-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Tm1JyoPQEWsB0lOs6gpley3aFemepr8ephoO+rcyfW9Cvrl+tDnBdknT4nYfeiwA Xgab6GVnaV1SZ4+89mkpew== 0000950123-96-003169.txt : 19960624 0000950123-96-003169.hdr.sgml : 19960624 ACCESSION NUMBER: 0000950123-96-003169 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 19960621 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLOBALSTAR TELECOMMUNICATIONS LTD CENTRAL INDEX KEY: 0000933401 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 133795510 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-06477 FILM NUMBER: 96583671 BUSINESS ADDRESS: STREET 1: 600 THIRD AVENUE STREET 2: 36TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126971105 MAIL ADDRESS: STREET 1: 600 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10016 S-3 1 FORM S-3 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 1996 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ GLOBALSTAR TELECOMMUNICATIONS LIMITED (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) BERMUDA 13-3795510 (STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
------------------------ Cedar House 41 Cedar Avenue Hamilton HM12, Bermuda (809) 295-2244 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ ERIC J. ZAHLER 600 Third Avenue New York, New York 10016 (212) 697-1105 (NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ WITH COPIES TO: BRUCE R. KRAUS, ESQ. ROBERT ROSENMAN, ESQ. WILLKIE FARR & GALLAGHER CRAVATH SWAINE & MOORE One Citicorp Center Worldwide Plaza 153 East 53rd Street 825 Eighth Avenue New York, New York 10022 New York, New York 10019 (212) 821-8000 (212) 474-1000
------------------------ APPROXIMATE DATE OF THE COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to time after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: / / ________________ If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: / / - --------------- If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: / / CALCULATION OF REGISTRATION FEE - --------------------------------------------------------------------------------------------------------------- PROPOSED PROPOSED MAXIMUM MAXIMUM OFFERING AGGREGATE AMOUNT OF TITLE OF EACH CLASS OF AMOUNT TO BE PRICE OFFERING REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE - --------------------------------------------------------------------------------------------------------------- 6 1/2% Convertible Preferred Equivalent Obligations............................... $310,000,000 100% $310,000,000 $106,897(1)(2) - --------------------------------------------------------------------------------------------------------------- Common Stock, $1.00 par value................ 4,769,230(3) $ -- $ -- $ --(4) - ---------------------------------------------------------------------------------------------------------------
(1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457 under the Securities Act of 1933, as amended (the "Securities Act"). The price shown for the Convertible Preferred Equivalent Obligations (the "Securities") is based on the offering price on February 29, 1996. (2) $106,897 was wired to the Securities and Exchange Commission's account at Mellon Bank in payment of the required registration fee due in connection with this Registration Statement. (3) The shares of Common Stock being registered hereunder include the number of shares of Common Stock initially issuable upon conversion of the Securities (4,769,230 shares) plus such indeterminate number of additional shares as may become issuable upon conversion of the Securities as a result of adjustments in the conversion price thereof or upon redemption payments, interest payments and certain other payments made on the Securities by the delivery of Common Stock in accordance with the terms of the Securities. (4) Pursuant to Rule 457(i) under the Securities Act, no registration fee is required for the Common Stock issuable upon conversion of the Securities because no additional consideration will be required in connection with the issuance of such shares. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A) MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED JUNE 20, 1996 $310,000,000 6 1/2% CONVERTIBLE PREFERRED EQUIVALENT OBLIGATIONS DUE 2006 AND 4,769,230 SHARES OF COMMON STOCK GLOBALSTAR TELECOMMUNICATIONS LIMITED ------------------------ This Prospectus relates to the 6 1/2% Convertible Preferred Equivalent Obligations due 2006 (the "Securities") of Globalstar Telecommunications Limited, a Bermuda company ("GTL" or the "Company"), and the shares of Common Stock, par value $1.00 per share (the "Common Stock"), issuable upon conversion of the Securities (the "Conversion Shares"). The Securities are convertible at any time prior to redemption or maturity, at a conversion price of $65.00 per share, which represents a conversion ratio of 0.7692 shares per Security, subject to adjustment under certain conditions (the "Conversion Price"). The Securities were issued and sold by the Company (the "Original Offering") in March and April 1996, to the Initial Purchasers (as defined herein, see "Selling Holders") in a private placement and were resold by the Initial Purchasers in transactions exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), in the United States to qualified institutional buyers (as defined in Rule 144A under the Securities Act), to certain accredited investors (as defined in Rule 501(a) under the Securities Act) and outside the United States to non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act. The Securities and the Conversion Shares (together, the "Offered Securities") may be offered and sold from time to time by the holders named herein or by their transferees, pledgees, donees or their successors (collectively, the "Selling Holders") pursuant to this Prospectus. The Offered Securities may be sold by the Selling Holders from time to time directly to purchasers or through agents, underwriters or dealers. See "Plan of Distribution" and "Selling Holders." If required, the names of any such agents or underwriters involved in the sale of the Offered Securities and the applicable agent's commission, dealer's purchase price or underwriter's discount, if any, will be set forth in an accompanying supplement to this Prospectus (the "Prospectus Supplement"). The Selling Holders will receive all of the net proceeds from the sale of the Offered Securities and will pay all underwriting discounts, selling commissions and related fees, if any, applicable to any such sale. The Company is responsible for payment of all other expenses incident to the offer and sale of the Offered Securities. The Selling Holders and any broker-dealers, agents or underwriters which participate in the distribution of the Offered Securities may be deemed to be "underwriters" within the meaning of the Securities Act, and any commission received by them and any profit on the resale of the Offered Securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. See "Plan of Distribution" for a description of indemnification arrangements. The Common Stock is listed on the Nasdaq National Market (the "NNM") under the symbol "GSTRF." On June 19, 1996, the last reported sale price of the Common Stock on the NNM was $51.00 per share. Interest on the Securities is payable quarterly in arrears on March 1, June 1, September 1, and December 1, commencing on June 1, 1996, subject to deferral without compound interest or penalty as described herein. The Securities will be general unsecured obligations of the Company and will be subordinated in right of payment to all Debt Obligations (as defined herein) of the Company. See "Description of Securities -- Ranking." The Securities will not limit the amount of Debt Obligations that the Company may incur. Although the Securities are not equity securities under applicable Bermuda law, the Securities are the substantial equivalent of convertible preferred stock and will be treated as such for U.S. tax purposes. The Company may make any payments due on the Securities, including redemption and interest payments, (i) in cash, (ii) by delivery of Common Stock (in the manner described herein) or (iii) through any combination of the foregoing. The Company utilized the proceeds of the Original Offering to purchase convertible preferred general partnership interests (the "Preferred Partnership Interests") of Globalstar, L.P., a Delaware limited partnership ("Globalstar"), the terms of which are generally similar to those of the Securities, and which will provide the principal source of payments for the Securities. Globalstar will use substantially all the proceeds from the sale of Preferred Partnership Interests to the Company for the design, construction and deployment of the Globalstar System. The Company is a general partner of Globalstar; its sole asset consists of its partnership interests in Globalstar. As a result, the obligations of the Company in respect of the Securities will be structurally subordinate to all indebtedness and other liabilities of Globalstar. See "Description of Securities." The Securities are subject to mandatory redemption on March 1, 2006 (the "Mandatory Redemption Date") and are not redeemable by the Company before March 2, 1999 unless the market price of the Common Stock exceeds certain thresholds. In such event, the Securities will be redeemable, in whole or in part, by the Company upon payment of the principal of and premium (including an interest make-whole payment) and accrued interest, if any, on the Securities. See "Description of Securities." The Securities are eligible for trading by qualified institutional buyers on the PORTAL market. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER "RISK FACTORS" BEGINNING ON PAGE 13. THE OFFERED SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ June 20, 1996 3 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information filed by the Company can be inspected and copied at public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; Seven World Trade Center, 13th Floor, New York, New York 10048; and Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such material can be obtained from the Public Reference Section of the Commission, Washington, D.C. 20549 at prescribed rates. The Common Stock is quoted on the NNM, and copies of the reports, proxy statements and other information filed by the Company with the Commission may also be inspected at the offices of Nasdaq Operation, 1735 K Street, N.W., Washington, D.C. 20006. Globalstar is not currently subject to the periodic reporting and other informational requirements of the Exchange Act, except those applicable as a result of the Company's significant investment in Globalstar. The Company has agreed that, whether or not it is required to do so by the rules and regulations of the Commission, for so long as any of the Securities remain outstanding, it will furnish to the trustee and the holders of the Securities and file with the Commission, or cause to be so filed as part of the financial statements of the Company (i) all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if Globalstar were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by Globalstar's independent public accountants and (ii) all reports that would be required to be filed with the Commission on Form 8-K if Globalstar were required to file such reports. In addition, for so long as any of the Securities remain outstanding, the Company has agreed to make available to any prospective purchaser of the Securities or beneficial owner of the Securities in connection with any sale thereof the information required by Rule 144A(d)(4) under the Securities Act. The Company has filed with the Commission a Registration Statement on Form S-3 (together with all exhibits and amendments, the "Registration Statement") under the Securities Act, with respect to the Offered Securities. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits and schedules thereto, certain portions of which are omitted as permitted by the rules and regulations of the Commission. For further information with respect to the Company and the Offered Securities, reference is made to the Registration Statement, including the exhibits and schedules. The Registration Statement may be inspected, without charge, at the Commission's principal office at 450 Fifth Street, NW, Washington, D.C. 20549, and also at the regional offices of the Commission listed above. Copies of such material may also be obtained from the Commission upon the payment of prescribed rates. Statements contained in the Prospectus as to any contracts, agreements or other documents filed as an exhibit to the Registration Statement are not necessarily complete, and in each instance reference is hereby made to the copy of such contract, agreement or other document filed as an exhibit to the Registration Statement for a full statement of the provisions thereof, and each such statement in the Prospectus is qualified in all respects by such reference. i 4 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents have been filed by the Company with the Commission pursuant to the Exchange Act and are hereby incorporated by reference into this Prospectus: (a) the Company's Annual Report on Form 10-K for the year ended December 31, 1995; (b) the Company's Proxy Statement relating to the 1996 Annual Meeting of Stockholders; (c) the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 1996 (as amended by the Form 10-Q/A filed with the Commission on May 21, 1996); and (d) the description of the Company's Common Stock contained in the Company's registration statement on Form 8-A filed under the Exchange Act and any amendments or reports filed for the purpose of updating such description. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the offering of the Offered Securities offered hereby shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing such documents (provided, however, that the information referred to in item 402(a)(8) of Regulation S-K of the Commission shall not be deemed specifically incorporated by reference herein). Any statement contained herein or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein (or in the applicable Prospectus Supplement) or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement as modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus has been delivered, upon the written or oral request of any such person, a copy of any or all of the documents incorporated by reference in this Prospectus (other than exhibits and schedules thereto, unless such exhibits or schedules are specifically incorporated by reference into the information that this Prospectus incorporates). Written or oral requests for copies of these documents should be directed to Globalstar Telecommunications Limited, 600 Third Avenue, New York, New York 10016, Attention: Secretary (Telephone (212) 697-1105). ii 5 PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and financial statements (including the notes thereto) incorporated by reference in this Prospectus. THE COMPANY The Company is a Bermuda company that acts as a general partner of Globalstar. Globalstar is building and preparing to launch and operate a worldwide, low-earth orbit ("LEO") satellite-based digital telecommunications system (the "Globalstar(TM) System"). The Globalstar System is designed to enable local service providers to offer low-cost, high quality wireless voice telephony and data services in virtually every populated area of the world. To date, Globalstar service providers have agreed to offer Globalstar service and seek to obtain all necessary local regulatory approvals in nations accounting for 67% of the world's population. The Globalstar System's worldwide coverage is designed to enable its service providers to extend modern telecommunications services rapidly and economically to millions of people who currently lack basic telephone service and to enhance wireless telecommunications 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. The Globalstar System has been designed to provide services at prices comparable to today's cellular services and substantially lower than the prices announced by Globalstar's anticipated principal competitors. Globalstar users will make and receive calls through a variety of Globalstar phones, including hand-held and vehicle-mounted units similar to today's cellular telephones, fixed telephones similar either to phone booths or ordinary wireline telephones, and data terminals and facsimile machines (collectively, the "Globalstar Phones"). Dual-mode Globalstar Phones will provide access to both the Globalstar System and the subscriber's land-based cellular service. Each Globalstar Phone will communicate through one or more satellites to a local Globalstar service provider's interconnection point (known as a gateway) which will, in turn, connect into existing telecommunications networks. Globalstar is on schedule to begin launching satellites in the second half of 1997, to commence commercial operations in the second half of 1998 (the "In-Service Date") and to have its full constellation of 48 satellites, plus eight in-orbit spare satellites, launched by the end of 1998 (the "Full Constellation Date"). Significant regulatory and licensing milestones have been achieved for the Globalstar System, including allocation of required frequencies by the Federal Communications Commission ("FCC") and the 1995 World Radiocommunication Conference ("WRC '95"). To date, Globalstar has raised or received commitments for approximately $1.4 billion in equity, debt and vendor financing, representing over 75% of the total external financing expected to be required to complete the system and to achieve worldwide operations. Globalstar intends to raise the balance of its external financing needs in the capital markets and may also seek financing support from its strategic partners. See "-- Sources and Uses of Capital by Globalstar." Full satellite critical design review was successfully completed in January 1996. Manufacturing of long-lead time components of the Globalstar satellites has commenced, engineering models are under construction and the non-recurring design phase of the satellite contract is close to completion. Definitive agreements have been reached with three launch providers for the launch of the full Globalstar satellite constellation. These agreements provide for a variety of launch options, giving Globalstar considerable launch flexibility. Internationally, Globalstar's partners have been seeking alliances in their assigned territories with service providers and have entered into such agreements in certain territories. Globalstar believes these relationships with in-country service providers may facilitate the granting of local regulatory approval for operation of the Globalstar System and provide local marketing and technical expertise. The Globalstar System has been designed to address the substantial and growing demand for telecommunications services worldwide, particularly in developing countries. More than 3 billion people today live without residential telephone service, many of them in rural areas where the cost of installing wireline service 6 is prohibitively high. Moreover, even where telephone infrastructure is available in developing countries, outdated equipment often leads to unreliable local service and limited international access. The number of worldwide fixed phone lines has increased from 473 million to 647 million since 1988 and is projected to increase to one billion by 2002. Nonetheless, since 1988, waiting lists for fixed service have increased from 36 million to 46 million, resulting in an average waiting time before installation of approximately one and a half years. Similarly, the cellular market has grown from 4 million worldwide subscribers in 1988 to an estimated 87 million in 1995 and is projected to increase to 334 million by 2001. At that time, it is projected that only 40% of the world's population will live in areas with cellular coverage. The remaining 60% of the world population will have access to wireless telephone service principally through satellite-based systems like the Globalstar System. Globalstar's business plan requires penetration of only a small fraction of these potential markets to achieve its objectives. The Globalstar System has been designed with attributes which the Company believes compare favorably to other proposed global mobile satellite service ("MSS") systems (two of which have also been licensed by the FCC; the applications of three others have been deferred), including: (i) Globalstar's unique combination of code division multiple access ("CDMA") technology and path diversity through multiple satellite coverage, which will reduce call interruptions and signal blockage from obstructions and will use satellite power more efficiently; (ii) a proven space segment design without complex intersatellite links or on-board call processing and a ground segment with flexible, low-cost gateways and competitively priced Globalstar Phones; (iii) lower average wholesale prices than other proposed MSS systems; and (iv) gateways installed in most major countries, minimizing tail charges (i.e. amounts charged by carriers other than the Globalstar service provider for connecting a Globalstar call through its network), resulting in low costs for domestic and regional calls, which will account for the vast majority of Globalstar's anticipated usage. Loral Space & Communications Ltd. ("Loral SpaceCom") is a principal founder of Globalstar and, through a subsidiary, is its managing general partner. Loral SpaceCom has invested $238 million directly and indirectly in Globalstar. Loral SpaceCom owns, directly or indirectly, 32.6% of Globalstar, on a fully diluted basis. Other Globalstar strategic partners include leading domestic and international telecommunications service providers and space and telecommunications equipment manufacturers who, together with Loral SpaceCom, have invested $425 million in equity and committed $310 million in vendor financing for Globalstar. In addition, Loral SpaceCom, Lockheed Martin Corporation ("Lockheed Martin") and certain strategic partners have guaranteed, or provided indemnification with respect to, Globalstar's obligations under a $250 million credit facility. See "-- Recent Developments." GLOBALSTAR STRATEGIC PARTNERS Globalstar has selected strategic partners whose marketing, operating and technical expertise will enhance Globalstar's capabilities. These partners are playing key roles in the construction, operation and marketing of the Globalstar System. In addition to Globalstar's founding partners, Loral SpaceCom and QUALCOMM Incorporated ("Qualcomm"), the leading supplier of CDMA digital telecommunications technology, Globalstar's strategic partners are:
TELECOMMUNICATIONS EQUIPMENT TELECOMMUNICATIONS SERVICE PROVIDERS AND AEROSPACE SYSTEMS MANUFACTURERS - ----------------------------------------------- -------------------------------------------------------- - - AirTouch Communications, Inc. ("AirTouch") - Alcatel Espace ("Alcatel") - - DACOM Corporation ("Dacom") - Alenia Spazio S.p.A. ("Alenia") - - France Telecom - Daimler-Benz Aerospace AG ("DASA") - - Vodafone Group Plc ("Vodafone") - Finmeccanica S.p.A. ("Finmeccanica") - Hyundai Electronics Industries Co. Ltd. ("Hyundai") - Space Systems/Loral, Inc. ("SS/L")
Loral SpaceCom, through a subsidiary, has overall management responsibility for the design, construction, deployment and operation of the Globalstar System. SS/L, an affiliate of Loral SpaceCom, is providing 2 7 the system's satellites under a fixed-price contract that also requires SS/L to obtain launch services and launch insurance. Qualcomm is designing and will manufacture Globalstar Phones and gateways and certain ground support equipment. The Company was organized as a Bermuda company on November 23, 1994 and has its principal offices at Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda ((809) 295-2244). The Company's sole business is to act as a general partner of Globalstar. BUSINESS STRATEGY Globalstar's strategy for successful operation is based upon: (i) providing potential users worldwide with high quality telecommunications services; (ii) employing a system architecture designed to minimize cost and technological risks; and (iii) leveraging the marketing, operating and technical capabilities of its strategic partners. PROVIDING HIGH QUALITY, WORLDWIDE SERVICE To achieve rapid and sustained customer acceptance of the system, Globalstar has been designed to provide a high quality, worldwide service that combines the best of existing cellular service with the technological advantages of the Globalstar System described below to meet the needs of individual end users. Worldwide Coverage and Access. The Globalstar System's worldwide coverage has been designed to enable its service providers to extend modern telecommunications services rapidly and economically to millions of people who currently lack basic telephone services and to enhance wireless telecommunications in areas underserved or not served by existing or future cellular systems. Globalstar expects to provide a communications solution in parts of the world where the build-out of terrestrial systems cannot be economically justified. The Globalstar System has also been designed to enable international travelers to make and receive calls at a unique telephone number through their mobile Globalstar Phone anywhere in the world where Globalstar service is authorized by local regulatory authorities. Multiple Satellite Coverage; Soft Handoff. CDMA digital communications technology combined with continuous multiple satellite coverage and signal path diversity (a patented SS/L method of signal reception not available to competing systems) will enable the Globalstar System to provide service to a wide variety of locations, with less potential for signal blockage from buildings, terrain or other natural features. Globalstar Phones have been designed to operate with a single satellite in view, although typically signals from two to four satellites overhead will be combined to provide service. Therefore, the loss of an individual satellite is not expected to result in any gap in global coverage. Each Globalstar Phone has been designed to communicate with as many as three satellites simultaneously, combining the signals received to ensure maximum service quality. As satellites are constantly moving in and out of view, they will be seamlessly added to and removed from the calls in progress, thereby reducing the risk of call interruption. Superior Call Quality; Increased Privacy. Based on terrestrial simulations of the Globalstar System, Globalstar expects that Qualcomm's CDMA digital technology will enable Globalstar to provide digital voice services which will have better overall clarity, quality and privacy than those of analog land-based cellular systems currently in use. Qualcomm's CDMA technology, which is available to Globalstar on an exclusive basis for commercial MSS applications, has also been selected for digital cellular service by 12 of the 15 largest U.S. cellular service providers and the two largest holders of personal communications services ("PCS") licenses in the U.S. (by population served). Efficient Use of Satellite Resources. The Globalstar System's use of multiple satellites to communicate with each Globalstar Phone (a patented SS/L method of signal reception not available to competing systems) has been designed to allow its communications signals to bypass obstructions. Path diversity is expected to permit Globalstar to maintain its desired level of service quality while using less power and satellite resources than would be required in a system using single path satellites, which attempt to penetrate obstructions by using higher single satellite power and overall higher link margins. 3 8 No Voice Delay. Globalstar satellites' low-earth orbit of 750 nautical miles is expected to result in no perceptible voice delay, as compared with the noticeable time delay of calls utilizing geosynchronous satellites, which orbit at an altitude of 22,500 nautical miles. Globalstar believes that its system will also entail noticeably less voice delay than mid-earth orbit ("MEO") MSS systems and, in many cases, than LEO systems requiring on-board satellite call processing to support satellite-to-satellite switching systems. EMPLOYING A SYSTEM ARCHITECTURE DESIGNED TO MINIMIZE COST AND RISK Low-Cost Service. Globalstar intends to offer its service providers effective average prices substantially lower than those announced by its anticipated principal competitors. Globalstar's service providers will set their own retail pricing and will pay to Globalstar wholesale prices generally expected to range between $0.35 and $0.55 per minute. Other proposed satellite-based systems have proposed retail pricing ranging from under $1.00 to $3.00 per minute plus monthly charges for some of the systems. As a result of its pricing commitments to its service providers or as a result of competitive pressures, Globalstar may not be in a position to pass on to its service providers unexpected increases in the cost of constructing the Globalstar System. However, Globalstar believes that its low system and operating costs and high gross margins at target pricing and usage levels provide it with substantial additional pricing flexibility if necessary to meet competition. See "Business -- Competition." Simple Space Segment of Proven Design. Globalstar believes its system will cost less to design and construct and may be the first of the proposed worldwide systems to provide commercial service. To achieve low cost, reduce technological risk and accelerate deployment of the Globalstar System, Globalstar's system architecture uses small satellites incorporating a well-established repeater design that acts essentially as a simple "bent pipe," relaying signals received directly to the ground. All of the system's call processing and switching operations are on the ground, where they are accessible for maintenance and can benefit from continuing technological advances. The Globalstar space segment is being manufactured under a fixed-price contract with SS/L. The contract provides for the construction of 56 satellites meeting designated performance specifications and for SS/L to obtain launch and launch insurance services. Flexible, Low-Cost Ground Segment. Globalstar has been designed to offer local governments and service providers affordable telephone infrastructure where the cost of build-out of land-based wireline or wireless telephone systems is either too great or not economically justifiable. By purchasing a single gateway for approximately $3 million to $8 million (depending on the capacity desired), a service provider can extend basic telephone service to fixed terminals on a national basis in countries as large as Saudi Arabia and mobile service to cover an area almost as large as Western Europe. As a result of the low cost of its gateways, Globalstar expects that its service providers will install gateways in most of the major countries in which they offer service. Each country with a Globalstar gateway will have access to domestic service without the imposition of international tail charges on in-country calls, thereby offering subscribers the lowest possible cost for domestic calls, which account for the vast majority of all cellular calls today. Competitively Priced Globalstar Phones. Hand-held and vehicle-mounted Globalstar Phones are anticipated to be priced comparably and will be similar in size and function to current digital cellular telephones. Dual-mode Globalstar Phones will be able to access both Globalstar and a variety of local land-based analog and digital cellular services, where available. Mobile and fixed Globalstar Phones are expected to cost less than $750 each, and Globalstar public telephone booths are expected to cost between $1,000 and $2,500, depending upon desired capacity and the number of units sharing a fixed antenna. Qualcomm is required to license three additional manufacturers of Globalstar Phones. Qualcomm has granted a license to Orbitel Mobile Communications Ltd. ("Orbitel"), an affiliate of L.M. Ericsson, to manufacture Globalstar Phones and has contracted with Orbitel to develop a dual-mode GSM/Globalstar CDMA phone. Globalstar believes that licensing multiple manufacturers will spur competition, which will reduce prices. As is the case with many cellular systems today, service providers may subsidize the cost of Globalstar Phones to generate additional usage revenue. In addition, national and local governments may subsidize some or all elements of system cost, particularly in rural areas, thereby reducing the cost of access to subscribers. 4 9 LEVERAGING THE CAPABILITIES OF GLOBALSTAR'S STRATEGIC PARTNERS Loral SpaceCom, through a subsidiary, has overall management responsibility for the design, construction, deployment and operation of the Globalstar System. Globalstar's strategic partners will play key roles in the design, construction, operation and marketing of the Globalstar System. Telecommunications service providers. AirTouch, Dacom, France Telecom and Vodafone will provide in-country marketing and telephony expertise to Globalstar. Globalstar's strategic partner service providers (the "Strategic Service Providers") have been granted exclusive rights to provide Globalstar service in countries around the world in which they have particular marketing strength and experience and access to an established customer base of 60 million subscribers. To maintain their service provider rights on an exclusive basis, these Strategic Service Providers and additional service providers are required to make minimum payments to Globalstar equal to 50% of target revenues. Based upon current targets (which are subject to adjustment in 1998 based upon an updated market analysis), such minimum payments total approximately $5.0 billion through 2005. Globalstar anticipates that these service providers will place orders of approximately $500 million (for 50 gateways and 250,000 Globalstar Phones) within six to nine months. In order to accelerate the deployment of gateways around the world prior to the In-Service Date, Globalstar and the Strategic Service Providers intend to jointly finance the procurement of 25 gateways and long-lead parts for 25 additional gateways for resale to service providers. Globalstar expects to recover its investment in this gateway financing program from such resales. There can be no assurance that the service providers will elect to retain their exclusivity and make such payments or place such orders for Globalstar Phones and gateways. Globalstar expects to add additional service providers in order to provide coverage throughout the world. Each service provider will, subject to obtaining required local regulatory approvals, market and distribute Globalstar service in its designated territories and own and operate the gateways necessary to serve its markets. Telecommunications equipment and aerospace systems manufacturers. SS/L, Alcatel, Alenia, DASA, Finmeccanica and Hyundai have contracted to design, build and deploy the Globalstar System. Qualcomm, using its CDMA technology, is designing and will manufacture Globalstar Phones and gateways and has primary responsibility, along with Globalstar, for the design and implementation of the ground operations control centers ("GOCCs"). Qualcomm's CDMA technology is available to Globalstar on an exclusive basis for commercial MSS satellite applications. SS/L is performing under a fixed-price contract for the construction of Globalstar's satellites in conjunction with its alliance partners, Aerospatiale Societe Nationale Industrielle ("Aerospatiale"), Alcatel, DASA and Finmeccanica (collectively, the "Strategic Alliance"), and with Hyundai. RECENT DEVELOPMENTS Globalstar remains on schedule to begin launching satellites in the second half of 1997 and to commence operations in the second half of 1998. Globalstar's recommended feeder link allocations were adopted at WRC '95, and Globalstar is currently pursuing the final assignment of such feeder links before the FCC. On December 15, 1995, Globalstar entered into a credit agreement with a bank syndicate providing for a $250 million credit facility (the "Globalstar Credit Agreement"). On January 7, 1996, Loral Corporation ("Loral"), the former parent of Loral SpaceCom, entered into a merger agreement (the "Merger Agreement") with Lockheed Martin and its subsidiary pursuant to which Lockheed Martin agreed, upon satisfaction of certain conditions, to consummate a tender offer (the "Tender Offer") for all outstanding shares of common stock of Loral. Pursuant to the Restructuring, Financing and Distribution Agreement, dated as of January 7, 1996, among Loral, Lockheed Martin and certain subsidiaries of Loral (the "Distribution Agreement"), Loral agreed to contribute its space and telecommunications businesses, including all of its direct and indirect interest in Globalstar, to Loral SpaceCom, a newly-formed Bermuda company, the shares of which were distributed to Loral shareholders of record immediately prior to Loral's acquisition by Lockheed Martin. The Tender Offer and the Distribution were consummated in April 1996. 5 10 Following the consummation of the Tender Offer, Loral merged with a subsidiary of Lockheed Martin. As a result of such merger, Globalstar now has, through its relationship with Loral SpaceCom, the benefit of technical support from Lockheed Martin. Upon the merger, Lockheed Martin guaranteed $206.3 million of Globalstar's obligations under the Globalstar Credit Agreement, and SS/L and certain other Globalstar strategic partners guaranteed $11.7 million and $32 million of Globalstar's obligations under the Globalstar Credit Agreement, respectively. In addition, Loral SpaceCom has agreed to indemnify Lockheed Martin for liability in excess of $150 million under its guarantee of the Globalstar Credit Agreement. In connection with such guarantees and indemnity of the Globalstar Credit Agreement, the Company issued to Loral SpaceCom, Lockheed Martin, SS/L and the other strategic partners participating in such guarantee or indemnity, warrants (the "GTL Guarantee Warrants") to purchase 4,185,318 shares of Common Stock. The GTL Guarantee Warrants have an exercise price of $26.50, are subject to certain vesting requirements, expire on April 19, 2003, are not exercisable until six months after Globalstar commences initial operations unless accelerated at the sole discretion of the managing general partner of Globalstar and may not be transferred to third parties prior to such exercise date. In connection with the issuance of GTL Guarantee Warrants, the Company received (i) warrants to acquire 4,185,318 ordinary partnership interests in Globalstar ("Ordinary Partnership Interests") plus (ii) additional warrants (the "Additional Warrants") to purchase an additional 1,131,168 Ordinary Partnership Interests, on terms and conditions generally similar to those of the GTL Guarantee Warrants. As a result, the Company will not incur any dilution of the Company's interest in Globalstar resulting from the issuance of the GTL Guarantee Warrants. In addition, Globalstar has also agreed to pay to Loral SpaceCom and the other guaranteeing partners a fee equal to 1.5% per annum of the average quarterly amount outstanding under the Globalstar Credit Agreement (the "Guarantee Fee"). 6 11 SOURCES AND USES OF CAPITAL BY GLOBALSTAR (In millions) The net proceeds of the Original Offering to the Company were approximately $300 million (after deducting discounts and commissions and expenses). Globalstar has received commitments for financing which, together with projected Service Provider Payments (defined in footnote (1) below), anticipated payments from the sale of gateways and Globalstar Phones and projected net service revenues from initial operations, will account for approximately $1.8 billion of the approximately $2.2 billion that Globalstar expects to require to fully fund the Globalstar System through the Full Constellation Date. See "Risk Factors." The net proceeds of the Original Offering were used to acquire 4,769,230 Preferred Partnership Interests in Globalstar representing (on a fully converted basis) an 8.4% equity interest in Globalstar on a fully diluted basis after giving effect to the exercise of GTL Guarantee Warrants and the Additional Warrants. Globalstar will in turn use substantially all of the proceeds from the sale of the Preferred Partnership Interests to the Company towards the design, construction and launch of the Globalstar System, including the procurement of launch insurance and ground segment components, as well as related operating and development expenses. Pending such use, the net proceeds will be invested in short-term investment grade securities. The following table summarizes the estimated sources and uses of capital by Globalstar for the period from inception through the Full Constellation Date:
SOURCES Funds Committed to Date: Initial Equity Investments............... $ 294 Vendor Financing......................... 310 GTL Initial Public Offering Proceeds..... 186 Bank Financing........................... 250 Service Provider Payments(1)............. 33 Net Proceeds of the Original Offering(2)............................ 300 ------- Total Funds to Date.................... 1,373 ------- Future Funds(3)(5): Net Service Revenues from Initial Operations............................. 162 Resale of Gateways(4).................... 88 Service Provider and Other Payments(1)... 164 Future Financing......................... 414 ------- Total Future Funds..................... 828 ------- Total Sources.......................... $ 2,201 ======= USES Globalstar System: Satellite Constellation(5)............... $ 998 Launch Services and Insurance............ 394 Ground Segment........................... 416 System Engineering....................... 20 ------- Total System Cost...................... 1,828 Operating Expenses and Working Capital..... 172 Net Cash Interest Expense and Preferred Distributions............................ 64 Purchase of Gateways for Resale(4)......... 80 Repayment of Vendor Financing.............. 57 ------- Total Uses............................. $ 2,201 =======
