<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 333-83239
PROSPECTUS SUPPLEMENT
TO PROSPECTUS DATED AUGUST 18, 1999
5,246,209 SHARES
[GLOBALSTAR LOGO]
GLOBALSTAR TELECOMMUNICATIONS LIMITED
COMMON STOCK
-------------------------
This is a public offering of 5,246,209 shares of our common stock to certain
partners of Globalstar or their affiliates.
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public offering price..................................... $10.7125 $56,200,000
Proceeds, before expenses, to us.......................... $10.7125 $56,200,000
</TABLE>
Our common stock is traded on the Nasdaq National Market under the symbol
"GSTRF," and the last reported sale price of the common stock on September 21,
2000, was $9.25 per share.
-------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE S-5 TO READ ABOUT CERTAIN RISKS THAT YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY
OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------------------
The date of this prospectus supplement is September 22, 2000
<PAGE> 2
PROSPECTUS SUPPLEMENT SUMMARY
You should read the entire prospectus supplement, our base prospectus dated
August 18, 1999, and the other documents incorporated by reference before making
an investment decision. The information in this prospectus supplement replaces
any inconsistent information in the base prospectus and in the other documents
incorporated herein by reference. Globalstar Telecommunications Limited is
referred to in this prospectus supplement as "we", "our", "us" or "GTL" and
Globalstar, L.P. is referred to as "Globalstar."
GLOBALSTAR TELECOMMUNICATIONS LIMITED
OUR COMPANY
We are a general partner of Globalstar, which has recently commenced
operations of its global telecommunications network. As of June 30, 2000, we
owned approximately 39% of Globalstar's ordinary partnership interests and,
after giving effect to the purchase of Globalstar's ordinary partnership
interests with the proceeds from this offering, we will own approximately 40% of
Globalstar's ordinary partnership interests, without giving any effect to our
purchase of partnership interests resulting from the offering of up to $105
million of our common stock through Bear Stearns, pursuant to a common stock
purchase agreement entered into on September 18, 2000.
Loral Space & Communications Ltd., one of the world's leading satellite
companies, is one of the founders of, and, through a subsidiary, serves as the
managing general partner of, Globalstar.
GLOBALSTAR
Globalstar owns and operates a satellite constellation that forms the
backbone of a global telecommunications network designed to serve virtually
every populated area of the world. Globalstar's network, which we refer to as
the Globalstar system, uses Qualcomm's patented CDMA technology to provide
high-quality mobile and fixed telephone service to customers who live, work or
travel beyond the reach of terrestrial-based communications networks. Qualcomm
has agreed that Globalstar will be the only provider of mobile satellite
services to which it will license its patented CDMA technology.
Globalstar's service provider partners, who are experienced
telecommunications companies, have launched, are launching or are preparing to
launch, service in key markets worldwide. Globalstar and its service provider
partners have also begun intensive marketing campaigns and are adopting
multifaceted, locally oriented marketing strategies to serve their markets.
Under Globalstar's agreements with its service providers, these partners are the
exclusive providers of Globalstar service within their assigned territory and
will retain their exclusivity as long as they meet minimum performance goals.
Under these agreements, Globalstar acts as a wholesaler of capacity on its space
segment to its service providers. Globalstar has assigned the largest service
territories to its founding strategic partners, including a France Telecom
Alcatel joint venture, Vodafone AirTouch, ChinaSat, Elsacom and Dacom.
The Globalstar system commenced commercial service in the first quarter of
2000 when Globalstar began its transition from a development stage entity to an
operating limited partnership. As of August 31, 2000, there were 20 gateways in
revenue service, and three additional gateways have completed their system
testing process, two of which are expected to be in revenue service during the
third quarter of 2000. In addition, several existing gateways have been or are
being upgraded to expand their coverage areas, bringing service to new
S-1
<PAGE> 3
territories and markets. These include large parts of Alaska, the northern
Atlantic sea lanes between North America and northern Europe, most of the
Caribbean and the Sea of Japan.
Globalstar service providers are now providing commercial service in 40
countries, including Argentina, Australia, Brazil, Canada, China, Mexico, Saudi
Arabia, South Korea, the United States and virtually all of western Europe. By
the end of the fourth quarter 2000, Globalstar service providers plan to have
commercial service available in approximately 60 additional countries, including
Russia, Scandinavia and Turkey.
The Globalstar system is designed to offer a cost-effective communications
solution for areas underserved or unserved by existing telecommunications
infrastructures. Globalstar mobile phones are simple to use -- just like
ordinary cellular telephones -- and are among the smallest, lightest and least
expensive satellite phones currently available. These phones are multimode,
functioning as cellular phones where terrestrial cellular service is available
and as satellite phones where cellular service is not available. Globalstar
phones provide this multimode capability without separate modules or plug-ins.
Globalstar pay phones and fixed wireless phones for business and residential use
provide basic telephone service in rural villages and at remote industrial and
residential sites.
Globalstar phones have familiar features such as phone book, voicemail,
short messaging service, and, in some service areas, call forwarding. Commercial
data service is expected to be available in North America later this year, and
in Europe, Australia and other GSM territories in 2001. As of August 31, 2000,
Globalstar's vendors Qualcomm, Ericsson and Telit had manufactured,
collectively, approximately 120,000 Globalstar phones.
Globalstar's utilization of Qualcomm's CDMA technology should enable it to
swiftly adopt future improvements as this industry-leading wireless technology
evolves. In addition, because the intelligence of the Globalstar system is
located on the ground, future enhancements are easily implemented.
As an example of this design flexibility, Globalstar recently concluded
preliminary agreements with In-Flight Network, a joint venture between News
Corporation and Rockwell Collins, to provide Internet and e-mail services to
passengers in commercial and other aircraft. Under those agreements, Globalstar,
In-Flight Network and Qualcomm will participate jointly in the development of a
system that will provide broadband Internet access as well as e-mail and
voice-over-IP applications directly to aircraft. In 2001, Globalstar expects to
provide an independent two-way channel for Internet access, e-mail, downloading
of data and other applications, supplemented by a very high bandwidth forward
link over a geostationary satellite, capable of providing high volume content
such as streaming video.
Globalstar's full constellation of 52 satellites, including four in-orbit
spares, is in orbit and functioning. Based on our experience to date, we expect
Globalstar satellites to have a useful life of 10 years, rather than our
original expectation of 7 1/2 years. The Globalstar satellites use a simple,
traditional "bent pipe" design, amplifying and reflecting received signals
directly back to earth, with no intersatellite links. Gateways owned and
operated by Globalstar service providers then connect customer calls through the
existing public telephone network. As a result, the Globalstar system will
complement and extend, rather than bypass, the existing telephone network
infrastructure. Globalstar believes its call quality is equal to, or better
than, digital cellular connections.
According to industry sources, more than 80% of the world's land mass is
not covered by cellular service. Globastar believes, based on market research,
that its addressable market -- those who live, work or regularly travel to areas
underserved or unserved by existing telecommunications infrastructure and who
desire and have the ability to pay for telephone service such as that offered by
Globalstar -- is approximately 40 million potential customers. We expect that
Globalstar's first generation system will have a system capacity of
approximately 7 million subscribers, less than one fifth of Globalstar's
potential addressable market. In fact, because of the limited spectrum available
for use by mobile satellite services
S-2
<PAGE> 4
like Globalstar, the combined capacity of Globalstar and the other existing and
announced mobile satellite service systems are capable of serving only a portion
of this market.
Globalstar's original consortium of 12 leading international
telecommunications service providers and manufacturers has grown into an
international organization with marketing channels in 125 countries and
agreements with over 220 local service providers. Globalstar-supported
cooperative advertising is creating brand awareness globally and within selected
market segments, while sales channels are focused both on the mass market as
well as targeted market segments, including:
- government, including police, emergency and military users;
- commercial freight and fishing vessels, cruise ships and recreational
boats;
- truck drivers and business travelers;
- the forestry, mining, oil and gas and other natural resource industries;
- wilderness guides and outdoor enthusiasts;
- agribusiness;
- commercial and private aircraft; and
- utilities.
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.
From July 1, 2000 through December 31, 2000, Globalstar expects to spend
approximately $161 million for the enhancement of its system software, for the
eight spare satellites being constructed by Space Systems/Loral, for development
work completed but not paid at June 30, 2000, for repayment of vendor financing
and for the net financing provided to Globalstar's service providers to assist
in the purchase of gateways, fixed access terminals and handsets (net of
expected receipts of $129 million from the service providers as repayment of
such financing). In addition, cash interest, preferred dividends and operating
costs are estimated to be between $100 million and $125 million per quarter for
the remainder of 2000.
Globalstar expects that its cash on hand ($463 million at June 30, 2000),
the drawdown of all its remaining available credit (approximately $29 million at
June 30, 2000), the expected proceeds of this offering, and, assuming the $105
million offering with Bear Stearns is completed this year, the expected proceeds
from that offering, will enable it to end 2000 with a cash balance of
approximately $206 million. Globalstar will require significant additional funds
to cover its cash outflows for 2001, which it expects will include operating
expenses, interest on indebtedness and dividends on preferred stock of as much
as $500 million, as well as capital expenditures and other cash requirements.
The amount of such additional funds will depend, among other things, upon the
amount and timing of revenues generated. We cannot assure you of the amount of
revenues that will be generated or of the accuracy of the amounts estimated
above. If Globalstar is not able to raise sufficient funds, the lack of funds
may result in a default on its debt facilities. If Globalstar cannot obtain
waivers or otherwise cure such default, there could be a severe adverse effect
on the value of our shareholders' equity. See "Risk Factors" beginning on page
S-5 herein and "Liquidity and Capital Resources" in our and Globalstar's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 incorporated
by reference herein.
Globalstar's $500 million credit agreement contains a financial condition
covenant which comes into effect on March 31, 2001, and requires, among other
things, that Globalstar have revenues of $100 million for the four quarters
ending March 31, 2001. Globalstar's revenues for
S-3
<PAGE> 5
the first of these four quarters, the quarter ended June 30, 2000, were
$708,000. Given the level of revenues in the quarter ended June 30, 2000,
Globalstar anticipates that the growth in revenues during the subsequent three
quarters will not be sufficient to meet the $100 million revenue covenant. If
Globalstar cannot satisfy this covenant or obtain waivers or amendments from a
majority of the bank lenders or fulfill the $500 million obligation in a form
satisfactory to all the bank lenders, Globalstar would be in default under its
debt facilities (including vendor financing) and Globalstar's lenders and
bondholders would have the right to accelerate payment of their loans to
Globalstar. If Globalstar is not able to obtain waivers or refinance such debt,
there could be a severe adverse effect on the value of our shareholders' equity.
Loral SatCom Ltd. and Loral Satellite, Inc., directly and indirectly wholly
owned subsidiaries of Loral Space & Communications, Ltd., have jointly and
severally guaranteed Globalstar's obligations under this credit agreement. See
"Risk Factors" beginning on page S-5 herein and "Liquidity and Capital
Resources" in our and Globalstar's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000 incorporated by reference herein.
THE OFFERING
We are offering 5,246,209 shares of our common stock under this prospectus
supplement to certain partners of Globalstar or their affiliates.
These partners or their affiliates have agreed not to sell the shares for a
period of 90 days after this offering.
<TABLE>
<S> <C>
Common stock offered by us........... 5,246,209
Common stock to be outstanding after
the offering(1).................... 102,157,948
Use of proceeds...................... Purchase of ordinary partnership interests in
Globalstar
Nasdaq National Market Symbol........ GSTRF
</TABLE>
-------------------------
(1) The number of shares outstanding after this offering is based on the number
of shares outstanding on June 30, 2000 and does not include shares of our
common stock issuable upon exercise of options or warrants or upon
conversion of our convertible preferred stock or shares of our common stock
issuable in connection with our $105,000,000 purchase agreement with Bear
Stearns. See "Risk Factors -- Holders of our common stock may be diluted by
future stock issuances."
S-4
<PAGE> 6
RISK FACTORS
You should carefully consider the following risks before you decide to buy
our common stock. An investment in our common stock also entails additional
risks which are described in our and Globalstar's Annual Report on Form 10-K for
the year ended December 31, 1999 and in our and Globalstar's Quarterly Report on
Form 10-Q for the quarter ended June 30, 2000 which are incorporated by
reference in this prospectus and in the base prospectus, to the extent they have
not been updated by the information provided to you in this section.
THE GLOBALSTAR SYSTEM ONLY RECENTLY COMMENCED OPERATIONS, AND CUSTOMER DEMAND
FOR THE SERVICE HAS EMERGED MORE SLOWLY THAN WE ORIGINALLY ANTICIPATED,
RESULTING IN LOWER THAN ANTICIPATED REVENUES. FAILURE TO OBTAIN SUFFICIENT
REVENUES COULD RESULT IN DEFAULT UNDER GLOBALSTAR'S DEBT FACILITIES.
Telephone systems using low-earth orbit satellites are a new business that
has not yet succeeded in the marketplace. Globalstar commenced commercial
operations in the first quarter of 2000 and has yet to generate significant
subscriber revenues, despite being in service in parts of the world for more
than six months. For the six month period ended June 30, 2000, Globalstar had
approximately $1.3 million of revenues. Globalstar's market penetration rates,
minutes of use and resulting revenues have been significantly less than its
management's original expectations. Roll-out of commercial service in countries
has also been slower than expected. Globalstar believes that it is too early in
the service roll-out to discern any trend or pattern in minutes of use and
resulting revenues that would be indicative of future results. There can be no
assurance that Globalstar will be able to rapidly and significantly improve its
market penetration rates and revenues from current levels to a level sufficient
to fund Globalstar's future cash requirements, including cash requirements to
service its debt. If Globalstar is unable to obtain sufficient funds to pay for
its debt service, Globalstar would be in default under its debt facilities and
there could be a severe adverse effect on the value of our shareholders' equity.
See "Liquidity and Capital Resources" in our and Globalstar's Quarterly Report
on Form 10-Q for the quarter ended June 30, 2000 incorporated by reference
herein.
The first company to launch service in this industry, Iridium L.L.C., filed
for bankruptcy in August 1999. Iridium terminated commercial service in March
2000, although it is currently providing service to its customers at no charge.
GLOBALSTAR MUST ACHIEVE SIGNIFICANT REVENUES QUICKLY IN ORDER TO MEET A
FINANCIAL COVENANT THAT WILL COME INTO EFFECT IN MARCH 2001.
Globalstar's $500 million credit agreement contains various financial
condition covenants, one of which comes into effect on March 31, 2001. This
covenant would require, among other things, that Globalstar have revenues of
$100 million for the four quarters ending March 31, 2001. Globalstar's revenues
for the first of these four quarters, the quarter ended June 30, 2000, were
$708,000. Given the level of revenues in the quarter ended June 30, 2000,
Globalstar anticipates that the growth in revenues during the subsequent three
quarters will not be sufficient to meet the $100 million revenue covenant.
If Globalstar cannot satisfy this covenant, obtain waivers or amendments
from a majority of the bank lenders, or fulfill the $500 million obligation in a
form satisfactory to all the bank lenders, Globalstar would be in default under
its debt facilities (including vendor financing) and Globalstar's lenders and
bondholders would have the right to accelerate payment of their loans to
Globalstar. If Globalstar is not able to obtain waivers or refinance such debt,
there could be a severe adverse effect on the value of our shareholders' equity.
Loral SatCom Ltd. and Loral Satellite, Inc., directly and indirectly wholly
owned subsidiaries of Loral Space & Communications Ltd., have jointly and
severally guaranteed Globalstar's obligations under this credit agreement.
S-5
<PAGE> 7
GLOBALSTAR WILL INCUR ADDITIONAL SYSTEM COSTS AND WILL REQUIRE SIGNIFICANT
ADDITIONAL FUNDS.
From July 1, 2000 through December 31, 2000, Globalstar expects to spend
approximately $161 million for the enhancement of its system software, for the
eight spare satellites being constructed by Space Systems/Loral, for development
work completed but not paid at June 30, 2000, for repayment of vendor financing
and for the financing provided to Globalstar's service providers to assist in
the purchase of gateways, fixed access terminals and handsets (net of expected
receipts of $129 million from the service providers as repayment of such
financing). In addition, cash interest, preferred dividends and operating costs
are estimated to be between $100 million and $125 million per quarter for the
remainder of 2000.
