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Filed pursuant to Rule 424(b)(3)
PROSPECTUS Registration No. 333-96145
GLOBALSTAR TELECOMMUNICATIONS LIMITED
3,000,000 SHARES OF 9% SERIES B CONVERTIBLE REDEEMABLE
PREFERRED STOCK DUE 2011
AND
8,518,693 SHARES OF COMMON STOCK
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The holders of restricted shares of the Series B Preferred Stock named on
pages 47 and 48 should deliver this prospectus when they offer or sell their
shares of the Series B Preferred Stock or shares of our Common Stock that may be
issued to them upon conversion of, or in connection with, dividend, redemption,
or other payments on the Series B Preferred Stock. After that, the shares will
be free of restrictions under the securities laws. We originally issued the
Series B Preferred Stock in a private placement in December 1999. The selling
option holders named on page 48 should also deliver this prospectus to offer or
sell shares issued upon exercise of their options to purchase our stock granted
to them by Loral.
At the time of the private placement, we agreed with the initial purchasers
that we would use our reasonable efforts to effect this registration after the
closing and to keep it in effect as long as necessary. The named selling
stockholders may resell their shares despite any restrictive legends on the face
of their securities if they deliver this prospectus, unless we instruct them
that they may not. Buyers who purchase from them will receive unlegended, freely
tradeable stock.
Our common stock is listed on the Nasdaq National Market under the symbol
"GSTRF." On February 14, 2000 the last reported sale price of our common stock
was $31.0625 per share. We do not intend to list our Series B preferred stock on
any exchange or on Nasdaq.
OWNERS OF THE SERIES B PREFERRED STOCK AND COMMON STOCK FACE BUSINESS AND
FINANCIAL RISKS. A DESCRIPTION OF THOSE RISKS BEGINS ON PAGE 7.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE SECURITIES OR DETERMINED THAT THIS PROSPECTUS IS
ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
February 14, 2000
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PROSPECTUS SUMMARY
The following is only a summary of some of the important terms of the
offering described in this prospectus. The main body of this prospectus, as well
as documents and financial statements that are incorporated by reference,
contain more detailed information regarding us and Globalstar. GTL is referred
to in this prospectus 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."
GTL and Globalstar............ We are a general partner, owning, as of
February 1, 2000, approximately 39% of
Globalstar, which is now commencing operations
of its global telecommunications network. We
operate as a holding company to permit public
equity ownership of Globalstar. Our sole asset
consists of our partnership interests in
Globalstar. On February 1, 2000, we issued
8,050,000 shares of our common stock. We used
the net proceeds from that offering of
approximately $268.5 million to purchase
1,987,654 ordinary partnership interests in
Globalstar.
Globalstar owns and operates a 48-satellite
constellation, plus four in-orbit spares, that
forms the backbone of its 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.
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.
Loral Space & Communications Ltd., one of the
world's leading satellite companies, is one of
the founders of Globalstar. As of February 1,
2000, Loral owned, directly and indirectly,
including through us, approximately 40% of
Globalstar's equity.
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Our address is: Cedar House, 41 Cedar Avenue,
Hamilton HM12, Bermuda. Our telephone number
is: (441) 295-2244.
Securities Being Offered...... This prospectus covers the offer and sale of
the following:
- 3,000,000 shares of Series B Preferred
Stock owned by selling stockholders
named on pages 47 and 48;
- up to 6,890,693 shares of common stock
which are issuable upon conversion or
in connection with dividend,
redemption, or other payments thereon;
and
- 1,628,000 shares of common stock
issuable upon exercise of options Loral
has granted to the selling stockholders
named on page 48 against shares of our
stock that Loral currently owns.
TERMS OF THE SERIES B PREFERRED STOCK
Liquidation Preference........ Each share of Series B Preferred Stock has a
"liquidation preference" of $50, which is the amount a holder of one share of
Series B Preferred Stock would be entitled to
receive if our company were to be liquidated.
Total Liquidation
Preference.................... $150 million, that is, $50 per share times
3,000,000 shares of the Series B Preferred
Stock.
Ranking....................... The Series B Preferred Stock ranks:
- senior to all shares of our other
capital stock, unless the other stock
expressly provides otherwise,
- equal with our 8% Series A Convertible
Redeemable Preferred Stock due 2011 and
any of our preferred stock issued in
the future and any of our capital stock
which provides that it be ranked equal
with the Series B Preferred Stock,
- junior to our capital stock which
provides that it be ranked senior to
the preferred stock, and
- junior to all our indebtedness and
other obligations.
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Dividends..................... Dividends accrue at the rate of 9% per year and
are payable quarterly in arrears on March 1,
June 1, September 1 and December 1 of each
year, starting on March 1, 2000.
Redemption of the Series B
Preferred Stock............... Beginning on December 3, 2002, we will have the
right to redeem some or all of the Series B
Preferred Stock at a redemption price equal to
a percentage of the liquidation preference plus
accrued dividends and liquidated damages, if
any, to the date of redemption. From December
3, 2002 until December 1, 2003, the redemption
price for each share will equal (105.1% X $50)
+ accrued dividends + liquidated damages, if
any. The premium percentage will decline each
year on December 1 from December 1, 2003
onwards until it equals 100.0% on December 1,
2006, and will remain at 100.0% until redeemed.
We have the right to redeem some or all of the
Series B Preferred Stock before December 3,
2002 at a redemption price of 105.1% of its
liquidation preference but only if our common
stock at the time of redemption is trading at
specified premiums over the then prevailing
conversion price for at least 20 out of 30
consecutive trading days. If we redeem the
Series B Preferred Stock before December 3,
2002, we will have to make an additional
payment, or make-whole payment, intended to
make the holders of the Series B Preferred
Stock whole for the dividend payments they will
not receive through December 3, 2002. This
make-whole payment will include accrued
dividends and liquidated damages, if any, plus
the present value of the total amount of
dividends that would have been required to be
paid from the redemption date through December
1, 2002 if the Series B Preferred Stock had not
been redeemed.
We will be required to redeem any Series B
Preferred Stock still outstanding on December
1, 2011 at a redemption price equal to 100% of
the total liquidation preference plus accrued
dividends and liquidated damages, if any, to
that date. We may pay this redemption in cash
or shares of our common stock (subject to some
restrictions) or a combination of the two.
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We Used the Proceeds from the
Original Sale of the Series B
Preferred Stock to Buy Series
B Preferred Partnership
Interests of Globalstar....... We used the net proceeds from the original
offering of the Series B Preferred Stock to
purchase Series B Preferred Partnership
Interests of Globalstar (the "Series B
Preferred Partnership Interests"), the terms of
which are generally similar to those of the
Series B Preferred Stock.
Globalstar will use the proceeds from the sale
of the Series B Preferred Partnership Interests
to us for the cost of the continued deployment
of the Globalstar System and for general
corporate purposes. Prior to this use,
Globalstar intends to invest the proceeds in
short-term investment grade debt securities.
Method of Dividend, Redemption
and Other Payments............ Globalstar may generally make any payments due
on its Series B Preferred Partnership
Interests:
- in cash,
- by delivery of its ordinary partnership
interests, or
- through any combination of the two.
Likewise, we may generally make any payments
due on the Series B Preferred Stock, such as
redemption payments and dividend payments:
- in cash,
- by delivery of our common stock, or
- through any combination of the two.
If Globalstar makes a payment on the Series B
Preferred Partnership Interests in ordinary
partnership interests, we may make payments in
our common stock or in cash from the proceeds
of a sale of common stock. However, if
Globalstar makes a scheduled distribution in
cash, we must make the corresponding payment in
cash. We also have the right to pay dividends
even though we may not have received a
distribution on the Series B Preferred
Partnership Interests for the corresponding
dividend payment date.
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Optional Conversion........... At any time after January 31, 2000, holders of
Series B Preferred Stock will have the right to
convert some or all of their shares of Series B
Preferred Stock, unless we have already
redeemed them. The initial conversion price is
$25.9569 per share. At that price, holders of
the Series B Preferred Stock would receive
1.9263 shares of our common stock for each $50
liquidation preference of Series B Preferred
Stock (that is, 50/25.9569). Holders of Series
B Preferred Stock will not be entitled to any
accrued dividends upon conversion. The
conversion price will be adjusted if specified
dilutive events occur.
If holders of the Series B Preferred Stock
convert the Series B Preferred Stock into our
common stock, we will convert a proportionate
amount of our holdings of the Series B
Preferred Partnership Interests into
Globalstar's ordinary partnership interests.
Limited Voting Rights......... Holders of the Series B Preferred Stock are
generally not entitled to any voting rights,
unless we have not declared or paid dividends
for a total of six quarterly periods.
Registration Rights For
Holders of the Series B
Preferred Stock............... We have agreed for the benefit of the holders
of the Series B Preferred Stock that we will
maintain the effectiveness, under the
Securities Act, of the shelf registration
statement that includes this prospectus for a
period of up to two years after the Series B
Preferred Stock was originally issued (or less,
if all restricted securities traded under the
shelf registration statement have been sold),
or that we will file a supplement to an
existing shelf registration statement to
include the Series B Preferred Stock.
If we do not satisfy these obligations, we will
be required to pay liquidated damages.
Trading....................... Our common stock currently trades on the Nasdaq
National Market under the symbol GSTRF. We have
not applied and do not intend to apply for the
listing of the Series B Preferred Stock on any
securities exchange.
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Series B Preferred Partnership
Interests..................... The Series B Preferred Partnership Interests
have generally the same terms and conditions as
the Series B Preferred Stock, except that the
Globalstar Series B preferred partnership
interests are not subject to any registration
rights and rank junior not just to the debt
obligations of Globalstar, but to all existing
and future liabilities of Globalstar. Cash
distributions on Globalstar's Series B
Preferred Partnership Interests will be limited
to the amount of the partnership capital
accounts that are maintained for those
interests and that reflect a preferred
allocation of Globalstar profits. The Series B
Preferred Partnership Interests have limited
voting rights similar to those of the Series B
Preferred Stock.
Ranking of Preferred
Partnership Interests......... The Series B Preferred Partnership Interests
rank junior to all existing and future
liabilities of Globalstar, including but not
limited to (1) distributions made to Globalstar
partners to pay taxes, (2) Globalstar's
managing general partner's allocation and (3) a
fee equal to 1.5% per year of the average
quarterly amount borrowed under Globalstar's
$250 million credit facility payable to certain
of Globalstar's partners for their guarantees
under that facility. The Series B Preferred
Partnership Interests rank equal with
Globalstar's preferred partnership interests
issued in connection with the offering of the
Series A Preferred Stock (the "Series A
Preferred Partnership Interests"). They,
however, rank senior to Globalstar's ordinary
partnership interests with respect to the
payment of distributions and otherwise receive
certain preferred allocation of profits and
losses.
For detailed information regarding the Series B Preferred Stock, you should
refer to the section of this prospectus called "Description of Preferred Stock"
and "Description of Common Stock."