- --------------- (1) Service Provider Payments are amounts to be paid to Globalstar for services to be rendered by Globalstar to each service provider exclusively within a particular territory (subject to certain limitations). Service providers making such payments will be eligible for certain pricing concessions that are subject to cumulative limitations. Other payments reflect amounts anticipated to be received in connection with the sale of gateways and Globalstar Phones. Globalstar has received commitments for $33 million, of which $24 million has been paid through March 31, 1996, and expects that future service provider agreements for territories not yet assigned will provide an additional $120 million of Service Provider Payments through the Full Constellation Date. (2) Represents $310 million of gross proceeds from the sale of the Securities less discounts and commissions and other expenses of the Original Offering of $10 million. (3) Additional funds to complete the Globalstar System are expected to be obtained from a combination of sources, including the issuance of debt, projected Service Provider Payments, projected net service revenues from initial operations, anticipated payments from the sale of gateways and Globalstar Phones and placements of limited partnership interests with new and existing strategic investors. There can be no assurance that the future financing will be available on favorable terms or on a timely basis, if at all, or that Service Provider Payments and other payments from service providers or cash flow from operations will be realized as anticipated. See "Risk Factors -- Development Stage Company -- Additional Financing Requirements." (4) Globalstar and the Strategic Service Providers intend to jointly finance the procurement of 25 gateways and long-lead parts for 25 additional gateways for resale to service providers, thereby accelerating the deployment of gateways around the world prior to the In-Service Date. (5) Globalstar is presently evaluating a plan to purchase long-lead-time component parts for possible use in constructing 6 to 12 additional satellites. The current estimated additional cost for these components is approximately $75 to $120 million, depending upon the quantity purchased. The plan has two purposes: (i) to enable Globalstar to have on-orbit at least 38 to 44 satellites during 1999, even in the event of launch failures of up to two launches of 12 satellites each, and (ii) to provide ground spares that would be readily available to replenish the satellite constellation in the event of satellite attrition during the first generation or if there are opportunities for increasing capacity. If Globalstar were to experience a launch failure, the long-lead-time components would be used to build replacement satellites and the cost associated with the construction and launch of such satellites would be reimbursed through insurance. See "Risk Factors -- Development Stage Company -- Sources of Possible Delay and Increased Cost" and "Risk Factors -- Technological Risks -- Satellite Launch Risks -- Limited Life of Satellites." 7 12 THE SECURITIES Securities................. 6 1/2% Convertible Preferred Equivalent Obligations due 2006 (the "Securities") of Globalstar Telecommunications Limited. Although the Securities are not equity securities under applicable Bermuda law, the Securities are the substantial equivalent of convertible preferred stock and will be treated as such for U.S. tax purposes. The Securities are convertible at a conversion price of $65.00 per share into an aggregate of 4,769,230 shares of Common Stock, representing approximately 25% of the Common Stock outstanding on a fully diluted basis, and an indirect beneficial interest in 4,769,230 units of Ordinary Partnership Interests upon conversion of the Preferred Partnership Interests, representing approximately 8.4% of the total units of Ordinary Partnership Interests outstanding on a fully diluted basis after giving effect to the GTL Guarantee Warrants and the Additional Warrants. Principal Amount........... $310 million. Mandatory Redemption Date....................... March 1, 2006 (the "Mandatory Redemption Date"). Coupon..................... The Securities accrue interest at the rate of 6 1/2% per annum. Interest will be computed on the basis of a 360-day year of twelve 30-day months and will be payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year (each an "Interest Payment Date"), commencing on June 1, 1996. The Company may make such payments in (i) cash, (ii) by delivery of Common Stock to Holders (based upon 90% of the Average Market Value (as defined below)), or (iii) through any combination of the foregoing; provided however, that if Globalstar shall have paid the scheduled distribution with respect to the Preferred Partnership Interests corresponding to such payment in cash, the Company shall make such payment in cash. The Company may elect to defer interest payments on any Interest Payment Date if Globalstar shall have deferred payment of the scheduled distribution in respect of the Preferred Partnership Interests corresponding to such interest payment. Arrearages of deferred but unpaid interest accruals ("Interest Arrearages") will not themselves bear interest, but so long as any Interest Arrearage remains outstanding, the Company will be prohibited from paying (i) dividends on its Common Stock, (ii) dividends on any preferred stock or (iii) interest on debt ranking pari passu with or junior to the Securities from time to time outstanding, except with respect to such pari passu debt, on a pro rata basis based on the aggregate principal amount of such debt. Preferred distributions equal to the aggregate amount of interest payable by the Company on the Securities will be payable to the Company by Globalstar in respect of the Preferred Partnership Interests if, as and when declared by Globalstar's General Partners' Committee. The Company may not elect to defer any interest payment if Globalstar has paid the scheduled distribution in respect of the Preferred Partnership Interests corresponding to such interest payment. In the event that interest payments are deferred by the Company for an aggregate of six quarterly interest payments, the holders of the Securities (the "Holders") will have the rights described under "Voting Rights" below. 8 13 Provisional Redemption by Company.................. The Securities may be redeemed (the "Provisional Redemption") by the Company, in whole or in part, at any time prior to March 2, 1999, at a redemption price of 103% of the aggregate principal amount of the Securities to be redeemed plus accrued and unpaid interest, if any, to the date of redemption (the "Provisional Redemption Date"), in the event that the Current Market Value (as defined below) of the Common Stock equals or exceeds the following Trigger Percentages of the Conversion Price then in effect for at least 20 trading days in any consecutive 30-day trading period ending on the trading day prior to the date of mailing of the notice of Provisional Redemption (the "Notice Date"), if called for redemption in the 12-month period ending on March 1 of the following years:
YEAR TRIGGER PERCENTAGES ----- ------------------- 1997.. 170% 1998.. 160% 1999.. 150%
Upon any Provisional Redemption, the Company will make an additional payment (the "Interest Make-Whole Payment") with respect to the Securities called for redemption in an amount equal to the present value of the aggregate value of the interest payments thereafter payable on such Securities from the Provisional Redemption Date to the third anniversary of the Issue Date (the "Interest Make-Whole Period"). Such present value shall be calculated using the bond equivalent yield on U.S. Treasury notes or bills having a term nearest in length to that of the Interest Make-Whole Period as of the Notice Date. THE COMPANY SHALL BE OBLIGATED TO MAKE THE INTEREST MAKE-WHOLE PAYMENT ON ALL SECURITIES CALLED FOR PROVISIONAL REDEMPTION, REGARDLESS OF WHETHER SUCH SECURITIES ARE CONVERTED PRIOR TO THE PROVISIONAL REDEMPTION DATE. Optional Redemption by Company.................. Commencing March 2, 1999, the Securities will be redeemable at any time, in whole or in part, at the election of the Company (the "Optional Redemption"), at a redemption price equal to the percentage of the principal amount set forth below plus accrued and unpaid interest, if any, to the date of redemption (the "Optional Redemption Date"), if redeemed in the 12-month period ending on March 1 of the following years:
YEAR REDEMPTION PRICE ----- ---------------- 2000.. 103% 2001.. 102% 2002.. 101%
and thereafter at a redemption price equal to 100% of the principal amount plus accrued and unpaid interest, if any, to the Optional Redemption Date. Mandatory Redemption by Company.................. The Securities are subject to mandatory redemption (the "Mandatory Redemption") by the Company on the Mandatory Redemption Date, at a redemption price of 100% of the principal amount plus accrued and 9 14 unpaid interest, if any (including all Interest Arrearages), to the Mandatory Redemption Date. Method of Payments......... Globalstar may make any payments due on the Preferred Partnership Interests (i) in cash, (ii) by delivery of Ordinary Partnership Interests to the Company (as described below) or (iii) through any combination of the foregoing. Likewise, the Company may make any payments due on the Securities, including redemption payments, interest payments and the Interest Make-Whole Payment: (i) in cash; (ii) by delivery of Common Stock (based upon 90% of the Average Market Value (as defined below) in the case of interest payments, including Interest Make-Whole Payments, and 100% of the Average Market Value in the case of all other payments); or (iii) through any combination of the foregoing, provided, however, that if Globalstar shall have paid the scheduled distribution with respect to the Preferred Partnership Interests corresponding to any such payments in cash, the Company shall make such payment in cash. If Globalstar shall have made any payment on the Preferred Partnership Interests by delivery of Ordinary Partnership Interests, the Company may make payments by delivery of Common Stock or a cash payment from the proceeds of a sale of Common Stock. The Company also reserves the right to make interest payments notwithstanding the fact that it shall not have received a distribution on the Preferred Partnership Interests for the corresponding Interest Payment Date. If the Company elects to make a cash payment from the proceeds of any issuance of Common Stock and Globalstar shall have previously declared its intent to pay its corresponding distribution in Ordinary Partnership Interests, the valuation of the Ordinary Partnership Interests to be delivered to the Company underlying the Common Stock to be issued shall be based upon the price at which such Common Stock is sold. If the Company elects to deliver Common Stock to the Holders in lieu of a cash payment and Globalstar shall have previously declared its intent to pay its corresponding distribution in Ordinary Partnership Interests, the valuation of the Ordinary Partnership Interests to be delivered to the Company underlying such Common Stock shall be based upon 90% of the Average Market Value of the Common Stock, in the case of an interest payment, including Interest Make-Whole Payments, and 100% of the Average Market Value of the Common Stock, in the case of all other payments. The Indenture (as defined below) for the Securities and the agreement governing the Preferred Partnership Interests will contain certain notice procedures to provide the Company adequate time to make all payments due on the applicable payment date. Holders will receive notice, as described in "Description of Securities -- Method of Payments", stating (i) in the case of a Provisional or Optional Redemption, the date of any such Provisional or Optional Redemption and (ii) in the case of all non-cash payments, the form of consideration that the Company will make on the applicable payment date. "Average Market Value" of the Common Stock will mean the arithmetic average of the Current Market Value for the ten trading days ending on the second business day prior to the applicable date of payment. 10 15 "Current Market Value" of the Common Stock will mean the average of the high and low sale prices of the Common Stock as reported on the NNM or any national securities exchange upon which the Common Stock is then listed, for the trading day in question. Optional Conversion by Holders............... The Securities are convertible, in whole or in part, at the option of the Holders at any time after 60 days from the Issue Date and prior to the Mandatory Redemption Date (unless earlier redeemed by the Company), initially at the conversion price of $65.00 per share (equivalent to 0.7692 shares of Common Stock for each $50.00 principal amount of Securities). Holders will not be entitled to any Interest Arrearage upon conversion. The Conversion Price is subject to adjustment upon the occurrence of certain dilutive events. Upon an optional conversion of Securities into Common Stock, the Company will convert a proportionate number of Preferred Partnership Interests into Ordinary Partnership Interests. References in this Offering Memorandum to Globalstar partnership interests shall refer collectively to the Preferred Partnership Interests and the Ordinary Partnership Interests. Voting Rights.............. Except as required by law, the Holders of the Securities are not entitled to any voting rights unless the Company has deferred interest payments for an aggregate of six quarterly interest payments (a "Deferral Trigger Event"), in which case the number of members of the General Partners' Committee of Globalstar will be increased by one and the Holders of the Securities, voting separately as a class with the holders of any other securities upon which similar voting rights have been conferred and are exercisable, will be entitled to elect one representative to such General Partners' Committee (the "CPE Representative"). In addition, upon a Deferral Trigger Event, Loral SpaceCom has agreed to use its best efforts to cause the shareholders of the Company to approve and elect a nominee to the Board of Directors of the Company designated by the Holders of the Securities (the "CPE Nominee"). If the shareholders shall fail to approve such CPE Nominee, Loral SpaceCom will seek the resignation of a Loral SpaceCom designee director from the Board of Directors of the Company and will use its best efforts to cause the Board of Directors of the Company to appoint the CPE Nominee to the Board of Directors of the Company until the next annual meeting of shareholders, at which time such appointment will be submitted to the shareholders of the Company for their approval; provided, however, that if such shareholder approval is not obtained, the above-described mechanics shall continue to be in effect. The CPE Representative and the CPE Nominee, if appointed to the Board, will promptly resign their offices upon receipt of notice from the Company that all Interest Arrearages with respect to the Securities have been paid. Restrictive Covenants...... None. Registration Rights........ Pursuant to a registration rights agreement (the "Registration Rights Agreement") among the Company, Globalstar and the Initial Purchasers, the Company has agreed for the benefit of the Holders of Securities that it will: (i) within 120 days after the Issue Date, file a shelf registration statement (the "Shelf Registration Statement") with the 11 16 Commission with respect to resales of the Securities and the Common Stock issuable upon conversion thereof; (ii) use its best efforts to cause such Shelf Registration Statement to be declared effective by the Commission within 180 days after the Issue Date; and (iii) maintain such Shelf Registration Statement continuously effective under the Securities Act until the third anniversary of the Issue Date or such earlier date as of which the Securities shall no longer constitute restricted securities pursuant to Rule 144(k) or until all the Securities or the Common Stock issuable upon conversion thereof have been sold pursuant to such Shelf Registration Statement. Listing.................... The Securities are eligible for trading by qualified institutional buyers on the PORTAL Market. The Common Stock is listed on the NNM and the Company has applied for listing the Conversion Shares on the NNM. Ranking of Securities...... The Securities will be subordinated to all existing and future Debt Obligations (as defined herein) of the Company and rank senior to preferred stock and the Common Stock with respect to the payment of dividends, payments on redemption and payments of amounts distributable upon dissolution, liquidation or winding up of the Company. The Securities will be structurally subordinate to all existing and future obligations of Globalstar. See "Ranking of Preferred Partnership Interests" below. Preferred Partnership Interests.................. In connection with the Original Offering, Globalstar and the Company amended the partnership agreement to provide for the Company's purchase of 4,769,230 Preferred Partnership Interests. The Preferred Partnership Interests have generally the same terms and conditions as the Securities, except that they will not be subject to any registration rights, will be subordinate not just to the debt obligations of Globalstar, but to all existing and future liabilities of Globalstar, and cash distributions thereon will be limited to the amount of the partnership capital accounts that are maintained for such interests and that reflect a preferred allocation of Globalstar profits to such accounts. The Preferred Partnership Interests will have no voting rights, except as provided by law. See "Governance of Globalstar -- Preferred Partnership Interests" and "-- Allocations and Distributions." Ranking of Preferred Partnership Interests...... The Preferred Partnership Interests are subordinated to all existing and future liabilities of Globalstar including without limitation: (i) certain distributions made to partners in respect of taxes levied upon the operations of Globalstar; (ii) distribution of the Managing Partner's Allocation (as defined below) to Loral/Qualcomm Satellite Services, L.P. ("LQSS"), the managing general partner of Globalstar; and (iii) the Guarantee Fee or notes that may be issued to the partners of Globalstar in lieu of such Guarantee Fee. The Preferred Partnership Interests will, however, rank senior to the Ordinary Partnership Interests with respect to the payment of distributions and otherwise receive certain preferred allocation of profits and losses. See "Risk Factors -- Risks Relating to the Securities -- Subordination of Securities" and "Governance of Globalstar -- Allocations and Distributions." 12 17 RISK FACTORS Prospective investors should carefully consider the following risk factors, in addition to the other information contained elsewhere in this Prospectus, in evaluating whether to purchase the Offered Securities. The following risk factors relate to the Company and Globalstar. DEVELOPMENT STAGE COMPANY Development Stage Company; Expectation of Continued Losses; Negative Cash Flow. Globalstar is a development stage company and has no operating history. From its inception, Globalstar has incurred net losses and expects such losses to continue. Globalstar will require expenditures of significant funds for development, construction, testing and deployment before commercialization of the Globalstar System. Globalstar does not expect to launch satellites until the second half of 1997, to commence operations before the second half of 1998 or to achieve positive cash flow before 1999. There can be no assurance that Globalstar will achieve its objectives by the targeted dates. In addition, upon deployment and commencement of operations, any failure on the part of management to manage effectively the growth of Globalstar may have an adverse effect on the business of Globalstar. Additional Financing Requirements. Globalstar expects to require total capital of approximately $2.2 billion for capital expenditures, development and operating costs of the system through 1998. To date, Globalstar has raised or received commitments for approximately $1.4 billion in equity, debt and vendor financing. Globalstar believes that its current equity, debt and vendor financing commitments and the net proceeds of the Original Offering are sufficient to fund Globalstar's requirements into the first quarter of 1997. Additional funds to complete the Globalstar System are expected to be obtained from a combination of sources, including the issuance of debt, projected Service Provider Payments, projected net service revenues from initial operations, anticipated payments from the sale of gateways and Globalstar Phones and placements of limited partnership interests with new and existing strategic investors. There can be no assurance that additional funds required to complete the Globalstar System will be available or realized as anticipated. If there are unforeseen delays, if technical or regulatory developments result in a need to modify the design of all or a portion of the Globalstar System, if service provider agreements for additional territories are not entered into at the times or on the terms anticipated by Globalstar or if other additional costs are incurred, the risk of which is substantial in view of the early stage of Globalstar's development, additional capital will be required. The ability of Globalstar to achieve positive cash flow will depend upon the successful and timely design, construction and deployment of the Globalstar System, the successful marketing of its services by service providers and the ability of the Globalstar System to successfully compete against other satellite-based telecommunications systems, as to which there can be no assurance. If Globalstar fails to commence commercial operations in the second half of 1998 or achieve positive cash flow in 1999, additional capital will be needed. Although Globalstar believes it will be able to obtain the additional financing it requires, there can be no assurance that the capital required to complete the Globalstar System will be available from the public or private capital markets or from its existing partners on favorable terms or on a timely basis, if at all. A substantial shortfall in meeting its capital needs would prevent completion of the Globalstar System. See "Summary -- Sources and Uses of Capital by Globalstar." Sources of Possible Delay and Increased Cost. Potential investors should be aware of the problems, delays and expenses that may be encountered by an enterprise in Globalstar's stage of development, 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, the competitive and regulatory environment in which Globalstar will operate, marketing problems and costs and expenses that may exceed current estimates. Delay in the timely design, construction, deployment, commercial operation and achievement of positive cash flow of the Globalstar System could result from a variety of causes, including delays associated with the regulatory process in various jurisdictions, delay in the integration of the Globalstar System into the land-based network, changes in the technical specifications of the Globalstar System due to regulatory developments or otherwise, delays encountered in the construction, integration or 13 18 testing of the Globalstar System by Globalstar vendors, delayed or unsuccessful launches, delays in financing, insufficient or ineffective service provider marketing efforts, slower-than-anticipated consumer acceptance of Globalstar service and other events beyond Globalstar's control. Substantial delays in any of the foregoing matters would delay Globalstar's achievement of profitable operations. REGULATION Licensing Risks; Impact of Multiple FCC Licensees; Impact on System Capacity. The operations of the Globalstar System are and will continue to be subject to United States and foreign regulation. In order to operate in the United States and on an international basis, the Globalstar System must be authorized to provide MSS in each of the jurisdictions in which its service providers intend to operate. On January 31, 1995, the FCC authorized Loral/Qualcomm Partnership, L.P. ("LQP"), the general partner of Globalstar's managing general partner, to construct, launch and operate the Globalstar System for the purpose of providing MSS in the United States (the "FCC License"). The FCC License was subsequently assigned to L/Q Licensee, Inc. ("L/Q Licensee"), a wholly owned subsidiary of LQP. Even though Globalstar has received an FCC authorization, there can be no assurance that the further regulatory approvals required for worldwide operations will be obtained, or that they will be obtained in a timely manner or in the form necessary to implement Globalstar's proposed operations. Globalstar's business may also be significantly affected by regulatory changes resulting from judicial decisions and/or adoption of treaties, legislation or regulation by the national authorities where the Globalstar System plans to operate. The FCC License authorizes the construction, launch and operation of the satellite constellation and assigns the system's user links in the United States. Globalstar must still receive unconditional authorization for its feeder links. Separate licenses must also be obtained from the FCC for operation of gateways and Globalstar Phones in the United States. Failure to obtain, or delay in obtaining, any such authorization would adversely affect implementation of the system. As discussed below, the feeder link spectrum proposed for use with the Globalstar System has been allocated internationally but has not yet been allocated in the United States for MSS feeder links. The MSS applications of LQP and five other companies (the "MSS applicants") were considered concurrently at the FCC (the "MSS Proceeding") for authority to construct, launch and operate MSS systems in the United States capable of operating within the MSS user links. The FCC has stated that it could grant up to five licenses for systems in the MSS user link spectrum. On January 31, 1995, LQP and two other applicants (one a time division multiple access ("TDMA") system and the other a CDMA system) were granted authorizations to construct, launch and operate their proposed MSS systems. The three remaining applicants have been given until 60 days after FCC action on a pending appeal (challenging the application of the financial standard to one of the deferred applicants) to demonstrate that they meet the FCC's financial qualification standard for MSS systems. The FCC has stated that it will not consider additional applications for these user links until the processing of these first six applications has been completed. To the extent that additional MSS systems are authorized by the FCC or other national regulatory bodies to use the spectrum for which Globalstar has been authorized, the Globalstar System's capacity would be reduced. The FCC licensees, and any others that may be licensed from the three pending applications, will compete with Globalstar for investment capital, subscribers and service providers in markets all over the world. See "-- Demand -- Competition." In addition, the decision to grant LQP's application is subject to pending petitions for reconsideration and an application for review at the FCC and remains subject to further appeals at the FCC or judicial appeals. An application for review was filed by one of the deferred MSS applicants requesting a rescission of the FCC License. While Globalstar believes that this appeal is without merit, there can be no assurance that such application for review would not result in reversal or stay of the grant of LQP's application. Unsuccessful applicants have sought to appeal adverse FCC decisions on their applications as well as the award of licenses to other applicants, which may result in the grant of additional licenses. In the event that the FCC were to be judicially required to reconsider its licensing procedures as a result of judicial appeals, there is a risk that the FCC could reprocess the MSS applicants and adopt a different licensing procedure. Under these circumstances, there can be no assurance that the FCC would not use an auction procedure to award licenses. There is also no assurance that licensing authorities in other jurisdictions 14 19 would not adopt auction procedures. If an applicable regulatory authority were to adopt an auction procedure, there can be no assurance that L/Q Licensee or the applicable Globalstar service providers in such territories would be willing or able to compete therein as successfully as other MSS applicants. In addition, even if L/Q Licensee or the applicable Globalstar service providers were successful in obtaining MSS licenses as a result of such spectrum auctions, the increased cost and expenses incurred for such licenses could adversely affect Globalstar's prospects. Authorization will be required in each country in which Globalstar Phones are used and in which Globalstar's gateways are located. Local regulatory approval for operation of the Globalstar System is the responsibility of the service providers in each territory. Although many countries have moved to privatize the provision of telecommunications service and to permit competition in the provision of such service, some countries continue to require that all telecommunications service be provided by a government-owned entity. While service providers have been selected, in part, based upon their perceived qualifications to obtain the requisite local approvals, there can be no assurance that they will be successful in doing so, and if they are not successful, Globalstar service will not be available in such territories. In that event, depending upon geographical and market considerations, Globalstar may or may not have the ability to redirect the system capacity that such territories would have otherwise used to serve territories in which service is authorized. Regulatory schemes in countries in which Globalstar or its service providers seek to operate may impose impediments on Globalstar's operations. There can be no assurance that such restrictions would not be unduly burdensome. Availability of Requested Feeder Link Spectrum. The frequencies in which Globalstar proposes to operate its feeder links were allocated internationally at the International Telecommunication Union's ("ITU") WRC '95 for non-geostationary MSS feeder links. The FCC has granted LQP conditional authority to construct a system at its own risk capable of operating in a similar set of frequencies, and L/Q Licensee has filed a request at the FCC for unconditional assignment of feeder links consistent with WRC '95 allocations. Potential Interference with Glonass. A segment of the Russian Global Navigation Satellite System ("Glonass") currently operates worldwide in a portion of the frequency band proposed to be used by Globalstar and other MSS systems for the user uplinks, resulting in potential difficulty in meeting protection requirements for Glonass in the lower portion of the MSS band. An agreement has been secured to move Glonass to a lower frequency band by 1998, thereby providing additional separation between MSS and Glonass operations to MSS systems. Negotiations are ongoing between U.S. government officials and officials from the Russian Federation to move Glonass to an even lower frequency band, thereby facilitating full use of the 1610-1626.5 MHz band for MSS. Pending this frequency modification, a segment of the MSS spectrum may not be useable for MSS user uplinks so as to create a protective band of spectrum for Glonass. This is not expected to have an adverse effect on Globalstar's capacity in the United States. A decision to protect Glonass on the part of regulatory authorities in nations making extensive use of Globalstar fixed services, however, could reduce Globalstar's effective system capacity in such jurisdictions. European Union Regulatory Matters. European Union competition law proscribes agreements that have the effect of appreciably restricting or distorting competition in the European Union. Globalstar and others have received an inquiry from the Commission of the European Union requesting information regarding its activities. A violation of European Union competition law could subject Globalstar to fines or enforcement actions that could result in expenses to Globalstar, delay the commencement of Globalstar service in western Europe, and/or depending on the circumstances, adversely affect Globalstar's contractual rights vis-a-vis its European strategic partners. In addition, the Commission has proposed legislation at the European Union level which, if adopted, would give the Commission broad regulatory authority over "satellite PCS" systems such as Globalstar. TECHNOLOGICAL RISKS Technological Risks. The Globalstar System is exposed to the risks inherent in a large-scale complex telecommunications system employing advanced technologies which must be adapted to the Globalstar application and which have never been tested or used as a commercial whole. Deployment of the Globalstar 15 20 satellite constellation will involve volume production and testing of satellites in quantities significantly higher than those previously prevailing in the industry. The integration of a worldwide LEO satellite-based system like Globalstar has never occurred; there is no assurance that such integration will be successfully implemented. The operation of the Globalstar System will require the detailed design and integration of advanced digital communications technologies in devices from personal handsets and public telephone networks to gateways in remote regions of the globe and satellites operating in space. The failure to develop, produce and implement the system, or any of its diverse and dispersed elements, as required, could delay the In-Service or Full Constellation Date of the Globalstar System or render it unable to perform at the quality and capacity levels required for success. Satellite Launch Risks. Satellite launches are subject to significant risks, including disabling damage to or loss of the satellites. Historically, launch failure ("hot failure") rates on low-earth orbit and geostationary satellite launches have been approximately 10%. However, launch failure rates may vary depending on the particular launch vehicle. The McDonnell-Douglas Delta launch vehicle, scheduled to launch the first eight satellites (four per launch) of the Globalstar satellite constellation, recently suffered a partial launch failure on one out of its last fifty launches. The Ukrainian Zenit launch vehicle, which is proposed to launch 36 Globalstar satellites (twelve per launch), has never been used in commercial applications. The Chinese Long March 2E, which is currently scheduled to be used as the vehicle to launch the last twelve satellites of the Globalstar satellite constellation (twelve per launch), has experienced two failures in its last five attempts. In addition, a Long March 3B recently suffered a failure on its maiden launch attempt. These failures are being studied to assess their implications for the deployment of Globalstar satellites. Globalstar currently anticipates launching satellites in groups of either four or 12 satellites in each launch. Satellite launches of more than eight commercial satellites have not been attempted before. There is no assurance that Globalstar satellite launches will be successful or that its launch failure rate will not exceed the industry average. Globalstar's contract with SS/L for the construction and launch of its satellite constellation requires SS/L to procure insurance covering the replacement cost of satellites lost in the event of hot failure. There is no assurance, however, that launch insurance will be available or that, if available, would be at a cost or on terms acceptable to Globalstar. Globalstar's launch contracts for 64% of its satellite constellation provide for relaunches at no additional charge in the event of a hot failure. However, the launch provider may, because of financial reasons or otherwise, be unable to provide such relaunches. A single launch failure would result in a loss of either four or 12 Globalstar satellites. Although the cost of replacing such satellites and launch vehicles will in most cases be covered by insurance, a launch failure could result in delays in the In-Service or the Full Constellation Date. See "-- Limited Insurance." SS/L has agreed to obtain launch vehicles on behalf of Globalstar and arrange for the launch of Globalstar satellites at an estimated total cost of $302 million for all 56 satellites, subject to an equitable adjustment in light of future market conditions, which may, in turn, be influenced by international political developments. An adverse change in launch vehicle market conditions which prohibits Globalstar from utilizing the launch vehicles for which it has contracted could result in an increase in the launch cost payable by Globalstar, which may be substantial. In addition, there can be no assurance that replacement launch vehicles will be available in the future at a cost or on terms acceptable to Globalstar. Two of Globalstar's launch operators are subject to export control regulations. China Great Wall Industry Corporation ("China Great Wall"), the manufacturer of the Long March 2E and 3B, is located in China. NPO Yuzhnoye ("Yuzhnoye"), based in Ukraine, has certain ties with Russia and intends to launch the Zenit rocket from a launch site in Kazakhstan. Changes in governmental policies or political leadership in the United States, China, Ukraine, Russia or Kazakhstan could affect the cost, availability, timing and/or overall advisability of utilizing these launch providers. While there is no assurance that the necessary export licenses will be obtained, Globalstar has provided against the risk that such licenses will not be granted or that the deterioration in the relationships between the United States and these countries may make the use of such launch providers inadvisable by procuring options on sufficient launches with a U.S.