Globalstar expects that its cash on hand ($463 million at June 30, 2000),
the drawdown of all its remaining available credit (approximately $29 million at
June 29, 2000), the expected proceeds of this offering, and, assuming the $105
million offering with Bear Stearns is completed this year, the expected proceeds
from that offering, will enable it to end 2000 with a cash balance of
approximately $206 million. Globalstar will require significant additional funds
to cover its cash outflows for 2001, which it expects will include operating
expenses, interest on indebtedness and dividends on preferred stock of as much
as $500 million, as well as capital expenditures and other cash requirements.
The amount of such additional funds will depend, among other things, upon the
amount and timing of revenues generated. We cannot assure you of the amount of
revenues that will be generated or of the accuracy of the amounts estimated
above. If Globalstar is not able to raise sufficient funds, the lack of funds
may result in a default on its debt facilities. If Globalstar cannot obtain
waivers or otherwise cure such default, there could be a severe adverse effect
on the value of our shareholders' equity.
Globalstar also has secured from SS/L twelve and eighteen month options to
purchase two additional Delta launch vehicles. The total future commitment for
these launch vehicles is approximately $82 million plus escalation of 3% per
year. If these launch vehicles are not used by the end of 2003, Globalstar will
incur a termination charge of approximately $19 million.
LOCKHEED MARTIN IS DISPUTING GLOBALSTAR'S RIGHT TO ISSUE IT A $150 MILLION
SUBORDINATED NOTE IN SATISFACTION OF PAYMENTS MADE UNDER A GUARANTY.
On June 30, 2000, Globalstar's $250 million credit facility with The Chase
Manhattan Bank, which was fully drawn, matured, and was thereupon repaid in full
by its guarantors, including Lockheed Martin Corporation. Pursuant to the
relevant agreements entered into in 1996, Globalstar issued to all the
guarantors three-year notes in proportion to the principal amount of the credit
facility guarantees.
Lockheed Martin, however, has rejected the notes it received and is instead
asking Globalstar to issue new securities with additional rights and enhanced
value, without waiving its claim that it is entitled to receive an immediate
cash reimbursement by Globalstar of its $150 million payment to the bank
lenders. Globalstar disputes Lockheed Martin's interpretation of the relevant
agreements, but is, nonetheless, in discussions with Lockheed Martin to resolve
the dispute.
If the dispute is not resolved, we cannot be sure that if the matter were
litigated the court would agree with Globalstar's interpretation of the
agreements. Moreover, if as a result of this dispute, a holder of Globalstar
public bonds claimed a cross default under the applicable indentures, and a
court ruled against Globalstar, the maturity date of the bonds would be
accelerated. Management believes, however, that a court would agree with
Globalstar's interpretation of the relevant agreements.
S-6
<PAGE> 8
GLOBALSTAR FACES INTENSE COMPETITION FROM BOTH DIRECT AND INDIRECT COMPETITORS,
AND ADDITIONAL DIRECT COMPETITORS PLAN TO ENTER THE MARKET SOON.
ICO Global Communications 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. ICO
Global has emerged from its bankruptcy proceedings with reduced debt
obligations, pursuant to a financing package from a group led by Craig McCaw,
which makes it more likely that ICO Global will complete its system and compete
with Globalstar in the future.
If Constellation Communications, Inc. and Mobile Communications Holdings,
Inc., which have held licenses from the Federal Communications Commission since
July 1997, attract financing, build their systems and begin operations, they
will become direct competitors as well. If Iridium receives additional financing
and resumes commercial service, it will also become a direct competitor.
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 or with
foreign systems, Globalstar's available capacity will be reduced.
Existing fixed satellite systems, including those of American Mobile
Satellite Corporation, Comsat Corporation's Planet-1, PT Asia Cellular
Satellites and Inmarsat, and proposed systems, such as Thuraya Satellite
Telecommunications Company, also provide, or intend 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. These land-based
telecommunications services are being built more quickly than Globalstar
originally anticipated, which has contributed to lessened demand for
Globalstar's service.
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.
S-7
<PAGE> 9
THE RIGHT OF SHAREHOLDERS UNDER BERMUDA LAW ARE DIFFERENT FROM THE 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 law either in an
original action in Bermuda or under a United States judgment. Bermuda law giving
shareholders rights to sue directors is less developed than in the United States
and may provide fewer rights.
PRICES OF OUR COMMON STOCK MAY BE VOLATILE.
Many things that we cannot predict or control may affect the price of our
common stock. Risks associated with the operation of satellite systems, in
particular, may cause sudden changes in the price.
In addition, the stock markets in general, and the Nasdaq National Market
and technology companies in particular, have experienced extreme price and
volume fluctuations that have often been unrelated or disproportionate to the
operating performance of these companies. These broad market and industry
factors may seriously impact the market price of our common stock, regardless of
our actual operating performance.
HOLDERS OR OUR COMMON STOCK MAY BE DILUTED BY FUTURE STOCK ISSUANCES.
As of June 30, 2000, 96,911,740 shares of our common stock were
outstanding. In addition:
- Globalstar partners have the right, exercisable over a period of years
following the beginning of Globalstar service and two consecutive
quarters of positive net income, to exchange their outstanding ordinary
partnership interests for approximately 154 million shares of our common
stock.
- holders of outstanding warrants issued in connection with Globalstar's
11 3/8% senior notes have the right to exercise them for 3,810,469 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 has 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 our common
stock);
- in connection with its provision of approximately $531 million of vendor
financing to Globalstar, Qualcomm has 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 $42.25 per partnership interest (equivalent to $10.56 per share of
common stock);
- Globalstar employees and directors have options to buy 8,415,800 shares
of our common stock, at exercise prices ranging from $4.16 to $31.41 per
share;
- under our stock option plan, we may in the future grant employees'
options to purchase as many as 1,487,300 shares of our common stock;
- in connection with service provider arrangements in China under which
China Telecommunications Broadcast Satellite Corporation has agreed to
act as the sole distributor of Globalstar service in China, China Telecom
has an option to acquire
S-8
<PAGE> 10
937,500 Globalstar partnership interests (equivalent to 3,750,000 shares
of our common stock) for $18,750,000;
- 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 2,999,990
shares of our Series B preferred stock are outstanding and are
convertible into 5,778,791 shares of our common stock; and
- up to $105,000,000 of our common stock issuable from time to time
pursuant to a common stock purchase agreement with Bear Stearns, entered
into on September 18, 2000.
Sales of significant amounts of our common stock to the public, or the
perception that those sales could happen, could adversely affect the price of
our common stock.
S-9
<PAGE> 11
FORWARD-LOOKING STATEMENTS
Some statements and information contained or incorporated by reference in
this prospectus supplement and the base prospectus are not historical facts, but
are "forward-looking statements", as this term is defined in the Private
Securities Litigation Reform Act of 1995. We wish to caution you that these
forward looking statements are only predictions, and actual events or results
may differ materially as a result of risks that we face, including those set
forth in this prospectus supplement and the base prospectus under "Risk Factors"
or incorporated therein by reference. When we or Globalstar use the words
"believe", "intend", "expect", "may", "will", "should", "anticipate" or their
negatives, or 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.
USE OF PROCEEDS
We will use the net proceeds of approximately $56,000,000 from this
offering to purchase ordinary partnership interests in Globalstar. Globalstar,
in turn, will use these proceeds for general corporate purposes, including
capital expenditures, operations (including marketing and distribution of phones
and services) and interest expense.
PRICE RANGE OF COMMON STOCK
Our common stock is quoted on the Nasdaq National Market under the symbol
"GSTRF." The following table lists, for the periods indicated, the range of high
and low sales prices for our common stock as reported on the Nasdaq National
Market. The sale prices for the common stock have been adjusted to reflect the
two-for-one stock split we issued on June 8, 1998, to shareholders of record as
of May 29, 1998 and the two-for-one stock split we issued on May 28, 1997 to
shareholders of record as of May 12, 1997.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1997
First Quarter............................................. $ 17 13/16 $12 1/2
Second Quarter............................................ $ 16 3/4 $11 7/8
Third Quarter............................................. $ 26 3/4 $13 1/2
Fourth Quarter............................................ $ 29 3/4 $19 1/2
1998
First Quarter............................................. $ 37 1/8 $19
Second Quarter............................................ $ 36 1/8 $25 3/4
Third Quarter............................................. $ 28 1/8 $ 9 5/8
Fourth Quarter............................................ $ 22 1/8 $ 8 5/16
1999
First Quarter............................................. $ 24 1/2 $12 5/8
Second Quarter............................................ $ 24 1/2 $13 1/2
Third Quarter............................................. $ 33 $20 1/2
Fourth Quarter............................................ $ 49 1/2 $19
2000
First Quarter............................................. $ 53 3/4 $12 13/16
Second Quarter............................................ $ 15 3/4 $ 5 13/16
Third Quarter (through September 21, 2000)................ $ 14 3/16 $ 7 1/8
</TABLE>
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<PAGE> 12
CAPITALIZATION
The following table sets forth the cash and cash equivalents and
capitalization of GTL and Globalstar as of June 30, 2000 on an unaudited
historical basis.
GLOBALSTAR TELECOMMUNICATIONS LIMITED
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, 2000
-------------
<S> <C>
Shareholders' equity:
Preference shares, $.01 par value, 20,000,000 shares
authorized:
8% Series A convertible redeemable preferred stock
(4,396,295 shares outstanding, $220 million redemption
value)................................................. $ 213,393
9% Series B convertible redeemable preferred stock
(2,999,990 shares outstanding, $150 million redemption
value)................................................. 145,574
Common stock, $1.00 par value, 600,000,000 shares
authorized (96,911,740 shares outstanding).............. 96,912
Paid-in-capital........................................... 1,001,132
Warrants.................................................. 11,268
Accumulated deficit....................................... (370,684)
----------
Total shareholders' equity and capitalization...... $1,097,595
==========
</TABLE>
GLOBALSTAR, L.P.
(IN THOUSANDS, EXCEPT PARTNERSHIP INTEREST DATA)
<TABLE>
<CAPTION>
JUNE 30, 2000
-------------
<S> <C>
Cash and cash equivalents(1)................................ $ 463,486
==========
Vendor financing liability, including current portion(2).... $ 758,824
Revolving credit facility................................... 100,000
Term loans payable, including current portion............... 400,000
Notes payable(3)............................................ 206,300
Notes payable to affiliates(3).............................. 43,700
Senior notes ($1,450,000 aggregate principal amount)........ 1,403,388
Partners' capital:
8% Series A convertible redeemable preferred partnership
interests (4,396,295 interests outstanding, $220
million redemption value).............................. 213,393
9% Series B convertible redeemable preferred partnership
interests (2,999,990 interests outstanding, $150
million redemption value).............................. 145,574
Ordinary partnership interests (61,861,714 interests
outstanding)........................................... 336,410
Unearned compensation(4)................................ (1,773)
Warrants(5)............................................. 215,388
----------
Total partners' capital............................ 908,992
----------
Total capitalization............................... $3,821,204
==========
</TABLE>
-------------------------
(1) Includes restricted cash of $49 million, consisting of payments received
from service providers for the purchase of gateways.
(2) See Note 6 of Globalstar's consolidated financial statements for the year
ended December 31, 1999 and Note 5 of Globalstar's condensed consolidated
financial statements for the period ended June 30, 2000, incorporated by
reference.
(3) See Note 6 of Globalstar's condensed consolidated financial statements for
the period ended June 30, 2000, incorporated by reference.
(4) See Note 11 of Globalstar's consolidated financial statements for the year
ended December 31, 1999, incorporated by reference.
(5) See Notes 6, 7 and 9 of Globalstar's consolidated financial statements for
the year ended December 31, 1999 and Note 5 of Globalstar's condensed
consolidated financial statements for the period ended June 30, 2000,
incorporated by reference.
S-11
<PAGE> 13
TAXATION
This summary of certain tax considerations is based upon current (as of the
date of this prospectus) laws, treaties, cases, regulations and rulings, all of
which are subject to change, possibly with retroactive effect. It does not
consider all the tax issues that might be relevant to an investor or that depend
upon an investor's particular circumstances.
Prospective investors should consult their own professional advisors about
the tax consequences of acquiring, holding and disposing of the common stock
under the laws of the jurisdictions in which they are subject to taxation.
The legal conclusions set forth below in the discussion of U.S. tax law are
the opinions of Willkie Farr & Gallagher, our U.S. counsel. The summary of
certain Bermuda tax consequences is the opinion of Appleby, Spurling & Kempe,
our Bermuda counsel.
UNITED STATES TAX CONSIDERATIONS
Taxation of United States Holders. This section discusses certain rules
applicable to a holder of stock that is a United States Holder. For purposes of
this discussion, a "United States Holder" means a holder of stock who or which
is:
- an individual who is a citizen or resident of the United States for U.S.
federal income tax purposes,
- a corporation or other entity taxable as a corporation created or
organized under the laws of the United States or any political
subdivision thereof (including the States and the District of Columbia),
- an estate or trust described in Section 7701(a)(30) of the Internal
Revenue Code of 1986, as amended (the "Code"), or
- a person whose worldwide income or gain is otherwise subject to U.S.
federal income taxation on a net income basis.
Certain U.S. federal income tax consequences relevant to a holder of stock
other than a United States Holder (a "non-U.S. Holder") are discussed separately
below.
A dividend payment on the stock will be taxable as ordinary dividend income
to the extent it is paid out of our current or accumulated earnings and profits.
Payments in excess of earnings and profits will be treated as a tax-free return
of capital to the extent of the United States Holder's tax basis in the stock.
These payments will reduce the tax basis at which the stock is held; payments in
excess of tax basis will be treated in the same manner as gains arising from a
sale or other disposition of the stock, as discussed below.
Because we are a foreign corporation, the dividend payments will not be
eligible for the inter-corporate dividends-received deduction. Holders should
consult their U.S. tax advisors regarding the U.S. foreign tax credit treatment
of dividends received from us.
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, provided
that certain requirements are met.
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
S-12
<PAGE> 14
will not become one. We continue to earn, through Globalstar, sufficient active
income to avoid PFIC status. However, Globalstar may earn passive income such as
interest on working capital and royalties on certain intangibles. Furthermore,
the extent and timing of Globalstar's active business income cannot be predicted
with certainty.
If we were a PFIC, unless a United States Holder of our stock made the QEF
election described below, he would be subject to a tax-deferral charge on gain
on a disposition of such stock and on certain "excess distributions" received
from us. In addition, any such gains or excess distributions would be taxable at
ordinary income rates.
If a United States Holder makes the qualified electing fund ("QEF")
election, he will be required to include in his taxable income his pro rata
share of our ordinary earnings and net capital gain for each taxable year
(regardless of when or whether cash attributable to such income is actually
distributed to such shareholder by us). If the United States Holder makes a QEF
election, the tax-deferral charge and ordinary income rules described in the
preceding paragraph will not apply. Actual distributions out of amounts so
included in income will not be taxable to the shareholder. A United States
Holder's tax basis in its shares of stock will be increased by the amount so
included and decreased by the amount of nontaxable distributions. A United
States Holder making a QEF election may also elect to defer the payment of tax
on certain undistributed income of the PFIC (subject to an interest charge)
until such time as the income is distributed or the holder sells the stock.
The QEF election is effective only if we make certain required information
available to the United States Holders. In the event we are characterized as a
PFIC for federal income tax purposes, we will undertake to provide each United
States Holder with the information needed to make a QEF election and to
determine the pro rata share of our ordinary earnings and net capital gain
applicable to our stock.