RISK FACTORS
An investment in our common stock and preferred stock involves risks that
should be considered by prospective investors. These risks are discussed in the
section of this prospectus called "Risk Factors."
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RISK FACTORS
This prospectus and the documents incorporated by reference in this
prospectus contain forward-looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Actual results could differ materially from those
projected or suggested in any forward-looking statements as a result of a wide
variety of factors and conditions, including, but not limited to, the factors
summarized below.
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
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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 $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 its 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.
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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 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 efforts by service providers; and
- slower-than-anticipated consumer acceptance.
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 FACES SPECIAL RISKS BY DOING BUSINESS IN DEVELOPING MARKETS AND FACES
CURRENCY RISKS.
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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.
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,
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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.
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
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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, 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.
- 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.
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- 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.
THERE IS NO PUBLIC MARKET FOR THE SERIES B PREFERRED STOCK, AND NO SUCH MARKET
MAY DEVELOP.
There is no public market for the Series B Preferred Stock. We do not
intend to list it on any exchange or on Nasdaq. It is possible that an active
trading market will not develop or may be discontinued and the shares of Series
B Preferred Stock may remain relatively illiquid.
PRICES OF OUR COMMON STOCK AND THE SERIES B PREFERRED 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,
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<PAGE> 15
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 our
satellites were destroyed.
Since the value of the Series B Preferred Stock will be partly based on the
value of our common stock, it is also likely to have a volatile price.
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 in China and satisfaction of certain revenue
targets; 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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<PAGE> 16
HOLDERS WILL BE SUBORDINATED TO OTHER OBLIGATIONS OF GTL AND GLOBALSTAR.
The Series B Preferred Stock will be subordinated to all indebtedness with
respect to the payments of dividends and amounts distributable upon dissolution,
liquidation or winding up of our company. The Series B Preferred Partnership
Interests will be similarly subordinated to all existing and future indebtedness
and liabilities of Globalstar.
Because we are a holding company, our sole assets are the ordinary and
preferred partnership interests we hold in Globalstar and our obligations on the
Series B Preferred Stock will be structurally subordinate to all liabilities of
Globalstar, including, without limitation (i) guarantee fee or notes that may be
issued to partners of Globalstar in lieu of the guarantee fee; (ii) the
distribution of Globalstar's managing partner's allocation; and (iii) certain
distributions made to partners in respect of taxes levied upon the operations of
Globalstar. As of December 31, 1999, Globalstar had $1.45 billion principal
amount of senior notes outstanding. Globalstar also has an undrawn $250 million
credit facility, and, in addition, 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. In addition,
Globalstar established a $500 million credit facility on August 5, 1999, of
which $400 million was drawn as of December 31, 1999.
There can be no assurance that, in the event of a dissolution, liquidation,
reorganization or winding up of our company, the purchasers of Series B
Preferred Stock will receive any portion of their initial investment.
WE DEPEND ON GLOBALSTAR CAPITAL ACCOUNTS FOR CASH DISTRIBUTIONS ON THE SERIES B
PREFERRED PARTNERSHIP INTERESTS.
The cash that Globalstar can pay to us in redemption of the Series B
Preferred Partnership Interests will be limited to the balance in the capital
account maintained by Globalstar for the benefit of such interests. This account
balance following the original offering of the Series B Preferred Stock equalled
approximately $145 million. This balance will be increased by the adjusted
income allocated to us with respect to the Series B Preferred Partnership
Interests. The capital account balance will likewise be decreased by any losses
allocated, and cash distributed, to us with respect to the Series B Preferred
Partnership Interests. Losses would be allocated with respect to the Series B
Preferred Partnership Interests only after losses have first been allocated to
reduce the capital accounts for all holders of ordinary partnership interests to
zero.
If losses and distributions by Globalstar exceed the adjusted income
outlined above, the balance in the capital account will be less than the total
redemption price for the Series B Preferred Partnership Interests on December 1,
2011. In that case, Globalstar will pay the excess to us in ordinary partnership
interests. To the extent we receive a payment in ordinary partnership interests
instead of cash, we will make the corresponding payment by issuing our common
stock to holders of the Series B Preferred Stock or by selling our common stock
and using the net proceeds from these sales to make the redemption payment.
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<PAGE> 17
FORWARD-LOOKING STATEMENTS
Some things in this prospectus, or incorporated by reference in this
prospectus, are known as "forward-looking statements," as that term is used in
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements may relate to, among other
things, future performance generally, business development activities, future
capital expenditures, financing sources and availability and the effects of
regulation and competition.
When we or Globalstar use the words "believe," "intend," "expect," "may,"
"will," "should," "anticipate" or their negatives, or other similar expressions,
the statements which include those words are usually forward-looking statements.
When we describe strategy that involves risks or uncertainties, we are making
forward-looking statements.
We warn you that forward-looking statements are only predictions. Actual
events or results may differ as a result of risks that we face, including those
set forth in the section of this prospectus called "Risk Factors." Those are
representative of factors that could affect the outcome of the forward-looking
statements.
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<PAGE> 18
RATIOS
GLOBALSTAR TELECOMMUNICATIONS LIMITED
RATIO OF EARNINGS TO COVER FIXED CHARGES AND PREFERRED STOCK DIVIDENDS(1)
The ratio of earnings to cover fixed charges and preferred stock dividends
presented below should be read together with the financial statements and the
notes accompanying them and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" found in our and Globalstar's Annual Report
on Form 10-K for the year ended December 31, 1998 and Quarterly Report on Form
10-Q for the quarter ended September 30, 1999, incorporated into this prospectus
by reference.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
- ------------------------------ --------------
1995 1996 1997 1998 1999 1998
- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
N.A. 1x 1x 1x 1x 1x
</TABLE>
- ---------------
(1) Our earnings available to cover fixed charges and preferred dividends
consist solely of dividends from Globalstar on the preferred partnership
interests held by us.
GLOBALSTAR, L.P.
DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES
AND DISTRIBUTIONS ON PREFERRED PARTNERSHIP INTERESTS
(In thousands)
The deficiency of earnings to cover fixed charges and distributions on
preferred partnership interests presented below should be read together with the
financial statements and the notes accompanying them and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" found
in our and Globalstar's Annual Report on Form 10-K for the year ended December
31, 1998 and Quarterly Report on Form 10-Q for the quarter ended September 30,
1999, incorporated into this prospectus by reference.
<TABLE>
<CAPTION>
NINE MONTHS
MARCH 23, 1994 ENDED
(COMMENCEMENT OF YEAR ENDED DECEMBER 31, SEPTEMBER 30,
OPERATIONS) TO ---------------------------------- ------------------
DECEMBER 31, 1994 1995 1996 1997 1998 1999 1998
- ----------------- ---- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
N.A. N.A. $81,869 $184,683 $330,475 $291,920 $238,078
</TABLE>
USE OF PROCEEDS
We will receive no proceeds from sales of securities under this prospectus.
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<PAGE> 19
BUSINESS
OVERVIEW
Globalstar owns and operates a satellite constellation that forms the
backbone of its global telecommunications network designed to serve virtually
every populated area of the world. 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'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.
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.
Globalstar's service provider partners, 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.
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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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. 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
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<PAGE> 21
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 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
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<PAGE> 22
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 in-orbit spare satellites 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 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.
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
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<PAGE> 23
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 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
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<PAGE> 24
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.
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DESCRIPTION OF THE SERIES B PREFERRED STOCK
The following summary is not intended to be complete. For a complete
description of the Series B Preferred Stock and the registration rights
agreement, you should read the relevant annex to our Bye-Laws and the
registration rights agreement, which have been filed with the Securities and
Exchange Commission.
Our only assets are our interests in Globalstar. Therefore, we are
dependent upon payments from Globalstar to meet our obligations, including those
under the Series B Preferred Stock. We have invested the net proceeds from the
sale of the Series B Preferred Stock in Series B Preferred Partnership
Interests. These interests have terms generally similar to those of the Series B
Preferred Stock as to dividends, redemptions and conversion. However, instead of
common stock, Globalstar may issue ordinary partnership interests in payment of
dividends, redemptions and conversions.
The transfer agent for the Series B Preferred Stock will be The Bank of New
York unless we select a successor.
RANKING
The Series B Preferred Stock ranks, with respect to dividend distributions
and distributions upon our liquidation, winding-up and dissolution,
- junior to all our existing and future indebtedness and other obligations;
- junior to each class of capital stock or series of preferred stock we
establish after December 2, 1999 the terms of which expressly provide
that such class or series will rank senior to the Series B Preferred
Stock as to dividend distributions and distributions upon our
liquidation, winding-up and dissolution (we refer to these securities as
"Senior Securities");
- on parity with the Series A Preferred Stock and with any shares of our
preferred stock issued in the future and any other class of capital stock
or series of preferred stock we establish after December 2, 1999 the
terms of which expressly provide that such class or series will rank on a
parity with the Series B Preferred Stock as to dividend distributions and
distributions upon our liquidation, winding-up and dissolution (we refer
to these securities as "Parity Securities"); and
- senior to all classes of our common stock and to each other class of
capital stock or series of our preferred stock established after December
2, 1999 the terms of which do not expressly provide that it ranks senior
to or on a parity with the Series B Preferred Stock as to dividend
distributions and distributions upon our liquidation, winding-up and
dissolution (we refer to these securities, together with our common
stock, as "Junior Securities").
The Series B Preferred Stock will be subject to the issuance of Junior
Securities, Parity Securities and Senior Securities, provided that we may not
issue any new class of Senior Securities without the approval of the holders of
at least 66 2/3% of the shares of Series B Preferred Stock then outstanding,
voting or consenting, as the case may be, together as one class.
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<PAGE> 26
No dividend shall be declared or paid upon, and no sum will be set apart
for the payment of dividends upon, any outstanding share of Series B Preferred
Stock with respect to any dividend period unless all dividends for all preceding
dividend periods have been declared and paid, or declared and a sufficient sum
set apart for the payment of such dividends, upon all outstanding shares of
Senior Securities.
DIVIDENDS
When, as and if the board of directors declares a dividend out of funds we
have legally available therefor, the holders of the Series B Preferred Stock
will be entitled to receive a dividend. Dividends:
- are cumulative from the issue date of the Series B Preferred Stock and
accrue at the rate per annum of 9% of the Liquidation Preference per
share;
- are payable quarterly in arrears on each March 1, June 1, September 1 and
December 1, commencing on March 1, 2000 (each, a "Dividend Payment Date")
(unless such date is not a business day, in which case such payment shall
be made on the next succeeding business day), to the holders of record as
of the next preceding February 15, May 15, August 15 and November 15
(each, a "Record Date");
- are computed on the basis of a 360-day year consisting of twelve 30-day
months and be deemed to accrue on a daily basis;
- accrue whether or not we have earnings or profits, whether or not we have
funds legally available for the payment of such dividends and whether or
not we declare dividends; and
- accumulate to the extent they are not paid on the Dividend Payment Date
for the period to which they relate.