-based launch provider to launch all the remaining satellites of the Globalstar constellation. If Globalstar were to exercise these options for U.S. launches in the wake of the failure to obtain any necessary export licenses or as a result of adverse 16 21 developments in U.S. relations with these countries, the cost of launching the Globalstar satellite constellation would be significantly increased. Limited Life of Satellites. A number of factors will affect the useful lives of Globalstar's satellites, including the quality of construction, expected gradual environmental degradation of solar panels and the durability of component parts. Random failure of satellite components could result in damage to or loss of a satellite ("cold failures"). In rare cases, satellites could also be damaged or destroyed by electrostatic storms or collisions with other objects. As a result of these factors, the first-generation satellite constellation (including spares) is designed to operate at full performance for a minimum of 7 1/2 years, after which performance is expected to gradually decline. However, there can be no assurance of the constellation's specific longevity. Globalstar's operating results would be adversely affected in the event the useful life of the satellites were significantly shorter than 7 1/2 years. Globalstar anticipates using funds generated from operations to develop a second generation of satellites. If sufficient funds from operations are not available and Globalstar is unable to obtain external financing for the second-generation constellation, Globalstar will not be able to deploy a second-generation satellite constellation to replace first-generation satellites at the end of their useful lives. In that event, the Globalstar System would cease operations at that time. Limited Insurance. Globalstar intends to obtain insurance against launch failure which would cover the cost of relaunch and the replacement cost of lost satellites in the event of hot failures for 56 satellites in its constellation. However, Globalstar may self-insure for hot failures for up to 12 such satellites. Globalstar's contract with SS/L provides for the construction and launch of eight spare satellites to minimize the effect of any launch or orbital failures. Globalstar currently does not intend to purchase insurance to cover any cold failures that may occur once the satellites have been successfully deployed from the launch vehicle. Globalstar's management believes that this quantity of spare satellites will be sufficient for full commercial operation. However, there can be no assurance that additional satellites and launches will not be required. In such an event, in addition to the replacement costs incurred by Globalstar, the date for commencement of full commercial operations may be delayed. SS/L has agreed to obtain on Globalstar's behalf insurance for the cost of replacing satellites lost in hot failures, and for any relaunch costs not covered by the applicable launch contract, for an estimated premium of $92 million, in certain circumstances subject to an equitable adjustment in light of future market conditions. An adverse change in insurance market conditions may result in an increase in the insurance premium paid by Globalstar, which may be substantial. In addition, there is no assurance that launch insurance will be available or that, if available, would be at a cost or on terms acceptable to Globalstar. Globalstar's contract with SS/L provides for the construction and launch of eight spare satellites to minimize the effect of any launch or orbital failures. Globalstar's management believes that this quantity of spare satellites will be sufficient for initial operation. However, there can be no assurance that additional satellites and launches will not be required. In such an event, in addition to the replacement costs incurred by Globalstar, Globalstar's In-Service or Full Constellation Date may be delayed. FUTURE OPERATING RISKS Dependence on Service Providers and Other Third Parties. The availability of Globalstar service in each region or country will depend upon the cooperation, operational and marketing efficiency, competitiveness, finances and regulatory status of Globalstar's service provider in that region or country. The willingness of companies to become service providers will depend upon a variety of factors, including pricing, local regulations and Globalstar's competitiveness with other satellite-based telecommunications systems. Globalstar believes that enlisting the support of established telecommunications service providers, some of which are the dominant carriers in their markets, will be essential both to obtaining necessary local regulatory approvals and to rapidly accessing a broad market of potential users. Globalstar's Strategic Service Providers have agreed to act as exclusive service providers in 70 countries although it is anticipated that in many cases these partners will enter into strategic alliance with local service providers to provide Globalstar service in these countries. In addition, Globalstar expects to raise additional funds prior to the Full Constellation Date in the form of Service Provider Payments from prospective service providers in other territories throughout the world. Globalstar's business plan assumes that Globalstar will contract with service providers to provide 17 22 service in the remaining territories of the world, in certain cases, on terms more favorable to Globalstar than those contained in its founding service provider agreements, and that such agreements will provide for Service Provider Payments due prior to the Full Constellation Date aggregating $120 million. There can be no assurance that additional service provider agreements will be entered into in the future or that this plan will be achieved. If such Service Provider Payments are not realized, Globalstar will be required to obtain other sources of financing in order to complete the Globalstar System. If the service providers fail to obtain the necessary local regulatory approval or to adequately market and distribute Globalstar's services, Globalstar's business could be adversely affected. There can be no assurance that enough service providers will contract for Globalstar service and procure and install the gateways and obtain the regulatory licenses necessary for complete global service. Failure to offer service in any particular region will eliminate that area's market potential and reduce Globalstar's ability to service its global roamer market. Certain strategic partners and other third parties are designing and constructing the component parts of the Globalstar System and launching the Globalstar satellites. In the event such parties are unable to perform their obligations or are unable or not permitted due to political considerations to provide Globalstar with a launch vehicle to launch its satellites, Globalstar's In-Service and Full Constellation Date may be delayed and its costs may be increased. Risks of Doing Business in Developing Markets; Currency Risks. Globalstar's largest potential markets are in developing countries or regions that are substantially underserved and not expected to be served by existing telecommunications systems. In doing business in such markets, Globalstar and its local service providers may face market, inflation, interest rate and currency fluctuation, government policy, price and wage, exchange control, taxation and social instability, expropriation and other economic, political or diplomatic conditions that are significantly more volatile than those commonly experienced in the United States and other industrialized countries. Although Globalstar anticipates that it will receive payments from its service providers in U.S. dollars, limited availability of U.S. currency in these local markets may prevent a service provider from making payments in U.S. dollars. Moreover, under certain pricing arrangements that Globalstar will offer to its service providers, exchange rate fluctuations may affect the price Globalstar will be entitled to receive for its services. There can be no assurance that, in connection with entering into agreements with additional service providers, or in connection with any agreements with its present service providers, Globalstar will not incur any additional risks relating to currency fluctuations. Pricing Risk. Globalstar's pricing to service providers will, under certain circumstances, not be automatically adjusted for inflation; in such cases, Globalstar will be able to increase its pricing to service providers only if the service provider increases its prices to subscribers, and it may be required to lower its pricing if the service provider lowers its prices to subscribers. In recent years, pricing in the telecommunications industry has trended downward, in some cases making it difficult for service providers to raise their prices to compensate for cost inflation. In the event that Globalstar is unable to offset any increased costs resulting from inflation with efficiency advances in its technology, Globalstar's business may be adversely affected. Although Globalstar expects future service provider agreements to contain pricing terms more favorable to Globalstar than those contained in its agreements with founding service providers, there can be no assurance that such terms will be achieved or that such terms will, on the one hand, be high enough to provide an attractive return on Globalstar's costs of designing, constructing and operating the Globalstar System or, on the other hand, be attractive enough to service providers to induce them to provide service, including, where applicable, to make Service Provider Payments and, further, to permit them to offer the service to end users at rates which will attract adequate subscriber volume. In the event that Globalstar reduces its standard pricing, Globalstar's revenues at given levels of usage will be lower than the revenue levels currently anticipated. Substantial Leverage. Globalstar has entered into an agreement with a bank syndicate for a $250 million credit facility expiring December 15, 2000, and also expects to utilize $310 million of committed vendor financing (of which $62 million was outstanding as of March 31, 1996) which is scheduled to mature earlier than the Mandatory Redemption Date. The Globalstar Credit Agreement permits Globalstar to incur up to $950 million of indebtedness on a senior basis to finance the buildout of the Globalstar System; an 18 23 unlimited amount of indebtedness may be incurred by Globalstar on a subordinated basis. The Preferred Partnership Interests also do not limit the amount of indebtedness that Globalstar may incur. Significant additional debt is expected to be incurred in the future. As a result, Globalstar is expected to become highly leveraged. Globalstar will be dependent on its cash flow from operations to service this debt. Any delay in the commencement of Globalstar operations will adversely affect Globalstar's ability to service its debt obligations. Globalstar's current and future debt service requirements could have important consequences to holders of the Offered Securities, including the following: (i) limiting Globalstar's ability to obtain additional financing for future working capital needs or financing for deployment, development and operation of the Globalstar System or other purposes; (ii) dedicating a substantial portion of Globalstar's cash flow from operations to the payment of principal and interest on its indebtedness, thereby reducing funds available for operations and distributions on its Preferred Partnership Interests; and (iii) increasing Globalstar's vulnerability to adverse economic conditions than less leveraged competitors and, thus, limiting its ability to withstand competitive pressures. The discretion of Globalstar's management with respect to certain business matters will be limited by covenants contained in the Globalstar Credit Agreement and future debt instruments. Among other things, the covenants contained in the Globalstar Credit Agreement restrict, condition or prohibit Globalstar from paying cash distributions on its partnership interests, creating liens on its assets, making certain asset dispositions, conducting certain other business and entering into transactions with affiliates and related persons. There can be no assurance that Globalstar's leverage and such restrictions will not materially and adversely affect Globalstar's ability to finance its future operations or capital needs or to engage in other business activities. Moreover, a failure to comply with the obligations contained in the Globalstar Credit Agreement or any agreements with respect to additional financing could result in an event of default under such agreements, which could permit acceleration of the related debt and acceleration of debt under future debt agreements that may contain cross-acceleration or cross-default provisions. See "Summary -- Sources and Uses of Capital by Globalstar" and "-- Development Stage Company -- Additional Financing Requirements." Product Liability; Alleged Health Risks. There has been adverse publicity concerning alleged health risks associated with the use of portable hand-held telephones with transmitting antennas integrated into handsets. On March 11, 1993, the FCC proposed amending and updating its guidelines for evaluating environmental radio frequency radiation from FCC-regulated transmitters. Comments on the proposed guidelines were filed on January 25, 1994, and reply comments were filed on April 25, 1994. The FCC has not yet made any decisions concerning the proposed guidelines. The handsets Globalstar has contracted with Qualcomm to develop for use by mobile subscribers will have antennas for communication with the satellites and, in the case of the dual-mode hand-held Globalstar Phones, with the land-based cellular system. Because hand-held Globalstar Phones will use on average lower power to transmit signals than traditional cellular units, Globalstar does not believe that the proposed new guidelines will require any significant modifications of the Globalstar System or of the mobile hand-held Globalstar Phones designed to be used with the Globalstar System. There can, however, be no assurance that the guidelines, as adopted, or any associated health concerns, would not have an adverse effect on Globalstar's mobile handset business. Effect of Loss of Key Personnel. The success of Globalstar's business will be partially dependent upon the ability of Globalstar to attract and retain highly qualified technical and management personnel. None of Globalstar's existing employees has an employment contract with Globalstar nor does Globalstar maintain "key man" insurance with respect to any of such individuals. There can be no assurance that Globalstar will be able to retain such persons or attract other highly qualified personnel. Globalstar is dependent upon officers of Loral SpaceCom or subsidiaries thereof for senior management services. Although one such officer has an employment agreement with Loral SpaceCom, there can be no assurance that such person will continue to be employed by Loral SpaceCom and thus continue to be available to Globalstar. The loss of any of these individuals and the subsequent effect on business relationships could have an adverse effect on Globalstar's business. 19 24 DEMAND Competition. Competition in the telecommunications industry is intense, fueled by rapid and continuous technological advances and alliances between industry participants on an international scale. Although no present participant is currently providing the same global personal telecommunications service proposed by Globalstar, it is anticipated that one or more additional competing MSS systems will be launched and that the success, or anticipated success, of Globalstar and its competitors could attract other entrants. If any of Globalstar's competitors succeeds in marketing and deploying its system substantially earlier than Globalstar, Globalstar's ability to compete in areas served by such competitor may be adversely affected. A number of satellite-based telecommunications systems not involved in the MSS Proceeding have also been proposed using geostationary satellites and, in one case, a MEO system. Globalstar's most direct competitors are the two other FCC-licensed MSS applicants, Motorola, Inc.'s ("Motorola") IRIDIUM system ("Iridium") and TRW, Inc.'s ODYSSEY system ("Odyssey"), and ICO Global Communications' global satellite system ("ICO"). ICO was not an applicant or a licensee in the MSS Proceeding or any other proceedings before the FCC; it is seeking to operate in a different frequency band not available for use by MSS systems under current international guidelines in place until 2000. Comsat Corporation ("Comsat"), the U.S. signatory to the International Maritime Satellite Organization ("Inmarsat"), has applied to the FCC to participate in the procurement of facilities of the system proposed by ICO. It has also sought FCC approval of a proposal to extend the scope of services provided by Inmarsat, currently limited to maritime services, to include telecommunications services to land-based mobile units. These applications are currently pending before the FCC. Comsat has been instructed in the past by the U.S. government to seek to ensure that ICO does not receive preferred access to any market and that non-discriminatory access to such areas for all mobile satellite communications networks be established, subject to spectrum coordination and availability. Nonetheless, because ICO is affiliated with Inmarsat and because its investors include state-owned telecommunications monopolies in a number of countries, there can be no assurance that ICO might not be given preferential treatment in the local licensing process in those countries. It is also possible that one or more of the three pending MSS applicants will demonstrate financial qualification sufficient to obtain an FCC license and become a competitor of Globalstar. In addition to competing for investment capital, subscribers and service providers in markets all over the world, the MSS systems, including Globalstar, also compete with each other for the limited spectrum available for MSS operations. Unlike CDMA systems such as Globalstar and Odyssey, which permit multiple systems to operate within the same band, the design of Iridium's TDMA system requires a separate frequency segment dedicated specifically for its use. If more than two CDMA systems become operational, CDMA systems like Globalstar will effectively have a smaller spectrum segment within which to operate their user uplinks in the U.S. While CDMA does permit spectrum sharing among competing systems, the capacity of the systems operating within that spectrum will decrease as the number of systems operating in the band increases. For example, Globalstar's capacity over a given area would decrease by approximately 25% if the total number of licensed MSS systems increased from three to four, assuming that Iridium is one of the licensed systems and the two other CDMA systems receiving licenses have technical characteristics similar to Globalstar's and are experiencing the same level of usage. The FCC has declined to make efforts to extend the U.S. band plan for CDMA and TDMA Big LEO systems to other countries. However, it has stated that it plans to express the view in discussions with other administrations that global satellite systems are more likely to succeed if individual administrations adopt complementary systems for licensing them. Geostationary-based satellite systems, including American Mobile Satellite Corporation ("AMSC"), Asia Pacific Mobile Telecom ("APMT"), Afro-Asian Satellite ("ASC"), PT Asia Cellular Satellite ("ACES"), Lockheed Martin's Satphone and Comsat's Planet-1 plan to provide satellite-based telecommunications services in areas proposed to be serviced by Globalstar. Because some of these systems involve relatively simple ground control requirements and are expected to deploy no more than two satellites, they may succeed in deploying and marketing their systems before Globalstar. In addition, coordination of standards among regional geostationary systems could enable these systems to provide worldwide service to 20 25 their subscriber base, thereby increasing the competition to Globalstar. For example, Comsat has announced a global mobile satellite service (Planet-1) to commence in 1996 using existing Inmarsat satellites, a six-pound, laptop-size phone, costing $3,000 with an expected per-minute usage rate of $3.00. Comsat has announced plans to offer Planet-1 services on a regional basis in Asia, Africa and the Middle East in the summer of 1996 and in Europe and the Americas in the fourth quarter of 1996. Some of these potential competitors have financial, personnel and other resources substantially greater than those of Globalstar. Many of these competitors are raising capital and may compete with Globalstar for service providers and financing. Technological advances and a continuing trend toward strategic alliances in the telecommunications industry could give rise to significant new competitors. There can be no assurance that some of these competitors will not provide a more efficient or less expensive service. However, Globalstar believes that based upon the public statements and other publicly available information of the other MSS applicants, Globalstar will be a low-cost provider. Depending on the competitive environment, however, pricing competition could require Globalstar to reduce its anticipated pricing to service providers, thus adversely affecting its financial performance. Satellite-based telecommunications systems are characterized by high up-front costs and relatively low marginal costs of providing service. Several systems are being proposed, and, while the proponents of these systems foresee substantial demand for the services they will provide, the actual level of demand will not become known until such systems are constructed, launched and begin operations. If the capacity of Globalstar and any competing systems exceeds demand, price competition could be particularly intense. See "-- Regulation -- Licensing Risks; Impact of Multiple FCC Licensees; Impact on System Capacity." TELEDESIC(R) ("Teledesic"), GM Hughes Electronics Corp.'s Spaceway(R) ("Spaceway") and Loral SpaceCom's Cyberstar ("Cyberstar") have each applied to the FCC for licenses to operate satellite-based telecommunications and video transmission systems in the 28GHz Ka-band. Certain MSS applicants, not including Globalstar, have applied to use this band for their feeder uplinks, as have proponents of land-based Local Multipoint Distribution Services ("LMDS") for cellular television services. The FCC is in the process of developing a band-width allocation plan for use of the available Ka-band spectrum by these services. Globalstar's primary business will be voice telephony, and its data transmission business will be focused on small data packet services such as paging and messaging. It therefore does not regard the television or broadband data services to fixed terminals proposed by Teledesic, Spaceway and Cyberstar or the wireless cable and fixed telephony services proposed by the LMDS applicants as competing services. Risk of Accelerated Build-Out and Competing Technological Advances. It is expected that as land-based telecommunications services expand to regions currently underserved or not served by wireline or cellular services, demand for Globalstar service in those regions may be reduced. If such systems are constructed at a more rapid rate than that anticipated by Globalstar, the demand for Globalstar service may be reduced at rates higher than those assumed in Globalstar's market analysis. Globalstar may also face competition in the future from companies using new technologies and new satellite systems. New technology could render Globalstar obsolete or less competitive by satisfying consumer demand in alternative ways or through the introduction of incompatible telecommunications standards. A number of these new technologies, even if they are not ultimately successful, could have an adverse effect on Globalstar as a result of their initial marketing efforts. Globalstar's business would be adversely affected if competitors begin operations or existing or new telecommunications service providers penetrate Globalstar's target markets before completion of the Globalstar System. Subscriber Acceptance. Subscriber acceptance of the Globalstar System (both in terms of placement of Globalstar Phones and subscriber usage thereof) will depend upon a number of factors, including price, demand for service and the extent of availability of alternative telecommunications systems. If the level of actual subscriber demand and usage for Globalstar service is below that expected by Globalstar, Globalstar's cash flow will be adversely affected. Globalstar's hand-held phone is expected to be larger and heavier for the same talk time than today's smallest and lightest pocket-sized, hand-held cellular telephones and is expected to have a significantly longer and thicker antenna than hand-held cellular telephones. The Globalstar System will function best when there is an unobstructed line-of-sight between the user and one or more of the 21 26 Globalstar satellites overhead. Obstacles such as buildings, trees or mountainous terrain may degrade service quality, more so than would be the case with terrestrial cellular systems, and service may not be available in the core of high-rise buildings. There is no assurance that these characteristics of the hand-held Globalstar Phone will not adversely affect subscriber demand for Globalstar service. STRUCTURAL AND MARKET RISKS Potential Conflicts of Interest. Partners of LQSS, the managing general partner of Globalstar, or their affiliates are principal suppliers to Globalstar of the major components of the Globalstar System, and are also expected to engage in the manufacture of system elements to be sold to service providers and subscribers. A substantial portion of the proceeds of the Original Offering will be used to fund Globalstar's obligations under these contracts. During the design, development and deployment of the Globalstar System, Globalstar will be substantially dependent upon the management skills of Loral SpaceCom and certain technologies developed by affiliates of Loral, Qualcomm and SS/L to design and manufacture the Globalstar satellite constellation, satellite operations control centers ("SOCCs"), GOCCs, gateways and Globalstar Phones. Globalstar has entered into contracts for the design of various segments of the Globalstar System with affiliates of LQSS, including a fixed-price satellite production contract with SS/L and a cost-plus-fee contract with Qualcomm to design the gateways, GOCCs and Globalstar Phones. To the extent that such contracts have been or will be awarded to partners of Globalstar or LQSS or their affiliates, such parties will have a conflict of interest with respect to the terms thereof. Partners and affiliates of Globalstar, including companies affiliated with or controlled by Loral SpaceCom, will be among Globalstar's principal service provider customers and may therefore have conflicts of interest with respect to the terms of Globalstar's service provider agreements and any proposed amendments thereto. In addition, if Globalstar is unable to offer Globalstar service to a service provider on competitive terms in a particular country or region, such a service provider, which may be a partner of Globalstar, can act as a service provider to a competing MSS system in such region or country while at the same time serving as a Globalstar service provider in other markets. Controlling Person. Globalstar is currently managed by a General Partners' Committee, a majority of the representatives on which are designated directly or indirectly by Loral SpaceCom. Representatives on the General Partners' Committee not affiliated with Loral SpaceCom (the "Independent Representatives") will, however, have the right to pass upon certain matters prior to any decision to submit such matters to a vote of the partners and will have certain authority over the hiring or dismissal of senior officers of Globalstar. Change of Control of GTL and Reduction in Interest; Investment Company Act Considerations. In the event of (i) a change of control of the Company at a time when the Company owns less than 50% of the Globalstar partnership interests outstanding, including certain changes in the Company's Board of Directors, or (ii) a sale or other disposition of partnership interests following which the equity interest of the Company in Globalstar has been reduced to an interest of less than 5% (a "Reduction in Interest"), which, in the event of either clause (i) or (ii) above has not been approved by LQSS or by the partners of Globalstar, the Company will become a limited partner in Globalstar and will no longer appoint representatives to serve on Globalstar's General Partners' Committee. Certain other governance rights granted to the Company under Globalstar's partnership agreement will also be revoked, and the Company will enjoy only the rights of a limited partner in Globalstar. If the Company were to cease participation in the management of Globalstar, which would result if the Company were to undergo a change of control or a Reduction in Interest shall have occurred, its interest in Globalstar could be deemed an "investment security" for purposes of the Investment Company Act of 1940, as amended (the "Investment Company Act"). In general, a person is an "investment company" if, subject to certain exceptions, it owns investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items). The Company's sole asset is its partnership interests in Globalstar. A determination that such investment was an investment security could result in the Company's being deemed to be an investment company under the Investment Company Act and its becoming subject to the registration and other requirements of the Investment Company Act. In order to register, the Company might be required to reincorporate as a domestic U.S. corporation and would thereafter be subject to U.S. tax on its worldwide income, subject to any applicable foreign tax credits. Absent a change of control or a 22 27 Reduction in Interest, Globalstar intends to conduct its operations so as to avoid being deemed an investment company under the Investment Company Act. No Dividends; Holding Company Structure; General Partner Liability. GTL has not declared or paid any dividends on its Common Stock, and Globalstar has not made any distributions to its partners, since their respective dates of inception. Except for interest payments by the Company on the Securities and distribution payments by Globalstar on the Preferred Partnership Interests, the Company and Globalstar do not currently anticipate paying any such dividends or distributions prior to Globalstar's Full Constellation Date and achievement of positive cash flow, which is not expected to occur until 1999. GTL is a holding company, the sole asset of which is its partnership interests in Globalstar. The Company has no independent means of generating revenues. Globalstar will pay the Company's operating expenses related to Globalstar; such expenses are not expected to be material. As a general partner of Globalstar, the Company is jointly and severally liable with the other general partner for the debts and other obligations of Globalstar to the extent Globalstar is unable to pay such debts. To the extent permitted by applicable law and agreements relating to indebtedness, Globalstar intends to distribute to its partners, including the Company, its net cash received from operations, less amounts required to repay outstanding indebtedness, pay distributions on the Preferred Partnership Interests, satisfy other liabilities and fund capital expenditures and contingencies (including funds required for design, construction and deployment of the second-generation satellite constellation). The Company intends to promptly distribute as dividends to holders of its Common Stock the distributions made to it by Globalstar, less any amounts required for the payment of taxes, for repayment of any liabilities, including payments on the Securities, and to fund contingencies. Rights of Shareholders under Bermuda Law. The Company is incorporated under the laws of the Islands of Bermuda. Principles of law relating to such matters as the validity of corporate procedures, the fiduciary duties of the Company's management, directors and controlling shareholders, and the rights of its shareholders are governed by Bermuda law and the Company's Memorandum of Association and Bye-Laws. Such principles of law may differ from those that would apply if the Company were incorporated in a jurisdiction in the United States. In addition, there is uncertainty as to whether the courts of Bermuda would enforce (i) judgments of United States courts obtained against the Company or its officers and directors resident in foreign countries predicated upon the civil liability provisions of the securities laws of the United States or any state or (ii) in original actions brought in Bermuda, liabilities against the Company or such persons predicated upon the securities laws of the United States or any state. Tax Considerations. Special U.S. tax rules apply to U.S. taxpayers who own stock in a "passive foreign investment company" (a "PFIC"). Although the Company believes that it will not become a PFIC, there is a risk that in the future it may become one. In such an event, a U.S. shareholder would be subject at his election either to (i) a current tax on undistributed earnings or (ii) a tax deferral charge on certain distributions and on gains from a sale of the Securities or Common Stock (which will be taxed as ordinary income). The Company expects that a significant portion of its worldwide income will not be subject to tax by the United States, Bermuda or by the countries from which it derives its income. However, the extent to which certain foreign jurisdictions may require the Company to pay tax or to make payments in lieu of tax cannot be determined in advance. See "-- Investment Company Act Considerations" and "Taxation." Shares Eligible for Future Sale. As of May 31, 1996, the Company had outstanding 10,000,000 shares of Common Stock and GTL Guarantee Warrants entitling the holders thereof, subject to vesting requirements, to purchase 4,185,318 additional shares of Common Stock. In addition, the existing partners of Globalstar will have the right, following the satisfaction of certain performance criteria by the Globalstar System and after at least two consecutive reported fiscal quarters of positive net income, to exchange their Ordinary Partnership Interests for an equal number of shares of Common Stock of the Company, subject to certain limitations on the amount of Ordinary Partnership Interests that may be so exchanged in any twelve-month period (the "Exchange Right"). This Exchange Right may be accelerated upon the occurrence of certain events, including a change of control of the Company. As of May 31, 1996, an aggregate of 250,000 shares of Common Stock were reserved for issuance under the Company's stock option plan. Sales of substantial amounts of Common Stock in the public market could adversely affect the market price of the Common Stock. The Company agreed to file, within 120 days after the Issue Date (as defined below), the 23 28 Registration Statement with the Commission covering the resale of the Securities and the Conversion Shares. See "-- Dilution." Volatility. The trading price of the Common Stock has been highly volatile, and the trading price for the Securities may also be highly volatile. Factors such as announcements of fluctuations in the Company's or its competitors' operating results and market conditions for growth stocks or technology stocks in general could have a significant impact on the future trading price of the Common Stock and the Securities. In particular, the trading price of the common stock of many technology companies has experienced extreme price and volume fluctuations, which have at times been unrelated to the operating performance of such companies whose stocks were affected. In addition, the trading price of the Common Stock and the Securities could be subject to significant fluctuations in response to variations in Globalstar's prospects and operating results which will in turn be affected by delays in the design, construction, deployment, customer acceptance and commercial operation of the Globalstar System, delays in obtaining service providers or regulatory approvals in particular countries, launch failures, general conditions in the telecommunications industry, regulation, international events, changes in interest rates and other factors. There can be no assurance that these factors will not have an adverse effect on the trading price of the Common Stock or the Securities. Dilution. Globalstar expects to fund its remaining capital requirement of approximately $828 million from a combination of sources, including the issuance of debt, projected Service Provider Payments, projected net service revenues from initial operations, anticipated payments from the sale of gateways and Globalstar Phones and placements of limited partnership interests with new and existing strategic investors. Globalstar may, subject to certain preemptive and approval rights of Globalstar's other partners, sell additional equity interests (either directly or through the issuance of warrants to purchase, or debt securities convertible into, partnership interests), diluting the indirect percentage ownership in Globalstar represented by the shares issuable upon conversion of the Securities. Issuing additional partnership interests to new or existing partners would dilute, pro rata, the percentage ownership in Globalstar of the other Globalstar partners. The issuance of additional partnership interests at prices lower than the Conversion Price would result in further dilution to the Company. The Company has issued the GTL Guarantee Warrants to purchase 4,185,318 shares of Common Stock of the Company. In connection with the issuance of the GTL Guarantee Warrants, Globalstar issued to the Company warrants to purchase 4,185,318 Ordinary Partnership Interests plus Additional Warrants to purchase 1,131,168 Ordinary Partnership Interests. In order to raise proceeds sufficient to exercise the Additional Warrants, GTL may be required to issue additional shares of Common Stock. Furthermore, Ordinary Partnership Interests in Globalstar are convertible, over a period of years following the Full Constellation Date and after at least two consecutive reported fiscal quarters of positive net income, into shares of Common Stock, subject to certain restrictions, on a one-for-one basis, subject to adjustment in certain events. RISKS RELATING TO THE SECURITIES Subordination of Securities. Although the Securities are not equity securities under applicable Bermuda law, the Securities are the substantial equivalent of convertible preferred stock. The Securities will be subordinated to all Debt Obligations with respect to the payments of interest and amounts distributable upon dissolution, liquidation or winding up of the Company. The Indenture (as defined herein) governing the Securities will not limit the amount of indebtedness or other obligations that the Company may incur. The Company may incur additional indebtedness in order to finance the completion of the Globalstar System. Such indebtedness in all likelihood will rank senior to the Securities. The Indenture does not provide the Holders with any rights to accelerate the payment of the Securities. See "-- Development Stage Company -- Additional Financing Requirements." In addition, because the Company is a holding company, the sole asset of which is its partnership interests in Globalstar, its obligations on the Securities will be structurally subordinate to all liabilities of Globalstar, including, without limitation (i) the distribution of Globalstar's Managing Partner's Allocation (the "Managing Partner's Allocation"); (ii) the Guarantee Fee or notes that may be issued to the partners of Globalstar in lieu of such Guarantee Fee; and (iii) certain distributions made to partners in respect of taxes 24 29 levied upon the operations of Globalstar. At March 31, 1996, Globalstar had approximately $62 million of outstanding indebtedness in the form of vendor financing. There can be no assurance that, in the event of a dissolution, liquidation, reorganization or winding up of the Company, the purchasers of Securities will receive any portion of their initial investment. Absence of Existing Market for the Securities. The Company does not intend to list the Securities on any national securities exchange or to seek the admission thereof for trading on any automated dealer quotation system. The Securities have been and may continue to be traded in the PORTAL market, the National Association of Securities Dealers' screen-based automated market for trading of securities eligible for resale under Rule 144A; however, no assurance can be given as to the liquidity of, or trading market for, the Securities. The Company has been advised by the Initial Purchasers that they are making and currently intend to continue to make a market in the Securities. However, the Initial Purchasers are not obligated to do so and any market-making activities with respect to the Securities may be discontinued at any time without notice. Notwithstanding the effectiveness of the Registration Statement of which this Prospectus is a part, no assurance can be given as to the liquidity of the trading market for the Securities. The liquidity of, and trading market for, the Securities also may be adversely affected by general declines in the market for similar securities. Such a decline may adversely affect such liquidity and trading markets independent of the financial performance of, and prospects for the Company. Dependence on Globalstar for Payments; Conflict of Interest. The Company will be dependent in large part upon the distributions on the Preferred Partnership Interests to service its cash payments on the Securities. The payment of the scheduled distribution from Globalstar to the Company corresponding to the interest payment due on the Securities and the redemption payments corresponding to the Provisional Redemption and Optional Redemption are at the sole discretion of Globalstar. To the extent that Globalstar defers payment on the Preferred Partnership Interests in order to finance the buildout of the Globalstar System or otherwise, the Company and Globalstar may be deemed to have a conflict of interest. In addition, Globalstar may defer any scheduled distribution with respect to interest payments on the Securities without compound interest or penalty. As a result, whether the Company makes any of these payments to Holders is primarily controlled by Globalstar. Interest Deferral; Payments in Common Stock. Interest payments on the Securities are subject to deferral by the Company without compound interest or penalty. The Holders will not have any rights to accelerate payment following such deferral and will only be entitled to certain voting rights described herein. See "Description of Securities--Voting Rights." If any scheduled distribution from Globalstar is made by delivery of Ordinary Partnership Interests, the Company may make the corresponding interest payment by delivering Common Stock or by selling Common Stock and using the proceeds from such sale to make such payment. There is no assurance that the liquidity of, or trading market for, the Common Stock will be sufficient to allow a Holder of Securities to fully realize the value of Common Stock received in payment therefor. See "Description of Securities -- Method of Payments." In addition, the Company may deliver Common Stock or sell Common Stock and use the proceeds from such sale to make a payment on the Securities, even if Globalstar has elected not to make the corresponding payment with respect thereto. To the extent that the Company sells Common Stock in such a manner, the interest of the Holders of the Securities in the Company and in Globalstar will be diluted. Dependence on Globalstar Capital Accounts for Cash Distributions to the Company. The amount of cash that Globalstar can pay to the Company in redemption of its Preferred Partnership Interests will be limited to the balance in the capital account maintained by Globalstar with respect to such Preferred Partnership Interests. Such capital account balance initially will equal the net proceeds of the Original Offering (approximately $300 million); subsequently, such capital account balance will be increased by the amount of adjusted income allocated to, and decreased by the amount of losses allocated and cash distributed to, the Company with respect to such Preferred Partnership Interests. Adjusted income for this purpose is computed by adding amortization and depreciation expense to profits and will include increases in the fair 25 30 market value of Globalstar's assets that will be recognized as income when partnership interests are issued or redeemed. Losses would be allocated to the Preferred Partnership Interests only after losses have first been allocated to reduce the capital accounts for all Ordinary Partnership Interests to zero. To the extent the aggregate cash distributions made by Globalstar to the Company with respect to the Preferred Partnership Interests plus the Original Offering expenses exceed the aggregate amount of adjusted income allocated to the Preferred Partnership Interests of the Company, the balance in the capital account will be less than the full amount of the redemption price for the Preferred Partnership Interests at the Mandatory Redemption Date. In such case, Globalstar will pay the excess of the redemption price over the balance in the capital account by issuing additional Ordinary Partnership Interests to the Company. To the extent the Company receives some or all of the redemption price of the Preferred Partnership Interests in Ordinary Partnership Interests, the Company will pay the redemption price of the Securities, to the extent in excess of cash received, by issuing shares of Common Stock to Holders of the Securities or by selling Common Stock and using the net proceeds therefrom to make such payment. Effect on Common Stock of Globalstar Liquidation. In the absence of sufficient Globalstar adjusted income, under certain circumstances involving a liquidation of Globalstar (including a disposition of all its assets), payments with respect to the Securities could exceed Globalstar's liquidating distributions with respect to the Preferred Partnership Interests and would then reduce the payment that otherwise would be made with respect to the Common Stock. In such event, the amount received by the holders of the Common Stock would be less than the amount that they would have otherwise received and would be less than the amount they would have received if they had owned Ordinary Partnership Interests in Globalstar directly. 26 31 GLOBALSTAR TELECOMMUNICATIONS LIMITED RATIO OF EARNINGS TO FIXED CHARGES(1) The ratio of earnings to fixed charges presented below should be read in conjunction with the Financial Statements and the notes thereto and "Management's Discussion and Analysis of Results of Operations and Financial Condition" found in the Company's Annual Report on Form 10-K for the year ended December 31, 1995 and the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 1996 (as amended by the Form 10-Q/A filed with the Commission on May 21, 1996) incorporated herein by reference.
YEAR ENDED THREE MONTHS DECEMBER 31, 1995 ENDED MARCH 31, 1996 ---------------------------------------------------------------------------- N/A 1x
- --------------- (1) The earnings of the Company available to cover fixed charges consist solely of dividends from Globalstar on the Redeemable Preferred Partnership Interests held by the Company. GLOBALSTAR, L.P. DEFICIENCY OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (In thousands) The deficiency of earnings to fixed charges and preferred stock dividends presented below should be read in conjunction with the Financial Statements and the notes thereto and "Management's Discussion and Analysis of Results of Operations and Financial Condition" found in the Company's Annual Report on Form 10-K for the year ended December 31, 1995 and the Company's Quarterly Report on Form 10-Q for the three months ended March 31, 1996 (as amended by the Form 10-Q/A filed with the Commission on May 21, 1996) incorporated herein by reference.
