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PROSPECTUS
GLOBALSTAR TELECOMMUNICATIONS LIMITED
4,000,000 SHARES OF 8% CONVERTIBLE REDEEMABLE PREFERRED STOCK DUE 2011
AND
8,400,000 SHARES OF COMMON STOCK
------------------------
The holders of restricted shares of our preferred stock named on pages 31
and 32 should deliver this prospectus when they offer or sell their shares.
After that, the shares will be free of restrictions under the securities laws.
We will also deliver this prospectus when any holder of preferred stock converts
shares of preferred stock into common stock, so that this common stock will be
freely tradeable. We originally issued the preferred stock in a private
placement in January 1999. The holders of restricted shares of our common stock
named on page 33 should also deliver this prospectus to offer or sell their
shares. These holders bought their shares in July 1998.
At the time of the private placement, we agreed with the initial purchasers
that we would use our reasonable efforts to effect this registration after the
closing and to keep it in effect as long as necessary. The named selling
stockholders may resell their shares despite any restrictive legends on the face
of their securities, unless we instruct them that they may not. Buyers who
purchase from them will receive unlegended, freely tradeable stock.
Our common stock is listed on the Nasdaq National Market under the symbol
"GSTRF." On April 19, 1999, the last reported sale price of our common stock was
$18.25 per share. We do not intend to list our preferred stock on any exchange
or on Nasdaq.
OWNERS OF THE PREFERRED AND COMMON STOCK FACE BUSINESS AND FINANCIAL RISKS.
A DESCRIPTION OF THOSE RISKS BEGINS ON PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
April 20, 1999
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TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 6
Ratios...................................................... 8
Use of Proceeds............................................. 8
Description of Preferred Stock.............................. 9
Description of Common Stock................................. 22
Taxation.................................................... 26
Selling Stockholders........................................ 31
Plan of Distribution........................................ 33
Legal Matters............................................... 35
Experts..................................................... 35
Incorporation of Certain Documents by Reference............. 36
Where You Can Find More Information......................... 36
Forward-Looking Statements.................................. 37
</TABLE>
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PROSPECTUS SUMMARY
The following is only a summary of some of the important terms of the
offering described in this prospectus. The main body of this prospectus, as well
as documents and financial statements that are incorporated by reference into
this prospectus, contain more detailed information regarding us and Globalstar.
GTL and Globalstar............ Globalstar has begun to launch and is preparing
to operate a satellite constellation that will
form the backbone of a wireless digital
telephone system able to serve most of the
populated world. The Globalstar(TM) System will
extend wireless digital telephone service to
millions of people who today lack even basic
telephone service. Globalstar plans to begin
commercial service in September 1999.
Loral Space & Communications Ltd., one of the
world's premier satellite companies, is one of
the founders of Globalstar, owns approximately
43% of its equity and, through a subsidiary,
serves as the managing general partner of
Globalstar. We are another general partner of
Globalstar and operate as a holding company to
permit public equity ownership in Globalstar.
Our address is: Cedar House, 41 Cedar Avenue,
Hamilton HM12, Bermuda. Our telephone number
is: (441) 295-2244.
Securities Being Offered...... This prospectus covers the offer and sale of
the following:
- 4,000,000 shares of preferred stock
owned by selling stockholders named on
pages 31 and 32;
- up to 8,600,000 shares of common stock
issuable on conversion of the preferred
stock; and
- 8,400,000 shares of common stock owned
by selling stockholders named on page
33.
TERMS OF THE PREFERRED STOCK
Liquidation Preference..... Each share of preferred stock has a
"liquidation preference" of $50, which is the
amount a holder of one share of preferred stock
would be entitled to receive if our company
were liquidated.
Total Liquidation
Preference.............. $200 million, that is, $50 per share times
4,000,000 shares of preferred stock.
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Ranking.................... The preferred stock ranks:
- senior to all shares of our other
capital stock, unless the other stock
expressly provides otherwise,
- equal with any of our preferred stock
issued in the future and any of our
capital stock which provides that it be
ranked equal with the preferred stock,
- junior to our capital stock which
provides that it be ranked senior to
the preferred stock, and
- junior to all our indebtedness and
other obligations.
Dividends.................. Dividends accrue at the rate of 8% per year and
are payable on February 15, May 15, August 15
and November 15 of each year, starting on May
15, 1999.
Redemption of the
Preferred Stock............ We have the right to redeem some or all of the
preferred stock on or before February 15, 2002,
at a redemption price of 104.6% of its
liquidation preference. In other words, we will
pay 104.6% times $50 for each share. We only
have this right if the common stock at the time
of redemption is trading at a specified premium
over the then prevailing conversion price.
If we redeem the preferred stock on or before
February 15, 2002, we will have to make an
additional payment intended to make the
preferred stockholders whole for the dividend
payments they will not receive. This make-whole
payment will include accrued dividends and
liquidated damages, if any, plus the present
value of the total amount of dividends that
would have been required to be paid from the
redemption date through February 15, 2002 if
the preferred stock had not been redeemed.
Beginning on February 20, 2002, we will have
the right to redeem some or all of the
preferred stock at a redemption price equal to
a percentage of the liquidation preference plus
accrued dividends and liquidated damages, if
any, to the date of redemption. From February
20, 2002 until February 19, 2003, the
redemption price for each share will equal
(104.6% X $50)+ accrued dividends + liquidated
damages. The premium
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percentage will decline each year on February
20, from 2002 onwards until it equals 100% on
February 20, 2006, and will remain at 100%
until redeemed.
We will be required to redeem any preferred
stock still outstanding on February 15, 2011 at
a redemption price equal to 100% of the total
liquidation preference plus accrued dividends
and liquidated damages, if any, to that date.
We Used the Proceeds from
the Original Sale of the
Preferred Stock to Buy
Preferred Partnership
Interests of Globalstar.... We used the net proceeds from the original
offering of the preferred stock to purchase
preferred partnership interests of Globalstar.
Method of Dividend,
Redemption and Other
Payments...................... Globalstar may generally make any payments due
on its preferred partnership interests:
- in cash,
- by delivery of its ordinary partnership
interests, or
- through any combination of the two.
Likewise, we may generally make any payments
due on the preferred stock, such as redemption
payments and dividend payments:
- in cash,
- by delivery of our common stock, or
- through any combination of the two.
If Globalstar makes a payment on the preferred
partnership interests in ordinary partnership
interests, we may make payments in our common
stock or in cash from the proceeds of a sale of
common stock. However, if Globalstar makes a
scheduled distribution in cash, we must make
the corresponding payment in cash. We also have
the right to pay dividends even though we may
not have received a distribution on the
preferred partnership interests for the
corresponding dividend payment date.
Optional Conversion........ If you are a holder of preferred stock, you may
convert some or all of your shares of preferred
stock, unless we
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have already redeemed them. The initial
conversion price is $23.2563 per share. At that
price, you would receive 2.15 shares of common
stock for each $50 liquidation preference of
preferred stock (that is, 50/23.2563). You will
not be entitled to any accrued dividends upon
conversion. The conversion price will be
adjusted if specified dilutive events occur.
If you convert our preferred stock into our
common stock, we will convert a proportionate
number of our holdings of Globalstar's
preferred partnership interests into
Globalstar's ordinary partnership interests.
Limited Voting Rights...... Holders of the preferred stock are generally
not entitled to any voting rights, unless we
have not declared or paid dividends for a total
of six quarterly periods.
Registration Rights For
Holders of the Preferred
Stock...................... We have agreed for the benefit of the holders
of preferred stock that we will maintain a
shelf registration statement continuously
effective under the Securities Act for a period
of up to two years after the preferred stock
was originally issued (or less, if all
restricted securities traded under the shelf
registration statement have been sold).
If we do not satisfy these obligations, we will
be required to pay liquidated damages.
Trading.................... Our common stock currently trades on the Nasdaq
National Market under the symbol GSTRF. We have
not applied and do not intend to apply for the
listing of the preferred stock on any
securities exchange.
Preferred Partnership
Interests.................. The Globalstar preferred partnership interests
have generally the same terms and conditions as
the preferred stock, except that the Globalstar
preferred partnership interests are not subject
to any registration rights and will rank junior
not just to the debt obligations of Globalstar,
but to all existing and future liabilities of
Globalstar. Cash distributions on Globalstar's
preferred partnership interests will be limited
to the amount of the partnership capital
accounts that are maintained for those
interests and that reflect a preferred
allocation of Globalstar profits. Globalstar's
preferred partnership
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interests will have limited voting rights
similar to those of our preferred stock.
Ranking of Preferred
Partnership Interests...... Globalstar's preferred partnership interests
will rank junior to all existing and future
liabilities of Globalstar, including but not
limited to (1) distributions made to Globalstar
partners to pay taxes, (2) Globalstar's
managing general partner's allocation and (3) a
fee equal to 1.5% per year of the average
quarterly amount borrowed under Globalstar's
credit facility payable to certain of
Globalstar's partners for their guarantees
under that facility. The preferred partnership
interests will, however, rank senior to
Globalstar's ordinary partnership interests
with respect to the payment of distributions
and otherwise receive certain preferred
allocation of profits and losses.
Registration Rights for
Holders of Common Stock....... We have agreed for the benefit of some of the
selling stockholders who hold our common stock
to pay liquidated damages, under certain
circumstances, if the shelf registration
statement becomes effective but subsequently
ceases to be effective or useable. This does
not apply to holders of our common stock who
received their common stock on conversion of,
or as a payment in respect of, their preferred
stock.
For detailed information regarding the preferred stock, you should refer to
the section of this prospectus called "Description of Preferred Stock" and
"Description of Common Stock."
RISK FACTORS
An investment in our common stock and preferred stock involves risks that
should be considered by prospective investors. These risks are discussed in the
section of this prospectus called "Risk Factors."
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RISK FACTORS
An investment in our securities entails some risks which are described in
our and Globalstar's Annual Report on Form 10-K for the year ended December 31,
1998 and are incorporated by reference in this prospectus. Additional risks
relating to an investment in our common stock and preferred stock include the
following:
THE RIGHTS OF SHAREHOLDERS UNDER BERMUDA LAW ARE DIFFERENT FROM RIGHTS OF
SHAREHOLDERS UNDER U.S. LAW
Since we are a Bermuda company, the principles of law that govern
shareholder rights, the validity of corporate procedures and other matters are
different from those that would apply if we were a U.S. company. For example, it
is not certain whether a Bermuda court would enforce liabilities against us or
our officers and directors based upon United States securities laws either in an
original action in Bermuda or under a United States judgment. Bermuda law giving
shareholders rights to sue directors is less developed than in the United States
and may provide fewer rights.