We may elect to pay dividends in cash, by delivery of our common stock, or
through any combination of cash and common stock.
We will, in accordance with the Series B Preferred Stock annex, take all
actions required or permitted under The Companies Act 1981 of Bermuda (the
"Companies Act") to permit the payment of dividends on the Series B Preferred
Stock.
No dividends of any kind shall be declared or paid upon, and no sum will be
set apart for the payment of dividends upon, any outstanding share of Series B
Preferred Stock with respect to any dividend period unless all dividends for all
preceding dividend periods have been declared and paid, or declared and a
sufficient sum set apart for the payment of such dividends, upon all outstanding
shares of Series B Preferred Stock.
Unless full cumulative dividends on all outstanding shares of Series B
Preferred Stock for all past dividend periods shall have been declared and paid,
or declared and a sufficient sum for the payment thereof set apart, then:
- no dividend (other than a dividend payable solely in shares of any Junior
Securities or Parity Securities or a partial dividend on Parity
Securities that is paid pro rata on
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<PAGE> 27
the Series B Preferred Stock) shall be declared or paid upon, or any sum
set apart for the payment of dividends upon, any shares of Junior
Securities or Parity Securities, respectively;
- no other distribution shall be declared or made upon, or any sum set
apart from the payment of any distribution upon, any shares of Junior
Securities or Parity Securities, other than a distribution consisting
solely of Junior Securities or Parity Securities, respectively;
- no shares of Junior Securities or Parity Securities or any warrants,
rights, calls or options exercisable for or convertible into any Junior
Securities or Parity Securities shall be purchased, redeemed or otherwise
acquired (excluding an exchange for shares of other Junior Securities or
Parity Securities, respectively) by us or any of our subsidiaries; and
- no monies shall be paid into or set apart or made available for a sinking
or other like fund for the purchase, redemption or other acquisition of
any shares of Junior Securities or Parity Securities or any warrants,
rights, calls or options exercisable for or convertible into any Junior
Securities or Parity Securities by us or any of our subsidiaries.
Holders of the Series B Preferred Stock will not be entitled to any
dividends, whether payable in cash, property or stock, in excess of the full
cumulative dividends as described above.
In the future, we or Globalstar may be party to credit agreements or other
agreements relating to indebtedness that contain restrictions on our ability to
pay cash dividends on the Series B Preferred Stock.
OPTIONAL REDEMPTION
Provisional Redemption. At any time prior to December 3, 2002, we may
redeem the Series B Preferred Stock, in whole or in part (the "Provisional
Redemption"), at the redemption price of 105.1% of the aggregate Liquidation
Preference of the shares of Series B Preferred Stock to be redeemed (the
"Provisional Redemption") if the Current Market Value (as defined below) of our
common stock equals or exceeds the following trigger percentages of the
prevailing conversion price (as described below) then in effect for at least 20
trading days in any consecutive 30-day trading day period ending on the trading
day prior to the date of mailing of the notice of Provisional Redemption (the
"Notice Date"), if called for redemption in the 12-month period ending on the
dates set forth below:
<TABLE>
<CAPTION>
TRIGGER
DATE PERCENTAGE
- ---- ----------
<S> <C>
December 1, 2000................... 170%
December 1, 2001................... 160%
December 2, 2002................... 150%
</TABLE>
UPON ANY PROVISIONAL REDEMPTION, WE WILL MAKE AN ADDITIONAL PAYMENT (THE
"DIVIDEND MAKE-WHOLE PAYMENT") WITH RESPECT TO THE SHARES OF SERIES B PREFERRED
STOCK
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<PAGE> 28
CALLED FOR REDEMPTION, INCLUDING THOSE SHARES OF SERIES B PREFERRED STOCK
CONVERTED INTO SHARES OF OUR COMMON STOCK BETWEEN THE NOTICE DATE AND THE
PROVISIONAL REDEMPTION DATE. THE DIVIDEND MAKE-WHOLE PAYMENT WILL BE EQUAL TO
THE SUM OF:
(1) THE PRESENT VALUE OF THE AGGREGATE AMOUNT OF DIVIDENDS THAT WOULD
OTHERWISE HAVE ACCRUED FROM THE PROVISIONAL REDEMPTION DATE THROUGH
DECEMBER 1, 2002 (THE "DIVIDEND MAKE-WHOLE PERIOD"), AND
(2) THE AMOUNT OF ANY ACCUMULATED AND UNPAID DIVIDENDS (INCLUDING A
PRORATED DIVIDEND FOR ANY PARTIAL DIVIDEND PERIOD) AND LIQUIDATED
DAMAGES (AS DEFINED), IF ANY, TO THE PROVISIONAL REDEMPTION DATE.
Such present value shall be calculated using the bond equivalent yield on
U.S. Treasury notes or bills having a term nearest in length to that of the
Dividend Make-Whole Period as of the Notice Date.
Subsequent Optional Redemption. At any time on or after December 3, 2002,
we may at our option redeem the Series B Preferred Stock, in whole or from time
to time in part (the "Optional Redemption"), at a redemption price equal to the
percentage of the Liquidation Preference set forth below, in each case together
with accumulated and unpaid dividends (including an amount equal to a prorated
dividend for any partial dividend period) and Liquidated Damages, if any, to the
date of redemption, upon not less than 30 nor more than 60 days' prior written
notice, if redeemed during the 12-month period commencing on the dates set forth
below (unless such date is not a business day, in which case such period will
commence on the next succeeding business day):
<TABLE>
<CAPTION>
DATE PERCENTAGE
---- ----------
<S> <C>
December 3, 2002........................... 105.1%
December 1, 2003........................... 103.9%
December 1, 2004........................... 102.6%
December 1, 2005........................... 101.3%
December 1, 2006 and thereafter............ 100.0%
</TABLE>
We may not authorize or make any Provisional Redemption or Optional
Redemption unless, prior to giving the applicable redemption notice, all
accumulated and unpaid dividends on the Series B Preferred Stock for periods
ended prior to the date of such redemption notice shall have been paid in cash
or common stock. In the event of partial redemptions of the Series B Preferred
Stock, the shares to be redeemed will be determined pro rata or by lot, as
determined by us, provided that we may redeem all shares held by holders of
fewer than 100 shares of Series B Preferred Stock (or by holders that would hold
fewer than 100 shares of Series B Preferred Stock following such redemption)
prior to our redemption of other shares of Series B Preferred Stock.
MANDATORY REDEMPTION
Unless it has already been redeemed or converted, the Series B Preferred
Stock will be mandatorily redeemed by us on December 1, 2011 (the "Mandatory
Redemption") at a
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<PAGE> 29
redemption price equal to 100% of its Liquidation Preference, together with
accumulated and unpaid dividends and Liquidated Damages, if any, to the
mandatory redemption date.
METHOD OF PAYMENTS
Globalstar may, at its option, make any payments due on the Series B
Preferred Partnership Interests
- in cash,
- by delivery of its ordinary partnership interests to us (as described
below and subject to certain limitations), or
- through a combination of cash and its ordinary partnership interests.
Likewise, subject to certain restrictions, we may generally make any
payments due on the Series B Preferred Stock, including dividend payments and
redemption payments,
- in cash,
- by delivery of our common stock, or
- through any combination of cash and our common stock.
If we elect to make any such payment, or any portion thereof, in shares of
our common stock, such shares shall be valued for such purpose:
- in the case of any dividend payment, Provisional Redemption payment,
Dividend Make-Whole Payment, Optional Redemption payment, or portion
thereof, at 95% of the Average Market Value (as defined below); and
- in the case of any Mandatory Redemption payment, or portion thereof (a)
if on the date of such payment the shelf registration statement is
effective or is no longer required to be effective, at 100% of the
Average Market Value and (b) otherwise, at 90% of the Average Market
Value.
If Globalstar shall have paid the scheduled distribution or redemption
payment on the Series B Preferred Partnership Interests corresponding to such
payment in cash, we shall also make such payment in cash. We intend to use the
same form of consideration as Globalstar used with respect to the Series B
Preferred Partnership Interests, except that we will deliver common stock
instead of ordinary partnership interests. We reserve the right to make a cash
payment from the proceeds of an issuance of our common stock following a payment
by Globalstar through a delivery of ordinary partnership interests. We also
reserve the right to make dividend payments notwithstanding the fact that we
shall not have received a distribution on the Series B Preferred Partnership
Interests for the corresponding Dividend Payment Date.
We will make each dividend payment, Provisional Redemption payment
(including the associated Dividend Make-Whole Payment), Optional Redemption
payment and Mandatory Redemption payment on the Series B Preferred Stock in
cash, except to the extent we have elected to make all or any portion of such
payment in shares of our common stock. We may not make any such payment, or any
portion thereof (other than a Mandatory Redemption payment, or portion thereof),
in shares of our common stock unless, on the
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<PAGE> 30
date of such payment, the shelf registration statement referred to below is
effective or is no longer required to be effective.
If, as a matter of law, we are not able to issue our common stock in
payment of the mandatory redemption price, then we may, at our option, cause the
Series B Preferred Stock to be converted on the mandatory redemption date into
the same number of shares of our common stock as we could otherwise have issued
in satisfaction of the mandatory redemption price, provided that we have given
the holders of the Series B Preferred Stock notice of the exercise of such
option at least 30 days prior to the mandatory redemption date. No fractional
shares of common stock will be delivered to the holders of the Series B
Preferred Stock, but we will instead pay a cash adjustment to each holder that
would otherwise be entitled to a fraction of a share of common stock. The amount
of such cash adjustment will be determined based on the proceeds received by the
transfer agent from the sale of that number of shares of our common stock, which
we will deliver to the transfer agent for such purpose, equal to the aggregate
of all such fractions (rounded up to the nearest whole share).
The transfer agent is authorized and directed in the Series B Preferred
Stock annex to sell such shares at the best available prices and distribute the
proceeds to the holders in proportion to their respective interests therein. We
will pay the expenses of the transfer agent with respect to such sale, including
brokerage commissions. Any portion of any such payment that is declared and not
paid through the delivery of shares of common stock will be paid in cash.
We will make a public announcement no later than the close of business on
the tenth business day prior to the Record Date for each dividend as to whether
we will pay such dividend and, if so, the form of consideration we will use to
make such payment.
"Average Market Value" of our common stock means the arithmetic average of
the Current Market Value of our common stock for the ten trading days ending on
the fifth business day prior to (a) in the case of the payment of any dividend,
the Record Date for such dividend and (b) in the case of any other payment, the
date of such payment.
"Current Market Value" of our common stock means the average of the high
and low sale prices of our common stock as reported on the Nasdaq National
Market or such other SEC-recognized national securities exchange or trading
system which we may from time to time designate upon which the greatest number
of our common stock is then listed or traded, for the trading day in question.
