satellites. Loral is contractually obligated to increase this interest to 75.5%.
SATELLITE OPERATIONS CONTROL CENTER (SOCC) -- monitors and controls the
satellite after it is launched. There are no antennas or radio frequency
equipment located at the SOCC. Radio frequency links to and from the satellite
are via telemetry and command units that are physically located at selected
gateways. The SOCC coordinates with other elements of the Globalstar Ground
Segments.
SECURITIES ACT -- the Securities Act of 1933, as amended.
SELLING HOLDERS -- the holders of the Guaranty Warrants.
SERVICE (OR GLOBALSTAR SERVICE) -- the transmission and reception of voice,
data, messaging, paging, position, location or other information through the
Globalstar System using a service provider's gateway(s).
SERVICE PROVIDER -- Globalstar's partners and other entities that will act as
local intermediaries between Globalstar and the subscribers. Service providers
will build and own the gateways, obtain the necessary regulatory approvals and
market and distribute Globalstar service in their respective markets.
SHAREHOLDERS -- holders of record of Common Stock outstanding as of the Record
Date.
SHARES -- Warrant Shares and Rights Shares.
SPACE SEGMENT -- the space-based portion of the Globalstar System.
SPECTRUM -- the radio frequency spectrum.
STANDBY AGREEMENT -- the agreement between GTL and Loral, pursuant to which
Loral has agreed to subscribe for and purchase at the Subscription Price all
Rights Shares not otherwise subscribed for on or prior to the Expiration Date.
STRATEGIC PARTNER -- Globalstar's direct and indirect partners which will play
key roles in the design, construction, operation and marketing of the Globalstar
System.
SUBSCRIPTION AGENT -- The Bank of New York.
SUBSCRIPTION CERTIFICATES -- transferable subscription certificates underlying
the Rights.
SUBSCRIPTION PRICE -- $26.50 per share of Common Stock.
SWITCH -- a device that opens or closes circuits or selects the paths or
circuits to be used for transmission of information; switching is the process of
interconnecting circuits to form a transmission path between users.
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<PAGE> 96
TCUs -- telemetry and command units, self-contained units installed in selected
gateways which use the gateway antennas. They include the ground-based telemetry
receiver and the ground-based command transmitters. They interface with and are
directly controlled by SOCCs via the Globalstar data network.
TDMA -- see Time Division Multiple Access.
TELITAL -- TELITAL S.r.L., a private company organized under the laws of Italy,
which designs, develops and produces telephony products for European and
international markets.
TIME DIVISION MULTIPLE ACCESS (TDMA) -- a digital method of multiplexing that
combines a number of signals through a common point by organizing them
sequentially and transmitting each in bursts at different instants of time.
Communicating devices at different geographical locations share a multipoint or
broadcast channel by means of a technique that allocates different time slots to
different users.
UNIT OFFERING -- the offering of the Units.
UNITS -- the 500,000 units issued on February 19, 1997, consisting of
$500,000,000 11 3/8% Senior Notes due 2004 of Globalstar and its subsidiary,
Globalstar Capital Corporation, and warrants to purchase 1,032,250 shares of
Common Stock.
UPLINK -- the transmitting of a satellite circuit extending from the Earth to
the satellite. Compare to downlink.
USER LINK -- the path by which information flows when traveling from a
Subscriber Terminal to a satellite and from a satellite to a Subscriber
Terminal. LQP has applied for user uplinks in the L-band and user downlinks in
the S-bank regions of the frequency spectrum.
VODAFONE -- Vodafone Group Plc, a U.K. company. Vodafone is one of the largest
providers of mobile telecommunications services in the world, with 1.4 million
cellular subscribers worldwide.
WARC -- see World Administrative Radio Conference.
WARC '92 -- the 1992 WARC.
WRC -- see World Radiocommunication Conference.
WRC '95 -- the 1995 World Radiocommunication Conference.
WARRANT ACCELERATION AND REGISTRATION RIGHTS AGREEMENT -- the agreement by and
among GTL, LQSS and the Warrant Holders pursuant to which GTL and LQSS agreed to
accelerate the vesting and exercisability of the Guaranty Warrants.
WARRANT SHARES -- 4,185,318 shares of Common Stock issuable upon exercise of the
Guaranty Warrants.
WORLD ADMINISTRATIVE RADIO CONFERENCE (WARC) -- an ITU conference for adopting
international allocations for radio frequencies and satellite orbit locations.
WORLD RADIOCOMMUNICATION CONFERENCE (WRC) -- since 1993, the successor to the
World Administrative Radio Conference.
YUZHNOYE -- YUZHNOYE NPO YUZHNOYE, A UKRAINE LAUNCH VEHICLE MANUFACTURER.
References to corporate entities include their subsidiaries unless
otherwise specified.
G-7
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======================================================
NO DEALER, SALESPERSON OR OTHER 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 WARRANT SHARES 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
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PAGE
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Summary............................... 1
Risk Factors.......................... 6
Use of Proceeds....................... 15
Dividend Policy....................... 15
The Company........................... 17
Business.............................. 17
Regulation............................ 23
Taxation.............................. 27
Selling Holders....................... 29
Plan of Distribution.................. 34
Legal Opinions........................ 36
Experts............................... 36
Glossary of Terms..................... G-1
</TABLE>
======================================================
======================================================
GLOBALSTAR
TELECOMMUNICATIONS LIMITED
4,185,318 Shares
of Common Stock
Issuable upon Exercise
of Warrants to Purchase
such Shares
---------------------------
PROSPECTUS
March , 1997
---------------------------
======================================================
<PAGE> 98
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..................................... $ 100,490
Nasdaq National Market listing fee....................... 17,500
Printing fees............................................ 50,000
Legal fees and expenses.................................. 25,000
Blue Sky fees and expenses (including legal fees)........ 5,000
Accounting fees and expenses............................. 5,000
Subscription Agent's fees and expenses................... 10,000
Information Agent's fees and expenses.................... 5,000
Miscellaneous fees and expenses.......................... 2,010
---------
Total............................................... $ 220,000
=========
</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 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 has entered 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.
ITEM 16. EXHIBITS.
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
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1+ -- Form of Standby Agreement between Loral and the Company.
4+ -- Form of Subscription Certificate.
5+ -- Opinion of Appleby, Spurling & Kempe.
8.1+ -- Tax Opinion of Appleby, Spurling & Kempe.
8.2+ -- Tax Opinion of Willkie Farr & Gallagher.
12* -- Statement Regarding Computation of Ratios.
</TABLE>
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EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
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<S> <C>
23.1+ -- Consent of Deloitte & Touche LLP.
23.2+ -- Consent of Appleby, Spurling & Kempe (included in their opinions filed as Exhibits
5 and 8.1).
23.3+ -- Consent of Willkie Farr & Gallagher (included in their opinion filed as Exhibit
8.2).
24** -- Powers of attorney (included in Signature Page).
99.1+ -- Form of Instructions as to Use of Globalstar Telecommunications Limited
Subscription Certificates.
99.2+ -- Form of Notice of Guaranteed Delivery.
99.3+ -- Form of Letter to Shareholders.
99.4+ -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
99.5+ -- Form of Letter to Clients from Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
99.6+ -- Form of Subscription Agency Agreement.
99.7+ -- Form of Information Agency Agreement.
</TABLE>
- ---------------
+ Filed herewith.
* Incorporated by reference to the identically numbered exhibit to the
Company's Form 10-K for the period ending December 31, 1996.
** Previously filed.
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.
II-2
<PAGE> 100
(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> 101
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO 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 MARCH 10, 1997.
GLOBALSTAR TELECOMMUNICATIONS LIMITED
By: /s/ ERIC J. ZAHLER
------------------------------------
Eric J. Zahler
Vice President, General Counsel
and Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
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NAME TITLE DATE
- ------------------------------------------ ---------------------------------------------------
<C> <S> <C>
* Chairman of the Board and Chief March 10, 1997
- ------------------------------------------ Executive Officer (Principal
BERNARD L. SCHWARTZ Executive Officer)
* President, Chief Operating March 10, 1997
- ------------------------------------------ Officer
MICHAEL B. TARGOFF and Director
* Senior Vice President, Chief March 10, 1997
- ------------------------------------------ Financial Officer and Director
MICHAEL P. DEBLASIO (Principal Financial Officer)
* Director March 10, 1997
- ------------------------------------------
ROBERT B. HODES
* Director March 10, 1997
- ------------------------------------------
SIR RONALD GRIERSON
* Director March 10, 1997
- ------------------------------------------
E. JOHN PEETT
* Director March 10, 1997
- ------------------------------------------
A. ROBERT TOWBIN
* Vice President and Controller March 10, 1997
- ------------------------------------------ (Principal Accounting Officer)
HARVEY B. REIN
By: /s/ ERIC J. ZAHLER
--------------------------------------
Eric J. Zahler
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 102
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------------- -------------------------------------------------------------------------------
<S> <C>
1+ -- Form of Standby Agreement between Loral and the Company.
4+ -- Form of Subscription Certificate.
5+ -- Opinion of Appleby, Spurling & Kempe.
8.1+ -- Tax Opinion of Appleby, Spurling & Kempe.
8.2+ -- Tax Opinion of Willkie Farr & Gallagher.
12* -- Statement Regarding Computation of Ratios.
23.1+ -- Consent of Deloitte & Touche LLP.
23.2+ -- Consent of Appleby, Spurling & Kempe (included in their opinions filed as
Exhibits 5 and 8.1).
23.3+ -- Consent of Willkie Farr & Gallagher (included in their opinion filed as Exhibit
8.2).
24** -- Powers of Attorney (included in Signature Page).
99.1+ -- Form of Instructions as to Use of Globalstar Telecommunications Limited
Subscription Certificates.
99.2+ -- Form of Notice of Guaranteed Delivery.
99.3+ -- Form of Letter to Shareholders.
99.4+ -- Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
99.5+ -- Form of Letter to Clients from Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
99.6+ -- Form of Subscription Agency Agreement.
99.7+ -- Form of Information Agency Agreement.
</TABLE>
- ---------------
+ Filed herewith.
* Incorporated by reference to the identically numbered exhibit in the
Company's Form 10-K for the period ending December 31, 1996.
** Previously filed.
II-5
<PAGE> 1
EXHIBIT 1
<PAGE> 2
EXHIBIT 1
STANDBY STOCK PURCHASE AGREEMENT
THIS STANDBY STOCK PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of March , 1997, by and between Globalstar Telecommunications
Limited, a Bermuda company (the "Company") and Loral Space & Communications
Ltd., a Bermuda company (the "Purchaser").
WITNESSETH:
WHEREAS, the Company anticipates issuing to its Shareholders holding Common
Stock on a record date to be determined by the Company, subscription rights (the
"Rights") to subscribe for and purchase an aggregate of 1,131,168 shares (the
"Rights Shares") of the Company's Common Stock, $1.00 par value per share (the
"Common Stock"), at the per share Subscription Price of $26.50 (the "Rights
Offering"); and
WHEREAS, in connection with the Rights Offering the Purchaser agrees to
purchase and the Company agrees to sell and issue at the Subscription Price to
the Purchaser any and all Rights Shares not subscribed for by the holders of the
Rights; and
WHEREAS, the Purchaser and the Company desire to enter into this Agreement
regarding the issuance, sale and purchase of the Standby Shares (as defined
herein);
NOW, THEREFORE, in and for consideration of the premises, and other good
and valuable consideration the receipt and sufficiency of all of which is hereby
acknowledged, intending to be legally bound, the parties agree as follows:
I. CERTAIN DEFINITIONS.
A. Capitalized terms not otherwise defined herein have the meanings
ascribed to them in the Preliminary or Final Prospectus, as the case may be,
contained in the Company's Registration Statement (as defined below).
B. The following terms have the meanings specified:
"Commission" means the United States Securities and Exchange
Commission.
"Effective Date" means the date as of which the Commission declares
the Registration Statement to be effective for purposes of the Securities
Act.
"Prospectus" means the prospectus constituting a part of the
Registration Statement (including all information incorporated therein by
reference), as from time to time amended or supplemented. If any revised
prospectus shall be filed by the Company at the Commission on or after the
Effective Date of the Registration Statement, the term "Prospectus" shall
refer to each such revised prospectus from and after the time it is first
used.
"Registration Statement" means the registration statement filed by the
Company with the Commission on form S-3 (Commission including all exhibits
thereto, and as the same may be amended (at the date on which it became or
becomes effective) and, in the event any post-effective amendment thereto
is filed with the Commission prior to the Closing Date, the term
"Registration Statement" shall also mean such registration statement as so
amended.
"Securities Act" shall mean the Securities Act of 1933, as amended.
II. PURCHASE AND SALE OF SHARES.
Subject to the terms and conditions herein set forth, the Company hereby
agrees to issue and sell to the Purchaser, and the Purchaser hereby agrees to
purchase from the Company, at the Subscription Price, up to 1,131,168 shares of
the Common Stock (the "Standby Shares"), with the exact number of the Standby
<PAGE> 3
Shares to be calculated by subtracting (a) the number of Rights Shares sold
pursuant to the Rights Offering from (b) the 1,131,168 Rights Shares available
for sale pursuant to the Rights Offering.
III. THE CLOSING.
As soon as practicable following its determination of the number of Rights
Shares subject to Rights that expire without being exercised, the Company shall
notify the Purchaser of the number of Standby Shares, if any, to be purchased by
the Purchaser. The delivery of and payment for the Standby Shares (the
"Closing"), if any, shall occur on the fifth business day following the
Expiration Date (or such later date as the Company and the Purchaser may agree,
the "Closing Date") at the office of Willkie Farr & Gallagher, 153 E. 53rd
Street, New York, New York, at 10:00 a.m. New York time (the "Closing Time").
IV. DELIVERY OF THE STANDBY SHARES.
At the Closing, the Standby Shares, registered in the name of the purchaser
or such nominee(s) as the Purchaser may have specified in writing, shall be
delivered by or on behalf of the Company to the Purchaser, for the Purchaser's
account, against delivery by the Purchaser of the aggregate Subscription Price
therefor in immediately available funds in the form of one or more certified
checks or a wire transfer to an account designated by the Company.
V. REPRESENTATIONS AND WARRANTIES.
The Company hereby represents and warrants to the Purchaser as of the date
hereof and, unless otherwise specified herein, at and as of the date hereof and
at and as of Closing Time as follows:
(1) The Company has filed with the Commission the Registration
Statement (Commission File No. 333-22063), including a preliminary
Prospectus, for the registration under the Act of the offering and sale of
the Rights and the Rights Shares. The Company has filed with the
Commission, or will file prior to the Closing, a further amendment to the
Registration Statement (including the form of final Prospectus). The
Company has included in the Registration Statement as of the date hereof,
and will include in the Registration Statement, as of the Effective Date
and the Closing Date, all information required by the Securities Act and
the rules and regulations promulgated thereunder to be included in the
final Prospectus with respect to the Rights and the Underlying Shares and
the offering thereof.
(2) On the Effective Date and the Closing Date, the Registration
Statement, including any Prospectus filed in accordance with Rule 424(b),
(a) does and will comply in all material respects with the
applicable requirements of the Act and the rules promulgated thereunder,
and
(b) does not and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not
misleading.
(3) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus relating to the proposed offering of
the Shares nor instituted or, to the knowledge of the Company, threatened
to institute proceedings for that purpose.
(4) The Company has been duly formed under the laws of the Islands of
Bermuda and is an existing company in good standing under said laws with
full power and authority to enter into and perform its obligations under
this Agreement.
(5) The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action of the Company this Agreement, when duly executed and delivered by
the Purchaser, will constitute a valid and legally binding instrument of
the Company, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
2
<PAGE> 4
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general principles of equity.