THERE IS NO PUBLIC MARKET FOR THE PREFERRED STOCK,
AND NO SUCH MARKET MAY DEVELOP
There is no public market for the preferred stock. We do not intend to list
it on any exchange or on Nasdaq. It is possible that an active trading market
will not develop or may be discontinued and the shares of preferred stock
offered by this prospectus may remain relatively illiquid.
PRICES OF THE COMMON AND PREFERRED STOCK MAY BE VOLATILE
Many things that we cannot predict or control may hurt the price of the
common stock. Risks associated with the deployment and operation of satellite
systems, in particular, may cause sudden changes in the price. For example, on
September 10, 1998 the price of the common stock closed almost 40% below the
closing price of the previous day, after news of the Zenit 2 rocket launch
failure in which 12 of our satellites were destroyed.
Since the value of the preferred stock will be partly based on the common
stock, it is also likely to have a volatile price.
HOLDERS OF COMMON STOCK MAY BE DILUTED BY FUTURE STOCK ISSUANCES
As of December 31, 1998, 82,016,679 shares of common stock were
outstanding. In addition, at that date:
- Globalstar partners have the right, exercisable over a period of years
following the beginning of Globalstar service and two consecutive
quarters of positive net income, to exchange their ordinary partnership
interests for about 152 million shares of common stock;
- holders of outstanding warrants have the right to exercise them for
4,069,325 shares of common stock;
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- Globalstar employee and directors have unexercised options to buy
2,121,690 shares of common stock; and
- under our stock option plan, we may in the future grant employees'
options to purchase as many as 349,800 shares of common stock, and we
have requested that shareholders approve at our annual meeting on May 18,
1999 a proposal to increase by 2,500,000 the number of shares of common
stock that would be available for issuance under our stock option plan.
Sales of significant amounts of common stock to the public, including the
common stock covered by this registration statement, or the perception that
those sales could happen, could hurt the price of the common stock.
WE DEPEND ON GLOBALSTAR CAPITAL ACCOUNTS FOR CASH DISTRIBUTIONS ON THE
GLOBALSTAR PREFERRED PARTNERSHIP INTERESTS WE HOLD
The cash that Globalstar can pay to us in redemption of its preferred
partnership interests will be limited to the balance in the capital account
maintained by Globalstar for the benefit of those interests. This account
balance at the outset was equal to the net proceeds of the original offering of
the preferred stock (about $340 million). This balance will be increased by the
adjusted income allocated to us with respect to the preferred partnership
interests. The capital account balance will likewise be decreased by any losses
allocated, and cash distributed, to us with respect to the preferred partnership
interests. Losses would be allocated to us with respect to the preferred
partnership interests only after losses have first been allocated to reduce the
capital accounts for all holders of ordinary partnership interests to zero.
If losses and distributions by Globalstar exceed the adjusted income
outlined above, the balance in the capital account will be less than the total
redemption price for the preferred partnership interests on February 15, 2011.
In that case, Globalstar will pay the excess to us in ordinary partnership
interests. To the extent we receive a payment in ordinary partnership interests
instead of cash, we will make the corresponding payment by issuing common stock
to holders of the preferred stock or by selling common stock and using the net
proceeds from these sales to make the redemption payment.
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RATIOS
GLOBALSTAR TELECOMMUNICATIONS LIMITED
RATIO OF EARNINGS TO COVER FIXED CHARGES AND PREFERRED STOCK DIVIDENDS(1)
The ratio of earnings to cover fixed charges and preferred stock dividends
presented below should be read together with the financial statements and the
notes accompanying them and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" found in our and Globalstar's Annual Report
on Form 10-K for the year ended December 31, 1998 incorporated into this
prospectus by reference.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
- -----------------------------------------------------------------------------
1995 1996 1997 1998
- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
N.A. 1x 1x 1x
</TABLE>
- ---------------
(1) Our earnings available to cover fixed charges and preferred dividends
consist solely of dividends from Globalstar on the preferred partnership
interests held by us.
GLOBALSTAR, L.P.
DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES
AND DISTRIBUTIONS ON PREFERRED PARTNERSHIP INTERESTS
(In thousands)
The deficiency of earnings to cover fixed charges and distributions on
preferred partnership interests presented below should be read together with the
financial statements and the notes accompanying them and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" found
in our and Globalstar's Annual Report on Form 10-K for the year ended December
31, 1998 incorporated into this prospectus by reference.
<TABLE>
<CAPTION>
MARCH 23, 1994
(COMMENCEMENT OF YEAR ENDED DECEMBER 31,
OPERATIONS) TO --------------------------------------------------------------------------------
DECEMBER 31, 1994 1995 1996 1997 1998
-------------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
N.A. N.A. $81,869 $184,683 $330,475
</TABLE>
USE OF PROCEEDS
We will receive no proceeds from sales of securities under this prospectus.
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DESCRIPTION OF PREFERRED STOCK
The following summary is not intended to be complete. For a complete
description of the preferred stock, you should read the annex to our bye-laws,
which sets forth the terms. A copy of that annex is an exhibit to our and
Globalstar's Annual Report on Form 10-K for the year ended December 31, 1998,
which is incorporated by reference in this prospectus.
Our only assets are our interests in Globalstar. Therefore, we are
dependent upon payments from Globalstar to meet our obligations, including those
under the preferred stock. We have invested the net proceeds from the sale of
the preferred stock in preferred partnership interests of Globalstar. These
interests have terms generally similar to those of the preferred stock as to
dividends, redemptions and conversion. However, instead of common stock,
Globalstar may issue ordinary partnership interests in payment of dividends,
redemptions and conversions.
The transfer agent for the preferred stock will be The Bank of New York
unless we select a successor.
RANKING
The preferred stock ranks, with respect to dividend distributions and
distributions upon our liquidation, winding-up and dissolution,
- senior to all classes of our common stock and to each other class of
capital stock or series of our preferred stock established after January
21, 1999 the terms of which do not expressly provide that it ranks senior
to or on a parity with the preferred stock as to dividend distributions
and distributions upon our liquidation, winding-up and dissolution (we
refer to these securities, together with our common stock , as "Junior
Securities"),
- on a parity with any additional shares of our preferred stock issued in
the future and any other class of capital stock or series of preferred
stock we establish after January 21, 1999, the terms of which expressly
provide that such class or series will rank on a parity with the
preferred stock as to dividend distributions and distributions upon our
liquidation, winding-up and dissolution (we refer to these securities as
"Parity Securities"), and
- junior to each class of capital stock or series of preferred stock we
establish after January 21, 1999 the terms of which expressly provide
that such class or series will rank senior to the preferred stock as to
dividend distributions and distributions upon our liquidation, winding-up
and dissolution (we refer to these securities as "Senior Securities").
The preferred stock will be subject to the issuance of Junior Securities,
Parity Securities and Senior Securities, provided that we may not issue any new
class of Senior Securities without the approval of the holders of at least
66 2/3% of the shares of preferred stock then outstanding, voting or consenting,
as the case may be, together as one class.
No dividend shall be declared or paid upon, and no sum will be set apart
for the payment of dividends upon, any outstanding share of preferred stock with
respect to any
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dividend period unless all dividends for all preceding dividend periods have
been declared and paid, or declared and a sufficient sum set apart for the
payment of such dividends, upon all outstanding shares of Senior Securities.
DIVIDENDS
When, as and if the board of directors declares a dividend out of funds we
have legally available therefor, the holders of the preferred stock will be
entitled to receive a dividend. Dividends:
- are cumulative from the issue date of the preferred stock;
- accrue at the rate per annum of 8% of the Liquidation Preference per
share;
- are payable quarterly in arrears on each February 15, May 15, August 15
and November 15, commencing on May 15, 1999 (each, a "Dividend Payment
Date") (unless such date is not a Business Day, in which case such
payment shall be made on the next succeeding Business Day), to the
holders of record as of the next preceding February 1, May 1, August 1
and November 1 (each, a "Record Date");
- are computed on the basis of a 360-day year consisting of twelve 30-day
months and be deemed to accrue on a daily basis;
- accrue whether or not we have earnings or profits, whether or not we have
funds legally available for the payment of such dividends and whether or
not we declare dividends; and
- accumulate to the extent they are not paid on the Dividend Payment Date
for the period to which they relate.
We will, in accordance with the preferred stock annex, take all actions
required or permitted under The Companies Act 1981 of Bermuda (the "Companies
Act") to permit the payment of dividends on the preferred stock.
No dividends of any kind shall be declared or paid upon, and no sum will be
set apart for the payment of dividends upon any outstanding share of preferred
stock with respect to any dividend period unless all dividends for all preceding
dividend periods have been declared and paid, or declared and a sufficient sum
set apart for the payment of such dividends, upon all outstanding shares of
preferred stock.
Unless full cumulative dividends on all outstanding shares of preferred
stock for all past dividend periods shall have been declared and paid, or
declared and a sufficient sum for the payment thereof set apart, then:
- no dividend (other than a dividend payable solely in shares of any Junior
Securities or Parity Securities or a partial dividend on Parity
Securities that is paid pro rata on the preferred stock) shall be
declared or paid upon, or any sum set apart for the payment of dividends
upon, any shares of Junior Securities or Parity Securities, respectively;
- no other distribution shall be declared or made upon, or any sum set
apart from the payment of any distribution upon, any shares of Junior
Securities or Parity Securi-
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ties, other than a distribution consisting solely of Junior Securities or Parity
Securities, respectively;
- no shares of Junior Securities or Parity Securities or any warrants,
rights, calls or options exercisable for or convertible into any Junior
Securities or Parity Securities shall be purchased, redeemed or otherwise
acquired (excluding an exchange for shares of other Junior Securities or
Parity Securities, respectively) by us or any of our subsidiaries; and
- no monies shall be paid into or set apart or made available for a sinking
or other like fund for the purchase, redemption or other acquisition of
any shares of Junior Securities or Parity Securities or any warrants,
rights, calls or options exercisable for or convertible into any Junior
Securities or Parity Securities by us or any of our subsidiaries.
Holders of the preferred stock will not be entitled to any dividends,
whether payable in cash, property or stock, in excess of the full cumulative
dividends as described above.