PROCEDURE FOR REDEMPTION
On and after a redemption date, unless we default in the payment of the
applicable redemption price, dividends will cease to accrue on shares of Series
B Preferred Stock called for redemption and all rights of holders of such shares
will terminate except for the right to receive the redemption price, without
interest. However, if we shall not have previously given a notice of redemption
and not have segregated and irrevocably set apart an amount in cash equal to the
full redemption price in trust for the benefit of holders of the Series B
Preferred Stock called for redemption, then at the close of business on the day
on
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<PAGE> 31
which such funds are so segregated and set apart, the holders of the shares to
be redeemed shall cease to be our stockholders and shall be entitled, subject to
their rights of conversion, to receive only the redemption price for their
shares on the redemption date.
We will make a public announcement of the redemption (including a statement
of the form of consideration we will use to effect the same) and send a written
notice thereof by first class mail to each holder of record of shares of Series
B Preferred Stock not fewer than 30 days nor more than 60 days prior to the date
fixed for such redemption.
Shares of Series B Preferred Stock issued and reacquired will, upon
compliance with the applicable requirements of law, have the status of
authorized but unissued shares of our preferred stock undesignated as to series
and may with any and all other authorized but unissued shares of our preferred
stock be designated or redesignated and issued, as part of any series of our
preferred stock.
CONVERSION RIGHTS
At any time after January 31, 2000, each share of Series B Preferred Stock
will be convertible at any time, unless previously redeemed, at the option of
the holder thereof, into that number of shares of our common stock equal to
$50.00 (the Liquidation Preference per share of Series B Preferred Stock)
divided by the conversion price then applicable. A holder's right to convert
shares of Series B Preferred Stock called for redemption will terminate at the
close of business on the business day preceding the redemption date and will be
lost if not exercised prior to that time, unless we default in making the
payment due upon redemption.
The initial conversion price is $25.9569 per share. At that price, holders
of the Series B Preferred Stock would receive 1.9263 shares of our common stock
for each $50 liquidation preference of Series B Preferred Stock (that is,
50/25.9569). The conversion price is subject to adjustment in certain events,
including:
- the payment of dividends (and other distributions) in our common stock on
any class of our capital stock other than the payment of dividends in our
common stock on the Series B Preferred Stock or the Series A Preferred
Stock or any other regularly scheduled dividend on any other class of our
preferred stock which does not trigger any anti-dilution provisions in
any of our other securities;
- the issuance to all holders of our common stock of rights, warrants or
options entitling them to subscribe for or purchase our common stock at
less than the current market price (as calculated pursuant to the Series
B Preferred Stock annex);
- subdivisions, combinations and reclassifications of our common stock; and
- distributions to all holders of our common stock of evidences of our
indebtedness, shares of any class of our capital stock, cash or other
assets (including securities, but excluding those dividends, rights,
warrants, options and distributions referred to in the three clauses
above and dividends and distributions paid in cash out of our accumulated
deficit or retained earnings, unless the sum of all such cash dividends
and distributions made and the amount of cash and the fair market value
of other
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<PAGE> 32
consideration paid in respect of any repurchases of our common stock by
us or any of our subsidiaries, in each case within the preceding 12
months in respect of which no adjustment has been made, exceeds 20% of
the product of the then current market price of our common stock times
the aggregate number of shares of our common stock outstanding on the
record date for such dividend or distribution).
We are not required to make any adjustment of the conversion price until
cumulative adjustments amount to 1% or more of the conversion price as last
adjusted. Notwithstanding the foregoing, no adjustment to the conversion price
shall reduce the conversion price below the then applicable par value per share
of our common stock. In addition to the foregoing adjustments, we are permitted
to make such reductions in the conversion price as we consider to be advisable
in order that any event treated for federal income tax purposes as a dividend of
stock or stock rights will not be taxable to the holders of our common stock.
In the case of certain consolidations or mergers to which we are a party or
the transfer of substantially all of our assets, each share of Series B
Preferred Stock then outstanding would become convertible only into the kind and
amount of securities, cash and other property receivable upon the consolidation,
merger or transfer by a holder of the number of shares of our common stock into
which such share of Series B Preferred Stock might have been converted
immediately prior to such consolidation, merger or transfer (assuming such
holder of common stock failed to exercise any rights of election and received
per share the kind and amount receivable per share by a plurality of
non-electing shares).
No fractional shares of our common stock will be issued upon conversion; in
lieu thereof, we will pay a cash adjustment based upon the closing price of our
common stock on the business day prior to the conversion date.
The holder of record of a share of Series B Preferred Stock at the close of
business on a record date with respect to the payment of dividends on the Series
B Preferred Stock will be entitled to receive such dividends with respect to
such share on the corresponding Dividend Payment Date, notwithstanding the
conversion of such share after such Record Date and prior to such Dividend
Payment Date.
A share of Series B Preferred Stock surrendered for conversion during the
period from the close of business on any Record Date for the payment of
dividends to the opening of business of the corresponding Dividend Payment Date
must be accompanied by a payment in cash, our common stock or a combination
thereof (depending on the method of payment that we have chosen to pay the
dividend) in an amount equal to the dividend payable on such Dividend Payment
Date. However, this does not apply if such share of Series B Preferred Stock has
been called for redemption on a redemption date occurring during the period from
the close of business on any Record Date for the payment of dividends to the
close of business on the business day immediately following the corresponding
Dividend Payment Date.
The dividend payment with respect to a share of Series B Preferred Stock
called for redemption on a date during the period from the close of business on
any Record Date for the payment of dividends to the close of business on the
business day immediately following the corresponding Dividend Payment Date will
be payable on such Dividend Payment Date
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<PAGE> 33
to the record holder of such share on such Record Date if such share has been
converted after such Record Date and prior to such Dividend Payment Date. Except
as provided with respect to a Provisional Redemption, no payment or adjustment
will be made upon conversion of shares of Series B Preferred Stock for
accumulated and unpaid dividends or for dividends with respect to the common
stock issued upon such conversion.
VOTING RIGHTS
Holders of shares of the Series B Preferred Stock have no voting rights,
except as required by law and upon the occurrence of a Voting Rights Triggering
Event. The accumulation of accrued and unpaid dividends on the outstanding
Series B Preferred Stock in an amount equal to six quarterly dividends (whether
or not consecutive) constitutes a Voting Rights Triggering Event, giving the
holders of a majority of the outstanding shares of Series B Preferred Stock the
right to elect such number of members to our board of directors constituting at
least 20% of the then existing board of directors before such election (rounded
to the nearest whole number). However, such number shall be no less than one nor
greater than two, and the number of members of our board of directors will be
immediately and automatically increased by one or two, as the case may be.
Voting rights arising as a result of a Voting Rights Triggering Event will
continue until all dividends in arrears on the Series B Preferred Stock are paid
in full, at which time the term of office of any such members of the Board of
Directors so elected shall terminate and such directors shall be deemed to have
resigned.
In addition, the Series B Preferred Stock annex provides that without the
approval of holders of at least 66 2/3% of the shares of Series B Preferred
Stock then outstanding, voting or consenting, as the case may be, as one class,
- we will not authorize any class of Senior Securities or any obligation or
security convertible or exchangeable into or evidencing a right to
purchase shares of any class or series of Senior Securities, and
- we may not amend the Series B Preferred Stock annex or bye-laws so as to
affect adversely the specified rights, preferences, privileges or voting
rights of holders of shares of the Series B Preferred Stock or authorize
the issuance of any additional shares of Series B Preferred Stock.
The Series B Preferred Stock annex also provides that:
- except as set forth above with respect to Senior Securities, (a) the
creation, authorization or issuance of any shares of Junior Securities,
Parity Securities or Senior Securities or (b) the increase or decrease in
the amount of authorized capital stock of any class, including any Series
B Preferred Stock, shall not require the consent of the holders of Series
B Preferred Stock and shall not be deemed to affect adversely the rights,
preferences, privileges, special rights or voting rights of holders of
shares of Series B Preferred Stock, and
- we will not require the consent of the holders of Series B Preferred
Stock to authorize, create (by way of reclassification or otherwise) or
issue any Parity
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<PAGE> 34
Securities or any obligation or security convertible or exchangeable into
or evidencing a right to purchase, shares of any class or series of
Parity Securities.
MERGER, CONSOLIDATION AND SALE OF ASSETS
Without the vote or consent of the holders of a majority of the then
outstanding shares of Series B Preferred Stock, we may not consolidate or merge
with or into, or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its assets to, any person unless:
- the entity formed by such consolidation or merger (if other than us) or
to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made (in any such case, the "resulting
entity") is a corporation organized and existing under the laws of
Bermuda, the United States or any State thereof or the District of
Columbia;
- if we are not the resulting entity, the Series B Preferred Stock is
converted into or exchanged for and becomes shares of such resulting
entity, having in respect of such resulting entity the same (or more
favorable) powers, preferences and relative, participating, optional or
other special rights thereof that the Series B Preferred Stock had
immediately prior to such transaction; and
- immediately after giving effect to such transaction, no Voting Rights
Triggering Event has occurred and is continuing.
The resulting entity of such transaction shall thereafter be deemed to be
the "Company" for all purposes of the Series B Preferred Stock annex.
Except as described herein, the Series B Preferred Stock annex does not
provide the holders of the Series B Preferred Stock with any special protection
in the event of a takeover, recapitalization or similar transaction which could
adversely affect our capital structure or the value of the Series B Preferred
Stock or our common stock.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
our company or reduction or decrease in our capital stock resulting in a
distribution of assets to the holders of any class or series of our capital
stock, each holder of shares of the Series B Preferred Stock will be entitled to
payment out of our assets available for distribution of an amount equal to the
Liquidation Preference per share of Series B Preferred Stock held by such
holder, plus accrued and unpaid dividends and Liquidated Damages, if any, to the
date fixed for liquidation, dissolution, winding-up or reduction or decrease in
capital stock (including an amount equal to a prorated dividend for the period
from the last dividend payment date to the date fixed for liquidation,
dissolution, winding up or reduction or decrease in capital stock), before any
distribution is made on any Junior Securities, including, without limitation,
common stock.
After payment in full of the Liquidation Preference and all accrued
dividends and Liquidated Damages, if any, to which holders of Series B Preferred
Stock are entitled, such holders will not be entitled to any further
participation in any distribution of our assets. If,
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<PAGE> 35
upon our liquidation, dissolution or winding-up, whether voluntary or
involuntary, the amounts payable with respect to the Series B Preferred Stock
and all other Parity Securities are not paid in full, the holders of the
Series B Preferred Stock and the Parity Securities will share equally and
ratably in any distribution of our assets in proportion to the full Liquidation
Preference and accumulated and unpaid dividends and Liquidated Damages, if any,
to which each is entitled. However, neither the voluntary sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of our property or assets nor our
consolidation or merger with or into one or more entities will be deemed to be a
voluntary liquidation, dissolution or winding-up or reduction or decrease in
capital stock, unless such sale, conveyance, exchange or transfer shall be in
connection with a liquidation, dissolution or winding-up of our business or
reduction or decrease in capital stock.