(6) The Rights Shares (including the Standby Shares, if any) have been
duly authorized by the Company, and when issued and delivered by the
Company against payment of the Subscription Price therefor will be validly
issued, fully paid and nonassessable. The Rights have been duly authorized
by the Company, and when issued and delivered by the Company, will
constitute valid and legally binding obligations of the Company,
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(7) The execution and delivery of this Agreement, the consummation by
the Company of the transactions contemplated hereby and in the Prospectus
and the compliance by the Company with the terms hereof do not and will not
conflict with, or result in a breach or violation of, any of the terms or
provisions of, or constitute a default under, (a) the Memorandum of
Association or Bye-laws of the Company, or any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company
is a party or by which any of its properties or assets are bound, with such
exceptions as would not have a material adverse effect on the financial
condition of the Company, or (b) any applicable law, rule, regulation,
judgment, order or decree of any government, governmental instrumentality
or court having jurisdiction over the Company or any of its properties or
assets.
(8) No consent, approval, authorization, order, registration or
qualification of or with any government, governmental instrumentality or
court is required for the valid authorization, execution, delivery and
performance by the Company of this Agreement, the issue of the Rights and
the Rights Shares (including the Standby Shares, if any) or the
consummation by the Company of the other transactions contemplated by this
Agreement, except such as (a) have been obtained on or before the date
hereof or (b) if not required prior to the date hereof, will have been
obtained on or before the Closing Date.
B. The Purchaser hereby represents and warrants to the Company, as of the
date hereof and at and as of the Closing Time, as follows:
(1) The Purchaser has been duly formed under the laws of the Islands
of Bermuda and is an existing company in good standing under said laws with
full power and authority to enter into and perform its obligations under
this Agreement.
(2) The execution, delivery and performance of this Agreement by the
Purchaser and the consummation by the Purchaser of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action of the Purchaser and this Agreement, when duly executed and
delivered by the Company, will constitute a valid and legally binding
agreement of the Purchaser, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general principles of equity.
(3) The Purchaser is not (i) a member of the National Association of
Securities Dealers, Inc. ("NASD"), (ii) an officer, director, general
partner, employee or agent of any NASD member, (iii) associated with any
NASD member or (iv) an immediate family member of any such person.
(4) The Purchaser acknowledges that, upon its receipt of the Standby
Shares, such shares will constitute "restricted securities" within the
meaning of Rule 144(a)(3) under the Securities Act for the purposes of any
resale by the Purchaser of such Standby Shares.
(5) The Purchaser shall not, directly or indirectly, sell, pledge or
otherwise dispose of any Standby Shares in one transaction or series of
transactions except (a)(i) pursuant to a registration statement that has
been declared effective under the Securities Act or (ii) in compliance with
an available exemption from registration under the Securities Act and (B)
in compliance with the applicable securities laws of any state of the
United States or any other applicable jurisdiction.
3
<PAGE> 5
(6) The Purchaser is acquiring the Standby Shares for its own account
without any view to, and not for offer or sale in connection with, any
distribution of the Standby Shares in violation of the Securities Act.
VI. CLOSING CONDITIONS.
A. The obligations of the Company to consummate its issuance and sale of
the Standby Shares shall be subject to the conditions that (1) all
representations and warranties and other statements of the Purchaser are, as of
the date hereof and at and as of the Closing Time, true and correct in all
material respects, (2) the Purchaser shall have performed in all material
respects all of its obligations hereunder to have been performed at or prior to,
the Closing Time, and (3) no stop order suspending the effectiveness of the
Registration Statement or any amendment or supplement thereto shall have been
issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission.
B. The obligations of the Purchaser to the consummate its purchase of the
Standby Shares shall be subject to the conditions that (1) all representations
and warranties and other statements of the Company are, as of the date hereof
and at and as of the Closing Time, true and correct in all material respects,
(2) the Company shall have performed in all material respects all of its
obligations hereunder to have been performed at or prior to the Closing Time,
and (3) no stop order suspending the effectiveness of the Registration Statement
or any amendment or supplement thereto shall have been issued and no proceeding
for that purpose shall have been initiated or threatened by the Commission.
VII. TERMINATION.
Either of the parties hereto may terminate this Agreement if the
transactions contemplated hereby are not consummated by December 31, 1997
through no fault of such party. In addition, this Agreement shall terminate upon
mutual consent of the parties hereto. The Company and the Purchaser hereby agree
that any termination of this Agreement pursuant to this Section 6, or the
termination of the Rights Offering for any reason whatsoever by the Company
(other than termination in the event of a breach of this Agreement by the
Purchaser or misrepresentation of any of the statements made herein by the
Purchaser) shall be without liability of the Company or the Purchaser.
VIII. GOVERNING LAW.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York without regard to principles of conflicts of laws.
IX. ENTIRE AGREEMENT.
This Agreement represents the entire understanding of the parties with
respect to the matters addressed herein and supersedes all prior written and
oral understandings concerning the subject matter hereof.
X. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all such respective counterparts shall
together constitute but one and the same instrument.
XI. ATTORNEYS' FEES.
In the event of any suit or other proceeding to construe or enforce any
provision of this Agreement, or otherwise in connection with this Agreement, the
prevailing party's reasonable attorneys' fees and costs (in addition to all
other amounts and relief to which such party may be entitled) shall be paid by
the other party, whether or not such suit or proceeding is prosecuted to
judgment.
4
<PAGE> 6
IN WITNESS WHEREOF, and intending to be legally bound, the Company and the
Purchaser has each signed or caused to be signed its name as of the day and year
first above written.
COMPANY
GLOBALSTAR TELECOMMUNICATIONS LIMITED
Cedar House
41 Cedar Avenue
Hamilton HM12
Bermuda
By:
------------------------------------
Name:
Title:
PURCHASER
LORAL SPACE & COMMUNICATIONS LTD.
600 Third Avenue
New York, New York 10016
By:
------------------------------------
Name:
Title:
5
<PAGE> 1
EXHIBIT 4
<PAGE> 2
EXHIBIT 4
<TABLE>
<S> <C>
SUBSCRIPTION CERTIFICATE NUMBER: NUMBER OF RIGHTS:
NUMBER OF SHARES
AVAILABLE FOR SUBSCRIPTION:
CUSIP NUMBER G3930H 13 8
REGISTERED OWNER:
</TABLE>
THIS OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME ON APRIL , 1997
UNLESS EXTENDED, AND THIS SUBSCRIPTION CERTIFICATE IS VOID THEREAFTER
GLOBALSTAR TELECOMMUNICATIONS LIMITED
SUBSCRIPTION RIGHTS FOR COMMON STOCK
SUBSCRIPTION CERTIFICATE
Dear Shareholder:
As the registered owner of this Subscription Certificate, you are entitled
to exercise the Rights issued to you as of March , 1997, the Record Date for
Rights Offering of Globalstar Telecommunications Limited (the "Company"), to
subscribe for the number of shares of Common Stock of the Company shown on this
Certificate pursuant to the rights offering (the "Rights Offering") upon the
terms and conditions and at the Subscription Price for each share of Common
Stock as specified in the Company's Prospectus dated March , 1997 (the
"Prospectus"). The terms and conditions of the Rights Offering set forth in the
Prospectus are incorporated herein by reference. Copies of the Prospectus are
available upon request from the Information Agent, W.F. Doring & Co., Inc. at
the toll-free telephone number (888) 330-5111.
METHOD OF EXERCISE OR TRANSFER OF RIGHTS
The Rights represented by this Subscription Certificate may be exercised by
duly completing and executing Form 1, and may be transferred, assigned,
exercised or sold through a bank or broker by duly completing and executing Form
2. This Subscription Certificate is transferable and may be combined or divided
at the office of the Subscription Agent. Rights holders should be aware that if
they choose to exercise or transfer less than all of the Rights evidenced
hereby, they may not receive a new subscription certificate in sufficient time
to exercise the remaining Rights evidenced thereby.
Full payment of the Subscription Price of $26.50 per share for all shares
subscribed for pursuant to the Rights Offering must accompany this Subscription
Certificate and must be made payable in United States dollars by money order or
check drawn on a bank located in the United States payable to The Bank of New
York. Alternatively, if a Notice of Guaranteed Delivery is used, a properly
completed Subscription Certificate, together with payment in full, as described,
must be received by the Subscription Agent by no later than the close of
business on the third business day after the Expiration Date. See pages 29
through 32 of the Prospectus.
Any questions regarding this Subscription Certificate may be directed to
the Information Agent, W.F. Doring & Co., Inc. at the toll-free telephone number
(888) 330-5111.
<TABLE>
<S> <C> <C>
By Mail: THE BANK OF NEW YORK By Hand or Overnight Courier:
101 BARCLAY STREET
Tender & Exchange Department NEW YORK, NEW YORK 10286 Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Facsimile Transmission: Receive and Deliver Window
New York, New York 10286-1248 (for Eligible Institutions Only) New York, New York 10286
(212) 815-6213
</TABLE>
THIS RIGHTS OFFERING HAS BEEN QUALIFIED OR IS BELIEVED TO BE EXEMPT FROM
QUALIFICATION ONLY UNDER THE FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF
EACH OF THE STATES IN THE UNITED STATES. RESIDENTS OF OTHER JURISDICTIONS MAY
NOT PURCHASE THE SHARES OF COMMON STOCK OFFERED HEREBY UNLESS THEIR PURCHASES OF
SUCH SHARES ARE EFFECTED IN ACCORDANCE WITH THE APPLICABLE LAWS OF SUCH
JURISDICTIONS.
<TABLE>
<S> <C>
Eric J. Zahler Michael B. Targoff
Secretary President and Chief Operating Officer
</TABLE>
<PAGE> 3
FORM 1 -- EXERCISE AND SUBSCRIPTION: The undersigned hereby irrevocably
exercises one or more Rights evidenced by this Subscription Certificate to
subscribe for shares of Common Stock as indicated below, and the terms and
subject to the conditions specified in the Prospectus, receipt of which is
hereby acknowledged.
(a) Number of shares subscribed for pursuant to the Rights (each Right may
be exercised for one Share):
(Number of new shares) X $26.50 = $ -------------------
(b) Method of Payment (check and complete appropriate box(es)):
[ ] Uncertified, certified or cashier's check, bank draft or money
order in the amount of $
----------------------, payable to The Bank of New York, subscription
agent.
[ ] Wire transfer in the amount of $
- ------------, directed to The Bank of New York, subscription agent, ABA No.:
----------------------, GTL Rights Offering DDA No.:
----------------------, Attention:
----------------------------. Indicate name of institution wire
transferring funds and name of registered holder.
(c) If the number of Rights being exercised is less than all of the Rights
represented by this Subscription Certificate, check one of the
following boxes:
[ ] Deliver to me a new Subscription Certificate evidencing the
remaining Rights to which I am entitled.
[ ] Deliver a new Subscription Certificate evidencing the remaining
Rights in accordance with my Form 2 instructions (any required
signature guarantees must be included).
(d) If Rights are being exercised pursuant to a Notice of Guaranteed
Delivery delivered to the Subscription Agent prior to the date hereof,
complete the following:
Name(s) of Registered Owner(s):
- ----------------------------------------------------------
Window Ticket Number (if any):
- -----------------------------------------------------------
Date of execution of Notice of Guaranteed Delivery:
- ------------------, 1997
Name and Telephone Number of Eligible Institution which Guaranteed
Delivery:
- --------------------------------------------------------------------------------
FORM 2 -- CHECK THE BOX BELOW TO TRANSFER YOUR SUBSCRIPTION CERTIFICATE OR SOME
OR ALL OF YOUR RIGHTS EVIDENCED HEREBY OR TO EXERCISE OR SELL RIGHTS THROUGH
YOUR BANK OR BROKER: [ ] For value received,
- ------------------Rights represented by this Subscription Certificate are hereby
assigned to (please print name and address and Taxpayer Identification No. of
transferee in full):
Name:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Taxpayer Identification No. (Social Security Number for individuals):
- -------------------------------
Upon completion of Form 1 and/or Form 2, subscribers and/or transferors must
sign below:
- --------------------------------------------------------------------------------
Signature of Subscriber or Transferor+
+ To effect a Transfer, a signature Guarantee must be provided by an Eligible
Institution as defined in Rule 17Ad-15 of the Securities Exchange Act of 1934.
2
<PAGE> 1
EXHIBIT 5
<PAGE> 2
EXHIBIT 5
[LETTERHEAD OF APPLEBY, SPURLING & KEMPE]
7 March, 1997
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"). We have been requested to render this opinion
as to Bermuda law in connection with its registration of transferable
subscription rights (the "Rights") to subscribe for 1,131,168 shares of Common
Stock issuable upon exercise of rights to subscribe for the shares (the "Rights
Shares") and 4,185,318 shares of Common Stock issuable upon exercise of Warrant
to purchase such shares (the "Warrant 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 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 the Rights, the Rights Shares and the Warrant Shares have been duly
authorised by the Company and when issued in accordance with the terms of the
Prospectus will be validly issued, fully paid and subject to no further calls.
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.
<PAGE> 3
(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 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 and that it will not
give rise to an action in any jurisdiction other than Bermuda. It is issued
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
<PAGE> 1
EXHIBIT 8.1
<PAGE> 2
[LETTERHEAD OF APPLEBY, SPURLING & KEMPE]
7 March, 1997
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"). We have been requested to render this opinion
as to Bermuda law in connection with its registration of transferrable
subscription rights (the "Rights") to subscribe for 1,131,168 shares of Common
Stock issuable upon exercise of rights to subscribe for the shares (the "Rights
Shares") and 4,185,318 shares of Common Stock issuable upon exercise of Warrant
to purchase such shares (the "Warrant 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 the statements set forth in the Prospectus under the heading
"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
<PAGE> 3
(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 8.1 to the Registration
Statement and to the reference to our firm 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 and that it will not
give rise to an action in any jurisdiction other than Bermuda. It is issued
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
<PAGE> 1
EXHIBIT 8.2
<PAGE> 2
EXHIBIT 8.2
[WILLKIE FARR & GALLAGHER LETTERHEAD]
March 7, 1997
Globalstar Telecommunications Limited
Cedar House
41 Cedar Avenue
Hamilton HM12 Bermuda
Ladies and Gentlemen:
We have acted as counsel for Globalstar Telecommunications Limited, a
Bermuda corporation (the "Company"), in connection with (i) the proposed
issuance of rights (the "Rights") to acquire up to 1,131,168 shares of the
Company's common stock, par value $1.00 per share (the "Common Stock"); (ii) the
proposed issuance of up to 1,131,168 shares of Common Stock upon exercise of
such rights; and (iii) the proposed sale of up to 4,185,318 shares of Common
Stock by the holders of certain warrants previously issued by the Company,
following the exercise of such warrants, as described in the Company's
Prospectus (the "Prospectus"), contained in the Form S-3 Registration Statement,
File No. 333-22063 (as amended to date, the "Registration Statement") filed with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act").
As counsel for the Company, we have examined copies of the Registration
Statement and such other certificates and documents as we have deemed relevant
and necessary for the opinion hereinafter set forth. In such examination, we
have assumed the genuineness of all 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.
The opinion set forth below assumes the accuracy of the statements and
facts described in the Prospectus and that the offering of the Rights is
consummated in the manner set forth therein.
Based upon the foregoing and having regard for such legal questions as we
have deemed relevant, it is our opinion that the legal conclusions set forth in
the discussion of U.S. tax law under the heading "Taxation--Distribution and
Ownership of the Rights" and "Taxation--Other United States Tax Considerations"
address the material U.S. tax consequences of an investment in the Common Stock
pursuant to the exercise of the Rights.
The foregoing opinion is based on current provisions of the Internal
Revenue Code of 1986, as amended, the Treasury Regulations promulgated
thereunder, published pronouncements of the Internal Revenue Service and case
law, all of which are subject to change. No opinion is expressed concerning any
matters other than those specifically referred to herein.
We consent to the filing of this opinion letter as Exhibit 8.2 to the
Registration Statement and to the reference to our name in the Prospectus
constituting a part of such Registration Statement under the heading "Legal
Opinions". In giving such consent, we do not hereby admit that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations of the Securities and Exchange
Commission thereunder.