In the future, we or Globalstar may be party to credit agreements or other
agreements relating to indebtedness that contain restrictions on our ability to
pay cash dividends on the preferred stock.
OPTIONAL REDEMPTION
Provisional Redemption. At any time on or prior to February 15, 2002, we
may redeem the preferred stock, in whole or in part (the "Provisional
Redemption"), at the redemption price of 104.6% of the aggregate Liquidation
Preference of the shares of preferred stock to be redeemed (the "Provisional
Redemption Date") if the Current Market Value (as defined below) of the common
stock equals or exceeds the following trigger percentages of the prevailing
conversion price (as described below) then in effect for at least 20 trading
days in any consecutive 30-day trading day period ending on the trading day
prior to the date of mailing of the notice of Provisional Redemption (the
"Notice Date"), if called for redemption in the 12-month period ending on
February 15 of the following years:
<TABLE>
<CAPTION>
TRIGGER
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2000............................... 170%
2001............................... 160%
2002............................... 150%
</TABLE>
UPON ANY PROVISIONAL REDEMPTION, WE WILL MAKE AN ADDITIONAL PAYMENT (THE
"DIVIDEND MAKE-WHOLE PAYMENT") WITH RESPECT TO THE SHARES OF PREFERRED STOCK
CALLED FOR REDEMPTION, INCLUDING THOSE SHARES OF PREFERRED STOCK CONVERTED INTO
COMMON STOCK BETWEEN THE NOTICE DATE AND THE PROVISIONAL REDEMPTION DATE. THE
DIVIDEND MAKE-WHOLE PAYMENT WILL BE EQUAL TO THE SUM OF
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(1) THE PRESENT VALUE OF THE AGGREGATE AMOUNT OF DIVIDENDS THAT WOULD
OTHERWISE HAVE ACCRUED FROM THE PROVISIONAL REDEMPTION DATE THROUGH
FEBRUARY 15, 2002 (THE "DIVIDEND MAKE-WHOLE PERIOD"), AND
(2) THE AMOUNT OF ANY ACCUMULATED AND UNPAID DIVIDENDS (INCLUDING A
PRORATED DIVIDEND FOR ANY PARTIAL DIVIDEND PERIOD) AND PREFERRED STOCK
LIQUIDATED DAMAGES (AS DEFINED), IF ANY, TO THE PROVISIONAL REDEMPTION
DATE.
Such present value shall be calculated using the bond equivalent yield on U.S.
Treasury notes or bills having a term nearest in length to that of the Dividend
Make-Whole Period as of the Notice Date.
Subsequent Optional Redemption. At any time on or after February 20,
2002, we may at our option redeem the preferred stock, in whole or from time to
time in part (the "Optional Redemption"), at a redemption price equal to the
percentage of the Liquidation Preference set forth below, in each case together
with accumulated and unpaid dividends (including an amount equal to a prorated
dividend for any partial dividend period) and preferred stock Liquidated
Damages, if any, to the date of redemption, upon not less than 30 nor more than
60 days' prior written notice, if redeemed during the 12-month period commencing
on the dates set forth below:
<TABLE>
<CAPTION>
DATE PERCENTAGE
---- ----------
<S> <C>
February 20, 2002.......................... 104.6%
February 19, 2003.......................... 103.4%
February 19, 2004.......................... 102.3%
February 19, 2005.......................... 101.1%
February 19, 2006 and thereafter........... 100.0%
</TABLE>
We may not authorize or make any Provisional Redemption or Optional
Redemption unless, prior to giving the applicable redemption notice, all
accumulated and unpaid dividends for periods ended prior to the date of such
redemption notice shall have been paid in cash or common stock. In the event of
partial redemptions of preferred stock, the shares to be redeemed will be
determined pro rata or by lot, as determined by us, provided that we may redeem
all shares held by holders of fewer than 100 shares of preferred stock (or by
holders that would hold fewer than 100 shares of preferred stock following such
redemption) prior to our redemption of other shares of preferred stock.
MANDATORY REDEMPTION
Unless it has already been redeemed or converted, the preferred stock will
be mandatorily redeemed by us on February 15, 2011 at a redemption price equal
to 100% of its Liquidation Preference, together with accumulated and unpaid
dividends and Liquidated Damages, if any, to the mandatory redemption date.
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METHOD OF PAYMENTS
Globalstar may make any payments due on its preferred partnership interests
- in cash,
- by delivery of ordinary partnership interests in Globalstar to us (as
described below and subject to certain limitations), or
- through a combination of cash and non-preferred partnership interests.
Likewise, subject to certain restrictions, we may generally make any
payments due on the preferred stock, including dividend payments and redemption
payments,
- in cash,
- by delivery of common stock, or
- through any combination of cash and common stock.
If Globalstar shall have paid the scheduled distribution or redemption
payment on the preferred partnership interests corresponding to such payment in
cash, we shall also make such payment in cash. We intend to use the same form of
consideration as Globalstar used with respect to the preferred partnership
interests, except that we will deliver common stock instead of ordinary
partnership interests. We reserve the right to make a cash payment from the
proceeds of an issuance of common stock following a payment by Globalstar
through a delivery of ordinary partnership interests. We also reserve the right
to make dividend payments notwithstanding the fact that we shall not have
received a distribution on the preferred partnership interests for the
corresponding Dividend Payment Date.
We will make each dividend payment, Provisional Redemption payment
(including the associated Dividend Make-Whole Payment), Optional Redemption
payment and Mandatory Redemption payment on the preferred stock in cash, except
to the extent we have elected to make all or any portion of such payment in
shares of common stock. We may not make any such payment, or any portion thereof
(other than a Mandatory Redemption payment, or portion thereof), in shares of
common stock unless, on the date of such payment, the shelf registration
statement referred to below is effective or is no longer required to be
effective.
If we elect to make any such payment, or any portion thereof, in shares of
common stock, such shares shall be valued for such purpose:
- in the case of any dividend payment, Provisional Redemption payment,
Dividend Make-Whole Payment, Optional Redemption payment, or portion
thereof, at 95% of the Average Market Value (as defined below); and
- in the case of any Mandatory Redemption payment, or portion thereof (a)
if on the date of such payment the shelf registration statement is
effective or is no longer required to be effective, at 100% of the
Average Market Value and (b) otherwise, at 90% of the Average Market
Value.
If, as a matter of law, we are not able to issue common stock in payment of
the mandatory redemption price, then we may, at our option, cause the preferred
stock to be
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converted on the mandatory redemption date into the same number of shares of
common stock as we could otherwise have issued in satisfaction of the mandatory
redemption price, provided that we have given the Holders notice of the exercise
of such option at least 30 days prior to the mandatory redemption date. No
fractional shares of common stock will be delivered to the Holders, but we will
instead pay a cash adjustment to each holder that would otherwise be entitled to
a fraction of a share of common stock. The amount of such cash adjustment will
be determined based on the proceeds received by the transfer agent from the sale
of that number of shares of common stock, which we will deliver to the transfer
agent for such purpose, equal to the aggregate of all such fractions (rounded up
to the nearest whole share).
The transfer agent is authorized and directed in the preferred stock annex
to sell such shares at the best available prices and distribute the proceeds to
the holders in proportion to their respective interests therein. We will pay the
expenses of the transfer agent with respect to such sale, including brokerage
commissions. Any portion of any such payment that is declared and not paid
through the delivery of shares of common stock will be paid in cash.
We will make a public announcement no later than the close of business on
the tenth business day prior to the Record Date for each dividend as to whether
we will pay such dividend and, if so, the form of consideration we will use to
make such payment.
"Average Market Value" of the common stock means the arithmetic average of
the Current Market Value of the common stock for the ten trading days ending on
the fifth business day prior to (a) in the case of the payment of any dividend,
the Record Date for such dividend and (b) in the case of any other payment, the
date of such payment.
"Current Market Value" of the common stock means the average of the high
and low sale prices of the common stock as reported on the Nasdaq National
Market or any national securities exchange upon which the common stock is then
listed, for the trading day in question.
PROCEDURE FOR REDEMPTION
On and after a redemption date, unless we default in the payment of the
applicable redemption price, dividends will cease to accrue on shares of
preferred stock called for redemption and all rights of holders of such shares
will terminate except for the right to receive the redemption price, without
interest. However, if we shall not have previously given a notice of redemption
and not have segregated and irrevocably set apart an amount in cash equal to the
full redemption price in trust for the benefit of holders of the preferred stock
called for redemption, then at the close of business on the day on which such
funds are so segregated and set apart, the holders of the shares to be redeemed
shall cease to be our stockholders and shall be entitled, subject to their
rights of conversion, to receive only the redemption price for their shares on
the redemption date.
We will make a public announcement of the redemption (including a statement
of the form of consideration we will use to effect the same) and send a written
notice thereof by first class mail to each holder of record of shares of
preferred stock not fewer than 30 days nor more than 60 days prior to the date
fixed for such redemption.
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Shares of preferred stock issued and reacquired will, upon compliance with
the applicable requirements of law, have the status of authorized but unissued
shares of our preferred stock undesignated as to series and may with any and all
other authorized but unissued shares of our preferred stock be designated or
redesignated and issued, as part of any series of our preferred stock.
CONVERSION RIGHTS
Each share of preferred stock will be convertible at any time, unless
previously redeemed, at the option of the holder thereof, into that number of
shares of our common stock equal to $50.00 (the Liquidation Preference per share
of preferred stock) divided by the conversion price then applicable. A holder's
right to convert shares of preferred stock called for redemption will terminate
at the close of business on the business day preceding the redemption date and
will be lost if not exercised prior to that time, unless we default in making
the payment due upon redemption.
The initial conversion price is $23.2563 per share, and each share of
preferred stock is initially convertible into 2.15 shares of common stock. The
conversion price is subject to adjustment in certain events, including:
- the payment of dividends (and other distributions) in common stock on any
class of our capital stock other than the payment of dividends in common
stock on the preferred stock or any other regularly scheduled dividend on
any other preferred stock which does not trigger any anti-dilution
provisions in any other security;
- the issuance to all holders of common stock of rights, warrants or
options entitling them to subscribe for or purchase common stock at less
than the current market price (as calculated pursuant to the preferred
stock annex);
- subdivisions, combinations and reclassifications of common stock; and
- distributions to all holders of common stock of evidences of our
indebtedness, shares of any class of our capital stock, cash or other
assets (including securities, but excluding those dividends, rights,
warrants, options and distributions referred to in clauses (1) through
(3) above and dividends and distributions paid in cash out of our
retained earnings, unless the sum of all such cash dividends and
distributions made and the amount of cash and the fair market value of
other consideration paid in respect of any repurchases of common stock by
us or any of our subsidiaries, in each case within the preceding 12
months in respect of which no adjustment has been made, exceeds 20% of
the product of the then current market price of the common stock times
the aggregate number of shares of common stock outstanding on the record
date for such dividend or distribution).