The Series B Preferred Stock annex does not contain any provision requiring
funds to be set aside to protect the liquidation preference of the Series B
Preferred Stock, although such liquidation preference will be substantially in
excess of the par value of such shares of Series B Preferred Stock.
Consequently, there will be no restriction upon our surplus solely because the
liquidation preference of the Series B Preferred Stock will exceed the par value
thereof and there will be no remedies available to holders of the Series B
Preferred Stock before or after the payment of any dividend, other than in
connection with our liquidation, solely by reason of the fact that such dividend
would reduce our surplus to an amount less than the difference between the
liquidation preference of the Series B Preferred Stock and its par value.
COVENANT TO REPORT
We will, pursuant to the Series B Preferred Stock annex, file with the
transfer agent within 15 days after we file them with the SEC, copies of the
annual, quarterly and current reports and the information, documents, and other
reports that we are required to file with the SEC pursuant to Section 13(a) or
15(d) of the Exchange Act ("SEC Reports").
In the event we are not required or shall cease to be required to file SEC
Reports pursuant to the Exchange Act, we will nevertheless continue to file such
reports with the SEC (unless the SEC will not accept such a filing). Whether or
not required by the Exchange Act to file SEC Reports with the SEC, so long as
any shares of Series B Preferred Stock are outstanding, we will furnish copies
of the SEC Reports to the holders of Series B Preferred Stock at the time we are
required to make such information available to the transfer agent and to
prospective investors who request it in writing.
In addition, we have agreed that, for so long as any shares of Series B
Preferred Stock remain outstanding, we will furnish to the holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
Under the registration rights agreement entered into among us, Globalstar
and the initial purchasers of the Series B Preferred Stock, we have agreed to
maintain the
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<PAGE> 36
effectiveness of the shelf registration statement for a period of up to two
years after the Series B Preferred Stock was originally issued (or less, if all
restricted securities traded under the shelf registration statement have been
sold), or that we will file a supplement to an existing shelf registration
statement to include the Series B Preferred Stock.
In the event of a Registration Default (as defined below) we have agreed to
pay to each holder of Transfer Restricted Securities liquidated damages
("Liquidated Damages").
A "Registration Default" occurs and triggers the Liquidated Damages in the
event that (i)(A) this shelf registration statement is not declared effective on
or prior to the date that is 210 days after the consummation of the offering and
(B) we fail to file a supplement to an existing shelf registration statement to
include the Series B Preferred Stock within 210 days after the closing of the
offering or (ii) this shelf registration statement (or the existing shelf
registration statement in the event we file a supplement as described in clause
(i)(B)) is declared effective but thereafter ceases to be effective or usable
for any period of ten consecutive trading days or for any 20 days in any 180-day
period in connection with resales of Transfer Restricted Securities (provided,
that we will have the option of suspending the effectiveness of the shelf
registration statement or notifying holders of Transfer Restricted Securities
that the shelf registration statement shall be deemed to not be effective (in
which case the shelf registration statement shall not be considered "effective"
for the purposes of the Series B Preferred Stock provisions), without becoming
obligated to pay Liquidated Damages for periods of up to a total of 60 days in
any calendar year if our board of directors determines that compliance with the
disclosure obligations necessary to maintain the effectiveness of the shelf
registration statement at such time could reasonably be expected to have an
adverse effect on us or a pending corporate transaction).
"Transfer Restricted Securities" for this purpose, means each share of
Series B Preferred Stock and each share of common stock issuable upon conversion
of the Series B Preferred Stock or in satisfaction of any dividend or other
payment on the Series B Preferred Stock until the earlier of (i) the second
anniversary of the last Closing Date and (ii) such time as (A) such security
shall no longer constitute a restricted security for purposes of Rule 144(k)
under the Securities Act or (B) such security has been sold pursuant to the
shelf registration statement.
Liquidated Damages, if any:
- will be paid at a rate of 0.50% of the Liquidation Preference of the
Series B Preferred Stock constituting Transfer Restricted Securities;
- accrue from the date of the Registration Default to and including the
30th day following such Registration Default and, increase by 0.50% for
each subsequent 30 day period;
- may not exceed 2.00% of the Liquidated Preference of the Series B
Preferred Stock; and
- will be paid in cash on each Dividend Payment Date specified in the
Series B Preferred Stock annex with respect to shares of Series B
Preferred Stock.
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<PAGE> 37
Following the cure of all Registration Defaults, the accrual of Liquidated
Damages will cease.
We will provide to each holder of Series B Preferred Stock copies of the
prospectus which will be a part of the shelf registration statement, notify each
holder when the shelf registration statement (if not an existing shelf
registration statement) has become effective and take certain actions as are
required to permit unrestricted resales of the Series B Preferred Stock (and the
common stock into which the Series B Preferred Stock is convertible). A Holder
of Transfer Restricted Securities selling such securities pursuant to the shelf
registration statement is generally required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and is bound by the provisions
of the Registration Rights Agreement which are applicable to such holder
(including certain indemnification obligations).
FORM AND DENOMINATION
Global Shares; Book Entry Form. Except as set forth below, shares of
Series B Preferred Stock will be evidenced initially by one or more global
certificates (the "Global Certificate") which will be deposited with, or on
behalf of, the Depositary Trust Company (the "Depositary") and registered in the
name of Cede & Co., as nominee of the Depositary (the "Global Certificate
Holder"). Except as set forth below, record ownership of the Global Certificate
may be transferred, in whole or in part, only to another nominee of the
Depositary or to a successor of the Depositary or its nominee.
Shares of Series B Preferred Stock that are originally transferred to
institutional "accredited investors" as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act will be issued in the form of certificates in
definitive form (the "Definitive Securities"). Upon the transfer to a qualified
institutional buyer of Definitive Securities, such Definitive Securities may be
exchanged, subject to the requirements of the Depositary, for a beneficial
interest in the Global Certificate representing the number of shares of Series B
Preferred Stock transferred.
Owners of a beneficial interest in the Global Certificate may hold their
interest in the Global Certificate directly through the Depositary if such
holder is a Participant in the Depositary or indirectly through organizations
that are Participants in the Depositary. Persons who are not Participants may
beneficially own interests in the Global Certificate held by the Depositary only
through Participants or certain banks, brokers, dealers, trust companies and
other parties that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. So long as Cede & Co., as the
nominee of the Depositary, is the registered owner of the Global Certificate,
Cede & Co. for all purposes will be considered the sole holder of the Global
Certificate.
The shares of Series B Preferred Stock represented by the Global
Certificate are exchangeable for Definitive Securities of like tenor as such
Series B Preferred Stock if (i) the Depositary notifies us that it is unwilling
or unable to continue as Depositary for the Global Certificate and a successor
is not promptly appointed or if at any time the Depositary ceases to be a
clearing agency registered under the Exchange Act or (ii) we determine at
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any time in our discretion not to have all of the shares of Series B Preferred
Stock represented by the Global Certificate. Any shares of Series B Preferred
Stock that are exchangeable pursuant to the preceding sentence are exchangeable
for Definitive Securities issuable in authorized denominations and registered in
such names as the Depositary shall direct. Subject to the foregoing, the Global
Certificate is not exchangeable, except for a Global Certificate of the same
aggregate denomination to be registered in the name of the Depositary or its
nominee. In addition, such certificates will bear the legend referred to under
"Notice to Investors" (unless we determine otherwise in accordance with
applicable law) subject, with respect to such shares of Series B Preferred
Stock, to the provisions of such legend.
Payments of dividends on and any redemption price with respect to the
Global Certificate will be made to the Global Certificate holder or its nominee,
as registered owner of the Global Certificate, by wire transfer of immediately
available funds on each Dividend Payment Date or redemption date, as applicable.
Neither we nor the transfer agent will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Certificate or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
We have been informed by the Depositary that, with respect to any payment
of dividends on, or the redemption price with respect to, the Global
Certificate, the Depositary's practice is to credit Participants' accounts on
the payment date therefor, with payments in amounts proportionate to their
respective beneficial interests in the Series B Preferred Stock represented by
the Global Certificate as shown on the records of the payments by Participants
to owners of beneficial interests in the Series B Preferred Stock represented by
the Global Certificate held through such Participants will be the responsibility
of such Participants, as is now the case with securities held for accounts of
customers registered in "street name".
Transfers between Participants will be effected in the ordinary way in
accordance with the Depositary's rules and will be settled in immediately
available funds. The laws of some states require that certain persons take
physical delivery of securities in definitive form. Consequently, the ability to
transfer beneficial interests in the Global Certificate to such persons may be
limited. Because the Depositary can only act on behalf of a beneficial interest
in the Series B Preferred Stock represented by the Global Certificate to pledge
such interest to persons or entities that do not participate in the Depositary
system, or otherwise take actions in respect of such interest, may be affected
by the lack of a physical certificate evidencing such interest.
Neither we nor the transfer agent will have responsibility for the
performance of the Depositary or its Participants or Indirect Participants of
their respective obligations under the rules and procedures governing their
operations. The Depositary has advised us that it will take any action permitted
to be taken by a holder of Series B Preferred Stock (including, without
limitation, the presentation of Depositary interests in the Global Certificate
are credited, and only in respect of the Series B Preferred Stock represented by
the Global Certificate as to which such Participant or Participants has or have
given such direction).
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The Depositary has also advised us that the Depositary is a limited purpose
trust company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17a of the Exchange Act. The Depositary was created to
hold securities for its Participants and to facilitate the clearance and
settlement of securities transactions between Participants through electronic
book-entry changes to accounts of its Participants, thereby eliminating the need
for physical movement of certificates. Participants include securities brokers
and dealers, banks, trust companies and clearing corporations and may include
certain other organizations such as the initial purchasers of the Series B
Preferred Stock. Certain of such Participants (or their representatives),
together with other entities, own the Depositary. Indirect access to the
Depositary system is available to others such as banks, brokers, dealers and
trust companies that clear through, or maintain a custodial relationship with a
Participant, either directly or indirectly.
Although we expect that DTC will agree to the foregoing procedures, it is
under no obligation to perform or to continue to perform such procedures and DTC
may discontinue such procedures at any time. Neither we nor the transfer agent
will have any responsibility for the performance by DTC or its Participants or
indirect participants of their respective obligations under the rules and
procedures governing their operations.
DESCRIPTION OF COMMON STOCK
We have authorized 600,000,000 shares of common stock, par value $1.00 per
share. As of January 26, 2000, we had 88,792,956 shares of common stock
outstanding.
BERMUDA LAW
The following discussion is based upon the advice of Appleby, Spurling &
Kempe, our Bermuda counsel.