A U.S. shareholder that holds "marketable" stock in a PFIC may, in lieu of
making a QEF election, avoid certain unfavorable consequences of the PFIC rules
by electing to mark the PFIC stock to market as of the close of each taxable
year. If a United States Holder has stock which is marketable, then such United
States Holder may be eligible to be taxed on a mark-to-market basis with regard
to such stock. If such United States Holder so elected, he would be taxed on
changes in market value of the stock from year to year, whether or not he
actually sold such stock. A United States Holder that makes the mark-to-market
election will be required to include in income each year as ordinary income an
amount equal to the excess, if any, of the fair market value of the stock at the
close of the year over the United States Holder's adjusted tax basis in such
stock. If, at the close of the year, the United States Holder's adjusted tax
basis exceeds the fair market value of the stock, then the United States Holder
may deduct any such excess from ordinary income, but only to the extent of net
mark-to-market gains previously included in income. Any gain from the actual
sale of the PFIC stock will be treated as ordinary income, and any loss will be
treated as ordinary loss to the extent of net mark-to-market gains previously
included in income. We expect our stock to constitute "marketable" stock for
these purposes. However, we cannot assure you that our stock will continue to
constitute "marketable" stock in the future.
Taxation of Non-U.S. Holders. We expect that most of our income will be
from sources outside the United States and will not be effectively connected
with a U.S. trade or business. Thus, non-U.S. Holders will not be subject to
U.S. federal taxation on distributions received from us unless those
distributions are effectively connected with the conduct by the non-U.S. Holder
of a trade or business in the United States. In addition, a non-U.S. Holder will
not be subject to U.S. federal income taxation on gains realized on a sale or
exchange of stock unless (1) the gain from the sale is effectively connected
with a trade or business of the non-U.S. Holder in the United States (unless an
applicable treaty provides otherwise) or (2) the non-U.S. Holder is an
individual and is present in the United States for 183 or more days in
S-13
<PAGE> 15
the taxable year of the disposition and certain other conditions are met. 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 effectively connected with a trade or business of the non-U.S. Holder
in the United States depends on the facts and circumstances of each investor's
case. Non-U.S. Holders that are foreign corporations may be subject to an
additional branch profits tax on their income which is effectively connected
with a U.S. trade or business. 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.
Information Reporting and Backup Withholding. Under certain circumstances
relating to the manner in which certain non-U.S. Holders hold their stock,
dividend payments with respect to our stock and proceeds from the sale, exchange
or redemption of our stock may be subject to information reporting to the IRS
and possible U.S. backup withholding at a 31% rate. Backup withholding will not
apply, however, to a holder who furnishes a correct taxpayer identification
number or provides under penalties of perjury a certificate of foreign status
and makes any other required certification or who is otherwise exempt from
backup withholding. Both U.S. Holders and non-U.S. Holders should consult their
tax advisors regarding the application of the information reporting and backup
withholding rules to holders in their circumstances.
Amounts withheld as backup withholding may be credited against a holder's
U.S. federal income tax liability, and a holder may obtain a refund of any
excess amounts withheld under the backup withholding rules by filing the
appropriate claim for refund with the IRS and furnishing any required
information.
Taxation of GTL. Our tax consequences result from our status as a partner
in Globalstar. As a partnership, Globalstar itself will not have any U.S.
federal income tax liability. Generally, its partners will be taxed as if they
directly expended their share of Globalstar expenditures and directly realized
their share of Globalstar income. We expect, based on Globalstar's description
of its proposed activities, that most of our income will be from sources outside
the United States and that such income will not be effectively connected with
the conduct of a trade or business within the United States. Thus, we believe
that there generally will be no U.S. federal income taxes on our share of such
income. The United States Treasury Department is engaged in a project to draft
and propose regulations that will determine how the partners will be taxed in
the United States on their respective shares of Globalstar's income. The outcome
of the regulation project cannot be predicted. The Treasury Department may adopt
final regulations that characterize substantial portions of our income as
derived from U.S. sources and as effectively connected with a U.S. trade or
business.
We will be subject to U.S. tax at regular U.S. federal, state and local
corporate rates on our share of Globalstar's income that is effectively
connected with the conduct of a trade or business in the United States ("U.S.
Income") and will be required to file federal, state and local income tax
returns with respect to such U.S. Income. Globalstar is obligated to provide the
information required for us to prepare our federal, state and local income tax
returns. Globalstar intends to make cash distributions, to the extent of
available funds, to all partners, including us, until the non-U.S. partners,
again including us, have been distributed an amount sufficient to enable them to
pay the federal, state and local income taxes on their share of Globalstar's
U.S. Income. The distribution to non-U.S. partners for federal income taxes may
take the form of a withholding tax payment made by Globalstar to the U.S.
Treasury. The amount withheld may exceed the amount of our federal income tax
liability, in which case we would be entitled to seek a refund from the U.S.
Treasury for the excess amount. In addition to the regular U.S. taxes, we will
be subject to a United States branch profits tax (currently at a 30% rate) on
actual or deemed withdrawals of our share of Globalstar's U.S. Income.
S-14
<PAGE> 16
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 our stock
(other than Holders ordinarily resident in Bermuda) in respect of their
investment in the stock.
We have obtained from the Minister of Finance under the Exempted
Undertakings Tax Protection Act 1966, as amended, a certificate confirming that,
in the event of there being enacted in Bermuda, any legislation imposing tax
computed on profits or income, or computed on any capital asset, gain or
appreciation or any tax in the nature of estate duty or inheritance tax, such
tax shall not until March 28, 2016 be applicable to us or to any of our
operations, or our other obligations except insofar as such tax applies to
persons ordinarily resident in Bermuda and holding such stock or other
obligations, or to any land we lease or let in Bermuda.
We are liable to pay the Bermuda government an annual registration fee
calculated on a sliding scale based upon our assessable capital which fee will
not exceed BD$26,500.
We have been classified as non-resident of the Bermuda exchange control
area by the Bermuda Monetary Authority, whose permission for the issue of the
stock has been obtained. The transfer of stock between persons regarded as
non-resident of Bermuda for exchange control purposes and the issue and
redemption of stock to and by such persons may be effective without specific
consents under the Exchange Control Act 1972 of Bermuda and Regulations made
thereunder. Transfers involving any person regarded as resident in Bermuda for
exchange control purposes may require specific authorization under that Act. We,
by virtue of being a non-resident of Bermuda for exchange control purposes, are
free to acquire, hold and sell any foreign currency, securities and other
investments without restrictions.
Purchasers of stock may be required to pay stamp taxes and other charges in
accordance with the laws and practices of the country of purchase. Prospective
purchasers should consult their tax advisers as to the tax laws of applicable
jurisdictions and the specific tax consequences of acquiring, holding and
disposing of the stock.
The stock does not provide for additional payments by us following a change
in the tax laws or rules of Bermuda that is adverse to the Holders of our stock.
TAX CONSIDERATIONS IN OTHER JURISDICTIONS
Any portion of our income from sources outside the United States, realized
through Globalstar or otherwise, may be subject to taxation by foreign countries
and the extent to which these countries may require us or Globalstar to pay tax
or to make payments in lieu of tax cannot be determined in advance. However,
based upon our review of current tax laws, including applicable international
tax treaties of certain countries that Globalstar believes to be among its
significant potential markets, we expect that a significant portion of our
worldwide income will not be subject to tax by the United States, Bermuda or by
the countries from which we derive our income. To the extent that Globalstar
bears a higher foreign tax because any holder of ordinary partnership interests
(including us) is not subject to United States tax on its share of Globalstar's
foreign income, the additional foreign tax will be specifically allocated to
such partner and will reduce amounts distributed by Globalstar to such partner
with respect to its ordinary partnership interests.
S-15
<PAGE> 17
LEGAL MATTERS
Certain United States tax matters described under "Taxation" will be passed
upon for us by Willkie Farr & Gallagher, New York, New York. The validity of the
common stock will be passed upon for us by Appleby, Spurling & Kempe, Hamilton,
Bermuda. As of August 31, 2000, partners and counsel in Willkie Farr & Gallagher
beneficially owned approximately 144,452 shares of common stock. Mr. Robert B.
Hodes is counsel to the law firm of Willkie Farr & Gallagher and serves as a
director on our board of directors and the board of directors of Loral and as a
member of the executive and audit committees of our board of directors and the
board of directors of Loral.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC which
you can read at the SEC's Web site at http://www.sec.gov. You can also read
these documents at the SEC's public reference rooms in Washington, D.C.,
Chicago, Illinois and New York, N.Y. Please call the SEC toll free at
1-800-SEC-0330 for information about its public reference rooms.
We have filed a registration statement with the SEC on Form S-3 under the
Securities Act of 1933. This prospectus does not contain all of the information
in the registration statement. We have omitted certain parts of the registration
statement, as permitted by the rules and regulations of the SEC. You may inspect
and copy the registration statement, including exhibits, at the SEC's web site
and public reference facilities. Our statements in this prospectus about the
contents of any contract or other document are not necessarily complete. You
should refer to the copy of the contract or other document we have filed as an
exhibit to the registration statement for complete information.
The SEC allows us to "incorporate by reference" the information we file
with it, which means we can satisfy our legal obligations to disclose important
information contained in those documents by referring you to them. The
information included in the following documents is incorporated by reference and
is considered to be a part of this prospectus. More recent information that we
file with the SEC automatically updates and supersedes any inconsistent
information contained in prior filings.
The documents listed below have been filed under the Securities and
Exchange Act of 1934 with the SEC and are incorporated herein by reference:
- GTL's and Globalstar's Annual Report on Form 10-K for the year ended
December 31, 1999;
- GTL's and Globalstar's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 2000;
- GTL's and Globalstar's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2000;
- GTL's Proxy Statement relating to the 2000 Annual Meeting of
Shareholders;
- GTL's and Globalstar's Current Report on Form 8-K, filed July 7, 2000;
- GTL's and Globalstar's Current Report on Form 8-K, filed September 19,
2000; and
- the description of GTL's common stock contained in GTL's registration
statement on Form 8-A filed under the Exchange Act and any amendments or
reports filed for the purpose of updating such description.
We also incorporate by reference all documents subsequently filed by us
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, until the
offering of the securities under this prospectus is completed.
We will provide without charge to each person, including any person having
a control relationship with that person, to whom a prospectus is delivered, a
copy of any or all of the information that has been incorporated by reference in
this prospectus but not delivered with
S-16
<PAGE> 18
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. For information about Globalstar,
please direct your request in writing or by telephone to Globalstar, L.P. at
3200 Zanker Road, P.O. Box 640670, San Jose, California 95134-0670, Attention
Daniel P. McEntee, (408) 933-4000.
You should rely on the information incorporated by reference or provided in
this prospectus or any prospectus supplement. We have not authorized anyone else
to provide you with different information. We are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this prospectus or any prospectus supplement is accurate
as of any date other than the date on the front of those documents.
S-17
<PAGE> 19
PROSPECTUS DATED AUGUST 18, 1999
$500,000,000
<TABLE>
<S> <C>
GLOBALSTAR GLOBALSTAR, L.P.
TELECOMMUNICATIONS GLOBALSTAR CAPITAL
LIMITED CORPORATION
COMMON STOCK DEBT SECURITIES
PREFERRED STOCK
WARRANTS
</TABLE>
-------------------------
GTL may from time to time offer the following equity or equity-related
securities separately or together in one or more series or classes and in
amounts, at prices and on terms to be determined at the time of the offering and
set forth in one or more supplements to this prospectus:
- shares of its common stock, par value $1.00 per share;
- shares of its preferred stock, par value $.01 per share; and
- warrants to purchase shares of common stock or preferred stock.
Globalstar and Globalstar Capital may from time to time offer jointly and
severally debt securities in one or more series or classes, which may be either
senior or subordinated, secured or unsecured, in amounts, at prices and on terms
to be determined at the time of the offering.
The specific terms of these securities will be provided in one or more
supplements to this prospectus. In the case of debt securities, these terms will
include, as applicable, the specific designation, aggregate principal amount,
maturity, rate or formula of interest, premium and terms for redemption. In case
of preferred stock, these terms will include, as applicable, the specific title
and stated value, any dividend, liquidation, redemption, conversion, voting and
other rights. In the case of common stock, these terms will include the
aggregate number of shares offered. In the case of warrants, these terms will
include the duration, offering price, exercise price and detachability.
We may sell any combination of these securities, in one or more offerings,
up to a total aggregate public offering price of $500,000,000.
GTL's common stock is listed on the Nasdaq National Market under the symbol
GSTRF. The closing price of GTL's common stock on the Nasdaq National Market was
$30 per share on August 17, 1999.
You should read this prospectus and any prospectus supplement carefully
before you invest.
THE SECURITIES WE MAY OFFER INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" ON PAGE 3 FOR A DISCUSSION OF MATTERS THAT YOU SHOULD CONSIDER BEFORE
INVESTING IN THESE SECURITIES.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this prospectus is August 18, 1999.
<PAGE> 20
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY..................................................... 1
GLOBALSTAR, GTL AND GLOBALSTAR CAPITAL...................... 1
SECURITIES TO BE OFFERED.................................... 2
RISK FACTORS................................................ 3
RATIOS...................................................... 5
USE OF PROCEEDS............................................. 6
GENERAL DESCRIPTION OF THE SECURITIES....................... 7
DESCRIPTION OF COMMON STOCK................................. 7
DESCRIPTION OF PREFERRED STOCK.............................. 10
DESCRIPTION OF WARRANTS..................................... 14
DESCRIPTION OF DEBT SECURITIES.............................. 15
PLAN OF DISTRIBUTION........................................ 25
LEGAL MATTERS............................................... 26
EXPERTS..................................................... 26
WHERE YOU CAN FIND MORE INFORMATION......................... 27
INDEX TO FINANCIAL PAGES.................................... F-1
</TABLE>
i
<PAGE> 21
SUMMARY
This prospectus is part of a registration statement that we filed with the
SEC utilizing a shelf registration process. Under this shelf registration
process, we may, over the next two years, sell any combination of the securities
described in this prospectus, jointly or independently, in one or more offerings
up to a total dollar amount of $500,000,000. This prospectus provides you with a
general description of the securities we may offer. Each time we sell
securities, we will provide a prospectus supplement containing more specific
information about the terms of that offering. The prospectus supplements may
also add, update or change information contained in this prospectus. This
summary highlights selected information from this prospectus and does not
contain all the information that may be important to you.
We may sell the securities to or through national or international
underwriters, dealers or agents or directly to purchasers in and outside of the
United States. We and our agents reserve the sole right to accept and to reject
in whole or in part any proposed purchase of securities. The prospectus
supplement, which we will provide to you each time we offer securities, will set
forth the name of any underwriters, dealers or agents involved in the sale of
the securities, and any applicable fee, commission or discount arrangements with
them.
GLOBALSTAR, GTL AND GLOBALSTAR CAPITAL
Globalstar is now completing the launch of a satellite constellation that
will form the backbone of a wireless digital telephone system able to serve most
of the populated world. The Globalstar(TM) System will extend wireless digital
telephone service to millions of people who today lack even basic telephone
service. Globalstar plans to begin commercial service in September 1999.
Loral Space & Communications Ltd., one of the world's premier satellite
companies, is one of the founders of the Globalstar project, owns 43% of its
equity, including its holdings in GTL, and, through a subsidiary, serves as the
managing general partner of Globalstar. GTL is another general partner of
Globalstar and operates as a holding company to permit public equity ownership
in Globalstar. GTL's sole business is acting as a general partner of Globalstar.
At June 30, 1999, GTL held 35% of the outstanding ordinary partnership interests
and 100% of the outstanding 8% Redeemable Preferred Partnership Interests of
Globalstar. In the event of conversion of the 8% Redeemable Preferred
Partnership Interests, GTL's ownership of ordinary partnership interests would
increase to 39%.
Globalstar Capital is a wholly-owned subsidiary of Globalstar and was
formed for the primary purpose of serving as a co-issuer and co-obligor with
respect to certain debt obligations of Globalstar.
GTL's address is: Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda.
GTL's telephone number is: (441) 295-2244. Globalstar's and Globalstar Capital's
address is 3200 Zanker Road, San Jose, California 95134, and their telephone
number is: (408) 933-4000.
1
<PAGE> 22
SECURITIES TO BE OFFERED
COMMON STOCK
GTL may issue its common stock. GTL has authorized 600,000,000 shares of
common stock, par value $1.00 per share. Each holder of common stock is
generally entitled to one vote, irrespective of the number of shares held.
Holders of common stock are entitled to receive dividends declared by the board
of directors, subject to the rights of preferred stockholders.