We are not required to make any adjustment of the conversion price until
cumulative adjustments amount to 1% or more of the conversion price as last
adjusted. Notwithstanding the foregoing, no adjustment to the conversion price
shall reduce the conversion price below the then applicable par value per share
of the common stock. In addition to the foregoing adjustments, we are permitted
to make such reductions in the conversion price as we
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consider to be advisable in order that any event treated for federal income tax
purposes as a dividend of stock or stock rights will not be taxable to the
holders of the common stock.
In the case of certain consolidations or mergers to which we are a party or
the transfer of substantially all of our assets, each share of preferred stock
then outstanding would become convertible only into the kind and amount of
securities, cash and other property receivable upon the consolidation, merger or
transfer by a holder of the number of shares of common stock into which such
share of preferred stock might have been converted immediately prior to such
consolidation, merger or transfer (assuming such holder of common stock failed
to exercise any rights of election and received per share the kind and amount
receivable per share by a plurality of non-electing shares).
No fractional shares of common stock will be issued upon conversion; in
lieu thereof, we will pay a cash adjustment based upon the closing price of the
common stock on the business day prior to the conversion date.
The holder of record of a share of preferred stock at the close of business
on a record date with respect to the payment of dividends on the preferred stock
will be entitled to receive such dividends with respect to such share of
preferred stock on the corresponding Dividend Payment Date, notwithstanding the
conversion of such share after such Record Date and prior to such Dividend
Payment Date.
A share of preferred stock surrendered for conversion during the period
from the close of business on any Record Date for the payment of dividends to
the opening of business of the corresponding Dividend Payment Date must be
accompanied by a payment in cash, common stock or a combination thereof
(depending on the method of payment that we have chosen to pay the dividend) in
an amount equal to the dividend payable on such Dividend Payment Date. However,
this does not apply if such share of preferred stock has been called for
redemption on a redemption date occurring during the period from the close of
business on any Record Date for the payment of dividends to the close of
business on the business day immediately following the corresponding Dividend
Payment Date.
The dividend payment with respect to a share of preferred stock called for
redemption on a date during the period from the close of business on any Record
Date for the payment of dividends to the close of business on the business day
immediately following the corresponding Dividend Payment Date will be payable on
such Dividend Payment Date to the record holder of such share on such Record
Date if such share has been converted after such Record Date and prior to such
Dividend Payment Date. Except as provided with respect to a Provisional
Redemption, no payment or adjustment will be made upon conversion of shares of
preferred stock for accumulated and unpaid dividends or for dividends with
respect to the common stock issued upon such conversion.
VOTING RIGHTS
Holders of shares of the preferred stock have no voting rights, except as
required by law and upon the occurrence of a Voting Rights Triggering Event. The
accumulation of accrued and unpaid dividends on the outstanding preferred stock
in an amount equal to six quarterly dividends (whether or not consecutive)
constitutes a Voting Rights Triggering Event, giving
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the holders of a majority of the outstanding shares of preferred stock the right
to elect such number of members to our board of directors constituting at least
20% of the then existing board of directors before such election (rounded to the
nearest whole number). However, such number shall be no less than one nor
greater than two, and the number of members of our board of directors will be
immediately and automatically increased by one or two, as the case may be.
Voting rights arising as a result of a Voting Rights Triggering Event will
continue until all dividends in arrears on the preferred stock are paid in full,
at which time the term of office of any such members of the Board of Directors
so elected shall terminate and such directors shall be deemed to have resigned.
In addition, the preferred stock annex provides that without the approval
of holders of at least 66 2/3% of the shares of preferred stock then
outstanding, voting or consenting, as the case may be, as one class,
- we will not authorize any class of Senior Securities or any obligation or
security convertible or exchangeable into or evidencing a right to
purchase shares of any class or series of Senior Securities, and
- we may not amend the preferred stock annex or bye-laws so as to affect
adversely the specified rights, preferences, privileges or voting rights
of holders of shares of the preferred stock or authorize the issuance of
any additional shares of preferred stock.
The preferred stock annex also provides that
- except as set forth above with respect to Senior Securities, (a) the
creation, authorization or issuance of any shares of Junior Securities,
Parity Securities or Senior Securities or (b) the increase or decrease in
the amount of authorized capital stock of any class, including any
preferred stock, shall not require the consent of the holders of
preferred stock and shall not be deemed to affect adversely the rights,
preferences, privileges, special rights or voting rights of holders of
shares of preferred stock, and
- we will not require the consent of the holders of preferred stock to
authorize, create (by way of reclassification or otherwise) or issue any
Parity Securities or any obligation or security convertible or
exchangeable into or evidencing a right to purchase, shares of any class
or series of Parity Securities.
MERGER, CONSOLIDATION AND SALE OF ASSETS
Without the vote or consent of the holders of a majority of the then
outstanding shares of preferred stock (excluding the shares owned by), we may
not consolidate or merge with or into, or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its assets to, any person
unless:
- the entity formed by such consolidation or merger (if other than us) or
to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made (in any such case, the "resulting
entity") is a corporation organized and existing under the laws of
Bermuda, the United States or any State thereof or the District of
Columbia;
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- if we are not the resulting entity, the preferred stock is converted into
or exchanged for and becomes shares of such resulting entity, having in
respect of such resulting entity the same (or more favorable) powers,
preferences and relative, participating, optional or other special rights
thereof that the preferred stock had immediately prior to such
transaction; and
- immediately after giving effect to such transaction, no Voting Rights
Triggering Event has occurred and is continuing.
The resulting entity of such transaction shall thereafter be deemed to be
the "Company" for all purposes of the preferred stock annex.
Except as described herein, the preferred stock annex does not provide the
holders of the preferred stock with any special protection in the event of a
takeover, recapitalization or similar transaction which could adversely affect
our capital structure or the value of the preferred stock or the common stock.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
our company or reduction or decrease in our capital stock resulting in a
distribution of assets to the holders of any class or series of our capital
stock, each holder of shares of the preferred stock will be entitled to payment
out of our assets available for distribution of an amount equal to the
Liquidation Preference per share of preferred stock held by such holder, plus
accrued and unpaid dividends and preferred stock Liquidated Damages, if any, to
the date fixed for liquidation, dissolution, winding-up or reduction or decrease
in capital stock (including an amount equal to a prorated dividend for the
period from the last dividend payment date to the date fixed for liquidation,
dissolution, winding up or reduction or decrease in capital stock), before any
distribution is made on any Junior Securities, including, without limitation,
common stock.
After payment in full of the Liquidation Preference and all accrued
dividends and preferred stock Liquidated Damages, if any, to which holders of
preferred stock are entitled, such holders will not be entitled to any further
participation in any distribution of our assets. If, upon our liquidation,
dissolution or winding-up, whether voluntary or involuntary, the amounts payable
with respect to the preferred stock and all other Parity Securities are not paid
in full, the holders of the preferred stock and the Parity Securities will share
equally and ratably in any distribution of our assets in proportion to the full
Liquidation Preference and accumulated and unpaid dividends and preferred stock
Liquidated Damages, if any, to which each is entitled. However, neither the
voluntary sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of our property
or assets nor our consolidation or merger with or into one or more entities will
be deemed to be a voluntary liquidation, dissolution or winding-up or reduction
or decrease in capital stock, unless such sale, conveyance, exchange or transfer
shall be in connection with a liquidation, dissolution or winding-up of our
business or reduction or decrease in capital stock.
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The preferred stock annex does not contain any provision requiring funds to
be set aside to protect the liquidation preference of the preferred stock,
although such liquidation preference will be substantially in excess of the par
value of such shares of preferred stock. Consequently, there will be no
restriction upon our surplus solely because the liquidation preference of the
preferred stock will exceed the par value thereof and there will be no remedies
available to holders of the preferred stock before or after the payment of any
dividend, other than in connection with our liquidation, solely by reason of the
fact that such dividend would reduce our surplus to an amount less than the
difference between the liquidation preferences of the preferred stock and its
par value.
COVENANT TO REPORT
We will, pursuant to the preferred stock annex, file with the transfer
agent within 15 days after we file them with the SEC, copies of the annual,
quarterly and current reports and the information, documents, and other reports
that we are required to file with the SEC pursuant to Section 13(a) or 15(d) of
the Exchange Act ("SEC Reports").
In the event we are not required or shall cease to be required to file SEC
Reports pursuant to the Exchange Act, we will nevertheless continue to file such
reports with the SEC (unless the SEC will not accept such a filing). Whether or
not required by the Exchange Act to file SEC Reports with the SEC, so long as
any shares of preferred stock are outstanding, we will furnish copies of the SEC
Reports to the holders of preferred stock at the time we are required to make
such information available to the transfer agent and to prospective investors
who request it in writing.
In addition, we have agreed that, for so long as any shares of preferred
stock remain outstanding, we will furnish to the holders and to securities
analysts and prospective investors, upon their request, the information required
to be delivered pursuant to Rule 144A(d)(4) under Securities Act.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Under the registration rights agreement entered into among us, Globalstar
and the initial purchasers of the preferred stock, we have agreed to use our
reasonable efforts to maintain the effectiveness of the shelf registration
statement for a period ending on the earlier of the second anniversary of the
original issuance of the preferred stock and the date when all Transfer
Restricted Securities covered by the shelf registration statement have been
sold.
In the event of a Registration Default (as defined below) we have agreed to
pay to each holder of Transfer Restricted Securities preferred stock Liquidated
Damages ("Liquidated Damages").
A "Registration Default" occurs and triggers the preferred stock Liquidated
Damages occurs in the event that this shelf registration statement is declared
effective but thereafter ceases to be effective or usable for any period of ten
consecutive days or for any 20 days in any 180-day period in connection with
resales of Transfer Restricted Securities (provided, that we will have the
option of suspending the effectiveness of the shelf registration
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statement or notifying holders of Transfer Restricted Securities that the shelf
registration statement shall be deemed to not be effective (in which case the
shelf registration statement shall not be considered "effective" for the
purposes of the preferred stock provisions), without becoming obligated to pay
Liquidated Damages for periods of up to a total of 60 days in any calendar year
if our board of directors determines that compliance with the disclosure
obligations necessary to maintain the effectiveness of the shelf registration
statement at such time could reasonably be expected to have an adverse effect on
us or a pending corporate transaction).
