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Filed pursuant to Rule 424(b)(2)
PROSPECTUS SUPPLEMENT Registration No. 333-83239
TO PROSPECTUS DATED AUGUST 18, 1999
7,000,000 SHARES
[LOGO]
GLOBALSTAR TELECOMMUNICATIONS LIMITED
COMMON STOCK
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This is a public offering of 7,000,000 shares of common stock of Globalstar
Telecommunications Limited.
Our common stock is traded on the Nasdaq National Market under the symbol
"GSTRF." On January 26, 2000, the last reported sale price for our common stock
on the Nasdaq National Market was $37.25 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE S-4 TO READ ABOUT CERTAIN RISKS THAT YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ------------
<S> <C> <C>
Public offering price....................................... $35.000 $245,000,000
Underwriting discount....................................... $ 1.575 $ 11,025,000
Proceeds, before expenses, to us............................ $33.425 $233,975,000
</TABLE>
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The underwriters may, under certain circumstances, purchase up to an additional
1,050,000 shares of common stock from us at the public offering price less the
underwriting discount.
The underwriters are severally underwriting the shares being offered. The
underwriters expect to deliver the shares against payment in New York, New York
on February 1, 2000.
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BEAR, STEARNS & CO. INC.
BANC OF AMERICA SECURITIES LLC
LEHMAN BROTHERS
C.E. UNTERBERG, TOWBIN
ING BARINGS
CREDIT LYONNAIS SECURITIES (USA) INC.
The date of this prospectus supplement is January 26, 2000
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PROSPECTUS SUPPLEMENT SUMMARY
The following is only a general summary of some of the information
contained in this prospectus supplement. You should read the entire prospectus
supplement, our base prospectus dated August 18, 1999, and the documents
incorporated by reference before making an investment decision. The information
in this prospectus supplement replaces any inconsistent information in the base
prospectus attached hereto. Globalstar Telecommunications Limited is referred to
in this prospectus supplement as "we," "our," "us," or "GTL." Globalstar, L.P.
is referred to as "Globalstar," and Loral Space and Communications Ltd. is
referred to as "Loral."
GLOBALSTAR TELECOMMUNICATIONS LIMITED
OUR COMPANY
We are a general partner, owning, as of December 31, 1999, and after giving
effect to this offering, approximately 38.4% of Globalstar, which is now
commencing operations of its global telecommunications network. We operate as a
holding company to permit public equity ownership interest in Globalstar. Our
sole asset consists of our partnership interests in Globalstar.
Loral, one of the world's leading satellite companies, is one of the
founders of, and, through a subsidiary, serves as the managing general partner
of, Globalstar.
GLOBALSTAR
Globalstar owns and operates a satellite constellation that forms the
backbone of a global telecommunications network designed to serve virtually
every populated area of the world. Globalstar's network, which we refer to as
the Globalstar system, uses Qualcomm's patented CDMA technology to provide
high-quality mobile and fixed telephone service to customers who live, work or
travel beyond the reach of adequately developed communications networks.
Qualcomm has agreed that Globalstar will be the only provider of mobile
satellite services to which it will license its patented CDMA technology.
Globalstar's service provider partners, who are experienced
telecommunications companies, are actively launching, or preparing to launch,
service in key markets worldwide. Globalstar and its service provider partners
have also begun intensive marketing campaigns and are adopting multifaceted,
locally oriented marketing strategies to serve their markets. Under Globalstar's
agreements with its service providers, these partners are the exclusive
providers of Globalstar service within their assigned territory and will retain
their exclusivity as long as they meet minimum performance goals. Under these
agreements, Globalstar acts as a wholesaler of capacity on its space segment to
its service providers. Globalstar has assigned the largest service territories
to its founding strategic partners, including France Telecom, Vodafone AirTouch,
ChinaSat, Elsacom and Dacom.
The Globalstar system is now commencing operations through ten gateways
which cover 58 countries. By the end of the first quarter of 2000, 18 gateways
are scheduled to be in operation, covering 79 countries and by the end of the
second quarter of 2000, we expect a total of 22 gateways to be in service,
covering 86 countries.
Globalstar service providers are now providing billable service in 11
countries, including Austria, Brazil, Canada, Greece, Italy, South Korea,
Switzerland and the United States. By the end of the first quarter 2000, service
providers plan to have billable services available in 61 additional countries,
including Argentina, Australia, Chile, China, Mexico, Russia, South Africa and
the principal nations of both Eastern and Western Europe. By the end of the
second quarter of 2000, a total of 82 countries are expected to be in billable
operations.
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The Globalstar system is designed to offer a cost-effective communications
solution for areas underserved or unserved by existing telecommunications
infrastructures. Globalstar mobile phones are simple to use -- just like
ordinary cellular telephones -- and are among the smallest, lightest and least
expensive satellite phones currently available. These phones are multimode,
functioning as cellular phones where terrestrial cellular service is available
and as satellite phones where cellular service is not available. Globalstar
phones provide this multimode capability without separate modules or plug-ins.
Globalstar pay phones and fixed wireless phones for business and residential use
provide basic telephone service in rural villages and at remote industrial and
residential sites.
Globalstar phones have familiar features such as phone book, voicemail,
short messaging service, and, in some service areas, call forwarding. Globalstar
plans to introduce additional features this year, including data calls, Internet
access, email and fax capability, caller ID and position location. Globalstar's
utilization of Qualcomm's CDMA technology should enable it to swiftly adopt
future improvements as this industry-leading wireless technology evolves. In
addition, because the intelligence of the Globalstar system is located on the
ground, future enhancements are easily implemented.
Globalstar's full constellation of 48 satellites is in orbit and
functioning. Based on our experience to date, we expect Globalstar satellites to
have a useful life of 10 years, rather than our original expectation of 7 1/2
years. The Globalstar satellites use a simple, traditional "bent pipe" design,
amplifying and reflecting received signals directly back to earth, with no
intersatellite links. Gateways owned and operated by Globalstar service
providers then connect customer calls through the existing public telephone
network. As a result, the Globalstar system will complement and extend, rather
than bypass, the existing telephone network infrastructure. Globalstar is in the
process of completing a period of intensive user trials in which over one
million calls have been placed under a variety of conditions, including
simulations of full capacity utilization. Trial users rated call quality equal
to, or better than, digital cellular connections.
According to industry sources, more than 80% of the world's land mass is
not covered by cellular service. Globalstar believes, based on market research,
that its addressable market -- those who live, work or regularly travel to areas
underserved or unserved by existing telecommunications infrastructure and who
desire and have the ability to pay for telephone service such as that offered by
Globalstar -- is approximately 40 million potential customers. We expect that
Globalstar's first generation system will have a system capacity of
approximately 7 million subscribers, less than one fifth of Globalstar's
potential addressable market. In fact, because of the limited spectrum available
for use by mobile satellite services like Globalstar, the combined capacity of
Globalstar and the other existing and announced mobile satellite service systems
are capable of serving only a portion of this market.
Globalstar's original consortium of 12 leading international
telecommunications service providers and manufacturers has grown into an
international organization with marketing channels in 125 countries and
agreements with over 220 local service providers. Globalstar-supported
cooperative advertising is creating brand awareness globally and within selected
market segments, while sales channels are focused both on the mass market as
well as targeted market segments, including:
- government, including police, emergency and military users;
- commercial freight and fishing vessels, cruise ships and recreational
boats;
- truck drivers and business travellers;
- the forestry, mining, oil and gas and other natural resource
industries;
- wilderness guides and outdoor enthusiasts;
- agribusiness; and
- utilities.
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Our service providers have an existing customer base of more than 100
million cellular customers from which they intend to identify for direct
marketing efforts those who work in, or frequently travel to, or through, areas
without cellular service.
THE OFFERING
Common stock offered by us.... 7,000,000 shares
Common stock to be outstanding
after the offering............ 95,792,956(1) shares
Use of proceeds............... We will use the net proceeds from this offering
to purchase ordinary partnership interests in
Globalstar. Globalstar will, in turn, use the
proceeds from its offering for general
corporate purposes, including:
- to accelerate beyond planned efforts for the
roll-out of Globalstar service through
increased support for service provider
marketing activities and the funding of
promotional discounts;
- development of new service features; and
- possible repayment of debt.
Nasdaq National Market
symbol........................ GSTRF
Unless we indicate otherwise, the information in this prospectus supplement
assumes the underwriters will not exercise their over-allotment option.
- ------------------------
(1) Does not include shares of our common stock issuable upon exercise of
options and warrants and upon conversion of our convertible preferred stock.
See "Risk Factors -- Securities convertible into substantial amounts of our
common stock are outstanding."
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RISK FACTORS
Before you invest in our common stock, you should carefully consider the
following risks.
THE GLOBALSTAR SYSTEM HAS JUST COMMENCED OPERATIONS AND WE CANNOT PREDICT
CUSTOMER DEMAND FOR THE SERVICE.
Since telephone systems using low-earth orbit satellites are a new
commercial technology, we cannot predict demand for Globalstar's service. The
first company to launch service in this industry, Iridium L.L.C., filed for
bankruptcy in August 1999. If Globalstar fails to generate sufficient cash flow
from operations through the marketing efforts of its service providers, it will
be unable to fund its operating costs or service its debt.
GLOBALSTAR DEPENDS ON SERVICE PROVIDERS TO MARKET ITS SERVICE AND IMPLEMENT
IMPORTANT PARTS OF ITS SYSTEM AND ON OTHER THIRD PARTIES TO COMPLETE ITS SYSTEM.
Globalstar depends on independent service providers to supply ground
equipment and user terminals and to market Globalstar service in each country
where it plans to operate, and we cannot be sure that these service providers
will be successful. We expect that these service providers will operate in 125
countries, many of which have developing economies. Globalstar's strategy of
focusing on areas that lack basic telephone service exposes it to the risk that
customers in these countries will not be able to afford the service.
Globalstar currently has no service provider for several important regions
and countries, including India, Malaysia, Indonesia, the Philippines and other
parts of Southeast Asia. If Globalstar cannot enlist suitable service providers
in these territories, it will not be able to offer service in those areas.
Globalstar service providers could fail to: obtain local partners; acquire,
install or adequately maintain and operate the Globalstar gateways; or obtain
the regulatory licenses needed for service in their countries. If Globalstar is
unable to offer service in any particular region or country, it will not benefit
from the potential demand in that region or country.
Some Globalstar partners and other third parties are building parts of the
Globalstar system. The failure of these partners or other parties to perform as
expected could delay the roll-out of Globalstar's commercial service and
increase Globalstar's costs.
GLOBALSTAR FACES RISKS INHERENT IN FOREIGN OPERATIONS.
Globalstar expects that most of its business will be conducted outside the
United States. International operations are subject to changes in domestic and
foreign government regulations and telecommunications standards, tariffs or
taxes and other trade barriers. Political, economic or social instability or
other developments, including currency fluctuations, could also adversely affect
Globalstar's operations. In addition, Globalstar's contracts may be governed by
foreign law or enforceable only in foreign jurisdictions. As a result,
Globalstar may find it hard to enforce its rights under these agreements if
there is a dispute.
GLOBALSTAR HAS SUBSTANTIAL DEBT THAT CONTAINS COVENANTS RESTRICTING ITS
ACTIVITIES.
Globalstar has $1.45 billion principal amount of senior notes outstanding
as of December 31, 1999. Globalstar also has an undrawn $250 million credit
facility, which it expects to draw down, expiring on June 30, 2000. In addition,
Globalstar has incurred and expects to incur an aggregate of approximately $800
million of vendor financing and payment deferrals, the terms for $400 million of
which are being finalized. Globalstar established a $500 million credit facility
on August 5, 1999 that is comprised of a
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$100 million three-year revolving credit facility, a $100 million three-year
term loan and a $300 million four-year term loan. Payments of principal are
required at various times during the existence of the facility, with the first
payment due January 15, 2001. As of December 31, 1999, $400 million of term
loans were outstanding under this credit facility. Globalstar will depend on its
cash flow from future operations to service this debt. Any failure to develop a
revenue stream quickly may adversely affect Globalstar's ability to service
these debt obligations.
Covenants contained in the credit agreements, the indentures governing the
senior notes and future debt instruments will limit Globalstar's options for
dealing with business issues. The credit agreements, indentures and future debt
instruments will also limit Globalstar's ability to pay dividends on its
partnership interests. If the credit agreements' guarantees expire, their
financial covenants will impose additional limitations on Globalstar's ability
to incur new debt. We cannot be sure that these restrictions and Globalstar's
debt will not materially and adversely affect Globalstar's ability to finance
its future operations or capital needs or to engage in other business
activities. They may also require Globalstar to issue equity on terms which
dilute our existing shareholders.
A failure to comply with the terms of the credit agreements, the indentures
or other agreements could result in an event of default under those agreements.
This in turn could permit acceleration of the related debt and result in a
default under other debt instruments.
Because we are a general partner of Globalstar, we are jointly and
severally liable with the other general partner for the recourse debt and other
recourse obligations of Globalstar to the extent Globalstar is unable to pay
such debts.
GLOBALSTAR MAY REQUIRE ADDITIONAL FINANCING.
Globalstar will require additional financing if service revenues are
insufficient to cover cash interest, preferred dividends and operating costs
estimated to be approximately $125 million per quarter for 2000 and to the
extent Globalstar's $250 million credit facility cannot be extended. There can
be no assurance that these funds will be available to Globalstar on favorable
terms, if at all. In addition, financing in future periods will depend upon
various factors that cannot be predicted or that may be beyond Globalstar's
control, such as funds from operations, repayment of financing provided to the
service providers, the maturity of debt and the ability to refinance.
GLOBALSTAR MAY ENCOUNTER DELAYS AND INCREASED COSTS.
A number of factors may cause delay in Globalstar's achievement of revenues
and positive cash flow. These factors, many of which are beyond Globalstar's
control, include:
- regulatory delays;
- delays in integrating Globalstar's system into the land-based
telecommunications networks;
- delays in constructing additional gateways by service providers;
- delays in integrating or testing the local ground segments of the system
by Globalstar vendors;
- inadequate marketing effort by service providers; and
- slower-than-anticipated consumer acceptance.
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GLOBALSTAR'S SATELLITES HAVE A LIMITED LIFE AND MAY FAIL PREMATURELY.
Globalstar's satellites have performed well in orbit and have certain
redundant systems in case of failure. However, in-orbit failure may result from
various causes, including:
- component failure;
- loss of power or fuel;
- inability to control positioning of the satellite;
- solar and other astronomical events; and
- space debris.
Repair of satellites in space is not feasible. Factors that affect the
useful lives of Globalstar's satellites include the quality of construction,
gradual degradation of solar panels and the durability of components. Random
failure of satellite components may result in damage to or loss of a satellite
before the end of its expected life. Because Globalstar has a large
constellation and will have a number of spare satellites, Globalstar currently
does not intend to insure its satellites against in-orbit failures.
The first-generation Globalstar satellites were originally expected to
operate for a minimum of seven and one-half years. We do not know how long the
first generation constellation will actually last, although we now expect, based
on the limited operational experience to date, a 10-year lifespan. Globalstar
plans to use funds from operations and, possibly, proceeds from additional
financings, to deploy a second generation of satellites. However, enough money
might not be available when needed, leaving Globalstar without a
second-generation constellation.
Globalstar plans to launch four in-orbit spare satellites in February 2000.
This launch, and any subsequent launches of replacement satellites, will be
subject to the risk of launch failure.
GLOBALSTAR FACES SPECIAL RISKS BY DOING BUSINESS IN DEVELOPING MARKETS AND FACES
CURRENCY RISKS.
Globalstar's largest potential markets are in developing countries or
regions that are substantially underserved and are not expected to be served by
existing telecommunications systems. Developing countries are more likely than
industrialized countries to experience market, currency and interest
fluctuations and may have higher inflation. In addition, these countries present
risks relating to government policy, price and wage, exchange control, tax
related and social instability, expropriation and other economic, political and
diplomatic conditions.
Although Globalstar anticipates that it will receive payments from its
service providers in U.S. dollars, limited availability of U.S. currency in some
local markets may prevent a service provider from making payments in U.S.
dollars. In addition, exchange rate fluctuations may affect Globalstar's ability
to control the prices charged for its services.
GLOBALSTAR'S BUSINESS IS REGULATED, CAUSING UNCERTAINTY AND ADDITIONAL COSTS.
Globalstar's operations are and will continue to be subject to United
States and foreign regulation. Globalstar's system must be authorized in each of
the markets in which its service providers intend to provide service. Globalstar
and its service providers may not be able to obtain or retain all regulatory
approvals needed for operations. Regulatory changes, such as those resulting
from judicial decisions and/or adoption of treaties, legislation or regulation
in countries where Globalstar intends to operate, may also significantly affect
Globalstar's business.
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Glonass, the Russian global navigation satellite system, operates worldwide
in frequency bands adjacent to and including spectrum authorized for use by
Globalstar and other systems for user uplinks. Glonass has proposed to migrate
to lower frequencies. This migration could have an adverse effect on
Globalstar's use of its authorized frequencies. While we do not expect this to
have a material adverse effect upon Globalstar's capacity, Glonass's actions may
reduce Globalstar's capacity in some markets.
GLOBALSTAR FACES INTENSE COMPETITION FROM BOTH DIRECT AND INDIRECT COMPETITORS,
AND ADDITIONAL DIRECT COMPETITORS PLAN TO ENTER THE MARKET SOON.
Iridium was the first low-earth-orbit satellite system to begin global
personal telecommunications service. In its Chapter 11 bankruptcy proceedings,
Iridium continues to operate and compete. If Iridium emerges from bankruptcy
proceedings with a debt-free or reduced-debt capital structure and a viable
business plan, it would be in a position to compete more effectively with
Globalstar.
ICO Global has proposed a similar worldwide system and has filed a request
with the Federal Communications Commission to operate in the United States in a
different frequency band than that used by Globalstar. Because ICO Global's
investors include many state-owned telecommunications monopolies, ICO Global
could receive preferential treatment in the local licensing process in those
countries. While ICO Global, too, has filed for bankruptcy, an announced
financing package from a group led by Craig McCaw makes it likely that ICO
Global will complete its system and compete with Globalstar in the future.
If Constellation Communications, Inc. and Mobile Communications Holdings,
Inc., which have held licenses from the Federal Communications Commission since
July 1997, attract financing, build their systems and begin operations, they
will become direct competitors as well.
In addition to competing for investment capital, subscribers and service
providers in markets all over the world, the mobile satellite services systems,
including Globalstar, also compete with each other for the limited spectrum
available for mobile satellite services operations. CDMA systems such as
Globalstar, Constellation and Mobile Communications Holdings permit multiple
systems to operate within the same frequency band. To the extent that Globalstar
is required to share this frequency band with these other systems, Globalstar's
available capacity will be reduced.
Existing fixed satellite systems, including those of American Mobile
Satellite Corporation, Comsat Corporation's Planet-1, and Inmarsat, and proposed
systems, including those of PT Asia Cellular Satellites and Thuraya, Satellite
Communications Company, also provide, or are intended to provide, competing
service on a regional basis at potentially lower costs.
Technological advances and a continuing trend toward strategic alliances in
the telecommunications industry could give rise to significant new competitors.
Satellite-based telecommunications systems are characterized by high
up-front costs and relatively low operating costs. Several systems are being
proposed and, while the proponents of these systems believe that there will be
significant demand for their services, actual demand will not become known until
such systems are operational. If the capacity of Globalstar and competing
systems exceeds demand, price competition could be intense.
NEW TECHNOLOGIES AND THE EXPANSION OF LAND-BASED SYSTEMS MAY REDUCE DEMAND FOR
GLOBALSTAR'S SERVICE.
The extension of land-based telecommunications services to regions
currently underserved or not served by wireline or cellular services may reduce
demand for Globalstar service in those regions. If these land-based
telecommunications services are built more quickly than Globalstar anticipates,
demand for Globalstar's service may be reduced sooner than Globalstar now
assumes.
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Globalstar may also face competition in the future from companies using new
technologies and new satellite systems. The space and communications industries
are subject to rapid advances and innovations in technology. New technology
could render Globalstar obsolete or less competitive by satisfying consumer
demand in more attractive ways or through the introduction of incompatible
standards. In addition, Globalstar depends on technologies developed by third
parties, and we cannot be certain that these technologies will continue to be
available to Globalstar on a timely basis or on reasonable terms.
GLOBALSTAR COULD FACE LIABILITY BASED ON ALLEGED HEALTH RISKS.
There has been adverse publicity concerning alleged health risks associated
with the use of portable hand-held telephones which have transmitting antennae.
Because hand-held Globalstar telephones will use on average lower power to
transmit signals than traditional cellular telephones, Globalstar does not
believe that proposed new guidelines from the Federal Communications Commission
will require any significant modifications of its system or of its hand-held
telephones. Even so, we cannot be certain that these guidelines, or any
associated health issues, will not have an adverse effect on Globalstar's
business.
GLOBALSTAR RELIES ON KEY PERSONNEL.
Globalstar needs highly qualified personnel. Except for Mr. Bernard L.
Schwartz, our Chairman and Chief Executive Officer and the Chief Executive
Officer and Chairman of the General Partners' Committee of Globalstar, none of
our or Globalstar's officers has an employment contract with us, Globalstar or
its managing general partner. In addition, neither we nor Globalstar maintains
"key man" life insurance. The departure of any of the key executives could have
an adverse effect on Globalstar's business.
THE YEAR 2000 PROBLEM COULD CAUSE COMPLICATIONS.
As of the date of this prospectus supplement, Globalstar's computer systems
and software programs are functioning properly. However, there is still a
possibility that some computer systems and software programs may not function
properly later in the year 2000 and beyond because of a once common programming
standard which used two digits instead of four digits to signify a year. This
problem is often referred to as the "Year 2000" problem.
If Globalstar is unable to fix a serious Year 2000 problem, there could be
an interruption or failure of Globalstar's operations. Likewise, if Globalstar's
suppliers or service providers are unable to fix a material Year 2000 problem, a
resulting interruption or failure of their business could hurt Globalstar, as
would a failure of the public telephone network in any country where Globalstar
operates.
GLOBALSTAR AND OTHER COMPANIES INVOLVED IN GLOBALSTAR'S SYSTEM HAVE POTENTIAL
CONFLICTS OF INTEREST WHICH COULD RESULT IN DECISIONS ADVERSE TO GLOBALSTAR'S
INTERESTS.
Potential conflicts of interest include the following:
- Globalstar partners, or their affiliates, are suppliers of the major
parts of the Globalstar system. They also manufacture the system elements
which will be sold to service providers and subscribers.
- Globalstar is dependent upon the management skills of Loral and
technologies developed by Loral and others.
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- Partners and affiliates of Globalstar, including companies affiliated
with or controlled by Loral, will be among Globalstar's main customers.
Accordingly, they may have conflicts of interest with respect to the
terms of Globalstar's service provider agreements.
- If Globalstar is unable to offer its service to a service provider on
competitive terms in a particular country or region, the service
provider, which may be a partner of Globalstar's, may act as a service
provider to a competing system in that region or country while at the
same time serving as a Globalstar service provider in other markets.
- Globalstar is currently managed by a committee of its general partners, a
majority of the representatives on which may be designated by Loral,
which in turn owns Space Systems/Loral, Inc., a prime contractor of
Globalstar.
A CHANGE OF CONTROL OF GTL OR REDUCTION IN GTL'S OWNERSHIP OF GLOBALSTAR COULD
RESULT IN GTL HAVING TO PAY ADDITIONAL TAXES AND BECOMING SUBJECT TO ONEROUS
REQUIREMENTS UNDER THE INVESTMENT COMPANY ACT.
If either of the following occurs, we will become a limited partner in
Globalstar and will no longer appoint representatives to serve on its committee
of general partners:
- a change of control of GTL at a time when GTL owns less than 50% of the
Globalstar partnership interests outstanding, including changes in GTL's
board of directors; or
- a sale or other disposition of partnership interests following which our
equity interest is reduced to less than 5%, without prior approval by the
managing general partner of Globalstar or by the limited partners of
Globalstar.