We were incorporated as an exempted company under The Companies Act 1981 of
Bermuda (the "Act"). Accordingly, the rights of our shareholders are governed by
Bermuda law and our Memorandum of Association and Bye-Laws.
The following is a summary of certain provisions of Bermuda law and our
organizational documents. You should note that this summary is not a
comprehensive description of such laws and documents and that it is qualified in
its entirety by appropriate reference to Bermuda law and to our organizational
documents.
Dividends. Under Bermuda law, a company may pay such dividends as are
declared from time to time by its board of directors unless there are reasonable
grounds for believing that the company is or would, after the payment, be unable
to pay its liabilities as they become due or that the realizable value of its
assets would thereby be less than the aggregate of its liabilities and issued
share capital and share premium accounts.
Voting Rights. Under Bermuda law, questions brought before a general
meeting of shareholders are decided by a majority vote of shareholders present
at the meeting (or by such majority as the Act or our Bye-Laws prescribe). Each
shareholder present, or in
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person holding proxies for any shareholder, is entitled to one vote,
irrespective of the number of shares held, unless a poll is requested.
Our Bye-Laws provide that, subject to the provisions of the Act, any
questions proposed for the consideration of the shareholders will be decided by
a simple majority of the votes cast. Each shareholder present, or person holding
proxies for any shareholder, is entitled to one vote. If a poll is requested,
each shareholder present in person or by proxy has one vote for each share held.
A poll may only be requested under our Bye-Laws by
- the Chairman of the meeting,
- at least three shareholders present in person or by proxy,
- any shareholder or shareholders, present in person or by proxy, holding
between them not less than 10% of the total voting rights of all
shareholders having the right to vote at such meeting, or
- a shareholder or shareholders, present in person or by proxy, holding our
voting shares on which an aggregate sum has been paid up equal to not
less than 10% of the total sum paid up on all such voting shares.
Rights in Liquidation. Under Bermuda law, in the event of liquidation,
dissolution or winding up of a company, the proceeds of such liquidation,
dissolution or winding up are distributed pro rata among the holders of common
stock. However, such distribution may only be effected after satisfaction in
full of all claims of creditors and subject to the preferential rights accorded
to any series of preferred stock.
Meetings of Shareholders. Under Bermuda law, a company is required to
convene at least one general shareholders' meeting per calendar year. Bermuda
law provides that a special general meeting may be called by the board of
directors and must be called upon the request of shareholders holding not less
than 10% of such of the paid-up capital of the company carrying the right to
vote. Bermuda law also requires that shareholders be given at least five days'
advance notice of a general meeting but the accidental omission of notice to any
person does not invalidate the proceedings at a meeting. Under our Bye-Laws, at
least ten days' notice of the annual general meeting and of any special general
meeting must be given to each shareholder.
Access to Books and Records and Dissemination of Information. Members of
the general public have the right to inspect the public documents of a company
available at the office of the Registrar of Companies in Bermuda. These
documents include the company's certificate of incorporation, its memorandum of
association (including its objects and powers) and any alteration to the
company's memorandum of association.
Under Bermuda law, the shareholders have the additional right to inspect
the bye-laws of the company, minutes of general meetings and the company's
audited financial statements, which must be presented at the annual general
meeting. The register of shareholders of a company is also open to inspection by
shareholders without charge and to members of the general public on the payment
of a fee. A company is required to maintain its share
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<PAGE> 41
register in Bermuda but may, subject to the provisions of the Act, establish a
branch register outside Bermuda.
A company is required to keep at its registered office a register of its
directors and officers which is open for inspection for not less than two hours
in each day by members of the public without charge. Bermuda law does not,
however, provide a general right for shareholders to inspect or obtain copies of
any other corporate records.
Election or Removal of Directors. Under Bermuda law and our Bye-Laws,
directors are elected at the annual general meeting to serve until their
successors are elected or appointed, unless they are earlier removed or resign.
Under Bermuda law and our Bye-Laws, a director may be removed at a special
general meeting of shareholders specifically called for that purpose, provided
that the director was served with at least 14 days' notice. The director has a
right to be heard at the meeting. Any vacancy created by the removal of a
director at a special general meeting may be filled at such meeting by the
election of another director in his or her place or, in the absence of any such
election, by the board of directors.
Amendment of Memorandum of Association and Bye-Laws. Bermuda law provides
that the memorandum of association of a company may be amended by a resolution
passed at a general meeting of shareholders of which due notice has been given.
An amendment to the memorandum of association also requires the approval of the
Bermuda Minister of Finance, who may grant or withhold approval at his
discretion. However, such approval of the Bermuda Minister of Finance is not
required for an amendment which alters or reduces a company's share capital as
provided in the Act. Except as set forth therein, the bye-laws may be amended by
a resolution passed by a majority of shares cast at a general meeting.
Under Bermuda law, the holders of an aggregate of no less than 20% in par
value of a company's issued share capital have the right to apply to the Bermuda
Court for an annulment of any amendment of the memorandum of association adopted
by shareholders at any general meeting. This does not apply to an amendment
which alters or reduces a company's share capital as provided in the Act. Where
such an application is made, the amendment becomes effective only to the extent
that it is confirmed by the Bermuda Court. An application for amendment of the
memorandum of association must be made within 21 days after the date on which
the resolution altering the company's memorandum is passed. Such application may
be made on behalf of the persons entitled to make the application by one or more
of their number as they may appoint in writing for the purpose. No such
application may be made by persons voting in favour of the amendment.
Appraisal Rights and Shareholder Suits. Under Bermuda law, in the event
of an amalgamation of two Bermuda companies, a shareholder who is not satisfied
that fair value has been paid for his shares may apply to the Bermuda Court to
appraise the fair value of
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<PAGE> 42
his shares. The amalgamation of a company with another company requires the
amalgamation agreement to be approved by:
- the board of directors,
- a meeting of the holders of shares of the amalgamating company of which
they are directors,
- a meeting of the holders of each class of such shares, and
- the Bermuda Minister of Finance (who may grant or withhold consent at his
discretion).
Class actions and derivative actions are generally not available to
shareholders under Bermuda law. The Bermuda courts, however, would ordinarily be
expected to permit a shareholder to commence an action in the name of a company
to remedy a wrong done to the company where the act complained of:
- is alleged to be beyond the corporate power of the company,
- is illegal, or
- would result in the violation of the company's memorandum of association
or bye-laws.
Furthermore, consideration would be given by the Court to acts that are
alleged to constitute a fraud against the minority shareholders or, for
instance, where an act requires the approval of a greater percentage of the
company's shareholders than those who actually approved it.
When the affairs of a company are being conducted in a manner oppressive or
prejudicial to the interests of some part of the shareholders, one or more
shareholders may apply to the Bermuda Court for an order regulating the
company's conduct of affairs in the future or ordering the purchase of the
shares by any shareholder, by other shareholders or by the company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is The Bank of New
York.
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TAXATION
This summary of certain tax considerations is based upon current (as of the
date of this prospectus) laws, treaties, cases, regulations and rulings, all of
which are subject to change, possibly with retroactive effect. It does not
consider all the tax issues that might be relevant to an investor or that depend
upon an investor's particular circumstances.
Prospective investors should consult their own professional advisors about
the tax consequences of acquiring, holding and disposing of the preferred stock
under the laws of the jurisdictions in which they are subject to taxation.
The legal conclusions set forth below in the discussion of U.S. tax law are
the opinions of Willkie Farr & Gallagher, our U.S. counsel. The summary of
certain Bermuda tax consequences is the opinion of Appleby, Spurling & Kempe,
our Bermuda counsel.
UNITED STATES TAX CONSIDERATIONS
Taxation of United States Holders of Series B Preferred and Common
Stock. This section discusses certain rules applicable to a holder of stock
that is a United States Holder. For purposes of this discussion, a "United
States Holder" means a holder of stock who or which is
- an individual who is a citizen or resident of the United States for U.S.
federal income tax purposes,
- a corporation or other entity taxable as a corporation created or
organized under the laws of the United States or any political
subdivision thereof (including the States and the District of Columbia),
- an estate or trust described in Section 7701(a)(30) of the Internal
Revenue Code of 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 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 Series B Preferred Stock, as discussed below.
We may begin accumulating earnings and profits in 2000 and, if so, these rules
will determine the extent to which dividend payments constitute ordinary income,
return of capital, or capital gain. Dividends on the Series B Preferred Stock
paid with common stock will be taxed in the same manner as a cash distribution
in an amount equal to the fair market value of such stock. Certain adjustments
to the Conversion Price of the Series B Preferred Stock also would be taxed as
if they were cash distributions, generally equal in
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amount to the fair market value of any increase in proportionate interest in us
caused by the adjustment.
Because we are a foreign corporation, the dividend payments will not be
eligible for the inter-corporate dividends-received deduction.
Subject to the discussion below on passive foreign investment companies
("PFICs") and assuming the United States Holder holds the stock as a capital
asset, any gain or loss recognized by a United States Holder on the sale or
other disposition (other than a redemption by us) of stock will be capital gain
or loss. Such capital gain or loss will be long-term or short-term depending on
the holding period for the stock. A United States Holder will also generally
recognize capital gain or loss upon a redemption of stock for cash.
Notwithstanding the foregoing, on a redemption of Series B Preferred Stock,
in certain limited circumstances (primarily those involving United States
Holders whose proportionate interests in us remain the same or increase after
the redemption, and those involving United States Holders with significant
interests in us whose interests in us are not materially reduced as a result of
the redemption), such United States Holders may be required to treat any
payments received with respect to such redemption as a dividend (taxable as
described above) in whole or in part, without offset for such United States
Holder's basis in the Series B Preferred Stock, and may not be entitled to
recognize a loss.
Subject to the discussion below on PFICs, the conversion of preferred stock
into common stock or the receipt of solely common stock on a Provisional,
Optional or Mandatory Redemption would not be a taxable event. If both cash and
common stock are received in a redemption, the United States Holder would
realize a gain (which under certain limited circumstances may be taxed as
ordinary dividend income) equal to the amount by which the fair market value of
the common stock and the cash received exceeded his tax basis in the Security
surrendered. However, the gain recognized for tax purposes would be the lesser
of (x) the gain realized or (y) the cash received.
Special rules apply to the taxation of a U.S. shareholder in a PFIC. A PFIC
is a foreign corporation (1) 75% or more of whose income is passive or (2) 50%
or more of whose assets produce or are held to produce passive income. We
believe that we have not been a PFIC and will not become one. We continue to
earn, through Globalstar, sufficient active income to avoid PFIC status.
However, Globalstar may earn passive income such as interest on working capital
and royalties on certain intangibles. Furthermore, the extent and timing of
Globalstar's active business income cannot be predicted with certainty.