"Transfer Restricted Securities" for this purpose, means each share of
preferred stock and each share of common stock issuable upon conversion of the
preferred stock or in satisfaction of any dividend or other payment on the
preferred stock until (a) the date on which such security has been effectively
registered under the Securities Act and disposed of in accordance with the shelf
registration statement or (b) the date on which such security is distributed to
the public pursuant to Rule 144 under the Securities Act or may be distributed
to the public pursuant to Rule 144(k) under the Securities Act.
Liquidated Damages, if any:
- will be paid at a rate of 0.50% of the Liquidation Preference of the
preferred stock constituting Transfer Restricted Securities;
- accrue from the date of the Registration Default to and including the
30th day following such Registration Default and, increase by 0.50% for
each subsequent 30 day period;
- may not exceed 2.00% of the Liquidated Preference of the preferred stock;
and
- will be paid in cash on each Dividend Payment Date specified in the
preferred stock annex with respect to shares of preferred stock.
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease.
We will provide to each holder of preferred stock copies of this
prospectus, which will be a part of the shelf registration statement, notify
each holder when the shelf registration statement has become effective and take
certain actions as are required to permit unrestricted resales of the preferred
stock (and the common stock into which the preferred stock is convertible). A
Holder of Transfer Restricted Securities selling such securities pursuant to the
shelf registration statement is generally required to be named as a selling
securityholder in this prospectus and to deliver a prospectus to purchasers,
will be subject to certain of the civil liability provisions under the
Securities Act in connection with such sales and is bound by the provisions of
the Registration Rights Agreement which are applicable to such holder (including
certain indemnification obligations).
FORM AND DENOMINATION
Global Shares; Book Entry Form. Except as set forth below, shares of
preferred stock were evidenced initially by one or more global certificates (the
"Global Certificate") which were deposited with, or on behalf of, the Depositary
Trust Company (the "Depositary")
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and registered in the name of Cede & Co., as nominee of the Depositary (the
"Global Certificate Holder"). Except as set forth below, record ownership of the
Global Certificate may be transferred, in whole or in part, only to another
nominee of the Depositary or to a successor of the Depositary or its nominee.
Shares of preferred stock that are originally transferred to institutional
"accredited investors" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act will be issued in the form of certificates in definitive form
(the "Definitive Securities"). Upon the transfer to a qualified institutional
buyer of Definitive Securities, such Definitive Securities may be exchanged,
subject to the requirements of the Depositary, for a beneficial interest in the
Global Certificate representing the number of shares of preferred stock
transferred.
Owners of a beneficial interest in the Global Certificate may hold their
interest in the Global Certificate directly through the Depositary if such
holder is a Participant in the Depositary or indirectly through organizations
that are Participants in the Depositary. Persons who are not Participants may
beneficially own interests in the Global Certificate held by the Depositary only
through Participants or certain banks, brokers, dealers, trust companies and
other parties that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. So long as Cede & Co., as the
nominee of the Depositary, is the registered owner of the Global Certificate,
Cede & Co. for all purposes will be considered the sole holder of the Global
Certificate. Owners of beneficial interest in the Global Certificate will be
entitled to have Definitive Securities registered in their names and to receive
physical delivery of Definitive Securities.
Payments of dividends on and any redemption price with respect to the
Global Certificate will be made to the Global Certificate holder or its nominee,
as registered owner of the Global Certificate, by wire transfer of immediately
available funds on each Dividend Payment Date or redemption date, as applicable.
Neither we nor the transfer agent will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Certificate or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
We have been informed by the Depositary that, with respect to any payment
of dividends on, or the redemption price with respect to, the Global
Certificate, the Depositary's practice is to credit Participants' accounts on
the payment date therefor, with payments in amounts proportionate to their
respective beneficial interests in the preferred stock represented by the Global
Certificate as shown on the records of the payments by Participants to owners of
beneficial interests in the preferred stock represented by the Global
Certificate held through such Participants will be the responsibility of such
Participants, as is now the case with securities held for accounts of customers
registered in "street name".
Transfers between Participants will be effected in the ordinary way in
accordance with the Depositary's rules and will be settled in immediately
available funds. The laws of some states require that certain persons take
physical delivery of securities in definitive form. Consequently, the ability to
transfer beneficial interests in the Global Certificate to such persons may be
limited. Because the Depositary can only act on behalf of a beneficial interest
in the preferred stock represented by the Global Certificate to pledge such
interest
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to persons or entities that do not participate in the Depositary system, or
otherwise take actions in respect of such interest, may be affected by the lack
of a physical certificate evidencing such interest.
Neither we nor the transfer agent will have responsibility for the
performance of the Depositary or its Participants or Indirect Participants of
their respective obligations under the rules and procedures governing their
operations. The Depositary has advised us that it will take any action permitted
to be taken by a holder of preferred stock (including, without limitation, the
presentation of Depositary interests in the Global Certificate are credited, and
only in respect of the preferred stock represented by the Global Certificate as
to which such Participant or Participants has or have given such direction).
The Depositary has also advised us that the Depositary is a limited purpose
trust company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17a of the Exchange Act. The Depositary was created to
hold securities for its Participants and to facilitate the clearance and
settlement of securities transactions between Participants through electronic
book-entry changes to accounts of its Participants, thereby eliminating the need
for physical movement of certificates. Participants include securities brokers
and dealers, banks, trust companies and clearing corporations and may include
certain other organizations such as the initial purchasers of the preferred
stock. Certain of such Participants (or their representatives), together with
other entities, own the Depositary. Indirect access to the Depositary system is
available to others such as banks, brokers, dealers and trust companies that
clear through, or maintain a custodial relationship with a Participant, either
directly or indirectly.
Although we expect that DTC will agree to the foregoing procedures, it is
under no obligation to perform or to continue to perform such procedures and DTC
may discontinue such procedures at any time. Neither we nor the transfer agent
will have any responsibility for the performance by DTC or its Participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
DESCRIPTION OF COMMON STOCK
We have authorized 600,000,000 shares of common stock, par value $1.00 per
share. As of December 31, 1998, we had 82,016,679 shares of common stock
outstanding.
BERMUDA LAW
The following discussion is based upon the advice of Appleby, Spurling &
Kempe, our Bermuda counsel.
We were incorporated as an exempted company under The Companies Act 1981 of
Bermuda (the "Act"). Accordingly, the rights of our shareholders are governed by
Bermuda law and our Memorandum of Association and Bye-Laws.
The following is a summary of certain provisions of Bermuda law and our
organizational documents. You should note that this summary is not a
comprehensive description of
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such laws and documents and that it is qualified in its entirety by appropriate
reference to Bermuda law and to our organizational documents.
Dividends. Under Bermuda law, a company may pay such dividends as are
declared from time to time by its board of directors unless there are reasonable
grounds for believing that the company is or would, after the payment, be unable
to pay its liabilities as they become due or that the realizable value of its
assets would thereby be less than the aggregate of its liabilities and issued
share capital and share premium accounts.
Voting Rights. Under Bermuda law, questions brought before a general
meeting of shareholders are decided by a majority vote of shareholders present
at the meeting (or by such majority as the Act or our Bye-Laws prescribe). Each
shareholder has one vote, irrespective of the number of shares held, unless a
poll is requested.
Our Bye-Laws provide that, subject to the provisions of the Act, any
questions proposed for the consideration of the shareholders will be decided by
a simple majority of the votes cast. Each shareholder present, or person holding
proxies for any shareholder, is entitled to one vote. If a poll is requested,
each shareholder present in person or by proxy has one vote for each share held.
A poll may only be requested under our Bye-Laws by
- the Chairman of the meeting,
- at least three shareholders present in person or by proxy,
- any shareholder or shareholders, present in person or by proxy, holding
between them not less than 10% of the total voting rights of all
shareholders having the right to vote at such meeting, or
- a shareholder or shareholders, present in person or by proxy, holding our
voting shares on which an aggregate sum has been paid up equal to not
less than 10% of the total sum paid up on all such voting shares.
Rights in Liquidation. Under Bermuda law, in the event of liquidation,
dissolution or winding up of a company, the proceeds of such liquidation,
dissolution or winding up are distributed pro rata among the holders of common
stock. However, such distribution may only be effected after satisfaction in
full of all claims of creditors and subject to the preferential rights accorded
to any series of preferred stock.
Meetings of Shareholders. Under Bermuda law, a company is required to
convene at least one general shareholders' meeting per calendar year. Bermuda
law provides that a special general meeting may be called by the board of
directors and must be called upon the request of shareholders holding not less
than 10% of such of the paid-up capital of the company carrying the right to
vote. Bermuda law also requires that shareholders be given at least five days'
advance notice of a general meeting but the accidental omission of notice to any
person does not invalidate the proceedings at a meeting. Under our Bye-Laws, at
least ten days' notice of the annual general meeting and of any special general
meeting must be given to each shareholder.
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Under Bermuda law, the number of shareholders constituting a quorum at any
general meeting of shareholders is determined by the bye-laws of a company. Our
Bye-Laws provide that the presence in person or by proxy of the holders of more
than 50% of our voting capital stock constitutes a quorum.
Access to Books and Records and Dissemination of Information. Members of
the general public have the right to inspect the public documents of a company
available at the office of the Registrar of Companies in Bermuda. These
documents include the company's certificate of incorporation, its memorandum of
association (including its objects and powers) and any alteration to the
company's memorandum of association.
Under Bermuda law, the shareholders have the additional right to inspect
the bye-laws of the company, minutes of general meetings and the company's
audited financial statements, which must be presented at the annual general
meeting. The register of shareholders of a company is also open to inspection by
shareholders without charge and to members of the general public on the payment
of a fee. A company is required to maintain its share register in Bermuda but
may, subject to the provisions of the Act, establish a branch register outside
Bermuda.
A company is required to keep at its registered office a register of its
directors and officers which is open for inspection for not less than two hours
in each day by members of the public without charge. Bermuda law does not,
however, provide a general right for shareholders to inspect or obtain copies of
any other corporate records.