PREFERRED STOCK
GTL may issue its preferred stock in whatever classes or series the board
of directors authorizes, subject to limitations prescribed by Bermuda law and
GTL's bye-laws and memorandum of association. We will describe the specific
terms of any class or series of preferred stock we will issue in the future in
the applicable prospectus supplement for that offering.
WARRANTS
GTL may issue warrants to purchase GTL's common stock and GTL's preferred
stock. Also, we may issue warrants tied to and dependent upon movements of
currency exchange rates, the prices of stocks underlying one or more indices, or
the prices of other underlying commodities. The applicable prospectus supplement
will describe the terms of the warrants.
DEBT SECURITIES
Globalstar and Globalstar Capital may offer secured and unsecured general
obligations, which may be senior debt securities or subordinated debt
securities. Senior debt securities will have the same rank as all their other
unsecured, unsubordinated debt. Under specified circumstances, such as default
on senior debt, the subordinated debt securities will not be entitled to payment
for a specified time, if at all, and will rank junior to senior debt in a
liquidation of Globalstar. Secured debt will have the right to receive proceeds
from the collateral that secures that debt, before such proceeds are available
to other security holders.
The debt securities will be issued under an indenture or indentures among
Globalstar, Globalstar Capital and the trustee or trustees we name in the
prospectus supplement. We have summarized the indentures, which will be exhibits
to the registration statement of which this prospectus is a part.
2
<PAGE> 23
RISK FACTORS
An investment in our securities entails some risks which are described in
our Annual Report on Form 10-K for the year ended December 31, 1998 and are
incorporated by reference in this prospectus. We will also describe the risks
relating specifically to the different types of securities we may offer under
this registration statement in the supplemental prospectus relating thereto. You
should consider these risks and the following, additional risks relating to an
investment in our securities:
THE RIGHTS OF SHAREHOLDERS UNDER BERMUDA LAW ARE DIFFERENT FROM RIGHTS OF
SHAREHOLDERS UNDER U.S. LAW.
Since GTL is a Bermuda company, the principles of law that govern
shareholder rights, the validity of corporate procedures and other matters are
different from those that would apply if it were a U.S. company. For example, it
is not certain whether a Bermuda court would enforce liabilities against GTL or
its officers and directors based upon United States securities laws either in an
original action in Bermuda or under a United States judgment. Bermuda law giving
shareholders rights to sue directors is less developed than in the United States
and may provide fewer rights.
SPACE SYSTEMS/LORAL, GLOBALSTAR'S PRIME CONTRACTOR, IS THE TARGET OF A GRAND
JURY INVESTIGATION; CONGRESS HAS HELD RELATED HEARINGS.
Space Systems/Loral, which is the prime contractor in the Globalstar
System, could be accused of criminal violations of the export control laws
arising out of the participation of its employees in a committee formed to
review the findings of the Chinese regarding the 1996 crash of a Long March
rocket in China. Whether or not Space Systems/Loral is indicted or convicted,
Space Systems/Loral will remain subject to the State Department's general
statutory authority to prohibit exports of satellites and related services if it
finds a violation of the Arms Export Control Act that puts the exporter's
reliability in question. Further, the State Department can suspend export
privileges whenever it determines that grounds for debarment exist and that such
suspension "is reasonably necessary to protect world peace or the security or
foreign policy of the United States." If Space Systems/Loral were to be indicted
and convicted of a criminal violation of the Arms Export Control Act, it
- would be subject to a fine of $1 million per violation;
- could be debarred from certain export privileges; and
- could be debarred from participation in government contracts.
If Space Systems/Loral loses its export privileges, Globalstar will be
unable to launch its satellites outside the United States, which would delay the
completion of its full satellite constellation and result in increased launch
costs.
HOLDERS OF COMMON STOCK MAY BE DILUTED BY FUTURE STOCK ISSUANCES.
At June 30, 1999, 82,026,576 shares of GTL's common stock were outstanding.
In addition, at that date:
- Globalstar partners had the right, exercisable over many years, to
exchange their partnership interests for about 151,750,000 shares of
common stock,
- holders of outstanding warrants had the right to exercise them for
4,069,325 shares of common stock,
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<PAGE> 24
- GTL has outstanding 6,999,900 shares of 8% Convertible Redeemable
Preferred Stock, due 2011, convertible into 15,049,470 whole shares of
common stock,
- Globalstar employees had unexercised options to buy 2,731,500 shares of
common stock, and
- under GTL's stock option plan, GTL may in the future grant employee
options to purchase as many as 2,230,300 shares of common stock.
In addition, on August 5, 1999, in consideration for the guarantee by two
Loral subsidiaries of a $500 million Globalstar credit facility, Loral and
certain Loral subsidiaries received warrants to purchase an aggregate of
3,450,000 Globalstar partnership interests (equivalent to approximately
13,800,000 shares of GTL common stock). The warrants vest in stages (provided
that the guarantee is then in effect): 50% on February 5, 2000, 25% on August 5,
2000 and the remaining 25% on August 5, 2001. The warrants are immediately
exercisable after vesting and have a seven-year term.
Sales of significant amounts of common stock to the public, including the
common stock covered by this registration statement, or the perception that
those sales could happen, could hurt the price of the common stock.
GTL IS DEPENDENT UPON PAYMENTS FROM GLOBALSTAR TO MEET ITS OBLIGATIONS.
Because GTL is a holding company whose only assets are its interests in
Globalstar, GTL is dependent upon payments from Globalstar to meet its
obligations, including those under its preferred stock. Further, GTL's rights
and the rights of holders of its securities, including the holders of preferred
stock, to participate in the distribution of assets of any subsidiary of GTL
upon Globalstar's liquidation or recapitalization will be subject to the prior
claims of Globalstar's creditors and preferred stockholders. GTL's rights and
the rights of its security holders will not be subordinated to the extent it is
a creditor with recognized claims against Globalstar or a holder of preferred
partnership interests of Globalstar.
THIS PROSPECTUS INCLUDES FORWARD-LOOKING STATEMENTS.
Some statements and information contained or incorporated by reference in
this prospectus are not historical facts, but are "forward-looking statements",
as such term is defined in the Private Securities Litigation Reform Act of 1995.
We wish to caution you that these forward-looking statements are only
predictions, and actual events or results may differ materially as a result of
risks that we face, including those set forth herein under "Risk Factors." These
forward-looking statements can be identified by the use of forward-looking
terminology such as "believes", "expects", "plans", "may", "will", "would,"
"could," "should", or "anticipates" or the negative of these words or other
variations of these words or other comparable words, or by discussions of
strategy that involve risks and uncertainties.
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<PAGE> 25
RATIOS
GLOBALSTAR TELECOMMUNICATIONS LIMITED
RATIO OF EARNINGS TO COVER FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The ratio of earnings to fixed charges presented below should be read
together with the financial statements and the notes accompanying them and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" found in our Annual Report on Form 10-K for the year ended December
31, 1998 and our Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1999 which are incorporated into this prospectus by reference. Our
earnings available to cover fixed charges consist solely of dividends from
Globalstar on the preferred partnership interests we hold.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SIX MONTHS SIX MONTHS
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ENDED JUNE 30, ENDED JUNE 30,
1995 1996 1997 1998 1998 1999
------------ ------------ ------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
N/A 1X 1X 1X 1X 1X
</TABLE>
GLOBALSTAR, L.P. DEFICIENCY OF EARNINGS TO
COVER FIXED CHARGES AND PREFERRED PARTNERSHIP INTERESTS
(in thousands)
The deficiency of earnings to cover fixed charges and preferred partnership
interests presented below should be read together with the financial statements
and the notes accompanying them and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" found in our Annual Report on
Form 10-K for the year ended December 31, 1998 and our Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1999 which are incorporated into
this prospectus by reference.
<TABLE>
<CAPTION>
MARCH 23, 1994
(COMMENCEMENT
OF OPERATIONS) YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SIX MONTHS SIX MONTHS
TO DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ENDED JUNE 30, ENDED JUNE 30,
1994 1995 1996 1997 1998 1998 1999
--------------- ------------ ------------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
N/A N/A $81,869 $184,683 $330,475 $146,851 $185,729
</TABLE>
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<PAGE> 26
USE OF PROCEEDS
Unless the applicable prospectus supplement states otherwise, Globalstar
will use the net proceeds from the sale of the offered securities for general
corporate purposes, which may include a possible refinancing of outstanding
securities. Until we use the net proceeds in this manner, we may temporarily use
them to make short-term investments. GTL intends to use the proceeds of any
offering of its securities to purchase Globalstar Securities having
substantially similar terms.
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<PAGE> 27
GENERAL DESCRIPTION OF THE SECURITIES
We may offer shares of GTL common stock, preferred stock or warrants,
Globalstar's and Globalstar Capital's debt securities, or any combination of the
foregoing, either individually or as units consisting of one or more securities.
We may offer up to $500,000,000 of securities under this prospectus. If
securities are offered as units, we will describe the terms of the units in a
prospectus supplement.
This section describes the general terms and provisions of the securities.
The applicable prospectus supplement will describe the specific terms of the
securities offered through that prospectus supplement as well as any of the
general terms described below that will not be applicable to the securities
offered.
DESCRIPTION OF COMMON STOCK
We have summarized some of the terms and provisions of GTL's common stock
in this section. The following is a summary of certain provisions of Bermuda law
and GTL's organizational documents. You should note that this summary is not a
comprehensive description of such laws and documents and that it is qualified in
its entirety by appropriate reference to Bermuda law and to GTL's organizational
documents.
BERMUDA LAW
The following discussion is based upon the advice of Appleby, Spurling &
Kempe, GTL's Bermuda counsel.
GTL was incorporated as an exempted company under The Companies Act 1981 of
Bermuda (the "Act"). Accordingly, the rights of its shareholders are governed by
Bermuda law and GTL's memorandum of association and bye-laws.
DIVIDENDS. Under Bermuda law, a company may pay such dividends as are
declared from time to time by its board of directors unless there are reasonable
grounds for believing that the company is or would, after the payment, be unable
to pay its liabilities as they become due or that the realizable value of its
assets would thereby be less than the aggregate of its liabilities and issued
share capital and share premium accounts.
VOTING RIGHTS. Under Bermuda law, questions brought before a general
meeting of shareholders are decided by a majority vote of shareholders present
at the meeting (or by such majority as the Act or the bye-laws of GTL
prescribe). GTL's bye-laws provide that, subject to the provisions of the Act,
any questions proposed for the consideration of the shareholders will be decided
by a simple majority of the votes cast. Each shareholder present, or person
holding proxies for any shareholder, is entitled to one vote. If a poll is
requested, each shareholder present in person or by proxy has one vote for each
share held.
A poll may only be requested under GTL's bye-laws by:
- the Chairman of the meeting;
- at least three shareholders present in person or by proxy;
- any shareholder or shareholders, present in person or by proxy, holding
between them not less than 10% of the total voting rights of all
shareholders having the right to vote at such meeting; or
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<PAGE> 28
- a shareholder or shareholders, present in person or by proxy, holding
voting shares in GTL on which an aggregate sum has been paid up equal to
not less than 10% of the total sum paid up on all such voting shares.
RIGHTS IN LIQUIDATION. Under Bermuda law, in the event of liquidation,
dissolution or winding-up of a company, the proceeds of such liquidation,
dissolution or winding-up are distributed pro rata among the holders of common
stock. However, such distribution may only be effected after satisfaction in
full of all claims of creditors and subject to the preferential rights accorded
to any series of preferred stock.
MEETINGS OF SHAREHOLDERS. Under Bermuda law, a company is required to
convene at least one general shareholders' meeting per calendar year. Bermuda
law provides that a special general meeting may be called by the board of
directors and must be called upon the request of shareholders holding not less
than 10% of such of the paid-up capital of the company carrying the right to
vote. Bermuda law also requires that shareholders be given at least five days'
advance notice of a general meeting, although the accidental omission of notice
to any person does not invalidate the proceedings at a meeting. Under the
bye-laws of GTL, at least five days' notice of the annual general meeting must
be given to each shareholder.
Under Bermuda law, the number of shareholders constituting a quorum at any
general meeting of shareholders is determined by the bye-laws of a company.
GTL's bye-laws provide that the presence in person or by proxy of at least two
shareholders entitled to vote constitute a quorum.
ACCESS TO BOOKS AND RECORDS AND DISSEMINATION OF INFORMATION. Members of
the general public have the right to inspect the public documents of a company
available at the office of the Registrar of Companies in Bermuda. These
documents include the company's certificate of incorporation, its memorandum of
association (including its objects and powers) and any alteration to the
company's memorandum of association.
The shareholders have the additional right to inspect the bye-laws of the
company, minutes of general meetings and the company's audited financial
statements, which must be presented at the annual general meeting. The register
of shareholders of a company is also open to inspection by shareholders without
charge and to members of the general public on the payment of a fee. A company
is required to maintain its share register in Bermuda but may, subject to the
provisions of the Act, establish a branch register outside Bermuda.
A company is required to keep at its registered office a register of its
directors and officers which is open for inspection for not less than two hours
in each day by members of the public without charge. Bermuda law does not,
however, provide a general right for shareholders to inspect or obtain copies of
any other corporate records.
ELECTION OR REMOVAL OF DIRECTORS. Under Bermuda law and GTL's bye-laws,
directors are elected at the annual general meeting or to serve until their
successors are elected or appointed, unless they are earlier removed or resign.
Under Bermuda law and GTL's bye-laws, a director may be removed at a
special general meeting of shareholders specifically called for that purpose,
provided that the director was served with at least 14 days' notice. The
director has a right to be heard at the meeting. Any vacancy created by the
removal of a director at a special general meeting may be filled at such meeting
by the election of another director in his or her place or, in the absence of
any such election, by the board of directors.
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<PAGE> 29
AMENDMENT OF MEMORANDUM OF ASSOCIATION AND BYE-LAWS. Bermuda law provides
that the memorandum of association of a company may be amended by a resolution
passed at a general meeting of shareholders of which due notice has been given.
An amendment to the memorandum of association also requires the approval of the
Bermuda Minister of Finance, who may grant or withhold approval at his
discretion. However, such approval of the Bermuda Minister of Finance is not
required for an amendment which alters or reduces a company's share capital as
provided in the Act. Except as set forth therein, the bye-laws may be amended by
a resolution passed by a majority of votes cast at a general meeting.
Under Bermuda law, the holders of an aggregate of no less than 20% in par
value of a company's issued share capital have the right to apply to the Bermuda
Court for an annulment of any amendment of the memorandum of association adopted
by shareholders at any general meeting. This does not apply to an amendment
which alters or reduces a company's share capital as provided in the Act. Where
such an application is made, the amendment becomes effective only to the extent
that it is confirmed by the Bermuda Court. An application for amendment of the
memorandum of association must be made within 21 days after the date on which
the resolution altering the company's memorandum is passed. Such application may
be made on behalf of the persons entitled to make the application by one or more
of their number as they may appoint in writing for the purpose. No such
application may be made by persons voting in favor of the amendment.
APPRAISAL RIGHTS AND SHAREHOLDER SUITS. Under Bermuda law, in the event of
an amalgamation of two Bermuda companies, a shareholder who is not satisfied
that fair value has been paid for his shares may apply to the Bermuda Court to
appraise the fair value of his shares. The amalgamation of a company with
another company requires the amalgamation agreement to be approved by:
- a meeting of the holders of shares of the amalgamating company of which
they are directors; and
- a meeting of the holders of each class of such shares; and
- the consent of the Bermuda Minister of Finance (who may grant or withhold
consent at his discretion).
Class actions and derivative actions are generally not available to
shareholders under Bermuda law. The Bermuda courts, however, would ordinarily be
expected to permit a shareholder to commence an action in the name of a company
to remedy a wrong done to the company where the act complained of:
- is alleged to be beyond the corporate power of the company; or
- is illegal; or
- would result in the violation of the company's memorandum of association
or bye-laws.
Furthermore, consideration would be given by the Court to acts that are
alleged to constitute a fraud against the minority shareholders or, for
instance, where an act requires the approval of a greater percentage of the
company's shareholders than those who actually approved it.