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.
Very truly yours,
WILLKIE FARR & GALLAGHER
<PAGE> 1
EXHIBIT 23.1
CONSENT OF DELOITTE & TOUCHE LLP
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement (Registration No. 333-22063) of Globalstar
Telecommunications Limited on Form S-3 of our reports dated February 24, 1997,
appearing in the Annual Report on Form 10-K of Globalstar Telecommunications
Limited for the year ended December 31, 1996 and to the reference to us under
the heading "Experts" in each Prospectus included within this Amendment No. 1 to
the Registration Statement.
DELOITTE & TOUCHE LLP
San Jose, California
March 7, 1997
<PAGE> 1
EXHIBIT 99.1
<PAGE> 2
EXHIBIT 99.1
INSTRUCTIONS FOR COMPLETING
GLOBALSTAR TELECOMMUNICATIONS LIMITED
SUBSCRIPTION CERTIFICATES
CONSULT THE INFORMATION AGENT OR YOUR BANK OR
BROKER AS TO ANY QUESTIONS
------------------------
The following instructions relate to a rights offering (the "Rights
Offering") by Globalstar Telecommunications Limited, a Bermuda company (the
"Company"), to the holders of its common stock, par value $1.00 per share (the
"Common Stock"), as described in the Company's Prospectus dated March , 1997
(the "Prospectus"). Holders of record of Common Stock at the close of business
on March , 1997 (the "Record Date") are receiving one (1) transferable
subscription right (a "Right") for each 8.84042 shares of Common Stock held of
record on the Record Date. The Rights are evidenced by transferable subscription
certificates ("Subscription Certificates"), which record holders are receiving
with copies of the Company's Prospectus. Each whole Right entitles the holder
thereof to purchase from the Company one (1) share of Common Stock at the
subscription price of $26.50 (the "Subscription Price"). No fractional Rights or
cash in lieu thereof have been distributed or paid by the Company. The number of
Rights distributed to each holder of Common Stock have been rounded down to the
nearest whole number. An aggregate of 1,131,168 Rights exercisable to purchase
an aggregate of 1,131,168 shares of Common Stock are being distributed in
connection with the Rights Offering.
The Rights will expire at 5:00 p.m. New York City time, on April , 1997,
unless extended (the "Expiration Time").
The number of Rights to which you are entitled is printed on the face of
your Subscription Certificate. You should indicate your wishes with regard to
the exercise and/or transfer of your Rights by completing the appropriate form
or forms on the back of your Subscription Certificate and returning the
Subscription Certificate to the Subscription Agent in the envelope provided.
YOUR SUBSCRIPTION CERTIFICATE MUST BE RECEIVED BY THE SUBSCRIPTION AGENT,
OR GUARANTEED DELIVERY PROCEDURES WITH RESPECT TO YOUR RIGHT
MUST BE COMPLIED WITH, AND PAYMENT OF THE SUBSCRIPTION PRICE, INCLUDING FINAL
CLEARANCE OF ANY CHECKS, MUST BE RECEIVED BY THE SUBSCRIPTION AGENT AT OR BEFORE
5:00 P.M., NEW YORK CITY TIME, ON APRIL , 1997, OR ON SUCH LATER DATE AS THE
EXPIRATION TIME IS EXTENDED. YOU MAY NOT REVOKE ANY PROPER EXERCISE OF A RIGHT.
1. SUBSCRIPTION.
To exercise Rights, complete and sign the Form 1 on the reverse side of
your Subscription Certificate and send it (or Notice of Guaranteed Delivery),
together with payment in full of the Subscription Price for each share of Common
Stock subscribed for pursuant to the Rights Offering to The Bank of New York, as
Subscription Agent (the "Subscription Agent"). Payment of the Subscription Price
must be made for the full number of shares of Common Stock being subscribed for
(a) in U.S. dollars by check or postal, telegraphic or express money order
payable to The Bank of New York, as Subscription Agent or (b) by wire transfer
of funds in U.S. dollars to the account maintained by the Subscription Agent for
such purpose at [ ], ABA No. ; GTL Rights Offering DDA
No.: ; Attention: . THE SUBSCRIPTION PRICE WILL BE DEEMED
TO HAVE BEEN RECEIVED BY THE SUBSCRIPTION AGENT ONLY UPON (I) CLEARANCE OF ANY
UNCERTIFIED CHECK, (II) RECEIPT BY THE SUBSCRIPTION AGENT OF ANY CERTIFIED OR
CASHIER'S CHECK OR OF ANY POSTAL, TELEGRAPHIC OR EXPRESS MONEY ORDER, OR (III)
RECEIPT OF COLLECTED FUNDS IN THE SUBSCRIPTION AGENT'S ACCOUNT DESIGNATED ABOVE.
IF PAYING BY UNCERTIFIED PERSONAL CHECK, PLEASE NOTE
<PAGE> 3
THAT THE FUNDS PAID THEREBY MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR.
ACCORDINGLY, REGISTERED RIGHTS HOLDERS WHO WISH TO PAY THE SUBSCRIPTION PRICE BY
MEANS OF AN UNCERTIFIED PERSONAL CHECK ARE URGED TO MAKE PAYMENT SUFFICIENTLY IN
ADVANCE OF THE EXPIRATION TIME TO ENSURE THAT SUCH PAYMENT IS RECEIVED AND
CLEARS BY SUCH TIME AND ARE URGED TO CONSIDER, IN THE ALTERNATIVE, PAYMENT BY
MEANS OF CERTIFIED OR CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.
Alternatively, you may cause a written guarantee substantially in the form
of Exhibit A to these instructions (the "Notice of Guaranteed Delivery") from a
member firm of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc., or from a commercial bank or
trust company having an office or correspondent in the United States (each, an
"Eligible Institution"), to be received by the Subscription Agent prior to the
Expiration Time; payment in full of the applicable Subscription Price may be
made separately as long as said payment is also received by the Subscription
Agent prior to the Expiration Time. Such Notice of Guaranteed Delivery must
state your name, the number of Rights represented by your Subscription
Certificate and the number of underlying shares of Common Stock being subscribed
for pursuant to the exercise of the Rights and must guarantee the delivery to
the Subscription Agent of your properly completed and executed Subscription
Certificate by 5:00 p.m., New York City time on April , 1997. Additional
copies of the Notice of Guaranteed Delivery may be obtained upon request from
the Information Agent at the address, or by calling the telephone number,
indicated below.
Banks, brokers and other nominee Rights holders who exercise the Rights on
behalf of beneficial owners of Rights will be required to certify to the
Subscription Agent and the Company (by delivery to the Subscription Agent of a
Nominee Holder Certification substantially in the form of Exhibit B to these
instructions), as to the aggregate number of Rights which have been exercised
and the number of shares of Common Stock thereby subscribed for pursuant to the
exercise of the Rights by each beneficial owner of Rights (which may include
such nominee) on whose behalf such nominee is acting.
If you exercise less than all of the Rights evidenced by your subscription
certificate by so indicating in Form 1 of your subscription certificate, the
Subscription Agent will issue to you a new subscription certificate evidencing
the unexercised Rights. However, if you choose to have a new subscription
certificate sent to you, you may not receive any such new subscription
certificate in sufficient time to permit you to sell or exercise the Rights
evidenced thereby.
If the number of Rights Shares being subscribed for pursuant to the Rights
is not specified, you will be deemed to have exercised such Rights with respect
to the maximum whole number of shares of Common Stock that may be acquired for
the Subscription Price payment delivered.
ONCE A HOLDER HAS EXERCISED THE RIGHTS, THE EXERCISE MAY NOT BE REVOKED.
The addresses and facsimile number of the Subscription Agent are as
follows:
THE BANK OF NEW YORK
101 BARCLAY STREET
NEW YORK, NEW YORK 10286
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
Tender & Exchange Department (for Eligible Institutions Only) Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
</TABLE>
2
<PAGE> 4
The address and toll-free telephone number of the Information Agent, to
whom all questions and requests for the Prospectus or other documents relating
to the Rights Offering should be addressed, are as follows:
W.F. DORING & CO., INC.
150 BAY STREET
8TH FLOOR
JERSEY CITY, NEW JERSEY 07302
(888) 330-5111
2. ISSUANCE AND DELIVERY OF STOCK CERTIFICATES.
Certificates for shares of Common Stock issuable upon exercise of the
Rights will be mailed as soon as practicable after the subscriptions have been
accepted by the Subscription Agent.
3. TRANSFERS OF RIGHTS.
The Rights evidenced by a single Subscription Certificate may be
transferred in whole or in part as follows:
(a) Sale of Rights through a Bank or Broker. To sell all Rights
evidenced by a subscription certificate through your bank or broker, so
indicate on Form 2 and deliver your properly completed and executed
subscription certificate to your bank or broker and have your signature
guaranteed by an Eligible Institution. Your subscription certificate should
be delivered to your bank or broker in ample time for it to be exercised.
If Form 2 is completed without designating a transferee, the Subscription
Agent may thereafter treat the bearer of the subscription certificate as
the absolute owner of all of the Rights evidenced by such subscription
certificate for all purposes, and the Subscription Agent shall not be
affected by any notice to the contrary. Your bank or broker cannot issue
subscription certificates. If you wish to sell less than all of the Rights
evidenced by a subscription certificate, either you or your bank or broker
must instruct the Subscription Agent as to the action to be taken with
respect to the Rights not sold, or you or your bank or broker must first
have your subscription certificate divided into subscription certificates
of appropriate denominations by following the instructions in paragraph 4
of these instructions. The subscription certificates evidencing the number
of Rights you intend to sell can then be transferred by your bank or broker
in accordance with the instructions in this paragraph 3(a).
(b) Transfers of Rights to a Designated Transferee. To transfer all of
your Rights evidenced by your subscription certificate to a transferee
other than a bank or broker, you must check the box for Form 2 and complete
Form 2 in its entirety, execute the subscription certificate and have your
signature guaranteed by an Eligible Institution. If Form 2 is completed
without designating a transferee, the Subscription Agent may thereafter
treat the bearer of the subscription certificate as the absolute owner of
all of the Rights evidenced by such subscription certificate for all
purposes, and the Subscription Agent shall not be affected by any notice to
the contrary. Only the Subscription Agent can issue subscription
certificates. You may transfer less than all of the rights evidenced by
your subscription certificates, in which case you may obtain a new
subscription certificate in the appropriate smaller denomination by
following the instructions in paragraph 4 below. The number of Rights you
intend to transfer can then be transferred by following the instructions in
this paragraph 3(b).
Rights holders wishing to transfer all or a portion of their Rights should
allow a sufficient amount of time prior to the Expiration Date for (i) the
transfer instructions to be received and processed by the Subscription Agent,
(ii) a new Subscription Certificate to be issued and transmitted to the
transferee or transferees with respect to transferred Rights, and to the
transferor with respect to retained Rights, if any, and (iii) the Rights
evidenced by such new Subscription Certificates to be exercised or sold by the
recipients thereof.
All commissions, fees and other expenses (including brokerage commissions
and transfer taxes) incurred in connection with the purchase, sale or exercise
of Rights will be for the account of the transferor or subscriber of the Rights,
and none of such commissions, fees or expenses will be paid by the Company or
the Subscription Agent.
3
<PAGE> 5
4. DIVIDING SUBSCRIPTION CERTIFICATES.
To have a subscription certificate divided into smaller denominations, you
must send your subscription certificate, together with complete separate
instructions (including specification of the denominations into which you wish
your rights to be divided) signed by you, to the Subscription Agent, allowing a
sufficient amount of time for new subscription certificates to be issued and
returned so that they can be used prior to the Expiration Date. Alternatively,
you may ask a bank or broker to effect such actions on your behalf. Your
signature must be guaranteed by an Eligible Institution if any of the new
subscription certificates are to be issued in a name other than that in which
the old subscription certificate was issued. Subscription certificates may not
be divided into units to purchase fractional shares and any instruction to do so
will be rejected. As a result of delays in the mail, the time of the
transmittal, the necessary processing time and other factors, you or your
transferee may not receive such new subscription certificates in time to enable
the holder to complete the sale or exercise by the Expiration Date. Neither the
Company nor the Subscription Agent will be liable to either a transferor or a
transferee for any such delays.
5. SIGNATURES.
(a) Signatures by Registered Holder. The signature on the Subscription
Certificate must correspond with the name of the registered holder exactly
as it appears on the face of the Subscription Certificate, without any
alteration or change whatsoever. Joint owners should each sign. Persons who
sign the Subscription Certificate in a representative or other fiduciary
capacity, such as an executor, trustee or corporate officer, must indicate
such capacity when signing and, unless waived by the Subscription Agent in
its sole and absolute discretion, must present to the Subscription Agent
satisfactory evidence of their authority to so act.
(b) Execution by Person Other than Registered Holder. If the
Subscription Certificate is signed by a person other than the holder named
on the face of the Subscription Certificate, proper evidence of authority
of the person signing the Subscription Certificate must accompany the same
unless, for good cause, the Subscription Agent dispenses with proof of
authority.
(c) Signature Guarantees. Your signature must be guaranteed by an
Eligible Institution if you wish to transfer your Rights, as specified in
3(b) above, to a transferee including a bank or a broker.
6. METHOD OF DELIVERY.
The method of delivery of Subscription Certificate and payment of the
Subscription Price to the Subscription Agent will be at the election and risk of
the registered holder of the Rights but, if sent by mail, it is recommended that
they be sent by registered mail, properly insured, with return receipt
requested, and that a sufficient number of days be allowed to ensure delivery to
the Subscription Agent and the clearance of any uncertified personal checks sent
in payment of the Subscription Price prior to 5:00 p.m., New York City time, on
April , 1997.
7. TRANSFER TAXES.
The Company will pay transfer taxes, if any, applicable to the issuance and
sale of Common Stock to a registered Rights holder upon the exercise of Rights
by such holder. If, however, a transfer tax is imposed for any reason other than
the issuance and sale of the Company's Common Stock to a registered Rights
holder upon exercise of Rights by such holder, the amount of any such transfer
taxes (whether imposed on the registered holder or on any other person) will be
payable by the registered holder or such other person. In any such event, the
Subscription Agent will be entitled to refuse to take the action requested until
it has received satisfactory evidence of the payment of such taxes or exemption
therefrom.
8. IRREGULARITIES.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Company, whose determinations
will be final and binding. The Company, in its sole
4
<PAGE> 6
discretion, may waive any defect or irregularity, or permit a defect or
irregularity to be corrected within such time as it may determine, or reject the
purported exercise of any Rights Certificates will not be deemed to have been
received or accepted until all irregularities have been waived or cured within
such time as the Company determines, in its sole discretion. Neither the Company
nor the Subscription Agent will be under any duty to give notification of any
defect or irregularity in connection with the submission of Subscription
Certificates or incur any liability for failure to give such notification.
9. LOST, STOLEN, MUTILATED OR DESTROYED SUBSCRIPTION CERTIFICATES.
Upon receipt by the Company and the Subscription Agent of evidence
reasonably satisfactory to them of the loss, theft, mutilation, or destruction
of a Subscription Certificate, and in the case of loss, theft or destruction, of
indemnity and/or security satisfactory to them, in their sole discretion, and
reimbursement to the Company and the Subscription Agent of all reasonable
expenses incidental thereto, and upon surrender and cancellation of the
Subscription Certificate, if mutilated, the Subscription Agent will make and
deliver a new Subscription Certificate of like tenor to the registered Rights
holder in lieu of the Subscription Certificate so lost, stolen, mutilated or
destroyed. If required by the Company or the Subscription Agent, an indemnity
bond must be sufficient in the judgment of each party to protect the Company,
the Subscription Agent or any agent thereof from any loss which any of them may
suffer in a lost, stolen, mutilated or destroyed Subscription Certificate is
replaced.