Election or Removal of Directors. Under Bermuda law and our Bye-Laws,
directors are elected at the annual general meeting or until their successors
are elected or appointed, unless they are earlier removed or resign.
Under Bermuda law and our Bye-Laws, a director may be removed at a special
general meeting of shareholders specifically called for that purpose, provided
that the director was served with at least 14 days' notice. The director has a
right to be heard at the meeting. Any vacancy created by the removal of a
director at a special general meeting may be filled at such meeting by the
election of another director in his or her place or, in the absence of any such
election, by the board of directors.
Amendment of Memorandum of Association and Bye-Laws. Bermuda law provides
that the memorandum of association of a company may be amended by a resolution
passed at a general meeting of shareholders of which due notice has been given.
An amendment to the memorandum of association also requires the approval of the
Bermuda Minister of Finance, who may grant or withhold approval at his
discretion. However, such approval of the Bermuda Minister of Finance is not
required for an amendment which alters or reduces a company's share capital as
provided in the Act. Except as set forth therein, the bye-laws may be amended by
a resolution passed by a majority of shares cast at a general meeting.
Under Bermuda law, the holders of an aggregate of no less than 20% in par
value of a company's issued share capital have the right to apply to the Bermuda
Court for an annulment of any amendment of the memorandum of association adopted
by shareholders at any general meeting. This does not apply to an amendment
which alters or reduces a company's share capital as provided in the Act. Where
such an application is made, the
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amendment becomes effective only to the extent that it is confirmed by the
Bermuda Court. An application for amendment of the memorandum of association
must be made within 21 days after the date on which the resolution altering the
company's memorandum is passed. Such application may be made on behalf of the
persons entitled to make the application by one or more of their number as they
may appoint in writing for the purpose. No such application may be made by
persons voting in favour of the amendment.
Appraisal Rights and Shareholder Suits. Under Bermuda law, in the event
of an amalgamation of two Bermuda companies, a shareholder who is not satisfied
that fair value has been paid for his shares may apply to the Bermuda Court to
appraise the fair value of his shares. The amalgamation of a company with
another company requires the amalgamation agreement to be approved by
- the board of directors,
- a meeting of the holders of shares of the amalgamating company of which
they are directors,
- a meeting of the holders of each class of such shares, and
- the Bermuda Minister of Finance (who may grant or withhold consent at his
discretion).
Class actions and derivative actions are generally not available to
shareholders under Bermuda law. The Bermuda courts, however, would ordinarily be
expected to permit a shareholder to commence an action in the name of a company
to remedy a wrong done to the company where the act complained of
- is alleged to be beyond the corporate power of the company,
- is illegal, or
- would result in the violation of the company's memorandum of association
or bye-laws.
Furthermore, consideration would be given by the Court to acts that are
alleged to constitute a fraud against the minority shareholders or, for
instance, where an act requires the approval of a greater percentage of the
company's shareholders than those who actually approved it.
When the affairs of a company are being conducted in a manner oppressive or
prejudicial to the interests of some part of the shareholders, one or more
shareholders may apply to the Bermuda Court for an order regulating the
company's conduct of affairs in the future or ordering the purchase of the
shares by any shareholder, by other shareholders or by the company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is The Bank of New
York.
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<PAGE> 28
TAXATION
This summary of certain tax considerations is based upon current (as of the
date of this prospectus) laws, treaties, cases, regulations and rulings, all of
which are subject to change, possibly with retroactive effect. It does not
consider all the tax issues that might be relevant to an investor or that depend
upon an investor's particular circumstances.
Prospective investors should consult their own professional advisors about
the tax consequences of acquiring, holding and disposing of the preferred stock
under the laws of the jurisdictions in which they are subject to taxation.
The legal conclusions set forth below in the discussion of U.S. tax law are
the opinions of Willkie Farr & Gallagher, our U.S. counsel. The summary of
certain Bermuda tax consequences is the opinion of Appleby, Spurling & Kempe,
our Bermuda counsel.
UNITED STATES TAX CONSIDERATIONS
Taxation of United States Holders of Preferred and Common Stock. This
section discusses certain rules applicable to a holder of stock that is a United
States Holder. For purposes of this discussion, a "United States Holder" means a
holder of stock who or which is
- an individual who is a citizen or resident of the United States for U.S.
federal income tax purposes,
- a corporation or other entity taxable as a corporation created or
organized under the laws of the United States or any political
subdivision thereof (including the States and the District of Columbia),
- an estate or trust described in Section 7701(a)(30) of the Internal
Revenue Code of 1976, as amended (the "Code"), or
- a person whose worldwide income or gain is otherwise subject to U.S.
federal income taxation on a net income basis.
Certain U.S. federal income tax consequences relevant to a holder other
than a United States Holder (a "non-U.S. Holder") are discussed separately
below.
A dividend payment on the stock will be taxable as ordinary dividend income
to the extent it is paid out of our current or accumulated earnings and profits.
Payments in excess of earnings and profits will be treated as a tax-free return
of capital to the extent of the United States Holder's tax basis in the stock.
These payments will reduce the tax basis at which the stock is held. We expect
that dividend payments at least for 1999 will not be covered by earnings and
profits and will constitute a tax-free return of capital. Subject to the
discussion below, and assuming that the holder holds the stock as a capital
asset, payments in excess of the United States Holder's tax basis will be a
capital gain that is long-term or short-term depending on the holding period for
the stock. Dividends on the preferred stock paid with common stock will be taxed
in the same manner as a cash distribution in an amount equal to the fair market
value of such stock. Certain adjustments to the Conversion Price of the
Preferred Stock also would be taxed as if they were cash distributions,
generally
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<PAGE> 29
equal in amount to the fair market value of the increased proportionate interest
in us affected by the adjustment.
Because we are a foreign corporation, the dividend payments will not be
eligible for the inter-corporate dividends-received deduction.
Subject to the discussion below on passive foreign investment companies
("PFICs") and assuming the United States Holder holds the stock as a capital
asset, any gain or loss recognized by a United States Holder on the sale or
other disposition (other than a redemption by us) of stock will be capital gain
or loss. Such capital gain or loss will be long-term or short-term depending on
the holding period for the stock. A United States Holder will also generally
recognize capital gain or loss upon a redemption of stock for cash.
Notwithstanding the foregoing, on a redemption of preferred stock, in
certain limited circumstances (primarily those involving United States Holders
whose proportionate interests in us remain the same or increase after the
redemption, and those involving United States Holders with significant interests
in us whose interests in us are not materially reduced as a result of the
redemption), such United States Holders may be required to treat any payments
received with respect to such redemption as a dividend (taxable as described
above) in whole or in part, without offset for such United States Holder's basis
in the preferred stock, and may not be entitled to recognize a loss.
Subject to the discussion below on PFICs, the conversion of preferred stock
into common stock or the receipt of solely common stock on a Provisional,
Optional or Mandatory Redemption would not be a taxable event. If both cash and
common stock are received in a redemption, the United States Holder would
realize a gain (which under certain limited circumstances may be taxed as
ordinary dividend income) equal to the amount by which the fair market value of
the common stock and the cash received exceeded his tax basis in the Security
surrendered. However, the gain recognized for tax purposes would be the lesser
of (x) the gain realized or (y) the cash received.
Special rules apply to the taxation of a U.S. shareholder in a PFIC. A PFIC
is a foreign corporation (1) 75% or more of whose income is passive or (2) 50%
or more of whose assets produce or are held to produce passive income. We
believe that we have not been a PFIC and will not become one. We continue to
earn, through Globalstar, sufficient active 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 we were a PFIC, unless a United States Holder of preferred stock or
common stock made the QEF election described below, he would be subject to a
tax-deferral charge on gain on a disposition of such stock and on certain
"excess distributions" received from us. Any such gains or excess distributions
would be taxable at ordinary income rates. Under currently proposed, but not yet
adopted, Treasury Regulations, the exchange of the preferred stock for common
stock (either on conversion or on redemption of the preferred stock) would not
be a "disposition" if we were a PFIC for the taxable year in which the
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<PAGE> 30
conversion occurred. If we had been a PFIC but were no longer, the exchange
would appear to be considered a taxable event.
If a United States Holder makes the qualified electing fund ("QEF")
election, he will be required to include in his taxable income his pro rata
share of our ordinary earnings and net capital gain for each taxable year
(regardless of when or whether cash attributable to such income is actually
distributed to such shareholder by us). If the United States Holder 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 United States
Holder's tax basis in its shares of stock will be increased by the amount so
included and decreased by the amount of nontaxable distributions. Additionally,
under currently proposed, but not yet adopted, Treasury Regulations, a United
States Holder may be permitted to make a "special preferred QEF election."
United States Holders considering a special preferred QEF election should
consult their own tax advisors as to the availability and consequences of such
special preferred QEF election.
The QEF election is effective only if we make certain required information
available to the United States Holders. In the event we are characterized as a
PFIC for federal income tax purposes, we will undertake to provide each United
States Holder with the information needed to make a QEF election and to
determine the pro rata share of our ordinary earnings and net capital gain
applicable to the preferred and common stock.
A U.S. shareholder that holds "marketable" stock in a PFIC may, in lieu of
making a QEF election, avoid certain unfavorable consequences of the PFIC rules
by electing to mark the PFIC stock to market as of the close of each taxable
year. If the preferred stock becomes marketable, or if a United States Holder
has common stock, which is marketable, then such United States Holder may be
eligible to be taxed on a mark-to-market basis with regard to such stock. If
such United States Holder so elected, he would be taxed on changes in market
value of the stock from year to year, whether or not he actually sold such
stock. A United States Holder that makes the mark-to-market election will be
required to include in income each year as ordinary income an amount equal to
the excess, if any, of the fair market value of the stock at the close of the
year over the United States Holder's adjusted tax basis in such stock. If, at
the close of the year, the United States Holder's adjusted tax basis exceeds the
fair market value of the stock, then the United States Holder may deduct any
such excess from ordinary income, but only to the extent of net mark-to-market
gains previously included in income. Any gain from the actual sale of the PFIC
stock will be treated as ordinary income, and any loss will be treated as
ordinary loss to the extent of net mark-to-market gains previously included in
income.
Liquidated Damages. We intend to take the position that the Liquidated
Damages described above under "Description of Preferred Stock -- Registration
Rights; Liquidated Damages" will be taxable to the United States Holder as
ordinary income in accordance with the holder's method of accounting for U.S.
federal income tax purposes. It is possible, however, that the IRS may take a
different position, in which case a United States Holder might be required to
include such Liquidated Damages in income as such Liquidated Damages accrue or
become fixed (regardless of such United States Holder's usual method
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<PAGE> 31
of tax accounting). The source of such Liquidated Damages is unclear; we believe
that they should be treated as foreign source income for foreign tax credit
purposes.