When the affairs of a company are being conducted in a manner oppressive or
prejudicial to the interests of some part of the shareholders, one or more
shareholders may apply to the Bermuda Court for an order regulating the
company's conduct of affairs in the future or ordering the purchase of the
shares by any shareholder, by other shareholders or by the company.
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<PAGE> 30
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is The Bank of New
York.
DESCRIPTION OF PREFERRED STOCK
This section describes the general terms and provisions of GTL's preferred
stock. The applicable prospectus supplement will describe the specific terms of
the preferred stock offered through that prospectus supplement, as well as any
general terms described in this section that will not apply to those shares of
preferred stock.
On January 31, 1999, GTL sold 7,000,000 shares of its 8% Convertible
Redeemable Preferred Stock due 2011 in a private placement for an aggregate
amount of $350 million. GTL used the proceeds to purchase the Globalstar 8%
Convertible Redeemable Preferred Partnership Interests from Globalstar, with
substantially identical terms. The 8% Convertible Redeemable Preferred Stock
ranks, with respect to dividend distributions and distributions upon GTL's
liquidation, winding-up and dissolution:
- senior to all classes of GTL common stock and to each other class of
capital stock or series of GTL preferred stock established after January
21, 1999 the terms of which do not expressly provide that it ranks senior
to or on a parity with the 8% Convertible Redeemable Preferred Stock;
- on a parity with any other class of capital stock or series of GTL
preferred stock established after January 21, 1999 the terms of which
expressly provide that such class or series will rank on a parity with
the 8% Convertible Redeemable Preferred Stock; and
- junior to each class of capital stock or series of GTL preferred stock
established after January 21, 1999 the terms of which expressly provide
that such class or series will rank senior to the 8% Convertible
Redeemable Preferred Stock.
In the event that GTL's assets upon liquidation, winding-up or dissolution
are less than or equal to the aggregate liquidation preference and accrued but
unpaid dividends on the 8% Convertible Redeemable Preferred Stock, holders of
common stock will not, and holders of other series of GTL preferred stock may
not, receive any amounts upon such liquidation, winding-up or dissolution.
We have summarized selected terms of the preferred stock which may be
offered by GTL below.
GENERAL
The preferred stock will have the rights described in this section unless
the applicable prospectus supplement provides otherwise. You should read the
prospectus supplement relating to the particular series of the preferred stock
it offers for specific terms, including:
- the designation, stated value and liquidation preference of that series
of the preferred stock and the number of shares offered;
- the dividend rate or rates or method of calculation of dividends, the
dividend periods, the date or dates on which dividends will be payable
and whether such dividends will be cumulative or noncumulative and, if
cumulative, the dates from which dividends shall commence to cumulate;
- the redemption price or prices, if any, and the terms and conditions of
any redemption;
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<PAGE> 31
- the terms and conditions upon which the shares are convertible or
exchangeable, if they are convertible or exchangeable;
- the voting rights;
- the initial public offering price at which the shares will be issued; and
- any additional dividend, liquidation, redemption, sinking fund and other
rights, preferences, privileges, limitations and restrictions of that
series of preferred stock.
When GTL issues shares of preferred stock for cash, they will be fully paid
and nonassessable. This means that the full purchase price for those shares will
have been paid and the holders of those shares will not be assessed any
additional monies for those shares. Holders of preferred stock will generally
have no preemptive rights to subscribe for any additional securities that GTL
may issue.
In order to fund Globalstar as the actual operating entity, it is GTL's
intention to use any proceeds it will receive from the sale of its preferred
stock to purchase back-to-back preferred partnership interests in Globalstar.
These preferred partnership interests and GTL's preferred stock will have
substantially identical terms, subject, however, to the differences imposed by
their respective jurisdictions and forms of incorporation and tax
considerations.
RIGHTS UPON LIQUIDATION
Unless the applicable prospectus supplement states otherwise, if GTL
liquidates, dissolves or winds up its business, the holders of shares of each
series of the preferred stock will be entitled to receive:
- liquidating distributions in the amount stated in the applicable
prospectus supplement; and
- all accrued and unpaid dividends whether or not earned or declared.
GTL will pay these amounts to the holders of shares of each series of the
preferred stock, and all amounts owing on any preferred stock ranking equally
with that series of preferred stock as to liquidating distributions, out of its
funds available for distribution to stockholders. These payments will be made
before any distribution is made to holders of any securities ranking junior to
the series of preferred stock upon liquidation.
If GTL liquidates, dissolves or winds up its business, and the assets
available for distribution to the holders of the preferred stock of any series
and any other shares of its stock ranking equal with that series are not
sufficient to pay all liquidating distributions and accrued and unpaid dividends
in full, then the holders of preferred stock and equal ranking shares will
receive pro rata distributions of liquidating distributions and accrued and
unpaid dividends. This means that the distributions GTL pays to these holders
will bear the same relationship to each other that the full distributable
amounts for which these holders are respectively entitled upon liquidation of
GTL's business bear to each other.
After GTL pays the full amount of the liquidating distribution to which the
holders of a series of the preferred stock are entitled, those holders will have
no right or claim to any of GTL's remaining assets.
DIVIDENDS
The holders of the preferred stock will be entitled to receive dividends,
when, as and if declared by GTL's board of directors, out of funds GTL can
legally use to pay dividends. The prospectus supplement relating to a particular
series of preferred stock will describe the dividend rates and dates
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<PAGE> 32
on which dividends will be payable. The rates may be fixed or variable or both.
If the dividend rate is variable, the applicable prospectus supplement will
describe the formula used for determining the dividend rate for each dividend
period. GTL will pay dividends to the holders of record as they appear on its
stock books on the record dates fixed by GTL's board of directors. The
applicable prospectus supplement will specify whether dividends will be paid in
the form of cash, preferred stock or common stock.
The applicable prospectus supplement will also state whether dividends on
any series of preferred stock are cumulative or noncumulative. If GTL's board of
directors does not declare a dividend payable on a dividend payment date on any
noncumulative series of preferred stock, then the holders of that series will
not be entitled to receive a dividend for that dividend period. In those
circumstances, GTL will not be obligated to pay the dividend accrued for that
period, whether or not dividends on such preferred stock are declared or paid on
any future dividend payment dates. Cumulative dividends, on the other hand, will
accrue whether or not GTL has any earnings or profits, whether or not there are
funds legally available for the payment of dividends and whether or not
dividends are declared.
GTL's board of directors may not declare and pay a dividend on any of GTL's
stock ranking, as to dividends, equal with or junior to any series of preferred
stock unless full dividends on that series have been declared and paid, or
declared and sufficient money is set aside for payment. Until either full
dividends are paid, or are declared and payment is set aside, on preferred stock
ranking equal as to dividends, then:
- no dividend shall be declared or paid upon, or any sum set apart for the
payment of dividends upon, any shares of junior securities;
- no other distribution shall be declared or made upon, or any sum set
apart from the payment of any distribution upon shares of junior
securities, other than a distribution consisting only of junior
securities;
- no shares of junior securities shall be purchased, redeemed or otherwise
acquired (excluding an exchange for shares of other junior securities) by
GTL or any of its subsidiaries; and
- no monies shall be paid or set apart or made available for a sinking or
other like fund for the purchase, redemption or other acquisition of any
shares of junior securities by GTL or any of its subsidiaries.
GTL is dependent on Globalstar's ability to pay dividends as a source of
funds for its own dividend payments. Globalstar's credit agreements and the
indentures relating to its outstanding debt may contain restrictions on the
ability of GTL to pay cash dividends.
REDEMPTION
Preferred stock may be redeemable, in whole or in part, at GTL's option,
and may be subject to mandatory redemption through a sinking fund or otherwise,
as described in the applicable prospectus supplement. If a series of preferred
stock is subject to mandatory redemption, the applicable prospectus supplement
will specify the number of shares that GTL will redeem each year and the
redemption price.
Redeemed preferred stock will become authorized but unissued preferred
stock that GTL may issue in the future. If preferred stock is redeemed, GTL will
pay all accrued and unpaid dividends on those shares to, but excluding, the
redemption date. In the case of any noncumulative series of preferred stock,
accrued and unpaid dividends will not include any accumulation of dividends for
prior
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<PAGE> 33
dividend periods. The applicable prospectus supplement will also specify whether
GTL will pay the redemption price in cash or other property.
If GTL redeems fewer than all shares of any series of the preferred stock
held by any holder, GTL will also specify the number of shares to be redeemed
from the holder in the notice. Even though the terms of a series of preferred
stock may permit redemption of shares of preferred stock in whole or in part, if
any dividends, including accumulated dividends, on that series are past due:
- GTL will not redeem any preferred stock of that series unless it
simultaneously redeems all outstanding shares of preferred stock of that
series; and
- GTL will not purchase or otherwise acquire any preferred stock of that
series.
The prohibition discussed in the prior sentence will not prohibit GTL from
purchasing or acquiring preferred stock of that series through a purchase or
exchange offer if GTL makes the offer on the same terms to all holders of that
series.
Unless the applicable prospectus supplement specifies otherwise, GTL will
give notice of a redemption by mailing a notice to each record holder of the
shares to be redeemed, between 30 to 60 days prior to the date fixed for
redemption. GTL will mail the notices to the holders' addresses as they appear
on its records. Each notice will state:
- the redemption date;
- the number of shares and the series of the preferred stock to be
redeemed;
- the redemption price;
- the place or places where holders can surrender the certificates for the
preferred stock for payment of the redemption price;
- that dividends on the shares to be redeemed will cease to accrue on the
redemption date; and
- the date when the holders' conversion rights, if any, will terminate.
If GTL has given notice of the redemption and has provided the funds for
the payment of the redemption price, then beginning on the redemption date:
- the dividends on the preferred stock called for redemption will no longer
accrue;
- such shares will no longer be considered outstanding; and
- the holder will no longer have any rights as stockholders except to
receive the redemption price.
When the holders of these shares surrender the certificates representing
these shares, in accordance with the notice, the redemption price described
above will be paid out of the funds GTL provides. If fewer than all the shares
represented by any certificate are redeemed, a new certificate will be issued
representing the unredeemed shares without cost to the holder of those shares.
CONVERSION OR EXCHANGE RIGHTS
The prospectus supplement relating to a series of preferred stock that is
convertible or exchangeable will state the terms on which shares of that series
are convertible or exchangeable into common stock, another series of preferred
stock or debt securities.
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<PAGE> 34
VOTING RIGHTS
Except as indicated below or in the applicable prospectus supplement, or
except as expressly required by applicable law, the holders of preferred stock
will not be entitled to vote.
If GTL fails to pay stated dividends on any shares of preferred stock for
six consecutive quarterly periods, the holders of the majority of all
outstanding shares of preferred stock will be entitled to vote for the election
of at least 20% of the existing board of directors, but in no event more than
one or less than two additional directors. The number of directors on the board
will be increased automatically without the need of any special meeting.
Except as may be provided in the applicable prospectus supplement, so long
as any shares of preferred stock remain outstanding, unless GTL receives the
consent of the holders of at least 66 2/3% of all outstanding preferred stock
voting as one class, GTL will not:
- authorize or issue any new class or series of capital stock, or any
obligation or security that represents the right to purchase any shares
of any class or series of capital stock, ranking senior to the
outstanding series of preferred stock as to dividends or liquidating
distributions; or
- amend or modify the provisions of GTL's memorandum of association, so as
to materially and adversely affect any right, preference, privilege or
voting power of that series of preferred stock or the holders of that
series of preferred stock.
Except as provided in the applicable prospectus supplement, the consent of
holders of all the shares of preferred stock will be required to amend or modify
GTL's memorandum of association so as to:
- change a mandatory redemption date, or the due date of any dividend;
- reduce the liquidation preference, redemption price or dividend rate;
- impair or adversely affect the right to institute suit for the
enforcement of any redemption payment, conversion rights or redemption
rights;
- modify the provisions with respect to the ranking of a particular series
of preferred stock; or
- alter the voting rights of the preferred stock, except to increase the
required percentage vote of the holders of preferred stock.
GTL will not be required to obtain the consent of the holders of preferred
stock to authorize, create (by way of reclassification or otherwise) or issue
any securities ranking junior to or on parity with the preferred stock, or any
obligation or security convertible or exchangeable into such a security.
DESCRIPTION OF WARRANTS
GTL may issue additional warrants for the purchase of common stock or
preferred stock. We may issue these warrants independently or together with any
other securities offered by any prospectus supplement, and they may be attached
to or separate from such offered securities. Each series of warrants will be
issued under a separate warrant agreement which we will enter into with a
warrant agent specified in the applicable prospectus supplement. The warrant
agent will act solely as our agent in connection with the warrants of such
series and will not assume any obligation or relationship of agency or trust for
or with any provisions of the warrants offered.
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<PAGE> 35
A prospectus supplement will describe specific terms of the warrants and
the applicable warrant agreements. These terms will contain some or all of the
following:
- the title of the warrants;
- the aggregate number of the warrants;
- the price or prices at which the warrants will be issued;
- the designation, terms and number of shares of common stock or preferred
stock purchasable upon exercise of the warrants;
- the designation and terms of the securities, if any, with which the
warrants are issued and the number of the warrants issued with each of
these securities;
- the date, if any, on and after which the warrants and the related common
stock or preferred stock will be separately transferable;
- the price at which each share of common stock or preferred stock
purchasable upon exercise of the warrants may be purchased;
- the date on which the right to exercise the warrants shall commence and
the date on which such right shall expire;
- the minimum or maximum amount of the warrants which may be exercised at
any one time;
- information with respect to book-entry procedures, if any;
- a discussion of federal income tax consideration in connection with the
warrants; and
- any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants.
DESCRIPTION OF DEBT SECURITIES
The debt securities will be Globalstar's and Globalstar Capital's direct
secured or unsecured general obligations as joint and several obligors and may
include debentures, notes, bonds and/or other evidences of indebtedness. The
debt securities will be either senior debt securities or subordinated debt
securities and may be secured or unsecured.
The debt securities will be issued under one or more separate indentures by
and among Globalstar, Globalstar Capital and The Bank of New York, as trustee.
Senior debt securities will be issued under a senior indenture, subordinated
debt securities will be issued under a subordinated indenture and secured debt
will be issued under a secured indenture. Together, the senior indentures, the
subordinated indentures and the secured indentures are called indentures. A copy
of the form of each type of indenture will be filed as an exhibit to the
registration statement of which this prospectus is a part. A prospectus
supplement will describe the particular terms of any debt securities Globalstar
and Globalstar Capital may offer.
The following summaries of the debt securities and the indentures are not
complete. We strongly urge you to read the indentures and the description of the
debt securities included in the prospectus supplement.
GENERAL TERMS OF DEBT SECURITIES
The debt securities issued under each indenture may be issued without limit
as to aggregate principal amount, in one or more series. Each indenture will
provide that there may be more than one
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trustee under the indenture, each with respect to one or more series of debt
securities. Any trustee under either indenture may resign or be removed with
respect to one or more series of debt securities issued under that indenture,
and a successor trustee may be appointed to act with respect to that series.
If two or more persons are acting as trustee with respect to different
series of debt securities issued under the same indenture, each of those
trustees will be a trustee of a trust under that indenture separate and apart
from the trust administered by any other trustee. In that case, except as
otherwise indicated in this prospectus, any action described in this prospectus
to be taken by the trustee may be taken by each of those trustees only with
respect to the one or more series of debt securities for which it is trustee.
A prospectus supplement relating to a series of debt securities being
offered will include specific terms relating to the offering and that series.