If we were a PFIC, unless a United States Holder of Series B Preferred
Stock or common stock made the QEF election described below, he would be subject
to a tax-deferral charge on gain on a disposition of such stock and on certain
"excess distributions" received from us. Any such gains or excess distributions
would be taxable at ordinary income rates. Under currently proposed, but not yet
adopted, Treasury Regulations, the exchange of the Series B Preferred Stock for
common stock (either on conversion or on redemption of the Series B Preferred
Stock) would not be a "disposition" if we were a PFIC for the taxable year in
which the conversion occurred. If we had been a PFIC but were no longer, the
exchange would appear to be considered a taxable event.
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If a United States Holder makes the qualified electing fund ("QEF")
election, he will be required to include in his taxable income his pro rata
share of our ordinary earnings and net capital gain for each taxable year
(regardless of when or whether cash attributable to such income is actually
distributed to such shareholder by us). If the United States Holder makes a QEF
election, the tax-deferral charge and ordinary income rules described in the
preceding paragraph will not apply. Actual distributions out of amounts so
included in income will not be taxable to the shareholder. A United States
Holder's tax basis in its shares of stock will be increased by the amount so
included and decreased by the amount of nontaxable distributions. Additionally,
under currently proposed, but not yet adopted, Treasury Regulations, a United
States Holder may be permitted to make a "special preferred QEF election."
United States Holders considering a special preferred QEF election should
consult their own tax advisors as to the availability and consequences of such
special preferred QEF election.
The QEF election is effective only if we make certain required information
available to the United States Holders. In the event we are characterized as a
PFIC for federal income tax purposes, we will undertake to provide each United
States Holder with the information needed to make a QEF election and to
determine the pro rata share of our ordinary earnings and net capital gain
applicable to the Series B Preferred Stock and common stock.
A U.S. shareholder that holds "marketable" stock in a PFIC may, in lieu of
making a QEF election, avoid certain unfavorable consequences of the PFIC rules
by electing to mark the PFIC stock to market as of the close of each taxable
year. If the preferred stock becomes marketable, or if a United States Holder
has common stock, which is marketable, then such United States Holder may be
eligible to be taxed on a mark-to-market basis with regard to such stock. If
such United States Holder so elected, he would be taxed on changes in market
value of the stock from year to year, whether or not he actually sold such
stock. A United States Holder that makes the mark-to-market election will be
required to include in income each year as ordinary income an amount equal to
the excess, if any, of the fair market value of the stock at the close of the
year over the United States Holder's adjusted tax basis in such stock. If, at
the close of the year, the United States Holder's adjusted tax basis exceeds the
fair market value of the stock, then the United States Holder may deduct any
such excess from ordinary income, but only to the extent of net mark-to-market
gains previously included in income. Any gain from the actual sale of the PFIC
stock will be treated as ordinary income, and any loss will be treated as
ordinary loss to the extent of net mark-to-market gains previously included in
income.
Liquidated Damages. We intend to take the position that the Liquidated
Damages described above under "Description of Preferred Stock -- Registration
Rights; Liquidated Damages" will be taxable to the United States Holder as
ordinary income in accordance with the holder's method of accounting for U.S.
federal income tax purposes. It is possible, however, that the IRS may take a
different position, in which case a United States Holder might be required to
include such Liquidated Damages in income as such Liquidated Damages accrue or
become fixed (regardless of such United States Holder's usual method of tax
accounting). The source of such Liquidated Damages is unclear; we believe that
they should be treated as foreign source income for foreign tax credit purposes.
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Taxation of Non-U.S. Holders of Stock. We expect that most of our income
will be from sources outside the United States and will not be effectively
connected with a U.S. trade or business. Thus, non-U.S. Holders will not be
subject to U.S. federal taxation on distributions received from us unless those
distributions are effectively connected with the conduct by the non-U.S. Holder
of a trade or business in the United States. In addition, such non-U.S. Holders
will not be subject to U.S. federal income taxation on gains realized on a sale
or exchange of Series B Preferred Stock or common stock unless the sale of such
stock is attributable to an office or fixed place of business maintained by him
in the United States. The determination of whether a non-U.S. Holder is engaged
in the conduct of a trade or business in the United States or whether the sale
of a non-U.S. Holder's stock is attributable to an office or fixed place of
business of the non-U.S. Holder in the United States depends on the facts and
circumstances of each investor's case. Each prospective non-U.S. Holder should
consult with his own tax advisor to determine whether his distributions or gains
will be subject to U.S. federal income taxation.
Taxation of GTL. Our tax consequences result from our status as a partner
in Globalstar. As a partnership, Globalstar itself will not be subject to U.S.
federal income taxation. Generally, its partners will be taxed as if they
directly expended their share of Globalstar expenditures and directly realized
their share of Globalstar income. We expect, based on Globalstar's description
of its proposed activities, that most of our income will be from sources outside
the United States and that such income will not be effectively connected with
the conduct of a trade or business within the United States ("Foreign Income").
Thus, we believe that there generally will be no U.S. taxes on our share of
Globalstar's Foreign Income. The 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 so as to subject that income to regular U.S. federal income
tax and a 30% branch profits tax. Any portion of our income from sources outside
the United States, realized through Globalstar or otherwise, may be subject to
taxation by foreign countries and the extent to which these countries may
require us or Globalstar to pay tax or to make payments in lieu of tax cannot be
determined in advance.
We will be subject to U.S. tax at regular U.S. federal, state and local
corporate rates on our share of Globalstar's income that is effectively
connected with the conduct of a trade or business in the United States ("U.S.
Income") and will be required to file federal, state and local income tax
returns with respect to such U.S. Income. Globalstar is obligated to provide the
information required for us to prepare our federal, state and local income tax
returns. Globalstar will make cash distributions to us in an amount sufficient
to pay our U.S. tax liability attributable to the Series B Preferred Partnership
Interests. In addition, Globalstar intends to make cash distributions, to the
extent of available funds, to all partners, including us, holding ordinary
partnership interests until the non-U.S. partners, again including us, have been
distributed an amount sufficient to enable them to pay the federal, state and
local income taxes on their share of Globalstar's U.S. Income. The distribution
to non-U.S. partners for federal income taxes may take the form of a withholding
tax payment made by
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Globalstar to the U.S. Treasury. The amount withheld may exceed the amount of
our federal income tax liability, in which case we would be entitled to seek a
refund from the U.S. Treasury for the excess amount. In addition to the regular
U.S. taxes, we will be subject to a United States branch profits tax (currently
at a 30% rate) on actual or deemed withdrawals of our share of Globalstar's U.S.
Income.
BERMUDA TAX CONSIDERATIONS
At the date of this prospectus, there is no Bermuda income tax, corporation
or profits tax, withholding tax, capital gains tax, capital transfer tax, estate
or stamp duty or inheritance tax payable by us or the Holders of Series B
Preferred Stock or our common 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 Series B Preferred Stock
or other obligations, or to any land we lease or let in Bermuda.
We are liable to pay the Bermuda government an annual registration fee
calculated on a sliding scale based upon our assessable capital which fee will
not exceed BD$26,500.
We have been classified as non-resident of the Bermuda exchange control
area by the Bermuda Monetary Authority, whose permission for the issue of the
Series B Preferred Stock has been obtained. The transfer of stock between
persons regarded as non-resident of Bermuda for exchange control purposes and
the issue and redemption of stock to and by such persons may be effective
without specific consents under the Exchange Control Act 1972 of Bermuda and
Regulations made thereunder. Transfers involving any person regarded as resident
in Bermuda for exchange control purposes may require specific authorization
under that Act. We, by virtue of being a non-resident of Bermuda for exchange
control purposes, are free to acquire, hold and sell any foreign currency,
securities and other investments without restrictions.
Purchasers of stock may be required to pay stamp taxes and other charges in
accordance with the laws and practices of the country of purchase. Prospective
purchasers should consult their tax advisers as to the tax laws of applicable
jurisdictions and the specific tax consequences of acquiring, holding and
disposing of the Series B Preferred Stock.
The Series B Preferred Stock does not provide for additional payments by us
following a change in the tax laws or rules of Bermuda that is adverse to the
Holders of Series B Preferred Stock or our common stock.
TAX CONSIDERATIONS IN OTHER JURISDICTIONS
Based upon its review of current tax laws, including applicable
international tax treaties of certain countries that Globalstar believes to be
among its significant potential markets,
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we expect that a significant portion of our worldwide income will not be subject
to tax by the United States, Bermuda or by the countries from which we derive
our income. However, to the extent that Globalstar bears a higher foreign tax
because any holder of ordinary partnership interests (including us) is not
subject to United States tax on its share of Globalstar's foreign income, the
additional foreign tax will be specifically allocated to such partner and will
reduce amounts distributed by Globalstar to such partner with respect to its
ordinary partnership interests.
SELLING STOCKHOLDERS
We originally issued and sold the Series B Preferred Stock in December 1999
to Bear, Stearns & Co. Inc., Banc of America Securities LLC, Lehman Brothers
Inc., and C.E. Unterberg, Towbin, in a private placement. The Series B Preferred
Stock was then resold by those initial purchasers in transactions exempt from
the registration requirements of the Securities Act in the United States to
qualified institutional buyers (as defined in Rule 144A under the Securities
Act) and to a limited number of institutional accredited investors (as defined
in Rule 501(A) under the Securities Act). The selling stockholders listed below
may, pursuant to this prospectus, from time to time offer and sell the number of
shares of Series B Preferred Stock listed below and/or the number of shares of
common stock into which such Series B Preferred Stock has been converted (the
"Conversion Shares") or that may be issued in connection with dividend,
redemption or other payments thereon (the "Payment Shares"). The Conversion
Shares are also listed below.