Taxation of Non-U.S. Holders of Stock. We expect that most of our income
will be from sources outside the United States and will not be effectively
connected with a U.S. trade or business. Thus, non-U.S. Holders will not be
subject to U.S. federal taxation on distributions received from us unless those
distributions are effectively connected with the conduct by the non-U.S. Holder
of a trade or business in the United States. In addition, such non-U.S. Holders
will not be subject to U.S. federal income taxation on gains realized on a sale
or exchange of preferred stock or common stock unless the sale of such stock is
attributable to an office or fixed place of business maintained by him in the
United States. The determination of whether a non-U.S. Holder is engaged in the
conduct of a trade or business in the United States or whether the sale of a
non-U.S. Holder's stock is attributable to an office or fixed place of business
of the non-U.S. Holder in the United States depends on the facts and
circumstances of each investor's case. Each prospective non-U.S. Holder should
consult with his own tax advisor to determine whether his distributions or gains
will be subject to U.S. federal income taxation.
Taxation of GTL. Our tax consequences result from our status as a partner
in Globalstar. As a partnership, Globalstar itself will not be subject to U.S.
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. We expect, based on Globalstar's description
of its proposed activities, that most of our 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, we believe that there generally will be no U.S. taxes on our share of
Globalstar's Foreign Income. The IRS may disagree, however, and/or may
promulgate regulations that would recharacterize a substantial portion of our
income as derived from U.S. sources and as effectively connected with a U.S.
trade or business so as to subject that income to regular U.S. federal income
tax and a 30% branch profits tax. Any portion of our income from sources outside
the United States, realized through Globalstar or otherwise, may be subject to
taxation by foreign countries and the extent to which these countries may
require us or Globalstar to pay tax or to make payments in lieu of tax cannot be
determined in advance.
We will be subject to U.S. tax at regular U.S. federal, state and local
corporate rates on our share of Globalstar's income that 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 us to prepare our federal, state and local income tax
returns. Globalstar will make cash distributions to us in an amount sufficient
to pay our U.S. tax liability attributable to the preferred partnership
interests. In addition, Globalstar intends to make cash distributions, to the
extent of available funds, to all partners, including us, holding ordinary
partnership interests until the non-U.S. partners, again including us, have been
distributed an amount sufficient to enable them to pay the federal, state and
local income taxes on their share of Globalstar's U.S. Income. The distribution
to non-U.S. partners for
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<PAGE> 32
federal income taxes may take the form of a withholding tax payment made by
Globalstar to the U.S. Treasury. The amount withheld may exceed the amount of
our federal income tax liability, in which case we would be entitled to seek a
refund from the U.S. Treasury for the excess amount. In addition to the regular
U.S. taxes, we will be subject to a United States branch profits tax (currently
at a 30% rate) on actual or deemed withdrawals of our share of Globalstar's U.S.
Income.
BERMUDA TAX CONSIDERATIONS
At the date of this prospectus, there is no Bermuda income tax, corporation
or profits tax, withholding tax, capital gains tax, capital transfer tax, estate
or stamp duty or inheritance tax payable by us or the Holders (other than
Holders ordinarily resident in Bermuda) in respect of their investment in the
stock.
We have obtained from the Minister of Finance under the Exempted
Undertakings Tax Protection Act 1966, as amended, a certificate confirming that,
in the event of there being enacted in Bermuda, any legislation imposing tax
computed on profits or income, or computed on any capital asset, gain or
appreciation or any tax in the nature of estate duty or inheritance tax, such
tax shall not until March 28, 2016 be applicable to us or to any of our
operations, or our other obligations except insofar as such tax applies to
persons ordinarily resident in Bermuda and holding such preferred stock or other
obligations, or to any land we lease or let in Bermuda.
We are liable to pay the Bermuda government an annual registration fee
calculated on a sliding scale based upon our assessable capital which fee will
not exceed BD$26,500.
We have been classified as non-resident of the Bermuda exchange control
area by the Bermuda Monetary Authority, whose permission for the issue of the
preferred stock has been obtained. The transfer of stock between persons
regarded as non-resident of Bermuda for exchange control purposes and the issue
and redemption of stock to and by such persons may be effective without specific
consents under the Exchange Control Act 1972 of Bermuda and Regulations made
thereunder. Transfers involving any person regarded as resident in Bermuda for
exchange control purposes may require specific authorization under that Act. We,
by virtue of being a non-resident of Bermuda for exchange control purposes, are
free to acquire, hold and sell any foreign currency, securities and other
investments without restrictions.
Purchasers of stock may be required to pay stamp taxes and other charges in
accordance with the laws and practices of the country of purchase. Prospective
purchasers should consult their tax advisers as to the tax laws of applicable
jurisdictions and the specific tax consequences of acquiring, holding and
disposing of the preferred stock.
The preferred stock does not provide for additional payments by us
following a change in the tax laws or rules of Bermuda that is adverse to the
Holders.
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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, we expect that a significant portion of
our worldwide income will not be subject to tax by the United States, Bermuda or
by the countries from which we derive our income. However, to the extent that
Globalstar bears a higher foreign tax because any holder of ordinary partnership
interests (including us) is not subject to United States tax on its share of
Globalstar's foreign income, the additional foreign tax will be specifically
allocated to such partner and will reduce amounts distributed by Globalstar to
such partner with respect to its ordinary partnership interests.
SELLING STOCKHOLDERS
We originally issued and sold the preferred stock in January 1999 to Bear,
Stearns & Co. Inc., Lehman Brothers Inc., Donaldson, Lufkin & Jenrette
Securities Corporation, C.E. Unterberg, Towbin, CIBC Oppenheimer Corp. and ING
Baring Furman Selz LLC in a private placement. The preferred stock was then
resold by those initial purchasers in transactions exempt from the registration
requirements of the Securities Act in the United States to qualified
institutional buyers (as defined in Rule 144A under the Securities Act) and to a
limited number of accredited investors (as defined in Rule 501(A) under the
Securities Act). The selling stockholders listed below may, pursuant to this
prospectus, from time to time offer and sell the number of shares of preferred
stock listed below and/or the number of shares of common stock into which such
preferred stock has been converted. The number of whole shares of common stock
into which such preferred stock is initially convertible (the "Conversion
Shares") is also listed below.
<TABLE>
<CAPTION>
SHARES OF CONVERSION
SELLING PREFERRED STOCKHOLDERS PREFERRED STOCK SHARES
- ------------------------------ --------------- ----------
<S> <C> <C>
Deutsche Bank Securities Inc. ....................... 685,550 1,473,901
R2 Investments, LDC.................................. 569,850 1,225,151
Bear, Stearns & Co. ................................. 400,000 859,982
IDS Life Managed Fund, Inc. ......................... 200,000 429,991
Dickstein & Co., L.P. ............................... 160,000 343,992
Paloma Securities L.L.C. ............................ 120,000 257,994
Fidelity Capital & Income Fund....................... 100,000 214,995
Double Black Diamond Offshore LDC.................... 88,780 190,873
Black Diamond Offshore LTD........................... 87,110 187,282
HBK Securities....................................... 79,825 171,620
Credit Research & Trading............................ 76,900 165,331
Vanguard Equity Income Fund.......................... 60,100 129,212
HBK Offshore Fund Ltd. .............................. 55,250 118,785
Lipper Convertibles, L.P. ........................... 55,000 118,247
SoundShore Holdings Ltd. ............................ 53,000 113,947
Hamilton Partners Limited............................ 50,000 107,497
Lagunitas Partners, LP............................... 50,000 107,497
HBK Finance L.P. .................................... 42,675 91,749
Continental Casualty Company......................... 38,700 83,203
Deephaven Market Neutral Fund Limited................ 32,999 70,946
</TABLE>
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<TABLE>
<CAPTION>
SHARES OF CONVERSION
SELLING PREFERRED STOCKHOLDERS PREFERRED STOCK SHARES
- ------------------------------ --------------- ----------
<S> <C> <C>
Ellsworth Convertible Growth and Income Fund, 30,000 64,498
Inc. .............................................
Bancroft Convertible Fund, Inc. ..................... 30,000 64,498
HBK Cayman L.P. ..................................... 29,750 63,961
Deephaven Market Neutral Trading LP.................. 27,001 58,050
White River Securities LLC........................... 25,000 53,748
PaceSetter I, LP..................................... 25,000 53,748
Butcher + Provision Workers.......................... 21,000 45,149
Forest Global Convertible Fund Series A5............. 20,600 44,289
Gruber & McBaine Int'l............................... 20,000 42,999
Sage Capital......................................... 20,000 42,999
Forest Fukeum Fund LP................................ 16,500 35,474
Morgan Stanley Dean Witter Income Builder Fund....... 16,000 34,399
TQA Arbitrage Fund LP................................ 15,000 32,249
Anglo American Security Fund, LP..................... 15,000 32,249
Dickstein International Limited...................... 14,000 30,099
The Common Fund...................................... 12,700 27,304
Q Investments, L.P. ................................. 12,500 26,874
Lockheed Martin Master Retirement Trust.............. 10,000 21,499
Worldwide Transactions Ltd. ......................... 9,110 19,586
Jackson Investment Fund Ltd.......................... 8,000 17,199
SoundShore Opportunity Holding Fund Ltd. ............ 7,500 16,124
Millenco, L.P. ...................................... 7,500 16,124
Tamar Securities Inc. ............................... 5,000 10,749
Columbus Asset MGMT a/c UK........................... 4,225 9,083
Morgan Stanley Dean Witter Variable Income Builder 4,000 8,599
Fund..............................................