These terms will contain some or all of the following:
- the title of the debt securities;
- any limit on the aggregate principal amount of the debt securities;
- the purchase price of the debt securities, expressed as a percentage of
the principal amount;
- the date or dates on which the principal of and any premium on the debt
securities will be payable or the method for determining the date or
dates;
- if the debt securities will bear interest, the interest rate or rates or
the method by which the rate or rates will be determined;
- if the debt securities will bear interest, the date or dates from which
any interest will accrue, the interest payment dates on which any
interest will be payable, the record dates for those interest payment
dates and the basis upon which interest shall be calculated if other than
that of a 360-day year of twelve 30-day months;
- the place or places where payments on the debt securities will be made
and the debt securities may be surrendered for registration of transfer
or exchange;
- if Globalstar and Globalstar Capital will have the option to redeem all
or any portion of the debt securities, the terms and conditions upon
which the debt securities may be redeemed;
- the terms and conditions of any sinking fund or other similar provisions
obligating Globalstar and Globalstar Capital or permitting a holder to
require Globalstar and Globalstar to redeem or purchase all or any
portion of the debt securities prior to final maturity;
- whether the amount of any payments on the debt securities may be
determined with reference to an index, formula or other method and the
manner in which such amounts are to be determined;
- if the debt securities are secured, a description of the underlying
collateral and any indenture provisions relating to the collateral;
- any additions or changes to the events of default in the respective
indentures;
- any additions or changes with respect to the other covenants in the
respective indentures;
- whether the debt securities will be issued in certificated or book-entry
form;
- whether the debt securities will be in registered or bearer form and, if
in registered form, the denominations of the debt securities if other
than $1,000 and multiples of $1,000;
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- the applicability of the defeasance and covenant defeasance provisions of
the applicable indenture; and
- any other terms of the debt securities consistent with the provisions of
the applicable indenture.
Debt securities may be issued under the indentures as original issue
discount securities to be offered and sold at a substantial discount from their
stated principal amount. Special U.S. federal income tax, accounting and other
considerations applicable to original issue discount securities will be
described in the applicable prospectus supplement.
Unless otherwise provided with respect to a series of debt securities, the
debt securities will be issued only in registered form, without coupons, in
denominations of $1,000 and multiples of $1,000.
SENIOR DEBT SECURITIES AND SENIOR INDEBTEDNESS
Senior debt securities are to be issued under a senior indenture. Each
series of senior debt securities will constitute senior indebtedness and will
rank equally with each other series of senior debt securities and other senior
indebtedness. All subordinated debt, including, but not limited to, all
subordinated debt securities, will be subordinated to the senior debt securities
and other senior indebtedness.
Senior indebtedness includes the following indebtedness or obligations:
- the principal of and premium, if any, and unpaid interest on indebtedness
for money borrowed;
- purchase money and similar obligations;
- obligations under capital leases;
- financing provided by vendors to Globalstar;
- guarantees, assumptions or purchase commitments relating to, or other
transactions as a result of which we are responsible for the payment of,
the indebtedness of others;
- renewals, extensions and refunding of that indebtedness;
- interest or obligations in respect of the indebtedness accruing after the
commencement of any insolvency or bankruptcy proceedings; and
- obligations associated with derivative products.
However, indebtedness or obligations are not senior indebtedness if the
instrument by which Globalstar and Globalstar Capital become obligated for that
indebtedness or those obligations expressly provides that that indebtedness or
those obligations are junior in right of payment to any other of Globalstar's
and Globalstar Capital's indebtedness or obligations.
SUBORDINATED DEBT SECURITIES
Subordinated debt securities are to be issued under a subordinated
indenture. Payments on the subordinated debt securities will be subordinated to
Globalstar's senior indebtedness, whether outstanding on the date of the
subordinated indenture or incurred after that date. No class of subordinated
debt securities will be subordinated to any other class of subordinated debt
securities. At June 30, 1999, Globalstar's aggregate senior indebtedness
consisted of approximately $1.45 billion principal amount of long term
indebtedness and $403 million of vendor financing, and, on August 5, 1999,
Globalstar entered into a $500 million credit facility with a group of banks, of
which $300 million is outstanding. Additionally, at June 30, 1999, Globalstar
had available the full amount of a
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$250 million credit facility originally entered into in December 1995. The
applicable prospectus supplement for each issuance of subordinated debt
securities will specify the aggregate amount of our outstanding indebtedness as
of the most recent practicable date that would rank senior to and equally with
the offered subordinated debt securities.
If any of certain specified events occur, the holders of senior
indebtedness must receive payment of the full amount due on the senior
indebtedness, or that payment must be duly provided for, before Globalstar and
Globalstar Capital may make payments on the subordinated debt securities. These
events are:
- any distribution of Globalstar's assets upon Globalstar's liquidation,
reorganization or other similar transaction except for a distribution in
connection with a merger or other transaction complying with the covenant
described above under "Merger";
- the occurrence and continuation of a payment default on any senior
indebtedness; or
- a declaration of the acceleration of the principal of any series of the
subordinated debt securities, or, in the case of original issue discount
securities, the portion of the principal amount specified under their
terms, as due and payable, that has not been rescinded and annulled.
However, if the event is the acceleration of any series of subordinated
debt securities, only the holders of senior indebtedness outstanding at the time
of the acceleration of those subordinated debt securities, or, in the case of
original issue discount securities, that portion of the principal amount
specified under their terms, must receive payment of the full amount due on that
senior indebtedness, or such payment must be duly provided for, before
Globalstar or Globalstar Capital makes payments on the subordinated debt
securities.
As a result of the subordination provisions, some of Globalstar's or
Globalstar Capital's general creditors, including holders of senior
indebtedness, are likely to recover more, ratably, than the holders of the
subordinated debt securities in the event of insolvency.
SECURED DEBT SECURITIES
Secured debt securities are to be issued under a secured debt indenture
containing terms and conditions similar in all material respects to the terms
and conditions applicable to the senior debt securities, except for provisions
relating to the collateral securing the debt securities.
CERTIFICATED SECURITIES
Except as otherwise stated in the applicable prospectus supplement, debt
securities will not be issued in certificated form. If, however, debt securities
are to be issued in certificated form, no service charge will be made for any
transfer or exchange of any of those debt securities. Globalstar and Globalstar
Capital may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection with the transfer or exchange of those
debt securities.
BOOK-ENTRY DEBT SECURITIES
The debt securities of a series may be issued in whole or in part in the
form of one or more global securities that will be deposited with the depositary
identified in the applicable prospectus supplement. Unless it is exchanged in
whole or in part for debt securities in definitive form, a global security may
not be transferred. However, transfers of the whole security between the
depositary for that global security and its nominee or their respective
successors are permitted.
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Unless otherwise stated, The Depository Trust Company, New York, New York
will act as depositary for each series of global securities. Beneficial
interests in global securities will be shown on, and transfers of global
securities will be effected only through, records maintained by DTC and its
participants.
DTC has provided the following information to us. DTC is a:
- limited-purpose trust company organized under the New York Banking Law;
- a banking organization within the meaning of the New York Banking Law;
- a member of the U.S. Federal Reserve System;
- a clearing corporation within the meaning of the New York Uniform
Commercial Code; and
- a clearing agency registered under the provisions of Section 17A of the
Securities Exchange Act.
DTC holds securities that its direct participants deposit with DTC. DTC
also facilitates the settlement among direct participants of securities
transactions, in deposited securities through electronic computerized book-entry
changes in the direct participant's accounts. This eliminates the need for
physical movement of securities certificates. Direct participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. DTC is owned by a number of its direct
participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to DTC's book-entry system is also available to indirect participants such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a direct participant. The rules
applicable to DTC and its direct and indirect participants are on file with the
SEC.
Principal and interest payments on global securities registered in the name
of DTC's nominee will be made in immediately available funds to DTC's nominee as
the registered owner of the global securities. Globalstar, Globalstar Capital
and the trustee will treat DTC's nominee as the owner of the global securities
for all other purposes as they may determine. Accordingly, Globalstar and
Globalstar Capital, the trustee and any paying agent will have no direct
responsibility or liability to pay amounts due on the global securities to
owners of beneficial interests in the global securities. It is DTC's current
practice, upon receipt of any payment of principal or interest, to credit direct
participants' accounts on the payment date according to their respective
holdings of beneficial interests in the global securities. These payments will
be the responsibility of the direct and indirect participants and not of DTC,
the trustee, Globalstar or Globalstar Capital.
Debt securities represented by a global security will be exchangeable for
debt securities in definitive form of like amount and terms in authorized
denominations only if:
- DTC notifies Globalstar and Globalstar Capital that it is unwilling or
unable to continue as depositary;
- DTC ceases to be a registered clearing agency and a successor depositary
is not appointed by Globalstar and Globalstar Capital within 90 days; or
- Globalstar and Globalstar Capital determine not to require all of the
debt securities of a series to be represented by a global security and
notify the trustee of their decisions.
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MERGER
Under the terms of the indentures, Globalstar generally may consolidate
with, or sell, lease or convey all or substantially all of its assets to, or
merge with or into, any other legal entity, if Globalstar is either the
continuing entity or, if Globalstar is not the continuing entity:
- the successor entity is organized under the laws of Bermuda or the United
States of America and expressly assumes all payments on all the debt
securities and the performance and observance of all the covenants and
conditions of the applicable indenture;
- neither Globalstar nor the successor entity is in default immediately
after the transaction under the indenture;
- immediately after giving effect to such transaction, the successor entity
would be able to incur an additional $1.00 of debt pursuant to the terms
of the indenture;
- immediately after giving effect to the transaction, the successor entity
has a consolidated net worth that is not less than the consolidated net
worth of Globalstar immediately prior to the transaction; and
- Globalstar has delivered to the trustee an officer's certificate and an
opinion of counsel, each stating that the transaction complies with the
indenture.
The indentures will not permit Globalstar Capital to consolidate with, or
sell, lease or convey substantially all of its assets to, or merger with or
into, any other legal entity.
EVENTS OF DEFAULT, NOTICE AND WAIVER
SENIOR INDENTURE. The senior indenture will provide that the following are
events of default with respect to any series of senior debt securities:
- default for 30 days in the payment of any interest on any debt security
of that series;
- default in the payment of the principal of or premium, if any, on any
debt security of that series at its maturity;
- default in making a sinking fund payment required for any debt security
of that series;
- default in the performance of any of Globalstar's other covenants in the
senior indenture that continues for 60 days after written notice, other
than default in a covenant included in the senior indenture solely for
the benefit of another series of senior debt securities;
- the acceleration of the maturity of more than $10,000,000 in the
aggregate of any of Globalstar's other indebtedness, where that
indebtedness is not discharged or that acceleration is not rescinded or
annulled;
- certain events of bankruptcy, insolvency or reorganization of Globalstar
or its property; and
- any other event of default provided with respect to a particular series
of debt securities.
The senior trustee generally may withhold notice to the holders of any
series of debt securities of any default with respect to that series if it
considers the withholding to be in the interest of those holders. However, the
senior trustee may not withhold notice of any default in the payment of the
principal of, or premium, if any, or interest on any debt security of that
series or in the payment of any sinking fund installment in respect of any debt
security of that series.
If an event of default with respect to any series of senior debt securities
occurs and is continuing, the senior trustee or the holders of not less than 25%
in principal amount of the outstanding debt
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securities of that series may declare the principal amount of all of the debt
securities of that series immediately due and payable. Subject to certain
conditions, the holders of a majority in principal amount of outstanding debt
securities of that series may rescind and annul that acceleration. However, they
may only do so if all events of default, other than the non-payment of
accelerated principal or specified portion of accelerated principal, with
respect to debt securities of that series have been cured or waived.
Holders of a majority in principal amount of any series of outstanding
senior debt securities may, subject to some limitations, waive any past default
with respect to that series and the consequences of the default. The prospectus
supplement relating to any series of senior debt securities which are original
issue discount securities will describe the particular provisions relating to
acceleration of a portion of the principal amount of those original issue
discount securities upon the occurrence and continuation of an event of default.
Within 120 days after the close of each fiscal year, Globalstar and Globalstar
Capital must file with the senior trustee a statement, signed by specified of
their officers, stating whether those officers have knowledge of any default
under the senior indenture.
Except with respect to its duties in case of default, the senior trustee is
not obligated to exercise any of its rights or powers at the request or
direction of any holders of any series of outstanding senior debt securities,
unless those holders have offered the senior trustee reasonable security or
indemnity. Subject to those indemnification provisions and limitations contained
in the senior indenture, the holders of a majority in principal amount of any
series of the outstanding debt securities issued thereunder may direct any
proceeding for any remedy available to the senior trustee, or the exercising of
any of the senior trustee's trusts or powers.
SUBORDINATED INDENTURE. The subordinated indenture will provide that the
following are events of default with respect to any series of subordinated debt
securities:
- default for 30 days in the payment of any interest on any debt security
of that series;
- default in the payment of the principal of or premium, if any, on any
debt security of that series at its maturity;
- default in making a sinking fund payment required for any debt security
of that series;
- any default in the performance of any of our other covenants in the
subordinated indenture that continues for 60 days after written notice,
other than default in a covenant included in the subordinated indenture
solely for the benefit of another series of subordinated debt securities;
- the acceleration of more than $10,000,000, where that indebtedness is not
discharged or that acceleration is not rescinded or annulled;
- certain events relating to the bankruptcy, insolvency or reorganization
of us or our property; and
- any other event of default provided with respect to a particular series
of debt securities.
The subordinated trustee generally may withhold notice to the holders of
any series of subordinated debt securities of any default with respect to that
series if it considers the withholding to be in the interest of the holders.
However, the subordinated trustee may not withhold notice of any default in the
payment of the principal of or premium, if any or interest on any debt security
of that series or in the payment of any sinking fund installment in respect of
any debt security of that series.
If an event of default with respect to any series of subordinated debt
securities occurs and is continuing, the subordinated trustee or the holders of
not less than 25% in principal amount of the outstanding debt securities of that
series may declare the principal amount of all of the debt securities
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of that series immediately due and payable. Subject to certain conditions, the
holders of a majority in principal amount of outstanding debt securities of that
series may rescind and annul that acceleration. However, they may only do so if
all events of default with respect to debt securities of that series have been
cured or waived. Holders of a majority in principal amount of any series of the
outstanding subordinated debt securities may, subject to some limitations, waive
any past default with respect to that series and the consequences of the
default. The prospectus supplement relating to any series of subordinated debt
securities which are original issue discount securities will describe the
particular provisions relating to acceleration of a portion of the principal
amount of those original issue discount securities upon the occurrence and
continuation of an event of default. Within 120 days after the close of each
fiscal year, Globalstar and Globalstar Capital must file with the subordinated
trustee a statement, signed by their specified officers, stating whether these
officers have knowledge of any default under the subordinated indenture.
Except with respect to its duties in case of default, the subordinated
trustee is not obligated to exercise any of its rights or powers at the request
or direction of any holders of any series of outstanding subordinated debt
securities, unless those holders have offered the subordinated trustee
reasonable security or indemnity. Subject to those indemnification provisions
and limitations contained in the subordinated indenture, the holders of a
majority in principal amount of any series of the outstanding subordinated debt
securities may direct any proceeding for any remedy available to the
subordinated trustee, or the exercising of any of the subordinated trustee's
trusts or powers.
AMENDMENT, SUPPLEMENT AND WAIVER
SENIOR INDENTURE. Modifications and amendments of the senior indenture may
be made only, subject to some exceptions, with the consent of the holders of a
majority in aggregate principal amount of all outstanding debt securities under
the senior indenture which are affected by the modification or amendment.
However, to the extent discussed in the prospectus supplement, the holder
of each affected senior debt security must consent to any modification or
amendment of the senior indenture that:
- changes the stated maturity of the principal of, or the premium, if any,
or any installment of interest on, that debt security;
- reduces the principal amount of, or the rate or amount of interest on, or
any premium payable on redemption of, that debt security;
- reduces the amount of principal of an original issue discount security
that would be due and payable upon declaration of acceleration of its
maturity or would be provable in bankruptcy;
- adversely affects any right of repayment of the holder of that debt
security;
- changes the place of payment where, or the currency in which, any payment
on that debt security is payable;
- impairs the right to institute suit to enforce any payment on or with
respect to that debt security;
- reduces the percentage of outstanding debt securities of any series
necessary to modify or amend the senior indenture or to waive compliance
with some of its provisions or defaults and their consequences; or
- make any change in any subsidiary guarantee that would adversely affect
the rights of holders of that security.
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Globalstar, Globalstar Capital and the senior trustee may amend the senior
indenture without the consent of the holders of any senior debt securities in
certain limited circumstances, such as:
- to evidence the succession of another entity to Globalstar and the
assumption by the successor of Globalstar's covenants contained in the
senior indenture;
- to secure the securities; and
- to cure any ambiguity, to correct or supplement any provision in the
senior indenture which may be inconsistent with any other provision of
the senior indenture.