If we were to become a limited partner in Globalstar, we could be deemed to
be an investment company under the Investment Company Act of 1940. If this
happened, we would become subject to the registration and other requirements of
that law. In order to register, we might be required to reincorporate as a
domestic U.S. corporation and would thereafter be subject to U.S. tax on our
worldwide income. We currently intend to conduct our operations so as to avoid
being deemed an investment company under the Investment Company Act.
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.
PRICES OF OUR COMMON STOCK MAY BE VOLATILE.
Many things that we cannot predict or control may affect the price of our
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 our 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 Globalstar's satellites were destroyed.
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SECURITIES CONVERTIBLE INTO SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK ARE
OUTSTANDING.
As of January 26, 2000, 88,792,956 shares of our common stock were
outstanding. In addition:
- Globalstar partners have the right, exercisable over many years, to
exchange their partnership interests for about 153,528,625 shares of
common stock;
- holders of outstanding warrants issued in connection with Globalstar's
11 3/8% senior notes have the right to exercise them for 3,867,234 shares
of our common stock at an exercise price of $17.394 per share;
- in connection with their guarantee of Globalstar's $500 million credit
facility, Loral and certain of its subsidiaries have warrants to purchase
an aggregate of 3,450,000 Globalstar partnership interests (equivalent to
approximately 13,800,000 shares of our common stock) at an exercise price
of $91.00 per partnership interest (equivalent to $22.75 per share of GTL
common stock);
- in connection with its provision of $500 million of vendor financing to
Globalstar (for which the terms of $400 million are still being
finalized), Qualcomm is expected to receive a number of warrants to
purchase Globalstar partnership interests comparable to those received by
Loral pursuant to Loral's guarantee of Globalstar's $500 million credit
facility;
- Globalstar employees and directors have options to buy 4,628,500 shares
of our common stock, at exercise prices ranging from $4.16 to $30.28 per
share;
- under our stock option plan, we may in the future grant employees'
options to purchase as many as 286,600 shares of our common stock;
- in connection with service provider arrangements in China under which
China Telecommunications Broadcast Satellite Corporation agreed to act as
the sole distributor of Globalstar service in China, China Telecom has an
option to acquire 937,500 Globalstar partnership interests (equivalent to
approximately 3,750,000 shares of our common stock) for $18,750,000 after
commencement of service; and
- 4,396,295 shares of our Series A preferred stock are outstanding and are
convertible into 9,451,837 shares of our common stock and 3,000,000
shares of our Series B preferred stock are outstanding and are
convertible into 5,778,810 shares of our common stock.
Sales of significant amounts of our common stock to the public, or the
perception that those sales are imminent, could adversely affect the price of
our common stock.
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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.
S-11
<PAGE> 13
USE OF PROCEEDS
We estimate that the net proceeds of this offering will be $233.5 million,
or $268.5 million if the underwriters' over-allotment option is exercised in
full, after deducting the underwriting discount and estimated offering expenses
payable by us. We will use the net proceeds of this offering to purchase
1,728,395 ordinary partnership interests in Globalstar or 1,987,654 ordinary
partnership interests if the underwriters' overallotment option is exercised in
full.
Without giving effect to this offering, as of December 31, 1999, Globalstar
had cash on hand and available bank borrowing capacity of approximately $524
million, including an undrawn credit facility of $250 million expiring June 30,
2000. Globalstar's management estimates that its cash operating expenses,
interest and preferred dividends for 2000 will be $125 million per quarter
(approximately half of which is for cash interest and preferred dividends). In
addition, $200 million will be required for capital expenditures and repayment
of vendor financing. Globalstar's management believes that its current financial
resources, together with anticipated cash from operations and an anticipated
extension of the $250 million credit facility, will be sufficient for such
purposes.
Accordingly, Globalstar intends to use the offering proceeds for other
general corporate purposes, which may include:
- to accelerate beyond planned efforts for the roll-out of Globalstar
service through increased support for service provider marketing
activities and the funding of promotional discounts;
- development of new service features; and
- possible repayment of debt.
S-12
<PAGE> 14
PRICE RANGE OF COMMON STOCK
Our common stock is quoted on the Nasdaq National Market under the symbol
"GSTRF." The following table lists, for the periods indicated, the range of high
and low sales prices for the common stock as reported on the Nasdaq National
Market. The sale prices for the common stock have been adjusted to reflect the
two-for-one stock split we issued on June 8, 1998, to shareholders of record as
of May 29, 1998 and the two-for-one stock split we issued on May 28, 1997 to
shareholders of record as of May 12, 1997.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1997
First Quarter............................................. $17 13/16 $12 1/2
Second Quarter............................................ $16 3/4 $11 7/8
Third Quarter............................................. $26 3/4 $13 1/2
Fourth Quarter............................................ $29 3/4 $19 1/2
1998
First Quarter............................................. $37 1/8 $19
Second Quarter............................................ $36 1/8 $25 3/4
Third Quarter............................................. $28 1/8 $ 9 5/8
Fourth Quarter............................................ $22 1/8 $ 8 5/16
1999
First Quarter............................................. $24 1/2 $12 5/8
Second Quarter............................................ $24 1/2 $13 1/2
Third Quarter............................................. $33 $20 1/2
Fourth Quarter............................................ $49 1/2 $19
2000
First Quarter (through January 26, 2000).................. $53 3/4 $32
</TABLE>
S-13
<PAGE> 15
CAPITALIZATION
The following table sets forth the cash and cash equivalents and
capitalization of GTL and Globalstar as of September 30, 1999, (i) on an
unaudited historical basis, (ii) on an unaudited pro forma basis to give effect
to (a) with respect to GTL, the conversion in November 1999 of 2,603,605 shares
of GTL's Series A preferred stock into 5,597,633 shares of GTL common stock, and
the issuance of 924,324 shares of GTL's common stock in connection with the
conversion as a make-whole dividend payment, (b) with respect to Globalstar, the
corresponding conversion of 2,603,605 Series A preferred partnership interests
into 1,382,124 ordinary partnership interests and the issuance of 231,081
ordinary partnership interests as a make-whole distribution payment, and (c) the
sale of 3,000,000 shares of GTL's Series B preferred stock and the related
purchase of Series B preferred partnership interests of Globalstar in December
1999 and (iii) on an unaudited pro forma as adjusted basis to give effect to
this offering after deducting the underwriting discount and estimated offering
expenses payable by us.
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- ---------- -----------
<S> <C> <C> <C>
Shareholders' equity:
Preference shares, $.01 par value, 20,000,000 shares
authorized:
8% Series A convertible redeemable preferred stock
(6,999,900 outstanding actual and 4,396,295
outstanding pro forma and pro forma as adjusted)... $ 340,109 $ 213,606 $ 213,606
9% Series B convertible redeemable preferred stock
(none outstanding actual and 3,000,000 outstanding
pro forma and pro forma as adjusted)............... -- 145,300 145,300
Common stock, $1.00 par value, 600,000,000 shares
authorized (82,196,315 outstanding actual, 88,718,272
outstanding pro forma and 95,718,272 outstanding pro
forma as adjusted)................................... 82,196 88,718 95,718
Paid-in capital......................................... 591,940 735,838 962,338
Warrants................................................ 11,568 11,568 11,568
Accumulated deficit..................................... (150,669) (159,003) (159,003)
--------- ---------- ----------
Total shareholders' equity and capitalization............. $ 875,144 $1,036,027 $1,269,527
========= ========== ==========
</TABLE>
S-14
<PAGE> 16
GLOBALSTAR, L.P.
(IN THOUSANDS, EXCEPT PARTNERSHIP INTEREST DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ---------- -----------
<S> <C> <C> <C>
Cash and cash equivalents................................ $ 171,343 $ 316,643 $ 550,143
========== ========== ==========
Vendor financing liability(1)............................ 420,377 420,377 420,377
Borrowings under $250,000 credit facility(2)............. -- -- --
Term loan B notes payable(3)............................. 300,000 300,000 300,000
Senior notes ($1,450,000 aggregate principal amount)..... 1,397,070 1,397,070 1,397,070
Partners' capital:
8% Series A convertible redeemable preferred
partnership interests (6,999,900 outstanding actual
and 4,396,295 outstanding pro forma and pro forma as
adjusted)........................................... 340,109 213,606 213,606
9% Series B convertible redeemable preferred
partnership interests (none outstanding actual and
3,000,000 outstanding pro forma and pro forma as
adjusted)........................................... -- 145,300 145,300
Ordinary partnership interests (58,225,002 outstanding
actual, 59,838,207 outstanding pro forma and
61,566,602 outstanding pro forma as adjusted)....... 439,532 566,035 799,535
Warrants(4)............................................ 169,614 169,614 169,614
---------- ---------- ----------
Total partners' capital........................ 949,255 1,094,555 1,328,055
---------- ---------- ----------
Total capitalization................................... $3,066,702 $3,212,002 $3,445,502
========== ========== ==========
</TABLE>
- ---------------
(1) Includes current portion of $170.3 million. See Note 6 of Globalstar's
consolidated financial statements for the year ended December 31, 1998,
incorporated by reference. Does not include $400 million of vendor financing
for which the terms are still being finalized.
(2) Globalstar has a $250 million credit facility, of which none was drawn at
September 30, 1999. See Note 7 to Globalstar's consolidated financial
statements for the year ended December 31, 1998, incorporated by reference.
(3) Under Globalstar's $500 million credit facility, Globalstar has drawn the
$300 million four-year term loan as of September
30, 1999 and in November 1999, drew down the $100 million three-year term
loan, and has available a $100 million three-year revolving credit facility.
See Note 8 to Globalstar's condensed consolidated financial statements for
the quarter ended September 30, 1999, incorporated by reference.
(4) See Notes 9 and 11 of Globalstar's consolidated financial statements for the
year ended December 31, 1998 and Note 8 of Globalstar's condensed
consolidated financial statements for the quarter ended September 30, 1999,
incorporated by reference.
S-15
<PAGE> 17
SELECTED FINANCIAL DATA
The following unaudited selected financial data of GTL and Globalstar as of
December 31, 1997 and 1998, and September 30, 1999, for the years ended December
31, 1996, 1997, and 1998, the nine months ended September 30, 1999 and 1998, and
cumulative has been derived from GTL's and Globalstar's consolidated financial
statements incorporated herein by reference from the most recent Annual Report
on Form 10-K of GTL and Globalstar and from the Quarterly Report on Form 10-Q of
GTL and Globalstar for the quarterly period ended September 30, 1999. The
following unaudited selected financial data of GTL and Globalstar as of December
31, 1996 and 1995, and for periods prior to the year ended December 31, 1996,
have been derived from consolidated financial statements of GTL and Globalstar
not included herein or otherwise incorporated by reference herein. The selected
financial data set forth below should be read in conjunction with the
consolidated financial statements of GTL and Globalstar referred to above. The
results of operations for the nine months ended September 30, 1999 are not
necessarily indicative of the results to be expected for the full year.
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(In thousands, except per share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------- ------------------------
1995 1996 1997 1998(1) 1998(1) 1999
--------- --------- --------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Equity in net loss applicable to ordinary
partnership interests of Globalstar ....... $ 12,632 $ 15,080 $ 24,152 $ 50,561 $ 35,124 $ 48,244
Net loss..................................... 12,632 15,080 24,152 50,561 35,124 28,935
Net loss applicable to common shareholders... 12,632 15,080 24,152 50,561 35,124 48,244
Net loss per share -- basic and diluted(2)... 0.32 0.38 0.43 0.67 0.48 0.59
CASH FLOW DATA:
Provided by operating activities............. -- -- -- -- -- 15,470
Used in investing activities................. (185,750) (299,500) (153,140) (1,112) (1,093) (342,621)
Provided by equity transactions.............. 185,750 -- 153,140 1,112 1,093 327,151
Provided by borrowings....................... -- 299,500 -- -- -- --
Dividends paid per common share.............. -- -- -- -- -- --
OTHER DATA:
Ratio of earnings to fixed charges........... N/A 1x 1x 1x 1x 1x
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------- SEPTEMBER 30,
1994 1995 1996 1997 1998 1999
--------- --------- --------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Investment in Globalstar .................... $ -- $ 173,118 $ 482,676 $612,716 $580,428 $ 878,644
Total assets................................. 190 173,118 482,676 612,716 580,428 878,644
Convertible preferred equivalent
obligations(3)............................. -- -- 300,358 301,410 -- --
Shareholders' equity......................... 124 173,118 180,639 309,627 580,428 875,144
Shareholders' equity per share(2)............ 2.59 4.33 4.52 5.05 7.08 10.65
</TABLE>
- ---------------
(1) Includes GTL's share of Globalstar's $17 million loss on launch failure.
(2) Restated to reflect two-for-one stock splits in May 1997 and June 1998.
(3) Converted to common stock in April 1998.
S-16
<PAGE> 18
GLOBALSTAR, LP.
(In thousands, except per partnership interest data)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1994
--------------------------------
PRE-CAPITAL
SUBSCRIPTION
PERIOD
------------ MARCH 23 NINE MONTHS
(COMMENCEMENT ENDED
JANUARY 1 TO OF OPERATIONS) TO YEARS ENDED DECEMBER 31, SEPTEMBER 30,
MARCH 22, DECEMBER 31, ----------------------------------------- -------------------
1994(1) 1994 1995 1996 1997 1998(2) 1998(2) 1999
------------ ----------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................. $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
Operating expenses........ 6,872 28,027 80,226 61,025 88,071 146,684 99,457 121,716
Interest income........... -- 1,783 11,989 6,379 20,485 17,141 14,282 4,908
Net loss applicable to
ordinary partnership
interests............... 6,872 26,244 68,237 71,969 88,788 151,740 107,372 138,627
Net loss per weighted
average ordinary
partnership interest
outstanding -- basic and
diluted................. 0.73 1.50 1.53 1.74 2.69 1.93 2.38
Cash distributions per
ordinary partnership
interest................ -- -- -- -- -- -- --
OTHER DATA:
Deficiency of earnings to
cover fixed
charges(3).............. N/A N/A 81,869 184,683 330,475 238,078 291,920
CASH FLOW DATA:
Used in operating
activities.............. 23,052 38,368 51,756 68,615 24,958 30,110 65,455
Used in investing
activities.............. 50,549 280,345 379,130 619,538 684,834 500,106 431,014
Provided by partners'
capital transactions.... 147,161 318,630 284,714 132,990 14,825 14,806 324,641
Provided by (used in)
other financing
activities.............. -- (1,875) 95,750 998,137 287,552 287,552 286,432
<CAPTION>
CUMULATIVE
MARCH 23, 1994
(COMMENCEMENT
OF OPERATIONS) TO
SEPTEMBER 30,
1999
-----------------
<S> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues.................. $ --
Operating expenses........ 525,749
Interest income........... 62,685
Net loss applicable to
ordinary partnership
interests............... 545,605
Net loss per weighted
average ordinary
partnership interest
outstanding -- basic and
diluted.................
Cash distributions per
ordinary partnership
interest................
OTHER DATA:
Deficiency of earnings to
cover fixed
charges(3)..............
CASH FLOW DATA:
Used in operating
activities.............. 274,536
Used in investing
activities.............. 2,443,078
Provided by partners'
capital transactions.... 1,222,961
Provided by (used in)
other financing
activities.............. 1,665,996
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------- SEPTEMBER 30,
1994 1995 1996 1997 1998 1999
-------- -------- -------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 73,560 $ 71,602 $ 21,180 $ 464,154 $ 56,739 $ 171,343
Working capital (deficiency), excluding current portion
of vendor financing................................... 35,423 17,687 (53,481) 349,970 (37,722) (174,617)
Globalstar System under construction.................... 71,996 400,257 891,033 1,626,913 2,365,362 3,027,474
Total assets............................................ 151,271 505,391 942,913 2,149,053 2,670,025 3,570,111
Vendor financing liability, including current portion... -- 42,219 130,694 197,723 371,170 420,377
Long-term debt.......................................... -- -- -- 1,099,531 1,396,175 1,697,070
Borrowings under long-term revolving credit
facilities............................................ -- -- 96,000 -- -- --
Redeemable preferred partnership interests(4)........... -- -- 302,037 303,089 -- 340,109
Ordinary partners' capital(4)........................... 112,944 386,838 315,186 380,828 602,401 949,255
</TABLE>
- ---------------
(1) Reflects certain costs incurred by Loral and Qualcomm prior to March 23,
1994, which were reimbursed by Globalstar through a capital subscription
credit or agreement for repayment in connection with the $275 million
capital subscription and commencement of Globalstar's operations on March
23, 1994.
(2) The results of operations for 1998 include a $17 million loss on launch
failure.
(3) The ratio of earnings to fixed charges is not meaningful as Globalstar is in
the development stage and, accordingly, has incurred operating losses.
(4) All outstanding redeemable preferred partnership interests as of December
31, 1997 were converted to ordinary partnership interests in April 1998.
S-17
<PAGE> 19
BUSINESS
OVERVIEW
Loral and Qualcomm founded the Globalstar project in 1991 when they merged
their visions of creating a low earth orbit satellite-based global
telecommunications system. This partnership brought together Loral, one of the
world's premier satellite systems manufacturers, and Qualcomm, the pioneer of
CDMA telecommunications technology, the spectrum-efficient, high-quality
protocol that has since become an important wireless industry standard
worldwide. Qualcomm has agreed that Globalstar will be the only provider of
mobile satellite services to which it will license its patented CDMA technology.
Globalstar was formed in 1994. Subsequently, manufacturers such as Alcatel,
Alenia and Daimler-Benz, as well as service providers including France Telecom,
Vodafone AirTouch, ChinaSat, Elsacom and Dacom, joined as strategic partners.
Globalstar assigned large territories to its strategic partners as part of their
initial investments in the project. Within these territories, these partners are
the exclusive providers of Globalstar service and will retain their exclusivity
as long as they meet minimum performance goals. Under these agreements,
Globalstar acts as a wholesaler of capacity on its space segment to its service
providers, who will pay on average approximately $0.47 per minute of usage.
In 1995, Globalstar received an FCC license to construct and launch its
satellite constellation and thereafter completed its initial public offering.
Globalstar began its satellite launch campaign in 1998, launching 48 satellites
by November 1999.
The Globalstar system is now commencing operations through ten gateways
which cover 58 countries. By the end of the first quarter of 2000, 18 gateways
are scheduled to be in operation, covering 79 countries and by the end of the
second quarter of 2000, we expect a total of 22 gateways to be in service,
covering 86 countries.
Globalstar service providers are now providing billable service in 11
countries, including Austria, Brazil, Canada, Greece, Italy, South Korea,
Switzerland and the United States. By the end of the first quarter 2000, service
providers plan to have billable services available in 61 additional countries,
including Argentina, Australia, Chile, China, Mexico, Russia, South Africa and
the principal nations of both Eastern and Western Europe. By the end of the
second quarter of 2000, a total of 82 countries are expected to be in billable
operations.
We believe, based on the market research conducted at the inception of the
Globalstar project, together with the more detailed forecasts of individual
markets by service providers, market research commissioned by our handset
manufacturers and third party research, that the system's addressable
market -- those who live, work or regularly travel to areas underserved or
unserved by existing telecommunications infrastructure and who desire and have
the ability to pay for telephone service like that offered by Globalstar -- is
approximately 40 million potential customers. We expect that Globalstar's first
generation system will have a system capacity of approximately 7 million
subscribers, less than one fifth of Globalstar's potential addressable market.
In fact, because of the limited spectrum available for use by mobile satellite
services like Globalstar, the combined capacity of Globalstar and the other
existing and announced mobile satellite service systems are capable of serving
only a portion of this market.
SERVICE LAUNCH ACTIVITIES
Globalstar's strategy has been to use its experienced telecommunications
service provider partners to provide a marketing organization with depth and
expertise in each local market that the system serves. They have begun intensive
marketing campaigns and are adopting multifaceted, locally oriented
S-18
<PAGE> 20
strategies to serve their markets. A number of Globalstar service providers
recently agreed in principle to make advance purchases of approximately 50
million minutes of Globalstar airtime. We expect these purchases to result in
$19 million of revenues in 2000, after giving effect to a 25% promotional
discount.
A recent understanding among all the principal Globalstar service providers
should result in a uniform retail pricing structure for Globalstar service
throughout most of the world. Although service providers will retain flexibility
to meet local conditions, domestic Globalstar calls will on average cost between
$1.00 and $1.50 per minute. The total cost of most international calls,
including third party costs of connection through the public network, will
generally cost between $1.50 and $2.99 per minute, depending upon distance and
local competitive factors.
Globalstar spent approximately $12 million on brand-building advertising in
1999 and plans to spend an additional $55 million in 2000, of which $20 million
will come from service providers as contributions to a cooperative advertising
program.
In each local market they serve, the service providers have created
partnerships with local cellular carriers to support the terrestrial cellular
capabilities of our multimode phones and established distribution networks
appropriate to the markets in question. As a result, Globalstar's original
consortium of 12 leading international telecommunications service providers and
manufacturers has grown into an international marketing organization with
marketing channels in 125 countries and agreements with more than 220 local
service providers. This means that responsibility for selling Globalstar service
in nearly every one of its markets will rest with distributors with extensive
experience with the relevant local market conditions and regulatory
environments. Globalstar's service providers will also be in a position to
market Globalstar service to their current customer base of more than 100
million cellular subscribers alongside their existing products and services.
Globalstar's service providers intend to adapt their marketing efforts to
the needs, characteristics and opportunities within each of the markets in which
they operate. In some cases, this will mean making phones available through the
same sales channels used to market cellular service to consumers. In other
cases, they will use industry-specific sales channels to address high-demand
market segments.
Globalstar service providers have identified a number of key segments of
the addressable marketplace characterized by early expressions of interest in
obtaining the service and by the potential for heavy usage of satellite airtime
estimated to range between several hundred and 1,000 minutes per phone per
month. These include:
Government. Because of its security, clarity, reliability and ubiquity,
Globalstar service meets the needs of military, law enforcement and
emergency response users, such as fire and ambulance services. During
Globalstar's user trials, one of its service providers responded to a
request from the Italian government to supply phones to support their
peacekeeping units in Kosovo. Globalstar service providers have also
provided phones for use in Venezuela to support disaster recovery
operations in the aftermath of its recent flood and in France, when high
winds toppled cellular towers.
Maritime. Globalstar service is or will be available in the coastal and
inland waterways where most maritime traffic is focused, as well as over
many trans-oceanic routes, such as the North Atlantic. Globalstar maritime
phones, which will be available in commercial quantities in the second
quarter of 2000, will offer a compact, cost-effective, high-quality
alternative to existing maritime satellite services. Commercial freight and
fishing vessels and private boats will be important markets for Globalstar.
Cruise lines will be of particular interest, because of the potential
S-19
<PAGE> 21
for high-volume usage of multiple on-board phones by passengers who need to
address business or family needs.
Transportation. Truck drivers have a continuous need to contact
dispatchers and destinations, and need to react to changing business
demands and weather conditions. In the developing world, neither cellular
service nor pay phones are available for vast portions of frequently
traveled routes. Even in the United States, only 50% of the land mass is
covered by cellular service. Business travelers in such areas have similar
requirements, which our service providers hope to address quickly by
equipping rental cars and corporate fleets.
Natural Resources. We believe that there is substantial unmet demand
for telecommunications services to support the field operations of the
forestry, mining, oil and gas and other natural resource industries. Most
of these operations take place in remote locations where a large, permanent
telecommunications infrastructure is uneconomic.
Outdoor Enthusiasts. Our service providers hope to make Globalstar
phones part of the basic equipment of wilderness guides and outfitters,
addressing the growing market for adventure and eco-tourism, as well as the
hunting, fishing and mountaineering markets.
Agribusiness. Large plantations, ranches and other agricultural
businesses in countries like Australia, Brazil and Argentina typically lie
beyond the range of current or planned cellular service, and should find
Globalstar service valuable to coordinate their operations.
Utilities. Utility companies worldwide need to maintain right-of-way
across long distances in territories that are often vast and remote.
Globalstar phones will enable them to monitor and deploy their resources
more efficiently.