Diocesean Investment Trust........................... 3,200 6,879
Crew Enterprises..................................... 3,000 6,449
IF Sheldo PSP........................................ 3,000 6,449
Columbus Asset MGMT a/c Exempt....................... 2,200 4,729
Clayton Manufacturing, Inc. ......................... 1,800 3,869
Norwest University................................... 1,500 3,224
LLT Limited.......................................... 1,300 2,794
Forest Alternate Strategies Fund II LP ASI........... 1,100 2,364
Jon Douglas.......................................... 1,000 2,149
IRC CMMIC Trust Fund................................. 1,000 2,149
B. Gene Carter....................................... 1,000 2,149
Columbus Asset MGMT a/c Jersey....................... 575 1,236
Forest Alternate Strategies Fund BLP ASM............. 500 1,074
Courtesy Chevrolet PSP, Phoenix...................... 300 644
Coastcast Corp. ..................................... 300 644
Steaven K. Jones, Sep IRA............................ 200 429
Courtesy Chevrolet PSP, San Diego.................... 100 214
Neil Simon 1983 Trust................................ 100 214
</TABLE>
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In July 1998, Loral Space & Communications Ltd. ("Loral") sold 8,400,000
shares of our common stock that Loral owned (the "Quantum Shares") to Quantum
Partners LDC, Quasar Strategic Partners LDC and Quantum Industrial Partners LDC
in a private sale. The selling stockholders listed below may, pursuant to this
prospectus, from time to time offer and sell the number of Quantum Shares listed
below.
<TABLE>
<CAPTION>
SELLING COMMON STOCKHOLDERS SHARES OF COMMON STOCK
--------------------------- -----------------------
<S> <C>
Quantum Industrial Partners LDC............ 2,100,000
Quantum Partners LDC....................... 4,200,000
Quasar Strategic Partners LDC.............. 2,100,000
</TABLE>
The information concerning the selling stockholders may change from time to
time. If required, such changes will be set forth in accompanying supplements to
this prospectus. Because the selling stockholders may offer all or some portion
of the common stock and/or preferred stock pursuant to this prospectus, and
because there are currently no agreements, arrangements or understandings with
respect to the sale of common stock or preferred stock, we cannot predict the
number of shares of common stock and preferred stock that will be held by the
selling stockholders upon termination of this offering.
PLAN OF DISTRIBUTION
The preferred stock and the common stock (collectively, the "Securities")
offered pursuant to this prospectus may be sold from time to time to purchasers
directly by the selling stockholders. Alternatively, the selling stockholders
may from time to time offer the Securities through brokers, dealers or agents
who may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders and/or the purchasers of the
Securities for whom they may act as agent. The selling stockholders and any such
brokers, dealers or agents who participate in the distribution of the Securities
may be deemed to be "underwriters," and any profits on the sale of the
Securities by them and any discounts, commissions or concessions received by any
such brokers, dealers or agents might be deemed to be underwriting discounts and
commissions under the Securities Act. To the extent the selling stockholders may
be deemed to be underwriters, the selling stockholders may be subject to certain
statutory liabilities of the Securities Act, including, but not limited to,
Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange
Act.
The Securities offered hereby may be sold from time to time by the selling
stockholders, or, to the extent permitted, by pledgees, donees, transferees or
other successors in interest. The Securities may be disposed of from time to
time in one or more transactions through any one or more of the following:
- a block trade, in which the broker or dealer so engaged will attempt to
sell the Securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by such broker or
dealer for its account;
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<PAGE> 36
- ordinary brokerage transactions and transactions, in which the broker
solicits purchasers;
- an exchange distribution in accordance with the rules of such exchange or
transactions in the over-the-counter market;
- the writing of options on the Securities;
- by the purchasers directly;
- sales through underwriters or dealers who may receive compensation in the
form of underwriting discounts, concessions, or commissions from the
selling stockholders or such successors in interest and/or from the
purchasers of the Securities for whom they may act as agent; and
- the pledge of the Securities as security for any loan or obligation,
including pledges to brokers or dealers who may, from time to time,
themselves effect distributions of the Securities or interest therein.
In addition, the Securities covered by this prospectus may be sold in
private transactions or under Rule 144 rather than pursuant to this prospectus.
There is no assurance that any Selling Stockholder will sell any or all of
the Securities offered by it hereunder or that any such Selling Stockholder will
not transfer, devise or gift such Securities by other means not described
herein.
Such sales may be made at prices and at terms then prevailing or at prices
related to the then current market price or at negotiated prices and terms. In
effecting sales, brokers or dealers may arrange for other brokers or dealers to
participate. The selling stockholders or such successors in interest, and any
underwriters, brokers, dealers or agents that participate in the distribution of
the Securities, may be deemed to be "underwriters" within the meaning of the
Securities Act, and any profit on the sale of the Securities by them and any
discounts, commissions or concessions received by any such underwriters,
brokers, dealers or agents may be deemed to be underwriting commissions or
discounts under the Securities Act.
In the event of any such offering, we will distribute a revised prospectus
or prospectus supplement, if required, which will set forth the aggregate amount
and type of Securities being offered and the terms of the offering, including
the name or names of any underwriters, dealers or agents, any discounts,
commissions and other items constituting compensation from the selling
stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to dealers. Such prospectus supplement and, if necessary, a
post-effective amendment to the registration statement of which this prospectus
is a part, will be filed with the SEC to reflect the disclosure of additional
information with respect to the distribution of the Securities.
To the best of our knowledge, there are currently no plans, arrangements or
understandings between any selling stockholders and any broker, dealer, agent or
underwriter regarding the sale of the Securities by the selling stockholders.
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<PAGE> 37
The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M, which may limit the timing of purchases and sales of any of the Securities by
the selling stockholders and any other such person. Furthermore, under
Regulation M under the Exchange Act, any person engaged in the distribution of
the Securities may not simultaneously engage in market-making activities with
respect to the particular Securities being distributed for certain periods prior
to the commencement of such distribution. All of the foregoing may affect the
marketability of the Securities and the ability of any person or entity to
engage in market-making activities with respect to the Securities.
Pursuant to the terms of the registration rights agreement dated January
26, 1999, among us, Globalstar and the initial purchasers (the "Registration
Rights Agreement"), holders of securities covered by a shelf registration
statement, on the one hand, and Globalstar and us, on the other hand, have
agreed to indemnify each other against certain liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution in
connection therewith. Pursuant to the registration rights agreement relating to
the Quantum Shares, holders of the Quantum Shares have agreed to indemnify Loral
and us, and we have agreed to indemnify the holders of the Quantum Shares,
against certain liabilities, including certain liabilities under the Securities
Act, or will be entitled to contribution in connection therewith.
Pursuant to the Registration Rights Agreement, and a separate registration
rights agreement with respect to the Quantum Shares, we have agreed to pay
substantially all expenses of the registration, offering and sale of the
Securities to the public, including, without limitation, SEC filing fees and
expenses of compliance with state securities or "blue sky" laws; provided,
however, that the selling stockholders will pay all underwriting discounts,
selling commissions and related fees, if any.
LEGAL MATTERS
Certain United States tax matters described under "Taxation" will be passed
upon for us by Willkie Farr & Gallagher, New York, New York, our general
counsel. The validity of the preferred stock, the Conversion Shares and the
other common stock offered hereby and the common stock issuable in satisfaction
of dividend or redemption payments on the preferred stock, will be passed upon
for us by Appleby, Spurling & Kempe, Hamilton, Bermuda. As of March 31, 1999,
partners and counsel in Willkie Farr & Gallagher beneficially owned
approximately 110,000 shares of common stock. Mr. Robert B. Hodes is counsel to
the law firm of Willkie Farr & Gallagher and a Director of Loral and our company
and a member of the Executive and Audit Committees of the Boards of Directors of
both Loral and our company.
EXPERTS
The annual financial statements of GTL and Globalstar incorporated in this
prospectus by reference from GTL's and Globalstar's Annual Report on Form 10-K
for the year ended
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December 31, 1998, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports, which are incorporated herein by
reference, and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in auditing and accounting.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with it, which means we can satisfy our legal obligations to disclose important
information contained in those documents by referring you to them. The
information included in the following documents is incorporated by reference and
is considered to be a part of this prospectus. More recent information that we
file with the SEC automatically updates and supersedes any inconsistent
information contained in prior filings.
The documents listed below have been filed under the Securities and
Exchange Act of 1934, with the SEC and are incorporated herein by reference:
- our and Globalstar's Annual Report on Form 10-K for the year ended
December 31, 1998;
- our Proxy Statement relating to the 1999 Annual Meeting of Shareholders;
- our and Globalstar's Current Report on Form 8-K, filed January 8, 1999;
- our and Globalstar's Current Report on Form 8-K, filed January 22, 1999;
and
- the description of our common stock contained in our Registration
Statement on Form 8-A filed under the Exchange Act and any amendments or
reports filed for the purpose of updating such description.
We also incorporate by reference all documents subsequently filed by us
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, until the
offering of the preferred stock and common stock under this prospectus is
completed.
We will provide, upon request, without charge to each person, including any
person having a control relationship with that person, to whom a prospectus is
delivered, a copy of any or all of the information that has been incorporated by
reference in this prospectus but not delivered with this prospectus. If you
would like to obtain this information from us, please direct your request,
either in writing or by telephone to Globalstar Telecommunications Limited,
Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda, Attn: Secretary, (441)
295-2244.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC and have filed a registration statement with the SEC on
Form S-3 to register these securities. Since this prospectus does not contain
all of the information included in the registration statement you may wish to
refer to the registration statement and its exhibits for further information
about us and the registered securities.
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You can access our SEC filings electronically at www.sec.gov, and can read
and copy our filings at the SEC's Public Reference Room (800-SEC-0330) at 450
Fifth Street, N.W., Washington, D.C. 20549. You can also obtain more information
about us by visiting our web site at www.globalstar.com.
FORWARD-LOOKING STATEMENTS
Some things in this prospectus, or incorporated by reference in this
prospectus, are known as "forward-looking statements," as that term is used in
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements may relate to, among other
things, future performance generally, business development activities, future
capital expenditures, financing sources and availability and the effects of
regulation and competition.
When we or Globalstar use the words "believe," "intend," "expect," "may,"
"will," "should," "anticipate" or their negatives, or other similar expressions,
the statements which include those words are usually forward-looking statements.
When we describe strategy that involves risks or uncertainties, we are making
forward-looking statements.
We warn you that forward-looking statements are only predictions. Actual
events or results may differ as a result of risks that we face, including those
set forth in the section of this prospectus called "Risk Factors." Those are
representative of factors that could affect the outcome of the forward-looking
statements.
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4,000,000 SHARES OF 8% CONVERTIBLE REDEEMABLE
PREFERRED STOCK DUE 2011
AND
8,400,000 SHARES OF
COMMON STOCK
------------------------
PROSPECTUS
DATED APRIL 20, 1999
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GLOBALSTAR TELECOMMUNICATIONS
LIMITED
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