SUBORDINATED INDENTURE. Modifications and amendments to the subordinated
indenture may be made only, subject to some exceptions, with the consent of the
holders of a majority in aggregate principal amount of all outstanding debt
securities under the subordinated indenture which are affected by the
modification or amendment. However, to the extent discussed in the prospectus
supplement, the holder of each affected subordinated debt security must consent
to any modification or amendment of the subordinated indenture that:
- changes the stated maturity of the principal of, or the premium, if any,
or any installment of interest on, that debt security;
- reduces the principal amount of, or the rate or amount of interest on, or
any premium payable on redemption of, that debt security;
- reduces the amount of principal of an original issue discount security
that would be due and payable upon declaration of acceleration of its
maturity or would be provable in bankruptcy;
- adversely affects any right of the repayment of the holder of that debt
security;
- changes the place of payment where, or the currency in which, any payment
on that debt security is payable;
- impairs the right to institute suit to enforce any payment on or with
respect to that debt security;
- reduces the percentage of outstanding debt securities of any series
necessary to modify or amend the subordinated indenture or to waive
compliance with some of its provisions or defaults and their
consequences; or
- subordinates the indebtedness evidenced by that debt security to any of
our indebtedness other than senior indebtedness.
Globalstar, Globalstar Capital and the subordinated trustee also may amend
the subordinated indenture without the consent of the holders of any
subordinated debt securities in certain limited circumstances, such as:
- to evidence the succession of another entity to Globalstar and the
assumption by the successor of Globalstar's covenants contained in the
subordinated indenture;
- to secure the securities; and
- to cure any ambiguity, to correct or supplement any provision in the
subordinated indenture which may be inconsistent with any other provision
of the subordinated indenture.
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DEFEASANCE AND COVENANT DEFEASANCE
To the extent stated in the prospectus supplement, Globalstar and
Globalstar Capital may elect to apply the provisions relating to defeasance and
discharge of indebtedness, or to defeasance of certain restrictive covenants in
the indentures, to the debt securities of any series.
When Globalstar and Globalstar Capital establish a series of debt
securities, Globalstar and Globalstar Capital may provide that that series is
subject to the defeasance and discharge provisions of the applicable indenture.
If those provisions are made applicable, Globalstar and Globalstar Capital may
elect either:
- to defease and be discharged from, subject to some limitations, all of
its obligations with respect to those debt securities; or
- to be released from its obligations to comply with specified covenants
relating to those debt securities as described in the applicable
prospectus supplement.
To effect that defeasance or covenant defeasance, Globalstar and Globalstar
Capital must irrevocably deposit in trust with the relevant trustee an amount in
any combination of funds or government obligations, which, through the payment
of principal and interest in accordance with their terms, will provide money
sufficient to make payments on those debt securities and any mandatory sinking
fund or analogous payments on those debt securities.
On such a defeasance, Globalstar and Globalstar Capital will not be
released from obligations:
- to pay additional amounts, if any, upon the occurrence of some events;
- to register the transfer or exchange of those debt securities;
- to replace some of those debt securities;
- to maintain an office relating to those debt securities; and
- to hold moneys for payment in trust.
To establish such a trust Globalstar and Globalstar Capital must, among
other things, deliver to the relevant trustee an opinion of counsel to the
effect that the holders of those debt securities:
- will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of the defeasance or covenant defeasance; and
- will be subject to U.S. federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if the
defeasance or covenant defeasance had not occurred. In the case of
defeasance, the opinion of counsel must be based upon a ruling of the IRS
or a change in applicable U.S. federal income tax law occurring after the
date of the applicable indenture.
Government obligations mean generally securities which are:
- direct obligations of the U.S. or of the government which issued the
foreign currency in which the debt securities of a particular series are
payable, in each case, where the issuer has pledged its full faith and
credit to pay the obligations; or
- obligations of an agency or instrumentality of the U.S. or of the
government which issued the foreign currency in which the debt securities
of that series are payable, the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the U.S. or that
other government.
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In any case, the issuer of government obligations cannot have the option to
call or redeem the obligations. In addition, government obligations include,
subject to certain qualifications, a depository receipt issued by a bank or
trust company as custodian with respect to any government obligation or a
specific payment of interest on or principal of any such government obligation
held by the custodian for the account of a depository receipt holder.
If Globalstar and Globalstar Capital effect covenant defeasance with
respect to any debt securities, the amount on deposit with the relevant trustee
will be sufficient to pay amounts due on the debt securities at the time of
their stated maturity. However, those debt securities may become due and payable
prior to their stated maturity if there is an event of default with respect to a
covenant from which Globalstar and Globalstar Capital have not been released. In
that event, the amount on deposit may not be sufficient to pay all amounts due
on the debt securities at the time of the acceleration.
The applicable prospectus supplement may further describe the provisions,
if any, permitting defeasance or covenant defeasance, including any
modifications to the provisions described above.
PLAN OF DISTRIBUTION
We may sell the offered securities (1) through agents, (2) through
underwriters, (3) to dealers, or (4) directly to one or more purchasers. The
applicable prospectus supplement will describe the terms of the offering of the
securities, including:
- the name or names of any underwriters, if any;
- whether these underwriters operate in or outside of the United States;
- the purchase price of the securities and the proceeds we will receive
from the sale;
- any underwriting discounts and other items constituting underwriters'
compensation;
- any initial public offering price;
- any discounts or concessions allowed or reallowed or paid to dealers; and
- any securities exchange or market on which the securities may be listed.
Offered securities may be sold through agents designated by us. Unless
otherwise indicated in a prospectus supplement, the agents will use their best
efforts to solicit purchases for the period of their appointment.
If underwriters are used in the sale, the offered securities will be
acquired by the underwriters for their own account. The underwriters may resell
the securities in one or more transactions, including negotiated transactions,
at a fixed public offering price or at varying prices determined at the time of
sale. The obligations of the underwriters to purchase the securities will be
subject to certain conditions. The underwriters will be obligated to purchase
all the securities of the series offered if any of the securities are purchased.
Any initial public offering price and any discounts or concessions allowed or
re-allowed or paid to dealers may be changed from time to time. We may also
decide to sell the offered securities or parts of any offering outside of the
United States, using international underwriters. In such an event, we will file
a separate information prospectus with the SEC.
If a dealer is used in the sale, we will sell the offered securities to the
dealer, as principal. The dealer may then resell those securities to the public
at varying prices to be determined by the dealer at the time of resale.
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We may also sell offered securities directly to institutional investors or
others. In this case, no underwriters or agents would be involved.
We may authorize underwriters, dealers and agents to solicit offers by
certain institutional investors to purchase offered securities under contracts
providing for payment and delivery on a future date specified in the prospectus
supplement. The prospectus supplement will also describe the public offering
price for the securities and the commission payable for solicitation of these
delayed delivery contracts. Delayed delivery contracts will contain definite
fixed price and quantity terms. The obligations of a purchaser under these
delayed delivery contracts will be subject to only two conditions:
- that the institution's purchase of the securities at the time of delivery
of the securities is not prohibited under the law of any jurisdiction to
which the institution is subject; and
- that we shall have sold to the underwriters the total principal amount of
the offered securities, less the principal amount covered by the delayed
delivery contracts.
Underwriters, dealers, agents and direct purchasers that participate in the
distribution of the offered securities may be underwriters as defined in the
Securities Act and any discounts or commissions they receive from us and any
profit on the resale of the offered securities by them may be treated as
underwriting discounts and commissions under the Securities Act. Any
underwriters, dealers or agents will be identified and their compensation
described in a prospectus supplement. Bear, Stearns & Co. Inc. may act as an
underwriter for one or more at-the-market offerings of GTL equity securities on
the Nasdaq National Market, which is the existing trading market for those
shares.
We may have agreements with the underwriters, dealers and agents to
indemnify them against certain civil liabilities, including liabilities under
the Securities Act, or to contribute with respect to payments which the
underwriters, dealers or agents may be required to make.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us or our subsidiaries in the ordinary course of their
businesses.
The place and time of delivery of the offered securities will be described
in the prospectus supplement.
LEGAL MATTERS
Appleby, Spurling & Kempe will issue an opinion as to the validity of the
offered securities under Bermuda law and Willkie Farr & Gallagher will issue an
opinion as to the validity of the offered securities under U.S. federal law,
Delaware law and New York law. Any underwriters will be advised about other
issues relating to any offering by their own legal counsel. As of June 30, 1999,
partners and counsel in Willkie Farr & Gallagher beneficially owned 110,000
shares of GTL common stock. Mr. Robert B. Hodes is counsel to the law firm of
Willkie Farr & Gallagher and a Director of Loral and GTL and a member of the
Executive and Audit Committees of the Boards of Directors of both Loral and GTL.
EXPERTS
The annual financial statements of GTL and Globalstar incorporated in this
prospectus by reference from GTL's and Globalstar's Annual Report on Form 10-K
for the year ended December 31, 1998 and the balance sheets of Globalstar
Capital and Loral/Qualcomm Satellite
26
<PAGE> 47
Services, L.P., as of December 31, 1998 and 1997 included in this prospectus
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports, which are included or incorporated by reference in this
prospectus, and have been so included or incorporated in reliance upon the
reports of such firm given upon their authority as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC which
you can read at the SEC's Web site at http://www.sec.gov. You can also read
these documents at the SEC's public reference rooms in Washington, D.C.,
Chicago, Illinois and New York, NY. Please call the SEC toll free at
1-800-SEC-0330 for information about its public reference rooms.
We have filed a registration statement with the SEC on Form S-3 under the
Securities Act of 1933. This prospectus does not contain all of the information
in the registration statement. We have omitted certain parts of the registration
statement, as permitted by the rules and regulations of the SEC. You may inspect
and copy the registration statement, including exhibits, at the SEC's web site
and public reference facilities. Our statements in this prospectus about the
contents of any contract or other document are not necessarily complete. You
should refer to the copy of each contract or other document we have filed as an
exhibit to the registration statement for complete information.
The SEC allows us to "incorporate by reference" the information we file
with it, which means we can satisfy our legal obligations to disclose important
information contained in those documents by referring you to them. The
information included in the following documents is incorporated by reference and
is considered to be a part of this prospectus. More recent information that we
file with the SEC automatically updates and supersedes any inconsistent
information contained in prior filings.
The documents listed below have been filed under the Securities and
Exchange Act of 1934 with the SEC and are incorporated herein by reference:
- GTL's and Globalstar's Annual Report on Form 10-K for the year ended
December 31, 1998;
- GTL's and Globalstar's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1999;
- GTL's and Globalstar's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1999;
- GTL's Proxy Statement relating to the 1999 Annual Meeting of
Shareholders;
- GTL's and Globalstar's Current Report on Form 8-K, filed January 8, 1999;
- GTL's and Globalstar's Current Report on Form 8-K, filed January 22,
1999;
- GTL's and Globalstar's Current Report on Form 8-K, filed August 6, 1999;
and
- the description of GTL's common stock contained in GTL's registration
statement on Form 8-A filed under the Exchange Act and any amendments or
reports filed for the purpose of updating such description.
We also incorporate by reference all documents subsequently filed by us
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, until the
offering of the securities under this prospectus is completed.
We will provide without charge to each person, including any person having
a control relationship with that person, to whom a prospectus is delivered, a
copy of any or all of the
27
<PAGE> 48
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. For information about Globalstar
and Globalstar Capital, please direct your request in writing or by telephone to
Globalstar, L.P. at 3200 Zanker Road, P.O. Box 640670, San Jose, California
95134-0670, Attention Stephen C. Wright, (408) 933-4000.
You should rely only on the information incorporated by reference or
provided in this prospectus or any prospectus supplement. We have not authorized
anyone else to provide you with different information. We are not making an
offer of these securities in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any prospectus
supplement is accurate as of any date other than the date on the front of those
documents.
28
<PAGE> 49
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
GLOBALSTAR CAPITAL CORPORATION
Independent Auditors' Report................................ F-2
Balance Sheets.............................................. F-3
Notes to Balance Sheets..................................... F-4
LORAL/QUALCOMM SATELLITE SERVICES, L.P.
Independent Auditors' Report................................ F-6
Balance Sheets.............................................. F-7
Notes to Balance Sheets..................................... F-8
</TABLE>
F-1
<PAGE> 50
INDEPENDENT AUDITORS' REPORT
To the Stockholder of Globalstar Capital Corporation:
We have audited the accompanying balance sheets of Globalstar Capital
Corporation (a wholly-owned subsidiary of Globalstar, L.P.) as of December 31,
1998 and 1997. These balance sheets are the responsibility of the Company's
management. Our responsibility is to express an opinion on these balance sheets
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheets are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheets. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audits of the balance sheets provide a reasonable basis for our
opinion.
In our opinion, such balance sheets present fairly, in all material
respects, the financial position of Globalstar Capital Corporation as of
December 31, 1998 and 1997 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
San Jose, California
February 16, 1999
F-2
<PAGE> 51
GLOBALSTAR CAPITAL CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF GLOBALSTAR, L.P.)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1997
------ ------
<S> <C> <C>
ASSETS
Receivable from Parent...................................... $1,000 $1,000
====== ======
LIABILITIES AND STOCKHOLDER'S EQUITY
Commitments and contingencies (Note 3)......................
Stockholder's equity........................................
Common stock, par value $.10; 1,000 shares authorized,
issued and outstanding................................. $ 10 $ 10
Paid-in capital............................................. 990 990
------ ------
$1,000 $1,000
====== ======
</TABLE>
See notes to balance sheets.
F-3
<PAGE> 52
GLOBALSTAR CAPITAL CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF GLOBALSTAR, L.P.)
NOTES TO BALANCE SHEETS
1. ORGANIZATION
Globalstar Capital Corporation ("Globalstar Capital"), a wholly-owned
subsidiary of Globalstar, L.P. ("Globalstar") was formed on July 24, 1995 for
the primary purpose of serving as a co-issuer and co-obligor with respect to
certain debt obligations of Globalstar.
2. COMMITMENTS AND CONTINGENCIES
Globalstar Capital is a co-obligor on the following Globalstar borrowings:
11 3/8% $500 MILLION SENIOR NOTES DUE 2004
In February, 1997, Globalstar sold $500 million principal amount of 11 3/8%
Senior Notes due 2004 in a private offering. The notes are senior in right of
payment to Globalstar's 8% Convertible Redeemable Preferred Partnership
Interests ("8% RPPIs"), may not be redeemed prior to February 2002 and are
subject to a prepayment premium prior to 2004. Interest is paid semi-annually.
11 1/4% $325 MILLION SENIOR NOTES DUE 2004
In June, 1997, Globalstar sold $325 million principal amount of 11 1/4%
Senior Notes due 2004 in a private offering. The notes are senior in right of
payment to Globalstar's 8% RPPIs, may not be redeemed prior to June 2002 and are
subject to a prepayment premium prior to 2004. Interest is paid semi-annually.
10 3/4% $325 MILLION SENIOR NOTES DUE 2004
In October, 1997, Globalstar sold $325 million principal amount of 10 3/4%
Senior Notes due 2004 in a private offering. The notes are senior in right of
payment to Globalstar's 8% RPPI's, may not be redeemed prior to November 2002
and are subject to a prepayment premium prior to 2004. Interest is paid
semi-annually.
11 1/2% $300 MILLION SENIOR NOTES DUE 2005
In May, 1998, Globalstar sold $300 million principal amount of 11 1/2%
Senior Notes due 2005 in a private offering. The notes are senior in right of
payment to Globalstar's 8% RPPI's, may not be redeemed prior to June 2003 and
are subject to a prepayment premium prior to 2005. Interest is paid
semi-annually.
The indentures for the 11 3/8% Senior Notes, the 11 1/4% Senior Notes, the
10 3/4% Senior Notes, and the 11 1/2% Senior Notes contain certain covenants
that, among other things, limit the ability of Globalstar to incur additional
debt, issue preferred stock, or pay dividends and certain distributions. In
certain limited circumstances involving a change of control of Globalstar, as
defined, each note is redeemable at the option of the holder for 101% of the
principal amount plus accrued interest.