Globalstar's service providers have an existing customer base of more than
100 million cellular customers from which they intend to identify for direct
marketing efforts those who work in, or frequently travel to, or through, areas
without cellular service.
THE GLOBALSTAR SYSTEM
The Globalstar system consists of a space segment, owned by Globalstar, a
ground segment, owned by Globalstar's service providers, and a user segment,
comprised of the telephones owned or leased by end users.
Satellite Constellation
The Globalstar space segment consists of:
- 48 low earth orbit satellites, currently in orbit and fully
operational;
- Four spare satellites to be launched in February 2000;
- Eight additional on-ground spare satellites that are being
constructed; and
- Two state-of-the art satellite and network operations control centers.
Globalstar's launch campaign is now substantially complete. The satellites
in orbit have experienced no material anomalies, and, based upon our experience,
their estimated life has been raised to 10 years, a 33% increase over our
original expectation of 7 1/2 years. This reflects both the manufacturing and
systems integration skills of Space Systems/Loral and the other contractors
involved, and Globalstar's simple, bent-pipe satellite design. This technology
choice kept the satellites simple and inexpensive, with the intelligence of the
system accessible on the ground in the Globalstar gateways and control centers.
S-20
<PAGE> 22
The design of Globalstar's orbital planes keeps two to four satellites
overhead at all times from any point on the earth's surface, other than the
poles. Space Systems/Loral's patented system design works with Qualcomm's CDMA
technology to permit dynamic selection of the strongest signal available from
all satellites in view, a technique we refer to as path diversity, resulting in
superior call clarity and a low incidence of dropped calls. As the satellites
and the user change positions, satellites are added and dropped seamlessly from
the call.
Gateways
Globalstar satellites relay calls to earth through Globalstar gateways,
which in turn connect the calls through the existing public telephone network.
As a result, the Globalstar system will complement and extend, rather than
bypass, the existing telephone network infrastructure. Gateway facilities
include large antennas that send and receive signals to and from the satellites,
sophisticated call processing equipment that connects calls to the local public
telephone network and the software that implements the system's features and
supports billing. These facilities, designed and manufactured by Qualcomm, are
owned and operated by the Globalstar service providers.
Each gateway serves a large geographic area. For example, three gateways
will together cover the United States and Canada from Anchorage to Florida and
San Diego to Newfoundland. Qualcomm has manufactured and shipped 38 gateways,
which, when installed, will provide coverage of approximately 80% of the world's
land mass. Gateway field testing began in October 1998, with hundreds of test
calls passing through each installed gateway daily.
Fifteen gateways have been installed, of which ten, covering 58 countries,
are now fully operational. The remaining six installed gateways are in the
commissioning and testing process, and eleven more are in the process of site
preparation and installation. By the end of the second quarter of 2000,
Globalstar expects to have at least 22 of these gateways in operation, covering
86 countries.
Globalstar service providers have, or expect to have, full local regulatory
approval to commence service as soon as their gateways become operational. Their
technical personnel have received training from Qualcomm on the operation and
maintenance of the gateways and will receive continuous support from the
system's network operations control centers.
Globalstar Phones
Globalstar supports handheld mobile phones, pay phones, fixed phones for
business and residential use and car and maritime adapter kits. Globalstar
mobile phones are as simple to use as ordinary cellular telephones and are among
the smallest, lightest and least expensive satellite phones currently available.
Globalstar phones are multimode and function as cellular phones where
terrestrial cellular service is available and as satellite phones where cellular
service is not available. Globalstar phones provide this multimode capabilities
without separate modules or plug-ins. The same Globalstar phone will work
anywhere in the world that is served by a Globalstar gateway.
Globalstar phones have familiar features such as phone book, voicemail,
short messaging service, and, in some service areas, call forwarding. Globalstar
plans to introduce additional features this year, including data calls up to
9600 bits per second, Internet access, email and fax capability, caller ID and
position location. Globalstar's utilization of Qualcomm's CDMA technology should
enable it to swiftly adopt future improvements as this industry-leading wireless
technology evolves.
Three manufacturers produce mobile phones for Globalstar: Qualcomm,
Ericsson and Telit. Qualcomm offers a tri-mode unit, that works on AMPS (the
analog standard), CDMA digital and
S-21
<PAGE> 23
Globalstar. The Ericsson and Telit phones support both Globalstar and the
digital cellular GSM protocol currently used throughout Europe and in many other
countries.
These manufacturers currently have an aggregate production capability of up
to 40,000 mobile phones per month. The manufacturers have informed us, moreover,
that they have the capability of rapidly multiplying these production rates if
warranted by demand by opening additional production lines. At year-end 1999,
36,000 mobile phones and 4,000 fixed phones had been shipped and are in various
sales channels awaiting customer orders, activation and final delivery. We
expect mobile phones generally to retail for between $1,300 and $1,500, and
fixed phones for approximately $2,500.
Globalstar pay phones and fixed wireless phones for business and
residential use provide basic telephone service in rural villages and at remote
industrial and residential sites. Qualcomm and Ericsson are producing fixed
Globalstar phones for areas without wireline telephone service. These pay phones
are commercially available and are able to accommodate tokens, debit and credit
cards.
QUALITY ASSURANCE
Each element of the Globalstar system, as well as the system as a whole,
has been subjected to rigorous and extensive testing. The satellites have been
tested in orbit since February of 1998, with the first over-the-air phone call
made in May 1998. Over 10,000 test calls per day pass though Globalstar's San
Diego test-bed gateway alone, with well over one million test calls made over
the system to date. The system's overall performance meets or exceeds all
specifications, even with the satellite beam loaded to full projected capacity,
and end-to-end testing has assured us that all system elements work together
under a wide variety of usage conditions. Call completion rates exceed 90%, with
excellent voice quality. Calls lasting more than one hour confirm the
effectiveness of the system's soft hand-off from satellite to satellite.
CUSTOMER CARE
Globalstar's service providers bring sophisticated, experienced customer
care organizations to the Globalstar system from their existing wireless
operations, and Globalstar is building on that core capability in several ways.
Globalstar has established a program to train the personnel at both the service
provider and distributor level who in turn will train the representatives who
will interface with customers in their respective organizations. One hundred ten
people have already graduated from these programs. Globalstar has also
established a central customer support center in San Jose, California accessible
to service providers by phone or through its secure web site.
S-22
<PAGE> 24
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 common 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. 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 1986, 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 of stock
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; payments in
excess of tax basis will be treated in the same manner as gains arising from a
sale or other disposition of the stock, as discussed below. We may begin
accumulating earnings and profits in 2000.
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.
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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 our 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. In addition, any such gains or excess distributions would be taxable at
ordinary income rates.
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.
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 our 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 a United States Holder has 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.
Taxation of Non-U.S. Holders. 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, a non-U.S. Holder will
not be subject to U.S. federal income taxation on gains realized on a sale or
exchange of 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
S-24
<PAGE> 26
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 have any U.S.
federal income tax liability. 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. Thus, we believe
that there generally will be no U.S. taxes on our share of such income. The
United States Treasury Department is engaged in a project to draft and propose
regulations that will determine how the partners will be taxed in the United
States on their respective shares of Globalstar's income. The outcome of the
regulation project cannot be predicted. The Treasury Department may adopt final
regulations that characterize substantial portions of our income as derived from
U.S. sources and as effectively connected with a U.S. trade or business.
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 intends to make cash distributions, to the extent of
available funds, to all partners, including us, 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 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 stock (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 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
stock has been obtained. The transfer of stock between persons regarded as
non-resident of Bermuda for exchange control purposes and the issue and
S-25
<PAGE> 27
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 stock.
The 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 of our stock.
TAX CONSIDERATIONS IN OTHER JURISDICTIONS
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. However,
based upon our 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. 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.
S-26
<PAGE> 28
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
among us and the underwriters, each of the underwriters named below has
severally agreed to purchase from us the number of shares of common stock set
forth opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
- ----------- ----------------
<S> <C>
Bear, Stearns & Co. Inc. ................................... 2,625,000
Banc of America Securities LLC.............................. 1,750,000
Lehman Brothers Inc......................................... 1,750,000
C.E. Unterberg, Towbin...................................... 350,000
ING Barings LLC............................................. 350,000
Credit Lyonnais Securities (USA) Inc. ...................... 175,000
---------
Total............................................. 7,000,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are subject to approval of legal matters by their counsel and
various other conditions. Under the underwriting agreement, the underwriters are
obligated to purchase and pay for all the above shares of common stock if any
are purchased.
Public Offering Price and Dealers Concession. The underwriters propose
initially to offer the shares of common stock offered by this prospectus to the
public at the initial public offering price per share set forth on the cover
page of this prospectus and to certain dealers at that price less a concession
not in excess of $0.945 per share. The underwriters may allow, and these dealers
may reallow, concessions not in excess of $0.10 per share on sales to certain
other dealers. After commencement of this offering, the offering price,
concessions and other selling terms may be changed by the underwriters.
Over-Allotment Option. We have granted the underwriters an option, which
may be exercised within 30 days after the date of this prospectus, to purchase
up to 1,050,000 additional shares of common stock to cover over-allotments, if
any, at the initial public offering price less the underwriting discount, each
as set forth on the cover page of this prospectus. If the underwriters exercise
this option in whole or in part, each of the underwriters will be severally
committed, subject to certain conditions, to purchase these additional shares of
common stock in proportion to their respective purchase commitments as indicated
in the preceding table and we will be obligated to sell these additional shares
to the underwriters. The underwriters may exercise this option only to cover
over-allotments made in connection with the sale of the shares of common stock
offered by this prospectus. These additional shares will be sold by the
underwriters on the same terms as those on which the shares offered by this
prospectus are being sold.
Underwriting Compensation. The following table summarizes the compensation
we will pay to the underwriters in connection with this offering:
<TABLE>
<CAPTION>
TOTAL
----------------------------------
WITHOUT EXERCISE WITH EXERCISE
OF THE OF THE
OVER-ALLOTMENT OVER-ALLOTMENT
PER SHARE OPTION OPTION
--------- ---------------- --------------
<S> <C> <C> <C>
Underwriting discount....................... $1.575 11,025,000 12,678,750
</TABLE>
Indemnification of Underwriters. In the underwriting agreement, we have
agreed to indemnify the underwriters against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments the
underwriters may be required to make in connection with these liabilities.
S-27
<PAGE> 29
Discretionary Accounts. The underwriters have informed us that they do not
intend to confirm sales to any account over which they exercise discretionary
authority.
Stabilization and Other Transactions. In order to facilitate this
offering, persons participating in this offering may engage in transaction that
stabilize, maintain or otherwise affect the price of the common stock during and
after this offering, including over-allotment, stabilizing and short-covering
transactions and the imposition of penalty bids. Persons participating in this
offering may also engage in passive market-making transactions in the common
stock on the Nasdaq National Market. Specifically, the underwriters may
over-allot or otherwise create a short position in the common stock for their
own account by selling more shares of common stock than have been sold to them
by us. The underwriters may elect to cover this short position by purchasing
shares of common stock in the open market by exercising the over-allotment
option granted to the underwriters. In addition, the underwriters may stabilize
or maintain the price of the common stock by bidding for or purchasing shares of
common stock in the open market and may impose penalty bids, under which selling
concessions allowed to syndicate members or other broker-dealers participating
in this offering are reclaimed if shares of common stock previously distributed
in this offering are repurchased in connection with stabilization transactions
or otherwise. The effect of these transactions may be to stabilize or maintain
the market price at a level above that which might otherwise prevail in the open
market. The imposition of a penalty bid may also affect the price of the common
stock to the extent that it discourages resales. No representation is made as to
the magnitude or effect of these stabilization transactions. These transactions
may be effected on the Nasdaq National Market or otherwise and, if commenced,
may be discontinued at any time.
Taxes. Purchasers of the shares of common stock offered by this prospectus
may be required to pay stamps taxes and other charges in accordance with the
laws and practices of the country of purchase in addition to the offering price
set forth on the cover page hereof.
Lock-up Agreement. Except for the common stock to be sold in this offering
and any shares offered in connection with employee benefit plans and other
limited exceptions, we have agreed not to offer, sell, contract to sell or
otherwise issue any shares of our common stock or other capital stock or
securities convertible into or exchangeable for, or any rights to acquire, our
common stock or our other capital stock, prior to the expiration of 90 days from
the date of this prospectus without the prior written consent of Bear, Stearns &
Co. Inc. on behalf of the representatives.
Each of the underwriters has from time to time provided certain investment
banking services to us and our affiliates, including Globalstar, for which they
have received customary fees. A. Robert Towbin, who is a member of our board of
directors and a member of the General Partner's Committee of Globalstar, is a
managing director of C.E. Unterberg, Towbin.
S-28
<PAGE> 30
LEGAL MATTERS
Certain United States tax matters described under "Taxation" will be passed
upon for GTL by Willkie Farr & Gallagher, New York, New York, general counsel to
GTL. The validity of the common stock will be passed upon for GTL by Appleby,
Spurling & Kempe, Hamilton, Bermuda. Cravath, Swaine & Moore, New York, New
York, represented the underwriters in connection with this offering. As of
December 31, 1999, partners and counsel in Willkie Farr & Gallagher beneficially
owned 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 GTL and a member of
the Executive and Audit Committees of the Boards of Directors of both Loral and
GTL.
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 and Globalstar's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999;
- our and Globalstar's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999;
- our and Globalstar's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999;
- 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;
- our and Globalstar's Current Report on Form 8-K, filed on August 6, 1999;
- our Current Report on Form 8-K, filed on December 2, 1999;
- our Current Report on Form 8-K, filed on December 21, 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 common stock under this prospectus is completed.
We will provide 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 M12, Bermuda, Attn: Secretary, (441) 295-2244.
S-29
<PAGE> 31
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.
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.
S-30
<PAGE> 32
PROSPECTUS DATED AUGUST 18, 1999
$500,000,000
<TABLE>
<S> <C>
GLOBALSTAR GLOBALSTAR, L.P.
TELECOMMUNICATIONS GLOBALSTAR CAPITAL
LIMITED CORPORATION
COMMON STOCK DEBT SECURITIES
PREFERRED STOCK
WARRANTS
</TABLE>
-------------------------
GTL may from time to time offer the following equity or equity-related
securities separately or together in one or more series or classes and in
amounts, at prices and on terms to be determined at the time of the offering and
set forth in one or more supplements to this prospectus:
- shares of its common stock, par value $1.00 per share;
- shares of its preferred stock, par value $.01 per share; and
- warrants to purchase shares of common stock or preferred stock.
Globalstar and Globalstar Capital may from time to time offer jointly and
severally debt securities in one or more series or classes, which may be either
senior or subordinated, secured or unsecured, in amounts, at prices and on terms
to be determined at the time of the offering.
The specific terms of these securities will be provided in one or more
supplements to this prospectus. In the case of debt securities, these terms will
include, as applicable, the specific designation, aggregate principal amount,
maturity, rate or formula of interest, premium and terms for redemption. In case
of preferred stock, these terms will include, as applicable, the specific title
and stated value, any dividend, liquidation, redemption, conversion, voting and
other rights. In the case of common stock, these terms will include the
aggregate number of shares offered. In the case of warrants, these terms will
include the duration, offering price, exercise price and detachability.
We may sell any combination of these securities, in one or more offerings,
up to a total aggregate public offering price of $500,000,000.
GTL's common stock is listed on the Nasdaq National Market under the symbol
GSTRF. The closing price of GTL's common stock on the Nasdaq National Market was
$30 per share on August 17, 1999.
You should read this prospectus and any prospectus supplement carefully
before you invest.
THE SECURITIES WE MAY OFFER INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" ON PAGE 3 FOR A DISCUSSION OF MATTERS THAT YOU SHOULD CONSIDER BEFORE
INVESTING IN THESE SECURITIES.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is August 18, 1999.
<PAGE> 33
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY..................................................... 1
GLOBALSTAR, GTL AND GLOBALSTAR CAPITAL...................... 1
SECURITIES TO BE OFFERED.................................... 2
RISK FACTORS................................................ 3
RATIOS...................................................... 5
USE OF PROCEEDS............................................. 6
GENERAL DESCRIPTION OF THE SECURITIES....................... 7
DESCRIPTION OF COMMON STOCK................................. 7
DESCRIPTION OF PREFERRED STOCK.............................. 10
DESCRIPTION OF WARRANTS..................................... 14
DESCRIPTION OF DEBT SECURITIES.............................. 15
PLAN OF DISTRIBUTION........................................ 25
LEGAL MATTERS............................................... 26
EXPERTS..................................................... 26
WHERE YOU CAN FIND MORE INFORMATION......................... 27
INDEX TO FINANCIAL PAGES.................................... F-1
</TABLE>
i
<PAGE> 34
SUMMARY
This prospectus is part of a registration statement that we filed with the
SEC utilizing a shelf registration process. Under this shelf registration
process, we may, over the next two years, sell any combination of the securities
described in this prospectus, jointly or independently, in one or more offerings
up to a total dollar amount of $500,000,000. This prospectus provides you with a
general description of the securities we may offer. Each time we sell
securities, we will provide a prospectus supplement containing more specific
information about the terms of that offering. The prospectus supplements may
also add, update or change information contained in this prospectus. This
summary highlights selected information from this prospectus and does not
contain all the information that may be important to you.
We may sell the securities to or through national or international
underwriters, dealers or agents or directly to purchasers in and outside of the
United States. We and our agents reserve the sole right to accept and to reject
in whole or in part any proposed purchase of securities. The prospectus
supplement, which we will provide to you each time we offer securities, will set
forth the name of any underwriters, dealers or agents involved in the sale of
the securities, and any applicable fee, commission or discount arrangements with
them.
GLOBALSTAR, GTL AND GLOBALSTAR CAPITAL
Globalstar is now completing the launch of 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 the Globalstar project, owns 43% of its
equity, including its holdings in GTL, and, through a subsidiary, serves as the
managing general partner of Globalstar. GTL is another general partner of
Globalstar and operates as a holding company to permit public equity ownership
in Globalstar. GTL's sole business is acting as a general partner of Globalstar.
At June 30, 1999, GTL held 35% of the outstanding ordinary partnership interests
and 100% of the outstanding 8% Redeemable Preferred Partnership Interests of
Globalstar. In the event of conversion of the 8% Redeemable Preferred
Partnership Interests, GTL's ownership of ordinary partnership interests would
increase to 39%.
Globalstar Capital is a wholly-owned subsidiary of Globalstar and was
formed for the primary purpose of serving as a co-issuer and co-obligor with
respect to certain debt obligations of Globalstar.
GTL's address is: Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda.
GTL's telephone number is: (441) 295-2244. Globalstar's and Globalstar Capital's
address is 3200 Zanker Road, San Jose, California 95134, and their telephone
number is: (408) 933-4000.
1
<PAGE> 35
SECURITIES TO BE OFFERED
COMMON STOCK
GTL may issue its common stock. GTL has authorized 600,000,000 shares of
common stock, par value $1.00 per share. Each holder of common stock is
generally entitled to one vote, irrespective of the number of shares held.
Holders of common stock are entitled to receive dividends declared by the board
of directors, subject to the rights of preferred stockholders.
PREFERRED STOCK
GTL may issue its preferred stock in whatever classes or series the board
of directors authorizes, subject to limitations prescribed by Bermuda law and
GTL's bye-laws and memorandum of association. We will describe the specific
terms of any class or series of preferred stock we will issue in the future in
the applicable prospectus supplement for that offering.
WARRANTS
GTL may issue warrants to purchase GTL's common stock and GTL's preferred
stock. Also, we may issue warrants tied to and dependent upon movements of
currency exchange rates, the prices of stocks underlying one or more indices, or
the prices of other underlying commodities. The applicable prospectus supplement
will describe the terms of the warrants.
DEBT SECURITIES
Globalstar and Globalstar Capital may offer secured and unsecured general
obligations, which may be senior debt securities or subordinated debt
securities. Senior debt securities will have the same rank as all their other
unsecured, unsubordinated debt. Under specified circumstances, such as default
on senior debt, the subordinated debt securities will not be entitled to payment
for a specified time, if at all, and will rank junior to senior debt in a
liquidation of Globalstar. Secured debt will have the right to receive proceeds
from the collateral that secures that debt, before such proceeds are available
to other security holders.
The debt securities will be issued under an indenture or indentures among
Globalstar, Globalstar Capital and the trustee or trustees we name in the
prospectus supplement. We have summarized the indentures, which will be exhibits
to the registration statement of which this prospectus is a part.
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<PAGE> 36
RISK FACTORS
An investment in our securities entails some risks which are described in
our Annual Report on Form 10-K for the year ended December 31, 1998 and are
incorporated by reference in this prospectus. We will also describe the risks
relating specifically to the different types of securities we may offer under
this registration statement in the supplemental prospectus relating thereto. You
should consider these risks and the following, additional risks relating to an
investment in our securities:
THE RIGHTS OF SHAREHOLDERS UNDER BERMUDA LAW ARE DIFFERENT FROM RIGHTS OF
SHAREHOLDERS UNDER U.S. LAW.
Since GTL is 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 it were a U.S. company. For example, it
is not certain whether a Bermuda court would enforce liabilities against GTL or
its 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.
SPACE SYSTEMS/LORAL, GLOBALSTAR'S PRIME CONTRACTOR, IS THE TARGET OF A GRAND
JURY INVESTIGATION; CONGRESS HAS HELD RELATED HEARINGS.
Space Systems/Loral, which is the prime contractor in the Globalstar
System, could be accused of criminal violations of the export control laws
arising out of the participation of its employees in a committee formed to
review the findings of the Chinese regarding the 1996 crash of a Long March
rocket in China. Whether or not Space Systems/Loral is indicted or convicted,
Space Systems/Loral will remain subject to the State Department's general
statutory authority to prohibit exports of satellites and related services if it
finds a violation of the Arms Export Control Act that puts the exporter's
reliability in question. Further, the State Department can suspend export
privileges whenever it determines that grounds for debarment exist and that such
suspension "is reasonably necessary to protect world peace or the security or
foreign policy of the United States." If Space Systems/Loral were to be indicted
and convicted of a criminal violation of the Arms Export Control Act, it
- would be subject to a fine of $1 million per violation;
- could be debarred from certain export privileges; and
- could be debarred from participation in government contracts.
If Space Systems/Loral loses its export privileges, Globalstar will be
unable to launch its satellites outside the United States, which would delay the
completion of its full satellite constellation and result in increased launch
costs.
HOLDERS OF COMMON STOCK MAY BE DILUTED BY FUTURE STOCK ISSUANCES.
At June 30, 1999, 82,026,576 shares of GTL's common stock were outstanding.
In addition, at that date:
- Globalstar partners had the right, exercisable over many years, to
exchange their partnership interests for about 151,750,000 shares of
common stock,
- holders of outstanding warrants had the right to exercise them for
4,069,325 shares of common stock,
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<PAGE> 37
- GTL has outstanding 6,999,900 shares of 8% Convertible Redeemable
Preferred Stock, due 2011, convertible into 15,049,470 whole shares of
common stock,
- Globalstar employees had unexercised options to buy 2,731,500 shares of
common stock, and
- under GTL's stock option plan, GTL may in the future grant employee
options to purchase as many as 2,230,300 shares of common stock.
In addition, on August 5, 1999, in consideration for the guarantee by two
Loral subsidiaries of a $500 million Globalstar credit facility, Loral and
certain Loral subsidiaries received warrants to purchase an aggregate of
3,450,000 Globalstar partnership interests (equivalent to approximately
13,800,000 shares of GTL common stock). The warrants vest in stages (provided
that the guarantee is then in effect): 50% on February 5, 2000, 25% on August 5,
2000 and the remaining 25% on August 5, 2001. The warrants are immediately
exercisable after vesting and have a seven-year term.
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.
GTL IS DEPENDENT UPON PAYMENTS FROM GLOBALSTAR TO MEET ITS OBLIGATIONS.