5
<PAGE> 7
EXHIBIT A
[FORM OF NOTICE OF GUARANTEED DELIVERY]
NOTICE OF GUARANTEED DELIVERY FOR SHARES OF COMMON
STOCK OF GLOBALSTAR TELECOMMUNICATIONS LIMITED
SUBSCRIBED FOR PURSUANT TO THE RIGHTS OFFERING
GLOBALSTAR TELECOMMUNICATIONS LIMITED RIGHTS OFFERING
As set forth in the Prospectus dated March , 1997 (the "Prospectus") of
Globalstar Telecommunications Limited (the "Company") under "The Rights
Offerings -- Exercise of Rights," this form or one substantially equivalent
hereto may be used as a means of effecting subscription and payment for shares
of Common Stock of the Company, subscribed for by exercise of Rights pursuant to
the Rights Offering. Such form may be delivered by hand or sent by facsimile
transmission, overnight courier or mail to the Subscription Agent and must be
received prior to 5:00 p.m. New York City time on April , 1997 (the
"Expiration Date")*. The terms and conditions of the Rights Offering set forth
in the Prospectus are incorporated by reference herein. Capitalized terms not
defined here have the meanings attributed to them in the Prospectus.
THE SUBSCRIPTION AGENT IS:
THE BANK OF NEW YORK
101 BARCLAY STREET
NEW YORK, NEW YORK 10286
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
(for Eligible Institutions
Only)
Tender & Exchange Department Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
</TABLE>
THE INFORMATION AGENT IS:
W.F. DORING & CO., INC.
150 BAY STREET
8TH FLOOR
JERSEY CITY, NEW JERSEY 07302
(888) 330-5111
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A TELECOPY OR FACSIMILE NUMBER, OTHER THAN AS SET FORTH
ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY.
The member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc. or a commercial bank or trust
company having an officer or correspondent in the U.S. which completes this form
must communicate the guarantee and the number of shares subscribed for under the
Rights Offering to the Subscription Agent and must deliver this Notice of
Guaranteed Delivery guaranteeing delivery of (i) payment in full for all
subscribed shares and (ii) a properly completed and executed Subscription
Certificate to the Subscription Agent prior to 5:00 p.m., New York City time, on
the Expiration Date.* The Subscription Certificate and full payment must then be
delivered by the close of business on the third business day after the
Expiration Date* to the Subscription Agent. Failure to do so will result in a
forfeiture of the Rights.
- ---------------
* Unless extended by the Company. (CONTINUED)
6
<PAGE> 8
LADIES AND GENTLEMEN:
The undersigned hereby represents that he or she is the registered holder
of Subscription Certificate(s) representing Rights and that such
Subscription Certificate(s) cannot be delivered to the Subscription Agent at or
before 5:00 p.m. New York City time, on April , 1997. Upon the terms and
subject to the conditions set forth in the Prospectus, receipt of which is
hereby acknowledged, the undersigned hereby elects to exercise the Right to
subscribe for one share of Common Stock per whole Right with respect to each of
Rights represented by such Subscription Certificate. The undersigned
understands that payment of the Subscription Price of $26.50 per share for each
share of Common Stock subscribed for pursuant to the Rights must be received by
the Subscription Agent at or before 5:00 p.m. New York City time, on April ,
1997, and represents that such payment in the aggregate amount of $
either (check appropriate box):
<TABLE>
<S> <C>
[ ] is being delivered to the Subscription [ ] has been delivered separately to the
Agent herewith; or: Subscription Agent; and is being or was
delivered in the manner set forth below
(check appropriate box and complete
information relating thereto):
</TABLE>
[ ] wire transfer of funds
- -- name of transferor institution
- --------------------------------------------------------------------------------
- -- date of transfer
- --------------------------------------------------------------------------------
- -- confirmation number, if available
- ----------------------------------------------------------------------------
[ ] uncertified check (Payment by uncertified check will not be deemed to have
been received by the Subscription Agent until such check has cleared. Rights
holders paying by such method are urged to make payment sufficiently in advance
of the Expiration Time to ensure that such payments are made by such date.)
[ ] certified or cashier's check
[ ] money order
- -- name of maker
- --------------------------------------------------------------------------------
- -- date and number of check or money order
- --------------------------------------------------------------------------------
- -- bank on which check is drawn or issuer of money order
- --------------------------------------------------------------------------------
Signature
- --------------------------------------------------------------------------------
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
If signature is by a trustee(s), executor(s), administrator(s),
guardian(s), attorney(s)-in-fact, agent(s), officer(s) of a corporation or
another acting in a fiduciary or representative capacity, such capacity must be
clearly indicated below.)
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Tel. No(s).
- --------------------------------------------------------------------------------
Subscription Certificate No(s). (if available)
- --------------------------------------------------------------------------------
7
<PAGE> 9
GUARANTEE
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an officer or correspondent in the U.S. guarantees
delivery of payment to the Subscription Agent by the close of business (5:00
p.m., New York City time) on the third business day after the Expiration Date
(April , 1997, unless extended) of (i) a properly completed and executed
Subscription Certificate and (ii) payment of the full Subscription Price for
shares subscribed for pursuant to the Rights Offering, if applicable, as
subscription for such shares is indicated herein or in the Subscription
Certificate.
<TABLE>
<S> <C>
Number of Subscription Shares
for Which You are Guaranteeing
Delivery of Rights and Payment: -------------------------------------
Number of Rights to be Delivered: -------------------------------------
Total Subscription Price
Payment to be delivered: -------------------------------------
- -------------------------------------------- --------------------------------------------
Name of Firm Authorized Signature
- -------------------------------------------- --------------------------------------------
Address Title
- -------------------------------------------- --------------------------------------------
Zip Code Name (Please Type or Print)
- --------------------------------------------
Name of Registered Holder (If Applicable)
- -------------------------------------------- --------------------------------------------
Telephone Number Date
</TABLE>
The institution which completes this form must communicate the guarantee to
the Subscription Agent and must deliver the subscription certificate(s) and the
payment referenced above to the Subscription Agent within the time period shown
herein. Failure to do so could result in a financial loss to such institution.
8
<PAGE> 10
EXHIBIT B
[FORM OF NOMINEE HOLDER CERTIFICATION]
GLOBALSTAR TELECOMMUNICATIONS LIMITED
NOMINEE HOLDER CERTIFICATION
The undersigned, a bank, broker or other nominee holder of rights
("Rights") to purchase shares of Common Stock, par value $1.00 per share
("Common Stock") of Globalstar Telecommunications Limited (the "Company")
pursuant to the Rights Offering described and provided for in the Company's
prospectus dated , 1997 (the "Prospectus"), hereby certifies to the
Company and to The Bank of New York, as Subscription Agent for such Rights
Offering, that the undersigned has subscribed for, on behalf of the beneficial
owners thereof (which may include the undersigned), the number of shares
specified below for each of the Rights (as defined in the Prospectus).
<TABLE>
<S> <C>
1. Number of shares subscribed for pursuant to the Rights
-------
2. Name(s) of Beneficial Owner(s)
-------
</TABLE>
--------------------------------------
Name of Nominee Holder
By:
--------------------------------------
Name:
Title:
Dated: , 1997
9
<PAGE> 1
EXHIBIT 99.2
<PAGE> 2
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY FOR SHARES OF COMMON
STOCK OF GLOBALSTAR TELECOMMUNICATIONS LIMITED
SUBSCRIBED FOR PURSUANT TO THE RIGHTS OFFERING
GLOBALSTAR TELECOMMUNICATIONS LIMITED RIGHTS OFFERING
As set forth in the Prospectus dated March , 1997 (the "Prospectus") of
Globalstar Telecommunications Limited (the "Company") under "The Rights
Offerings -- Exercise of Rights," this form or one substantially equivalent
hereto may be used as a means of effecting subscription and payment for shares
of Common Stock of the Company, subscribed for by exercise of Rights pursuant to
the Rights Offering. Such form may be delivered by hand or sent by facsimile
transmission, overnight courier or mail to the Subscription Agent and must be
received prior to 5:00 p.m. New York City time on April , 1997 (the
"Expiration Date")*. The terms and conditions of the Rights Offering set forth
in the Prospectus are incorporated by reference herein. Capitalized terms not
defined here have the meanings attributed to them in the Prospectus.
THE SUBSCRIPTION AGENT IS:
THE BANK OF NEW YORK
101 BARCLAY STREET
NEW YORK, NEW YORK 10286
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
(for Eligible Institutions
Only)
Tender & Exchange Department Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
</TABLE>
THE INFORMATION AGENT IS:
W.F. DORING & CO., INC.
150 BAY STREET
8TH FLOOR
JERSEY CITY, NEW JERSEY 07302
(888) 330-5511
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A TELECOPY OR FACSIMILE NUMBER, OTHER THAN AS SET FORTH
ABOVE, DOES NOT CONSTITUTE A VALID DELIVERY.
The member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc. or a commercial bank or trust
company having an officer or correspondent in the U.S. which completes this form
must communicate the guarantee and the number of shares subscribed for under the
Rights Offering to the Subscription Agent and must deliver this Notice of
Guaranteed Delivery guaranteeing delivery of (i) payment in full for all
subscribed shares and (ii) a properly completed and executed Subscription
Certificate to the Subscription Agent prior to 5:00 p.m., New York City time, on
the Expiration Date.* The Subscription Certificate and full payment must then be
delivered by the close of business on the third business day after the
Expiration Date* to the Subscription Agent. Failure to do so will result in a
forfeiture of the Rights.
- ---------------
* Unless extended by the Company. (CONTINUED)
<PAGE> 3
LADIES AND GENTLEMEN:
The undersigned hereby represents that he or she is the registered holder
of Subscription Certificate(s) representing Rights and that such
Subscription Certificate(s) cannot be delivered to the Subscription Agent at or
before 5:00 p.m. New York City time, on April , 1997. Upon the terms and
subject to the conditions set forth in the Prospectus, receipt of which is
hereby acknowledged, the undersigned hereby elects to exercise the Right to
subscribe for one share of Common Stock per whole Right with respect to each of
Rights represented by such Subscription Certificate. The undersigned
understands that payment of the Subscription Price of $26.50 per share for each
share of Common Stock subscribed for pursuant to the Rights must be received by
the Subscription Agent at or before 5:00 p.m. New York City time, on April ,
1997, and represents that such payment in the aggregate amount of $
either (check appropriate box):
<TABLE>
<S> <C>
[ ] is being delivered to the Subscription [ ] has been delivered separately to the
Agent herewith; or: Subscription Agent; and is being or was
delivered in the manner set forth below
(check appropriate box and complete
information relating thereto):
</TABLE>
[ ] wire transfer of funds
- -- name of transferor institution
- --------------------------------------------------------------------------------
- -- date of transfer
- --------------------------------------------------------------------------------
- -- confirmation number, if available
- --------------------------------------------------------------------------------
[ ] uncertified check (Payment by uncertified check will not be deemed to have
been received by the Subscription Agent until such check has cleared. Rights
holders paying by such method are urged to make payment sufficiently in advance
of the Expiration Time to ensure that such payments are made by such date.)
[ ] certified or cashier's check
[ ] money order
- -- name of maker
- --------------------------------------------------------------------------------
- -- date and number of check or money order
- --------------------------------------------------------------------------------
- -- bank on which check is drawn or issuer of money order
- --------------------------------------------------------------------------------
Signature
- --------------------------------------------------------------------------------
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE TYPE OR PRINT)
If signature is by a trustee(s), executor(s), administrator(s),
guardian(s), attorney(s)-in-fact, agent(s), officer(s) of a corporation or
another acting in a fiduciary or representative capacity, such capacity must be
clearly indicated below.)
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Tel. No(s).
- --------------------------------------------------------------------------------
Subscription Certificate No(s). (if available)
- --------------------------------------------------------------------------------
2
<PAGE> 4
GUARANTEE
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an officer or correspondent in the U.S. guarantees
delivery of payment to the Subscription Agent by the close of business (5:00
p.m., New York City time) on the third business day after the Expiration Date
(April , 1997, unless extended) of (i) a properly completed and executed
Subscription Certificate and (ii) payment of the full Subscription Price for
shares subscribed for pursuant to the Rights Offering, if applicable, as
subscription for such shares is indicated herein or in the Subscription
Certificate.
<TABLE>
<S> <C>
Number of Subscription Shares
for Which You are Guaranteeing
Delivery of Rights and Payment: -------------------------------------
Number of Rights to be Delivered: -------------------------------------
Total Subscription Price
Payment to be delivered: -------------------------------------
- -------------------------------------------- --------------------------------------------
Name of Firm Authorized Signature
- -------------------------------------------- --------------------------------------------
Address Title
- -------------------------------------------- --------------------------------------------
Zip Code Name (Please Type or Print)
- --------------------------------------------
Name of Registered Holder (If Applicable)
- -------------------------------------------- --------------------------------------------
Telephone Number Date
</TABLE>
The institution which completes this form must communicate the guarantee to
the Subscription Agent and must deliver the subscription certificate(s) and the
payment referenced above to the Subscription Agent within the time period shown
herein. Failure to do so could result in a financial loss to such institution.
3
<PAGE> 1
EXHIBIT 99.3
<PAGE> 2
EXHIBIT 99.3
GLOBALSTAR TELECOMMUNICATIONS LIMITED
CEDAR HOUSE
41 CEDAR AVENUE
HAMILTON HM12, BERMUDA
March , 1997
Dear Shareholder,
As a holder of Globalstar Telecommunications Limited Common Stock, you are
being given the opportunity to purchase additional shares of common stock in a
Rights Offering.
Globalstar has set the record date for this offering as the close of
business on March , 1997. For each 8.84042 shares of Globalstar Common Stock
you hold on that date, you will be entitled to purchase one additional share of
Globalstar for $26.50 in cash. The number of Rights distributed to you will be
rounded down to the nearest whole number. For example, if you hold 100 shares of
Common Stock, you will be entitled to purchase 11 additional shares at the price
of $26.50 per share.
The Rights being distributed to you are valuable; the exercise price of
$26.50 per share is substantially below the current market price of Globalstar
Common Stock, which as of March was $ per share. These Rights are
transferable; that is, you may sell them at any time before they expire. If you
exercise the Rights and purchase additional shares, the shares you purchase will
be freely tradeable on the Nasdaq National Market.
For your information, we have enclosed copies of the following documents:
1) The Prospectus, which contains important details of the Rights Offering,
as well as important information concerning Globalstar and the Common
Stock being offered. You should read the Prospectus carefully. ONCE A
HOLDER OF RIGHTS HAS EXERCISED SUCH RIGHTS, SUCH HOLDER'S ELECTION TO
EXERCISE MAY NOT BE REVOKED.
2) A Subscription Certificate, which must be completed to exercise your
Rights.
3) Instructions for completing the Subscription Certificate.
4) Notice of Guaranteed Delivery.
5) A return envelope addressed to The Bank of New York, which is the
Subscription Agent for this offering.
YOU NEED TO ACT QUICKLY. THE RIGHTS WILL EXPIRE AT 5 P.M., NEW YORK CITY
TIME, ON APRIL , 1997, UNLESS EXTENDED BY THE COMPANY. RIGHTS NOT EXERCISED ON
OR PRIOR TO THE EXPIRATION DATE SHALL EXPIRE AND BE NULL AND VOID.
To exercise the Rights, you must properly complete and sign the
Subscription Certificate (unless guaranteed delivery procedures are complied
with) and deliver payment in full for all Rights exercised to the Subscription
Agent by the deadline given above.
If you need additional copies of the enclosed materials, contact the
Information Agent, W.F. Doring & Co., Inc. at (888) 330-5111.
Very truly yours,
GLOBALSTAR TELECOMMUNICATIONS LIMITED
<PAGE> 1
EXHIBIT 99.4
<PAGE> 2
EXHIBIT 99.4
1,131,168 SHARES OF COMMON STOCK
OFFERED PURSUANT TO RIGHTS
DISTRIBUTED TO SHAREHOLDERS OF
GLOBALSTAR TELECOMMUNICATIONS LIMITED
March , 1997
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We are enclosing the materials listed below in connection with the offering
by Globalstar Telecommunications Limited (the "Company") of 1,131,168 shares of
common stock, par value $1.00 per share (the "Common Stock"), of the Company, at
a subscription price of $26.50 per share, pursuant to transferable subscription
rights (the "Rights") distributed to holders of record of Common Stock as of the
close of business on March , 1997 (the "Record Date"). The Rights are
described in the Prospectus and evidenced by a Subscription Certificate
registered in your name or the name of your nominee.