Globalstar Capital is a guarantor of a $250 million credit agreement
between Globalstar and a group of banks. At December 31, 1998, and December 31,
1997, there were no borrowings outstanding under this agreement.
F-4
<PAGE> 53
GLOBALSTAR CAPITAL CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF GLOBALSTAR, L.P.)
NOTES TO BALANCE SHEETS -- (CONTINUED)
3. SUBSEQUENT EVENTS
On January 21, 1999, Globalstar sold to GTL 7 million units (face amount of
$50 per unit) of 8% RPPIs in Globalstar, in connection with GTL's offering of 7
million shares (face amount of $50 per share) of 8% Convertible Redeemable
Preferred Stock due 2011 (the "Preferred Stock"). Dividends on the 8% RPPIs and
the Preferred Stock accrue at 8% per annum and are payable quarterly. Globalstar
is using the funds for the construction and deployment of the Globalstar System.
The Preferred Stock is convertible into shares of GTL common stock at a
conversion price of $23.2563 per share, subject to adjustment for certain
antidilution events. As of January 21, 1999, the Preferred Stock was convertible
into 15,049,685 shares of GTL common stock. Loral purchased 3 million shares
($150 million face amount) of the Preferred Stock issued, in order to maintain
its prior percentage ownership interest in Globalstar.
The Preferred Stock has limited voting rights. With respect to dividend
rights and rights upon liquidation, winding up and dissolution, the Preferred
Stock ranks senior to common stock and to all other future series of preferred
stock or other class of capital stock of GTL, the terms of which do not
expressly provide that such series or class ranks senior to or on parity with
the Preferred Stock. Prior to its mandatory redemption date, the Preferred Stock
is redeemable (at a premium which declines over time) by GTL beginning in
February 2002 (or beginning in February 2000 if GTL's stock price exceeds
certain defined price ranges). Payments due on the Preferred Stock may be made
in cash, GTL common stock or a combination of both at the option of GTL. In the
event accrued and unpaid dividends accumulate to an amount equal to six
quarterly dividends, holders of the majority of the outstanding shares of
Preferred Stock will be entitled to elect additional members to GTL's Board of
Directors.
The 8% RPPIs rank senior to ordinary partnership interests and have terms
substantially similar to the Preferred Stock. However, they are subordinate to
all existing and future liabilities of Globalstar, and cash distributions
thereon are limited to the amount of the partnership capital accounts that are
maintained for such interests. The 8% RPPIs will convert to ordinary partnership
interests upon any conversion of the Preferred Stock into GTL common stock.
Payments due on the 8% RPPIs may be made in cash. Globalstar ordinary
partnership interests or a combination of both at the option of Globalstar.
F-5
<PAGE> 54
INDEPENDENT AUDITORS' REPORT
To the Partners of Loral/Qualcomm Satellite Services, L.P.
We have audited the accompanying balance sheets of Loral/Qualcomm Satellite
Services, L.P. (a General Partner of Globalstar, L.P.) as of December 31, 1998
and 1997. These balance sheets are the responsibility of the Partnerships'
management. Our responsibility is to express an opinion on these balance sheets
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheets are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheets. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audits of the balance sheets provide a reasonable basis for our
opinion.
In our opinion, such balance sheets present fairly, in all material
respects, the financial position of Loral/Qualcomm Satellite Services, L.P. as
of December 31, 1998 and 1997 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
San Jose, California
February 16, 1999
F-6
<PAGE> 55
LORAL/QUALCOMM SATELLITE SERVICES, L.P.
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS:
Investment in Globalstar, L.P. ............................ $-- $--
Total assets...............................................
== ==
PARTNERS' CAPITAL:
Partnership interests (18,000 interests outstanding)....... $-- $--
Total partners' capital....................................
== ==
</TABLE>
See notes to balance sheets.
F-7
<PAGE> 56
LORAL/QUALCOMM SATELLITE SERVICES, L.P.
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
NOTES TO BALANCE SHEETS
1. ORGANIZATION AND BACKGROUND
Loral/Qualcomm Satellite Services, L.P. ("LQSS"), was formed in November
1993 as a Delaware limited partnership with a December 31 fiscal year end. The
general partner of LQSS is Loral/Qualcomm Partnership, L.P. ("LQP"), a limited
partnership whose general partner is Loral General Partner, Inc. ("LGP"), a
subsidiary of Loral Space & Communications Ltd., a Bermuda company ("Loral") and
whose limited partners include a subsidiary of QUALCOMM Incorporated
("Qualcomm").
Effective April 23, 1996, a merger between Loral Corporation ("Old Loral")
and Lockheed Martin Corporation ("Lockheed Martin") was completed. In
conjunction with the merger, Old Loral's space and communications businesses,
including its direct and indirect interests in LGP, LQP, LQSS, Globalstar, L.P.
("Globalstar"), Globalstar Telecommunications Limited ("GTL"), Space
Systems/Loral, Inc. ("SS/L"), and other affiliated businesses, as well as
certain other assets, were transferred to Loral.
LQSS's only activity is acting as the managing general partner of
Globalstar, a development stage limited partnership, which was founded to
design, construct and operate a worldwide, low-earth orbit satellite-based
wireless digital telecommunications system (the "Globalstar System"). The
Globalstar System's world-wide coverage is designed to enable its service
providers to extend modern telecommunications services to millions of people who
currently lack basic telephone service and to enhance wireless communications in
areas underserved or not served by existing or future cellular systems,
providing a telecommunications solution in parts of the world where the
build-out of terrestrial systems cannot be economically justified.
At December 31, 1998, LQSS held a 30.9% interest in Globalstar's
outstanding partnership interests. As LQSS's investment in Globalstar is LQSS's
only asset, LQSS is dependent upon Globalstar's success and achievement of
profitable operations for the recovery of its investment. Globalstar is a
development stage limited partnership which may encounter problems, delays and
expenses, many of which may be beyond Globalstar's control. These may include,
but are not limited to, problems related to technical development of the system,
testing, regulatory compliance, manufacturing and assembly, potential launch
failures which could delay the program schedule, the competitive and regulatory
environment in which Globalstar will operate, marketing problems and costs and
expenses that may exceed current estimates. There can be no assurance that
substantial delays in any of the foregoing matters would not delay Globalstar's
achievement of profitable operations and effect the recoverability of LQSS's
investment. All expenses necessary to maintain LQSS's operations are borne by
Globalstar.
While it is not anticipated that LQSS will incur any direct obligations for
borrowed money or any other liabilities, it will, as a general partner of
Globalstar, be jointly and severally liable for all liabilities of Globalstar
other than those that are by contract made expressly non-recourse to
Globalstar's general partners or otherwise guaranteed. Limited partners in LQSS
do not, in general, have such joint and several liability.
F-8
<PAGE> 57
LORAL/QUALCOMM SATELLITE SERVICES, L.P.
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
NOTES TO BALANCE SHEETS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT IN GLOBALSTAR, L.P.
LQSS accounts for its investment in Globalstar using the equity method of
accounting. Under this method, LQSS recognizes its allocated share of
Globalstar's net loss, for each period since its initial investment in March
1994. The difference between LQSS's initial investment in Globalstar and its
interest in Globalstar's ordinary partnership capital, at that time, is
attributable to certain intangible assets contributed to Globalstar for
development of the Globalstar System; this difference will be accreted by LQSS
on a ratable basis upon Globalstar's commencement of commercial services. During
1995, LQSS's investment in Globalstar was reduced to zero. Accordingly, LQSS has
discontinued providing for its allocated share of Globalstar's net losses, and
will recognize a liability as a result of its general partner status in
Globalstar only in the event that Globalstar's losses result in an aggregate
ordinary partners' capital deficiency. At December 31, 1998, suspended losses
representing LQSS's unrecognized equity in Globalstar's net losses aggregated
approximately $107,944,000.
NET (LOSS) INCOME ALLOCATION
The partnership agreements of LQSS and Globalstar provide that net losses
of each partnership are allocated among the partners with positive adjusted
capital account balances in accordance with their relative percentage interests
until the adjusted capital account balances of all partners are zero. Any
further net loss is allocated to the general partner.
Net income of each partnership is allocated among the partners in
proportion to, and to the extent of, distributions made to the partners out of
receipts for the period, as defined, then in proportion to and to the extent of
negative adjusted capital account balances and then in accordance with
percentage interests.
Under the terms of the partnership agreements, adjusted partners' capital
accounts are calculated in accordance with the principles of U.S. Treasury
Regulations governing the allocation of taxable income and loss including
adjustments to reflect the fair market value (including intangibles) of
partnership assets upon certain capital transactions including a sale of
partnership interests. Such adjustments are not permitted under generally
accepted accounting principles and, accordingly, are not reflected in the
accompanying financial statements.
INCOME TAXES
LQSS was organized as a Delaware limited partnership. As such, no income
tax provision (benefit) is included in the accompanying financial statements
since U.S. income taxes are the responsibility of its partners. Generally,
taxable income (loss), deductions and credits of LQSS will be passed
proportionately through to its partners.
3. INVESTMENT IN GLOBALSTAR
On March 23, 1994, LQSS entered into a subscription agreement to acquire
18,000,000 general ordinary partnership interests in Globalstar for $50,000,000.
LQSS paid $38,691,000 in cash during 1994 and 1995 and received a credit of
$11,309,000 against its capital subscription, as compensation
F-9
<PAGE> 58
LORAL/QUALCOMM SATELLITE SERVICES, L.P.
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
NOTES TO BALANCE SHEETS -- (CONTINUED)
for certain costs incurred by the partners of its general partner, LQP. As of
December 31, 1998, Globalstar had 38,242,593 general and 19,937,500 limited
ordinary partnership interests outstanding.
On February 14, 1995, GTL completed an initial public offering of
40,000,000 shares of common stock, resulting in net proceeds of $185,750,000,
which were used to purchase 10,000,000 ordinary general partnership interests in
Globalstar. LQSS and the other partners in Globalstar have the right to exchange
their ordinary partnership interests into shares of GTL common stock on an
approximate one-for-four basis following the Full Coverage Date, as defined, of
the Globalstar System and after two consecutive quarters of positive net income,
subject to certain annual limitations. GTL has reserved approximately 152
million shares for this purpose.
In May 1997 and June 1998, GTL issued two-for-one stock splits in the form
of 100% stock dividends. Prior to the stock splits, GTL's equity securities and
convertible securities were represented by equivalent Globalstar partnership
interests on an approximate one-for-one basis. Globalstar's partnership
interests were not affected by the GTL stock splits and, accordingly, GTL's
equity securities are now represented by equivalent Globalstar partnership
interests on an approximate four-for-one basis. All GTL shares and per share
amounts have been restated to reflect the two-for-one stock splits.
On December 15, 1995, Globalstar entered into a $250 million credit
agreement (the "Global Credit Agreement") with a group of banks. Lockheed
Martin, Qualcomm, SS/L and another Globalstar partner have guaranteed $206.3
million, $21.9 million, $11.7 million and $10.1 million of the Globalstar Credit
Agreement, respectively. In addition, Loral agreed to indemnify Lockheed Martin
for any liability in excess of $150 million.
Pursuant to other equity arrangements entered into by Globalstar,
additional Globalstar ordinary partnership interests have been reserved for
issuance. As LQSS is not a participant in such arrangements, such issuances
would result in the dilution of LQSS's interest in Globalstar's ordinary
partnership interests. At December 31, 1998 and 1997, LQSS held directly
18,000,000 ordinary general partnership interests, or 30.9% and 34.4%, of the
outstanding 58,180,093 and 52,319,076 ordinary partnership interests of
Globalstar, respectively.
At December 31, 1998, Globalstar had reserved additional ordinary
partnership interests for issuance for: exercise of warrants to purchase GTL
common stock issued in connection with Globalstar's 11 3/8% Senior Notes due
2004 (1,017,331 interests), exercise of a warrant issued to China Telecom to
purchase Globalstar ordinary partnership interests (937,500 interests), and
interests reserved for issuance under GTL's 1994 stock option plan (617,873
interests). Assuming all such reserved interests had been issued at December 31,
1998, LQSS's direct interest in Globalstar's ordinary partnership interests
would have decreased to 29.6%.
On January 21, 1999, Globalstar sold GTL $350 million face amount of 8%
redeemable preferred partnership interests ("8% RPPI's") in connection with
GTL's offering of $350 million of 8% Convertible Preferred Stock due 2011.
Conversion of the 8% RPPI's would result in the issuance of 3,762,421 interests,
subject to adjustment for certain antidilution events. Assuming all such
reserved interests had been issued at December 31, 1998, LQSS's direct interest
in Globalstar's ordinary partnership interests would have decreased to 27.9%.
F-10
<PAGE> 59
LORAL/QUALCOMM SATELLITE SERVICES, L.P.
(A GENERAL PARTNER OF GLOBALSTAR, L.P.)
NOTES TO BALANCE SHEETS -- (CONTINUED)
In addition, Globalstar may elect to make the preferred distribution on the
8% RPPI's in ordinary partnership interests, versus cash, which would further
dilute LQSS's direct interest in Globalstar's ordinary partnership interests.
4. PARTNERS' CAPITAL
On March 23, 1994, LQSS received capital subscriptions of $50,000,000 for a
42.2% general partnership interest and 57.8% limited partnership interests,
representing all issued and outstanding partnership interests. Of these capital
subscriptions, $38,691,000 was received in cash during 1994 and 1995 and a
capital subscription credit of $11,309,000 was issued to the general and limited
partners as compensation for expenditures incurred by Loral and Qualcomm from
January 1, 1993 through March 22, 1994, relating to the Globalstar System. LQSS
was in turn granted a credit against its capital subscription payable to
Globalstar for the same amount.
On April 14, 1997, LQSS effected a six-for-one split of partnership
interests so that one LQSS partnership interest would represent an effective
ownership of one Globalstar partnership interest. All LQSS interest and per
interest amounts have been restated to reflect the six-for-one split.
5. RELATED PARTY TRANSACTIONS
GLOBALSTAR MANAGING PARTNER'S ALLOCATION
Commencing after the initiation of Globalstar's services, LQSS will receive
a managing partner's allocation equal to 2.5% of Globalstar's revenues up to
$500 million, plus 3.5% of revenues in excess of $500 million. This managing
partner's allocation will be distributed to LQSS's general partner, LQP. Should
Globalstar incur a net loss in any year following commencement of services, the
allocation for that year will be reduced by 50% and Globalstar will be
reimbursed for allocation payments, if any, made in any prior quarter of such
year, sufficient to reduce the management allocation for such year to 50%. No
allocations have been received to date. The allocation may be deferred (with
interest 4% per annum) in any quarter in which Globalstar would report negative
cash flow from operations if the allocation were made.
F-11
<PAGE> 60
--------------------------------------------------------------------------------
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$500,000,000
<TABLE>
<S> <C>
GLOBALSTAR TELECOMMUNICATIONS GLOBALSTAR, L.P.
LIMITED GLOBALSTAR CAPITAL CORPORATION
COMMON STOCK DEBT SECURITIES
PREFERRED STOCK
WARRANTS
</TABLE>
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--------------------------------------------------------------------------------
<PAGE> 61
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT
OR ADDITIONAL INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT
SEEKING AN OFFER TO BUY SHARES OF OUR COMMON STOCK IN ANY JURISDICTION WHERE THE
OFFER OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS,
REGARDLESS OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY SALE OF OUR
COMMON STOCK.
---------------------------
TABLE OF CONTENTS
---------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement Summary............. S-1
The Offering.............................. S-4
Risk Factors.............................. S-5
Forward-Looking Statements................ S-10
Use of Proceeds........................... S-10
Price Range of Common Stock............... S-10
Capitalization............................ S-11
Taxation.................................. S-12
Legal Matters............................. S-16
Where you can find more information....... S-16
Base Prospectus
</TABLE>
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5,246,209 SHARES
[GLOBALSTAR LOGO]
GLOBALSTAR
TELECOMMUNICATIONS
LIMITED
COMMON STOCK
------------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------------
SEPTEMBER 22, 2000
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