CUMULATIVE MARCH 23, 1994 MARCH 23, 1994 (COMMENCEMENT OF THREE MONTHS (COMMENCEMENT OF OPERATIONS) TO YEAR ENDED ENDED OPERATIONS) TO DECEMBER 31, 1994 DECEMBER 31, 1995 MARCH 31, 1996 MARCH 31, 1996 - ------------------ ------------------ ------------------ ------------------ $26,244 $68,237 $15,376 $109,857
USE OF PROCEEDS The Securities and the Conversion Shares offered by the Selling Holders are not being sold by the Company, and the Company will not receive any proceeds from the sale thereof. DIVIDEND POLICY Except for payment by the Company on the Securities and payment by Globalstar on the Preferred Partnership Interests, the Company and Globalstar do not currently anticipate paying any such dividends or distributions prior to Globalstar's Full Constellation Date and achievement of positive cash flow, which is not expected to occur until 1999. The Company is a holding company, the sole asset of which is its partnership interests in Globalstar; the Company has no independent means of generating revenues. Globalstar will pay the Company's operating expenses related to Globalstar; such expenses are not expected to be material. To the extent permitted by applicable law and agreements relating to indebtedness, Globalstar intends to distribute to its partners, including the Company, its net cash received from operations, less amounts required to repay outstanding indebtedness, pay distributions on the Preferred Partnership Interests, satisfy other liabilities and fund capital expenditures and contingencies (including funds required for design, construction and deployment of the second-generation satellite constellation). Cash distributions by Globalstar may be restricted by future debt covenants. The Company intends to promptly distribute as dividends to the holders of its Common Stock 27 32 the distributions made to it by Globalstar, less any amounts required to be retained for the payment of taxes, for repayment of any liabilities, including payments on the Securities, and to fund contingencies. See "Risk Factors -- Structural and Market Risks -- No Dividends; Holding Company Structure; General Partner Liability." REGULATION UNITED STATES FCC REGULATION On January 31, 1995, LQP was granted authority by the FCC to construct, launch and operate the Globalstar System in assigned bands of the radio frequency spectrum for the user links. The authorization was subsequently assigned to L/Q Licensee, Inc. The FCC is the United States agency with jurisdiction over commercial uses of the radio spectrum. All commercial MSS systems such as Globalstar must obtain an authorization from the FCC to construct and launch their satellites and to operate the satellites to provide MSS services in assigned spectrum segments in the United States. The FCC may also adopt rules from time to time applicable to MSS systems which may impose constraints on the operation of Globalstar satellites, subscriber terminals and/or gateway earth stations. In November 1994, LQP requested that the FCC grant it authority to construct, launch and operate the Globalstar System using four separate segments of the radio frequency spectrum. The four segments proposed for Globalstar MSS operations were: User links: 1610-1626.5 MHz (user-to-satellite) 2483.5-2500 MHz (satellite-to-user) Feeder links: 5025-5225 MHz (gateway-to-satellite) 6875-7075 MHz (satellite-to-gateway)
The FCC License grants authority to construct the Globalstar System capable of operating in the 1610-1626.5 MHz and 2483.5-2500 MHz bands, but authorizes launch and operation in the 1610-1621.35 MHz and 2483.5-2500 MHz bands, consistent with the United States band plan for MSS Above 1 GHz systems. While the FCC granted LQP authority to construct the system at its own risk using the requested feeder link bands, it deferred action on grant of launch and operation authority for specific feeder link assignments until after WRC '95. L/Q Licensee has filed an application requesting assignment of feeder links in the 5 GHz and 7GHz bands consistent with the international allocation for non-geostationary MSS feeder links in these bands adopted at WRC '95. As described below, the WRC '95 allocation for the feeder uplinks was different from the initial Globalstar proposal. Accordingly, L/Q Licensee has also filed a request for the FCC to modify its construction authority related to feeder links to conform to the WRC '95 allocation for MSS feeder links in the 5 GHz band. The authorization granted by the FCC to LQP for Globalstar requires that construction, launch and operation of the system must be accomplished in accordance with the technical specifications set forth in the Globalstar FCC application, as amended, and consistent with the FCC's rules unless specifically waived. During the process of constructing the Globalstar System, there may be certain modifications to the design set forth in the application on file with the FCC which may require filing an application to modify the authorization, such as the application for feeder link assignments. There can be no assurance that the FCC will grant these requests or do so in a timely manner. Denial of such requests or delay in grant of such requests could adversely affect the performance of the Globalstar System or result in schedule delays or cost increases. LQP's MSS application was one of six considered concurrently by the FCC. On January 31, 1995, Motorola and TRW also were granted FCC licenses for MSS above 1 GHz systems. The applications of three other applicants were deferred, and these three applicants were given until January 1996 to establish that they are financially qualified to receive an MSS license. In January 1996, at the request of two of the deferred applicants, the FCC granted an extension of the deadline for demonstrating such financial qualification for all three deferred applicants. The FCC License only authorizes the construction, launch and operation of the Globalstar System's satellite constellation. Separate authorizations must be obtained from the FCC for operation of gateways and 28 33 Globalstar Phones in the United States. Globalstar's authorized United States service provider, AirTouch, will apply for the required regulatory authorizations for operation of gateways and Globalstar Phones, and the manufacturer will apply for equipment authorization for Globalstar Phones. Failure to obtain, or delay in obtaining, such licenses and authorizations would adversely affect the implementation of the Globalstar System. Similar procedures are expected to apply internationally. Globalstar proposes to operate on an international basis, but the FCC License only authorizes construction and launch of the system for operation in the United States. Even though the Globalstar System is licensed to operate in the United States by the FCC, in order to provide MSS service in other countries, Globalstar or its service providers must obtain the required regulatory authorizations in those countries. There can be no assurance that the required regulatory authorizations will be obtained in any other country in which Globalstar proposes to operate, or that they will be obtained in a timely manner, or that, if granted, they will authorize MSS service on the same terms as the U.S. license. Failure or delay in obtaining licenses for the Globalstar System in other countries or grant of licenses on substantially different terms and conditions would have an adverse effect on Globalstar. User links. "User link" refers to frequencies used for links between the satellites and Globalstar Phones. The Globalstar System has been licensed to operate with its user uplinks (earth-to-satellite) in the 1610-1621.35 segment of the 1610-1626.5 MHz band and with its user downlinks (satellite-to-earth) in the 2483.5-2500 MHz band. The 1610-1626.5 MHz and 2483.5-2500 MHz bands have been allocated in both the United States and internationally for MSS user links. These two frequency bands are also allocated in the United States for the Radio-Determination Satellite Service ("RDSS") on a co-primary basis with MSS systems. RDSS is a service which provides radio location through one or more satellites. Co-primary status requires systems in the relevant services to coordinate operations as specified by the FCC. "Coordination" generally refers to development of operational standards which allow two or more transmitting radio frequency stations to share the same frequency band so that neither causes or is subject to interfering emissions greater than a specified permissible level. The 1610-1626.5 MHz band is also allocated in the United States on a co-primary basis with MSS for the Aeronautical Radio-Navigation Service ("ARNS"), and the 1610.6-1613.8 MHz segment is also allocated on a co-primary basis with MSS for the Radio-Astronomy Service ("RAS"). ARNS is a radio- navigation service intended for the benefit and for the safe operation of aircraft. RAS involves reception of radio waves of cosmic origin. Operation of Globalstar user links for MSS in the United States will be constrained to the extent that the FCC requires L/Q Licensee to coordinate its operations with and to provide interference protection for authorized systems in the RDSS, RAS or ARNS services in these bands. "Interference protection" refers to protection for a radio frequency receiver and is generally stated as a ratio, usually expressed in decibels, at the receiver input determined under specified conditions such that a specified reception quality of the wanted (or desired) signal is achieved at the receiver input. The FCC recently concluded that the Russian Glonass system is unlikely to be used for ARNS in the United States prior to the year 2005 when Glonass is scheduled to operate outside Russia only below 1605 MHz. There is now a petition for reconsideration of this decision pending at the FCC, which requests the FCC to require MSS Above 1 GHz systems to protect Glonass operations above 1605 MHz through 2005. Moreover, the aviation community is seeking stringent protection levels for Glonass operations below 1605 MHz. There can be no assurance that the FCC would not impose requirements for protection of Glonass operations below or above 1605 MHz which may adversely effect the usefulness of a segment of the 1610-1626.5 MHz band for Globalstar user links. As a CDMA system, Globalstar must coordinate its operations in the United States with other licensed Big LEO CDMA systems and the TDMA system. The FCC's band plan provides that up to four CDMA systems may be licensed to operate in the 1610-1621.35 MHz and 2483.5-2500 MHz bands, but the FCC did not adopt specific guidelines for coordination among CDMA systems. There may be an adverse effect on the implementation of the Globalstar System as a result of this intersystem coordination process, depending upon the number of CDMA systems with which it must coordinate operations, their relative stages of development and readiness to coordinate, and their willingness to coordinate in good faith and in a timely 29 34 manner. While the FCC has stated that authorized CDMA systems may request relief at the FCC in the event that this CDMA coordination process is delayed, there can be no assurance that, if LQP sought such relief, the FCC would take favorable action or that it would act in a timely manner. The FCC has also encouraged the CDMA Big LEO systems to coordinate operations with the TDMA system to resolve any potential interference issues. Again, there can be no assurance that such intersystem coordination would not have an adverse effect on Globalstar operations. Feeder links. "Feeder link" refers to frequencies used for links between the satellites and gateway earth stations. The feeder links in which Globalstar applied to operate in November 1994 consist of the 5025-5225 MHz band for feeder uplinks and the 6875-7075 MHz band for feeder downlinks. L/Q Licensee has been granted conditional authorization to construct the Globalstar System with these feeder link frequencies at its own risk. In March 1996, L/Q Licensee submitted a modification application to the FCC, requesting that it be assigned the 5091-5250 MHz and 6875-7055 MHz bands for use as feeder links for the Globalstar System to conform to action taken at WRC '95. At WRC '95, the ITU adopted modifications to the International Table of Frequency Allocations to allocate the 5091-5250 MHz band (earth-to-space) and 6875-7075 MHz (space-to-earth) for non-geostationary MSS feeder links. Generally, in order to adopt an allocation into the U.S. Table of Frequency Allocations, the FCC initiates a notice-and-comment rulemaking proceeding. The FCC has not yet initiated such a proceeding to adopt the WRC '95 MSS feeder link allocations for the United States. There can be no assurance that the FCC will initiate and complete such a rulemaking on a timely basis, or that the U.S. allocation would be identical to the international allocation. Although Globalstar has requested a waiver of the U.S. Table to expedite the FCC's assignment of its feeder links, there can be no assurance that an unconditional assignment would be made before the conclusion of such a rulemaking proceeding. There can also be no assurance that third parties would not object to the allocation and/or the proposed feeder link assignment to Globalstar. In April 1996, the FCC initiated a notice-and-comment rulemaking to adopt rules which would make available 350 MHz in the 5 GHz band, including 5150-5250 MHz, for use by unlicensed devices for wireless high speed data services. In 1995, LQP opposed the petitions for rulemaking which sought promulgation of such rules on the grounds that the proposals were inconsistent with the U.S. recommendations for the 5000-5250 MHz band at WRC '95 and that the petitioners had not demonstrated the feasibility of sharing with MSS feeder links or the need for the bandwidth requested. In its rulemaking notice, the FCC has proposed rules which are designed to ensure that these devices do not cause harmful interference into licensed services using these bands, such as MSS feeder links. However, there can be no assurance that adoption of the rules proposed by the FCC, as they may be modified during the rulemaking process, would not have an adverse effect on the timing or the adoption in the United States of the WRC '95 allocation for MSS feeder links or on the usefulness of these bands for MSS feeder links. The 5000-5250 MHz band, which includes Globalstar's proposed feeder uplinks, is allocated on an international basis and in the United States for ARNS. Use of the 5 GHz band for MSS feeder links may be subject to stringent interference protection criteria and coordination requirements with ARNS systems. The 6875-7075 MHz band is allocated on a co-primary basis in the United States to Fixed-Satellite Service uplinks and to terrestrial fixed and mobile microwave systems, with which Globalstar may also be required to coordinate. Such coordination requirements may adversely affect the usefulness of these bands for MSS feeder links. Although both Motorola and TRW have requested feeder links in the 20/30 GHz band, other U.S. Big LEO systems have requested feeder links in the same bands as Globalstar. If such systems are licensed and are assigned feeder links in the same bands as Globalstar, Globalstar would be required to coordinate its use of the feeder links with such systems. Such inter-system coordination may adversely affect the usefulness of these bands for Globalstar feeder links. In May 1996, the FCC initiated a notice-and-comment rulemaking to adopt rules governing procedures to authorize service in the United States by satellite systems licensed by foreign countries. If a foreign satellite system was authorized to operate in the United States on the frequencies assigned as Globalstar user links or feeder links, additional coordination obligations may be imposed upon the Globalstar System. 30 35 In its order adopting rules and policies for MSS above 1 GHz (the "Order"), the FCC stated that an MSS above 1 GHz license would impose implementation milestones on licensed systems. If these milestones are not met, the FCC has stated that the license would be deemed null and void. Globalstar's current estimated implementation schedule falls within the milestones adopted by the FCC. However, the milestone schedule does not become effective until Globalstar is granted an unconditional authorization which includes feeder link frequencies. Delays in construction, launch or commencing operations of the Globalstar System could result in loss of the FCC License. The FCC License will be effective for 10 years from the date on which the licensee certifies to the FCC that its initial satellite has been successfully placed into orbit and that the operations of that satellite conform to the terms and conditions of its MSS license. While a licensee may apply to replace its MSS license to continue operations beyond the initial 10-year license term, there can be no assurance that, if applied for, such a replacement license would be granted. The rules and policies adopted for MSS above 1 GHz in the Order have been challenged in a judicial appeal and were the subject of petitions for reconsiderations at the FCC. On February 15, 1996, the FCC released an order resolving petitions for reconsideration of the Order. Three petitions seeking further reconsideration or clarification of this order have been filed. Judicial appeals regarding the FCC's decisions on the petitions for reconsideration may also be filed. In the event that the FCC were to be judicially required to reconsider its licensing procedures as a result of the pending judicial appeal, or an appeal of the orders on reconsideration, there is a risk that the FCC would reprocess the MSS applicants and adopt a different licensing procedure. Under these circumstances, there can be no assurance that the FCC would not use an auction procedure to award licenses. If the FCC were to use an auction procedure, there can be no assurance that L/Q Licensee would be willing or able to outbid other applicants to obtain a license for the spectrum needed to operate the Globalstar System. In addition, even if L/Q Licensee were successful in obtaining an MSS license in the spectrum auction, the increased cost and expenses incurred in bidding for the license would adversely affect Globalstar. Applicable statutes and regulations permit a judicial appeal of the grant of the FCC License in order to seek reversal of the FCC's decision to grant the license. Petitions for reconsideration and an application for review of the grant of the FCC License to Globalstar were filed and remain pending. A judicial appeal of the order resolving these petitions and application is possible. There can be no assurance that such appeals will not be filed, or, if filed, that such appeals will not be granted. Furthermore, there can be no assurance that if such appeals are filed, the court will take timely action. If such an appeal were successful, there can be no assurance that on remand the FCC would not decide to deny L/Q Licensee's application, or that on remand the FCC would take action on L/Q Licensee's application in a timely manner. UNITED STATES INTERNATIONAL TRAFFIC IN ARMS REGULATIONS The United States International Traffic in Arms Regulations under the United States Arms Export Control Act authorize the President of the United States to control the export and import of articles and services that can be used in the production of arms. Among other things, these regulations limit the ability to export certain articles and related technical data to certain nations. The scope of these regulations is very broad and extends to certain spacecraft, including certain satellites. Certain information involved in the performance of Globalstar's operations will fall within the scope of these regulations. As a result, Globalstar may not be able to make such information available to some investors or may have to restrict access to that information. EXPORT REGULATION From time to time, Globalstar requires import licenses and general destination export licenses to receive and deliver components of the Globalstar System. The United States Department of Commerce has imposed restrictions on certain transfer of technology, including rocket technology, to China and certain republics of the former Soviet Union. Because Globalstar's launch strategy contemplates using Chinese and Ukrainian launch providers with launch sites located in China and Kazakhstan, special export licenses are required to be obtained by SS/L in connection with these launches. 31 36 While Globalstar and SS/L have received informal confirmations from various governmental officials that all necessary permits should be forthcoming, and Globalstar has no reason to believe such permits will not be obtained, there can be no assurance that such export licenses will be granted, or, once granted, that the United States will not impose additional restrictions or trade sanctions against China or republics of the former Soviet Union in the future that would adversely affect the planned launches of the Globalstar satellite constellation. The Export Administration Act and the regulations thereunder control the export and re-export of United States-origin technology and commodities capable of both civilian and military applications (so-called "dual use" items). These regulations may prohibit or limit export and re-export of certain telecommunications equipment and related technology which are not affected by the International Traffic in Arms Regulations by requiring a license from the Department of Commerce before controlled items may be exported or re-exported to certain destinations. Although these regulations should not affect Globalstar's ability to deploy the satellite constellation, the export or re-export of Globalstar Phones, as well as gateways and related equipment and technical data, may be subject to these regulations, if such equipment is manufactured in the United States and then exported or re-exported. These regulations may also affect the export, from one country outside the United States to another, of United States-origin technical data or the direct products of such technical data. As a result, Globalstar may not be able to ensure the unrestricted availability of such equipment or technical data to certain customers and suppliers. The Company does not believe that these regulations will have a material adverse effect on Globalstar's operations. PRINCIPAL PARTNERS OF GLOBALSTAR The following table sets forth, as of May 31, 1996, certain information regarding the beneficial ownership of ordinary partnership interests in Globalstar. Globalstar has been involved in ongoing discussions with certain potential strategic partners and other strategic investors regarding transactions involving, among other things, possible investments in Globalstar Ordinary Partnership Interests. GLOBALSTAR, L.P.(1)
INTEREST PARTNERSHIP INTERESTS PERCENTAGE -------------------------------------------------------- --------------------- ---------- Loral SpaceCom(2)....................................... 17,412,783 35.8% Public Stockholders of GTL(3)........................... 11,517,907 22.9 Qualcomm................................................ 3,726,000 7.9 Vodafone................................................ 3,540,000 7.5 AirTouch................................................ 3,000,000 6.4 Finmeccanica............................................ 2,800,000 6.0 Hyundai(4).............................................. 2,400,000 5.1 Alcatel(5).............................................. 2,190,000 4.7 DASA(6)................................................. 1,720,000 3.7 France Telecom(7)....................................... 1,530,000 3.2 SS/L(8)................................................. 1,332,540 2.8 Dacom(9)................................................ 600,000 1.3
- --------------- (1) Includes impact of the conversion of the Securities and Preferred Partnership Interests issuable in connection therewith and excludes the issuance of the GTL Guarantee Warrants and the Additional Warrants, as such warrants are not exercisable within 60 days. Beneficial ownership of partnership interests has been calculated pursuant to Regulation 13d-3 under the Securities Exchange Act of 1934, as amended, which provides that: "Any securities not outstanding which are subject to such options, warrants, rights or conversion privileges shall be deemed to be outstanding for the purpose of computing the percentage of outstanding securities of the class owned by such person but shall not be deemed to be outstanding for the purpose of computing the percentage of the class by any other person." (2) Of the amount held by Loral SpaceCom (i) 2,000,000 partnership interests represent Loral SpaceCom's allocable share of the 3,000,000 partnership interests held by Loral/DASA Globalstar, L.P., a joint venture between Loral SpaceCom and DASA which is 66.7% owned by Loral SpaceCom and 33.3% owned by DASA, (ii) 647,460 partnership interests represent Loral SpaceCom's indirect interest in 1,980,000 partnership interests held by SS/L, (iii) 1,674,400 partnership interests represent Loral SpaceCom's holdings of Common Stock of the Company, without giving effect to the grant by Loral SpaceCom to certain of its executive 32 37 officers and directors of options to acquire an aggregate of 340,000 shares of Common Stock (none of such options have yet been exercised) and (iv) 1,576,923 partnership interests represent the conversion of the Securities and Preferred Partnership Interests. (3) Includes 3,192,307 partnership interests which represent the conversion of the Securities and Preferred Partnership Interests. Does not include partnership interests attributed to Loral SpaceCom described in note (2)(iii) and (iv) above. (4) Represents Hyundai's allocable share of the 3,000,000 partnership interests held by Hyundai/Dacom, a joint venture which is 80% owned by Hyundai and 20% owned by Dacom. (5) Of the amount held by Alcatel, 1,470,000 partnership interests represent Alcatel's allocable share of the 3,000,000 partnership interests held by TESAM, which is 51% owned by France Telecom and 49% owned by Alcatel. (6) Of the amount held by DASA, 1,000,000 partnership interests represent DASA's allocable share of the 3,000,000 partnership interests held by Loral/DASA Globalstar, L.P. (7) Represents France Telecom's allocable share of the 3,000,000 partnership interests held by TESAM. (8) Excludes 647,460 partnership interests attributable to Loral's 32.7% interest in SS/L. (9) Represents Dacom's allocable share of the 3,000,000 partnership interests held by Hyundai/Dacom. GOVERNANCE OF GLOBALSTAR The following discussion summarizes certain provisions of the Globalstar partnership agreement. This summary is qualified in its entirety by reference to the Globalstar partnership agreement, a copy of which has been filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1995 which is incorporated by reference into this Prospectus. GENERAL PARTNERS' COMMITTEE Globalstar has two general partners, LQSS and GTL. LQSS is the managing general partner of Globalstar. Globalstar is governed by the Globalstar General Partners' Committee (the "Committee" or the "General Partners' Committee"), consisting of four members who are appointed by LQSS and two members not affiliated with the Company. The day-to-day activities of Globalstar are managed by its officers, subject to the supervision of the Committee. However, LQSS has agreed that certain material partnership decisions will not be put to a vote of the partners as described below without the consent of at least one of the Independent Representatives on the Committee. See "-- Certain Actions." In addition, personnel decisions involving Globalstar officers of the rank of senior vice president or above cannot be made without the approval of at least one of the Independent Representatives, provided that LQSS retains the right to appoint provisional candidates and, under certain circumstances, may override the veto of the Independent Representatives. GTL directors not affiliated with Loral SpaceCom, including the Independent Representatives, will determine the vote of Ordinary Partnership Interests held by GTL in votes submitted to the partners in Globalstar as to the approval or disapproval of the financial terms and conditions of material transactions between Globalstar and the Loral SpaceCom or any of its affiliates (or which are deemed to be transactions in which the Loral SpaceCom is an interested party pursuant to the Globalstar partnership agreement). In addition, Globalstar has agreed with GTL that for so long as GTL remains a general partner of Globalstar, Globalstar will not issue more than 5,000,000 additional partnership interests without either the consent of at least one of GTL's Independent Representatives or the vote of a majority in interest of the Globalstar partners. The Independent Representatives will determine the vote of Globalstar partnership interests held by GTL with respect to any such vote submitted to the partners. Loral SpaceCom through its majority representation on the Board of Directors of GTL controls GTL's votes in all other matters. Matters relating to the FCC License for the Globalstar System, including compliance and other regulatory matters related thereto, will be under the exclusive control of L/Q Licensee. L/Q Licensee has agreed to use such license exclusively for the benefit of Globalstar. Actions by the Committee may be taken only with the concurrence of a majority of the members whether present in person at a meeting or by written consent. Written notice of all proposed Committee action will be given to all members prior to the taking of any such action, unless notice has been waived by any such member. The Committee may delegate any or all of its powers to officers of Globalstar except for transactions involving amounts in excess of $100,000 other than transactions taken in the ordinary course of business or actions taken to implement any business plan previously approved by the Committee. 33 38 CERTAIN ACTIONS The Committee will not take any action that would result in Globalstar being engaged in a business other than the development and operation of the Globalstar System without the prior written consent of all the partners of Globalstar. Certain decisions by the Committee not to construct and launch satellites in addition to the satellites for the 48-satellite constellation and the eight spare satellites will be subject to the approval by a majority in interest of the partners if such construction and launch could be made without additional contributions from the partners and satisfy certain thresholds relating to rates of return on investment. In addition, Globalstar will not, absent the consent of the affected partner, enter into any agreements with any persons that would conflict with or prejudice in any material respects the rights of such partner under either the Globalstar partnership agreement or any agreement entered into between such partner or its affiliate and Globalstar. The Committee may also not undertake the following actions unless it shall have first received the consent of a majority of votes cast at a meeting at which only those Globalstar partners without a financial interest, whether direct or indirect, in such transaction would be qualified to vote, where each Ordinary Partnership Interest would equal one vote and a majority of the qualified Ordinary Partnership Interests outstanding would constitute a quorum ("Consent of the Disinterested Partners"): (i) Enter into any agreements involving amounts in excess of $1,000,000 with any partner, any strategic partner (including any direct or indirect corporate parent of any such partner or strategic partner), any Alliance Partner or any of their respective affiliates; (ii) Enter into loans by a general partner or its affiliate to Globalstar; and (iii) Consent to a limited partner acquiring more than 20% of Globalstar's outstanding partnership interests. The following actions may not be undertaken by the Committee unless it shall have first received the consent described below and, in the case of the items described in clauses (i) through (iv), will not be put to a vote of the partners without the consent of at least one of the Independent Representatives: (i) Make any material amendments to the Globalstar partnership agreement or adopt any business plan that would materially change Globalstar's business purpose; (ii) Acquire either a controlling interest in, or a majority of the voting stock or equity of, any corporation or other entity, or assets not in the ordinary course of business, in either case if the aggregate fair market value is greater than $10 million; (iii) Sell, lease, exchange or dispose of Globalstar's material assets (other than to an entity controlled by Globalstar); (iv) Cause or permit the dissolution and/or liquidation of Globalstar or file bankruptcy proceedings or consent to such filing; (v) Adopt any increase in capital expenditures or operating expenses of more than 10% of the amount set forth in Globalstar's business plan dated March 1994 (or any revised business plan as approved by a majority in interest of the partners) and any subsequent increases in such expenditures or expenses (except as required to account for increases in the Consumer Price Index); (vi) Commence any litigation or arbitration, or settle any pending or threatened litigation, by or against Globalstar, if the damages sought are in excess of $100,000 or if such litigation or arbitration is against, or names as an adverse party, a partner; (vii) Adopt any modification to the specification of the Globalstar System that would change any major parameter by more than 10% or otherwise result in a material adverse effect on any service provider; (viii) Enter into any material business outside the scope of the partnership agreement; (ix) Undertake material commitments with respect to Globalstar's launch strategy, provided that Globalstar may nevertheless undertake material commitments with respect to its launch strategy absent 34 39 such consent if Globalstar undertakes a detailed review of such strategy and submits a written report of its analysis to the partners; (x) Appoint a successor to the office of President of Globalstar; (xi) Issue any equity interests other than partnership interests or issue or reserve for issuance more than 8,198,837 additional partnership interests plus the partnership interests issuable in connection with the Original Offering and the GTL Guarantee Warrants and the Additional Warrants; and (xii) Incur any indebtedness, including certain sale and leaseback transactions, if immediately after the incurrence thereof Globalstar's outstanding indebtedness would exceed 110% of the maximum amount of debt obligations contemplated by the then-current Globalstar business plan. See "Risk Factors -- Risks Relating to Securities -- Effect on Common Stock of Globalstar Liquidation." In order to take the actions described above, Globalstar must receive the consent of a majority of votes cast at a meeting of Globalstar partners where each Ordinary Partnership Interest would equal one vote and a majority of the Ordinary Partnership Interests outstanding would constitute a quorum for the meeting provided that there has been no veto by partners casting 9,000,000 or more qualifying votes. All Ordinary Partnership Interests held on behalf of a partner may cast one qualifying vote, provided that no more than 6,000,000 qualifying votes may be cast on behalf of any single partner regardless of the total number of Ordinary Partnership Interests held, and, provided further, that no more than 3,000,000 qualifying votes may be cast on behalf of GTL in respect of Ordinary Partnership Interests acquired using the proceeds from GTL's initial public offering or pursuant to the exercise of a partner's Exchange Right ("Consent of the Partners"). For purposes solely of determining the number of qualifying votes LQSS or a limited partner may cast against an action as described above, a partner will be deemed to continue to own the number of Ordinary Partnership Interests equal to the shares of Common Stock acquired by such partner pursuant to the Exchange Rights and which have not been disposed of. Except as otherwise described above, each partner has the right to cast one vote for each Ordinary Partnership Interest held by such partner with respect to the matters set forth above and for which it is qualified to vote. GTL, together with the limited partners not affiliated with Loral SpaceCom, hold more than 50% of Globalstar's outstanding Ordinary Partnership Interests. LQSS will cast its vote with respect to the above matters in accordance with the instructions of its partners, weighted to reflect the amount of partnership interests held by such partners in LQSS. LQSS will cast against any proposal the number of votes equal to the amount of Ordinary Partnership Interests held by it in Globalstar multiplied by the total percentage interests in LQSS held by all of its partners who oppose the proposal. The number of votes equal in amount to the remainder of LQSS's Ordinary Partnership Interests in Globalstar will be cast in favor of any such proposal. The Preferred Partnership Interests have no voting rights, other than as may be required by law. Each partner has agreed not to acquire any direct or indirect interest in any MSS applicant other than Globalstar until after the third anniversary of the In-Service Date, although each reserves the right, on behalf of itself and its affiliates, to conduct other business activities. Under certain circumstances, this restriction may not apply. COUNCIL OF SERVICE OPERATORS Globalstar has established a Council of Service Operators (the "Council of Service Operators" or "CSO"), made up initially of the chief executive officer of Globalstar, two representatives appointed by the Committee, two representatives appointed by each of the limited partners (other than Finmeccanica) who have committed to act, whether directly or indirectly, as service providers of Globalstar service and one representative appointed by Finmeccanica. Thereafter, the Committee may nominate three representatives of service providers not otherwise represented on the CSO, subject to approval by a majority of the members of the CSO. In addition, any new service provider who has irrevocably committed to make a capital commitment of $37.5 million to Globalstar will also be allowed to designate two representatives to the CSO. The role of the CSO is to give advice to the Committee regarding the practical implementation of the Globalstar System, thereby allowing the service providers a voice in the design and operation of Globalstar. Globalstar believes 35 40 that this arrangement benefits both Globalstar and the service providers. Globalstar will benefit from the service providers' expertise and practical on-the-ground knowledge while at the same time giving the service providers an active role in the design and coordination of the system that they will ultimately be using. The CSO will make recommendations to the Committee on matters such as tariffs, system architecture for the Globalstar System, capacity allocation among Globalstar service providers and administration of the Qualcomm agreement and the SS/L agreement. The Committee has agreed to consider in good faith any recommendations made by the CSO. In certain cases where the interests of the service providers and Globalstar are not adverse to each other, as determined by the Committee, or where the Company or its affiliate is the service provider in question, as made by those members who are not affiliated with the Company, the recommendations made by the CSO will be binding on Globalstar. INDEMNIFICATION AND FIDUCIARY STANDARDS Globalstar has agreed to indemnify its partners, the partners in LQSS and LQP, their respective affiliates and all of their respective officers, directors, partners, controlling shareholders, employees, and agents (each an "Indemnitee") from and against any and all losses and liabilities arising out of or incidental to the business of Globalstar so long as such Indemnitee's conduct did not constitute actual fraud, gross negligence, knowing breach of specific provisions of the Globalstar partnership agreement or willful or wanton misconduct. The Globalstar partnership agreement further provides that LQSS, GTL, the partners in LQSS and LQP, their respective affiliates and all of their respective officers, directors, partners, controlling shareholders, employees and agents (each a "General Partner Person") will not be liable to Globalstar or the limited partners for any losses sustained or liabilities incurred as a result of any act or omission of a General Partner Person, if such person or entity acted in good faith and in a manner it or he reasonably believed to be in, or not opposed to, the best interest of Globalstar and the conduct did not constitute gross negligence or non-performance. LQSS and GTL, as applicable, will indemnify the limited partners for losses and liabilities resulting from conduct of their respective General Partner Person that is found to have constituted bad faith, gross negligence or non-performance. PREFERRED PARTNERSHIP INTERESTS The Company will purchase at a purchase price equal to the net proceeds of the offering, 4,769,230 Preferred Partnership Interests. The Preferred Partnership Interests have generally similar terms and conditions to the Securities, except that they are not subject to any registration rights, will be subordinate, not just to the debt obligations of Globalstar, but to all existing and future liabilities of Globalstar, and cash distributions thereon will be limited to the amount of the partnership capital accounts that are maintained for such interests and that reflect a preferred allocation of Globalstar profit to such accounts. Preferred distributions equal to the aggregate amount of interest payable by the Company in respect of the Securities are payable, if as and when declared by the Globalstar General Partners' Committee, to the Company by Globalstar in respect of the Preferred Partnership Interests, which declaration shall be made no later than 20 business days before each Interest Payment Date. All payments due on the Preferred Partnership Interests, may be made (i) in cash, (ii) by delivery of Ordinary Partnership Interests to the Company or (iii) any combination of the foregoing. The partnership agreement provides that upon any optional conversion of Securities into Common Stock, the Company will convert a proportionate amount of Preferred Partnership Interests into Ordinary Partnership Interests. The Preferred Partnership Interests held by the Company have redemption provisions substantially similar to the Provisional Redemption, Optional Redemption and Mandatory Redemption provisions described under "Description of the Securities." ALLOCATIONS AND DISTRIBUTIONS Allocations. Adjusted income will be allocated first to the Preferred Partnership Interests (after the Managing Partner's Allocation and any allocation necessary to bring all partners' capital accounts up to zero) to bring their capital account to an amount equal to the principal amount of the Securities and unpaid distributions on the Preferred Partnership Interests. Adjusted income for this purpose is computed by adding amortization and depreciation expenses to profits and will include increases in the fair market value of 36 41 Globalstar's assets that will be recognized as income when partnership interests are issued or redeemed. The preferred allocation will be increased by the amount of the U.S. regular and branch profits taxes that are imposed at a rate of approximately 60% on the Company's U.S. source income. Losses will be allocated to the Ordinary Partnership Interests until the capital accounts for such interests have been reduced to zero. Thereafter losses will be allocated to the Preferred Partnership Interests until their capital accounts have been reduced to zero and then to the general partners. The Company expects that U.S. source income will be a minor portion of its total profit allocation. Distributions. Globalstar intends to distribute to its partners, including the Company, its net cash received from operations, less amounts required to repay outstanding indebtedness, satisfy other liabilities and fund capital expenditures and contingencies. Distributions after the distribution of the Managing Partner's Allocation and the Preferred Partnership Interests will generally be made in accordance with the partners' percentage interests in Globalstar. Distributions on liquidation will be made in accordance with capital account balances. Dependence on Globalstar Capital Accounts. The amount of cash that Globalstar can pay to the Company in redemption of its Preferred Partnership Interests will be limited to the balance in the capital account maintained by Globalstar with respect to such Preferred Partnership Interests. Such capital account balance initially will equal the net proceeds of the Original Offering (approximately $300 million); subsequently, such capital account balance will be increased by the amount of adjusted income allocated to, and decreased by the amount of losses allocated and cash distributed to, the Company with respect to such Preferred Partnership Interests. Adjusted income for this purpose is computed by adding amortization and depreciation expense to profits and will include increases in the fair market value of Globalstar's assets that would be recognized as income when partnership interests are issued or redeemed. Losses would be allocated to the Preferred Partnership Interests only after losses have first been allocated to reduce the capital accounts for all Ordinary Partnership Interests to zero. To the extent the aggregate cash distributions made by Globalstar to the Company with respect to the Preferred Partnership Interests plus the Offering expenses plus the amount of losses allocated to such interests exceed the aggregate amount of adjusted income allocated to the Company with respect to the Preferred Partnership Interests, the balance in the capital account will be less than the full amount of the redemption price for the Preferred Partnership Interests at the Mandatory Redemption Date. In such case, Globalstar will pay the excess of the redemption price over the balance in the capital account by issuing additional Ordinary Partnership Interests to the Company. Based upon the current trading value of the Company, the Company expects that the capital accounts for the Ordinary Partnership Interests, after giving effect to the Offering, would be in excess of $2 billion and the capital accounts for the Preferred Partnership Interests would be eroded by losses only if future losses exceeded such amount. In computing capital accounts, Globalstar's profits and losses are computed in accordance with the principles of the United States Treasury Regulations governing the valid allocation of taxable income and loss for U.S. tax purposes. The Treasury Regulations differ from generally accepted accounting principles in several ways, including permitting increases (or decreases) in the book value of partnership assets to reflect their fair market value upon the issuance or redemption of a partnership interest. Under the Globalstar partnership agreement and the Treasury Regulations, increases or decreases in the book value of Globalstar assets (which should reflect changes in the market value of the Company's stock and Securities) will be treated as an item of profit or loss to be allocated to the capital accounts of the Globalstar partners. To the extent the Company receives some or all of the redemption price of the Preferred Partnership Interests in Ordinary Partnership Interests, the Company will pay the redemption price of the Securities, to the extent in excess of the cash received, by issuing shares of Common Stock to Holders of the Securities or by selling Common Stock and using the net proceeds therefrom to make such payment. Effect on Common Stock of Globalstar Liquidation. In the absence of sufficient Globalstar adjusted income, under certain circumstances involving a liquidation of Globalstar (including a disposition of all its 37 42 assets), payments with respect to the Securities could exceed Globalstar's liquidating distributions with respect to the Preferred Partnership Interests and would then reduce the payment that otherwise would be made with respect to the Common Stock. In such event, the amount received by the holders of the Common Stock would be less than the amount that they would have otherwise received and would be less than the amount they would have received if they had owned Ordinary Partnership Interests in Globalstar directly. DISSOLUTION OF GLOBALSTAR Globalstar will continue until December 31, 2044, unless sooner dissolved upon the occurrence of any of the following: (i) the withdrawal of a general partner, or any other event that results in its ceasing to be a general partner (i.e., removal, bankruptcy or dissolution) unless at the time LQSS or a successor to LQSS remains a general partner; (ii) a sale of all or substantially all of the assets of Globalstar; (iii) the bankruptcy or the dissolution of LQSS or any successor managing general partner; (iv) upon the Consent of the Partners; or (v) any other event under Delaware law that would cause its dissolution. Globalstar will be reconstituted if a majority in interest of the partners (or remaining partners, in the event of a dissolution resulting from the withdrawal, bankruptcy or dissolution of LQSS or any successor managing general partner) vote to form a new partnership and, in the case of a dissolution resulting from the withdrawal, bankruptcy or dissolution of LQSS or any successor managing general partner, to appoint a successor managing general partner. ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS Additional Ordinary Partnership Interests may be offered by Globalstar from time to time as determined by the Committee, but no additional partner will be admitted without the Consent of the Partners. Such consent to the admittance of an additional partner, however, will not be unreasonably withheld. Issuances of partnership interests are, however, subject to preemptive rights by the partners except for issuances of partnership interests in connection with the execution of a service provider agreement or in connection with an underwritten public offering. Any issuance of partnership interests at a price below the price per partnership interest paid by Globalstar's strategic partners at the March 23, 1994 closing, or resulting in the issuance of more than 8,198,837 additional partnership interests plus the partnership interest issuable in connection with the conversion of the Preferred Partnership Interests, the GTL Guarantee Warrants and the Additional Warrants, will be subject to the Consent of the Partners. In addition, Globalstar has agreed with GTL that for so long as GTL remains a general partner of Globalstar, Globalstar will not issue more than 5,000,000 additional partnership interests without either the consent of at least one of GTL's Independent Representatives or the vote of a majority in interest of the Globalstar partners. The Independent Representatives will determine the vote of Ordinary Partnership Interests held by GTL with respect to any such vote submitted to the partners. LIMITATIONS OF TRANSFER OF PARTNERSHIP INTERESTS Transfer by General Partners. Under the Globalstar partnership agreement, any transfer of partnership interests by a general partner would be subject to the Consent of the Disinterested Partners. A general partner may transfer any or all of its partnership interests to an affiliate without requiring the Consent of the Disinterested Partners. In the case of GTL, however, a transfer may be made only to a 100%-owned affiliate and is subject to the consent of LQSS. In addition, any transfer of partnership interests by GTL would be subject to a right of first offer to the other partners of Globalstar and to Globalstar itself. Any successor to a general partner must be found by a Consent of the Disinterested Partners to have the financial, technical and managerial capabilities to permit it to perform the duties under the Globalstar partnership agreement. For the three-year period following the Full Constellation Date, Loral SpaceCom will not withdraw as a general partner or otherwise permit Globalstar to be managed by any entity other than Loral SpaceCom. Following such three-year period, Loral SpaceCom will be required to hold, through a general partner, at least 15% of the total number of Globalstar partnership interests outstanding, unless it shall have received the Consent of the Disinterested Partners. Transfer by the Limited Partners. Transfers of partnership interests by a Globalstar limited partner made before March 24, 1997 are subject to the consent of the Committee, which will not be unreasonably 38 43 withheld or delayed. In addition, any transfer of partnership interests by a limited partner will be subject to a right of first offer to the other partners of Globalstar and to Globalstar itself. The limited partners may, subject to the provision set forth below, freely transfer their partnership interests under the following circumstances: (i) the transfer is made to an affiliate; (ii) Globalstar is no longer managed, directly or indirectly, by the Company; or (iii) the Company shall itself have undergone a change of control. The limitations on transfers described above (other than Loral SpaceCom's required 15% minimum ownership, described above) will not apply to an exchange of Ordinary Partnership Interest by a partner electing to exercise its Exchange Right. Neither LQSS, GTL nor any limited partner of Globalstar will transfer any or all of their respective partnership interests in Globalstar if such transfer will adversely affect Globalstar's tax status. 39 44 DESCRIPTION OF CAPITAL STOCK The authorized capital of the Company consists of 60,000,000 shares of Common Stock, par value $1.00 per share. As of May 31, 1996, there were 10,000,000 shares of Common Stock outstanding. COMMON STOCK The holders of Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of the shareholders. The holders of Common Stock are entitled to receive ratably the dividends, if any, that may be declared from time to time by the Board of Directors out of funds legally available for such dividends. The holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities. Holders of Common Stock have no preemptive rights and no right to convert their Common Stock into any other securities. There are no redemption or sinking fund provisions applicable to the Common Stock. All the outstanding shares of Common Stock are, and the Conversion Shares, when issued and paid for as described herein, will be, validly issued, fully paid and nonassessable. BERMUDA LAW The following discussion is based upon the advice of Appleby, Spurling & Kempe, Bermuda counsel for the Company. The Company was incorporated as an exempted company under The Companies Act 1981 of Bermuda (the "Act") and the rights of its shareholders are governed by Bermuda law and the Company's Memorandum of Association and Bye-Laws. The following is a summary of certain provisions of Bermuda law and the Company's organizational documents. This summary is not a comprehensive description of such laws and documents and is qualified in its entirety by appropriate reference to Bermuda law and to the organizational documents of the Company. 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 the company prescribe), each shareholder having one vote, irrespective of the number of shares held, unless a poll is requested. The Company'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, with each shareholder present, or person holding proxies for any shareholder, 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 the Company's Bye-Laws by (i) the Chairman of the meeting, (ii) at least three shareholders present in person or by proxy, (iii) 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 (iv) a shareholder or shareholders present in person or by proxy holding voting shares in the company 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, after satisfaction in full of all claims of creditors and subject to the preferential rights accorded to any series of preferred stock, the proceeds of such liquidation, dissolution or winding up are distributed pro rata among the holders of common stock. Meetings of Shareholders. Under Bermuda law, a company is required to convene at least one general shareholders' meeting per calendar year. Bermuda law provides that a special general meeting may be called by the board of directors and must be called upon the request of shareholders holding not less than 10% of such of the paid-up capital of the company carrying the right to vote. Bermuda law also requires that shareholders be given at least five days' advance notice of a general meeting but the accidental omission of notice to any person does not invalidate the proceedings at a meeting. Under the Bye-Laws of the Company, at 40 45 least ten days' notice of the annual general meeting and of any special 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. The Company's Bye-Laws provide that the presence in person or by proxy of the holders of more than 50% of the voting capital stock of the Company 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 the Company's Bye-Laws, directors are elected at the annual general meeting or until their successors are elected or appointed, unless they are earlier removed or resign. Under Bermuda law and the Bye-Laws of the Company, a director may be removed at a special general meeting of shareholders specifically called for that purpose, provided that the director was served with at least 14 days' notice. The director has a right to be heard at the meeting. Any vacancy created by the removal of a director at a special general meeting may be filled at such meeting by the election of another director in his or her place or, in the absence of any such election, by the Board of Directors. Amendment of Memorandum of Association and Bye-Laws. Bermuda law provides that the Memorandum of Association of a company may be amended by a resolution passed at a general meeting of shareholders of which due notice has been given. An amendment to the Memorandum of Association other than an amendment which alters or reduces a company's share capital as provided in the Act also requires the approval of the Bermuda Minister of Finance, who may grant or withhold approval at his discretion. The Bye-Laws may be amended by a resolution passed by a majority of shares cast at a general meeting. Under Bermuda law, the holders of an aggregate of no less than 20% in par value of a company's issued share capital have the right to apply to the Bermuda Court for an annulment of any amendment of the Memorandum of Association adopted by shareholders at any general meeting, other than 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 and may be made on behalf of the persons entitled to make the application by one or more of their number as they may appoint in writing for the purpose. No such application may be made by persons voting in favour of the amendment. Appraisal Rights and Shareholder Suits. Under Bermuda law, in the event of an amalgamation of two Bermuda companies, a shareholder who is not satisfied that fair value has been paid for his shares may apply to the Bermuda Court to appraise the fair value of his shares. The amalgamation of a company with another company requires the amalgamation agreement to be approved by the board of directors and by a meeting of the holders of shares of the amalgamating company of which they are directors and of the holders of each class of such shares. Under Bermuda law, an amalgamation also requires 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 41 46 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. TRANSFER AGENT AND REGISTRAR The Transfer Agent and Registrar for GTL's Common Stock is The Bank of New York. 42 47 CERTAIN FOREIGN ISSUER CONSIDERATIONS The following discussion is based on the advice of Appleby, Spurling & Kempe, Bermuda counsel to the Company. The Company has been designated as a non-resident for exchange control purposes by the Bermuda Monetary Authority ("BMA"). There are no limitations on the rights of non-Bermuda owners of the Company's Common Stock to hold or vote their shares. Because the Company has been designated as a non-resident for Bermuda exchange control purposes, there are no restrictions on its ability to transfer funds in and out of Bermuda or to pay dividends to United States residents who are holders of the Company's Common Stock, other than in respect of local Bermuda currency. In the case of an applicant acting in a special capacity (for example, as an executor or trustee), certificates may, at the request of the applicant, record the capacity in which the applicant is acting. Notwithstanding the recording of any such special capacity, the Company is not bound to investigate or incur any responsibility in respect of the proper administration of any such estate or trust. The Company will take no notice of any trust applicable to any of its shares whether or not it had notice of such trust. Under Bermuda law, the Company is an exempted company (that is, it is exempted from the provisions of Bermuda law which stipulate that at least 60% of the equity must be beneficially owned by Bermudians). Consents under The Exchange Control Act 1972 of Bermuda and the regulations made thereunder have been obtained for the issue and subsequent transfer of the Conversion Shares to and among persons not resident in Bermuda for exchange control purposes. Persons regarded as residents of Bermuda for exchange control purposes require specific consent under The Exchange Control Act 1972 to purchase such shares of Common Stock into which the Securities are convertible (the "Conversion Shares"). The Act permits companies to adopt bye-law provisions relating to the transfer of shares of its Common Stock. Neither Bermuda law, the Memorandum of Association nor the Bye-Laws of the Company impose limitations on the right of foreign nationals or non-residents of Bermuda to hold or vote shares of Common Stock of the Company. Pursuant to the provisions of Section 28 of the Company Act 1981 of Bermuda, there is no minimum subscription which must be raised by the issue of the Securities to provide the funds required to be provided in respect of the matters set forth in that section. As an exempted company, the Company is exempt from Bermuda laws which restrict the percentage of share capital that may be held by non-Bermudians, but as an exempted company the Company may not participate in certain business transactions, including: (1) the acquisition or holding of land in Bermuda (except that required for its business and held by way of lease or tenancy for terms of not more than 21 years) without the express authorization of the Bermuda legislature; (2) the taking of mortgages on land in Bermuda to secure an amount in excess of $50,000 without the consent of the Bermuda Minister of Finance; (3) the acquisition of securities created or issued by, or any interest in, any local company or business, other than certain types of Bermuda government securities or securities of another exempted company, partnership or other corporation resident in Bermuda but incorporated abroad; or (4) the carrying on of business of any kind in Bermuda, except in furtherance of the business of the Company carried on outside Bermuda or under a license granted by the Bermuda Minister of Finance. The Bermuda government actively encourages foreign investment in exempted entities like the Company that are based in Bermuda but do not operate in competition with local business. In addition to having no restrictions on the degree of foreign ownership, the Company is subject neither to taxes on its income or dividends nor to any foreign exchange controls in Bermuda. In addition, there is no capital gains tax in Bermuda, and profits can be accumulated by the Company, as required, without limitation. The consent of the BMA Exchange Control has been obtained for the issue of the Securities and the Conversion Shares. Approvals or permissions received from the BMA do not constitute a guarantee by the BMA as to the performance of the scheme or creditworthiness of the company involved. Furthermore, in giving such approvals or permissions, the BMA shall not be liable for the performance or default of the scheme or for the correctness of any opinions or statements expressed. 43 48 DESCRIPTION OF SECURITIES GENERAL The Securities were issued under an Indenture, dated as of March 6, 1996 (the "Indenture"), between the Company and The Bank of New York, as Trustee (the "Trustee"). Section references in parentheses below are to sections in the Indenture. The following summarizes the material provisions of the Indenture and is subject to, and qualified in its entirety by reference to, all the provisions of the Indenture, including the definition therein of certain terms, a copy of which has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. Capitalized terms that are used but not otherwise defined herein have the meanings assigned to them in the Indenture. The Securities are limited to $310,000,000 aggregate principal amount and are unsecured obligations of the Company subordinated to all Debt Obligations (as defined below) of the Company. Although the Securities are not equity securities under applicable Bermuda law, the Securities are the substantial equivalent of convertible preferred stock and will be treated as such for U.S. tax purposes. See "Taxation." The Company is a holding company, the sole asset of which is its partnership interests in Globalstar. Consequently, the Securities will be effectively subordinated to all existing and future indebtedness and other liabilities and commitments of Globalstar. The Company has no independent means of generating revenue, and, therefore, the Company is dependent in large part upon the revenues and cash flow of Globalstar to meet its obligations, including its obligations under the Securities. The Indenture does not provide the Holders with any rights to accelerate the payment of the Securities. See "Risk Factors -- Risks Relating to the Securities." The specific terms of the Globalstar partnership agreement as it relates to, and affects, the Securities are summarized below. Such summary is qualified in its entirety by reference to the Globalstar partnership agreement, a copy of which has been filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1995 which is incorporated by reference into this Prospectus. The terms of the Company's Preferred Partnership Interests in Globalstar are intended generally to match the terms of the Securities, so that the Company's interest in Globalstar will be generally similar to the interests that the holders of the Securities (the "Holders") have in the Company. See "Risk Factors -- Risks Relating to the Securities -- Dependence on Globalstar Capital Accounts for Cash Distributions to the Company." The Securities are eligible for trading in the PORTAL market, a screen-based automated market for trading of securities eligible for resale under Rule 144A. INTEREST PAYMENTS The Securities will bear interest from March 6, 1996 at the rate per annum of 6 1/2% and will mature on March 1, 2006 (the "Mandatory Redemption Date"). Interest will be computed on the basis of a 360-day year of twelve 30-day months and will be payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year (each an "Interest Payment Date"), commencing on June 1, 1996, to the person in whose name the Security is registered at the close of business on the day of February 15, May 15, August 15, or November 15, as the case may be (each a "Regular Record Date"), next preceding such Interest Payment Date. (Section 3.07). The Company may elect to defer interest payments on any Interest Payment Date if Globalstar shall have deferred payment of the scheduled distribution in respect of the Preferred Partnership Interests corresponding to such interest payment. Arrearages of deferred but unpaid interest accruals ("Interest Arrearages") will not themselves bear interest, but so long as any Interest Arrearage remains outstanding, the Company will be prohibited from paying (i) dividends on its Common Stock, (ii) dividends on any preferred stock or (iii) interest on debt ranking pari passu with or junior to the Securities from time to time outstanding except on a pro rata basis with respect to any such pari passu debt based on the aggregate principal amount of such debt. Preferred distributions equal to the aggregate amount of interest payable by the Company on the Securities will be payable to the Company by Globalstar in respect of the Preferred Partnership Interests on each Interest Payment Date, if, as and when declared by the Globalstar General Partners' Committee. The 44 49 Company may not elect to defer any interest payment if Globalstar has paid the scheduled distribution in respect of Preferred Partnership Interests corresponding to such interest payment. In the event that the Company fails to pay the interest due for an aggregate of six quarterly interest payments, the Holders will have the rights and remedies described herein under "-- Voting Rights." OPTIONAL REDEMPTION Provisional Redemption. The Company may redeem, in whole or in part (the "Provisional Redemption"), at any time prior to March 2, 1999, at the redemption price of 103% of the aggregate principal amount of the Securities to be redeemed plus accrued and unpaid interest, if any, to the date of redemption (the "Optional Redemption Date"), in the event that the Current Market Value (as defined below) of the Common Stock equals or exceeds the following Trigger Percentages of the prevailing Conversion Price (as defined below) then in effect for at least 20 trading days in any consecutive 30-day trading day period ending on the trading day prior to the date of mailing of the notice of Provisional Redemption (the "Notice Date"), if called for Redemption in the 12-month period ending on March 1 of the following years:
TRIGGER YEAR PERCENTAGE - --------- -------------- 1997 170% 1998 160% 1999 150%
UPON ANY PROVISIONAL REDEMPTION, THE COMPANY WILL MAKE AN ADDITIONAL PAYMENT (THE "INTEREST MAKE-WHOLE PAYMENT") WITH RESPECT TO THE SECURITIES CALLED FOR REDEMPTION, INCLUDING THOSE SECURITIES CONVERTED INTO COMMON STOCK BETWEEN THE NOTICE DATE AND THE PROVISIONAL REDEMPTION DATE, IN AN AMOUNT EQUAL TO THE PRESENT VALUE OF THE AGGREGATE AMOUNT OF INTEREST PAYMENTS THEREAFTER PAYABLE ON SUCH SECURITIES FROM THE PROVISIONAL REDEMPTION DATE TO THE THIRD ANNIVERSARY OF THE ISSUE DATE (THE "INTEREST MAKE-WHOLE PERIOD"). Such present value shall be calculated using the bond equivalent yield on U.S. Treasury notes or bills having a term nearest in length to that of the Interest Make-Whole Period as of the Notice Date. Subsequent Optional Redemption. Commencing March 2, 1999, the Securities will be redeemable at any time, in whole or in part, at the election of the Company (the "Optional Redemption"), at a redemption price equal to the percentage set forth below of the principal amount to be redeemed plus accrued and unpaid interest, if any, to the date of redemption (the "Optional Redemption Date") if redeemed in the 12-month period ending on March 1 of the following years:
REDEMPTION YEAR PRICE - ---- -------------- 2000 103% 2001 102% 2002 101%
and thereafter at a redemption price equal to 100% of the principal amount to be redeemed plus accrued and unpaid interest, if any, to the Optional Date of Redemption. MANDATORY REDEMPTION Each Security (if not earlier redeemed or converted) will be mandatorily redeemed by the Company on the Mandatory Redemption Date at a redemption price of 100% of the principal amount per Security plus accrued and unpaid interest, if any (including all Interest Arrearages), to the Mandatory Redemption Date. METHOD OF PAYMENTS Globalstar may make any payments due on the Preferred Partnership Interests (i) in cash, (ii) by delivery of Ordinary Partnership Interests to the Company (as described below) or (iii) through any combination of the foregoing. Likewise, the Company may make any payments due on the Securities, including redemption payments, interest payments and the Interest Make-Whole Payment, (i) in cash; (ii) by 45 50 delivery of Common Stock (based upon 90% of the Average Market Value in the case of interest payments, including the Interest Make-Whole Payment, and 100% of the Average Market Value in the case of all other payments); or (iii) through any combination of the foregoing, provided, however, if Globalstar shall have paid the scheduled distribution or redemption payment on the Preferred Partnership Interests corresponding to such payment in cash, the Company shall make such payment in cash. The Company intends to use the same form of consideration as Globalstar used with respect to the Preferred Partnership Interests, except that the Company will deliver Common Stock instead of Ordinary Partnership Interests; however, the Company reserves the right to make a cash payment from the proceeds of an issuance of Common Stock following a payment by Globalstar through a delivery of Ordinary Partnership Interests. In the event that Globalstar pays a scheduled distribution to the Company in cash, the Company shall pay the corresponding interest payment in cash. The Company also reserves the right to make interest payments notwithstanding the fact that it shall not have received a distribution on the Preferred Partnership Interests for the corresponding Interest Payment Date. See "Risk Factors -- Risks Relating to the Securities -- Dependence on Globalstar for Payments; Conflicts of Interest" and "Risk Factors -- Risks Relating to the Securities -- Interest Deferral; Payments in Common Stock." If the Company elects to make a cash payment from the proceeds of any issuance of Common Stock, the valuation of the Ordinary Partnership Interests to be delivered to the Company underlying the Common Stock to be issued shall be based upon the price at which such Common Stock is sold, which sale shall occur no later than the fifth business day prior to the applicable payment date. If the Company elects to deliver Common Stock to the Holders in lieu of a cash payment, the valuation of the Ordinary Partnership Interests to be delivered to the Company underlying such Common Stock shall be based upon the 90% of the Average Market Value of the Common Stock in the case of interest payments, including the Interest Make-Whole Payment, and 100% of the Average Market Value of the Common Stock in the case of all other payments. No fractional shares of Common Stock will be delivered to the Holders, but the Company shall instead pay a cash adjustment determined as described under "-- Adjustment for Fractional Shares." Any portion of a redemption that is declared and not paid through the delivery of shares of Common Stock will be paid in cash. Globalstar will be required to deliver to the Company, no later than 20 business days prior to each Interest Payment Date, a notice stating (i) whether it will pay the applicable preferred distribution and (ii) if so, the form of consideration in which it will make such distribution. In addition, Globalstar will deliver to the Company a notice, no later than 20 business days prior to any Provisional Redemption Date, any Optional Redemption Date and the Mandatory Redemption Date, stating (i) in the case of a Provisional or Optional Redemption, that it has initiated such Redemption and (ii) the form of consideration which it will make on the applicable Redemption Date. The Company shall (i) in the case of a Provisional or Optional Redemption, notify the Holders, within one business day of receipt of the notice described above from Globalstar, of its intention to make such redemption, if such election shall have been made by the Company, and the date of any such Provisional or Optional Redemption and (ii) notify Globalstar, at least 12 business days prior to each Interest Payment Date or any applicable Redemption Date, as the case may be, of whether it has elected to pay the interest or redemption payment on the Securities in cash or in Common Stock. The Company shall also deliver notice described in clause (ii) above to the Holders but only if the form of payment includes Common Stock. "Average Market Value" of the Common Stock will mean the arithmetic average of the Current Market Value of the Common Stock for the ten trading days ending on the second business day prior to the applicable date of payment. "Current Market Value" of the Common Stock will mean the average of the high and low sale prices of the Common Stock as reported on the NNM or any national securities exchange upon which the Common Stock is then listed, for the trading day in question. CONVERSION RIGHTS The Securities are convertible into Common Stock at the option of the Holder at any time prior to the Mandatory Redemption Date (unless earlier redeemed by the Company), initially at the conversion price (the 46 51 "Conversion Price") of $65.00 per share (equivalent to 0.7692 shares of Common Stock for each $50 principal amount of Securities). The Securities are initially convertible into an aggregate of 4,769,230 shares of Common Stock, representing approximately 25% of the Common Stock outstanding on a fully diluted basis, and an indirect beneficial interest in 4,769,230 Ordinary Partnership Interests upon conversion, representing approximately 8.4% of the total units of Ordinary Partnership Interests outstanding after giving effect to the GTL Guarantee Warrants and the Additional Warrants. Upon a conversion of any Securities, a corresponding number of the Company's Preferred Partnership Interests in Globalstar will be converted into Ordinary Partnership Interests. Securities surrendered for conversion during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date (except Securities called for redemption on a Redemption Date within such period) must be accompanied by payment in cash of an amount equal to the interest thereon which the registered Holder is to receive; provided, that no payment shall be owed or payable to any converting Holder if the Board of Directors of the Company shall have elected to defer the interest payment to be made on such Interest Payment Date. No other adjustment for interest or dividends, including for any Interest Arrearages, is to be made upon conversion. Fractional shares of Common Stock will not be issued upon conversion, but in lieu thereof the Company will pay a cash adjustment in the manner described under "-- Adjustment for Fractional Shares." The right of conversion attaching to any Security may be exercised by a Holder by delivering the Security at the specified office of a conversion agent (as described under "-- Payments, Paying Agents and Conversion Agents" below) accompanied by a duly signed and completed notice of conversion. The conversion date shall be the date on which the Security and the duly signed and completed notice of conversion shall have been so delivered. A Holder delivering a Security for conversion will not be required to pay any taxes or duties payable in respect of the issue or delivery of Common Stock on conversion, but will be required to pay any tax or duty which may be payable in respect of any transfer involved in the issue or delivery of the Common Stock in a name other than that of the Holder. Certificates representing shares of Common Stock will not be issued or delivered unless all taxes and duties, if any, payable by the Holder have been paid. The Conversion Price is subject to adjustment (under formulae set forth in the Indenture) under certain circumstances, including: (i) the issuance of Common Stock as a dividend or distribution on Common Stock (other than the issuance of Common Stock in connection with the conversion of Securities); (ii) the issuance to all holders of Common Stock of rights or warrants entitling them to subscribe for or purchase Common Stock at a price per share less than the Current Market Price (other than the Guarantee Warrants and the Additional Warrants); (iii) certain subdivisions and combinations of Common Stock; (iv) the issuance as a dividend or distribution to all holders of Common Stock of shares of capital stock of the Company (other than Common Stock) or evidences of indebtedness, cash or other assets of the Company (including securities, but excluding those rights, warrants, dividends and distributions referred to above and dividends and distributions in connection with the liquidation, dissolution or winding up of the Company or paid exclusively in cash); (v) dividends or other distributions consisting exclusively of cash (excluding any cash portion of distributions referred to in clause (iv)) to all holders of Common Stock to the extent such distributions, combined with (A) all such all-cash distributions made within the preceding 12 months in respect of which no adjustment has been made plus (B) any cash and the fair market value of other consideration payable in respect of any tender offers by the Company for Common Stock concluded within the preceding 12 months in respect of which no adjustment has been made, exceeds 10% of the Company's market capitalization (being the product of the then current market price of the Common Stock times the number of shares of Common Stock then outstanding) on the record date for such distribution; and (vi) the purchase of Common Stock pursuant to a tender offer made by the Company to the extent that the aggregate consideration, together with (X) any cash and the fair market value of any other consideration payable in any other tender offer expiring within the 12 months preceding such tender offer in respect of which no adjustment has been made plus (Y) the aggregate amount of any such all-cash distributions referred to in clause (v) above to all holders of Common Stock within the 12 months preceding the expiration of such tender offer in respect of which no adjustments have been made, exceeds 10% of the Company's market capitalization on the expiration of such tender offer. 47 52 In the case of certain consolidations or mergers to which the Company is a party or the conveyance or transfer of the properties and assets of the Company substantially as an entirety, each Security then outstanding would, without the consent of any Holders of Securities, become convertible only into the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer by a holder of the number of shares of Common Stock into which the Security might have been converted immediately prior to such consolidation, merger, conveyance or transfer, assuming such holder of Common Stock failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon the consolidation, merger, conveyance or transfer (provided that if the kind of amount of securities, cash or other property so receivable is not the same for each non-electing share, the kind and amount so receivable by each non-electing share shall be deemed to be the kind and amount so receivable per share by a plurality of the non-electing shares). The Company may not become a party to any such consolidation or merger unless the terms thereof are consistent with the foregoing. (Section 12.06) RANKING The Securities will be subordinated and subject, to the extent and in the manner set forth in the Indenture, to the prior payment in full of all Debt Obligations of the Company (Section 13.01). "Debt Obligations" will mean the principal of, premium, if any, interest and other amounts due on any indebtedness, whether now outstanding or hereafter created, incurred, assumed or guaranteed by the Company, for money borrowed from others (including obligations under capitalized leases, purchase money indebtedness or any trade credit), liabilities incurred in the ordinary course of business, commitment, standby and other fees due and payable to financial institutions with respect to credit facilities that may be maintained by the Company or in connection with the acquisition by the Company of any other business or entity, or in respect of letters of credit or bid, performance or surety bonds issued for the account or on the credit of the Company, and, in each case, all renewals, extensions and refundings thereof, other than (i) any such indebtedness as to which, in the instrument creating or evidencing the same, it is provided that such indebtedness is pari passu or junior in right of payment to the Securities and (ii) the Securities. In addition, the Securities will rank senior to the Company's preferred stock and Common Stock with respect to the payment of dividends, payments on redemption and payments of amounts distributable upon dissolution, liquidation or winding up of the Company. The Indenture does not limit the amount of indebtedness or other obligations that the Company may incur. See "Risk Factors -- Risks Related to the Securities -- Subordination of Securities." No cash payments of principal of, premium, if any, or interest on, the Securities may be made and no Securities may be redeemed, retired or purchased for cash (excepting payment for fractional shares) if the Company is then in default in the payment of any Debt Obligations or if at the time any other Event of Default under the terms of any Debt Obligations exists permitting acceleration thereof. Upon any payment or distribution of assets of the Company in the event of any insolvency, reorganization, liquidation or similar proceeding, all Debt Obligations must be repaid in full (including any interest thereon accruing after the commencement of any proceeding) before the Holders will be entitled to receive or retain any payment. The Securities may not be declared due and payable prior to the Mandatory Redemption Date because of the failure to make interest payments when due or to make payments with respect to any applicable redemption or under the terms of any Debt Obligations. By reason of such subordination, in the event of insolvency, creditors of the Company who are holders of Debt Obligations may recover more, ratably, than Holders. (Section 13.02) The priority provisions of the Preferred Partnership Interests are generally similar to the subordination provisions of the Securities. The Company's Preferred Partnership Interests will be subordinated to the existing and future liabilities of Globalstar, and the Preferred Partnership Interests will rank senior only to the Ordinary Partnership Interests with respect to payment of distributions. The Preferred Partnership Interests also will be subordinated to (i) the distribution of the Managing Partner's Allocation which equals 2.5% of Globalstar's revenues up to $500 million plus 3.5% of revenues in excess of $500 million, which will be reduced by 50% in any year in which Globalstar incurs a net loss; (ii) the Guarantee Fee and the notes that may be issued in lieu of such Guarantee Fee; and (iii) certain distributions made to partners in respect of taxes levied upon the operations of Globalstar. Because the Company is a holding company, the sole asset of 48 53 which is its partnership interests in Globalstar, the obligations of the Company in respect of the Securities will be structurally subordinated to all obligations of Globalstar, including the Managing Partner's Allocation, the Guarantee Fee and tax distributions of Globalstar. At March 31, 1996, Globalstar had approximately $62 million of outstanding indebtedness in the form of accrued vendor financing. See "Risk Factors -- Risks Relating to the Securities -- Subordination of Securities." DENOMINATION, REGISTRATION AND TRANSFER The certificates representing the Securities have been issued in fully registered form, without coupons. Except as described in the next paragraph, the Securities have been deposited with, or on behalf of, The Depository Trust Company, New York, New York ("DTC"), and registered in the name of Cede & Co., as DTC's nominee in the form of a global Securities certificate (the "Global Certificate") or will remain in the custody of the Trustee pursuant to a FAST Balance Certificate Agreement between DTC and the Trustee. Securities originally purchased by or transferred to "accredited investors" (as defined in Rule 501(a) under the Securities Act) who are not "qualified institutional buyers" (as defined in Rule 144A under the Securities Act and referred to as "QIBs") have been issued and registered in certificated form without coupons (the "Restricted Certificated Securities"). Securities originally purchased by or transferred to persons outside of the United States pursuant to sales in accordance with Regulation S have been issued and registered in certificated form without coupons (the "Certificated Securities") or in the form of a temporary certificate as described more fully below. Restricted Certificated Securities are not eligible to be exchanged for an interest in a global Securities certificate. Securities originally purchased by persons outside the United States pursuant to sales in accordance with Regulation S under the Securities Act were represented upon issuance by a temporary Security certificate (the "Temporary Certificate") which were not exchangeable for an interest in the Global Certificate or Certificated Securities until the expiration of the "40-day restricted period" within the meaning of Rule 903(c)(3) of Regulation S under the Securities Act. Each Temporary Certificate was registered in the name of, and held by, a temporary certificate holder until the expiration of such 40-day period, at which time the Temporary Certificate may have been delivered to the Trustee in exchange for an interest in a Global Certificate or a Certificated Security. Ownership of beneficial interests in a Global Certificate will be limited to persons who have accounts with DTC ("participants") or persons who hold interests through participants. Ownership of beneficial interests in a Global Certificate will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants). Qualified institutional buyers may hold their interests in a Global Certificate directly through DTC if they are participants in such system, or indirectly through organizations which are participants in such system. So long as DTC, or its nominee, is the registered owner or holder of a Global Certificate, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Securities represented by such Global Certificate for all purposes under the Indenture and the Securities. No beneficial owner of an interest in a Global Certificate will be able to transfer the interest except in accordance with DTC's applicable procedures, in addition to those provided for under the Indenture or described above. Payments of the principal of, premium, if any, and interest on, a Global Certificate will be made to DTC or its nominee, as the case may be, as the registered owner thereof. Neither the Company, the Trustee nor any Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Certificate or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Company expects that DTC or its nominee, upon receipt of any payment of principal or interest on a Global Certificate, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Certificate as shown on the records of DTC or its nominee. The Company also expects that payments by participants to owners of beneficial interests in such Global Certificate held through such participants will be governed by standing instructions and 49 54 customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants. Transfers between participants in DTC will be effected in the ordinary way in accordance with DTC rules. If a Holder requires physical delivery of a Certificated Security for any reason, including to sell Securities to persons in jurisdictions which require such delivery of such Securities or to pledge such Securities, such Holder must transfer its interest in a Global Certificate in accordance with the normal procedures of DTC and the procedures set forth in the Indenture. Once an interest in a Global Certificate is delivered as a Certificated Security to an Accredited Investor, such Certificated Security may not be exchanged for an interest in a global Securities certificate. The Company expects that DTC will take any action permitted to be taken by a Holder of Securities (including the presentation of Securities for exchange as described below) only at the direction of one or more participants to whose account the DTC interests in a Global Certificate is credited and only in respect of such portion of the aggregate principal amount of the Securities as to which such participant or participants has or have given such direction. DTC has advised the Company as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "Clearing Agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and may include certain other organizations. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants"). Although the Company expects that DTC will agree to the foregoing procedures in order to facilitate transfers of interests in a Global Certificate, among participants of DTC, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Company nor the Trustee will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. If DTC is at any time unwilling or unable to continue as depositary for a Global Certificate and a successor depositary is not appointed by the Company within 90 days, the Company will issue Certificated Securities in exchange for a Global Certificate which will bear the legend referred to under "Notice to Investors" subject to the provisions of such legend. TRANSFER AND EXCHANGE A Holder may transfer or exchange Securities in accordance with the Indenture. The Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and the Company may require a Holder to pay any taxes and fees required by law or permitted by the Indenture. The Company is not required to transfer or exchange any Securities selected for redemption. Also, the Company is not required to transfer or exchange any Securities for a period of 15 days before a selection of Securities to be redeemed. The registered Holder of Securities will be treated as the owner of such Securities for all purposes. The transfer of Securities may be registered, and Securities may be presented in exchange for other Securities of different authorized denominations, at the office of Trustee or agency maintained by the Company for such purpose in New York City and any other office or agency maintained by the Company for such purpose, without service charge (other than the cost of delivery) and upon payment of any taxes or other governmental charges. Securities may also be presented for purposes of such exchange (but not registration) at the offices of the Trustee in London, or such other paying agents as may be specified in notices to the Holders of Securities in accordance with "Notices" below. The Company shall not be required, in the event of 50 55 a redemption in part, (i) to register the transfer of Securities for a period of 15 days immediately preceding the date notice is given identifying the serial numbers of the Securities called for such redemption; or (ii) to register the transfer of or exchange of, any such Securities, or portion thereof, called for redemption. (Section 3.05) PAYMENTS, PAYING AGENTS AND CONVERSION AGENTS The principal or Redemption Price of and interest, including any Interest Make-Whole Payment, on the Securities will be payable (whether such payments are in cash or Common Stock), and the Securities will be convertible and exchangeable and transfers thereof will be registrable, at the office of the Trustee or the office or agency of the Company maintained for such purpose in The City of New York and at any other office or agency maintained by the Company for such purpose, provided that, at the option of the Company, payment of interest in cash may be made by check mailed to the address of the person entitled thereto as it appears in the Security Register. All payments of cash will be made in United States Dollars. Payments (whether in cash or Common Stock) of the principal or Redemption Price of the Securities will be made at the corporate trust office of the Trustee or agency maintained by the Company for such purpose in New York City or any office or agency maintained for such purpose. If the payments are made in cash, such payments shall be made by United States dollar check drawn on, or wire transfer to a United States dollar account maintained by the Holder with, a bank located in New York City mailed to the Holder at such Holder's registered address or (if arrangements satisfactory to the Company are made by the agent of the Holder) by wire transfer to a dollar account maintained by the Holder with a bank in New York City. Payment of interest on any Interest Payment Date will be made to the person in whose name such Securities is registered at the close of business on the Regular Record Date prior to the relevant Interest Payment Date. Accrued interest payable on any Securities that are redeemed in cash will be payable in the manner described above with respect to payments of the Redemption Price of the Securities, except Securities that are redeemed on a date after the close of business on the Regular Record Date immediately preceding such Interest Payment Date and on or before the Interest Payment Date, on which interest will be paid to the Holder of record on the Interest Record Date. Any Interest Make-Whole Payment will be paid to the Holder of Record on the date of conversion or date of redemption, as the case may be. The Securities may be surrendered for conversion or exchange at the corporate trust office of the Trustee or agency maintained by the Company for such purpose in New York City or, at the option of the Holder and subject to applicable laws and regulations, at the office of any of the conversion agents. The paying agents and conversion agents may be terminated at any time and additional or other paying and conversion agents may be appointed, provided that until the Securities have been delivered for cancellation, or monies and/or Common Stock sufficient to pay the principal of and interest on the Securities have been made available for payment and either paid or returned to the Company, a paying, conversion and transfer agent will be maintained (i) in New York City for the payment of the principal or Redemption Price of and interest, including any Interest Make-Whole Payment, on Securities and for the surrender of Securities for conversion or redemption and (ii) in a European city for the payment of the principal or Redemption Price of and interest, including any Interest Make-Whole Payment, on Securities and for the surrender of Securities for conversion or redemption. Notice of any such termination or appointment and of any change in the office through which any paying, conversion or transfer agent will act will be given in accordance with "Notices" below. All monies paid and all Common Stock delivered by the Company to a paying agent for the payment of principal or Redemption Price of or interest, including any Interest Make-Whole Payment, on any Securities that remain unclaimed at the end of two years after such principal or interest shall have become due and payable will be repaid or returned, as the case may be, to the Company, and the Holder of such Securities will thereafter look only to the Company for payment or delivery thereof. 51 56 VOTING RIGHTS Except as required by law, the Holders will not be entitled to any voting rights unless the Company has deferred scheduled interest payments for an aggregate of six quarterly interest payments (a "Deferral Trigger Event"). In such case, the number of members of the General Partners' Committee of Globalstar will be increased by one and the Holders of the Securities, voting separately as a class with the Holders of any other securities upon which similar voting rights have been conferred and are exercisable, will be entitled to elect one representative to such General Partners' Committee (the "CPE Representative"). In addition, upon a Deferral Trigger Event, Loral SpaceCom has agreed to use its best efforts to cause the shareholders of the Company to approve and elect a nominee to the Board of Directors of the Company designated by the Holders of the Securities (the "CPE Nominee"). If the shareholders shall fail to approve such CPE Nominee, Loral SpaceCom will seek the resignation of a Loral SpaceCom designee director from the Board of Directors of the Company and will use its best efforts to cause the Board of Directors of the Company to appoint the CPE Nominee to the Board of Directors of the Company until the next annual meeting of shareholders, at which time such appointment will be submitted to the shareholders of the Company for their approval; provided, however, that if such shareholder approval is not obtained, the above-described mechanics shall continue to be in effect. The CPE Representative and the CPE Nominee, if appointed to the Board, will promptly resign upon receipt of notice from the Company that all Interest Arrearages with respect to the Securities have been paid. See "Risk Factors -- Structural and Market Risks. REGISTRATION RIGHTS Pursuant to the Registration Rights Agreement among the Company, Globalstar and the Initial Purchasers ("the Registration Rights Agreement"), the Company agreed for the benefit of the Holders of the Securities that it would: (i) within 120 days after the date the Securities were initially issued (the "Issue Date"), file a shelf registration statement (the "Shelf Registration Statement") with the Commission with respect to resales of the Securities and the Conversion Shares; (ii) use its best efforts to cause such Shelf Registration Statement to be declared effective by the Commission within 180 days after the Issue Date; and (iii) maintain such Shelf Registration Statement continuously effective under the Securities Act until the third anniversary of the Issue Date or such earlier date as of which the Securities shall no longer be restricted securities pursuant to Rule 144(k) or all the Securities or the Common Stock issuable upon conversion thereof have been sold pursuant to such Shelf Registration Statement. THE INTEREST RATE DUE ON THE SECURITIES DOES NOT INCREASE IN THE EVENT THAT THE COMPANY BREACHES ANY OF ITS OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT. The Company will provide to each Holder copies of the prospectus, which will be a part of such Shelf Registration Statement, notify each such Holder when such Shelf Registration Statement has become effective and take certain other actions as are required to permit unrestricted resales of the Securities and the Conversion Shares. A Holder of Offered Securities that sells such securities pursuant to a Shelf Registration Statement generally will be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement that are applicable to such a Holder (including certain indemnification and contribution rights and obligations). The Preferred Partnership Interests will not be subject to any registration rights. REPORTS Whether or not required by the rules and regulations of the Commission, so long as any Securities are outstanding, the Company will file with the Commission and furnish to the Holders of Securities all quarterly and annual financial information required to be contained in a filing with the Commission on Forms 10-Q and 10-K including a "Management's Discussion and Analysis of Results of Operations and Financial Condition" and, with respect to the annual information only, a report thereon by the Company's certified independent accountants. SINKING FUND There will be no sinking fund established for the retirement of the Securities. 52 57 MODIFICATION OF THE INDENTURE Modifications and amendments of the Indenture may be made by the Company and the Trustee with the consent of the Holders of two-thirds in principal amount of the Outstanding Securities; provided, that no such modification or amendment may, without the consent of the Holder of each Outstanding Security affected thereby, (i) change the Mandatory Redemption Date of the principal of, or the due date of any installment of interest on, the Securities, (ii) reduce the principal amount or Redemption Price of, the rate of interest thereon, or any Interest Make-Whole Payment payable on, any Securities, (iii) change the place of payment where, or the coin or currency in which, any Security or any payment thereon is payable, (iv) impair the right to institute suit for the enforcement of any such payment when due, (v) adversely affect the conversion rights of the Holders, (vi) modify the provisions of the Indenture with respect to the subordination of the Securities in a manner adverse to the Holders, (vii) adversely affect the right to require the Company to redeem Securities or (viii) reduce the percentage in principal amount of Securities the consent of whose Holders is required for modification or amendment of the Indenture or for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults. (Section 9.02) ADJUSTMENT FOR FRACTIONAL SHARES No fractional shares of Common Stock will be delivered upon the redemption or conversion of any Securities. Whether or not a fractional share would be delivered to a Holder of Securities shall be based upon the total number of Securities at the time held by such Holder and the total number of shares of Common Stock otherwise deliverable in respect thereof. In lieu of the issuance of a fraction of a share of Common Stock, the Company shall pay instead an amount in cash (rounded to the nearest whole cent) equal to the same fraction of the closing sales price of a share of Common Stock on the trading day immediately preceding the redemption or conversion date. (Section 12.03) CONSOLIDATION, MERGER, CONVEYANCE OR TRANSFER The Indenture provides that the Company shall not consolidate with or merge into any other corporation or convey or transfer its properties and assets substantially as an entirety to any person, unless (i) any such successor assumes the Company's obligations under the Securities and the Indenture, (ii) after giving effect thereto, no Event of Default shall have occurred and be continuing and (iii) certain other conditions under the Indenture are met. (Section 8.01) Upon any such consolidation or merger, or any such conveyance or transfer of the properties and assets of the Company substantially as an entirety, the successor corporation formed by such consolidation, or into which the Company is merged, or to which such conveyance or transfer is made, shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture with the same effect as if such successor corporation had been named as the Company. The Company as the predecessor corporation shall be relieved of all obligations and covenants under the Indenture. (Section 8.02) NOTICES Notice to Holders of Securities will be given by mail to the registered addresses of such Holders. (Section 1.06) REPLACEMENT OF SECURITIES Securities that become mutilated, destroyed, stolen or lost will be replaced by the Company at the expense of the Holder upon delivery to the Trustee of the Securities or evidence of the loss, theft or destruction thereof satisfactory to the Company and the Trustee. In the case of a lost, stolen or destroyed Security, an indemnity satisfactory to the Company and the Trustee may be required at the expense of the Holder of such Security before a replacement Security will be issued. (Section 3.06) GOVERNING LAW The Indenture will provide that the Securities will be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. (Section 1.12) THE TRUSTEE The Bank of New York will be the Trustee under the Indenture. 53 58 TAXATION This summary of certain tax considerations is based upon current (as of the date of this Prospectus) laws, treaties, cases, regulations and rulings. 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 an investment in the Company under the laws of the jurisdictions in which they are subject to taxation. The discussion of U.S. tax law is based upon the opinion of Willkie Farr & Gallagher, special U.S. counsel to the Company. The summary of certain Bermuda tax consequences is based upon the opinion of Appleby, Spurling & Kempe, Bermuda counsel to the Company. UNITED STATES TAX CONSIDERATIONS Taxation of United States Investors in the Company. For U.S. tax purposes the Securities will be classified as preferred stock and not as debt obligations. Interest payments will be taxed as dividends. A payment will be taxable as ordinary dividend income to the extent it is paid out of the Company's current or accumulated earnings and profits. Payments in excess of such earnings and profits will be treated as a tax-free return of capital to the extent of the Holder's tax basis in the Securities. Such payments will reduce the tax basis at which the Security is held. The Company expects that payments during at least the first two years will not be covered by earnings and profits and will constitute a tax-free return of capital. Subject to the discussion below, and assuming that the holder holds the Security as a capital asset, payments in excess of the Holder's tax basis will be a capital gain that is long-term or short-term depending on the holding period for the Security. Interest paid with Common Stock will be taxed in the same manner as a cash distribution in an amount equal to the fair market value of such stock. Certain adjustments to the Conversion Price also would be taxed as if they were cash distributions, generally equal in amount to the fair market value of the increased proportionate interest in the Company affected by the adjustment. Because the Company is a foreign corporation, the dividend payments will not be eligible for the inter-corporate dividends-received deduction. Subject to the discussion below on PFICs and assuming the Holder holds the Security as a capital asset, any gain or loss recognized by a U.S. holder on the sale or other disposition (other than a redemption by the Company) of a Security 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 Security. A Holder will also generally recognize capital gain or loss upon a redemption of Securities for cash. Notwithstanding the foregoing, on a redemption of Securities, in certain limited circumstances (primarily those involving Holders whose proportionate interests in the Company remain the same or increases after the redemption, or in the case of Holders with significant interests in the Company, whose interests in the Company are not materially reduced as a result of the redemption), such Holders may be required to treat any payments received with respect to such redemption as a dividend (taxable as described above) in whole or in part, without offset for such holder's basis in the Securities, and may not be entitled to recognize a loss. Subject to the discussion below on PFICs, the conversion of Securities into Common Stock or the receipt of solely Common Stock on a Provisional, Optional or Mandatory Redemption would not be a taxable event. If both cash and Common Stock are received in a redemption, the Holder would realize a gain (which under certain limited circumstances may be taxed as ordinary dividend income) equal to the amount by which the fair market value of the Common Stock and the cash received exceeded his tax basis in the Security surrendered. However, the gain recognized for tax purposes would be the lesser of (x) the gain realized or (y) the cash received. Special rules apply to the taxation of a U.S. shareholder in a "passive foreign investment company" (a "PFIC"). A PFIC is a foreign corporation (i) 75% or more of whose income is passive or (ii) 50% or more of whose assets produce or are held to produce passive income. The Company believes that it has not been a PFIC and will not become one. The Company expects to earn, through Globalstar, sufficient active income to avoid PFIC status. However, Globalstar may earn passive income such as interest on working capital and 54 59 royalties on certain intangibles. Furthermore, the extent and timing of Globalstar's active business income cannot be predicted with certainty. If the Company were a PFIC, unless a U.S. holder of Securities in Common Stock makes the QEF election described below, he would be subject to a tax-deferral charge on gain on a disposition of and on certain "excess distributions" received from the Company. Any such gains or excess distributions would be taxable at ordinary income rates. Under currently proposed, but not yet adopted, Treasury Regulations, the exchange of the Securities for Common Stock (either on conversion or on redemption of the Securities) would not be a "disposition" if the Company was a PFIC for the taxable year in which the conversion occurred. If the Company had been a PFIC but was no longer, the exchange would appear to be considered a taxable event. If a shareholder makes the qualified electing fund ("QEF") election, he would be required to include in his taxable income his pro rata share of the Company's 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 the Company). If the shareholder makes a QEF election, the tax-deferral charge and ordinary income rules described in the preceding paragraph will not apply. Actual distributions out of amounts so included in income will not be taxable to the shareholder. A shareholder's tax basis in its shares of Common Stock will be increased by the amount so included and decreased by the amount of nontaxable distributions. The QEF election is effective only if certain required information is made available by the Company to the U.S. Internal Revenue Service ("IRS"). In the event the Company is characterized as a PFIC for federal income tax purposes, the Company will undertake to provide to each U.S. shareholder the information needed to comply with the IRS information requirements and to determine each U.S. holder of Securities or Common Stock's pro rata share of the Company's ordinary earnings and net capital gain. Taxation of Non-U.S. Investors in the Company. The Company expects that most of its income will be from sources outside the United States and will not be effectively connected with a U.S. trade or business. Thus, a non-U.S. resident alien individual, a non-U.S. corporation, a non-U.S. trust or a non-U.S. estate will not be subject to U.S. federal taxation on distributions received from the Company unless those distributions are effectively connected with the conduct by the investor of a trade or business in the United States. In addition, such a non-U.S. investor will not be subject to U.S. federal taxation on gains realized by the investor on a sale or exchange of Securities or Common Stock unless the sale of such securities is attributable to an office or fixed place of business maintained by the investor in the United States. The determination of whether an investor is engaged in the conduct of a trade or business in the United States or whether the sale of an investor's Securities is attributable to an office or fixed place of business of the investor in the United States depends on the facts and circumstances of each investor's case. Each prospective investor should consult with his own tax advisor to determine whether his distributions or gains will be subject to U.S. federal taxation. Taxation of the Company. The Company's tax consequences result from its status as a partner in Globalstar. As a partnership, Globalstar itself will not be subject to federal income taxation. Generally, its partners will be taxed as if they directly expended their share of Globalstar expenditures and directly realized their share of Globalstar income. The Company expects, based on Globalstar's description of its proposed activities, that most of the Company's income will be from sources outside the United States and that such income will not be effectively connected with the conduct of a trade or business within the United States ("Foreign Income"). Thus, there generally will be no U.S. taxes on the Company's share of Globalstar's Foreign Income. The Company will be subject to U.S. tax at regular U.S. federal, state and local corporate rates on the Company's share of Globalstar's income which is effectively connected with the conduct of a trade or business in the United States ("U.S. Income"), and will be required to file federal, state and local income tax returns with respect to such U.S. Income. Globalstar is obligated to provide the information required for the Company to prepare its federal, state and local income tax returns. Globalstar intends to make cash distributions, to the extent of available funds, to all partners until the non-U.S. partners, such as the Company, have been distributed an amount sufficient to enable them to pay the federal, state and local income taxes on their share of Globalstar's U.S. Income. The distribution to non-U.S. partners for federal income taxes may be made by a withholding tax payment made by Globalstar to the U.S. Treasury. The amount withheld may exceed the 55 60 amount of the Company's federal income tax liability and the Company would then be entitled to seek a refund from the U.S. Treasury for the excess amount. In addition to the regular U.S. taxes, the Company will be subject to a United States branch profits tax (currently 30%) on actual or deemed withdrawals of its share of Globalstar's U.S. Income. A portion of each distribution by Globalstar to the Company will be a taxable withdrawal of U.S. income and, to the extent that it has cash available, Globalstar is required to make a distribution to the Company to enable it to pay its regular U.S. tax liability. 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 the Company or the Holders (other than Holders ordinarily resident in Bermuda) in respect of their investment in the Securities. The Company has 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 the Company or to any of its operations, or other obligations of the Company except insofar as such tax applies to persons ordinarily resident in Bermuda and holding such Securities or other obligations, or to any land in Bermuda leased or let to the Company. The Company is liable to pay the Bermuda government an annual registration fee calculated on a sliding scale based upon the assessable capital of the Company which fee will not exceed BD$25,000.00. The Company has been classified as non-resident of the Bermuda exchange control area by the Bermuda Monetary Authority, whose permission for the issue of the Securities has been sought. The transfer of Securities between persons regarded as non-resident of Bermuda for exchange control purposes and the issue and redemption of Securities 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 requires specific authorization under that Act. The Company by virtue of being a non-resident of Bermuda for exchange control purposes, is free to acquire, hold and sell any foreign currency, securities and other investments without restrictions. Purchasers of Securities 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 Securities. The Securities do not provide for additional payments by the Company following a change in the tax laws or rules of Bermuda that is adverse to the Holders. TAX CONSIDERATIONS IN OTHER JURISDICTIONS Based upon its review of current tax laws, including applicable international tax treaties of certain countries that Globalstar believes to be among its significant potential markets, the Company expects that a significant portion of its worldwide income will not be subject to tax by the United States, Bermuda or by the countries from which it derives its income. However, to the extent that Globalstar bears a higher foreign tax because any holder of Ordinary Partnership Interests (including the Company) is not subject to United States tax on its share of Globalstar's foreign income, the additional foreign tax will be specifically allocated to such partner and will reduce amounts distributed by Globalstar to such partner with respect to its Ordinary Partnership Interests. 56 61 SELLING HOLDERS The Securities were originally issued and sold by the Company in March and April, 1996, to Lehman Brothers Inc., Bear, Stearns & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation and Unterberg Harris (the "Initial Purchasers") in a private placement, and were resold by the Initial Purchasers in transactions exempt from the registration requirements of the Securities Act in the United States to qualified institutional buyers (as defined in Rule 144A under the Securities Act), to certain accredited investors (as defined in Rule 501(a) under the Securities Act) and outside the United States to non-U.S. persons in offshore transactions in reliance on Regulation S under the Securities Act. The Selling Holders may from time to time offer and sell the Offered Securities set forth below pursuant to this Prospectus. The following table sets forth information with respect to the Selling Holders (as of May 15, 1996) and the respective number of Securities and Conversion Shares beneficially owned by each Selling Holder. The term Selling Holders includes the holders listed below and the beneficial owners of the Offered Securities and their transferees, pledgees, donees or other successors. With the exception of Loral SpaceCom, other than as a result of the ownership of the Securities, none of the Selling Holders has, or within the past three years has had, any position, office or material relationship with the Company or any of its predecessors or affiliates. The table has been prepared based upon information furnished to the Company by the Trustee under the Indenture, by DTC and by or on behalf of the Selling Holders.
OFFERED SECURITIES ------------------------- PRINCIPAL NUMBER OF SELLING AMOUNT OF CONVERSION HOLDERS SECURITIES SHARES - --------------------------------------------------------------------- ------------ ---------- Loral SpaceCom(1).................................................... $102,500,000 1,576,923 Hull Capital Corp. .................................................. 50,000,000 769,230 Ardsley Partners..................................................... 33,250,000 511,538 Snyder Capital Management(2)......................................... 13,305,000 204,692 EDS Partners, L.P. .................................................. 12,500,000 192,307 Oaktree Capital Management, LLC...................................... 10,150,000 156,153 Pecks Management Partners LTD........................................ 8,200,000 126,153 John A. Levin & Co., Inc. ........................................... 6,620,000 101,846 Kayne, Anderson Investment(3)........................................ 5,000,000 76,923 Allstate Insurance Co. .............................................. 4,500,000 69,230 Glusken Sheff & Associates........................................... 4,500,000 69,230 Laterman Companies................................................... 4,500,000 69,230 Gruber & McBaine Capital(4).......................................... 3,200,000 49,230 HPB Associates....................................................... 2,500,000 38,461 Warburg, Pincus Counsellors, Inc.(5)................................. 2,000,000 30,768 Libertyview Capital Management....................................... 1,000,000 15,384 Gabelli & Company(6)................................................. 250,000 3,846 Bentley Capital Management, Inc. .................................... 150,000 2,307
- --------------- (1) Does not include 1,674,400 shares of Common Stock which are beneficially owned, but which are not being offered hereby. (2) Does not include 8,500 shares of Common Stock which are beneficially owned, but which are not being offered hereby. (3) Does not include 2,000 shares of Common Stock which are beneficially owned, but which are not being offered hereby. (4) Does not include 149,300 shares of Common Stock which are beneficially owned, but which are not being offered hereby. (5) Does not include 261,300 shares of Common Stock which are beneficially owned, but which are not being offered hereby. (6) Does not include 66,000 shares of Common Stock which are beneficially owned, but which are not being offered hereby. 57 62 The information concerning the Selling Holders may change from time to time. If required, such changes will be set forth in Prospectus Supplements. The per share conversion price and, therefore, the number of shares of Common Stock issuable upon conversion of the Securities, are subject to adjustment under certain circumstances. Accordingly, the number of shares of Common Stock issuable upon conversion of Securities may increase or decrease. Because the Selling Holders may offer all or some portion of the Securities or Conversion Shares pursuant to this Prospectus, and because there are currently no agreements, arrangements or understandings with respect to the sale of Securities or Conversion Shares, no estimate can be given as to the amount of Securities or Conversion Shares that will be held by the Selling Holders upon termination of this offering. PLAN OF DISTRIBUTION The Offered Securities offered hereby may be sold from time to time to purchasers directly by the Selling Holders. Alternatively, the Selling Holders may from time to time offer the Offered Securities to or through underwriters, broker-dealers or agents, who may receive compensation in the form of underwriting discounts, concessions or commissions from the Selling Holders or the purchasers of Offered Securities, for whom they may act as agent. The Selling Holders and any underwriters, broker-dealers or agents that participate in the distribution of the Offered Securities may be deemed to be "underwriters" within the meaning of the Securities Act and any profit on the sale of Offered Securities by them and any discounts, commissions, concessions or other compensation received by any such underwriter, broker-dealer or agent may be deemed to be underwriting discounts and commissions under the Securities Act. The Offered Securities offered hereby may be sold from time to time in one or more transactions at fixed prices, at prevailing market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. Such prices will be determined by the Selling Holders or by agreement between the Selling Holders and underwriters and dealers who may receive fees or commissions in connection therewith. The sale of the Offered Securities may be effected in transactions (which may involve crosses or block transactions) (i) on any national securities exchange or quotation service on which the Securities or the Common Stock may be listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than on such exchanges or in the over-the-counter market or (iv) through the writing of options. At the time a particular offering of Offered Securities is made, a Prospectus Supplement, if required, will be distributed which will set forth the aggregate amount and type of Offered Securities being offered and the terms of the offering, including the name or names of any underwriters, broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the Selling Holders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers. The outstanding Common Stock is listed on the NNM, and the Company has applied for listing the Conversion Shares on the NNM. There is no assurance as to the development or liquidity of any trading market that may develop for the Securities. Certain of the Initial Purchasers have engaged in transactions with and performed certain investment banking and other services for the Company in the past and received customary fees in connection therewith, and may do so from time to time in the future. To comply with the securities laws of certain jurisdictions, if applicable, the Offered Securities will be offered or sold in such jurisdictions only through registered or licensed brokers or dealers. In addition, in certain jurisdictions the Offered Securities may not be offered or sold (unless they have been registered or qualified for sale) in such jurisdictions or an exemption from registration or qualification is available and is complied with. Under applicable rules and regulations under the Exchange Act, any person engaged in a distribution of the Securities or the Common Stock may not simultaneously engage in market-making activities with respect to such securities for a period of two (with respect to the Conversion Shares) or nine (with respect to the Securities) business days prior to the commencement of such distribution. In addition to and without limiting the foregoing, each Selling Holder and any other person participating in a distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including without limitation Rules 10b-6 and 10b-7, which provisions may limit the timing of purchases and sales of any of the 58 63 Offered Securities by the Selling Holders or any such other person. All of the foregoing may affect the marketability of the Securities and the Common Stock and brokers' and dealers' ability to engage in market-making activities with respect to these securities. Pursuant to the Registration Rights Agreement, all expenses of the registration of the Offered Securities will be paid by the Company, including, without limitation, Commission filing fees and expenses of compliance with state securities or "blue sky" laws; provided, however, that the Selling Holders will pay all underwriting discounts, selling commissions and related fees, if any. The Selling Holders and the Company have agreed to indemnify each other against certain liabilities, including certain liabilities arising under the Securities Act, or will be entitled to contribution in connection therewith. This offering will terminate upon the earlier of (i) March 6, 1999, (ii) the date that the Securities no longer constitute restricted securities under Rule 144(k) of the Securities Act, or (iii) the date that all of the Securities or Conversion Shares covered by the Registration Statement have been sold pursuant to the Registration Statement. 59 64 LEGAL OPINIONS Certain United States tax matters described under "Taxation" will be passed upon for the Company by Willkie Farr & Gallagher, New York, New York, general counsel to the Company. The validity of the Securities and Conversion Shares offered hereby will be passed upon for the Company by Appleby, Spurling & Kempe, Hamilton, Bermuda. As of June 14, 1996, partners and counsel in Willkie Farr & Gallagher beneficially own 22,400 shares of the Common Stock. Mr. Robert B. Hodes is of counsel to the law firm of Willkie Farr & Gallagher, and a Director of the Company and Loral SpaceCom and a member of the Audit, Compensation and Executive Committees of the Boards of Directors of both the Company and Loral SpaceCom. EXPERTS The financial statements of the Company and Globalstar, L.P. have been incorporated in this Prospectus by reference from the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their reports, which are incorporated herein by reference, and have been so incorporated in reliance upon the reports of said firm given upon their authority as experts in auditing and accounting. 60 65 - ------------------------------------------------------ - ------------------------------------------------------ NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE OFFERED SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY OR GLOBALSTAR SINCE THE DATE HEREOF. ------------------ TABLE OF CONTENTS
PAGE Summary.............................. 1 Risk Factors......................... 14 Deficiency of Earnings to Cover Fixed Charges and Preferred Stock Dividends.......................... 27 Use of Proceeds...................... 27 Dividend Policy...................... 27 Principal Partners of Globalstar..... 28 Governance of Globalstar............. 29 Description of Capital Stock......... 35 Certain Foreign Issuer Considerations..................... 38 Description of Securities............ 39 Taxation............................. 39 Selling Holders...................... 52 Plan of Distribution................. 53 Legal Opinions....................... 55 Experts.............................. 55
- ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ GLOBALSTAR TELECOMMUNICATIONS LIMITED $310,000,000 6 1/2% CONVERTIBLE PREFERRED EQUIVALENT OBLIGATIONS DUE 2006 AND 4,769,230 SHARES OF COMMON STOCK ------------------------- PROSPECTUS JUNE 20, 1996 ------------------------- - ------------------------------------------------------ - ------------------------------------------------------ 66 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the fees and expenses payable by the Registrant in connection with this offering, other than underwriting discounts and commissions. All the amounts shown are estimates, except the SEC registration fee: SEC registration fee...................................... $106,897 Nasdaq National Market listing fee........................ 17,500 Legal fees and expenses................................... 35,000 Accounting fees and expenses.............................. 5,000 Miscellaneous fees and expenses........................... 10,603 -------- Total................................................ $175,000 ========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Bermuda law permits a company to indemnify its directors and officers, except for any act of willful negligence, willful default, fraud or dishonesty. The Registrant has provided in its Bye-Laws that its directors and officers will be indemnified and held harmless against any expenses, judgments, fines, settlements and other amounts incurred by reason of any act or omission in the discharge of their duty, other than in the case of willful negligence, willful default, fraud or dishonesty. Bermuda law and the Bye-Laws of the Registrant also permit the Registrant to purchase insurance for the benefit of its directors and officers against any liability incurred by them for the failure to exercise the requisite care, diligence and skill in the exercise of their powers and the discharge of their duties, or indemnifying them in respect of any loss arising or liability incurred by them by reason of negligence, default, breach of duty or breach of trust. The Registrant intends to enter into indemnification agreements with its officers and directors. To the extent permitted by law, the indemnification agreements may require the Registrant, among other things, to indemnify such officers and directors against certain liabilities that may arise by reason of their status or service as directors (other than liabilities arising from willful misconduct of a culpable nature) and to advance their expenses incurred as a result of any proceedings against them as to which they could be indemnified. The Registrant maintains a directors' and officers' liability insurance policy. II-1 67 ITEM 16. EXHIBITS.
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS - ----------- ---------------------------------------------------------------------------------- 4.1 -- Indenture, dated as of March 6, 1996, by and between the Company and the Bank of New York, as trustee, including form of security. 4.2 -- Registration Rights Agreement, dated March 6, 1996, by and among the Company, Globalstar and the Initial Purchasers. 5 -- Opinion of Appleby, Spurling & Kempe. 8.1 -- Tax Opinion of Willkie Farr & Gallagher. 8.2 -- Tax Opinion of Appleby, Spurling & Kempe (included as part of their opinion filed as Exhibit 5). 12 -- Statement Regarding Computation of Ratios. 23.1 -- Consent of Deloitte & Touche LLP. 23.2 -- Consent of Appleby, Spurling & Kempe (included in their opinion filed as Exhibit 5). 23.3 -- Consent of Willkie Farr & Gallagher (included in their opinion filed as Exhibit 8.1). 24 -- Powers of Attorney (included on signature page). 25 -- Statement on Form T-1 of Eligibility of Trustee.