Because GTL is a holding company whose only assets are its interests in
Globalstar, GTL is dependent upon payments from Globalstar to meet its
obligations, including those under its preferred stock. Further, GTL's rights
and the rights of holders of its securities, including the holders of preferred
stock, to participate in the distribution of assets of any subsidiary of GTL
upon Globalstar's liquidation or recapitalization will be subject to the prior
claims of Globalstar's creditors and preferred stockholders. GTL's rights and
the rights of its security holders will not be subordinated to the extent it is
a creditor with recognized claims against Globalstar or a holder of preferred
partnership interests of Globalstar.
THIS PROSPECTUS INCLUDES FORWARD-LOOKING STATEMENTS.
Some statements and information contained or incorporated by reference in
this prospectus are not historical facts, but are "forward-looking statements",
as such term is defined in the Private Securities Litigation Reform Act of 1995.
We wish to caution you that these forward-looking statements are only
predictions, and actual events or results may differ materially as a result of
risks that we face, including those set forth herein under "Risk Factors." These
forward-looking statements can be identified by the use of forward-looking
terminology such as "believes", "expects", "plans", "may", "will", "would,"
"could," "should", or "anticipates" or the negative of these words or other
variations of these words or other comparable words, or by discussions of
strategy that involve risks and uncertainties.
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<PAGE> 38
RATIOS
GLOBALSTAR TELECOMMUNICATIONS LIMITED
RATIO OF EARNINGS TO COVER FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The ratio of earnings to fixed charges 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 Annual Report on Form 10-K for the year ended December
31, 1998 and our Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1999 which are incorporated into this prospectus by reference. Our
earnings available to cover fixed charges consist solely of dividends from
Globalstar on the preferred partnership interests we hold.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SIX MONTHS SIX MONTHS
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ENDED JUNE 30, ENDED JUNE 30,
1995 1996 1997 1998 1998 1999
- ------------ ------------ ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
N/A 1X 1X 1X 1X 1X
</TABLE>
GLOBALSTAR, L.P. DEFICIENCY OF EARNINGS TO
COVER FIXED CHARGES AND PREFERRED PARTNERSHIP INTERESTS
(in thousands)
The deficiency of earnings to cover fixed charges and 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 Annual Report on
Form 10-K for the year ended December 31, 1998 and our Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1999 which are incorporated into
this prospectus by reference.
<TABLE>
<CAPTION>
MARCH 23, 1994
(COMMENCEMENT
OF OPERATIONS) YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SIX MONTHS SIX MONTHS
TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ENDED JUNE 30, ENDED JUNE 30,
1994 1995 1996 1997 1998 1998 1999
- --------------- ------------ ------------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
N/A N/A $81,869 $184,683 $330,475 $146,851 $185,729
</TABLE>
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<PAGE> 39
USE OF PROCEEDS
Unless the applicable prospectus supplement states otherwise, Globalstar
will use the net proceeds from the sale of the offered securities for general
corporate purposes, which may include a possible refinancing of outstanding
securities. Until we use the net proceeds in this manner, we may temporarily use
them to make short-term investments. GTL intends to use the proceeds of any
offering of its securities to purchase Globalstar Securities having
substantially similar terms.
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<PAGE> 40
GENERAL DESCRIPTION OF THE SECURITIES
We may offer shares of GTL common stock, preferred stock or warrants,
Globalstar's and Globalstar Capital's debt securities, or any combination of the
foregoing, either individually or as units consisting of one or more securities.
We may offer up to $500,000,000 of securities under this prospectus. If
securities are offered as units, we will describe the terms of the units in a
prospectus supplement.
This section describes the general terms and provisions of the securities.
The applicable prospectus supplement will describe the specific terms of the
securities offered through that prospectus supplement as well as any of the
general terms described below that will not be applicable to the securities
offered.
DESCRIPTION OF COMMON STOCK
We have summarized some of the terms and provisions of GTL's common stock
in this section. The following is a summary of certain provisions of Bermuda law
and GTL's organizational documents. You should note that this summary is not a
comprehensive description of such laws and documents and that it is qualified in
its entirety by appropriate reference to Bermuda law and to GTL's organizational
documents.
BERMUDA LAW
The following discussion is based upon the advice of Appleby, Spurling &
Kempe, GTL's Bermuda counsel.
GTL was incorporated as an exempted company under The Companies Act 1981 of
Bermuda (the "Act"). Accordingly, the rights of its shareholders are governed by
Bermuda law and GTL's memorandum of association and bye-laws.
DIVIDENDS. Under Bermuda law, a company may pay such dividends as are
declared from time to time by its board of directors unless there are reasonable
grounds for believing that the company is or would, after the payment, be unable
to pay its liabilities as they become due or that the realizable value of its
assets would thereby be less than the aggregate of its liabilities and issued
share capital and share premium accounts.
VOTING RIGHTS. Under Bermuda law, questions brought before a general
meeting of shareholders are decided by a majority vote of shareholders present
at the meeting (or by such majority as the Act or the bye-laws of GTL
prescribe). GTL's bye-laws provide that, subject to the provisions of the Act,
any questions proposed for the consideration of the shareholders will be decided
by a simple majority of the votes cast. 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 GTL's 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
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<PAGE> 41
- a shareholder or shareholders, present in person or by proxy, holding
voting shares in GTL 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, although the accidental omission of notice
to any person does not invalidate the proceedings at a meeting. Under the
bye-laws of GTL, at least five days' notice of the annual general meeting must
be given to each shareholder.
Under Bermuda law, the number of shareholders constituting a quorum at any
general meeting of shareholders is determined by the bye-laws of a company.
GTL's bye-laws provide that the presence in person or by proxy of at least two
shareholders entitled to vote constitute a quorum.
ACCESS TO BOOKS AND RECORDS AND DISSEMINATION OF INFORMATION. Members of
the general public have the right to inspect the public documents of a company
available at the office of the Registrar of Companies in Bermuda. These
documents include the company's certificate of incorporation, its memorandum of
association (including its objects and powers) and any alteration to the
company's memorandum of association.
The shareholders have the additional right to inspect the bye-laws of the
company, minutes of general meetings and the company's audited financial
statements, which must be presented at the annual general meeting. The register
of shareholders of a company is also open to inspection by shareholders without
charge and to members of the general public on the payment of a fee. A company
is required to maintain its share register in Bermuda but may, subject to the
provisions of the Act, establish a branch register outside Bermuda.
A company is required to keep at its registered office a register of its
directors and officers which is open for inspection for not less than two hours
in each day by members of the public without charge. Bermuda law does not,
however, provide a general right for shareholders to inspect or obtain copies of
any other corporate records.
ELECTION OR REMOVAL OF DIRECTORS. Under Bermuda law and GTL's bye-laws,
directors are elected at the annual general meeting or to serve until their
successors are elected or appointed, unless they are earlier removed or resign.
Under Bermuda law and GTL's 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.
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<PAGE> 42
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 votes 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 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 favor 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:
- a meeting of the holders of shares of the amalgamating company of which
they are directors; and
- a meeting of the holders of each class of such shares; and
- the consent of the Bermuda Minister of Finance (who may grant or withhold
consent at his discretion).
Class actions and derivative actions are generally not available to
shareholders under Bermuda law. The Bermuda courts, however, would ordinarily be
expected to permit a shareholder to commence an action in the name of a company
to remedy a wrong done to the company where the act complained of:
- is alleged to be beyond the corporate power of the company; or
- is illegal; or
- would result in the violation of the company's memorandum of association
or bye-laws.
Furthermore, consideration would be given by the Court to acts that are
alleged to constitute a fraud against the minority shareholders or, for
instance, where an act requires the approval of a greater percentage of the
company's shareholders than those who actually approved it.
When the affairs of a company are being conducted in a manner oppressive or
prejudicial to the interests of some part of the shareholders, one or more
shareholders may apply to the Bermuda Court for an order regulating the
company's conduct of affairs in the future or ordering the purchase of the
shares by any shareholder, by other shareholders or by the company.
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<PAGE> 43
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is The Bank of New
York.
DESCRIPTION OF PREFERRED STOCK
This section describes the general terms and provisions of GTL's preferred
stock. The applicable prospectus supplement will describe the specific terms of
the preferred stock offered through that prospectus supplement, as well as any
general terms described in this section that will not apply to those shares of
preferred stock.
On January 31, 1999, GTL sold 7,000,000 shares of its 8% Convertible
Redeemable Preferred Stock due 2011 in a private placement for an aggregate
amount of $350 million. GTL used the proceeds to purchase the Globalstar 8%
Convertible Redeemable Preferred Partnership Interests from Globalstar, with
substantially identical terms. The 8% Convertible Redeemable Preferred Stock
ranks, with respect to dividend distributions and distributions upon GTL's
liquidation, winding-up and dissolution:
- senior to all classes of GTL common stock and to each other class of
capital stock or series of GTL 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 8% Convertible Redeemable Preferred Stock;
- on a parity with any other class of capital stock or series of GTL
preferred stock established after January 21, 1999 the terms of which
expressly provide that such class or series will rank on a parity with
the 8% Convertible Redeemable Preferred Stock; and
- junior to each class of capital stock or series of GTL preferred stock
established after January 21, 1999 the terms of which expressly provide
that such class or series will rank senior to the 8% Convertible
Redeemable Preferred Stock.
In the event that GTL's assets upon liquidation, winding-up or dissolution
are less than or equal to the aggregate liquidation preference and accrued but
unpaid dividends on the 8% Convertible Redeemable Preferred Stock, holders of
common stock will not, and holders of other series of GTL preferred stock may
not, receive any amounts upon such liquidation, winding-up or dissolution.
We have summarized selected terms of the preferred stock which may be
offered by GTL below.
GENERAL
The preferred stock will have the rights described in this section unless
the applicable prospectus supplement provides otherwise. You should read the
prospectus supplement relating to the particular series of the preferred stock
it offers for specific terms, including:
- the designation, stated value and liquidation preference of that series
of the preferred stock and the number of shares offered;
- the dividend rate or rates or method of calculation of dividends, the
dividend periods, the date or dates on which dividends will be payable
and whether such dividends will be cumulative or noncumulative and, if
cumulative, the dates from which dividends shall commence to cumulate;
- the redemption price or prices, if any, and the terms and conditions of
any redemption;
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<PAGE> 44
- the terms and conditions upon which the shares are convertible or
exchangeable, if they are convertible or exchangeable;
- the voting rights;
- the initial public offering price at which the shares will be issued; and
- any additional dividend, liquidation, redemption, sinking fund and other
rights, preferences, privileges, limitations and restrictions of that
series of preferred stock.
When GTL issues shares of preferred stock for cash, they will be fully paid
and nonassessable. This means that the full purchase price for those shares will
have been paid and the holders of those shares will not be assessed any
additional monies for those shares. Holders of preferred stock will generally
have no preemptive rights to subscribe for any additional securities that GTL
may issue.
In order to fund Globalstar as the actual operating entity, it is GTL's
intention to use any proceeds it will receive from the sale of its preferred
stock to purchase back-to-back preferred partnership interests in Globalstar.
These preferred partnership interests and GTL's preferred stock will have
substantially identical terms, subject, however, to the differences imposed by
their respective jurisdictions and forms of incorporation and tax
considerations.
RIGHTS UPON LIQUIDATION
Unless the applicable prospectus supplement states otherwise, if GTL
liquidates, dissolves or winds up its business, the holders of shares of each
series of the preferred stock will be entitled to receive:
- liquidating distributions in the amount stated in the applicable
prospectus supplement; and
- all accrued and unpaid dividends whether or not earned or declared.
GTL will pay these amounts to the holders of shares of each series of the
preferred stock, and all amounts owing on any preferred stock ranking equally
with that series of preferred stock as to liquidating distributions, out of its
funds available for distribution to stockholders. These payments will be made
before any distribution is made to holders of any securities ranking junior to
the series of preferred stock upon liquidation.
If GTL liquidates, dissolves or winds up its business, and the assets
available for distribution to the holders of the preferred stock of any series
and any other shares of its stock ranking equal with that series are not
sufficient to pay all liquidating distributions and accrued and unpaid dividends
in full, then the holders of preferred stock and equal ranking shares will
receive pro rata distributions of liquidating distributions and accrued and
unpaid dividends. This means that the distributions GTL pays to these holders
will bear the same relationship to each other that the full distributable
amounts for which these holders are respectively entitled upon liquidation of
GTL's business bear to each other.
After GTL pays the full amount of the liquidating distribution to which the
holders of a series of the preferred stock are entitled, those holders will have
no right or claim to any of GTL's remaining assets.
DIVIDENDS
The holders of the preferred stock will be entitled to receive dividends,
when, as and if declared by GTL's board of directors, out of funds GTL can
legally use to pay dividends. The prospectus supplement relating to a particular
series of preferred stock will describe the dividend rates and dates
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<PAGE> 45
on which dividends will be payable. The rates may be fixed or variable or both.
If the dividend rate is variable, the applicable prospectus supplement will
describe the formula used for determining the dividend rate for each dividend
period. GTL will pay dividends to the holders of record as they appear on its
stock books on the record dates fixed by GTL's board of directors. The
applicable prospectus supplement will specify whether dividends will be paid in
the form of cash, preferred stock or common stock.
The applicable prospectus supplement will also state whether dividends on
any series of preferred stock are cumulative or noncumulative. If GTL's board of
directors does not declare a dividend payable on a dividend payment date on any
noncumulative series of preferred stock, then the holders of that series will
not be entitled to receive a dividend for that dividend period. In those
circumstances, GTL will not be obligated to pay the dividend accrued for that
period, whether or not dividends on such preferred stock are declared or paid on
any future dividend payment dates. Cumulative dividends, on the other hand, will
accrue whether or not GTL has any earnings or profits, whether or not there are
funds legally available for the payment of dividends and whether or not
dividends are declared.
GTL's board of directors may not declare and pay a dividend on any of GTL's
stock ranking, as to dividends, equal with or junior to any series of preferred
stock unless full dividends on that series have been declared and paid, or
declared and sufficient money is set aside for payment. Until either full
dividends are paid, or are declared and payment is set aside, on preferred stock
ranking equal as to dividends, then:
- no dividend shall be declared or paid upon, or any sum set apart for the
payment of dividends upon, any shares of junior securities;
- no other distribution shall be declared or made upon, or any sum set
apart from the payment of any distribution upon shares of junior
securities, other than a distribution consisting only of junior
securities;
- no shares of junior securities shall be purchased, redeemed or otherwise
acquired (excluding an exchange for shares of other junior securities) by
GTL or any of its subsidiaries; and
- no monies shall be paid 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 by GTL or any of its subsidiaries.
GTL is dependent on Globalstar's ability to pay dividends as a source of
funds for its own dividend payments. Globalstar's credit agreements and the
indentures relating to its outstanding debt may contain restrictions on the
ability of GTL to pay cash dividends.
REDEMPTION
Preferred stock may be redeemable, in whole or in part, at GTL's option,
and may be subject to mandatory redemption through a sinking fund or otherwise,
as described in the applicable prospectus supplement. If a series of preferred
stock is subject to mandatory redemption, the applicable prospectus supplement
will specify the number of shares that GTL will redeem each year and the
redemption price.
Redeemed preferred stock will become authorized but unissued preferred
stock that GTL may issue in the future. If preferred stock is redeemed, GTL will
pay all accrued and unpaid dividends on those shares to, but excluding, the
redemption date. In the case of any noncumulative series of preferred stock,
accrued and unpaid dividends will not include any accumulation of dividends for
prior
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dividend periods. The applicable prospectus supplement will also specify whether
GTL will pay the redemption price in cash or other property.
If GTL redeems fewer than all shares of any series of the preferred stock
held by any holder, GTL will also specify the number of shares to be redeemed
from the holder in the notice. Even though the terms of a series of preferred
stock may permit redemption of shares of preferred stock in whole or in part, if
any dividends, including accumulated dividends, on that series are past due:
- GTL will not redeem any preferred stock of that series unless it
simultaneously redeems all outstanding shares of preferred stock of that
series; and
- GTL will not purchase or otherwise acquire any preferred stock of that
series.
The prohibition discussed in the prior sentence will not prohibit GTL from
purchasing or acquiring preferred stock of that series through a purchase or
exchange offer if GTL makes the offer on the same terms to all holders of that
series.
Unless the applicable prospectus supplement specifies otherwise, GTL will
give notice of a redemption by mailing a notice to each record holder of the
shares to be redeemed, between 30 to 60 days prior to the date fixed for
redemption. GTL will mail the notices to the holders' addresses as they appear
on its records. Each notice will state:
- the redemption date;
- the number of shares and the series of the preferred stock to be
redeemed;
- the redemption price;
- the place or places where holders can surrender the certificates for the
preferred stock for payment of the redemption price;
- that dividends on the shares to be redeemed will cease to accrue on the
redemption date; and
- the date when the holders' conversion rights, if any, will terminate.
If GTL has given notice of the redemption and has provided the funds for
the payment of the redemption price, then beginning on the redemption date:
- the dividends on the preferred stock called for redemption will no longer
accrue;
- such shares will no longer be considered outstanding; and
- the holder will no longer have any rights as stockholders except to
receive the redemption price.
When the holders of these shares surrender the certificates representing
these shares, in accordance with the notice, the redemption price described
above will be paid out of the funds GTL provides. If fewer than all the shares
represented by any certificate are redeemed, a new certificate will be issued
representing the unredeemed shares without cost to the holder of those shares.
CONVERSION OR EXCHANGE RIGHTS
The prospectus supplement relating to a series of preferred stock that is
convertible or exchangeable will state the terms on which shares of that series
are convertible or exchangeable into common stock, another series of preferred
stock or debt securities.
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VOTING RIGHTS
Except as indicated below or in the applicable prospectus supplement, or
except as expressly required by applicable law, the holders of preferred stock
will not be entitled to vote.
If GTL fails to pay stated dividends on any shares of preferred stock for
six consecutive quarterly periods, the holders of the majority of all
outstanding shares of preferred stock will be entitled to vote for the election
of at least 20% of the existing board of directors, but in no event more than
one or less than two additional directors. The number of directors on the board
will be increased automatically without the need of any special meeting.
Except as may be provided in the applicable prospectus supplement, so long
as any shares of preferred stock remain outstanding, unless GTL receives the
consent of the holders of at least 66 2/3% of all outstanding preferred stock
voting as one class, GTL will not:
- authorize or issue any new class or series of capital stock, or any
obligation or security that represents the right to purchase any shares
of any class or series of capital stock, ranking senior to the
outstanding series of preferred stock as to dividends or liquidating
distributions; or
- amend or modify the provisions of GTL's memorandum of association, so as
to materially and adversely affect any right, preference, privilege or
voting power of that series of preferred stock or the holders of that
series of preferred stock.
Except as provided in the applicable prospectus supplement, the consent of
holders of all the shares of preferred stock will be required to amend or modify
GTL's memorandum of association so as to:
- change a mandatory redemption date, or the due date of any dividend;
- reduce the liquidation preference, redemption price or dividend rate;
- impair or adversely affect the right to institute suit for the
enforcement of any redemption payment, conversion rights or redemption
rights;
- modify the provisions with respect to the ranking of a particular series
of preferred stock; or
- alter the voting rights of the preferred stock, except to increase the
required percentage vote of the holders of preferred stock.
GTL will not be required to obtain the consent of the holders of preferred
stock to authorize, create (by way of reclassification or otherwise) or issue
any securities ranking junior to or on parity with the preferred stock, or any
obligation or security convertible or exchangeable into such a security.
DESCRIPTION OF WARRANTS
GTL may issue additional warrants for the purchase of common stock or
preferred stock. We may issue these warrants independently or together with any
other securities offered by any prospectus supplement, and they may be attached
to or separate from such offered securities. Each series of warrants will be
issued under a separate warrant agreement which we will enter into with a
warrant agent specified in the applicable prospectus supplement. The warrant
agent will act solely as our agent in connection with the warrants of such
series and will not assume any obligation or relationship of agency or trust for
or with any provisions of the warrants offered.
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A prospectus supplement will describe specific terms of the warrants and
the applicable warrant agreements. These terms will contain some or all of the
following:
- the title of the warrants;
- the aggregate number of the warrants;
- the price or prices at which the warrants will be issued;
- the designation, terms and number of shares of common stock or preferred
stock purchasable upon exercise of the warrants;
- the designation and terms of the securities, if any, with which the
warrants are issued and the number of the warrants issued with each of
these securities;
- the date, if any, on and after which the warrants and the related common
stock or preferred stock will be separately transferable;
- the price at which each share of common stock or preferred stock
purchasable upon exercise of the warrants may be purchased;
- the date on which the right to exercise the warrants shall commence and
the date on which such right shall expire;
- the minimum or maximum amount of the warrants which may be exercised at
any one time;
- information with respect to book-entry procedures, if any;
- a discussion of federal income tax consideration in connection with the
warrants; and
- any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
DESCRIPTION OF DEBT SECURITIES
The debt securities will be Globalstar's and Globalstar Capital's direct
secured or unsecured general obligations as joint and several obligors and may
include debentures, notes, bonds and/or other evidences of indebtedness. The
debt securities will be either senior debt securities or subordinated debt
securities and may be secured or unsecured.
The debt securities will be issued under one or more separate indentures by
and among Globalstar, Globalstar Capital and The Bank of New York, as trustee.
Senior debt securities will be issued under a senior indenture, subordinated
debt securities will be issued under a subordinated indenture and secured debt
will be issued under a secured indenture. Together, the senior indentures, the
subordinated indentures and the secured indentures are called indentures. A copy
of the form of each type of indenture will be filed as an exhibit to the
registration statement of which this prospectus is a part. A prospectus
supplement will describe the particular terms of any debt securities Globalstar
and Globalstar Capital may offer.
The following summaries of the debt securities and the indentures are not
complete. We strongly urge you to read the indentures and the description of the
debt securities included in the prospectus supplement.
GENERAL TERMS OF DEBT SECURITIES
The debt securities issued under each indenture may be issued without limit
as to aggregate principal amount, in one or more series. Each indenture will
provide that there may be more than one
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trustee under the indenture, each with respect to one or more series of debt
securities. Any trustee under either indenture may resign or be removed with
respect to one or more series of debt securities issued under that indenture,
and a successor trustee may be appointed to act with respect to that series.
If two or more persons are acting as trustee with respect to different
series of debt securities issued under the same indenture, each of those
trustees will be a trustee of a trust under that indenture separate and apart
from the trust administered by any other trustee. In that case, except as
otherwise indicated in this prospectus, any action described in this prospectus
to be taken by the trustee may be taken by each of those trustees only with
respect to the one or more series of debt securities for which it is trustee.
A prospectus supplement relating to a series of debt securities being
offered will include specific terms relating to the offering and that series.
These terms will contain some or all of the following:
- the title of the debt securities;
- any limit on the aggregate principal amount of the debt securities;
- the purchase price of the debt securities, expressed as a percentage of
the principal amount;
- the date or dates on which the principal of and any premium on the debt
securities will be payable or the method for determining the date or
dates;
- if the debt securities will bear interest, the interest rate or rates or
the method by which the rate or rates will be determined;
- if the debt securities will bear interest, the date or dates from which
any interest will accrue, the interest payment dates on which any
interest will be payable, the record dates for those interest payment
dates and the basis upon which interest shall be calculated if other than
that of a 360-day year of twelve 30-day months;
- the place or places where payments on the debt securities will be made
and the debt securities may be surrendered for registration of transfer
or exchange;
- if Globalstar and Globalstar Capital will have the option to redeem all
or any portion of the debt securities, the terms and conditions upon
which the debt securities may be redeemed;
- the terms and conditions of any sinking fund or other similar provisions
obligating Globalstar and Globalstar Capital or permitting a holder to
require Globalstar and Globalstar to redeem or purchase all or any
portion of the debt securities prior to final maturity;
- whether the amount of any payments on the debt securities may be
determined with reference to an index, formula or other method and the
manner in which such amounts are to be determined;
- if the debt securities are secured, a description of the underlying
collateral and any indenture provisions relating to the collateral;
- any additions or changes to the events of default in the respective
indentures;
- any additions or changes with respect to the other covenants in the
respective indentures;
- whether the debt securities will be issued in certificated or book-entry
form;
- whether the debt securities will be in registered or bearer form and, if
in registered form, the denominations of the debt securities if other
than $1,000 and multiples of $1,000;
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- the applicability of the defeasance and covenant defeasance provisions of
the applicable indenture; and
- any other terms of the debt securities consistent with the provisions of
the applicable indenture.