Each beneficial owner of Common Stock registered in your name or the name
of your nominee is entitled to one (1) Right for each 8.84042 shares of Common
Stock owned by such beneficial owner. No fractional Rights or cash in lieu
thereof will be issued or paid.
We are asking you to contact your clients for whom you hold Common Stock
registered in your name or in the name of your nominee to obtain instructions
with respect to the Rights.
Enclosed are copies of the following documents:
1. The Prospectus;
2. Subscription Certificate(s) evidencing Rights;
3. The Instructions for Completing Subscription Certificates;
4. A form of letter which may be sent to your clients for whose
accounts you hold Common Stock registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regards to the Rights;
5. Notice of Guaranteed Delivery; and
6. A return envelope addressed to The Bank of New York, Subscription
Agent.
YOUR PROMPT ACTION IS REQUESTED. THE RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON APRIL , 1997, UNLESS EXTENDED BY THE COMPANY.
To exercise the Rights, properly completed and executed Subscription
Certificates (unless the guaranteed delivery procedures are complied with) and
payment in full for all Rights exercised must be delivered to the Subscription
Agent as indicated in the Prospectus prior to 5:00 p.m., New York City time, on
April , 1997.
Additional copies of the enclosed materials may be obtained from W.F.
Doring & Co., Inc., the Information Agent. The Information Agent's telephone
number is (888) 330-5111.
Very truly yours,
GLOBALSTAR TELECOMMUNICATIONS LIMITED
<PAGE> 3
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS AN AGENT OF GLOBALSTAR TELECOMMUNICATIONS LIMITED, THE
INFORMATION AGENT OR THE SUBSCRIPTION AGENT, OR ANY OTHER PERSON MAKING OR
DEEMED MAKING OFFERS OF THE COMMON STOCK ISSUABLE UPON VALID EXERCISE OF THE
RIGHTS, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF
ANY OF THEM WITH RESPECT TO THE RIGHTS OFFERING EXCEPT FOR STATEMENTS MADE IN
THE PROSPECTUS.
<PAGE> 1
EXHIBIT 99.5
<PAGE> 2
EXHIBIT 99.5
1,131,168 SHARES OF COMMON STOCK
OFFERED PURSUANT TO RIGHTS
DISTRIBUTED TO SHAREHOLDERS OF
GLOBALSTAR TELECOMMUNICATIONS LIMITED
March , 1997
To Our Clients:
Enclosed for your consideration is a Prospectus, dated March , 1997,
and the Instructions for Completing Subscription Certificates relating to the
offer by Globalstar Telecommunications Limited (the "Company") of 1,131,168
shares of common stock, par value $1.00 per share (the "Common Stock"), of the
Company, at a subscription price of $26.50 per share, pursuant to transferable
subscription rights (the "Rights") distributed to holders of record of Common
Stock as of the close of business on March , 1997 (the "Record Date").
As described in the accompanying Prospectus, you will receive one (1)
transferable Right for each 8.84042 shares of Common Stock carried by us in your
account as of the Record Date. Each whole Right will entitle you to subscribe
for one share of Common Stock at a subscription price of $26.50 per share (the
"Subscription Price"). No fractional shares will be issued.
THE MATERIALS ENCLOSED ARE BEING FORWARDED TO YOU AS THE BENEFICIAL OWNER
OF COMMON STOCK CARRIED BY US IN YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME.
EXERCISE OF RIGHTS MAY BE MADE BY ONLY US AS THE RECORD OWNER AND PURSUANT TO
YOUR INSTRUCTIONS. Accordingly, we request instructions as to whether you wish
us to elect to subscribe for any shares of Common Stock to which you are
entitled pursuant to the terms and subject to the conditions set forth in the
enclosed Prospectus and the related Instructions for Completing Subscription
Certificates. However, we urge you to read these documents carefully before
instructing us to exercise Rights.
YOUR INSTRUCTIONS SHOULD BE FORWARDED AS PROMPTLY AS POSSIBLE IN ORDER TO
PERMIT US TO EXERCISE RIGHTS ON YOUR BEHALF IN ACCORDANCE WITH THE PROVISIONS OF
THE RIGHTS OFFERING. THE RIGHTS OFFERING WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON APRIL , 1997, UNLESS EXTENDED FOR UP TO FIFTEEN (15) DAYS BY THE
COMPANY. ONCE YOU HAVE EXERCISED A RIGHT, SUCH EXERCISE MAY NOT BE REVOKED.
If you wish to have us, on your behalf, exercise the Rights for any shares
of Common Stock, or sell such Rights on your behalf, please so instruct us by
completing, executing and returning to us the instructions form on the reverse
side of this letter.
ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE OFFERING SHOULD BE
DIRECTED TO W.F. DORING & CO., INC., THE INFORMATION AGENT, AT THE FOLLOWING
TOLL-FREE TELEPHONE NUMBER: (888) 330-5111.
INSTRUCTIONS
The undersigned acknowledges receipt of your letter and the enclosed
materials referred to therein relating to the offering of shares of common
stock, par value $1.00 per share (the "Common Stock"), of Globalstar
Telecommunications Limited (the "Company").
This will instruct you whether to exercise Rights to purchase shares of
Common Stock distributed with respect to the Company's Common Stock held by you
for the account of the undersigned, pursuant to the
<PAGE> 3
terms and subject to the conditions set forth in the Prospectus and the related
Instructions for Completing Subscription Certificates.
Box 1. [ ] Please DO NOT EXERCISE RIGHTS for shares of Common Stock.
Box 2. [ ] Please EXERCISE RIGHTS for shares of Common Stock as set forth
below.
(a) Number of shares subscribed for pursuant to the Rights:
(b) Total Subscription Price (total number of shares subscribed for pursuant
to the Rights multiplied by the Subscription Price of $26.50 per share):
(c) Method of Payment (check and complete appropriate box(es)):
[ ] Enclosing uncertified, certified or cashier's check, bank draft or
money order in the amount of $ payable to The Bank of New
York, subscription agent.
[ ] Wire transfer in the amount of $ directed to The Bank of
New York, subscription agent, ABA No.: . Rights Offering
DDA No.: , Attention: . Indicate name of
institution wire transferring funds and name of registered holder:
[ ] Please deduct payment from the following account maintained by you
as follows:
Type of Account:
Account No.:
Amount to be deducted: $
Box 3. [ ] Please TRANSFER RIGHTS as set forth below:
(a) Transfer
---------------------------------- Rights to
(insert number)
--------------------------------------------------.
(indicate name of transferee)
(b) Sell
---------------------------------- Rights on my behalf.
Date: , 1997
--------------------------------------
Signature(s)
--------------------------------------
Please print or type name
2
<PAGE> 1
EXHIBIT 99.6
<PAGE> 2
EXHIBIT 99.6
SUBSCRIPTION AGENCY AGREEMENT
This Subscription Agency Agreement (this "Agreement"), dated as of March
, 1997, is by and between Globalstar Telecommunications Limited, a Bermuda
company (the "Company"), and The Bank of New York, a New York Corporation (the
"Agent").
W I T N E S S E T H:
WHEREAS, the Agent is currently the Transfer Agent and Registrar for the
Company in respect of its Common Stock, par value $1.00 per share (the "Common
Stock");
WHEREAS, the Company proposes to distribute to the holders of Common Stock,
of record (the "Stockholders") as of the close of business on March , 1997
(the "Record Date"), certificates ("Subscription Certificates") representing
transferable rights (the "Rights") to subscribe for and purchase an aggregate of
1,131,168 shares of Common Stock (the "Rights Shares"), at the rate of one share
of Common Stock for each 8.84042 shares of Common Stock held by each Stockholder
on the Record Date (the "Rights Offering"), at a subscription price equal to
$26.50 per share (the "Subscription Price");
WHEREAS, the Rights Offering will expire on April , 1997, unless extended
by the Company (the "Expiration Date");
WHEREAS, pursuant to a certain standby agreement dated as of March ,
1997, Loral Space and & Telecommunications Ltd. (the "Standby Purchaser") has
agreed to subscribe for and purchase at the Subscription Price all Rights Shares
not otherwise subscribed for on or prior to the Expiration Date;
WHEREAS, the Company has filed a registration statement relating to the
Rights and the Rights Shares with the Securities and Exchange Commission under
the Securities Act of 1933 (the "Act") on February 19, 1997 (in the form in
which it first becomes effective under the Act and as it may thereafter be
amended, the "Registration Statement"), which Registration Statement will
include a final prospectus containing the terms of the Rights Offering (the
"Final Prospectus");
WHEREAS, the Company desires the Agent to perform certain acts on behalf of
the Company and the Agent desires to so act, in connection with distribution of
the Subscription Certificates, transfers, if any, of the same and recordation of
such transfers, the issuance and exercise of the Rights to subscribe therein set
forth, and the coordination with W.F. Doring & Co., Inc. (the "Information
Agent") in order to fully inform the ultimate beneficial Stockholders of the
Rights Offering, all upon the terms and subject to the conditions set forth
herein;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, the parties hereby agree as follows:
Section 1. Appointment of Agent. The Company hereby appoints and
authorizes the Agent to act on its behalf in accordance with the provisions
hereof, and the Agent hereby accepts such appointment and agrees to so act. In
connection with the foregoing appointment as Agent, the Company hereby also
appoints the Agent as Transfer Agent and as Registrar of the Company for the
Subscription Certificates and the Common Stock to be issued pursuant to the
Rights, to act as provided herein and as is otherwise customary in such
capacities. The Agent acknowledges that the Information Agent will assist the
Agent in connection with certain aspects of the Rights Offering as described in
the Final Prospectus and the Information Agency Agreement which is an exhibit to
the Registration Statement.
Section 2. Subscription Certificates. (a) The Agent shall, from a list of
the Company's Stockholders on the Record Date (which list shall be prepared by
the Agent in its capacity as Transfer Agent and Registrar for the Common Stock),
prepare and record Subscription Certificates in the names of the Stockholders of
the Company as of the Record Date, setting forth the number of Rights to
subscribe to Common Stock calculated on the basis of one Right to subscribe for
and purchase one share of Common Stock for each 8.84042 shares of Common Stock
held by each Stockholder on the Record Date, provided, however, that the number
of Rights
<PAGE> 3
distributed to each Stockholder will be rounded down to the nearest whole number
and no fractional Rights or cash in lieu thereof will be issued. All questions
as to the validity and eligibility of any rounding of fractional rights shall be
determined by the Company in its sole discretion, and its determination shall be
final and binding. Each Subscription Certificate shall be dated as of the Record
Date.
(b) Reference is made to the Final Prospectus for a complete
description of the Rights.
(c) The Subscription Certificates shall be executed on behalf of the
Company by its Chairman or President and by its Secretary or Assistant
Secretary by facsimile signature. Upon written notice from the Company
executed by its Chairman, President, any Vice President, Secretary or
Assistant Secretary as to the effective date of the Registration Statement,
the Agent shall as promptly as practicable deliver the Subscription
Certificates, together with a copy of the Prospectus, Instructions for
Completing Subscription Certificates and all other ancillary documents
relating to the Rights Offering, to all Stockholders as of the Record Date.
The form of Subscription Certificate and Instructions for Completing
Subscription Certificates are attached hereto as Exhibits A and B,
respectively. If an officer whose signature has been placed upon a
Subscription Certificate shall cease to hold such office at any time
thereafter, such event shall have no effect on the validity of such
Subscription Certificate.
(d) The Agent shall keep or cause to be kept, at its principal offices
in New York, New York, books for registration of the Rights hereunder. Such
books shall show the names and addresses of the respective holders of the
Rights and the number of Rights evidenced by each outstanding Subscription
Certificate.
Section 3. Division of Subscription Certificates; Lost, Stolen, Mutilated
or Destroyed Subscription Certificates.
(a) A bank, trust company, securities dealer or broker holding Common
Stock on the Record Date for more than one beneficial owner may, by
submitting a written request by 5:00 p.m., New York City time on April ,
1997, exchange its Subscription Certificate to obtain Subscription
Certificates for the number of Rights which each such beneficial owner
would have been entitled to receive had each been the holder of record of
such shares on the Record Date; provided, however, each such beneficial
owner's Rights will be rounded down to the nearest whole number and no
fractional Rights or cash in lieu thereof will be distributed or paid.
(b) Upon receipt by the Company and the Agent of evidence reasonably
satisfactory to them of the loss, theft, mutilation, or destruction or a
Subscription Certificate, and in the case of loss, theft or destruction, of
indemnity and/or security satisfactory to them, in their sole discretion,
and reimbursement to the Company and the Agent of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Subscription
Certificate, if mutilated, the Agent will make and deliver a new
Subscription Certificate of like tenor to the registered Rights holder in
lieu of the Subscription Certificate so lost, stolen, mutilated or
destroyed. If required by the Company or the Subscription Agent, an
indemnity bond must be sufficient in the judgment of each party to protect
the Company, the Agent or any agent thereof from any loss which any of them
may suffer in a lost, stolen, mutilated or destroyed Subscription
Certificate is replaced.
Section 4. Transfers. At any time during the Rights Offering until 5:00
p.m. on the Expiration Date, the Agent shall:
(a) Effect transfers, divisions and combinations of Subscription
Certificates at the request of the holders thereof, in the manner and
subject to the terms and conditions set forth in the form of Subscription
Certificate and the Final Prospectus.
(b) Issue new Subscription Certificates under the circumstances, in
the manner and subject to the terms and conditions set forth in the form of
Subscription Certificate and in the Final Prospectus, and deliver a copy of
the Final Prospectus to each assignee or transferee of Subscription
Certificates upon the transfer thereof.
(c) Sell Rights represented by the Subscription Certificates for the
account of the holders thereof under the circumstances, in the manner and
subject to the terms and conditions set forth in the form of
2
<PAGE> 4
Subscription Certificate and in the Final Prospectus. The Proceeds per
Right paid to the seller thereof will be the same as the price received by
the Agent for the sale of such Right after deduction of any brokerage
commissions, taxes and other expenses. Net proceeds, if any, of the sale of
any Rights shall be remitted to the seller thereof.
Section 5. Exercise of Rights.
(a) Rights holders may exercise the Rights and by properly completing
and signing the subscription form on the Subscription Certificate,
including, if required, a signature guarantee from an Eligible Institution
(as defined in "Instructions for Completing Subscription Certificates"
accompanying the Subscription Certificate), and mailing or delivering the
Subscription Certificate to Agent at its corporate office specified in the
Prospectus, together with payment of the aggregate Subscription Price in
full, as set forth in Section 6 hereof. A Right will not be deemed
exercised until the Agent receives both payment of the Subscription Price
and a duly executed Subscription Certificate (or until the Guaranteed
Delivery Procedures set forth in Section 5(b) have been complied with).
Once a Rights holder has exercised a Right, such exercise may not be
revoked.
(b) A Rights holder may exercise Rights in whole or in part, but no
Rights may be exercised for fractional shares. If an exercising Rights
holder does not indicate the number of Rights being exercised, or does not
forward full payment of the aggregate Subscription Price for the number of
Rights that the Rights holder indicates are being exercised, then the
Rights holder will be deemed to have exercised the Rights with respect to
the maximum number of Rights that may be exercised for the aggregate
Subscription Price payment delivered by the Rights holder. Any amount
remaining after application of the foregoing procedures shall be returned
to the Rights holder by mail, without interest or deduction, as soon as
practicable after the Expiration Time (as hereinafter defined) and after
all prorations and adjustments have been effected.
Section 6. Expiration Time; Guaranteed Delivery.