II-2 68 ITEM 17. UNDERTAKINGS (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the registration statement is on Form S-3 or Form S-8, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the registrant pursuant to the provisions described under item 15 above, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding), is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-3 69 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON JUNE 20, 1996. GLOBALSTAR TELECOMMUNICATIONS LIMITED By: /s/ BERNARD L. SCHWARTZ ------------------------------------ Bernard L. Schwartz Chairman of the Board and Chief Executive Officer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS BELOW CONSTITUTES AND APPOINTS BERNARD L. SCHWARTZ AND MICHAEL B. TARGOFF AND EACH OF THEM, WITH FULL POWER TO ACT WITHOUT THE OTHER, HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, AND ANY AND ALL CAPACITIES, TO SIGN ANY AND ALL AMENDMENTS TO THIS REGISTRATION STATEMENT (INCLUDING POST-EFFECTIVE AMENDMENTS), AND TO FILE THE SAME, WITH ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON THEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS OR ANY OF THEM, OR THEIR OR HIS SUBSTITUTES OR SUBSTITUTE, MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE THEREOF. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
NAME TITLE DATE - ------------------------------------------ --------------------------------------------------- /s/ BERNARD L. SCHWARTZ Chairman of the Board and Chief June 20, 1996 - ------------------------------------------ Executive Officer (Principal BERNARD L. SCHWARTZ Executive Officer) /s/ MICHAEL B. TARGOFF President, Chief Operating Officer June 20, 1996 - ------------------------------------------ and Director MICHAEL B. TARGOFF /s/ ROBERT B. HODES Director June 20, 1996 - ------------------------------------------ ROBERT B. HODES /s/ A. ROBERT TOWBIN Director June 20, 1996 - ------------------------------------------ A. ROBERT TOWBIN /s/ MICHAEL P. DEBLASIO Senior Vice President, Chief June 20, 1996 - ------------------------------------------ Officer (Principal Financial MICHAEL P. DEBLASIO Officer) and Director /s/ NICHOLAS C. MOREN Vice President and Treasurer June 20, 1996 - ------------------------------------------ (Principal Accounting Officer) NICHOLAS C. MOREN
II-4 70 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS - ----------- ---------------------------------------------------------------------------------- 4.1 -- Indenture, dated as of March 6, 1996, by and between the Company and the Bank of New York, as trustee, including form of security. 4.2 -- Registration Rights Agreement, dated March 6, 1996, by and among the Company, Globalstar and the Initial Purchasers. 5 -- Opinion of Appleby, Spurling & Kempe. 8.1 -- Tax Opinion of Willkie Farr & Gallagher. 8.2 -- Tax Opinion of Appleby, Spurling & Kempe (included as part of their opinion filed as Exhibit 5). 12 -- Statement Regarding Computation of Ratios. 23.1 -- Consent of Deloitte & Touche LLP. 23.2 -- Consent of Appleby, Spurling & Kempe (included in their opinion filed as Exhibit 5). 23.3 -- Consent of Willkie Farr & Gallagher (included in their opinion filed as Exhibit 8.1). 24 -- Powers of Attorney (included on signature page). 25 -- Statement on Form T-1 of Eligibility of Trustee.
II-5 EX-4.1 2 INDENTURE AGREEMENT GLOBALSTAR/BANK OF NEW YORK 1 Exhibit 4.1 EXECUTION COPY ================================================================================ INDENTURE Between GLOBALSTAR TELECOMMUNICATIONS LIMITED and THE BANK OF NEW YORK, as Trustee Dated as of March 6, 1996 6 1/2% Convertible Preferred Equivalent Obligations due 2006 ================================================================================ 2 TABLE OF CONTENTS
Page ---- ARTICLE I Definitions and Other Provisions of General Application SECTION 1.01. Definitions ............................................... 1 SECTION 1.02. Compliance Certificates and Opinions .............................................. 12 SECTION 1.03. Form of Documents Delivered to Trustee ............................................... 13 SECTION 1.04. Acts of Holders ........................................... 14 SECTION 1.05. Notices, etc., to Trustee and Company ............................................... 15 SECTION 1.06. Notice to Holders; Waiver ................................. 15 SECTION 1.07. Conflict with Trust Indenture Act ......................... 16 SECTION 1.08. Effect of Headings and Table of Contents .............................................. 16 SECTION 1.09. Successors and Assigns .................................... 16 SECTION 1.10. Separability Clause ....................................... 16 SECTION 1.11. Benefits of Indenture ..................................... 16 SECTION 1.12. Governing Law ............................................. 17 SECTION 1.13. Legal Holidays ............................................ 17 ARTICLE II Security Forms SECTION 2.01. Forms Generally ........................................... 17 SECTION 2.02. Global Securities; Book Entry Provisions; Certificated Securities ............................................ 17
- -------------------- Note: This table of contents shall not, for any purpose, be deemed to be part of the Indenture. 3 2
Page ---- ARTICLE III The Securities SECTION 3.01. Title and Terms ........................................... 19 SECTION 3.02. Denominations ............................................. 21 SECTION 3.03. Execution, Authentication, Delivery and Dating ............................................ 21 SECTION 3.04. Temporary Securities ...................................... 21 SECTION 3.05. Registrar, Paying Agent and Conversion Agent ................................................. 22 SECTION 3.06. Mutilated, Destroyed, Lost and Stolen Securities ............................................ 27 SECTION 3.07. Payment of Interest; Mechanics of Payment, Interest Rights Preserved ............................................. 28 SECTION 3.08. Persons Deemed Owners ..................................... 30 SECTION 3.09. Cancellation .............................................. 30 SECTION 3.10. Computation of Interest ................................... 31 SECTION 3.11. CUSIP Number .............................................. 31 ARTICLE IV Satisfaction and Discharge SECTION 4.01. Satisfaction and Discharge of Indenture ............................................. 31 SECTION 4.02. Application of Trust Money ................................ 33 ARTICLE V Remedies SECTION 5.01. Collection of Obligations and Suits for Enforcement by Trustee ............................ 33 SECTION 5.02. Trustee May File Proofs of Claim .......................... 34 SECTION 5.03. Trustee May Enforce Claims Without Possession of Securities .............................. 35 SECTION 5.04. Application of Money Collected ............................ 35 SECTION 5.05. Limitation on Suits ....................................... 36 SECTION 5.06. Right of Holders To Receive Principal, Premium and Interest and To Convert ........................................ 36 SECTION 5.07. Restoration of Rights and Remedies ........................ 37 SECTION 5.08. Rights and Remedies Cumulative ............................ 37
4 3
Page ---- SECTION 5.09. Delay or Omission Not Waiver .............................. 37 SECTION 5.10. Control by Holders ........................................ 37 SECTION 5.11. Waiver of Past Defaults ................................... 38 SECTION 5.12. Undertaking for Costs ..................................... 38 SECTION 5.13. Waiver of Stay, Usury or Extension Laws .................................................. 39 SECTION 5.14. Voting Rights Upon a Deferral Trigger Event ................................................. 39 ARTICLE VI The Trustee SECTION 6.01. Certain Duties and Responsibilities ....................... 40 SECTION 6.02. Certain Rights of Trustee ................................. 41 SECTION 6.03. Not Responsible for Recitals or Issuance of Securities ................................ 42 SECTION 6.04. May Hold Securities ....................................... 43 SECTION 6.05. Money Held in Trust ....................................... 43 SECTION 6.06. Compensation and Reimbursement ............................ 43 SECTION 6.07. Corporate Trustee Required; Eligibility ........................................... 44 SECTION 6.08. Resignation and Removal; Appointment of Successor .......................................... 45 SECTION 6.09. Acceptance of Appointment by Successor .......................................... 46 SECTION 6.10. Merger, Conversion, Consolidation or Succession to Business ................................ 47 SECTION 6.11. Preferential Collection of Claims Against Company ....................................... 47 SECTION 6.12. Appointment of Authenticating Agent ....................... 48 ARTICLE VII Holders' List and Reports by Trustee and Company SECTION 7.01. Company To Furnish Trustee Names and Addresses of Holders .................................. 50 SECTION 7.02. Preservation of Information; Communications to Holders ............................. 50 SECTION 7.03. Reports by Trustee ........................................ 52 SECTION 7.04. SEC Reports; Reports by Company ........................... 52 SECTION 7.05. Compliance Certificate .................................... 53
5 4
Page ---- ARTICLE VIII Consolidation, Merger, Conveyance or Transfer SECTION 8.01. Company May Consolidate, etc., Only on Certain Terms ......................................... 53 SECTION 8.02. Successor Corporation Substituted ......................... 54 ARTICLE IX Supplemental Indentures SECTION 9.01. Supplemental Indentures Without Consent of Holders .................................... 54 SECTION 9.02. Supplemental Indentures with Consent of Holders ............................................ 55 SECTION 9.03. Execution of Supplemental Indentures ...................... 56 SECTION 9.04. Effect of Supplemental Indentures ......................... 56 SECTION 9.05. Conformity with Trust Indenture Act ....................... 57 SECTION 9.06. Reference in Securities to Supplemental Indentures ............................... 57 ARTICLE X Covenants SECTION 10.01. Payment of Principal, Premium and Interest .............................................. 57 SECTION 10.02. Maintenance of Office or Agency .......................... 58 SECTION 10.03. Security Payments To Be Held in Trust .............................................. 59 SECTION 10.04. Corporate Existence ...................................... 61 SECTION 10.05. Waiver of Certain Covenants .............................. 61 ARTICLE XI Redemption of Securities SECTION 11.01. Right of Redemption; Mechanics of Redemption ............................................ 61 SECTION 11.02. Applicability of Article ................................. 62 SECTION 11.03. Election To Redeem ....................................... 62
6 5
Page ---- SECTION 11.04. Selection by Trustee of Securities To Be Redeemed ........................................... 63 SECTION 11.05. Notice of Redemption ..................................... 63 SECTION 11.06. Deposit of Redemption Price .............................. 64 SECTION 11.07. Securities Payable on Redemption Date ....................................... 65 SECTION 11.08. Securities Redeemed in Part .............................. 65 ARTICLE XII Conversion of Securities SECTION 12.01. Conversion Privilege and Conversion Price ................................................. 65 SECTION 12.02. Exercise of Conversion Privilege ......................... 66 SECTION 12.03. Fractions of Shares ...................................... 67 SECTION 12.04. Adjustment of Conversion Price ........................... 68 SECTION 12.05. Notice of Adjustment of Conversion Price ................................................. 80 SECTION 12.06. Provisions in Case of Consolidation, Merger or Conveyance or Transfer of Properties and Assets ................................. 80 SECTION 12.07. Notice of Certain Corporate Action ....................... 82 SECTION 12.08. Company To Reserve Common Stock .......................... 83 SECTION 12.09. Taxes on Conversions ..................................... 83 SECTION 12.10. Covenant as to Common Stock .............................. 83 SECTION 12.11. Responsibility of Trustee ................................ 83 ARTICLE XIII Subordination of Securities SECTION 13.01. Securities Subordinate to Debt Obligations ........................................... 84 SECTION 13.02. No Payments When Debt Obligations in Default; Payment Over of Proceeds upon Dissolution, etc ................................. 84 SECTION 13.03. Trustee To Effectuate Subordination ......................................... 87 SECTION 13.04. Trustee Not Charged with Knowledge of Prohibition ........................................... 87 SECTION 13.05. Rights of Trustee as Holder of Debt Obligations ........................................... 88 SECTION 13.06. Article Applicable to Paying Agent ....................... 88 SECTION 13.07. Trustee Not Fiduciary for Holders of Debt Obligations ...................................... 88
7 6 EXHIBIT A FORM OF SECURITY EXHIBIT B FORM OF TRANSFER CERTIFICATE EXHIBIT C FORM OF ACCREDITED INVESTOR TRANSFEREE CERTIFICATE 8 7 GLOBALSTAR TELECOMMUNICATIONS LIMITED Reconciliation and Tie Between the Trust Indenture Act of 1939 and Indenture dated as of March 5, 1996
Trust Indenture Act Section Indenture Section - --------------- ----------------- Section 310(a)(1) ........................................................ 6.07 (a)(2) ................................................................. 6.07 (a)(3) ................................................................. Not Applicable (a)(4) ................................................................. Not Applicable (a)(5) ................................................................. 6.07 (b) .................................................................... 6.07 6.08 Section 311(a) ........................................................... 6.11 (b) .................................................................... 6.11 (b)(2) ................................................................. 7.03(a)(2) 7.03(b) Section 312(a) ........................................................... 7.01 7.02(a) (b) .................................................................... 7.02(b) (c) .................................................................... 7.02(c) Section 313(a) ........................................................... 7.03(a) (b) .................................................................... 7.03(b) (c) .................................................................... 7.03(a) (d) .................................................................... 7.03(c) Section 314(a) ........................................................... 7.04 (b) .................................................................... Not Applicable (c)(1) ................................................................. 1.02 (c)(2) ................................................................. 1.02 (c)(3) ................................................................. Not Applicable (d) .................................................................... Not Applicable (e) .................................................................... 1.02 Section 315(a) ........................................................... 6.01(a) (b) .................................................................... 6.02 7.03(a)(6) (c) .................................................................... 6.01(b) (d) .................................................................... 6.01(c) (d)(1) ................................................................. 6.01(a)(1) (d)(2) ................................................................. 6.01(c)(2) (d)(3) ................................................................. 6.01(c)(3) (e) .................................................................... 5.14 Section 316(a) ........................................................... 1.01 (a)(1)(A) .............................................................. 5.02 5.12
9
Trust Indenture Act Section Indenture Section - --------------- ----------------- (a)(1)(B) .............................................................. 5.13 (a)(2) ................................................................. Not Applicable (b) .................................................................... 5.08 Section 317(a)(1) ........................................................ 5.03 (a)(2) ................................................................. 5.04 (b) .................................................................... 10.03 Section 318(a) ........................................................... 1.07
- -------------------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Indenture. 10 INDENTURE dated as of March 6, 1996, between GLOBALSTAR TELECOMMUNICATIONS LIMITED, a corporation duly organized and existing under the laws of Bermuda (herein called the "Company"), having its principal office at Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda, and THE BANK OF NEW YORK, a New York banking corporation, as Trustee (herein called the "Trustee"). The Company has duly authorized the creation of an issue of its 6 1/2% Convertible Preferred Equivalent Obligations due 2006 (herein called the "Securities") of substantially the tenor and amount hereinafter set forth and to provide therefor the Company has duly authorized the execution and delivery of this Indenture. All things necessary to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, and to make this Indenture a valid agreement of the Company, in accordance with their and its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders (as hereinafter defined) thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: ARTICLE I Definitions and Other Provisions of General Application SECTION 1.01. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; 11 2 (b) all other terms used herein which are defined in the Trust Indenture Act (as hereinafter defined), either directly or by reference therein, have the meanings assigned to them therein; and (c) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Act" when used with respect to any Holder has the meaning specified in Section 1.04. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition of Affiliate, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Authenticating Agent" means any Person authorized by the Trustee to act on behalf of the Trustee to authenticate Securities. "Average Market Value" means the arithmetic average of the Current Market Value of the Common Stock for the ten Trading Days ending on the second Business Day prior to the applicable date of payment. "Board of Directors" means either the board of directors of the Company or any duly authorized committee of that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in The City of New York are authorized or obligated by law or executive order to be closed. 12 3 "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Stock", as applied to the capital stock of any corporation other than the Company, shall mean the capital stock of any class which has no preference in respect of dividends or other distributions of assets or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of such corporation and which is not subject to redemption by such corporation; and as applied to the Company, shall mean the Common Stock of the Company, par value $1.00; provided, however, that, subject to the provisions of Section 12.06, shares issuable on conversion of Securities shall include only shares of the class designated as Common Stock of the Company at the date of the execution of this instrument or shares of any class or classes resulting from any reclassification or reclassification thereof which have no preference in respect of dividends or other distributions of assets or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and which are not subject to redemption by the Company; provided further, that if at any time there shall be more than one such resulting class, the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its President or a Vice President and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee; provided, however, that any person duly designated by the Chairman of the Board, the President, a Vice President or any 13 4 other officer of the Company may sign or execute on behalf of any or all such persons listed above. "Conversion Agent" has the meaning specified in Section 3.05(a). "Conversion Price" has the meaning specified in Section 12.01. "Corporate Trust Office" means the principal office of the Trustee in The City of New York at which at any particular time its corporate trust business shall be administered, which office at the time of the execution of this indenture is located at 101 Barclay Street, Floor 21 West, New York, New York 10286, Attention of Corporate Trust Trustee Administration. "Corporation" includes corporations, associations, companies and business trusts. "CPE Nominee" has the meaning specified in Section 5.14. "CPE Representative" has the meaning specified in Section 5.14. "Current Market Price" has the meaning specified in Section 12.04. "Current Market Value" means the average of the high and low sales prices of the Common Stock as reported on the Nasdaq National Market or any national securities exchange upon which the Common Stock is then listed for the Trading Day in question. "Debt Obligations" will mean the principal of, premium, if any, interest and other amounts due on any indebtedness, whether now outstanding or hereafter created, incurred, assumed or guaranteed by the Company, for money borrowed from others (including obligations under capitalized leases, purchase money indebtedness or trade credit), liabilities incurred in the ordinary course of business, commitment, standby and other forms due and payable to financial institutions with respect to credit facilities that may be maintained by the Company or in connection with the acquisition by the Company of any other business or entity, or in respect of letters of credit or bid, performance or surety bonds issued for the account or on the credit of the 14 5 Company, and, in each case, all renewals, extensions and refundings thereof, other than (i) any such indebtedness as to which, in the instrument creating or evidencing the same, it is provided that such indebtedness is pari passu or junior in right of payment to the Securities and (ii) the Securities. "Deferral Election" means the election of the Board of Directors to defer the payment of an installment of interest due on an Interest Payment Date, or any portion due thereof. "Deferral Trigger Event" means the Company has deferred the payment of interest due under the Securities in an aggregate equal to six quarterly interest payments. "Depositary" means The Depository Trust Company, its nominees and their respective successors. "Dilution Trigger Event" has the meaning specified in Section 12.04. "Exchange Act" means the Securities Exchange Act of 1934. "General Partners' Committee" has the meaning specified in the Globalstar Amended Partnership Agreement. "Globalstar Amended Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership dated as of December 31, 1994, among the Company and certain general partners and limited partners named therein as amended as of March 6, 1996, pursuant to which the Preferred Partnership Interests were issued to the Company. "Globalstar Corresponding Redemption" means the redemption payments set forth in the Globalstar Amended Partnership Agreement corresponding to Provisional Redemption, Optional Redemption or Mandatory Redemption, as the case may be. "Globalstar Interest Payment Notice" means written notice delivered to the Company, with a copy to the Trustee, by Globalstar L.P. notifying the Company of (i) whether Globalstar L.P. has elected to defer the payment of a Scheduled Distribution pursuant to the provisions of the Globalstar Amended Partnership Agreement and (ii) if it has not elected to defer such Scheduled Distribution, whether it 15 6 will pay such Scheduled Distribution (A) in cash, (B) by delivery of Ordinary Partnership Interests or (C) through any combination of the foregoing. Such Notice shall be delivered at least 20 Business Days prior to the applicable Interest Payment Date and shall contain any other information required by the Globalstar Amended Partnership Agreement. "Globalstar L.P." means Globalstar, L.P., a registered Delaware limited partnership, and any successor entities. "Globalstar Partnership Interests" means Ordinary Partnership Interests and Preferred Partnership Interests. "Globalstar Redemption Notice" means written notice delivered to the Company by Globalstar notifying the Company of (i) in the case of a Provisional or Optional Redemption, Globalstar L.P.'s election to redeem any Preferred Partnership Interests pursuant to the provisions of the Globalstar Amended Partnership Agreement and (ii) whether it will make such redemption (A) in cash, (B) by delivery of Ordinary Partnership Interests or (C) through any combination of the foregoing. Such Notice shall be delivered at least 20 Business Days prior to the applicable Redemption Date and shall contain any other information required by the Globalstar Amended Partnership Agreement. "GTL Interest Payment Notice" means written notice delivered to the Holders and Globalstar L.P., with a copy to the Trustee, notifying them (i) whether the Company has elected to defer the payment of an interest payment pursuant to a Deferral Election, and (ii) if it has not elected to defer such interest, whether the Company is paying the installment of interest due on the applicable Interest Payment Date in (A) cash, (B) Common Stock or (C) through any combination of the foregoing. Such Notice shall be delivered at least 12 Business Days prior to the applicable Interest Payment Date and shall contain any information pertinent to such payment. The Company shall only deliver such Notice to the Holders if the form of payment includes Common Stock. "GTL Redemption Notice" means written notice delivered to the Holders, with a copy to the Trustee, notifying the Holders of the Company's election to redeem the Securities pursuant to a Provisional Redemption or Optional Redemption, as the case may be. Such Notice shall be delivered no later than one Business Day following receipt of the Globalstar Redemption Notice. 16 7 "GTL Response Redemption Notice" means written notice delivered to the Holders and Globalstar L.P., with a copy to the Trustee, notifying them of whether the Company is paying the applicable Redemption Price on such Securities in (i) cash, (ii) Common Stock or (iii) through any combination of the foregoing. Such Notice shall be delivered at least 12 Business Days prior to the applicable Redemption Date and shall contain any information pertinent to such redemption. The Company shall only deliver such Notice to the Holders if the form of payment includes Common Stock. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof. "Initial Purchasers" has the meaning specified in the Purchase Agreement. "Interest Arrearages" means the amount of interest payments that the Company has elected to defer pursuant to a Deferral Election that remains unpaid. "Interest Make-Whole Payment" means payment due to Holders whose Securities have been called for redemption pursuant to a Provisional Redemption, which shall be equal to the present value of the aggregate amount of interest payments thereafter payable on such Securities during the Interest Make-Whole Period, which shall be calculated using the bond equivalent yield on United States treasury notes or bills having a term nearest in length to that of the Interest Make-Whole Period as of the Notice Date. "Interest Make-Whole Period" means the period of time from Provisional Redemption Date to the third anniversary of March 6, 1996. "Interest Payment Date" means the date specified in a Security as the fixed dates on which any installment of interest is due and payable; provided, however, that if such date shall not be a Business Day, then such date shall be the next Business Day. "Lock-Up Agreement" means the letter agreement delivered to the Initial Purchasers by Loral SpaceCom dated 17 8 March 6, 1996, relating to the lock-up of the Securities and Common Stock. "Loral SpaceCom" means Loral Space & Communications Ltd. and any successor entities. "Loral SpaceCom Designee" means any member of the Board of Directors designated by Loral SpaceCom. "Mandatory Redemption Date" means the date specified in the Security as the fixed date on which the principal of such Security is due and payable; provided, however, that, if such date shall not be a Business Day, then the Mandatory Redemption Date shall be the next Business Day. "Notice Date" means the date of mailing of a notice of Provisional Redemption of Securities by the Company to the Holders. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the President or a Vice President and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel acceptable to the Trustee, who may be counsel for, or employed by, the Company. "Optional Redemption" has the meaning specified in Section 6 of the Security. "Optional Redemption Date" means the Redemption Date for an Optional Redemption as specified in Section 6 of the Security. "Ordinary Partnership Interest" has the meaning specified in the Globalstar Amended Partnership Agreement. "Outstanding" when used with respect to Securities means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; 18 9 (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided, that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Securities paid pursuant to the third paragraph of Section 3.06 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture; provided, however, that, in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver or taken any other action hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent, waiver or other action, only Securities which the Trustee has actual knowledge of being so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. "Paying Agent" has the meaning specified in Section 3.05(a). "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, limited liability company, unincorporated organization or government or any agency or political subdivision thereof. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security 19 10 authenticated and delivered under Section 3.06 in exchange for or in lieu of all or a portion of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as such mutilated, destroyed, lost or stolen Security or portion thereof. "Preferred Partnership Interests" has the meaning specified in the Globalstar Amended Partnership Agreement. "Preferred Stock" means capital stock of the Company designated by the Board of Directors having a preference in respect of dividends or other distributions of assets or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company. "Provisional Redemption" has the meaning specified in Section 5 of the Security. "Provisional Redemption Date" means the Redemption Date for a Provisional Redemption as specified in Section 5 of the Security. "Purchase Agreement" means the purchase agreement dated February 29, 1996, between the Company and the Initial Purchasers in connection with the Securities, as amended from time to time. "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture and includes the Provisional Redemption Date, the Optional Redemption Date and Mandatory Redemption Date, as the case may be. "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture and, in the case of a Provisional Redemption, includes the applicable Interest Make-Whole Payment as specified in Section 5 of the Security. "Registrar" has the meaning specified in Section 3.05(a). "Registration Rights Agreement" means the Registration Rights Agreement relating to the Securities dated March 6, 1996, between the Company and the Initial Purchaser. 20 11 "Regular Record Date" for the interest payable on any Interest Payment Date means the February 15, May 15, August 15 or November 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. "Responsible Officer", when used with respect to the Trustee, means any officer within the corporate trust department (or any successor department) of the Trustee, including, without limitation, any Vice President, any Assistant Vice President, any Assistant Treasurer, any Assistant Secretary or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject. "Scheduled Distribution" means the distribution required to be made in respect of the Preferred Partnership Interests pursuant to the Globalstar Amended Partnership Agreement corresponding to the installments of interest due pursuant to this Indenture. "Securities" means the 6 1/2% Convertible Preferred Equivalent Obligations due 2006 issued pursuant to this Indenture. "Security Register" has the meaning specified in Section 3.05(a). "Shelf Registration Statement" has the meaning specified in the Registration Rights Agreement. "Stock Transfer Agent" means The Bank of New York or any other entity named as the stock transfer agent of the Company. "Trading Day" means (a) if the applicable security is listed or admitted for trading on the New York Stock Exchange or another national securities exchange, a day on which such security actually trades on the New York Stock Exchange or another national securities exchange, (b) if the applicable security is quoted on The Nasdaq National Market, a day on which such security actually trades or (c) if the applicable security is not so listed, admitted for trading or quoted, any Business Day on which such security actually trades. 21 12 "Trigger Percentages" means the percentages set forth in Section 5 of the Security that triggers the Company's option to redeem the Securities pursuant to a Provisional Redemption. "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 and as in force at the date as of which this instrument was executed, except as provided in Section 9.05. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean such successor Trustee. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America are pledged and which are not callable or redeemable at the issuer's option. "Vice President", when used with respect to the Company or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". SECTION 1.02. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. 22 13 Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 1.03. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should 23 14 know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 1.04. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The ownership of Securities shall be proved by the Security Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security 24 15 and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. SECTION 1.05. Notices, etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (a) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing and mailed, first-class, postage prepaid, to the Trustee at its Corporate Trust Office, Attention of Corporate Trust Trustee Administration, or (b) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument or at any other address previously furnished in writing to the Trustee by the Company, or (c) the Company by the Trustee or the Trustee by the Company shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if transmitted by facsimile transmission to the Company at (212) 867-5248 or to the Trustee at (212) 815-5915 (or to such other facsimile transmission number previously furnished in writing to the Company by the Trustee or to the Trustee by the Company) and in each case confirmed by a copy sent to the Company or to the Trustee, as the case may be, by guaranteed overnight courier. SECTION 1.06. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date and not earlier than the 25 16 earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 1.07. Conflict with Trust Indenture Act. If and to the extent that any provision hereof limits, qualifies or conflicts with the duties imposed by, or with another provision (an "incorporated provision") included in this Indenture by operation of, any of Sections 3.10 to 3.18, inclusive, of the Trust Indenture Act, such imposed duties or incorporated provision shall control. SECTION 1.08. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 1.09. Successors and Assigns. All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not. SECTION 1.10. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 1.11. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, the holders of Debt Obligations 26 17 and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 1.12. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. SECTION 1.13. Legal Holidays. In any case where any Interest Payment Date or any Redemption Date of any Security or the last date on which a Holder has the right to convert his Securities shall not be a Business Day, then (notwithstanding any other provision of this Indenture or of the Securities) payment of principal or Redemption Price of or payment of interest on or conversion of the Securities need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on such Interest Payment Date or such Redemption Date or on such last day for conversion; provided, that no interest shall accrue for the period from and after such Interest Payment Date or such Redemption Date, as the case may be. ARTICLE II Security Forms SECTION 2.01. Forms Generally. The Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A which is hereby incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). The Company shall furnish any such legend not contained in Exhibit A to the Trustee in writing. Each Security shall be dated the date of its authentication. The terms and provisions of the Securities set forth in Exhibit A are part of the terms of this Indenture and, to the extent applicable, the Company and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby. SECTION 2.02. Global Securities; Book-Entry Provisions; Certificated Securities. (a) The Securities are 27 18 being offered and sold by the Company pursuant to a Purchase Agreement. Securities offered and sold to Qualified Institutional Buyers ("QIBs") in reliance on Rule 144A under the Securities Act ("Rule 144A"), as provided in the Purchase Agreement, shall be issued in the form of one or more permanent global Securities in definitive, fully registered form without interest coupons with the Global Securities Legend and Restricted Securities Legend set forth in Exhibit A hereto (each, a "Global Security"), which shall be deposited on behalf of the purchasers of the Securities represented thereby with the Trustee, at its New York office, as custodian for the Depositary, and registered in the name of the Depositary or a nominee of the Depositary, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depositary or its nominee as hereinafter provided. (b) This Section shall apply only to a Global Security deposited with or on behalf of the Depositary. The Company shall execute and the Trustee shall, in accordance with this Section, authenticate and deliver initially one or more Global Securities that (i) shall be registered in the name of Cede & Co. or other nominee of such Depositary and (ii) shall be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions or held by the Trustee as custodian for the Depositary pursuant to a FAST Balance Certificate Agreement between the Depositary and the Trustee. Members of, or participants in, the Depositary ("Agent Members") shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depositary or by the Trustee as the custodian of the Depositary or under such Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices of such Depositary governing the 28 19 exercise of the rights of a Holder of a beneficial interest in any Global Security. Except as provided in Section 3.05(b), owners of beneficial interests in Global Securities will not be entitled to receive physical delivery of certificated Securities. (c) Purchasers of Securities who are not QIBs will receive certificated Securities bearing the Restricted Securities Legend set forth in Exhibit A hereto ("Restricted Securities"). Restricted Securities will bear the Restricted Securities Legend set forth on Exhibit A unless removed in accordance with Section 3.05(c) and may not be exchanged for a Global Security, or interest therein, at any time, except as set forth in paragraph (d) of this Section. (d) Purchasers of Restricted Securities in reliance of Regulation S under the Securities Act ("Regulation S") may exchange such Restricted Securities for a beneficial interest in a Global Security following the expiration of the "40-day restricted period" within the meaning of Regulation S by delivering (1) any such Restricted Securities, duly endorsed as provided herein; (2) instructions from such Holder directing the Trustee to create a beneficial interest in such Global Security and the authorized denomination or denominations of such beneficial interest to be created; and (3) such other certificates, legal opinions or other information as the Company may reasonably require. (e) After a transfer of any Securities during the period of the effectiveness of a Shelf Registration Statement with respect to the Securities, all requirements pertaining to legends on such Security will cease to apply, the requirements requiring any such Security issued to certain Holders be issued in global form will cease to apply, and a certificated Security without legends will be available to the Holder of such Securities. ARTICLE III The Securities SECTION 3.01. Title and Terms. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to (a) $275,000,000 29 20 plus (b) such aggregate principal amount (which may not exceed $55,000,000 principal amount) of Securities as shall be purchased pursuant to the overallotment option provided in the Purchase Agreement, except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 3.04, 3.05, 3.06, 9.06, 11.08 or 12.02. The Securities shall be known and designated as the "6 1/2% Convertible Preferred Equivalent Obligations due 2006" of the Company. Their Mandatory Redemption Date shall be March 1, 2006, and the Securities shall bear interest at the rate of 6 1/2% per annum, from March 6, 1996, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, payable quarterly on March 1, June 1, September 1 and December 1, commencing June 1, 1996, until the principal thereof is paid or made available for payment. Payments (whether in cash or Common Stock) due on the Securities shall be payable at the office or agency of the Company maintained for such purpose in The City of New York and at any other office or agency maintained by the Company for such purpose. If any such payment is in cash, it shall be payable by United States dollar check drawn on, or wire transfer (provided that appropriate wire instructions have been received by the Trustee at least 15 days prior to the applicable date of payment) to a United States dollar account maintained by the Holder with, a bank located in New York City; provided, however, that at the option of the Company payment of interest in cash may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Any Interest Make-Whole Payment will be paid to the Holder of record on the date of conversion or Redemption Date, as the case may be. The Securities shall be redeemable as provided in Article XI. The Securities shall be convertible into Common Stock of the Company as provided in Article XII. The Securities shall be subordinated in right of payment to Debt Obligations as provided in Article XIII. Payments on the Securities shall be made in the form described in Section 10.01. 30 21 SECTION 3.02. Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of $50.00 and any integral multiple thereof. SECTION 3.03. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal reproduced thereon attested by its Secretary or one of its Assistant Secretaries except no corporate seal shall be required for Temporary Securities issued pursuant to Section 3.04; provided, further, that any person duly designated by the Chairman of the Board, the President, a Vice-President or any other officer of the Company may execute the securities on behalf of any or all such persons listed above. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder. 31 22 SECTION 3.04. Temporary Securities. Pending the preparation of definitive Securities, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. If temporary Securities are issued, the Company will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities, at any office or agency of the Company designated pursuant to Section 10.02, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. SECTION 3.05. Registrar, Paying Agent and Conversion Agent. (a) The Company shall maintain in the Borough of Manhattan, City of New York, State of New York and in a European city (only in connection with clauses (ii) and (iii) below) (i) an office or agency where Securities may be presented for registration of transfer or for exchange ("Registrar"), (ii) an office or agency where Securities may be presented for payment ("Paying Agent") and (iii) an office or agency where Securities may be presented for conversion ("Conversion Agent"). The Registrar shall keep a register of the Securities and of their transfer and exchange (the "Security Register"). The Company may appoint the Registrar, the Paying Agent and the Conversion Agent and may appoint one or more co-registrars, one or more additional paying agents and one or more additional conversion agents in such other locations as it shall determine. The term "Paying Agent" includes any additional paying agent and, with respect to payments hereunder by delivery of Common Stock, may include the Stock Transfer Agent, and the term "Conversion Agent" includes any additional conversion agent. The Company may change any Paying Agent, Registrar, co-registrar or 32 23 Conversion Agent without prior notice to any Holder. The Company shall notify the Trustee of the name and address of any Agent not a party to this Indenture. If the Company fails to appoint or maintain another entity as Registrar, Paying Agent or Conversion Agent, the Trustee shall act as such. The Company or any of its Affiliates may act as Paying Agent, Registrar, co-registrar or Conversion Agent. Upon surrender for registration of transfer of any Security at an office or agency of the Company, the Company shall execute, and the Trustee shall register on the Security Register and shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations, of a like aggregate principal amount. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations, of a like aggregate principal amount, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same obligation and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company, the Trustee and the Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 3.04, 9.06, 11.08, 12.01 or 12.02 not involving any transfer. 