Debt securities may be issued under the indentures as original issue
discount securities to be offered and sold at a substantial discount from their
stated principal amount. Special U.S. federal income tax, accounting and other
considerations applicable to original issue discount securities will be
described in the applicable prospectus supplement.
Unless otherwise provided with respect to a series of debt securities, the
debt securities will be issued only in registered form, without coupons, in
denominations of $1,000 and multiples of $1,000.
SENIOR DEBT SECURITIES AND SENIOR INDEBTEDNESS
Senior debt securities are to be issued under a senior indenture. Each
series of senior debt securities will constitute senior indebtedness and will
rank equally with each other series of senior debt securities and other senior
indebtedness. All subordinated debt, including, but not limited to, all
subordinated debt securities, will be subordinated to the senior debt securities
and other senior indebtedness.
Senior indebtedness includes the following indebtedness or obligations:
- the principal of and premium, if any, and unpaid interest on indebtedness
for money borrowed;
- purchase money and similar obligations;
- obligations under capital leases;
- financing provided by vendors to Globalstar;
- guarantees, assumptions or purchase commitments relating to, or other
transactions as a result of which we are responsible for the payment of,
the indebtedness of others;
- renewals, extensions and refunding of that indebtedness;
- interest or obligations in respect of the indebtedness accruing after the
commencement of any insolvency or bankruptcy proceedings; and
- obligations associated with derivative products.
However, indebtedness or obligations are not senior indebtedness if the
instrument by which Globalstar and Globalstar Capital become obligated for that
indebtedness or those obligations expressly provides that that indebtedness or
those obligations are junior in right of payment to any other of Globalstar's
and Globalstar Capital's indebtedness or obligations.
SUBORDINATED DEBT SECURITIES
Subordinated debt securities are to be issued under a subordinated
indenture. Payments on the subordinated debt securities will be subordinated to
Globalstar's senior indebtedness, whether outstanding on the date of the
subordinated indenture or incurred after that date. No class of subordinated
debt securities will be subordinated to any other class of subordinated debt
securities. At June 30, 1999, Globalstar's aggregate senior indebtedness
consisted of approximately $1.45 billion principal amount of long term
indebtedness and $403 million of vendor financing, and, on August 5, 1999,
Globalstar entered into a $500 million credit facility with a group of banks, of
which $300 million is outstanding. Additionally, at June 30, 1999, Globalstar
had available the full amount of a
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$250 million credit facility originally entered into in December 1995. The
applicable prospectus supplement for each issuance of subordinated debt
securities will specify the aggregate amount of our outstanding indebtedness as
of the most recent practicable date that would rank senior to and equally with
the offered subordinated debt securities.
If any of certain specified events occur, the holders of senior
indebtedness must receive payment of the full amount due on the senior
indebtedness, or that payment must be duly provided for, before Globalstar and
Globalstar Capital may make payments on the subordinated debt securities. These
events are:
- any distribution of Globalstar's assets upon Globalstar's liquidation,
reorganization or other similar transaction except for a distribution in
connection with a merger or other transaction complying with the covenant
described above under "Merger";
- the occurrence and continuation of a payment default on any senior
indebtedness; or
- a declaration of the acceleration of the principal of any series of the
subordinated debt securities, or, in the case of original issue discount
securities, the portion of the principal amount specified under their
terms, as due and payable, that has not been rescinded and annulled.
However, if the event is the acceleration of any series of subordinated
debt securities, only the holders of senior indebtedness outstanding at the time
of the acceleration of those subordinated debt securities, or, in the case of
original issue discount securities, that portion of the principal amount
specified under their terms, must receive payment of the full amount due on that
senior indebtedness, or such payment must be duly provided for, before
Globalstar or Globalstar Capital makes payments on the subordinated debt
securities.
As a result of the subordination provisions, some of Globalstar's or
Globalstar Capital's general creditors, including holders of senior
indebtedness, are likely to recover more, ratably, than the holders of the
subordinated debt securities in the event of insolvency.
SECURED DEBT SECURITIES
Secured debt securities are to be issued under a secured debt indenture
containing terms and conditions similar in all material respects to the terms
and conditions applicable to the senior debt securities, except for provisions
relating to the collateral securing the debt securities.
CERTIFICATED SECURITIES
Except as otherwise stated in the applicable prospectus supplement, debt
securities will not be issued in certificated form. If, however, debt securities
are to be issued in certificated form, no service charge will be made for any
transfer or exchange of any of those debt securities. Globalstar and Globalstar
Capital may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the transfer or exchange of those
debt securities.
BOOK-ENTRY DEBT SECURITIES
The debt securities of a series may be issued in whole or in part in the
form of one or more global securities that will be deposited with the depositary
identified in the applicable prospectus supplement. Unless it is exchanged in
whole or in part for debt securities in definitive form, a global security may
not be transferred. However, transfers of the whole security between the
depositary for that global security and its nominee or their respective
successors are permitted.
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Unless otherwise stated, The Depository Trust Company, New York, New York
will act as depositary for each series of global securities. Beneficial
interests in global securities will be shown on, and transfers of global
securities will be effected only through, records maintained by DTC and its
participants.
DTC has provided the following information to us. DTC is a:
- limited-purpose trust company organized under the New York Banking Law;
- a banking organization within the meaning of the New York Banking Law;
- a member of the U.S. Federal Reserve System;
- a clearing corporation within the meaning of the New York Uniform
Commercial Code; and
- a clearing agency registered under the provisions of Section 17A of the
Securities Exchange Act.
DTC holds securities that its direct participants deposit with DTC. DTC
also facilitates the settlement among direct participants of securities
transactions, in deposited securities through electronic computerized book-entry
changes in the direct participant's accounts. This eliminates the need for
physical movement of securities certificates. Direct participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. DTC is owned by a number of its direct
participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to DTC's book-entry system is also available to indirect participants such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a direct participant. The rules
applicable to DTC and its direct and indirect participants are on file with the
SEC.
Principal and interest payments on global securities registered in the name
of DTC's nominee will be made in immediately available funds to DTC's nominee as
the registered owner of the global securities. Globalstar, Globalstar Capital
and the trustee will treat DTC's nominee as the owner of the global securities
for all other purposes as they may determine. Accordingly, Globalstar and
Globalstar Capital, the trustee and any paying agent will have no direct
responsibility or liability to pay amounts due on the global securities to
owners of beneficial interests in the global securities. It is DTC's current
practice, upon receipt of any payment of principal or interest, to credit direct
participants' accounts on the payment date according to their respective
holdings of beneficial interests in the global securities. These payments will
be the responsibility of the direct and indirect participants and not of DTC,
the trustee, Globalstar or Globalstar Capital.
Debt securities represented by a global security will be exchangeable for
debt securities in definitive form of like amount and terms in authorized
denominations only if:
- DTC notifies Globalstar and Globalstar Capital that it is unwilling or
unable to continue as depositary;
- DTC ceases to be a registered clearing agency and a successor depositary
is not appointed by Globalstar and Globalstar Capital within 90 days; or
- Globalstar and Globalstar Capital determine not to require all of the
debt securities of a series to be represented by a global security and
notify the trustee of their decisions.
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MERGER
Under the terms of the indentures, Globalstar generally may consolidate
with, or sell, lease or convey all or substantially all of its assets to, or
merge with or into, any other legal entity, if Globalstar is either the
continuing entity or, if Globalstar is not the continuing entity:
- the successor entity is organized under the laws of Bermuda or the United
States of America and expressly assumes all payments on all the debt
securities and the performance and observance of all the covenants and
conditions of the applicable indenture;
- neither Globalstar nor the successor entity is in default immediately
after the transaction under the indenture;
- immediately after giving effect to such transaction, the successor entity
would be able to incur an additional $1.00 of debt pursuant to the terms
of the indenture;
- immediately after giving effect to the transaction, the successor entity
has a consolidated net worth that is not less than the consolidated net
worth of Globalstar immediately prior to the transaction; and
- Globalstar has delivered to the trustee an officer's certificate and an
opinion of counsel, each stating that the transaction complies with the
indenture.
The indentures will not permit Globalstar Capital to consolidate with, or
sell, lease or convey substantially all of its assets to, or merger with or
into, any other legal entity.
EVENTS OF DEFAULT, NOTICE AND WAIVER
SENIOR INDENTURE. The senior indenture will provide that the following are
events of default with respect to any series of senior debt securities:
- default for 30 days in the payment of any interest on any debt security
of that series;
- default in the payment of the principal of or premium, if any, on any
debt security of that series at its maturity;
- default in making a sinking fund payment required for any debt security
of that series;
- default in the performance of any of Globalstar's other covenants in the
senior indenture that continues for 60 days after written notice, other
than default in a covenant included in the senior indenture solely for
the benefit of another series of senior debt securities;
- the acceleration of the maturity of more than $10,000,000 in the
aggregate of any of Globalstar's other indebtedness, where that
indebtedness is not discharged or that acceleration is not rescinded or
annulled;
- certain events of bankruptcy, insolvency or reorganization of Globalstar
or its property; and
- any other event of default provided with respect to a particular series
of debt securities.
The senior trustee generally may withhold notice to the holders of any
series of debt securities of any default with respect to that series if it
considers the withholding to be in the interest of those holders. However, the
senior trustee may not withhold notice of any default in the payment of the
principal of, or premium, if any, or interest on any debt security of that
series or in the payment of any sinking fund installment in respect of any debt
security of that series.
If an event of default with respect to any series of senior debt securities
occurs and is continuing, the senior trustee or the holders of not less than 25%
in principal amount of the outstanding debt
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securities of that series may declare the principal amount of all of the debt
securities of that series immediately due and payable. Subject to certain
conditions, the holders of a majority in principal amount of outstanding debt
securities of that series may rescind and annul that acceleration. However, they
may only do so if all events of default, other than the non-payment of
accelerated principal or specified portion of accelerated principal, with
respect to debt securities of that series have been cured or waived.
Holders of a majority in principal amount of any series of outstanding
senior debt securities may, subject to some limitations, waive any past default
with respect to that series and the consequences of the default. The prospectus
supplement relating to any series of senior debt securities which are original
issue discount securities will describe the particular provisions relating to
acceleration of a portion of the principal amount of those original issue
discount securities upon the occurrence and continuation of an event of default.
Within 120 days after the close of each fiscal year, Globalstar and Globalstar
Capital must file with the senior trustee a statement, signed by specified of
their officers, stating whether those officers have knowledge of any default
under the senior indenture.
Except with respect to its duties in case of default, the senior trustee is
not obligated to exercise any of its rights or powers at the request or
direction of any holders of any series of outstanding senior debt securities,
unless those holders have offered the senior trustee reasonable security or
indemnity. Subject to those indemnification provisions and limitations contained
in the senior indenture, the holders of a majority in principal amount of any
series of the outstanding debt securities issued thereunder may direct any
proceeding for any remedy available to the senior trustee, or the exercising of
any of the senior trustee's trusts or powers.
SUBORDINATED INDENTURE. The subordinated indenture will provide that the
following are events of default with respect to any series of subordinated debt
securities:
- default for 30 days in the payment of any interest on any debt security
of that series;
- default in the payment of the principal of or premium, if any, on any
debt security of that series at its maturity;
- default in making a sinking fund payment required for any debt security
of that series;
- any default in the performance of any of our other covenants in the
subordinated indenture that continues for 60 days after written notice,
other than default in a covenant included in the subordinated indenture
solely for the benefit of another series of subordinated debt securities;
- the acceleration of more than $10,000,000, where that indebtedness is not
discharged or that acceleration is not rescinded or annulled;
- certain events relating to the bankruptcy, insolvency or reorganization
of us or our property; and
- any other event of default provided with respect to a particular series
of debt securities.
The subordinated trustee generally may withhold notice to the holders of
any series of subordinated debt securities of any default with respect to that
series if it considers the withholding to be in the interest of the holders.
However, the subordinated trustee may not withhold notice of any default in the
payment of the principal of or premium, if any or interest on any debt security
of that series or in the payment of any sinking fund installment in respect of
any debt security of that series.
If an event of default with respect to any series of subordinated debt
securities occurs and is continuing, the subordinated trustee or the holders of
not less than 25% in principal amount of the outstanding debt securities of that
series may declare the principal amount of all of the debt securities
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of that series immediately due and payable. Subject to certain conditions, the
holders of a majority in principal amount of outstanding debt securities of that
series may rescind and annul that acceleration. However, they may only do so if
all events of default with respect to debt securities of that series have been
cured or waived. Holders of a majority in principal amount of any series of the
outstanding subordinated debt securities may, subject to some limitations, waive
any past default with respect to that series and the consequences of the
default. The prospectus supplement relating to any series of subordinated debt
securities which are original issue discount securities will describe the
particular provisions relating to acceleration of a portion of the principal
amount of those original issue discount securities upon the occurrence and
continuation of an event of default. Within 120 days after the close of each
fiscal year, Globalstar and Globalstar Capital must file with the subordinated
trustee a statement, signed by their specified officers, stating whether these
officers have knowledge of any default under the subordinated indenture.
Except with respect to its duties in case of default, the subordinated
trustee is not obligated to exercise any of its rights or powers at the request
or direction of any holders of any series of outstanding subordinated debt
securities, unless those holders have offered the subordinated trustee
reasonable security or indemnity. Subject to those indemnification provisions
and limitations contained in the subordinated indenture, the holders of a
majority in principal amount of any series of the outstanding subordinated debt
securities may direct any proceeding for any remedy available to the
subordinated trustee, or the exercising of any of the subordinated trustee's
trusts or powers.
AMENDMENT, SUPPLEMENT AND WAIVER
SENIOR INDENTURE. Modifications and amendments of the senior indenture may
be made only, subject to some exceptions, with the consent of the holders of a
majority in aggregate principal amount of all outstanding debt securities under
the senior indenture which are affected by the modification or amendment.
However, to the extent discussed in the prospectus supplement, the holder
of each affected senior debt security must consent to any modification or
amendment of the senior indenture that:
- changes the stated maturity of the principal of, or the premium, if any,
or any installment of interest on, that debt security;
- reduces the principal amount of, or the rate or amount of interest on, or
any premium payable on redemption of, that debt security;
- reduces the amount of principal of an original issue discount security
that would be due and payable upon declaration of acceleration of its
maturity or would be provable in bankruptcy;
- adversely affects any right of repayment of the holder of that debt
security;
- changes the place of payment where, or the currency in which, any payment
on that debt security is payable;
- impairs the right to institute suit to enforce any payment on or with
respect to that debt security;
- reduces the percentage of outstanding debt securities of any series
necessary to modify or amend the senior indenture or to waive compliance
with some of its provisions or defaults and their consequences; or
- make any change in any subsidiary guarantee that would adversely affect
the rights of holders of that security.
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Globalstar, Globalstar Capital and the senior trustee may amend the senior
indenture without the consent of the holders of any senior debt securities in
certain limited circumstances, such as:
- to evidence the succession of another entity to Globalstar and the
assumption by the successor of Globalstar's covenants contained in the
senior indenture;
- to secure the securities; and
- to cure any ambiguity, to correct or supplement any provision in the
senior indenture which may be inconsistent with any other provision of
the senior indenture.
SUBORDINATED INDENTURE. Modifications and amendments to the subordinated
indenture may be made only, subject to some exceptions, with the consent of the
holders of a majority in aggregate principal amount of all outstanding debt
securities under the subordinated indenture which are affected by the
modification or amendment. However, to the extent discussed in the prospectus
supplement, the holder of each affected subordinated debt security must consent
to any modification or amendment of the subordinated indenture that:
- changes the stated maturity of the principal of, or the premium, if any,
or any installment of interest on, that debt security;
- reduces the principal amount of, or the rate or amount of interest on, or
any premium payable on redemption of, that debt security;
- reduces the amount of principal of an original issue discount security
that would be due and payable upon declaration of acceleration of its
maturity or would be provable in bankruptcy;
- adversely affects any right of the repayment of the holder of that debt
security;
- changes the place of payment where, or the currency in which, any payment
on that debt security is payable;
- impairs the right to institute suit to enforce any payment on or with
respect to that debt security;
- reduces the percentage of outstanding debt securities of any series
necessary to modify or amend the subordinated indenture or to waive
compliance with some of its provisions or defaults and their
consequences; or
- subordinates the indebtedness evidenced by that debt security to any of
our indebtedness other than senior indebtedness.
Globalstar, Globalstar Capital and the subordinated trustee also may amend
the subordinated indenture without the consent of the holders of any
subordinated debt securities in certain limited circumstances, such as:
- to evidence the succession of another entity to Globalstar and the
assumption by the successor of Globalstar's covenants contained in the
subordinated indenture;
- to secure the securities; and
- to cure any ambiguity, to correct or supplement any provision in the
subordinated indenture which may be inconsistent with any other provision
of the subordinated indenture.
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DEFEASANCE AND COVENANT DEFEASANCE
To the extent stated in the prospectus supplement, Globalstar and
Globalstar Capital may elect to apply the provisions relating to defeasance and
discharge of indebtedness, or to defeasance of certain restrictive covenants in
the indentures, to the debt securities of any series.
When Globalstar and Globalstar Capital establish a series of debt
securities, Globalstar and Globalstar Capital may provide that that series is
subject to the defeasance and discharge provisions of the applicable indenture.
If those provisions are made applicable, Globalstar and Globalstar Capital may
elect either:
- to defease and be discharged from, subject to some limitations, all of
its obligations with respect to those debt securities; or
- to be released from its obligations to comply with specified covenants
relating to those debt securities as described in the applicable
prospectus supplement.
To effect that defeasance or covenant defeasance, Globalstar and Globalstar
Capital must irrevocably deposit in trust with the relevant trustee an amount in
any combination of funds or government obligations, which, through the payment
of principal and interest in accordance with their terms, will provide money
sufficient to make payments on those debt securities and any mandatory sinking
fund or analogous payments on those debt securities.
On such a defeasance, Globalstar and Globalstar Capital will not be
released from obligations:
- to pay additional amounts, if any, upon the occurrence of some events;
- to register the transfer or exchange of those debt securities;
- to replace some of those debt securities;
- to maintain an office relating to those debt securities; and
- to hold moneys for payment in trust.
To establish such a trust Globalstar and Globalstar Capital must, among
other things, deliver to the relevant trustee an opinion of counsel to the
effect that the holders of those debt securities:
- will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of the defeasance or covenant defeasance; and
- will be subject to U.S. federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if the
defeasance or covenant defeasance had not occurred. In the case of
defeasance, the opinion of counsel must be based upon a ruling of the IRS
or a change in applicable U.S. federal income tax law occurring after the
date of the applicable indenture.
Government obligations mean generally securities which are:
- direct obligations of the U.S. or of the government which issued the
foreign currency in which the debt securities of a particular series are
payable, in each case, where the issuer has pledged its full faith and
credit to pay the obligations; or
- obligations of an agency or instrumentality of the U.S. or of the
government which issued the foreign currency in which the debt securities
of that series are payable, the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the U.S. or that
other government.
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In any case, the issuer of government obligations cannot have the option to
call or redeem the obligations. In addition, government obligations include,
subject to certain qualifications, a depository receipt issued by a bank or
trust company as custodian with respect to any government obligation or a
specific payment of interest on or principal of any such government obligation
held by the custodian for the account of a depository receipt holder.
If Globalstar and Globalstar Capital effect covenant defeasance with
respect to any debt securities, the amount on deposit with the relevant trustee
will be sufficient to pay amounts due on the debt securities at the time of
their stated maturity. However, those debt securities may become due and payable
prior to their stated maturity if there is an event of default with respect to a
covenant from which Globalstar and Globalstar Capital have not been released. In
that event, the amount on deposit may not be sufficient to pay all amounts due
on the debt securities at the time of the acceleration.
The applicable prospectus supplement may further describe the provisions,
if any, permitting defeasance or covenant defeasance, including any
modifications to the provisions described above.
PLAN OF DISTRIBUTION
We may sell the offered securities (1) through agents, (2) through
underwriters, (3) to dealers, or (4) directly to one or more purchasers. The
applicable prospectus supplement will describe the terms of the offering of the
securities, including:
- the name or names of any underwriters, if any;
- whether these underwriters operate in or outside of the United States;
- the purchase price of the securities and the proceeds we will receive
from the sale;
- any underwriting discounts and other items constituting underwriters'
compensation;
- any initial public offering price;
- any discounts or concessions allowed or reallowed or paid to dealers; and
- any securities exchange or market on which the securities may be listed.
Offered securities may be sold through agents designated by us. Unless
otherwise indicated in a prospectus supplement, the agents will use their best
efforts to solicit purchases for the period of their appointment.
If underwriters are used in the sale, the offered securities will be
acquired by the underwriters for their own account. The underwriters may resell
the securities in one or more transactions, including negotiated transactions,
at a fixed public offering price or at varying prices determined at the time of
sale. The obligations of the underwriters to purchase the securities will be
subject to certain conditions. The underwriters will be obligated to purchase
all the securities of the series offered if any of the securities are purchased.
Any initial public offering price and any discounts or concessions allowed or
re-allowed or paid to dealers may be changed from time to time. We may also
decide to sell the offered securities or parts of any offering outside of the
United States, using international underwriters. In such an event, we will file
a separate information prospectus with the SEC.
If a dealer is used in the sale, we will sell the offered securities to the
dealer, as principal. The dealer may then resell those securities to the public
at varying prices to be determined by the dealer at the time of resale.
25
<PAGE> 59
We may also sell offered securities directly to institutional investors or
others. In this case, no underwriters or agents would be involved.
We may authorize underwriters, dealers and agents to solicit offers by
certain institutional investors to purchase offered securities under contracts
providing for payment and delivery on a future date specified in the prospectus
supplement. The prospectus supplement will also describe the public offering
price for the securities and the commission payable for solicitation of these
delayed delivery contracts. Delayed delivery contracts will contain definite
fixed price and quantity terms. The obligations of a purchaser under these
delayed delivery contracts will be subject to only two conditions:
- that the institution's purchase of the securities at the time of delivery
of the securities is not prohibited under the law of any jurisdiction to
which the institution is subject; and
- that we shall have sold to the underwriters the total principal amount of
the offered securities, less the principal amount covered by the delayed
delivery contracts.
Underwriters, dealers, agents and direct purchasers that participate in the
distribution of the offered securities may be underwriters as defined in the
Securities Act and any discounts or commissions they receive from us and any
profit on the resale of the offered securities by them may be treated as
underwriting discounts and commissions under the Securities Act. Any
underwriters, dealers or agents will be identified and their compensation
described in a prospectus supplement.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act, or to contribute with respect to payments which the
underwriters, dealers or agents may be required to make.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us or our subsidiaries in the ordinary course of their
businesses.
The place and time of delivery of the offered securities will be described
in the prospectus supplement.
LEGAL MATTERS
Appleby, Spurling & Kempe will issue an opinion as to the validity of the
offered securities under Bermuda law and Willkie Farr & Gallagher will issue an
opinion as to the validity of the offered securities under U.S. federal law,
Delaware law and New York law. Any underwriters will be advised about other
issues relating to any offering by their own legal counsel. As of June 30, 1999,
partners and counsel in Willkie Farr & Gallagher beneficially owned 110,000
shares of GTL common stock. Mr. Robert B. Hodes is counsel to the law firm of
Willkie Farr & Gallagher and a Director of Loral and GTL and a member of the
Executive and Audit Committees of the Boards of Directors of both Loral and GTL.
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 December 31, 1998 and the balance sheets of Globalstar
Capital and Loral/Qualcomm Satellite Services, L.P., as of December 31, 1998 and
1997 included in this prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports, which are included or
26
<PAGE> 60
incorporated by reference in this prospectus, and have been so included or
incorporated in reliance upon the reports of such firm given upon their
authority as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC which
you can read at the SEC's Web site at http://www.sec.gov. You can also read
these documents at the SEC's public reference rooms in Washington, D.C.,
Chicago, Illinois and New York, NY. Please call the SEC toll free at
1-800-SEC-0330 for information about its public reference rooms.