(a) Rights may be exercised at any time after the date of issuance of
the Subscription Certificates with respect thereto but no later than 5:00
p.m., New York City time on such date as the Company shall designate to the
Agent in writing (which date may be extended for up to fifteen (15) days
upon written notice to the Agent by the Company and the Standby Purchasers,
or for a greater period of time, as may be determined by the Company, upon
notice to the foregoing parties and to the Stockholders) (the "Expiration
Time"), after which all unexercised Rights will be null and void. The Agent
shall not honor any purported exercise of Rights received by the Agent
after the Expiration Time, regardless of when the documents relating to
such exercise were transmitted, except when timely transmitted pursuant to
the Guaranteed Delivery Procedures set forth in subsection (b) below.
(b) Notwithstanding the provisions of this Agreement regarding
delivery of an executed Subscription Certificate to the Agent prior to the
Expiration Time, if a Rights holder wishes to exercise Rights, but time
will not permit such holder to cause the Subscription Certificate or
Subscription Certificates evidencing such Rights to reach the Agent on or
prior to the Expiration Time, such Rights may nevertheless be exercised if
all of the following conditions (the "Guaranteed Delivery Procedures") are
met:
(i) such holder has caused payment in full of the Subscription
Price for each share of Common Stock being subscribed for pursuant to
the Rights to be received (in the manner set forth in Section 7(a)
hereof) by the Agent on or prior to the Expiration Time;
(ii) the Agent receives, on or prior to the Expiration Time, a
guarantee notice (a "Notice of Guaranteed Delivery"), substantially in
the form provided with the Instructions for Completing Subscription
Certificates distributed with the Subscription Certificates, from a
member firm of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc., or from a
commercial bank or trust company having an office or correspondent in
the United States (each, an "Eligible Institution"), stating the name of
the exercising Rights holder, the number of Rights represented by the
Subscription Certificate or Subscription Certificates held by
3
<PAGE> 5
such exercising Rights holder, the number of shares of Common Stock
being subscribed for pursuant to the Rights and guaranteeing the
delivery to the Agent of any Subscription Certificate evidencing such
Rights within five business days following the date of the Notice of
Guaranteed Delivery; and
(iii) the properly completed Subscription Certificate evidencing
the Rights being exercised, with any required signatures guaranteed, is
received by the Agent within five (5) business days following the date
of the Notice of Guaranteed Delivery relating thereto. The Notice of
Guaranteed Delivery shall be delivered to the Agent in the same manner
as Subscription Certificates at the addresses set forth in or as
otherwise permitted by the Prospectus.
Section 7. Payment; Escrow Account.
(a) Payment of the Subscription Price for all subscribed for shares of
Common Stock shall be payable in United States dollars (i) by check,
certified check or bank draft drawn upon a United States bank or postal,
telegraphic or express money order payable to the order of The Bank of New
York, as Agent, or (ii) by wire transfer of funds to the account of the
Agent, as agent for the Company maintained for such purpose as set forth in
the Prospectus. The Subscription Price will be considered to have been paid
only upon (x) clearance of any uncertified check, (y) receipt by the Agent
of any certified check or bank draft drawn upon a United States bank or any
postal, telegraphic or express money order or (z) receipt of collected
funds in the Agent's account designated above, in payment of the
Subscription Price.
(b) All funds received by the Agent from the exercise of the Rights
will be held by the Agent, on behalf of the Company, in a segregated,
non-interest bearing account pending disbursement in the manner described
in subsection (c) below.
(c) The Agent shall deliver to the Company all proceeds received in
respect of the exercise of Rights as promptly as practicable following the
receipt of such proceeds, but in no event later than three (3) business
days after the Expiration Date. Proceeds to be returned to Rights holders
pursuant to Sections 5(c) shall be so returned as set forth in such
Section.
Section 8. No Rights of Stockholders. No Subscription Certificate shall
entitled a Rights holder to vote or receive dividends or be deemed the holder of
shares of Common Stock for any purpose, nor shall anything contained in any
Subscription Certificate be construed to confer upon any Rights holder any of
the rights of a stockholder of the Company or any right to vote, give or
withhold consent to any action by the Company (whether upon any
recapitalization, issue of stock, reclassification of stock, consolidation,
merger, conveyance or otherwise), receive notice of meetings of other action
affecting stockholders, or receive dividends or otherwise, until the Rights
evidenced thereby shall have been exercised and the shares of Common Stock
purchasable upon the exercise thereof shall have become deliverable as provided
in this Agreement and in the Prospectus.
Section 9. Delivery of Certificates. The Agent, in its capacity as
transfer agent for the Common Stock, shall issue and deliver certificates
representing shares of Common Stock purchased pursuant to exercise of the Rights
to subscribers as soon as practicable after the Expiration Time and after all
prorations have been effected. The Agent shall promptly notify the Company as to
the date of delivery of such certificates. Such certificates for Common Stock
purchased pursuant to the exercise of Rights shall be registered in the names
of, and delivered to, the Rights holders exercising such Rights.
Section 10. Foreign and Certain Other Stockholders. Rights may not be
exercised by any person, and neither the Prospectus nor any Subscription
Certificate shall constitute an offer to sell or a solicitation of an offer to
purchase any shares of Common Stock, in any jurisdiction in which such
transactions would be unlawful. The Agent shall reject any subscription pursuant
to the exercise of Rights by Rights holders outside the United States, if in the
opinion of the Company, the Company may not lawfully issue shares to such Rights
holders. The Agent shall not deliver Subscription Certificates to holders of
Common Stock whose addresses are outside the United States, however, the Agent
shall deliver Prospectuses and the other ancillary documents to such holders,
together with a letter in the form attached hereto as Exhibit C. The Agent shall
hold such Subscription Certificates for the account of such holders and upon
notice from such holders shall
4
<PAGE> 6
exercise the Rights on their behalf. To so exercise such Rights, such
stockholders must notify the Agent and deliver the Subscription Price to the
Agent not later than the Expiration Time. If no instructions and payment have
been received by the Agent prior to the Expiration Time, the Rights will expire
unexercised and be null and void.
Section 11. Reports. The Agent shall notify both the Company and its
designated representatives by telephone on a daily basis during the period
commencing with the mailing of Subscription Certificates and ending at the
Expiration Time (and in the case of deliveries pursuant to the Guaranteed
Delivery Procedures, the period ending five (5) business days after the
Expiration Time), which notice shall thereafter be confirmed in writing, of (a)
the number of Rights exercised on each day, (b) the number of shares of Common
Stock subscribed for pursuant to the Rights and the number of such Rights for
which payment has been received, (c) the number of Rights exercised pursuant to
the Guaranteed Delivery Procedures on such day, (d) the number of Rights for
which defective exercises have been received on such day and (e) cumulative
totals derived from the information set forth in clauses (a) through (d) above.
At or before 5:00 p.m. on the third business day following the Expiration Time,
the Agent shall certify in writing to the Company the cumulative totals through
the Expiration Time derived from the information set forth in clauses (a)
through (d) above. The Agent shall also maintain and update a listing of holders
who have fully or partially exercised their Rights and holders who have not
exercised their Rights. The Agent shall provide the Company or its designated
representatives with the information compiled pursuant to this Section 11 as any
of them shall request. The Agent hereby represents and warrants that the
information contained in each notification referred to in this Section 11 shall
be accurate in all material respects.
Section 12. Future Instructions and Interpretation.
(a) All questions as to the timeliness, validity, form and eligibility
of any exercise or Rights will be determined by the Company whose
determinations shall be final and binding. The Company, in its sole
discretion, may waive any defect or irregularity, permit a defect or
irregularity to be corrected within such time as it may determine or reject
the purported exercise of any Right. Subscriptions will not be deemed to
have been received or accepted until all irregularities have been waived or
cured within such time as the Company determines in its sole discretion.
Neither the Company nor the Agent shall be under any duty to give
notification of any defect or irregularity in connection with the
submission of Subscription Certificates or incur any liability for failure
to give such notification.
(b) The Agent is hereby authorized and directed to accept instructions
with respect to the performance of its duties hereunder from any authorized
officer of the Company, and to apply to any such officer for advice or
instructions in connection with its duties, and shall be indemnified and
not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such officer.
Section 13. Payment of Taxes. The Company covenants and agrees that it
will pay when due and payable all documentary, stamp and other taxes, if any,
which may be payable in respect of the issuance or delivery of any Subscription
Certificate or of the shares of Common Stock upon exercise of Rights; provided,
however, that the Company shall not be liable for any tax liability arising out
of any transaction which results in, or is deemed to be, an exchange of Rights
or shares or a constructive dividend with respect to the Rights or shares.
Section 14. Cancellation and Destruction of Subscription
Certificates. All Subscription Certificates surrendered for any reason shall be
canceled by the Agent, and no Subscription Certificate shall be issued in lieu
thereof except as expressly permitted by the provisions of this Agreement. The
Agent shall deliver all canceled Subscription Certificates to the Company, or
shall, at the request of the Company, destroy such canceled Subscription
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
Section 15. Agent Compensation. The Company agrees that it will pay to
the Agent $ as compensation for its services. The Company further
agrees that it will reimburse the Agent for its necessary and reasonable
expenses incurred in the performance of its duties as such, including without
limitation, postage, stationery and supplies, and counsel fees.
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<PAGE> 7
Section 16. Confidential Information. The Agent acknowledges the
confidential and proprietary nature of the Company's shareholder records and
information related thereto which it may receive pursuant to the exercise of its
duties under this Agreement. The Agent agrees that is shall maintain the
confidentiality thereof and, except as necessary to fulfill any duty under this
Agreement, shall not disclose the contents or nature thereof without the express
prior written authorization of a Company Vice President.
Section 17. Indemnification. The Company will indemnify, protect and hold
harmless the Agent from any and all liability, cost or expense resulting from
any act, omission, delay or refusal, made by it in reliance upon any signature,
endorsement, assignment, certificate, order, request, notice, instructions or
other instrument or document believed by it in good faith to be valid, genuine
and sufficient, and in accepting any subscription or in effecting any transfer
of Rights believed by it in good faith to have been duly authorized, in delaying
or refusing in good faith to accept any subscription or effect any transfer of
Rights. The Agent shall, in issuing and registering Common Stock as Transfer
Agent and Registrar pursuant to duly exercised Rights, be liable for and shall
indemnify and hold the Company harmless from any and all liability, cost or
expense as a result of or. arising our of its own negligence or bad faith or
that of its agents, servants or employees. The Agent agrees that, with respect
to its use on the Subscription Certificate of the facsimile signature of
officers of the Company it will indemnify, protect, and hold harmless the
Company from any and all liability, cost, or expense for anything done or
omitted to be done by the Agent with respect to the use of such facsimile
signature.
Section 18. Covenants of the Company
(a) The Company covenants that all shares of Common Stock issued upon
exercise of Rights set forth in the Subscription Certificates will be
validly issued, fully paid, nonassessable and free of preemptive rights.
(b) Upon written notice to the Agent that the Commission shall have
issued or threatened to issue any order preventing or suspending the use of
the Prospectus, or if for any reason it shall be necessary to amend or
supplement the Prospectus in order to comply with the Securities Act, the
Agent shall cease acting hereunder until receipt of written instructions
from the Company and such assurances as it may reasonable request that it
may comply with such instructions without violations of the Securities Act.
Section 19. Successor Agent.
(a) Any corporation into which the Agent may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Agent shall be a party, or
any corporation succeeding to the corporate trust business of the Agent,
shall be the successor to the Agent hereunder without the execution or
filing of any of the parties hereto, provided that such corporation would
be eligible for appointment as a successor Agent. In the event that, at the
time such successor to the Agent shall proceed to the agency created by
this Agreement, any of the Subscription Certificates shall have been
countersigned buy not delivered, any such successor to the Agent may adopt
the countersignature of the original Agent and deliver such Subscription
Certificates so countersigned. In the event at such time any of the
Subscription Certificates shall not have been countersigned, any successor
to the Agent may countersign such Subscription Certificates either in the
name of the predecessor Agent or in the name of the Successor Agent, and in
all such events such Subscription Certificates shall have the full force
provided in the Subscription Certificates and in this Agreement.
(b) In the event at any time the name of the Agent shall be changed
and at such time any of the Subscription Certificates shall have been
countersigned buy not delivered, the Agent may adopt the countersignature
under its prior name and deliver Subscription Certificates so
countersigned. In the event at such time any of the Subscription
Certificates shall not have been countersigned, the Agent may countersign
such Subscription Certificates either in its prior name or in its changed
name, and in all such events such Subscription Certificates shall have the
full force provided in the Subscription Certificates and in this Agreement.
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<PAGE> 8
Section 20. Conditions to Agent's Obligations. The Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions:
(a) The Agent may consult with legal counsel (who may be, but is not
required to be, legal counsel for the Company), and the opinion of such
counsel shall be full and complete authorization and protection to the
Agent as to any action taken or omitted by it in good faith and in
accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company, prior to taking or suffering any
action hereunder, such fact or matter (unless other evidence in respect
thereof is herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by the Chairman of the
Board, President or a Vice President and by the Secretary or Assistant
Secretary of Treasurer or Assistant Treasurer of the Company and delivered
to the Agent, and such certificate shall be full authorization to the Agent
for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.
(c) The Agent shall be liable hereunder only for its own gross
negligence or willful misconduct.
(d) Nothing herein shall preclude the Agent from acting in any other
capacity for the Company or for any other legal entity.
(e) The Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the
Subscription Certificates or be required to verify the same, but all such
statements and recitals are and shall be deemed to have been made by the
Company only.
(f) The Agent shall not be under any responsibility in respect of the
validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Agent) or in respect of the validity or
execution of any Subscription Certificate; nor shall it be responsible for
any breach by the Company of any covenant or condition contained in this
Agreement or in any Subscription Certificate; nor shall it by any act
hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Common Stock or other securities to be
issued pursuant to this Agreement or any Subscription Certificate or as to
whether any shares of Common Stock, or any shares or similar units of other
securities, will, when issued, be validly authorized and issued, fully
paid, and nonassessable.
(g) The Company agrees that it will perform, execute, acknowledge and
deliver, or cause to be performed, executed, acknowledged and delivered,
all such further and other acts, instruments and assurances as may
reasonably be required by the Agent for the carrying out or performing by
the Agent of the provisions of this Agreement.
(h) No provision of this Agreement shall require the Agent 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 its rights
if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(i) The Agent may resign and be discharged from its duties under this
Agreement upon 30 days' notice in writing mailed to the Company by
registered or certified mail.
Section 21. Supplements and Amendments. The Agent may, without the
consent or concurrence of the stockholders in whose names Subscription
Certificates are registered, by supplemental agreement or otherwise, concur with
the Company in making any changes or corrections in this Agreement or in a
Subscription Certificate that is appropriate to cure any ambiguity or to correct
any defective or inconsistent provision or clerical omission or mistake or
manifest error therein or herein contained, and which shall not be inconsistent
with the provisions of the Subscription Certificate except insofar as any such
change may confer additional rights upon the Rights holders.
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<PAGE> 9
Section 22. Tax Matters.
(a) The Agent shall comply with the information reporting and backup
withholding requirements of the Internal Revenue Code of 1986, as amended,
(the "Code"), including, without limitation, where appropriate, on a timely
basis, filing with the Internal Revenue Service and furnishing to Rights
holders fully completed Firms 1099B and 1099DIV. The Agent shall also
collect and duly preserve Forms W-8 and W-9 and other forms or information
necessary to comply with the backup withholding requirements of the Code.
(b) The Agent shall withhold from payments made to Rights holders
amounts sufficient to comply with the backup withholding requirements of
the Code.
Section 23. Notices. All notices and other communications provided for or
permitted hereunder shall be made by hand delivery, prepaid first class mail or
telecopier:
(a) If to the Company, to:
Globalstar Telecommunications Limited
600 Third Avenue
New York, New York 10016
(b) If to the Agent, to:
The Bank of New York
101 Barclay Street
New York, New York 10286
(c) If to a Rights holder, to the address shown on the registry books
of the Company.