<TABLE>
<CAPTION>
SELLING SHARES OF CONVERSION
PREFERRED STOCKHOLDERS PREFERRED STOCK STOCK
- ---------------------- --------------- ----------
<S> <C> <C>
Q Opportunity Fund Ltd..................... 1,690,200 3,255,782
Tribeca Investments LLC.................... 221,000 425,706
Deutsche Bank Securities Inc. ............. 182,700 351,930
The Guardian Life Insurance Co. of
America................................. 150,000 288,941
Double Black Diamond Offshore LDC.......... 119,610 230,401
Bear, Stearns & Co. Inc.................... 119,000 229,226
Banc of America Securities LLC............. 85,000 163,733
Forest Global Convertible Fund AS.......... 65,400 125,118
AIG Sound Shore Holdings Ltd............... 62,500 120,392
STI Capital Management..................... 58,800 113,265
Peoples Benefit Life Insurance Company..... 50,000 96,314
Black Diamond Offshore, Ltd................ 44,390 85,507
Fidelity Convertible Securities Fund....... 42,000 80,903
SG Cowen Securities........................ 40,000 77,051
JMG Capital Partners, LP................... 42,300 81,481
JMG Triton Offshore Fund, Ltd.............. 42,300 81,481
South Fork Partners........................ 20,000 38,525
The Bass Management Trust.................. 20,000 38,525
Forest Fulcrum Fund, L.P................... 18,200 35,058
Family Service Life Insurance Co........... 14,000 26,968
Pine Grove Equitized Partners V, L.L.C..... 12,500 24,078
Bancroft Convertible Fund, Inc............. 10,000 19,263
</TABLE>
47
<PAGE> 49
<TABLE>
<CAPTION>
SELLING SHARES OF CONVERSION
PREFERRED STOCKHOLDERS PREFERRED STOCK STOCK
- ---------------------- --------------- ----------
<S> <C> <C>
Ellsworth Convertible Growth and Income
Fund, Inc............................... 10,000 19,263
Sylvan IMA LTD c/o Forest Investment
Mgmt.................................... 7,400 14,254
Forest Performance Fund L.P................ 6,200 11,943
The Guardian Pension Trust................. 5,700 10,980
AIG Sound Shore Opportunity Holding Fund
Ltd..................................... 5,000 9,631
Forest Alternative Strategies Fund SM...... 2,800 5,394
AIG Sound Shore Strategic Holding Fund
Ltd..................................... 2,500 4,816
Forest Convertible L.P..................... 1,500 2,889
RBC Dominion............................... 1,100 2,119
</TABLE>
In addition, Loral has granted to certain of its officers and directors
options to acquire shares of our common stock (the "Option Shares"). Upon
exercise of such options, the selling stockholders listed below may, pursuant to
this prospectus, from time to time, offer and sell the number of Option Shares
listed below.
<TABLE>
<CAPTION>
SHARES OF
SELLING COMMON
COMMON STOCKHOLDERS STOCK
- ------------------- ---------
<S> <C>
Bernard L. Schwartz......................................... 560,000
Gregory J. Clark............................................ 20,000
Michael P. DeBlasio......................................... 120,000
Nicholas C. Moren........................................... 100,000
Eric J. Zahler.............................................. 100,000
Harvey B. Rein.............................................. 80,000
Howard Gittis............................................... 80,000
Robert B. Hodes............................................. 80,000
Gershon Kekst............................................... 80,000
Charles Lazarus............................................. 80,000
Melvin A. Ruderman.......................................... 80,000
E. Donald Shapiro........................................... 80,000
Allen M. Shinn.............................................. 80,000
Arthur L. Simon............................................. 80,000
Daniel Yankelovich.......................................... 80,000
</TABLE>
The information concerning the selling stockholders may change from time to
time. If required, such changes will be set forth in accompanying supplements to
this prospectus. Because the selling stockholders may offer all or some portion
of the common stock and/or preferred stock pursuant to this prospectus, and
because there are currently no agreements, arrangements or understandings with
respect to the sale of common stock or preferred stock, we cannot predict the
number of shares of common stock and preferred stock that will be held by the
selling stockholders upon termination of this offering.
48
<PAGE> 50
PLAN OF DISTRIBUTION
The Series B Preferred Stock, the Conversion Shares, the Payment Shares and
the Option Shares (collectively, the "Securities") offered pursuant to this
prospectus may be sold from time to time to purchasers directly by the selling
stockholder. Alternatively, the selling stockholders may from time to time offer
the Securities through brokers, dealers or agents who may receive compensation
in the form of discounts, concessions or commissions from the selling
stockholders and/or the purchasers of the Securities for whom they may act as
agent. The selling stockholders and any such brokers, dealers or agents who
participate in the distribution of the Securities may be deemed to be
"underwriters," and any profits on the sale of the Securities by them and any
discounts, commissions or concessions received by any such brokers, dealers or
agents might be deemed to be underwriting discounts and commissions under the
Securities Act. To the extent the selling stockholders may be deemed to be
underwriters, the selling stockholders may be subject to certain statutory
liabilities of the Securities Act, including, but not limited to, Sections 11,
12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.
The Securities offered hereby may be sold from time to time by the selling
stockholders, or, to the extent permitted, by pledgees, donees, transferees or
other successors in interest. The Securities may be disposed of from time to
time in one or more transactions through any one or more of the following:
- a block trade, in which the broker or dealer so engaged will attempt to
sell the Securities as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by such broker or
dealer for its account;
- ordinary brokerage transactions and transactions, in which the broker
solicits purchasers;
- an exchange distribution in accordance with the rules of such exchange or
transactions in the over-the-counter market;
- the writing of options on the Securities;
- by the purchasers directly;
- sales through underwriters or dealers who may receive compensation in the
form of underwriting discounts, concessions, or commissions from the
selling stockholders or such successors in interest and/or from the
purchasers of the Securities for whom they may act as agent; and
- the pledge of the Securities as security for any loan or obligation,
including pledges to brokers or dealers who may, from time to time,
themselves effect distributions of the Securities or interest therein.
In addition, the Securities covered by this prospectus may be sold in
private transactions or under Rule 144 rather than pursuant to this prospectus.
49
<PAGE> 51
There is no assurance that any selling stockholder will sell any or all of
the Securities offered by it hereunder or that any such selling stockholder will
not transfer, devise or gift such Securities by other means not described
herein.
Such sales may be made at prices and at terms then prevailing or at prices
related to the then current market price or at negotiated prices and terms. In
effecting sales, brokers or dealers may arrange for other brokers or dealers to
participate. The selling stockholders or such successors in interest, and any
underwriters, brokers, dealers or agents that participate in the distribution of
the Securities, may be deemed to be "underwriters" within the meaning of the
Securities Act, and any profit on the sale of the Securities by them and any
discounts, commissions or concessions received by any such underwriters,
brokers, dealers or agents may be deemed to be underwriting commissions or
discounts under the Securities Act.
In the event of any such offering, we will distribute a revised prospectus
or prospectus supplement, if required, which will set forth the aggregate amount
and type of Securities being offered and the terms of the offering, including
the name or names of any underwriters, dealers or agents, any discounts,
commissions and other items constituting compensation from the selling
stockholders and any discounts, commissions or concessions allowed or reallowed
or paid to dealers. Such prospectus supplement and, if necessary, a
post-effective amendment to the registration statement of which this prospectus
is a part, will be filed with the SEC to reflect the disclosure of additional
information with respect to the distribution of the Securities.
To the best of our knowledge, there are currently no plans, arrangements or
understandings between any selling stockholders and any broker, dealer, agent or
underwriter regarding the sale of the Securities by the selling stockholders.
The selling stockholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M, which may limit the timing of purchases and sales of any of the Securities by
the selling stockholders and any other such person. Furthermore, under
Regulation M under the Exchange Act, any person engaged in the distribution of
the Securities may not simultaneously engage in market-making activities with
respect to the particular Securities being distributed for certain periods prior
to the commencement of such distribution. All of the foregoing may affect the
marketability of the Securities and the ability of any person or entity to
engage in market-making activities with respect to the Securities.
Pursuant to the terms of the registration rights agreement dated December
8, 1999, among us, Globalstar and the initial purchasers (the "Registration
Rights Agreement"), holders of the Series B Preferred Stock covered by a shelf
registration statement, on the one hand, and Globalstar and us, on the other
hand, have agreed to indemnify each other against certain liabilities, including
certain liabilities under the Securities Act, or will be entitled to
contribution in connection therewith.
Pursuant to the Registration Rights Agreement, we have agreed to pay
substantially all expenses of the registration, offering and sale of the Series
B Preferred Stock to the public, including, without limitation, SEC filing fees
and expenses of compliance with state
50
<PAGE> 52
securities or "blue sky" laws; provided, however, that the selling stockholders
will pay all underwriting discounts, selling commissions and related fees, if
any.
LEGAL MATTERS
The validity of the Series B Preferred Stock, the Conversion Shares, the
Payment Shares and the Option Shares will be passed upon for us by Appleby,
Spurling & Kempe, Hamilton, Bermuda. As of December 31, 1999, partners and
counsel in Willkie Farr & Gallagher beneficially owned approximately 110,000
shares of common stock. Mr. Robert B. Hodes is counsel to the law firm of
Willkie Farr & Gallagher and a Director of Loral and our company and a member of
the Executive and Audit Committees of the Boards of Directors of both Loral and
our company.
EXPERTS
The annual financial statements of GTL and Globalstar incorporated in this
prospectus by reference from GTL's and Globalstar's Annual Report on Form 10-K
for the year ended December 31, 1998, have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports, which are incorporated
herein by reference, and have been so incorporated in reliance upon the reports
of such firm given upon their authority as experts in auditing and accounting.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with it, which means we can satisfy our legal obligations to disclose important
information contained in those documents by referring you to them. The
information included in the following documents is incorporated by reference and
is considered to be a part of this prospectus. More recent information that we
file with the SEC automatically updates and supersedes any inconsistent
information contained in prior filings.
The documents listed below have been filed under the Securities and
Exchange Act of 1934, with the SEC and are incorporated herein by reference:
- our and Globalstar's Annual Report on Form 10-K for the year ended
December 31, 1998;
- our 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;
51
<PAGE> 53
- our Current Report on Form 8-K, filed on December 2, 1999;
- our Current Report on Form 8-K, filed on December 21, 1999;
- our Current Report on Form 8-K, filed on February 1, 2000; 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 Series B Preferred Stock and common stock under this prospectus
is completed.
We will provide, upon request, without charge to each person, including any
person having a control relationship with that person, to whom a prospectus is
delivered, a copy of any or all of the information that has been incorporated by
reference in this prospectus but not delivered with this prospectus. If you
would like to obtain this information from us, please direct your request,
either in writing or by telephone to Globalstar Telecommunications Limited,
Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda, Attn: Secretary, (441)
295-2244.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC and have filed a registration statement with the SEC on
Form S-3 to register these securities. Since this prospectus does not contain
all of the information included in the registration statement you may wish to
refer to the registration statement and its exhibits for further information
about us and the registered securities.
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.
52
<PAGE> 54
- ------------------------------------------------------
- ------------------------------------------------------
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 Summary.................. 1
Risk Factors........................ 7
Forward-Looking Statements.......... 16
Ratios.............................. 17
Use of Proceeds..................... 17
Business............................ 18
Description of Preferred Stock...... 24
Description of Common Stock......... 38
Taxation............................ 42
Selling Stockholders................ 47
Plan of Distribution................ 49
Legal Matters....................... 51
Experts............................. 51
Incorporation of Certain Documents
by Reference...................... 51
Where You Can Find More
Information....................... 52
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
3,000,000 SHARES
OF 9% SERIES B CONVERTIBLE
REDEEMABLE PREFERRED STOCK
AND
8,518,693 SHARES OF
COMMON STOCK
GLOBALSTAR
TELECOMMUNICATIONS
LIMITED
-------------------------
PROSPECTUS
-------------------------
BEAR, STEARNS & CO. INC.
BANC OF AMERICA SECURITIES LLC
LEHMAN BROTHERS
C.E. UNTERBERG, TOWBIN
ING BARINGS
CREDIT LYONNAIS SECURITIES
(USA) INC.
FEBRUARY 14, 2000
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