We have filed a registration statement with the SEC on Form S-3 under the
Securities Act of 1933. This prospectus does not contain all of the information
in the registration statement. We have omitted certain parts of the registration
statement, as permitted by the rules and regulations of the SEC. You may inspect
and copy the registration statement, including exhibits, at the SEC's web site
and public reference facilities. Our statements in this prospectus about the
contents of any contract or other document are not necessarily complete. You
should refer to the copy of each contract or other document we have filed as an
exhibit to the registration statement for complete information.
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:
- GTL's and Globalstar's Annual Report on Form 10-K for the year ended
December 31, 1998;
- GTL's and Globalstar's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1999;
- GTL's and Globalstar's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1999;
- GTL's Proxy Statement relating to the 1999 Annual Meeting of
Shareholders;
- GTL's and Globalstar's Current Report on Form 8-K, filed January 8, 1999;
- GTL's and Globalstar's Current Report on Form 8-K, filed January 22,
1999;
- GTL's and Globalstar's Current Report on Form 8-K, filed August 6, 1999;
and
- the description of GTL's common stock contained in GTL's registration
statement on Form 8-A filed under the Exchange Act and any amendments or
reports filed for the purpose of updating such description.
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 securities under this prospectus is completed.
We will provide 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
27
<PAGE> 61
writing or by telephone to Globalstar Telecommunications Limited, Cedar House,
41 Cedar Avenue, Hamilton HM12, Bermuda, Attn: Secretary, (441) 295-2244. For
information about Globalstar and Globalstar Capital, please direct your request
in writing or by telephone to Globalstar, L.P. at 3200 Zanker Road, P.O. Box
640670, San Jose, California 95134-0670, Attention Stephen C. Wright, (408)
933-4000.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
28
<PAGE> 62
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
GLOBALSTAR CAPITAL CORPORATION
Independent Auditors' Report................................ F-2
Balance Sheets.............................................. F-3
Notes to Balance Sheets..................................... F-4
LORAL/QUALCOMM SATELLITE SERVICES, L.P.
Independent Auditors' Report................................ F-6
Balance Sheets.............................................. F-7
Notes to Balance Sheets..................................... F-8
</TABLE>
F-1
<PAGE> 63
INDEPENDENT AUDITORS' REPORT
To the Stockholder of Globalstar Capital Corporation:
We have audited the accompanying balance sheets of Globalstar Capital
Corporation (a wholly-owned subsidiary of Globalstar, L.P.) as of December 31,
1998 and 1997. These balance sheets are the responsibility of the Company's
management. Our responsibility is to express an opinion on these balance sheets
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheets are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheets. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audits of the balance sheets provide a reasonable basis for our
opinion.
In our opinion, such balance sheets present fairly, in all material
respects, the financial position of Globalstar Capital Corporation as of
December 31, 1998 and 1997 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
San Jose, California
February 16, 1999
F-2
<PAGE> 64
GLOBALSTAR CAPITAL CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF GLOBALSTAR, L.P.)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1997
------ ------
<S> <C> <C>
ASSETS
Receivable from Parent...................................... $1,000 $1,000
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Commitments and contingencies (Note 3)......................
Stockholder's equity........................................
Common stock, par value $.10; 1,000 shares authorized,
issued and outstanding................................. $ 10 $ 10
Paid-in capital............................................. 990 990
------ ------
$1,000 $1,000
====== ======
</TABLE>
See notes to balance sheets.
F-3
<PAGE> 65
GLOBALSTAR CAPITAL CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF GLOBALSTAR, L.P.)
NOTES TO BALANCE SHEETS
1. ORGANIZATION
Globalstar Capital Corporation ("Globalstar Capital"), a wholly-owned
subsidiary of Globalstar, L.P. ("Globalstar") was formed on July 24, 1995 for
the primary purpose of serving as a co-issuer and co-obligor with respect to
certain debt obligations of Globalstar.
2. COMMITMENTS AND CONTINGENCIES
Globalstar Capital is a co-obligor on the following Globalstar borrowings:
11 3/8% $500 MILLION SENIOR NOTES DUE 2004
In February, 1997, Globalstar sold $500 million principal amount of 11 3/8%
Senior Notes due 2004 in a private offering. The notes are senior in right of
payment to Globalstar's 8% Convertible Redeemable Preferred Partnership
Interests ("8% RPPIs"), may not be redeemed prior to February 2002 and are
subject to a prepayment premium prior to 2004. Interest is paid semi-annually.
11 1/4% $325 MILLION SENIOR NOTES DUE 2004
In June, 1997, Globalstar sold $325 million principal amount of 11 1/4%
Senior Notes due 2004 in a private offering. The notes are senior in right of
payment to Globalstar's 8% RPPIs, may not be redeemed prior to June 2002 and are
subject to a prepayment premium prior to 2004. Interest is paid semi-annually.
10 3/4% $325 MILLION SENIOR NOTES DUE 2004
In October, 1997, Globalstar sold $325 million principal amount of 10 3/4%
Senior Notes due 2004 in a private offering. The notes are senior in right of
payment to Globalstar's 8% RPPI's, may not be redeemed prior to November 2002
and are subject to a prepayment premium prior to 2004. Interest is paid
semi-annually.
11 1/2% $300 MILLION SENIOR NOTES DUE 2005
In May, 1998, Globalstar sold $300 million principal amount of 11 1/2%
Senior Notes due 2005 in a private offering. The notes are senior in right of
payment to Globalstar's 8% RPPI's, may not be redeemed prior to June 2003 and
are subject to a prepayment premium prior to 2005. Interest is paid
semi-annually.
The indentures for the 11 3/8% Senior Notes, the 11 1/4% Senior Notes, the
10 3/4% Senior Notes, and the 11 1/2% Senior Notes contain certain covenants
that, among other things, limit the ability of Globalstar to incur additional
debt, issue preferred stock, or pay dividends and certain distributions. In
certain limited circumstances involving a change of control of Globalstar, as
defined, each note is redeemable at the option of the holder for 101% of the
principal amount plus accrued interest.
Globalstar Capital is a guarantor of a $250 million credit agreement
between Globalstar and a group of banks. At December 31, 1998, and December 31,
1997, there were no borrowings outstanding under this agreement.
F-4
<PAGE> 66
GLOBALSTAR CAPITAL CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF GLOBALSTAR, L.P.)
NOTES TO BALANCE SHEETS -- (CONTINUED)
3. SUBSEQUENT EVENTS
On January 21, 1999, Globalstar sold to GTL 7 million units (face amount of
$50 per unit) of 8% RPPIs in Globalstar, in connection with GTL's offering of 7
million shares (face amount of $50 per share) of 8% Convertible Redeemable
Preferred Stock due 2011 (the "Preferred Stock"). Dividends on the 8% RPPIs and
the Preferred Stock accrue at 8% per annum and are payable quarterly. Globalstar
is using the funds for the construction and deployment of the Globalstar System.
The Preferred Stock is convertible into shares of GTL common stock at a
conversion price of $23.2563 per share, subject to adjustment for certain
antidilution events. As of January 21, 1999, the Preferred Stock was convertible
into 15,049,685 shares of GTL common stock. Loral purchased 3 million shares
($150 million face amount) of the Preferred Stock issued, in order to maintain
its prior percentage ownership interest in Globalstar.
The Preferred Stock has limited voting rights. With respect to dividend
rights and rights upon liquidation, winding up and dissolution, the Preferred
Stock ranks senior to common stock and to all other future series of preferred
stock or other class of capital stock of GTL, the terms of which do not
expressly provide that such series or class ranks senior to or on parity with
the Preferred Stock. Prior to its mandatory redemption date, the Preferred Stock
is redeemable (at a premium which declines over time) by GTL beginning in
February 2002 (or beginning in February 2000 if GTL's stock price exceeds
certain defined price ranges). Payments due on the Preferred Stock may be made
in cash, GTL common stock or a combination of both at the option of GTL. In the
event accrued and unpaid dividends accumulate to an amount equal to six
quarterly dividends, holders of the majority of the outstanding shares of
Preferred Stock will be entitled to elect additional members to GTL's Board of
Directors.
The 8% RPPIs rank senior to ordinary partnership interests and have terms
substantially similar to the Preferred Stock. However, they are subordinate to
all existing and future liabilities of Globalstar, and cash distributions
thereon are limited to the amount of the partnership capital accounts that are
maintained for such interests. The 8% RPPIs will convert to ordinary partnership
interests upon any conversion of the Preferred Stock into GTL common stock.
Payments due on the 8% RPPIs may be made in cash. Globalstar ordinary
partnership interests or a combination of both at the option of Globalstar.
F-5
<PAGE> 67
INDEPENDENT AUDITORS' REPORT
To the Partners of Loral/Qualcomm Satellite Services, L.P.
We have audited the accompanying balance sheets of Loral/Qualcomm Satellite
Services, L.P. (a General Partner of Globalstar, L.P.) as of December 31, 1998
and 1997. These balance sheets are the responsibility of the Partnerships'
management. Our responsibility is to express an opinion on these balance sheets
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheets are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheets. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audits of the balance sheets provide a reasonable basis for our
opinion.
In our opinion, such balance sheets present fairly, in all material
respects, the financial position of Loral/Qualcomm Satellite Services, L.P. as
of December 31, 1998 and 1997 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
San Jose, California
February 16, 1999
F-6
<PAGE> 68
LORAL/QUALCOMM SATELLITE SERVICES, L.P.
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS:
Investment in Globalstar, L.P. ............................ $-- $--
Total assets...............................................
== ==
PARTNERS' CAPITAL:
Partnership interests (18,000 interests outstanding)....... $-- $--
Total partners' capital....................................
== ==
</TABLE>
See notes to balance sheets.
F-7
<PAGE> 69
LORAL/QUALCOMM SATELLITE SERVICES, L.P.
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
NOTES TO BALANCE SHEETS
1. ORGANIZATION AND BACKGROUND
Loral/Qualcomm Satellite Services, L.P. ("LQSS"), was formed in November
1993 as a Delaware limited partnership with a December 31 fiscal year end. The
general partner of LQSS is Loral/Qualcomm Partnership, L.P. ("LQP"), a limited
partnership whose general partner is Loral General Partner, Inc. ("LGP"), a
subsidiary of Loral Space & Communications Ltd., a Bermuda company ("Loral") and
whose limited partners include a subsidiary of QUALCOMM Incorporated
("Qualcomm").
Effective April 23, 1996, a merger between Loral Corporation ("Old Loral")
and Lockheed Martin Corporation ("Lockheed Martin") was completed. In
conjunction with the merger, Old Loral's space and communications businesses,
including its direct and indirect interests in LGP, LQP, LQSS, Globalstar, L.P.
("Globalstar"), Globalstar Telecommunications Limited ("GTL"), Space
Systems/Loral, Inc. ("SS/L"), and other affiliated businesses, as well as
certain other assets, were transferred to Loral.
LQSS's only activity is acting as the managing general partner of
Globalstar, a development stage limited partnership, which was founded to
design, construct and operate a worldwide, low-earth orbit satellite-based
wireless digital telecommunications system (the "Globalstar System"). The
Globalstar System's world-wide coverage is designed to enable its service
providers to extend modern telecommunications services to millions of people who
currently lack basic telephone service and to enhance wireless communications in
areas underserved or not served by existing or future cellular systems,
providing a telecommunications solution in parts of the world where the
build-out of terrestrial systems cannot be economically justified.
At December 31, 1998, LQSS held a 30.9% interest in Globalstar's
outstanding partnership interests. As LQSS's investment in Globalstar is LQSS's
only asset, LQSS is dependent upon Globalstar's success and achievement of
profitable operations for the recovery of its investment. Globalstar is a
development stage limited partnership which may encounter problems, delays and
expenses, many of which may be beyond Globalstar's control. These may include,
but are not limited to, problems related to technical development of the system,
testing, regulatory compliance, manufacturing and assembly, potential launch
failures which could delay the program schedule, the competitive and regulatory
environment in which Globalstar will operate, marketing problems and costs and
expenses that may exceed current estimates. There can be no assurance that
substantial delays in any of the foregoing matters would not delay Globalstar's
achievement of profitable operations and effect the recoverability of LQSS's
investment. All expenses necessary to maintain LQSS's operations are borne by
Globalstar.
While it is not anticipated that LQSS will incur any direct obligations for
borrowed money or any other liabilities, it will, as a general partner of
Globalstar, be jointly and severally liable for all liabilities of Globalstar
other than those that are by contract made expressly non-recourse to
Globalstar's general partners or otherwise guaranteed. Limited partners in LQSS
do not, in general, have such joint and several liability.
F-8
<PAGE> 70
LORAL/QUALCOMM SATELLITE SERVICES, L.P.
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
NOTES TO BALANCE SHEETS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT IN GLOBALSTAR, L.P.
LQSS accounts for its investment in Globalstar using the equity method of
accounting. Under this method, LQSS recognizes its allocated share of
Globalstar's net loss, for each period since its initial investment in March
1994. The difference between LQSS's initial investment in Globalstar and its
interest in Globalstar's ordinary partnership capital, at that time, is
attributable to certain intangible assets contributed to Globalstar for
development of the Globalstar System; this difference will be accreted by LQSS
on a ratable basis upon Globalstar's commencement of commercial services. During
1995, LQSS's investment in Globalstar was reduced to zero. Accordingly, LQSS has
discontinued providing for its allocated share of Globalstar's net losses, and
will recognize a liability as a result of its general partner status in
Globalstar only in the event that Globalstar's losses result in an aggregate
ordinary partners' capital deficiency. At December 31, 1998, suspended losses
representing LQSS's unrecognized equity in Globalstar's net losses aggregated
approximately $107,944,000.
NET (LOSS) INCOME ALLOCATION
The partnership agreements of LQSS and Globalstar provide that net losses
of each partnership are allocated among the partners with positive adjusted
capital account balances in accordance with their relative percentage interests
until the adjusted capital account balances of all partners are zero. Any
further net loss is allocated to the general partner.
Net income of each partnership is allocated among the partners in
proportion to, and to the extent of, distributions made to the partners out of
receipts for the period, as defined, then in proportion to and to the extent of
negative adjusted capital account balances and then in accordance with
percentage interests.
Under the terms of the partnership agreements, adjusted partners' capital
accounts are calculated in accordance with the principles of U.S. Treasury
Regulations governing the allocation of taxable income and loss including
adjustments to reflect the fair market value (including intangibles) of
partnership assets upon certain capital transactions including a sale of
partnership interests. Such adjustments are not permitted under generally
accepted accounting principles and, accordingly, are not reflected in the
accompanying financial statements.
INCOME TAXES
LQSS was organized as a Delaware limited partnership. As such, no income
tax provision (benefit) is included in the accompanying financial statements
since U.S. income taxes are the responsibility of its partners. Generally,
taxable income (loss), deductions and credits of LQSS will be passed
proportionately through to its partners.
3. INVESTMENT IN GLOBALSTAR
On March 23, 1994, LQSS entered into a subscription agreement to acquire
18,000,000 general ordinary partnership interests in Globalstar for $50,000,000.
LQSS paid $38,691,000 in cash during 1994 and 1995 and received a credit of
$11,309,000 against its capital subscription, as compensation
F-9
<PAGE> 71
LORAL/QUALCOMM SATELLITE SERVICES, L.P.
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
NOTES TO BALANCE SHEETS -- (CONTINUED)
for certain costs incurred by the partners of its general partner, LQP. As of
December 31, 1998, Globalstar had 38,242,593 general and 19,937,500 limited
ordinary partnership interests outstanding.
On February 14, 1995, GTL completed an initial public offering of
40,000,000 shares of common stock, resulting in net proceeds of $185,750,000,
which were used to purchase 10,000,000 ordinary general partnership interests in
Globalstar. LQSS and the other partners in Globalstar have the right to exchange
their ordinary partnership interests into shares of GTL common stock on an
approximate one-for-four basis following the Full Coverage Date, as defined, of
the Globalstar System and after two consecutive quarters of positive net income,
subject to certain annual limitations. GTL has reserved approximately 152
million shares for this purpose.
In May 1997 and June 1998, GTL issued two-for-one stock splits in the form
of 100% stock dividends. Prior to the stock splits, GTL's equity securities and
convertible securities were represented by equivalent Globalstar partnership
interests on an approximate one-for-one basis. Globalstar's partnership
interests were not affected by the GTL stock splits and, accordingly, GTL's
equity securities are now represented by equivalent Globalstar partnership
interests on an approximate four-for-one basis. All GTL shares and per share
amounts have been restated to reflect the two-for-one stock splits.
On December 15, 1995, Globalstar entered into a $250 million credit
agreement (the "Global Credit Agreement") with a group of banks. Lockheed
Martin, Qualcomm, SS/L and another Globalstar partner have guaranteed $206.3
million, $21.9 million, $11.7 million and $10.1 million of the Globalstar Credit
Agreement, respectively. In addition, Loral agreed to indemnify Lockheed Martin
for any liability in excess of $150 million.
Pursuant to other equity arrangements entered into by Globalstar,
additional Globalstar ordinary partnership interests have been reserved for
issuance. As LQSS is not a participant in such arrangements, such issuances
would result in the dilution of LQSS's interest in Globalstar's ordinary
partnership interests. At December 31, 1998 and 1997, LQSS held directly
18,000,000 ordinary general partnership interests, or 30.9% and 34.4%, of the
outstanding 58,180,093 and 52,319,076 ordinary partnership interests of
Globalstar, respectively.
At December 31, 1998, Globalstar had reserved additional ordinary
partnership interests for issuance for: exercise of warrants to purchase GTL
common stock issued in connection with Globalstar's 11 3/8% Senior Notes due
2004 (1,017,331 interests), exercise of a warrant issued to China Telecom to
purchase Globalstar ordinary partnership interests (937,500 interests), and
interests reserved for issuance under GTL's 1994 stock option plan (617,873
interests). Assuming all such reserved interests had been issued at December 31,
1998, LQSS's direct interest in Globalstar's ordinary partnership interests
would have decreased to 29.6%.
On January 21, 1999, Globalstar sold GTL $350 million face amount of 8%
redeemable preferred partnership interests ("8% RPPI's") in connection with
GTL's offering of $350 million of 8% Convertible Preferred Stock due 2011.
Conversion of the 8% RPPI's would result in the issuance of 3,762,421 interests,
subject to adjustment for certain antidilution events. Assuming all such
reserved interests had been issued at December 31, 1998, LQSS's direct interest
in Globalstar's ordinary partnership interests would have decreased to 27.9%.
F-10
<PAGE> 72
LORAL/QUALCOMM SATELLITE SERVICES, L.P.
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
NOTES TO BALANCE SHEETS -- (CONTINUED)
In addition, Globalstar may elect to make the preferred distribution on the
8% RPPI's in ordinary partnership interests, versus cash, which would further
dilute LQSS's direct interest in Globalstar's ordinary partnership interests.
4. PARTNERS' CAPITAL
On March 23, 1994, LQSS received capital subscriptions of $50,000,000 for a
42.2% general partnership interest and 57.8% limited partnership interests,
representing all issued and outstanding partnership interests. Of these capital
subscriptions, $38,691,000 was received in cash during 1994 and 1995 and a
capital subscription credit of $11,309,000 was issued to the general and limited
partners as compensation for expenditures incurred by Loral and Qualcomm from
January 1, 1993 through March 22, 1994, relating to the Globalstar System. LQSS
was in turn granted a credit against its capital subscription payable to
Globalstar for the same amount.
On April 14, 1997, LQSS effected a six-for-one split of partnership
interests so that one LQSS partnership interest would represent an effective
ownership of one Globalstar partnership interest. All LQSS interest and per
interest amounts have been restated to reflect the six-for-one split.
5. RELATED PARTY TRANSACTIONS
GLOBALSTAR MANAGING PARTNER'S ALLOCATION
Commencing after the initiation of Globalstar's services, LQSS will receive
a managing partner's allocation equal to 2.5% of Globalstar's revenues up to
$500 million, plus 3.5% of revenues in excess of $500 million. This managing
partner's allocation will be distributed to LQSS's general partner, LQP. Should
Globalstar incur a net loss in any year following commencement of services, the
allocation for that year will be reduced by 50% and Globalstar will be
reimbursed for allocation payments, if any, made in any prior quarter of such
year, sufficient to reduce the management allocation for such year to 50%. No
allocations have been received to date. The allocation may be deferred (with
interest 4% per annum) in any quarter in which Globalstar would report negative
cash flow from operations if the allocation were made.
F-11
<PAGE> 73
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$500,000,000
<TABLE>
<S> <C>
GLOBALSTAR TELECOMMUNICATIONS GLOBALSTAR, L.P.
LIMITED GLOBALSTAR CAPITAL CORPORATION
COMMON STOCK DEBT SECURITIES
PREFERRED STOCK
WARRANTS
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 74
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
GLOBALSTAR TELECOMMUNICATIONS LIMITED
CEDAR HOUSE
41 CEDAR AVENUE
HAMILTON HM12, BERMUDA
TELEPHONE: (441) 295-2244
COMMISSION FILE NUMBER 0-25456
JURISDICTION OF INCORPORATION: BERMUDA
IRS IDENTIFICATION NUMBER: 13-3795510
GLOBALSTAR, L.P.
3200 ZANKER ROAD
SAN JOSE, CA 95134
TELEPHONE: (408) 933-4000
COMMISSION FILE NUMBER: 333-25461
JURISDICTION OF INCORPORATION: DELAWARE
IRS IDENTIFICATION NUMBER: 13-3759024
The registrants have filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
and have been subject to such filing requirements for the past 90 days.
As of October 31, 1999, there were 82,202,122 shares of Globalstar
Telecommunications Limited common stock outstanding.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 75
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C>
Part I. FINANCIAL INFORMATION
Globalstar Telecommunications Limited (A General Partner of
Globalstar L.P.).......................................... 2
Globalstar, L.P. (A Development Stage Limited
Partnership).............................................. 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 14
Part II. OTHER INFORMATION
Exhibits and Reports of Form 8-K............................ 19
</TABLE>
1
<PAGE> 76
PART I
FINANCIAL INFORMATION
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
Investment in Globalstar, L.P.:
Redeemable preferred partnership interests................ $ 340,109 $ --
Dividends receivable...................................... 3,500 --
Ordinary partnership interests............................ 523,467 568,394
Ordinary partnership warrants............................. 11,568 12,034
--------- ---------
Total assets........................................... $ 878,644 $ 580,428
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Dividends payable......................................... $ 3,500 $ --
Commitments and contingencies (Note 4)
Shareholders' equity:
8% Convertible redeemable preferred stock, $.01 par value,
10,000,000 shares authorized (6,999,900 issued and
outstanding at September 30, 1999), $350 million
redemption value....................................... 340,109 --
Common stock, $1.00 par value, 600,000,000 shares
authorized (82,196,315 and 82,016,679 issued and
outstanding at September 30, 1999 and December 31,
1998, respectively).................................... 82,196 82,017
Paid-in capital............................................. 591,940 588,802
Warrants.................................................... 11,568 12,034
Accumulated deficit......................................... (150,669) (102,425)
--------- ---------
Total shareholders' equity............................. 875,144 580,428
--------- ---------
Total liabilities and shareholders' equity............. $ 878,644 $ 580,428
========= =========
</TABLE>
NOTE: The December 31, 1998 balance sheet has been derived from audited
financial statements at that date.
See notes to condensed financial statements.