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered; two business days
after being deposited in the mail, postage prepaid, if mailed as aforesaid;
when receipt is acknowledged, if telecopied.
Section 24. Assignment.
(a) Except as provided in subsection (c) below, neither this Agreement
nor any rights or obligations hereunder may be assigned by either party
without the written consent of the other party.
(b) This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective permitted successors and assigns.
Section 25. Benefits of This Agreement. Nothing in this Agreement shall
be construed to give any person or corporation other than the Company, the Agent
and the holders of the Subscription Certificates any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Agent and the holders of the
Subscription Certificates.
Section 26. Amendments. This Agreement may be amended, supplemented or
otherwise modified only by a written instrument executed and delivered by each
of the Company and the Agent.
Section 27. Governing Law. This Agreement will be governed by, and
construed and interpreted in accordance with, the laws of the State of New York.
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<PAGE> 10
Section 28. Counterparts. This Agreement may be executed by the parties
hereto on separate counterparts, which counterparts taken together will be
deemed to constitute one and the same instrument.
GLOBALSTAR TELECOMMUNICATIONS LIMITED
By:
------------------------------------------
Name:
Title:
THE BANK OF NEW YORK
By:
------------------------------------------
Name:
Title:
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<PAGE> 11
EXHIBIT A
FORM OF SUBSCRIPTION CERTIFICATE
<TABLE>
<S> <C>
SUBSCRIPTION CERTIFICATE NUMBER: REGISTERED OWNER: NUMBER OF RIGHTS:
NUMBER OF SHARES AVAILABLE FOR SUB-
SCRIPTION: CUSIP NUMBER G3930H 13 8
</TABLE>
THIS OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME ON APRIL , 1997
UNLESS EXTENDED, AND THIS SUBSCRIPTION CERTIFICATE IS VOID THEREAFTER
GLOBALSTAR TELECOMMUNICATIONS LIMITED
SUBSCRIPTION RIGHTS FOR COMMON STOCK
SUBSCRIPTION CERTIFICATE
Dear Shareholder:
As the registered owner of this Subscription Certificate, you are entitled
to exercise the Rights issued to you as of March , 1997, the Record Date for
Rights Offering of Globalstar Telecommunications Limited (the "Company"), to
subscribe for the number of shares of Common Stock of the Company shown on this
Certificate pursuant to the rights offering (the "Rights Offering") upon the
terms and conditions and at the Subscription Price for each share of Common
Stock as specified in the Company's Prospectus dated March , 1997 (the
"Prospectus"). The terms and conditions of the Rights Offering set forth in the
Prospectus are incorporated herein by reference. Copies of the Prospectus are
available upon request from the Information Agent, W.F. Doring & Co., Inc. at
the toll-free telephone number 888-330-5111.
METHOD OF EXERCISE OR TRANSFER OF RIGHTS
The Rights represented by this Subscription Certificate may be exercised by
duly completing and executing Form 1, and may be transferred, assigned,
exercised or sold through a bank or broker by duly completing and executing Form
2. This Subscription Certificate is transferable and may be combined or divided
at the office of the Subscription Agent. Rights holders should be aware that if
they choose to exercise or transfer less than all of the Rights evidenced
hereby, they may not receive a new subscription certificate in sufficient time
to exercise the remaining Rights evidenced thereby.
Full payment of the Subscription Price of $26.50 per share for all shares
subscribed for pursuant to the Rights Offering must accompany this Subscription
Certificate and must be made payable in United States dollars by money order or
check drawn on a bank located in the United States payable to The Bank of New
York. Alternatively, if a Notice of Guaranteed Delivery is used, a properly
completed Subscription Certificate, together with payment in full, as described,
must be received by the Subscription Agent by no later than the close of
business on the third business day after the Expiration Date. See pages 29
through 32 of the Prospectus.
Any questions regarding this Subscription Certificate may be directed to
the Information Agent, W.F. Doring & Co., Inc. at the toll-free telephone number
888-330-5111.
<TABLE>
<S> <C> <C>
By Mail: THE BANK OF NEW YORK By Hand or Overnight Courier:
101 BARCLAY STREET-22W
Tender & Exchange Department NEW YORK, NEW YORK 10286 Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Facsimile Transmission: Receive and Deliver Window
New York, New York 10286-1248 (for Eligible Institutions New York, New York 10286
Only)
(212) 815-6213
</TABLE>
THIS RIGHTS OFFERING HAS BEEN QUALIFIED OR IS BELIEVED TO BE EXEMPT FROM
QUALIFICATION ONLY UNDER THE FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF
EACH OF THE STATES IN THE UNITED STATES. RESIDENTS OF OTHER JURISDICTIONS MAY
NOT PURCHASE THE SHARES OF COMMON STOCK OFFERED HEREBY UNLESS THEIR PURCHASES OF
SUCH SHARES ARE EFFECTED IN ACCORDANCE WITH THE APPLICABLE LAWS OF SUCH
JURISDICTIONS.
<TABLE>
<S> <C>
Eric J. Zahler Michael B. Targoff
Secretary President and Chief Operating Officer
</TABLE>
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<PAGE> 12
FORM 1 -- EXERCISE AND SUBSCRIPTION: The undersigned hereby irrevocably
exercises one or more Rights evidenced by this Subscription Certificate to
subscribe for shares of Common Stock as indicated below, and the terms and
subject to the conditions specified in the Prospectus, receipt of which is
hereby acknowledged.
(a) Number of shares subscribed for pursuant to the Rights (each Right may
be exercised for one Share):
(Number of new shares) X $26.50 = $______________
(b) Method of Payment (check and complete appropriate box(es)):
[ ] Uncertified, certified or cashier's check, bank draft or money
order in the amount of $______________________, payable to The
Bank of New York, subscription agent.
[ ] Wire transfer in the amount of $____________, directed to The
Bank of New York, subscription agent, ABA No.:___________________,
GTL Rights Offering DDA No.:______________________, Attention:
________________________. Indicate name of institution wire
transferring funds and name of registered holder.
(c) If the number of Rights being exercised is less than all of the Rights
represented by this Subscription Certificate, check one of the
following boxes:
[ ] Deliver to me a new Subscription Certificate evidencing the
remaining Rights to which I am entitled.
[ ] Deliver a new Subscription Certificate evidencing the remaining
Rights in accordance with my Form 2 instructions (any required
signature guarantees must be included).
(d) If Rights are being exercised pursuant to a Notice of Guaranteed
Delivery delivered to the Subscription Agent prior to the date hereof,
complete the following:
Name(s) of Registered Owner(s):
------------------------------------------------
Window Ticket Number (if any):
-------------------------------------------------
Date of execution of Notice of Guaranteed Delivery:__________________,
1997
Name and Telephone Number of Eligible Institution which Guaranteed
Delivery:
----------------------------------------------------------------------
FORM 2 -- CHECK THE BOX BELOW TO TRANSFER YOUR SUBSCRIPTION CERTIFICATE OR SOME
OR ALL OF YOUR RIGHTS EVIDENCED HEREBY OR TO EXERCISE OR SELL RIGHTS THROUGH
YOUR BANK OR BROKER: [ ] For value received,__________________Rights
represented by this Subscription Certificate are hereby assigned to (please
print name and address and Taxpayer Identification No. of transferee in full):
Name:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Taxpayer Identification No. (Social Security Number for individuals):
- ---------------------------------
Upon completion of Form 1 and/or Form 2, subscribers and/or transferors must
sign below:
- --------------------------------------------------------------------------------
Signature of Subscriber or Transferor+
+ To effect a Transfer, a signature Guarantee must be provided by an Eligible
Institution as defined in Rule 17Ad-15 of the Securities Exchange Act of 1934.
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EXHIBIT B
FORM OF INSTRUCTIONS FOR COMPLETING SUBSCRIPTION CERTIFICATES
INSTRUCTIONS FOR COMPLETING
GLOBALSTAR TELECOMMUNICATIONS LIMITED
SUBSCRIPTION CERTIFICATES
CONSULT THE INFORMATION AGENT OR YOUR BANK OR
BROKER AS TO ANY QUESTIONS
------------------------
The following instructions relate to a rights offering (the "Rights
Offering") by Globalstar Telecommunications Limited, a Bermuda company (the
"Company"), to the holders of its common stock, par value $1.00 per share (the
"Common Stock"), as described in the Company's Prospectus dated March , 1997
(the "Prospectus"). Holders of record of Common Stock at the close of business
on March , 1997 (the "Record Date") are receiving one (1) transferable
subscription right (a "Right") for each 8.84042 shares of Common Stock held of
record on the Record Date. The Rights are evidenced by transferable subscription
certificates ("Subscription Certificates"), which record holders are receiving
with copies of the Company's Prospectus. Each whole Right entitles the holder
thereof to purchase from the Company one (1) share of Common Stock at the
subscription price of $26.50 (the "Subscription Price"). No fractional Rights or
cash in lieu thereof have been distributed or paid by the Company. The number of
Rights distributed to each holder of Common Stock have been rounded down to the
nearest whole number. An aggregate of 1,131,168 Rights exercisable to purchase
an aggregate of 1,131,168 shares of Common Stock are being distributed in
connection with the Rights Offering.
The Rights will expire at 5:00 p.m. New York City time, on April , 1997,
unless extended (the "Expiration Time").
The number of Rights to which you are entitled is printed on the face of
your Subscription Certificate. You should indicate your wishes with regard to
the exercise and/or transfer of your Rights by completing the appropriate form
or forms on the back of your Subscription Certificate and returning the
Subscription Certificate to the Subscription Agent in the envelope provided.
YOUR SUBSCRIPTION CERTIFICATE MUST BE RECEIVED BY THE SUBSCRIPTION AGENT,
OR GUARANTEED DELIVERY PROCEDURES WITH RESPECT TO YOUR RIGHT
MUST BE COMPLIED WITH, AND PAYMENT OF THE SUBSCRIPTION PRICE, INCLUDING FINAL
CLEARANCE OF ANY CHECKS, MUST BE RECEIVED BY THE SUBSCRIPTION AGENT AT OR BEFORE
5:00 P.M., NEW YORK CITY TIME, ON APRIL , 1997, OR ON SUCH LATER DATE AS THE
EXPIRATION TIME IS EXTENDED. YOU MAY NOT REVOKE ANY PROPER EXERCISE OF A RIGHT.
1. SUBSCRIPTION.
To exercise Rights, complete and sign the Form 1 on the reverse side of
your Subscription Certificate and send it (or Notice of Guaranteed Delivery),
together with payment in full of the Subscription Price for each share of Common
Stock subscribed for pursuant to the Rights Offering to The Bank of New York, as
Subscription Agent (the "Subscription Agent"). Payment of the Subscription Price
must be made for the full number of shares of Common Stock being subscribed for
(a) in U.S. dollars by check or postal, telegraphic or express money order
payable to The Bank of New York, as Subscription Agent or (b) by wire transfer
of funds in U.S. dollars to the account maintained by the Subscription Agent for
such purpose at [ ], ABA No. ; GTL Rights Offering DDA
No.: ; Attention: . THE SUBSCRIPTION PRICE WILL BE DEEMED
TO HAVE BEEN RECEIVED BY THE SUBSCRIPTION AGENT ONLY UPON (I) CLEARANCE OF ANY
UNCERTIFIED CHECK, (II) RECEIPT BY THE SUBSCRIPTION AGENT OF ANY CERTIFIED OR
CASHIER'S CHECK OR OF ANY POSTAL, TELEGRAPHIC OR EXPRESS MONEY ORDER, OR
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<PAGE> 14
(III) RECEIPT OF COLLECTED FUNDS IN THE SUBSCRIPTION AGENT'S ACCOUNT
DESIGNATED ABOVE. IF PAYING BY UNCERTIFIED PERSONAL CHECK, PLEASE NOTE THAT THE
FUNDS PAID THEREBY MAY TAKE AT LEAST FIVE BUSINESS DAYS TO CLEAR. ACCORDINGLY,
REGISTERED RIGHTS HOLDERS WHO WISH TO PAY THE SUBSCRIPTION PRICE BY MEANS OF AN
UNCERTIFIED PERSONAL CHECK ARE URGED TO MAKE PAYMENT SUFFICIENTLY IN ADVANCE OF
THE EXPIRATION TIME TO ENSURE THAT SUCH PAYMENT IS RECEIVED AND CLEARS BY SUCH
TIME AND ARE URGED TO CONSIDER, IN THE ALTERNATIVE, PAYMENT BY MEANS OF
CERTIFIED OR CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.
Alternatively, you may cause a written guarantee substantially in the form
of Exhibit A to these instructions (the "Notice of Guaranteed Delivery") from a
member firm of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc., or from a commercial bank or
trust company having an office or correspondent in the United States (each, an
"Eligible Institution"), to be received by the Subscription Agent prior to the
Expiration Time; payment in full of the applicable Subscription Price may be
made separately as long as said payment is also received by the Subscription
Agent prior to the Expiration Time. Such Notice of Guaranteed Delivery must
state your name, the number of Rights represented by your Subscription
Certificate and the number of underlying shares of Common Stock being subscribed
for pursuant to the exercise of the Rights and must guarantee the delivery to
the Subscription Agent of your properly completed and executed Subscription
Certificate by 5:00 p.m., New York City time on April , 1997. Additional
copies of the Notice of Guaranteed Delivery may be obtained upon request from
the Information Agent at the address, or by calling the telephone number,
indicated below.
Banks, brokers and other nominee Rights holders who exercise the Rights on
behalf of beneficial owners of Rights will be required to certify to the
Subscription Agent and the Company (by delivery to the Subscription Agent of a
Nominee Holder Certification substantially in the form of Exhibit B to these
instructions), as to the aggregate number of Rights which have been exercised
and the number of shares of Common Stock thereby subscribed for pursuant to the
exercise of the Rights by each beneficial owner of Rights (which may include
such nominee) on whose behalf such nominee is acting.
If you exercise less than all of the Rights evidenced by your subscription
certificate by so indicating in Form 1 of your subscription certificate, the
Subscription Agent will issue to you a new subscription certificate evidencing
the unexercised Rights. However, if you choose to have a new subscription
certificate sent to you, you may not receive any such new subscription
certificate in sufficient time to permit you to sell or exercise the Rights
evidenced thereby.
If the number of Rights Shares being subscribed for pursuant to the Rights
is not specified, you will be deemed to have exercised such Rights with respect
to the maximum whole number of shares of Common Stock that may be acquired for
the Subscription Price payment delivered.
ONCE A HOLDER HAS EXERCISED THE RIGHTS, THE EXERCISE MAY NOT BE REVOKED.
The addresses and facsimile number of the Subscription Agent are as
follows:
THE BANK OF NEW YORK
101 BARCLAY STREET
NEW YORK, NEW YORK 10286
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
Tender & Exchange Department (for Eligible Institutions Only) Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
</TABLE>
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<PAGE> 15
The address and telephone number of the Information Agent, to whom all
questions and requests for the Prospectus or other documents relating to the
Rights Offering should be addressed, are as follows:
W.F. DORING & CO., INC.
150 BAY STREET
8TH FLOOR
JERSEY CITY, NEW JERSEY 07302
(888) 330-5111
2. ISSUANCE AND DELIVERY OF STOCK CERTIFICATES.
Certificates for shares of Common Stock issuable upon exercise of the
Rights will be mailed as soon as practicable after the subscriptions have been
accepted by the Subscription Agent.
3. TRANSFERS OF RIGHTS.
The Rights evidenced by a single Subscription Certificate may be
transferred in whole or in part as follows:
(a) Sale of Rights through a Bank or Broker. To sell all Rights
evidenced by a subscription certificate through your bank or broker, so
indicate on Form 2 and deliver your properly completed and executed
subscription certificate to your bank or broker and have your signature
guaranteed by an Eligible Institution. Your subscription certificate should
be delivered to your bank or broker in ample time for it to be exercised.