2
<PAGE> 77
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ --------------------
1999 1998 1999 1998
------- ------- -------- --------
<S> <C> <C> <C> <C>
Equity in net loss applicable to ordinary
partnership interests of Globalstar, L.P.......... $16,769 $14,555 $ 48,244 $ 35,124
Dividend income on Globalstar, L.P. redeemable
preferred partnership interests................. (7,129) -- (21,819) (22,197)
Interest expense on convertible preferred
equivalent obligations.......................... -- -- 2,510 22,197
------- ------- -------- --------
Net loss.......................................... 9,640 14,555 28,935 35,124
Preferred dividends on 8% convertible redeemable
preferred stock and accretion to redemption
value........................................... 7,129 -- 19,309 --
------- ------- -------- --------
Net loss applicable to common shareholders........ $16,769 $14,555 $ 48,244 $ 35,124
======= ======= ======== ========
Net loss per share -- basic and diluted........... $ 0.20 $ 0.18 $ 0.59 $ 0.48
======= ======= ======== ========
Weighted average shares outstanding -- basic
and diluted..................................... 82,062 82,008 82,035 72,973
======= ======= ======== ========
</TABLE>
See notes to condensed financial statements.
3
<PAGE> 78
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1999 1998
--------- -------------
<S> <C> <C>
Operating activities:
Net loss.................................................... $ (28,935) $(35,124)
Equity in net loss applicable to ordinary partnership
interests of Globalstar, L.P........................... 48,244 35,124
Accretion to redemption value of redeemable preferred
partnership interests.................................. (339) (351)
Dividends accrued on redeemable preferred partnership
interests.............................................. (3,500) 1,679
Amortization of convertible preferred equivalent
obligation issue costs................................. -- 351
Change in operating liability:
Interest payable....................................... -- (1,679)
--------- --------
Net cash provided by operating activities............ 15,470 --
--------- --------
Investing activities:
Purchase of ordinary partnership interests in Globalstar,
L.P.................................................... (2,846) (1,093)
Purchase of redeemable preferred partnership interests in
Globalstar, L.P........................................ (339,775) --
--------- --------
Net cash used in investing activities................ (342,621) (1,093)
--------- --------
Financing activities:
Net proceeds from issuance of common stock upon exercise
of options and warrants................................ 2,846 1,093
Proceeds from issuance of 8% convertible redeemable
preferred stock........................................ 339,775 --
Payment of dividends related to preferred stock........... (15,470) --
--------- --------
Net cash provided by financing activities............ 327,151 1,093
--------- --------
Net increase (decrease) in cash and cash equivalents........ -- --
Cash and cash equivalents, beginning of period.............. -- --
--------- --------
Cash and cash equivalents, end of period.................... $ -- $ --
========= ========
Non-cash transactions:
Conversion of redeemable preferred partnership interests
and related dividend make-whole payment into ordinary
partnership interests.................................. $ 5 $320,250
========= ========
Common stock issued upon conversion of convertible
preferred equivalent obligations and related interest
make-whole payment..................................... $ -- $320,250
========= ========
Common stock issued upon conversion of the 8% convertible
redeemable preferred stock............................. $ 5 $ --
========= ========
Supplemental information:
Interest paid during the period........................... $ 2,510 $ 5,038
========= ========
</TABLE>
See notes to condensed financial statements.
4
<PAGE> 79
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared by Globalstar Telecommunications Limited ("GTL") pursuant to the rules
of the Securities and Exchange Commission ("SEC") and, in the opinion of GTL,
include all adjustments (consisting of normal recurring accruals) necessary for
a fair presentation of financial position, results of operations and cash flows.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to SEC rules. GTL believes that the
disclosures made are adequate to keep the information presented from being
misleading. The results of operations for the three and nine months ended
September 30, 1999 are not necessarily indicative of the results to be expected
for the full year. These condensed financial statements should be read in
conjunction with GTL's audited financial statements and notes thereto included
in the latest Annual Report on Form 10-K for GTL and Globalstar, L.P.
("Globalstar").
2. ORGANIZATION AND BUSINESS
On November 23, 1994, GTL was incorporated as an exempted company under the
Companies Act 1981 of Bermuda. GTL's financial statements have been prepared in
accordance with accounting principles generally accepted in the United States of
America.
GTL's sole business is acting as a general partner of Globalstar, which is
building and will operate a worldwide, low-earth orbit satellite-based wireless
digital telecommunications system.
At September 30, 1999, GTL held 34.8% of the outstanding ordinary
partnership interests and 100% of the outstanding 8% Redeemable Preferred
Partnership Interests ("8% RPPIs") (see Note 4) of Globalstar. GTL accounts for
its investment in Globalstar on the equity method, recognizing its allocated
share of net losses in the period incurred. GTL's allocated share of
Globalstar's net losses applicable to ordinary partnership interests from the
period February 22, 1995 through September 30, 1999 was $150,669,000.
GTL's equity securities and convertible securities are represented by
equivalent Globalstar partnership interests on an approximate four-for-one
basis.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Earnings Per Share
GTL follows Statement of Financial Accounting Standards No. 128, Earnings
per Share ("SFAS 128") in presenting basic and diluted earnings per share. Due
to GTL's net losses for the three and nine months ended September 30, 1999 and
1998, diluted weighted average common shares outstanding excludes the weighted
average effect of the assumed conversion of GTL's 8% Convertible Redeemable
Preferred Stock into 15.0 million and 13.9 million common shares for the three
and nine months ended September 30, 1999, respectively, the assumed exercise of
outstanding options and warrants into 7.9 million and 5.7 million common shares
for the three months ended September 30, 1999 and 1998, respectively, and into
6.9 million and 5.7 million common shares for the nine months ended September
30, 1999 and 1998, respectively, and the assumed conversion, prior to actual
conversion in April 1998, of GTL's Convertible Preferred Equivalent Obligations
into 8.9 million common shares for the nine months ended September 30, 1998, as
their effect would have been anti-dilutive. Accordingly, basic and diluted net
loss per share is based on the net loss applicable to common shareholders' and
the weighted average common shares outstanding for the three and nine months
ended September 30, 1999 and 1998.
5
<PAGE> 80
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
NOTES TO CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
4. SHAREHOLDERS' EQUITY
8% Convertible Redeemable Preferred Stock
On January 21, 1999, GTL sold 7 million shares (face amount of $50 per
share) of 8% Convertible Redeemable Preferred Stock due 2011 (the "Preferred
Stock"). The Preferred Stock has an aggregate liquidation preference equal to
its $350 million aggregate redemption value and a mandatory redemption date of
February 15, 2011. Dividends accrue at 8% per annum and are payable quarterly.
The Preferred Stock is convertible into shares of GTL common stock at a
conversion price of $23.2563 per share, subject to adjustment for certain
antidilution events. As of September 30, 1999, the Preferred Stock was
convertible into 15,049,470 shares of GTL common stock. Loral Space &
Communications Ltd. ("Loral") purchased 3 million shares ($150 million face
amount) of the Preferred Stock issued, in order to maintain its prior percentage
ownership interest in Globalstar.
The Preferred Stock has limited voting rights. With respect to dividend
rights and rights upon liquidation, winding up and dissolution, the Preferred
Stock ranks senior to common stock and to all other future series of preferred
stock or other class of capital stock of GTL, the terms of which do not
expressly provide that such series or class ranks senior to or on parity with
the Preferred Stock. Prior to its mandatory redemption date, the Preferred Stock
is redeemable (at a premium which declines over time) by GTL beginning in
February 2002 (or beginning in February 2000 if GTL's stock price exceeds
certain defined price ranges). Payments due on the Preferred Stock may be made
in cash, GTL common stock or a combination of both at the option of GTL. In the
event accrued and unpaid dividends accumulate to an amount equal to six
quarterly dividends, holders of the majority of the outstanding shares of
Preferred Stock will be entitled to elect additional members to GTL's Board of
Directors.
GTL used the net proceeds of approximately $340 million to purchase 7
million units (face amount of $50 per unit) of Globalstar's 8% RPPIs having
terms substantially similar to those of the Preferred Stock.
5. CREDIT FACILITY
In August 1999, Globalstar completed a $500 million credit facility with
Bank of America. The credit facility is guaranteed by two subsidiaries of Loral,
which pledged certain assets to support the transaction. Loral received
consideration for its guarantee in the form of warrants to purchase an aggregate
of 3,450,000 Globalstar partnership interests (equivalent to approximately
13,800,000 shares of common stock of GTL).
6
<PAGE> 81
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PARTNERSHIP INTEREST DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 171,343 $ 56,739
Insurance proceeds receivable............................. -- 28,500
Production gateways and user terminals.................... 126,733 145,509
Other current assets...................................... 4,323 5,540
---------- ----------
Total current assets................................... 302,399 236,288
Property and equipment, net................................. 5,411 4,958
Globalstar System under construction:
Space segment............................................. 2,072,705 1,678,514
Ground segment............................................ 954,769 686,848
---------- ----------
3,027,474 2,365,362
Additional spare satellites................................. 22,488 --
Deferred financing costs.................................... 163,935 15,845
Other assets................................................ 48,404 47,572
---------- ----------
Total assets........................................... $3,570,111 $2,670,025
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable.......................................... $ 8,243 $ 14,240
Payable to affiliates..................................... 405,511 216,542
Vendor financing liability................................ 170,343 127,180
Accrued expenses.......................................... 17,753 11,679
Accrued interest.......................................... 45,509 31,549
---------- ----------
Total current liabilities.............................. 647,359 401,190
Deferred revenues........................................... 25,811 25,811
Vendor financing liability, net of current portion.......... 250,034 243,990
Deferred interest payable................................... 582 458
Term Loan B notes payable ($300,000 principal amount)....... 300,000 --
11 3/8% Senior notes payable ($500,000 principal amount).... 479,692 479,566
11 1/4% Senior notes payable ($325,000 principal amount).... 307,190 306,949
10 3/4% Senior notes payable ($325,000 principal amount).... 321,122 320,997
11 1/2% Senior notes payable ($300,000 principal amount).... 289,066 288,663
Commitments and contingencies (Notes 4, 6 and 8)
Partners' capital:
8% redeemable preferred partnership interests (6,999,900
outstanding at September 30, 1999), $350 million
redemption value....................................... 340,109 --
Ordinary partnership interests (58,225,002 and 58,180,093
outstanding at September 30, 1999 and December 31,
1998, respectively).................................... 439,532 573,421
Warrants.................................................. 169,614 28,980
---------- ----------
Total partners' capital................................ 949,255 602,401
---------- ----------
Total liabilities and partners' capital................ $3,570,111 $2,670,025
========== ==========
</TABLE>
NOTE: The December 31, 1998 balance sheet has been derived from audited
consolidated financial statements at that date.
See notes to condensed consolidated financial statements.
7
<PAGE> 82
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER INTEREST DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
THREE MONTHS ENDED NINE MONTHS ENDED MARCH 23, 1994
SEPTEMBER 30, SEPTEMBER 30, (COMMENCEMENT OF
------------------ -------------------- OPERATIONS) TO
1999 1998 1999 1998 SEPTEMBER 30, 1999
------- ------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C>
Operating expenses:
Development costs............... $21,803 $18,285 $ 78,856 $ 51,943 $353,872
Marketing, general and
administrative............. 20,067 10,817 42,860 30,199 154,562
Loss from launch failure...... -- 17,315 -- 17,315 17,315
------- ------- -------- -------- --------
Total operating expenses... 41,870 46,417 121,716 99,457 525,749
Interest income................. 833 4,462 4,908 14,282 62,685
------- ------- -------- -------- --------
Net loss........................ 41,037 41,955 116,808 85,175 463,064
Preferred distributions on
redeemable preferred
partnership interests and
accretion to redemption
value......................... 7,129 -- 21,819 22,197 82,541
------- ------- -------- -------- --------
Net loss applicable to ordinary
partnership interests......... $48,166 $41,955 $138,627 $107,372 $545,605
======= ======= ======== ======== ========
Net loss per ordinary
partnership interest -- basic
and diluted................... $ 0.83 $ 0.72 $ 2.38 $ 1.93
======= ======= ======== ========
Weighted average ordinary
partnership interests
outstanding -- basic and
diluted....................... 58,191 58,178 58,185 55,697
======= ======= ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
8
<PAGE> 83
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
NINE MONTHS ENDED MARCH 23, 1994
SEPTEMBER 30, (COMMENCEMENT OF
---------------------- OPERATIONS) TO
1999 1998 SEPTEMBER 30, 1999
--------- --------- ------------------
<S> <C> <C> <C>
Operating activities:
Net loss................................................... $(116,808) $ (85,175) $ (463,064)
Loss from launch failure................................... -- 17,315 17,315
Deferred revenues.......................................... -- (2,941) 25,811
Stock compensation transactions............................ 1,280 964 4,171
Depreciation and amortization.............................. 1,704 1,243 5,672
Changes in operating assets and liabilities
Other current assets..................................... 1,217 (1,199) (4,323)
Other assets............................................. (35) (2,205) (10,616)
Accounts payable......................................... (6,753) 9,840 5,168
Payable to affiliates.................................... 51,366 31,733 131,077
Accrued expenses......................................... 2,574 315 14,253
--------- --------- -----------
Net cash used in operating activities.................. (65,455) (30,110) (274,536)
--------- --------- -----------
Investing activities:
Globalstar System under construction....................... (662,112) (528,030) (3,235,289)
Insurance proceeds from launch failure..................... 28,500 -- 190,500
Payable to affiliates for Globalstar System under
construction............................................. 115,115 (58,576) 242,638
Capitalized interest accrued............................... 21,557 26,767 83,092
Accounts payable and other transactions.................... 897 (516) 3,216
Vendor financing liability................................. 49,207 137,601 420,377
--------- --------- -----------
Cash used for Globalstar System............................ (446,836) (422,754) (2,295,466)
Production gateways and user terminals..................... 18,776 (73,731) (126,733)
Additional spare satellites................................ (22,488) -- (22,488)
Payables to affiliates for additional spare satellites..... 22,488 -- 22,488
Purchases of property and equipment........................ (2,157) (2,994) (11,083)
Deferred FCC license costs................................. (797) (627) (9,796)
Purchases of investments................................... -- -- (126,923)
Maturity of investments.................................... -- -- 126,923
--------- --------- -----------
Net cash used in investing activities.................. (431,014) (500,106) (2,443,078)
--------- --------- -----------
Financing activities:
Net proceeds from issuance of $500,000 11 3/8% Senior
Notes.................................................... -- -- 472,090
Proceeds from warrants issued in connection with $500,000
11 3/8% Senior Notes..................................... -- -- 12,210
Net proceeds from issuance of $325,000 11 1/4% Senior
Notes.................................................... -- -- 301,850
Net proceeds from issuance of $325,000 10 3/4% Senior
Notes.................................................... -- -- 320,197
Net proceeds from issuance of $300,000 11 1/2% Senior
Notes.................................................... -- 287,552 287,552
Proceeds from issuance of $300,000 Term Loan B............. 300,000 -- 291,298
Deferred financing costs................................... (13,568) -- (6,991)
Proceeds from capital subscriptions receivable............. -- -- 282,441
Payment of accrued capital raising costs................... -- -- (2,400)
Sale of ordinary partnership interests..................... 2,846 19,843 349,388
Sale of redeemable preferred partnership interests to
GTL...................................................... 339,775 -- 639,275
Distributions on redeemable preferred partnership
interests................................................ (17,980) (5,037) (58,000)
Prepaid interest on redeemable preferred partnership
interests................................................ -- -- 47
Borrowings under long-term revolving credit facility....... 75,000 -- 246,000
Repayment of borrowings under long-term revolving credit
facility................................................. (75,000) -- (246,000)
--------- --------- -----------
Net cash provided by financing activities.............. 611,073 302,358 2,888,957
--------- --------- -----------
Net increase (decrease) in cash and cash equivalents........ 114,604 (227,858) 171,343
Cash and cash equivalents, beginning of period.............. 56,739 464,154 --
--------- --------- -----------
Cash and cash equivalents, end of period.................... $ 171,343 $ 236,296 $ 171,343
========= ========= ===========
Noncash transactions:
Payable to affiliates...................................... $ 9,308
===========
Accrual of capital raising costs........................... $ 2,400
===========
Deferred FCC license costs................................. $ 2,235
===========
Warrants issued in exchange for debt guarantee............. $ 141,000 $ 163,601
========= ===========
Accretion to redemption value of preferred partnership
interests................................................ $ 339 $ 351 $ 4,279
========= ========= ===========
Ordinary partnership interests distributed upon conversion
of redeemable preferred partnership interests and related
dividend make-whole payment.............................. $ 5 $ 320,250 $ 320,255
========= ========= ===========
Warrants issued to China Telecom to acquire ordinary
partnership interests.................................... $ 31,917 $ 31,917
========= ===========
Dividends accrued.......................................... $ 3,500 $ 3,500
========= ===========
Supplemental Information:
Interest paid.............................................. $ 113,502 $ 93,348 $ 310,422
========= ========= ===========
</TABLE>
See notes to condensed consolidated financial statements.
9
<PAGE> 84
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared by Globalstar, L.P. ("Globalstar") pursuant to the rules of the
Securities and Exchange Commission ("SEC") and, in the opinion of Globalstar,
include all adjustments (consisting of normal recurring accruals) necessary for
a fair presentation of financial position, results of operations and cash flows.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to SEC rules. Globalstar believes that
the disclosures made are adequate to keep the information presented from being
misleading. The results of operations for the three and nine months ended
September 30, 1999 are not necessarily indicative of the results to be expected
for the full year. These condensed consolidated financial statements should be
read in conjunction with Globalstar's audited consolidated financial statements
and notes thereto included in the latest Annual Report on Form 10-K for
Globalstar Telecommunications Limited ("GTL") and Globalstar.
2. ORGANIZATION AND BUSINESS
Globalstar, founded by Loral Space & Communications Ltd. ("Loral") and
QUALCOMM Incorporated ("Qualcomm"), is building and will operate a worldwide,
low-earth orbit satellite-based wireless digital telecommunications system (the
"Globalstar(TM) System").
Globalstar, a Delaware limited partnership with a December 31 fiscal year
end, was formed in November 1993. It had no activities until March 23, 1994,
when it received capital subscriptions for $275 million and commenced
operations. The accompanying condensed consolidated financial statements reflect
the operations of Globalstar from that date.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development Stage Company
Globalstar is devoting substantially all of its efforts to the launch,
licensing, construction and testing of the Globalstar System, and establishing
its business. Globalstar's planned principal operations have not commenced and,
accordingly, Globalstar is a development stage company as defined in Statement
of Financial Accounting Standards No. 7 "Accounting and Reporting by Development
Stage Enterprises."
On October 11, 1999, the Company announced a phased roll-out of service in
regions of the world covered by its first nine gateways. By the end of 1999,
Globalstar expects to have a total of nine gateways in operation. All of the 38
gateways on order have been manufactured and are ready for installation.
Globalstar may encounter problems, delays and expenses, many of which may
be beyond Globalstar's control. These may include, but are not limited to,
launch delays and launch failures, in-orbit failures, problems related to
technical development of the system, testing, regulatory compliance,
manufacturing and assembly, having user terminals available in sufficient
quantities, the competitive and regulatory environment in which Globalstar will
operate, marketing problems and costs and expenses that may exceed current
estimates. There can be no assurance that substantial delays in any of the
foregoing matters would not delay Globalstar's achievement of profitable
operations.
Earnings Per Ordinary Partnership Interest
Globalstar follows Statement of Financial Accounting Standards No. 128,
Earnings per Share ("SFAS 128") in presenting basic and diluted earnings per
partnership interest. Due to Globalstar's net losses for the three and nine
months ended September 30, 1999 and 1998, diluted weighted average ordinary
partnership interests outstanding excludes the weighted average effect of the
assumed conversion of the 8%
10
<PAGE> 85
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Redeemable Preferred Partnership Interests ("RPPI's") into 3.8 million and 3.5
million ordinary partnership interests for the three and nine months ended
September 30, 1999, and the assumed issuance of ordinary partnership interests
upon exercise of GTL's outstanding options and warrants into 5.2 million and 2.4
million ordinary partnership interests for the three months ended September 30,
1999 and 1998, respectively, and into 3.4 million and 2.8 million ordinary
partnership interests for the nine months ended September 30, 1999 and 1998,
respectively, and the assumed conversion, prior to the actual conversion in
April 1998, of the 6 1/2% redeemable preferred partnership interests into 2.1
million ordinary partnership interests for the nine months ended September 30,
1998, respectively, as their effect would have been anti-dilutive. Accordingly,
basic and diluted net loss per ordinary partnership interest are based on the
net loss applicable to ordinary partnership interests and the weighted average
ordinary partnership interests outstanding for the three and nine months ended
September 30, 1999 and 1998.
Reclassifications
Certain reclassifications have been made to conform prior period amounts to
the current period presentation.
4. GLOBALSTAR SYSTEM UNDER CONSTRUCTION
During 1999, Globalstar incurred $509 million for the design, construction
and deployment of the space and ground segments ("System Cost"), $153 million
for capitalized interest (including $26 million of non-cash interest), and $139
million of pre-operating losses. Through September 30, 1999, Globalstar incurred
costs of $2.59 billion for the System Cost, $438 million for capitalized
interest (including $82 million of non-cash interest) and $546 million of
pre-operating losses. Globalstar's estimated costs through December 31, 1999,
are $2.66 billion for the System Cost, $490 million for capitalized interest
(including $100 million of non-cash interest) and $677 million of pre-operating
losses. In addition, further expenditures on system software for the improvement
of system functionality beyond those planned for the start of service, for an
additional eight spare satellites (for which the cost and payment terms have not
been finalized with Space Systems/Loral, Inc., a subsidiary of Loral) and
financing that Globalstar is providing to the service providers for the purchase
of gateways, fixed access terminals and handsets, are estimated to be $493
million, of which $149 million has been incurred as of September 30, 1999 and
$220 million is expected to be incurred as of December 31, 1999. However,
Globalstar expects to receive $231 million from the service providers, as
repayment of financing provided to them for the purchase of gateways, fixed
access terminals and handsets. Net funds raised or committed through September
30, 1999 total $4.2 billion, including $500 million of vendor financing from
Qualcomm (of which the last $100 million will be drawn during 2000), for which
the terms of $400 million are still being finalized. In consideration for the
additional vendor financing, Qualcomm is expected to receive warrants to
purchase Globalstar partnership interests similar to that received by Loral (see
Note 8). Of the total net funds raised or committed through September 30, 1999,
$250 million must be repaid as early as June 30, 2000, unless it is extended or
refinanced. Additional financing will be required if service revenues are
insufficient to cover cash interest and operating costs estimated to be
approximately $125 million per quarter. Although Globalstar believes it will be
able to obtain these additional funds, there can be no assurance that such funds
will be available on favorable terms or on a timely basis, if at all.
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<PAGE> 86
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. PAYABLES TO AFFILIATES
Payables to affiliates is comprised of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
Qualcomm................................... $301,275 $120,606
SS/L....................................... 96,292 92,242
Other affiliates........................... 7,944 3,694
-------- --------
$405,511 $216,542
======== ========
</TABLE>
6. VENDOR FINANCING LIABILITY
At September 30, 1999, the long term portion of vendor financing liability
includes $90 million of interest bearing deferred billings due to SS/L which
were scheduled for repayment in 20 quarterly installments beginning on March 31,
1999. Globalstar is in negotiations with SS/L to continue to defer commencement
of repayment of the $90 million (see Note 4).
7. ORDINARY PARTNERS' CAPITAL
8% Redeemable Preferred Partnership Interests
On January 21, 1999, Globalstar sold to GTL seven million units (face
amount of $50 per unit) of 8% RPPIs in Globalstar, in connection with GTL's
offering of 7 million shares (face amount of $50 per share) of 8% Convertible
Redeemable Preferred Stock due 2011 (the "Preferred Stock"). Dividends on the 8%
RPPIs and the Preferred Stock accrue at 8% per annum and are payable quarterly.
Globalstar is using the funds for the construction and deployment of the
Globalstar System.
The Preferred Stock is convertible into shares of GTL common stock at a
conversion price of $23.2563 per share, subject to adjustment for certain
antidilution events. As of September 30, 1999, the Preferred Stock was
convertible into 15,049,470 shares of GTL common stock. Loral purchased 3
million shares ($150 million face amount) of the Preferred Stock issued, in
order to maintain its prior percentage ownership interest in Globalstar.
The Preferred Stock has limited voting rights. With respect to dividend
rights and rights upon liquidation, winding up and dissolution, the Preferred
Stock ranks senior to common stock and to all other future series of preferred
stock or other class of capital stock of GTL, the terms of which do not
expressly provide that such series or class ranks senior to or on parity with
the Preferred Stock. Prior to its mandatory redemption date, the Preferred Stock
is redeemable (at a premium which declines over time) by GTL beginning in
February 2002 (or beginning in February 2000 if GTL's stock price exceeds
certain defined price ranges). Payments due on the Preferred Stock may be made
in cash, GTL common stock or a combination of both at the option of GTL. In the
event accrued and unpaid dividends accumulate to an amount equal to six
quarterly dividends, holders of the majority of the outstanding shares of
Preferred Stock will be entitled to elect additional members to GTL's Board of
Directors.
The 8% RPPIs rank senior to ordinary partnership interests and have terms
substantially similar to the Preferred Stock. However, they are subordinate to
all existing and future liabilities of Globalstar, and cash distributions
thereon are limited to the amount of the partnership capital accounts that are
maintained for such interests. The 8% RPPIs will convert to ordinary partnership
interests upon any conversion of the Preferred Stock into GTL common stock.
Payments due on the 8% RPPIs may be made in cash, Globalstar ordinary
partnership interests or a combination of both at the option of Globalstar.
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<PAGE> 87
GLOBALSTAR, L.P.
(A DEVELOPMENT STAGE LIMITED PARTNERSHIP)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
GTL's equity securities and convertible securities are represented by
equivalent Globalstar partnership interests on an approximate four-for-one
basis.
8. CREDIT FACILITY
On August 5, 1999, Globalstar entered into a $500 million credit agreement
with a group of banks for the build-out of the Globalstar System. The credit
agreement provides for a $100 million three-year revolving credit facility
("Revolver"), a $100 million three-year term loan ("Term Loan A") and a $300
million four-year term loan ("Term Loan B"). The Term Loan facilities are
subject to an amortization payment schedule as follows: the Term Loan A facility
requires payments of 10% of the principal amount on each of January 15, 2001,
March 31, 2001, June 30, 2001, September 30, 2001 and December 31, 2001, 15% of
the principal amount on each of March 31, 2002 and June 30, 2002 and a final
payment of 20% of the principal amount on August 15, 2002; the Term Loan B
facility requires payments of 1% of the principal amount on each of January 15,
2001 and June 30, 2001, a payment of 15% of the principal amount on June 30,
2002, a payment of 25% of the principal amount on March 31, 2003 and a final
payment of 58% of the principal amount on August 15, 2003. All amounts
outstanding under the Revolver are due and payable on August 15, 2002.
Borrowings under the facilities bear interest, at Globalstar's option, at
various rates based on margins over the lead bank's base rate or the London
Interbank Offer Rate ("LIBOR") for periods of one to six months. Globalstar pays
a commitment fee on the unused portion of the facilities. The credit agreement
contains customary financial covenants that commence March 31, 2001, including,
minimum revenue thresholds, maintenance of consolidated net worth, interest
coverage ratios and maximum leverage ratios. In addition, the credit agreement
contains customary limitations on indebtedness, liens, contingent obligations,
fundamental changes, asset sales, dividends, investments, optional payments and
modification of subordinated and other debt instruments and transactions with
affiliates. As of September 30, 1999, Globalstar had drawn down the $300 million
Term Loan B. On November 12, 1999, Globalstar drew down the $100 million Term
Loan A.
The credit facility is guaranteed by Loral SatCom Ltd. and Loral Satellite,
Inc., wholly owned subsidiaries of Loral. The guarantee is secured by the pledge
of certain assets of Loral and its subsidiaries, including the stock of the
guarantors and the Telstar 6 and Telstar 7 satellites. In consideration for the
guarantee, Loral and certain Loral subsidiaries received warrants to purchase an
aggregate of 3,450,000 Globalstar partnership interests (equivalent to
approximately 13.8 million shares of common stock of GTL) at an exercise price
of $91.00 per partnership interest (equivalent to $22.75 per share of GTL common
stock, the average of the high and low trading prices of GTL common stock on
August 5, 1999, the closing date of the credit facility). The warrants vest in
stages (provided that the guarantee is then in effect): 50% on February 5, 2000,
25% on August 5, 2000 and the remaining 25% on August 5, 2001. The warrants are
immediately exercisable after vesting and have a seven-year term. Globalstar may
call the warrants after August 5, 2001 if the market price of GTL common stock
exceeds $45.50 for a certain period. After giving effect to the issuance of the
warrants, Loral's interest in Globalstar on a fully-diluted basis increased from
42% to 45%.
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<PAGE> 88
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the matters
discussed in the following Management's Discussion and Analysis of Results of
Operations and Financial Condition of the Company are not historical facts, but
are "forward-looking statements," as that term is defined in the Private
Securities Litigation Reform Act of 1995. In addition, the Company or its
representatives have made and may continue to make forward-looking statements,
orally or in writing, in other contexts, such as in reports filed with the SEC,
press releases or statements made with the approval of an authorized executive
officer of the Company. These forward-looking statements can be identified by
the use of forward-looking terminology such as "believes," "expects," "plans,"
"may," "will," "would," "could," "should," "anticipates," "estimates,"
"project," "intend," or "outlook" or the negative of these words or other
variations of these words or other comparable words, or by discussion of
strategy that involve risks and uncertainties. These forward-looking statements
are only predictions, and actual events or results may differ materially as a
result of a wide variety of factors and conditions, many of which are beyond
Globalstar's and/or GTL's control. Some of these factors and conditions include:
(i) the harshness of the space environment in which Globalstar's satellites
operate; (ii) governmental or regulatory changes; (iii) access to scarce launch
vehicle resources and risk of launch failures; (iv) as a development-stage
company Globalstar may continue to lose money, have negative cash flow, require
additional money and suffer delays in meeting its targets; (v) severe
competition in our industry; and (vi) Globalstar owes significant amounts of
money. For a detailed discussion of these factors and conditions, please refer
to the periodic reports that Globalstar and GTL file with the SEC. In addition,
Globalstar and GTL operate in an industry sector where securities values may be
volatile and may be influenced by economic and other factors beyond Globalstar's
and/or GTL's control.
GTL is a general partner of Globalstar and has no other business. GTL's
sole asset is its investment in Globalstar and GTL's results of operations
reflect its share of the results of operations of Globalstar on an equity
accounting basis. Therefore, matters discussed in this section address the
financial condition and results of operations of Globalstar.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased from $56.7 million at December 31, 1998
to $171.3 million at September 30, 1999. The net increase is primarily the
result of the net proceeds from the sale of Globalstar's 8% redeemable preferred
partnership interests ("8% RPPIs") totaling $339.8 million, the proceeds from
the August 5, 1999 credit agreement in the amount of $300.0 million, and
proceeds from the sale of production gateways and user terminals of $18.8
million mostly offset by the net expenditures for the Globalstar System of
$446.8 million, net cash used in operating activities of $65.5 million,
distributions on redeemable preferred partnership interests of $18.0 million and
payment of debt offering costs of $13.6 million.
Current liabilities increased from $401.2 million at December 31, 1998 to
$647.4 million at September 30, 1999, primarily as a result of the
reclassification of a portion of vendor financing due within one year and the
timing of payments to Globalstar affiliates.
On October 11, 1999, the Company announced a phased roll-out of service in
regions of the world covered by its first nine gateways. By the end of 1999,
Globalstar expects to have a total of nine gateways in operation. All of the 38
gateways on order have been manufactured and are ready for installation.
From January 1, to October 31, 1999, Globalstar had nine successful
launches, of four satellites each, aboard a combination of Soyuz and Delta
launch vehicles, bringing the total number of satellites in orbit to 44.
Globalstar had previously launched its first two groups of four satellites each
in 1998. The first 40 Globalstar satellites have reached their final orbital
positions and are currently being used to test system functionality and to
support Service Provider friendly user trials in preparation for the start of
service. Four of the launched satellites are expected to reach their final
orbital positions in December of 1999. As of October 31, 1999, in addition to
the 44 satellites already in orbit, Globalstar had four completed satellites on
hand and four more in final integration and test. Globalstar's current launch
plan includes two launches of four satellites each, using a
14
<PAGE> 89
Soyuz and a Delta rocket. According to the plan, Globalstar will launch a total
of 52 satellites (including four in-orbit spares) by January 2000.
During 1999, Globalstar incurred $509 million for the design, construction
and deployment of the space and ground segments ("System Cost"), $153 million
for capitalized interest (including $26 million of non-cash interest), and $139
million of pre-operating losses. Through September 30, 1999, Globalstar incurred
costs of $2.59 billion for the System Cost, $438 million for capitalized
interest (including $82 million of non-cash interest) and $546 million of
pre-operating losses. Globalstar's estimated costs through December 31, 1999,
are $2.66 billion for the System Cost, $490 million for capitalized interest
(including $100 million of non-cash interest) and $677 million of pre-operating
losses. In addition, further expenditures on system software for the improvement
of system functionality beyond those planned for the start of service, for an
additional eight spare satellites (for which the cost and payment terms have not
been finalized with Space Systems/Loral, Inc., a subsidiary of Loral) and
financing that Globalstar is providing to the service providers for the purchase
of gateways, fixed access terminals and handsets, are estimated to be $493
million, of which $149 million has been incurred as of September 30, 1999 and
$220 million is expected to be incurred as of December 31, 1999. However,
Globalstar expects to receive $231 million from the service providers, as
repayment of financing provided to them for the purchase of gateways, fixed
access terminals and handsets. Net funds raised or committed through September
30, 1999 total $4.2 billion, including $500 million of vendor financing from
Qualcomm (of which the last $100 million will be drawn during 2000), for which
the terms of $400 million are still being finalized. In consideration for the
additional vendor financing, Qualcomm is expected to receive warrants to
purchase Globalstar partnership interests similar to that received by Loral (see
below). Of the total net funds raised or committed through September 30, 1999,
$250 million must be repaid as early as June 30, 2000, unless it is extended or
refinanced. Additional financing will be required if service revenues are
insufficient to cover cash interest and operating costs estimated to be
approximately $125 million per quarter. Although Globalstar believes it will be
able to obtain these additional funds, there can be no assurance that such funds
will be available on favorable terms or on a timely basis, if at all.
On January 21, 1999, Globalstar sold to GTL seven million units (face
amount of $50 per unit) of 8% RPPIs, in connection with GTL's offering of 7
million shares (face amount of $50 per share) of 8% Convertible Redeemable
Preferred Stock due 2011 (the "Preferred Stock"). The Preferred Stock is
convertible into shares of GTL common stock at a conversion price of $23.2563
per share. Loral Space & Communication Ltd. ("Loral") purchased 3 million shares
or $150 million face amount of the $350 million of the Preferred Stock offered,
to maintain its ownership percentage. Dividends on the 8% RPPIs and the
Preferred Stock accrue at 8% per annum and are payable quarterly. Globalstar is
using the funds for the development, construction and deployment of the
Globalstar System.
In July 1999, Globalstar and GTL filed a shelf registration statement with
the SEC covering up to $500 million of securities. Under the registration
statement, Globalstar may, from time to time, offer debt securities, which may
be either senior or subordinated or secured or unsecured and GTL may, from time
to time, offer shares of common stock, preferred stock or warrants, all at
prices and on terms to be determined at the time of the offering. Proceeds from
any offering would be used for general corporate purposes, which may include
refinancing of outstanding indebtedness.
On August 5, 1999, Globalstar entered into a $500 million credit agreement
with a group of banks for the build-out of the Globalstar System. The credit
agreement provides for a $100 million three-year revolving credit facility
("Revolver"), a $100 million three-year term loan ("Term Loan A") and a $300
million four-year term loan ("Term Loan B"). The Term Loan facilities are
subject to an amortization payment schedule as follows: the Term Loan A facility
requires payments of 10% of the principal amount on each of January 15, 2001,
March 31, 2001, June 30, 2001, September 30, 2001 and December 31, 2001, 15% of
the principal amount on each of March 31, 2002 and June 30, 2002 and a final
payment of 20% of the principal amount on August 15, 2002; the Term Loan B
facility requires payments of 1% of the principal amount on each of January 15,
2001 and June 30, 2001, a payment of 15% of the principal amount on June 30,
2002, a payment of 25% of the principal amount on March 31, 2003 and a final
payment of 58% of the principal amount on August 15, 2003. All amounts
outstanding under the Revolver are due and payable on August 15, 2002.
15
<PAGE> 90
Borrowings under the facilities bear interest, at Globalstar's option, at
various rates based on margins over the lead bank's base rate or the London
Interbank Offer Rate ("LIBOR") for periods of one to six months. Globalstar pays
a commitment fee on the unused portion of the facilities. The credit agreement
contains customary financial covenants that commence March 31, 2001, including,
minimum revenue thresholds, maintenance of consolidated net worth, interest
coverage ratios and maximum leverage ratios. In addition, the credit agreement
contains customary limitations on indebtedness, liens, contingent obligations,
fundamental changes, asset sales, dividends, investments, optional payments and
modification of subordinated and other debt instruments and transactions with
affiliates. As of September 30, 1999, Globalstar had drawn down the $300 million
Term Loan B. On November 12, 1999, Globalstar drew down the $100 million Term
Loan A.
The credit facility is guaranteed by Loral SatCom Ltd. and Loral Satellite,
Inc., wholly owned subsidiaries of Loral. The guarantee is secured by the pledge
of certain assets of Loral and its subsidiaries, including the stock of the
guarantors and the Telstar 6 and Telstar 7 satellites. In consideration for the
guarantee, Loral and certain Loral subsidiaries received warrants to purchase an
aggregate of 3,450,000 Globalstar partnership interests (equivalent to
approximately 13,800,000 shares of common stock of GTL) at an exercise price of
$91.00 per partnership interest (equivalent to $22.75 per share of GTL common
stock, the average of the high and low trading prices of GTL common stock on
August 5, 1999, the closing date of the credit facility). The warrants vest in
stages (provided that the guarantee is then in effect): 50% on February 5, 2000,
25% on August 5, 2000 and the remaining 25% on August 5, 2001. The warrants are
immediately exercisable after vesting and have a seven-year term. Globalstar may
call the warrants after August 5, 2001 if the market price of GTL common stock
exceeds $45.50 for a certain period. After giving effect to the issuance of the
warrants, Loral's interest in Globalstar on a fully-diluted basis increased from
42% to 45%.
RESULTS OF OPERATIONS
Globalstar is a development stage partnership and has not commenced
commercial operations. For the period March 23, 1994 (commencement of
operations) to September 30, 1999, Globalstar has recorded cumulative net losses
applicable to ordinary partnership interests of $545.6 million. The net loss
applicable to ordinary partnership interests for the nine months ended September
30, 1999 increased to $138.6 million from $107.4 million for the nine months
ended September 30, 1998. The net loss applicable to ordinary partnership
interests for the three months ended September 30, 1999 increased to $48.2
million from $42.0 million for the three months ended September 30, 1998. The
net loss for both periods increased primarily as a result of increased activity
in the development of Globalstar user terminals, increased in-house engineering
and an increase in marketing, general and administrative costs. The increases
for the three and nine months in 1999 would have been higher, if not for the
loss on launch failure of $17.3 million in 1998. Globalstar is expending
significant funds for the development, construction, launch, testing and
deployment of the Globalstar System and expects such losses to continue through
the start of service.
Globalstar has earned interest income of $62.7 million on cash balances and
short-term investments since commencement of operations. Interest income was
$4.9 million and $14.3 million for the nine months ended September 30, 1999 and
1998, respectively and $0.8 million and $4.5 million for the three months ended
September 30, 1999 and 1998, respectively. The decrease in interest income
during both periods was a result of lower average cash balances available for
investment during 1999.
Operating Expenses. Development costs for the nine months ended September
30, 1999 were $78.9 million as compared to $51.9 million for the nine months
ended September 30, 1998. Development costs for the three months ended September
30, 1999 were $21.8 million as compared to $18.3 million for the three months
ended September 30, 1998. Development costs increased as a result of increased
activity in the development of Globalstar user terminals and in-house
engineering.
Marketing, general and administrative expenses increased to $42.9 million
from $30.2 million for the nine months ended September 30, 1999 and 1998,
respectively and to $20.1 from $10.8 million for the three months ended
September 30, 1999 and 1998, respectively. Marketing, general and administrative
expenses increased primarily as a result of increased marketing costs in
anticipation of the start of service.
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<PAGE> 91
Depreciation. Globalstar capitalizes all costs, including interest as
applicable, associated with the design, construction and deployment of the
Globalstar System, except costs associated with the development of the
Globalstar user terminals and certain technologies under a cost sharing
arrangement with Qualcomm. Globalstar will not record depreciation expense on
the Globalstar System under construction until the commencement of commercial
operations, as assets are placed into service.
Income Taxes. Globalstar is organized as a limited partnership. As such,
no income tax provision or benefit is included in the accompanying financial
statements since U.S. income taxes are the responsibility of its partners.
Generally, taxable income or loss, deductions and credits of Globalstar will be
passed through to its partners.
TAXATION
GTL will be subject to US federal, state and local corporate income tax on
its share of Globalstar's income that is effectively connected with the conduct
of a trade or business in the United States ("US income") and will be required
to file federal, state and local income tax returns with respect to such US
income. In addition, any portion of GTL's income from sources outside the US,
realized through Globalstar or otherwise, may be subject to taxation by certain
foreign countries. However, the extent to which these countries may require GTL
or Globalstar to pay tax or to make payments in lieu of tax cannot be determined
in advance.
YEAR 2000
The Year 2000 Issue is the result of computer programs which were written
using two digits rather than four to signify a year (i.e., the year 1999 is
denoted as "99" and not "1999"). Computer programs written using only two digits
may recognize the year 2000 as the year 1900. This could result in a system
failure or miscalculations causing disruption of operations.
Globalstar has implemented a Year 2000 program (the "Year 2000 Program")
for its internal products, system and equipment, as well as for key vendor
supplied products, systems and equipment. As part of the Year 2000 Program,
Globalstar is assessing the Year 2000 capabilities of, among other things, its
satellites, ground equipment, research and development activities, and facility
management systems. The Year 2000 Program consists of the following phases:
Inventory of Year 2000 items, Assessment (including prioritization), Remediation
(including modification, upgrading and replacement), Testing and Auditing. This
five-step program is divided into five major sections covering both information
and non-information technology systems: 1) business systems, 2) technical
systems, 3) imbedded hardware/firmware, 4) products and services, and 5)
vendor-supplied services. As of September 30, 1999, Globalstar has completed 99%
of the Inventory Phase and 96% of the Assessment Phase. Globalstar expects to
complete all phases of its Year 2000 Program during the fourth quarter of 1999,
prior to the anticipated in-service date of Globalstar.
Both internal and external resources are being utilized to execute
Globalstar's plan. The program to address Year 2000 has been underway since July
1997. The incremental costs incurred by Globalstar through September 30, 1999
for this effort were approximately $1.2 million. Based on its efforts to date,
Globalstar anticipates additional incremental expenses of approximately $140,000
will be incurred to substantially complete the effort.
As an added safeguard against the possibility that a Year 2000 related
issue will adversely affect the Company's ability to continue operations,
contingency plans are being developed under the assumption that worst case
scenarios are encountered in critical areas. Emphasis is being placed upon the
action to be taken if there is discontinuance of services and/or lack of
delivery of compliant products from third party suppliers, including utilities
which provide power, water, fuel and telecommunications. Baseline contingency
plans are expected to be completed during the fourth quarter of 1999. The
Company believes that adequate time will be available to ensure that its
contingency plans are developed, assessed and implemented prior to a Year 2000
issue having a material negative impact on the operations of the Company.
However, there can be no assurances that such plans will be completed on a
timely basis.
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The cost of the program and the dates on which Globalstar believes it will
substantially complete Year 2000 modifications are based on management's best
estimates. Such estimates were derived using software surveys and programs to
evaluate calendar date exposures and numerous assumptions of future events,
including the continued availability of certain resources, third-party Year 2000
readiness and other factors. Because none of these estimates can be guaranteed,
actual results could differ materially and adversely from those anticipated.
Specific factors that might cause an adjustment of costs are: number of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, the ability to validate supplier certification, the ability of
vendors to meet specific commitments and similar uncertainties.
Globalstar's failure to remediate a material Year 2000 problem could result
in an interruption or failure of certain basic business operations. These
failures could materially and adversely effect Globalstar's results of
operations, liquidity and financial condition. Ongoing assessments are made by
Globalstar regarding the Year 2000 readiness of its key third-party suppliers.
Information requests are distributed to such suppliers and replies are
evaluated. When the risk is deemed material, on-site visits to suppliers are
conducted to verify the adequacy of the information received. In addition,
Globalstar has commenced discussions with its service providers to determine the
status of their Year 2000 capabilities. However, due to the general uncertainty
of the Year 2000 problem, including uncertainty with regard to third-party
suppliers and service providers, especially those in developing countries,
Globalstar is unable to determine at this time whether the consequences of Year
2000 failures will have an adverse material impact on Globalstar's results of
operations, liquidity or financial condition. There can be no assurance that the
Company's Year 2000 Program will be successful in avoiding any interruption or
failure of certain basic business operations, which may have a material adverse
effect on the Company's results of operations or financial position.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133 Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"),
which requires that all derivative instruments be recorded on the balance sheet
at their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. Globalstar has not yet determined the impact that the
adoption of SFAS 133 will have on its earnings or financial position. Globalstar
is required to adopt SFAS 133 on January 1, 2001.
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ITEM 5. OTHER EVENTS
On October 28, 1999, the Company announced that Dr. Gregory J. Clark would
leave his position as Vice Chairman effective December 1, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following exhibits are filed as part of this report:
Exhibit 12 -- Statement Regarding Computation of Ratios
Exhibit 27 -- Financial Data Schedules
Exhibit 99.1 -- Financial Statements for Loral Qualcomm Satellite
Services, L.P.
Exhibit 99.2 -- Financial Statements for Globalstar Capital Corporation
(b) Reports on Form 8-K
<TABLE>
<CAPTION>
DATE OF REPORT DESCRIPTION
-------------- -----------
<S> <C>
August 5, 1999 Item 5 -- Other Events Globalstar Credit Agreement
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
GLOBALSTAR TELECOMMUNICATIONS
LIMITED
Registrant
/s/ RICHARD J. TOWNSEND
--------------------------------------
Richard J. Townsend
Vice President and Chief Financial
Officer
(Principal Financial Officer)
and Registrant's Authorized Officer
GLOBALSTAR, L.P.
/s/ STEPHEN WRIGHT
--------------------------------------
Stephen Wright
Vice President and Chief Financial
Officer
(Principal Financial Officer)
and Registrant's Authorized Officer
Date: November 12, 1999
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- ------------------------------------------------------
- ------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT OR ADDITIONAL INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR
IS IT SEEKING AN OFFER TO BUY SHARES OF OUR COMMON STOCK IN ANY JURISDICTION
WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF
THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR
ANY SALE OF OUR COMMON STOCK.
----------------------------------
TABLE OF CONTENTS
----------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement Summary....... S-1
Risk Factors........................ S-4
Forward-Looking Statements.......... S-11
Use of Proceeds..................... S-12
Price Range of Common Stock......... S-13
Capitalization...................... S-14
Selected Financial Data............. S-16
Business............................ S-18
Taxation............................ S-23
Underwriting........................ S-27
Legal Matters....................... S-29
Incorporation of Certain Documents
by Reference...................... S-29
Where you can find more
information....................... S-30
Base Prospectus
Quarterly Report on Form 10-Q for
the Quarter Ended September 30,
1999
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7,000,000 SHARES
[LOGO]
GLOBALSTAR TELECOMMUNICATIONS
LIMITED
COMMON STOCK
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PROSPECTUS
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BEAR, STEARNS & CO. INC.
BANC OF AMERICA SECURITIES LLC
LEHMAN BROTHERS
C.E. UNTERBERG, TOWBIN
ING BARINGS
CREDIT LYONNAIS SECURITIES
(USA) INC.
JANUARY 26, 2000
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