If Form 2 is completed without designating a transferee, the Subscription
Agent may thereafter treat the bearer of the subscription certificate as
the absolute owner of all of the Rights evidenced by such subscription
certificate for all purposes, and the Subscription Agent shall not be
affected by any notice to the contrary. Your bank or broker cannot issue
subscription certificates. If you wish to sell less than all of the Rights
evidenced by a subscription certificate, either you or your bank or broker
must instruct the Subscription Agent as to the action to be taken with
respect to the Rights not sold, or you or your bank or broker must first
have your subscription certificate divided into subscription certificates
of appropriate denominations by following the instructions in paragraph 4
of these instructions. The subscription certificates evidencing the number
of Rights you intend to sell can then be transferred by your bank or broker
in accordance with the instructions in this paragraph 3(a).
(b) Transfers of Rights to a Designated Transferee. To transfer all of
your Rights evidenced by your subscription certificate to a transferee
other than a bank or broker, you must check the box for Form 2 and complete
Form 2 in its entirety, execute the subscription certificate and have your
signature guaranteed by an Eligible Institution. If Form 2 is completed
without designating a transferee, the Subscription Agent may thereafter
treat the bearer of the subscription certificate as the absolute owner of
all of the Rights evidenced by such subscription certificate for all
purposes, and the Subscription Agent shall not be affected by any notice to
the contrary. Only the Subscription Agent can issue subscription
certificates. You may transfer less than all of the rights evidenced by
your subscription certificates, in which case you may obtain a new
subscription certificate in the appropriate smaller denomination by
following the instructions in paragraph 4 below. The number of Rights you
intend to transfer can then be transferred by following the instructions in
this paragraph 3(b).
Rights holders wishing to transfer all or a portion of their Rights should
allow a sufficient amount of time prior to the Expiration Date for (i) the
transfer instructions to be received and processed by the Subscription Agent,
(ii) a new Subscription Certificate to be issued and transmitted to the
transferee or transferees with respect to transferred Rights, and to the
transferor with respect to retained Rights, if any, and (iii) the Rights
evidenced by such new Subscription Certificates to be exercised or sold by the
recipients thereof.
All commissions, fees and other expenses (including brokerage commissions
and transfer taxes) incurred in connection with the purchase, sale or exercise
of Rights will be for the account of the transferor or subscriber of the Rights,
and none of such commissions, fees or expenses will be paid by the Company or
the Subscription Agent.
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<PAGE> 16
4. DIVIDING SUBSCRIPTION CERTIFICATES.
To have a subscription certificate divided into smaller denominations, you
must send your subscription certificate, together with complete separate
instructions (including specification of the denominations into which you wish
your rights to be divided) signed by you, to the Subscription Agent, allowing a
sufficient amount of time for new subscription certificates to be issued and
returned so that they can be used prior to the Expiration Date. Alternatively,
you may ask a bank or broker to effect such actions on your behalf. Your
signature must be guaranteed by an Eligible Institution if any of the new
subscription certificates are to be issued in a name other than that in which
the old subscription certificate was issued. Subscription certificates may not
be divided into units to purchase fractional shares and any instruction to do so
will be rejected. As a result of delays in the mail, the time of the
transmittal, the necessary processing time and other factors, you or your
transferee may not receive such new subscription certificates in time to enable
the holder to complete the sale or exercise by the Expiration Date. Neither the
Company nor the Subscription Agent will be liable to either a transferor or a
transferee for any such delays.
5. SIGNATURES.
(a) Signatures by Registered Holder. The signature on the Subscription
Certificate must correspond with the name of the registered holder exactly
as it appears on the face of the Subscription Certificate, without any
alteration or change whatsoever. Joint owners should each sign. Persons who
sign the Subscription Certificate in a representative or other fiduciary
capacity, such as an executor, trustee or corporate officer, must indicate
such capacity when signing and, unless waived by the Subscription Agent in
its sole and absolute discretion, must present to the Subscription Agent
satisfactory evidence of their authority to so act.
(b) Execution by Person Other than Registered Holder. If the
Subscription Certificate is signed by a person other than the holder named
on the face of the Subscription Certificate, proper evidence of authority
of the person signing the Subscription Certificate must accompany the same
unless, for good cause, the Subscription Agent dispenses with proof of
authority.
(c) Signature Guarantees. Your signature must be guaranteed by an
Eligible Institution if you wish to transfer your Rights, as specified in
3(b) above, to a transferee including a bank or a broker.
6. METHOD OF DELIVERY.
The method of delivery of Subscription Certificate and payment of the
Subscription Price to the Subscription Agent will be at the election and risk of
the registered holder of the Rights but, if sent by mail, it is recommended that
they be sent by registered mail, properly insured, with return receipt
requested, and that a sufficient number of days be allowed to ensure delivery to
the Subscription Agent and the clearance of any uncertified personal checks sent
in payment of the Subscription Price prior to 5:00 p.m., New York City time, on
April , 1997.
7. TRANSFER TAXES.
The Company will pay transfer taxes, if any, applicable to the issuance and
sale of Common Stock to a registered Rights holder upon the exercise of Rights
by such holder. If, however, a transfer tax is imposed for any reason other than
the issuance and sale of the Company's Common Stock to a registered Rights
holder upon exercise of Rights by such holder, the amount of any such transfer
taxes (whether imposed on the registered holder or on any other person) will be
payable by the registered holder or such other person. In any such event, the
Subscription Agent will be entitled to refuse to take the action requested until
it has received satisfactory evidence of the payment of such taxes or exemption
therefrom.
8. IRREGULARITIES.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Company, whose determinations
will be final and binding. The Company, in its sole
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discretion, may waive any defect or irregularity, or permit a defect or
irregularity to be corrected within such time as it may determine, or reject the
purported exercise of any Rights Certificates will not be deemed to have been
received or accepted until all irregularities have been waived or cured within
such time as the Company determines, in its sole discretion. Neither the Company
nor the Subscription Agent will be under any duty to give notification of any
defect or irregularity in connection with the submission of Subscription
Certificates or incur any liability for failure to give such notification.
9. LOST, STOLEN, MUTILATED OR DESTROYED SUBSCRIPTION CERTIFICATES.
Upon receipt by the Company and the Subscription Agent of evidence
reasonably satisfactory to them of the loss, theft, mutilation, or destruction
of a Subscription Certificate, and in the case of loss, theft or destruction, of
indemnity and/or security satisfactory to them, in their sole discretion, and
reimbursement to the Company and the Subscription Agent of all reasonable
expenses incidental thereto, and upon surrender and cancellation of the
Subscription Certificate, if mutilated, the Subscription Agent will make and
deliver a new Subscription Certificate of like tenor to the registered Rights
holder in lieu of the Subscription Certificate so lost, stolen, mutilated or
destroyed. If required by the Company or the Subscription Agent, an indemnity
bond must be sufficient in the judgment of each party to protect the Company,
the Subscription Agent or any agent thereof from any loss which any of them may
suffer in a lost, stolen, mutilated or destroyed Subscription Certificate is
replaced.
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<PAGE> 18
EXHIBIT C
FORM OF LETTER TO SHAREHOLDERS
SPECIAL NOTICE TO HOLDERS OF
GLOBALSTAR TELECOMMUNICATIONS LIMITED
COMMON STOCK
WHOSE ADDRESSES ARE OUTSIDE
THE UNITED STATES
Dear Shareholder:
Enclosed you will find materials relating to the Rights Offering of
Globalstar Telecommunications Limited (the "Company"). Holders of Common Stock
at the close of business on March , 1997 (the "Record Date") will receive
transferable rights ("Rights") to subscribe for and purchase shares of Common
Stock held of record on the Record Date. A Subscription Certificate representing
Rights to subscribe for shares of the Company's Common Stock at $26.50 per share
is not included in this mailing, but instead is being held on your behalf by the
Subscription Agent, The Bank of New York. If you wish to exercise any or all of
these Rights, you must so instruct the Subscription Agent in the manner
described in the accompanying Prospectus and Instructions for Completing
Subscription Certificates by 5:00 p.m., New York time, on April , 1997, unless
Offering is extended by the Company. Rights not exercised by such time will
expire and become null and void.
ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE OFFERING SHOULD BE
ADDRESSED TO W.F. DORING & CO., INC., THE INFORMATION AGENT, AT (888) 330-5111.
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<PAGE> 1
EXHIBIT 99.7
<PAGE> 2
EXHIBIT 99.7
INFORMATION AGENCY AGREEMENT
This Information Agency Agreement (the "Agreement") is by Globalstar
Telecommunications Limited, a Bermuda company (the "Company"), and W.F. Doring &
Co., Inc., as Information Agent (the "Information Agent") for the Company's
Rights Offering, as defined below.
W I T N E S S E T H:
WHEREAS, the Company proposes to distribute to the holders of Common Stock,
of record (the "Shareholders") as of the close of business on March , 1997
(the "Record Date"), certificates ("Subscription Certificates") representing
transferable rights (the "Rights") to subscribe for and purchase an aggregate of
1,131,168 shares of Common Stock (the "Rights Shares"), at the rate of one share
of Common Stock for each 8.84042 shares of Common Stock held by each Stockholder
on the Record Date (the "Rights Offering"), at a subscription price equal to
$26.50 per share (the "Subscription Price");
WHEREAS, the Rights Offering will expire on April , 1997, unless extended
by the Company (the "Expiration Date");
WHEREAS, pursuant to a certain standby agreement dated as of March ,
1997, Loral Space and & Telecommunications Ltd. (the "Standby Purchaser") has
agreed to subscribe for and purchase at the Subscription Price all Rights Shares
not otherwise subscribed for on or prior to the Expiration Date;
WHEREAS, the Company has filed a registration statement relating to the
Rights and the Rights Shares with the Securities and Exchange Commission under
the Securities Act of 1933 (the "Act") on February 19, 1997 (in the form in
which it first becomes effective under the Act and as it may thereafter be
amended, the "Registration Statement"), which Registration Statement will
include a final prospectus containing the terms of the Rights Offering (the
"Final Prospectus");
WHEREAS, the Company desires the Agent to perform certain acts on behalf of
the Company and the Agent desires to so act, in connection with distribution of
the Subscription Certificates, transfers, if any, of the same and recordation of
such transfers, the issuance and exercise of the Rights to subscribe therein set
forth, and the coordination with The Bank of New York (the "Subscription Agent")
in order to fully inform the ultimate beneficial Stockholders of the Rights
Offering, all upon the terms and subject to the conditions set forth herein;
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
herein contained, the parties hereby agree as follows:
Section 1. The Rights Offering. The Company is distributing to the
Shareholders Rights to subscribe for and purchase the Rights Shares at the
Subscription Price. Pursuant to the terms of the Rights Offering, each
Shareholder will receive one Right to purchase one Rights Share for each 8.84042
shares of Common Stock held by such Shareholder on the Record Date. The Rights
Offering will expire on the Expiration Date.
The Company filed a Registration Statement relating to the Rights and the
Rights Shares to be issued pursuant to the Rights Offering with the Securities
and Exchange Commission under the Act on February 19, 1997. Said Registration
Statement became effective on , 1997. A copy of the Final Prospectus
is attached as Exhibit 1 hereto.
The Rights are evidenced by fully-transferable Subscription Certificates, a
copy of the form of which is set forth hereto as Exhibit 2.
No fractional Rights will be issued. The Number of Rights distributed to
each Shareholder will be rounded down to the nearest whole number and no
fractional Rights or cash in lieu of thereof will be issued or paid.
<PAGE> 3
Section 2. Appointment of Agent.
The Company hereby appoints and authorizes the Information Agent to act on
its behalf in accordance with the provisions hereof, and the Information Agent
hereby accepts such appointment and agrees to so act. The Information Agent
acknowledges that the Subscription Agent will assist the Information Agent in
connection with certain aspects of the Rights Offering as described in the Final
Prospectus and the Subscription Agency Agreement which is an exhibit to the
Registration Statement.
Section 3. Duties of the Information Agent. As Information Agent you are
authorized and directed to:
(a) contact all brokers, banks depositories and other institutions
holding shares of Common Stock, as shown on appropriate portions of the
Company's shareholder list, the CEDE list and other depository lists, if
any, to ascertain quantities of materials needed for forwarding to
beneficial holders;
(b) deliver materials by messenger to New York City based brokers and
banks and by Federal Express or other means to non-New York City based
brokers and banks; follow up by telephone with each institution to insure
receipt of the materials and to confirm timely remailing of the materials
to the beneficial owners;
(c) maintain frequent contact with brokers and banks to monitor
response and to insure that all liaison procedures are proceeding
satisfactorily and will exert every effort to maximize contact with the
intermediaries and to do "end runs" around them directly to the underlying
owners (also known as the NOBOs);
(d) use your best efforts to reach underlying non-NOBO holders
directly, in situations where you feel it is necessary to contact such
holders. You will employ such means as necessary, relying on your
experience, to reach these holders to accelerate action from holders who
have not yet responded to your initial efforts;
(e) with respect to individual and other holders who do not hold the
shares of Common Stock in street name or in nominee accounts, mount a very
comprehensive telephone contact effort designed to reach all of those
holders in their homes or offices; in connection with this function, the
Company will instruct the Subscription Agent to supply you with appropriate
data so that individuals may be contacted; and
(f) obtain telephone numbers for the shareholders and immediately
telephone shareholders who have not yet acted and employ accelerated
transmittal procedures in order to get the data to the owners; such
telephone contacts will include, but are not limited to, confirming that
holders have received details by mail (you will be expected to re-mail via
Federal Express such remails in the event the shareholders have either
failed to receive the materials or have discarded same), that such
shareholders understand the significance of the upcoming deadline and
finally, that the shareholders are fully conversant with the procedure to
be used for effecting timely action.
Section 4. Agent Compensation. The Company agrees that it will pay to the
Information Agent compensation for its services as such in accordance with its
fee schedule to act as Information Agent, a copy of which the Company
acknowledges having received. The Company further agrees that it will reimburse
the Information Agent for its necessary and reasonable expenses incurred in the
performance of its duties as such, including without limitation, postage,
stationery and supplies, and counsel fees.
Section 5. Confidential Information. The Information Agent acknowledges
the confidential and proprietary nature of the Company's shareholder records and
information related thereto which it may receive pursuant to the exercise of its
duties under this Agreement. The Information Agent agrees that it shall maintain
the confidentiality thereof and, except as necessary to fulfill any duty under
this Agreement, shall not disclose the contents or nature thereof without the
express prior written authorization of a Company Vice President.
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Section 6. Instructions. The Information Agent will be entitled to rely
upon any instructions or directions furnished to it in writing by any officer of
the Company, and will be entitled to treat as genuine, and as the document is
purports to be, any letter or other document furnished to it by any officer of
the Company.
Section 7. Indemnification. The Company agrees to indemnify, hold
harmless, reimburse and defend the Information Agent and its officers, agents
and employees, against all claims or threatened claims, costs, expenses,
liabilities, obligations, losses or damages (including legal fees and expenses)
of any nature, incurred by or imposed upon the Information Agent or any of its
officers, agents or employees, which result, arise out of or are based upon
services rendered to pursuant to this Agreement (provided, however, that such
indemnification shall not apply to an indemnitee who is found to have acted in
breach of this Agreement or with gross negligence or willful disregard of its
duties with respect to the matter for which indemnification is sought).
Section 8. Amendments. This Agreement may be amended, supplemented or
otherwise modified only by a written instrument executed and delivered by each
of the Company and the Information Agent.
Section 9. Governing Law. This Agreement will be governed by, and
construed and interpreted in accordance with, the laws of the State of New York.
Section 10. Counterparts. This Agreement may be executed by the parties
hereto on separate counterparts, which counterparts taken together will be
deemed to constitute one and the same instrument.
GLOBALSTAR TELECOMMUNICATIONS LIMITED
By:
--------------------------------------------
Name:
Title:
W.F. DORING & Co., INC.
By:
--------------------------------------------
Name:
Title:
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