33 24 Neither the Company nor the Trustee or Registrar shall be required (a) to issue, authenticate or register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities selected for redemption under Section 11.04 and ending at the close of business on the day of such mailing or (b) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. (b) Notwithstanding any provision to the contrary herein, so long as a Global Security remains outstanding and is held by or on behalf of the Depositary, transfers of a Global Security, in whole or in part, or of any beneficial interest therein, shall only be made in accordance with Section 2.02 and this Section; provided, however, that beneficial interests in a Global Security may be transferred to persons who take delivery thereof in the form of a beneficial interest in the same Global Security in accordance with the transfer restrictions set forth in the Restricted Securities Legend and under the heading "Notice to Investors" in the Offering Memorandum. (i) Except for transfers or exchanges made in accordance with any of clauses (b)(ii) through (iv) of this Section, transfers of a Global Security shall be limited to transfers of such Global Security in whole, but not in part, to nominees of the Depositary or to a successor of the Depositary or such successor's nominee. (ii) Global Security to Restricted Security. If an owner of a beneficial interest in a Global Security deposited with the Depositary or with the Trustee as custodian for the Depositary wishes at any time to transfer its interest in such Global Security to a person who is required to take delivery thereof in the form of a Restricted Security, such owner may, subject to the rules and procedures of the Depositary, cause the exchange of such interest for one or more Restricted Securities of any authorized denomination or denominations and of the same aggregate principal amount. Upon receipt by the Trustee, as Registrar, at its office in The City of New York of (1) instructions from the Depositary directing the Trustee, as Registrar, to authenticate and deliver one or more Restricted Securities of the same aggregate principal amount as the beneficial interest in the Global Security to be 34 25 exchanged, such instructions to contain the name or names of the designated transferee or transferees, the authorized denomination or denominations of the Restricted Securities to be so issued and appropriate delivery instructions, (2) a certificate in the form of Exhibit B attached hereto given by the owner of such beneficial interest and stating that the person transferring such interest in such Global Security reasonably believes that the person acquiring the Restricted Securities for which such interest is being exchanged is an "accredited investor" (as defined in Rule 501(a) of Regulation D under the Securities Act) and is acquiring such Restricted Securities having an aggregate principal amount of not less than $250,000 for its own account or for one or more accounts as to which the transferee exercises sole investment discretion, (3) a certificate in the form of Exhibit C attached hereto given by the person acquiring the Restricted Securities for which such interest is being exchanged, to the effect set forth therein, and (4) such other certifications, legal opinions or other information as the Company may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, then the Trustee, as Registrar, as the case may be, will instruct the Depositary to reduce or cause to be reduced such Global Security by the aggregate principal amount of the beneficial interest therein to be exchanged and to debit or cause to be debited from the account of the person making such transfer the beneficial interest in the Global Security that is being transferred, and concurrently with such reduction and debit the Company shall execute, and the Trustee shall authenticate and deliver, one or more Restricted Securities of the same aggregate principal amount in accordance with the instructions referred to above. (iii) Restricted Security to Restricted Security. If a Holder of a Restricted Security wishes at any time to transfer such Restricted Security to a person who is required to take delivery thereof in the form of a Restricted Security, such Holder may, subject to the restrictions on transfer set forth herein and in such Restricted Security, cause the exchange of such Restricted Security for one or more Restricted Securities of any authorized denomination or denominations and of the same aggregate principal 35 26 amount. Upon receipt by the Trustee, as Registrar, at its office in The City of New York of (1) such Restricted Security, duly endorsed as provided herein, (2) instructions from such Holder directing the Trustee, as Registrar, to authenticate and deliver one or more Restricted Securities of the same aggregate principal amount as the Restricted Security to be exchanged, such instructions to contain the name of the transferee and the authorized denomination or denominations of the Restricted Securities to be so issued and appropriate delivery instructions, (3) a certificate from the Holder of the Restricted Security to be exchanged in the form of Exhibit B attached hereto, (4) a certificate in the form of Exhibit C attached hereto given by the person acquiring the Restricted Securities for which such interest is being exchanged, to the effect set forth therein, and (5) such other certifications, legal opinions or other information as the Company may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, then the Trustee, as Registrar, shall cancel or cause to be cancelled such Restricted Security and concurrently therewith, the Company shall execute, and the Trustee shall authenticate and deliver, one or more Restricted Securities of the same aggregate principal amount, in accordance with the instructions referred to above. (iv) Other Exchanges. In the event that a Global Security is exchanged for Securities in definitive registered form pursuant to this Section, prior to the effectiveness of a Shelf Registration Statement with respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of clauses (ii) and (iii) above (including the certification requirements intended to ensure that such transfers comply with Rule 144A or Regulation S under the Securities Act, as the case may be) and such other procedures as may from time to time be adopted by the Company. (c) Except in connection with a Shelf Registration Statement contemplated by and in accordance with the terms of the Registration Rights Agreement, if Securities are issued upon the transfer, exchange or replacement of Securities bearing the Restricted Securities Legend set forth in 36 27 Exhibit A hereto, or if a request is made to remove such Restricted Securities Legend on Securities, the Securities so issued shall bear the Restricted Securities Legend, or the Restricted Securities Legend shall not be removed, as the case may be, unless there is delivered to the Company such satisfactory evidence, which may include an opinion of counsel licensed to practice law in the State of New York, as may be reasonably required by the Company, that neither the legend nor the restrictions on transfer set forth therein are required to ensure that transfers thereof comply with the provisions of Rule 144A, Rule 144 or Regulation S under the Securities Act or, with respect to Restricted Securities, that such Securities are not "restricted" within the meaning of Rule 144 under the Securities Act. Upon provision of such satisfactory evidence, the Trustee, at the direction of the Company, shall authenticate and deliver Securities that do not bear the legend. (d) The Trustee shall have no responsibility for any actions taken or not taken by the Depositary. (e) Each Holder of a Security agrees to indemnify the Company and the Trustee against any liability that may result from the transfer, exchange or assignment of such Holder's Security in violation of any provision of this Indenture and/or applicable U.S. Federal or State securities law; provided, however, that such indemnity shall not apply to acts of wilful misconduct or gross negligence on the part of the Company or the Trustee, as the case may be. SECTION 3.06. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (a) evidence to their satisfaction of the destruction, loss or theft of any Security and (b) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and 37 28 principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 3.07. Payment of Interest; Mechanics of Payment; Interest Rights Preserved. (a) Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest; provided, however, that the Company may make a Deferral Election on any Interest Payment Date in the event that Globalstar L.P. shall have deferred payment of the Scheduled Distribution in respect of the Preferred Partnership Interest corresponding to such interest payment. Interest Arrearages will not themselves bear interest, but so long as any Interest Arrearage remains outstanding, the Company will be prohibited from paying (i) dividends on its Common Stock, (ii) dividends on any Preferred Stock or (iii) interest on debt ranking pari passu with or junior to the Securities from time to time outstanding, except with respect to any such 38 29 pari passu debt, on a pro rata basis based on the aggregate principal amount of such debt. (b) Pursuant to the Globalstar Amended Partnership Agreement, Globalstar L.P. shall deliver the Globalstar Interest Payment Notice to the Company not later than 20 Business Days prior to each Interest Payment Date, and in the event such Notice states the Scheduled Distribution due on such Interest Payment Date will include the delivery of Ordinary Partnership Interests, the Company shall deliver to Holders and Globalstar L.P. the GTL Interest Payment Notice not later than 12 Business Days prior to each applicable Interest Payment Date; provided, however, that the Company will only deliver the GTL Interest Payment Notice to the Holders if the form of consideration to be used on the applicable Interest Payment Date includes Common Stock. (c) In the event Globalstar elects to, pursuant to the Globalstar Amended Partnership Agreement, make the Scheduled Distribution due on the Interest Payment Date in cash, the Company shall pay, to the extent such Scheduled Distribution was paid in cash, the applicable interest payment due on such Interest Payment Date in cash. (d) In the event Globalstar elects to, pursuant to the Globalstar Amended Partnership Agreement, make the Scheduled Distribution due on the Interest Payment Date by delivering to the Company Ordinary Partnership Interests, the Company may either (A) issue Common Stock in the manner set forth in paragraph (e) of this Section and pay the applicable amount of interest due in cash from the proceeds of such issuance or (B) deliver shares of Common Stock in the manner set forth in Section 10.01(c). (e) In the event the Company elects to issue Common Stock, the proceeds of which will be used to pay the applicable interest payment due on the Interest Payment Date, the Company shall issue such Common Stock not later than five Business Days prior to the Interest Payment Date. (f) Any Interest Arrearage on any Security may be paid by the Company in any lawful manner not inconsistent with the requirements of the Nasdaq National Market or any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this clause, such manner of payment shall be deemed practicable by the Trustee. 39 30 (g) Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. (h) Securities surrendered for conversion during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date (except Securities called for redemption on a Redemption Date within such period) must be accompanied by payment in cash of an amount equal to the interest thereon which the registered Holder is to receive; provided, that no payment shall be owed or payable to any converting Holder if the Board of Directors of the Company shall have elected to defer the interest payment to be made on such Interest Payment Date pursuant to paragraph (a) of this Section. No other adjustment for interest or dividends, including for any Interest Arrearages, is to be made upon conversion. Fractional shares of Common Stock will not be issued upon conversion, but in lieu thereof the Company will pay a cash adjustment in the manner set forth in Section 12.03. (i) In no event shall the Company make a Deferral Election if Globalstar L.P. has made the applicable Scheduled Distribution. SECTION 3.08. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of the principal or Redemption Price of and (subject to Section 3.07) interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. SECTION 3.09. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or conversion shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the 40 31 Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be delivered to the Company by the Trustee. SECTION 3.10. Computation of Interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. SECTION 3.11. CUSIP Number. The Company in issuing Securities may use a "CUSIP" number, and if so, the Trustee may use the CUSIP number in notices of redemption or exchange as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Securities, and that reliance may be placed only on the other identification numbers printed on the Securities. The Company will promptly notify the Trustee of any change in the CUSIP number. ARTICLE IV Satisfaction and Discharge SECTION 4.01. Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to any surviving rights of conversion, registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (a) either (i) all Securities theretofore authenticated and delivered (other than (A) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.06 and (B) Securities for whose payment money and/or Common Stock has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid or redelivered to the Company or discharged from such trust, as provided 41 32 in Section 10.03) have been delivered to the Trustee for cancellation; or (ii) all such Securities not theretofore delivered to the Trustee for cancellation (A) have become due and payable, or (B) will become due and payable at their Mandatory Redemption Date within one year, or (C) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (A), (B) or (C) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for that purpose (I) money in an amount, or (II) U.S. Government Obligations that, through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount or (III) a combination thereof in each case sufficient to pay and discharge the entire obligation on such Securities not theretofore delivered to the Trustee for cancellation to the date of such deposit (in the case of Securities which have become due and payable) or to the Redemption Date, as the case may be and, in the case of (B) or (C) above, has delivered to the Trustee an Opinion of Counsel stating that (1) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (2) since the date of the Indenture, there has been a change in the applicable United States Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the Securities will not recognize income, gain or loss for United States Federal income tax purposes as a result of such satisfaction and discharge and will be subject to United States Federal income tax on the same amounts, in the same manner and at the same times 42 33 as would have been the case if such satisfaction and discharge had not occurred; (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and (c) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.06 and the obligations of the Company to any Authenticating Agent under Section 6.13 shall survive. SECTION 4.02. Application of Trust Money. All money deposited with the Trustee pursuant to Section 4.01 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal, Redemption Price and interest for whose payment such money has been deposited with the Trustee. All moneys and U.S. Government Obligations deposited with the Trustee pursuant to Section 4.01 (and held by it or any Paying Agent) for the payment of Securities subsequently converted shall be returned to the Company upon receipt by the Trustee of an Officers' Certificate. ARTICLE V Remedies SECTION 5.01. Collection of Obligations and Suits for Enforcement by Trustee. The Company covenants that if: (a) default is made with respect to any payment due on (including any Interest Arrearage) any Security at the Mandatory Redemption Date thereof; or (b) there is a failure to redeem any Security required to be redeemed on a Provisional Redemption Date or an Optional Redemption Date pursuant to the provisions of this Indenture; 43 34 the Company will, upon demand of the Trustee, pay to it (in cash and/or Common Stock, as elsewhere herein provided), for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for the principal or Redemption Price of and interest with interest upon the overdue principal or Redemption Price, (but excluding any Interest Make-Whole Payment), at the rate borne by the Securities; and, in addition thereto, such further amount (payable in cash) as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts and/or deliver such Common Stock forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of sums so due and unpaid (including the delivery of such Common Stock), may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Securities, wherever situated. SECTION 5.02. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal or Redemption Price of the Securities shall then be due and payable as therein expressed and irrespective of whether the Trustee shall have made any demand on the Company for the payment thereof) shall be entitled and empowered, by intervention in such proceeding or otherwise, (a) to file and prove a claim for the whole amount of principal or Redemption Price and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding; and 44 35 (b) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same after deduction of its charges and expenses; and any receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 6.06. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan or reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding. SECTION 5.03. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 5.04. Application of Money Collected. Subject to Article XIII, any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal or Redemption Price or interest upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: (a) to the payment of all amounts due the Trustee under Section 6.06; 45 36 (b) to the payment of the amounts then due and unpaid for principal or Redemption Price of and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal or Redemption Price and interest respectively; and (c) to the payment of the remainder, if any, to the Company, its successors or assigns, or to whomsoever may be lawfully entitled to the same, or as a court of competent jurisdiction may determine. SECTION 5.05. Limitation on Suits. No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (a) the Holders of not less than 25% in principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in its own name as Trustee hereunder; (b) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (c) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and (d) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. 46 37 SECTION 5.06. Right of Holders To Receive Principal, Premium and Interest and To Convert. Notwithstanding any other provision in this Indenture, but subject to Article XIII, the Holder of any Security shall have the right to receive payment of the principal or Redemption Price of and (subject to Section 3.07) interest on such Security on the Mandatory Redemption Date expressed in such Security (or on any other Redemption Date) and to convert such Security in accordance with Article XII and to institute suit for the enforcement of any such payment and right to convert, and such rights shall not be impaired without the consent of such Holder. SECTION 5.07. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 5.08. Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 5.09. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any default shall impair any such right or remedy or constitute a waiver of any such default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 5.10. Control by Holders. The Holders of a majority in principal amount of the Outstanding Securities 47 38 shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; provided that: (a) such direction shall not be in conflict with any rule of law or with this Indenture; (b) such direction is not unduly prejudicial to the other Holders or may involve the Trustee in personal liability or if the Trustee determines that it does not have sufficient indemnity against any loss or expense connected to such action; and (c) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 5.11. Waiver of Past Defaults. The Holders of not less than a majority in principal amount of the Outstanding Securities may on behalf of the Holders of all the Securities waive any past default hereunder and its consequences, except a default: (a) in the payment of the principal or Redemption Price of or interest on any Security; or (b) in respect of a covenant or provision hereof which under Article IX cannot be modified or amended without the consent of the Holder of each Outstanding Security affected. Upon any such waiver, such default shall cease to exist, and shall be deemed to have been cured, for every purpose of this Indenture but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 5.12. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees 48 39 and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities or to any suit instituted by any Holder for the enforcement of the payment of the principal or Redemption Price of or interest on any Security on or after the Mandatory Redemption Date expressed in such Security (or on or after any other Redemption Date) or for the enforcement of the right to convert any Security in accordance with Article XII. SECTION 5.13. Waiver of Stay, Usury or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, usury or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 5.14. Voting Rights Upon a Deferral Trigger Event. (a) Upon a Deferral Trigger Event, (i) as provided in the Globalstar Amended Partnership Agreement, the number of members of the General Partners' Committee of Globalstar L.P. will be increased by one and the Holders of the Securities, voting separately as a class with the holders of any other securities upon which similar voting rights have been conferred and are exercisable, will be entitled to elect one representative to the General Partners' Committee (the "CPE Representative") and (ii) as provided in the Lock-Up Agreement, Loral SpaceCom shall use its best efforts to cause the shareholders of the Company to approve and elect a nominee to the Board of Directors of the Company designated by the Holders of the Securities (the "CPE Nominee"). If the shareholders shall fail to approve such CPE Nominee, Loral SpaceCom will seek the resignation of a Loral SpaceCom Designee director from the Board of Directors and will use its best efforts to cause the Board of Directors to appoint the CPE Nominee to the Board of Directors until the next 49 40 annual meeting of shareholders of the Company, at which time such appointment will be submitted to the shareholders of the Company for their approval; provided, however, that if such shareholder approval is not obtained, the procedures described in clause (ii) above shall continue to be in effect. (b) The CPE Representative and the CPE Nominee, if appointed to the Board of Directors, will promptly resign upon receipt of notice from the Company that all Interest Arrearages with respect to the Securities have been paid. ARTICLE VI The Trustee SECTION 6.01. Certain Duties and Responsibilities. (a) The Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee. (b) In the absence of wilful misconduct on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, but, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether they conform to the requirements of this Indenture. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (i) this subsection shall not be construed to limit the effect of subsection (a) of this Section; (ii) the Trustee shall not be liable for any error of judgment made by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; 50 41 (iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and (iv) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (d) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. SECTION 6.02. Certain Rights of Trustee. Except as otherwise provided in Section 6.01: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; 51 42 (d) the Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and (h) the Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture. SECTION 6.03. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the 52 43 Securities. The Trustee shall not be accountable for the use or application by the Company or any Paying Agent other than the Trustee of Securities or the proceeds thereof. SECTION 6.04. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner of Securities and, subject to Section 6.11 and to Section 310(b) of the Trust Indenture Act, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Registrar or such other agent. Subject to Section 310(b) of the Trust Indenture Act, the Trustee may become and act as trustee under other indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding in the same manner as if it were not Trustee. SECTION 6.05. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. SECTION 6.06. Compensation and Reimbursement. The Company agrees: (a) to pay to the Trustee from time to time such compensation as may be agreed upon by the Trustee and the Company from time to time for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents, counsel and other persons not regularly in its employ), except to the extent any such expense,, disbursement or advance may be attributable to its negligence or bad faith; and 53 44 (c) to indemnify the Trustee (in its individual capacity and as Trustee), its officers, directors, attorneys-in-fact and agents for, and to hold each such person harmless against, any and all loss, claim, damage, liability or expense, including taxes (other than taxes based on the income of such person) incurred without negligence or bad faith on such person's part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against or investigating any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligations of the Company under this Section 6.06 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional obligations hereunder and shall survive the satisfaction and discharge of this Indenture. To secure the Company's payment obligations in this Section 6.06, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee except money or property held in trust to pay the principal of or Redemption Price of or interest on particular Securities and such lien shall survive the satisfaction and discharge of the Indenture and any other termination of the Indenture including any termination under any bankruptcy law. When the Trustee incurs expenses or renders services in connection herewith, the Holders by their acceptance of the Securities hereby agree that such expenses and the compensation for such services are intended to constitute expenses of administration under any bankruptcy law. "Trustee" for the purposes of this Section 6.06 shall include any predecessor Trustee, but the negligence or willful misconduct of any Trustee shall not affect the indemnification of any other Trustee. SECTION 6.07. Corporate Trustee Required; Eligibility. The Trustee shall at all times satisfy the requirements of Section 310 of the Trust Indenture Act and together with its immediate parent maintain a combined capital and surplus of at least $50,000,000, be subject to supervision or examination by Federal or State authority and have its Corporate Trust Office in The City of New York. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said 54 45 supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. SECTION 6.08. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 6.09. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of notice of resignation or removal, the Trustee resigning or being removed may petition any court of competent jurisdiction for the appointment of a successor Trustee. (b) The Trustee may resign at any time by giving written notice thereof to the Company. (c) The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Company. (d) If at any time: (i) the Trustee shall cease to be eligible under Section 6.07 and shall fail to resign after written request therefor by the Company or by any such Holder; or (ii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (A) the Company by a Board Resolution may remove the Trustee, or (B) subject to Section 5.14, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent 55 46 jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, the Trustee or any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first class mail, postage prepaid, to all Holders as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. SECTION 6.09. Acceptance of Appointment by Successor. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges pursuant to Section 6.06, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the 56 47 Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. Any retiring Trustee shall, nevertheless, retain a lien on all property or funds held or collected by such Trustee (except money or property held in trust to pay the principal or Redemption Price or interest on particular Securities) to secure any amounts then due pursuant to the provisions of Section 6.06. Upon acceptance of appointment by a successor Trustee as provided in this Section, the Company shall cause such successor Trustee to mail notice of succession of such Trustee hereunder to all Holders of Securities as the names and addresses of such Holders appear on the Security Register. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be eligible under this Article and qualified under Section 310 of the Trust Indenture Act. SECTION 6.10. Merger, Conversion, Consolidation or Succession to Business. Any trust company, banking corporation or national banking association into which the Trustee may be merged or converted or with which it may be consolidated, or any trust company, banking corporation or national banking association resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any trust company, banking corporation or national banking association succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder; provided, that such trust company, banking corporation or national banking association shall be otherwise eligible under this Article and qualified under Section 310 of the Trust Indenture Act, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities. SECTION 6.11. Preferential Collection of Claims Against Company. The Trustee is subject to Section 311(a) and (b) of the Trust Indenture Act. Any Trustee that has resigned or been removed shall be subject to Section 311(a) 57 48 and (b) of the Trust Indenture Act to the extent indicated therein. SECTION 6.12. Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents which shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 3.06, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any trust company, banking corporation or national banking association into which an Authenticating Agent may be merged or converted or with which it may be consolidated or any trust company, banking corporation or national banking association resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any trust company, banking corporation or national banking association succeeding to all or substantially all the corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent; provided, that such trust company, banking corporation or national banking 58 49 association shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first class mail, postage prepaid, to all Holders as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent herein. No successor Authenticating Agent shall be appointed unless eligible under the provisions of his Section. The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section. If an appointment is made pursuant to this Section, the Securities may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: This is one of the Securities referred to in the within-mentioned Indenture. Dated: THE BANK OF NEW YORK, as Trustee, by -------------------------- As Authenticating Agent by 59 50 -------------------------- Authorized Signatory ARTICLE VII Holders' Lists and Reports by Trustee and Company SECTION 7.01. Company To Furnish Trustee Names and Addresses of Holders. The Company will furnish or cause to be furnished to the Trustee: (a) quarterly, not more than 15 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Registrar. SECTION 7.02. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.01 and the names and addresses of Holders received by the Trustee in its capacity as Registrar. The Trustee may destroy any list furnished to it as provided in Section 7.01 upon receipt of a new list so furnished. (b) If three or more Holders (herein referred to as "applicants") apply in writing to the Trustee, and furnish to the Trustee reasonable proof that each such applicant has owned a Security for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders with respect to their rights under this Indenture or under the Securities and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall, within five Business 60 51 Days after the receipt of such application, at its election, either: (i) afford such applicants access to the information preserved at the time by the Trustee in accordance with Section 7.02(a), or (ii) inform such applicants as to the approximate number of Holders whose names and addresses appear in the information preserved at the time by the Trustee in accordance with Section 7.02(a), and as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application. If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Holder whose name and address appear in the information preserved at the time by the Trustee in accordance with Section 7.02(a) a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender the Trustee shall mail to such applicants and file with the Commission, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interest of the Holders or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If the Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, the Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Holders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of 61 52 either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 7.02(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 7.02(b). SECTION 7.03. Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant hereto. If required by Section 313(a) of the Trust Indenture Act, the Trustee shall, within 60 days after each May 15 following the date of this Indenture, deliver to Holders a brief report, dated as of such May 15, which complies with the provisions of such Section 313(a). (b) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange, if any, upon which the Securities are listed, with the Commission and with the Company. The Company will promptly notify the Trustee when, if ever, the Securities are listed on any stock exchange. SECTION 7.04. SEC Reports; Reports by Company. (a) Whether or not required by the rules and regulations of the SEC, so long as any Securities are outstanding, the Company shall file with the Commission and, if requested, furnish to the Trustee and to the Holders all quarterly and annual financial information required to be contained in a filing with the Commission on Forms 10-Q and 10-K, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to annual information only, a report thereon by the Company's certified independent accountants; (b) The Company shall also (1) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and (2) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within 30 days after the filing thereof with the Trustee, such summaries of any information, 62 53 documents and reports required to be filed by the Company pursuant to paragraphs (b)(1) of this Section as may be required by rules and regulations prescribed from time to time by the Commission. (c) Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company's compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers' Certificates). SECTION 7.05. Compliance Certificate. The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year of the Company, an Officers' Certificate stating that a review of the activities of the Company and its subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under, and complied with the covenants and conditions contained in, this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his knowledge the Company has kept, observed, performed and fulfilled each and every covenant, and complied with the covenants and conditions contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions hereof and that to the best of his knowledge no event has occurred and remains in existence by reason of which any payments on account of the Securities are prohibited. One of the Officers signing such Officers' Certificate shall be either the Company's principal executive officer, principal financial officer or principal accounting officer. ARTICLE VIII Consolidation, Merger, Conveyance or Transfer SECTION 8.01. Company May Consolidate, etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other corporation or convey or transfer its 63 54 properties and assets substantially as an entirety to any Person, unless: (a) the corporation formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer the properties and assets of the Company substantially as an entirety shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal or Redemption Price of and interest on all the Securities and the performance of every covenant of this Indenture on the part of the Company to be performed or observed and shall have provided for conversion rights in accordance with Section 12.10; and (b) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance or transfer and such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 8.02. Successor Corporation Substituted. Upon any consolidation or merger or any conveyance or transfer of the properties and assets of the Company substantially as an entirety in accordance with Section 8.01, the successor corporation formed by such consolidation or into which the Company is merged or to which such conveyance or transfer is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor corporation had been named as the Company herein, and thereafter the predecessor corporation shall be relieved of all obligations and covenants under this Indenture and the Securities. ARTICLE IX Supplemental Indentures SECTION 9.01. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, when authorized by a Board Resolution, the Company may and the Trustee, at any time and from time to time, shall enter into 64 55 one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (a) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (b) to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or (c) to make provision with respect to the conversion rights of Holders pursuant to the requirements of Section 12.06; or (d) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture; provided, that such action shall not adversely affect the interests of the Holders in any material respect; or (e) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect or maintain the qualification of this Indenture under the Trust Indenture Act, or under any similar Federal statute hereafter enacted. SECTION 9.02. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than two-thirds in principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, may and the Trustee shall enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (a) change the Mandatory Redemption Date of any Security, or the due date of any installment of interest on, any Security, or reduce the principal amount or 65 56 Redemption Price thereof or the rate of interest thereon or the amount of any Interest Make-Whole Payment, or change the place of payment where, or the coin or currency in which, any Security or any payment thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Mandatory Redemption Date (or on or after other Redemption Dates), or adversely affect the right to convert any Security as provided in Article XII, or adversely affect the right to require the Company to redeem the Securities as provided in Article XI or modify the provisions of this Indenture with respect to the subordination of the Securities in a manner adverse to the Holders, or (b) reduce the percentage in principal amount of the Outstanding Securities the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or (c) modify any of the provisions of this Section or Section 5.11, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 9.03. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.01) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. 66 57 SECTION 9.04. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be, and shall be deemed to be, modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. SECTION 9.05. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 9.06. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Securities so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities. ARTICLE X Covenants SECTION 10.01. Payment of Principal, Premium and Interest. The Company will duly and punctually pay or cause to be paid by no later than one Business Day prior to the date such payment is due the principal or Redemption Price of and interest on the Securities in accordance with the terms of the Securities and this Indenture; provided, however, that the Company may defer paying interest on any Interest Payment Date to the extent provided in Section 3.07. (b) The Company may make any payments due on the Securities, including redemption payments, interest payments and the Interest Make-Whole Payment, (i) in cash, (ii) by delivery of Common Stock (in the manner described in paragraph (c) of this Section); or (iii) through any combination of the foregoing; provided, however, that if Globalstar L.P. shall have paid the Scheduled Distribution or 67 58 the Globalstar Corresponding Redemption on the Preferred Partnership Interests in cash, the Company shall make the corresponding payment in cash. The Company may make a cash payment from the proceeds of an issuance of Common Stock following a payment by Globalstar L.P. through a delivery of Ordinary Partnership Interests. The Company also may make any interest payments notwithstanding the fact that it shall not have received a Scheduled Distribution on the Preferred Partnership Interests for the corresponding Interest Payment Date. (c) If the Company elects to deliver any Common Stock in lieu of a cash payment on any applicable date of payment, the Company shall deliver, in the aggregate, the number of shares of Common Stock equal to (i) the amount of payment that is not being paid in cash divided (ii) by: (A) in the case of interest payments and any Interest Make-Whole Payment, 90% of the Average Market Value of the Common Stock; or (B) in the case of all other payments, 100% of the Average Market Value of the Common Stock. No fractional shares of Common Stock will be delivered to a Holder, but the Company shall instead pay a cash adjustment determined as set forth in Section 12.03. Any portion of principal that is declared and not paid through the delivery of shares of Common Stock shall be paid in cash. SECTION 10.02. Maintenance of Office or Agency. The Company will maintain in The City of New York and in a European city an office or agency where Securities may be presented or surrendered for payment or repurchase where Securities may be surrendered for registration of transfer or exchange, where Securities may be surrendered for conversion and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such offices or agencies. If at any time the Company shall fail to maintain any such required offices or agencies or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies (in or outside The City of New York) where the Securities may be presented or surrendered for any or all such purposes and may from time to 68 59 time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in The City of New York for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 10.03. Security Payments To Be Held in Trust. If the Company shall at any time act as its own Paying Agent it will, on or before each due date with respect to any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto the applicable amount of cash or Common Stock, as the case may be, sufficient to pay, in the case of a cash payment, or deliver, in the case of delivery of Common Stock, the amount so becoming due and not deferred pursuant to a Deferral Election until such cash shall be paid or such Common Stock shall be delivered to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its action or failure so to act. Whenever the Company shall have one or more Paying Agents, it will prior to each due date with respect to any Securities, deposit with a Paying Agent the applicable amount of cash or Common Stock, as the case may be, sufficient to pay, in the case of a cash payment, or deliver, in the case of delivery of Common Stock, the amount so becoming due and not deferred pursuant to a Deferred Election, to be held in trust for the benefit of the Persons entitled to such payment or delivery, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its action or failure so to act. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all cash or Common Stock, as the case may be, held by it for payment or delivery with respect to Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid or delivered to such Persons or otherwise disposed of as herein provided; 69 60 (b) give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment or delivery that has not been deferred pursuant to a Deferral Election; and (c) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay, in the case of cash, or deliver, in the case of Common Stock, to the Trustee all such cash or Common Stock so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, in the case of cash, or deliver, in the case of Common Stock, or by Company Order direct any Paying Agent to pay, in the case of cash, or deliver, in the case of Common Stock, to the Trustee all such cash or Common Stock held in trust by the Company or such Paying Agent, to be held by the Trustee upon the same trusts as those upon which such cash or Common Stock were held by the Company or such Paying Agent; and, upon such payment or delivery, as the case may be, by the Company or any Paying Agent to the Trustee, the Company or such Paying Agent shall be released from all further liability with respect to such cash or Common Stock. The Company may use, with respect to Security payments by delivery of Common Stock, its then current transfer agent to act as a Paying Agent. Any cash or Common Stock deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for payment or delivery with respect to any Security and remaining unclaimed for two years after the applicable due date shall be returned to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment or delivery thereof, and all liability of the Trustee or such Paying Agent with respect to such cash or Common Stock, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such return, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such cash or Common Stock remains 70 61 unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such cash or Common Stock then remaining will be returned to the Company. SECTION 10.04. Corporate Existence. Subject to Article VIII, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 10.05. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any covenant or condition set forth in Section 10.04, if before the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect. ARTICLE XI Redemption of Securities SECTION 11.01. Right of Redemption; Mechanics of Redemption. (a) The Securities (i) may be redeemed, pursuant to either a Provisional Redemption (as described in Section 5 of the Security, any such Provisional Redemption shall include any Interest Make-Whole Payment) or Optional Redemption (as described in Section 6 of the Security), at the election of the Company, as a whole or from time to time in part, at any time permitted under the terms of such Sections of the Securities, and (ii) shall be redeemed at the Mandatory Redemption Date, any such Redemption at the Redemption Prices specified in the Security set forth for redemptions, together with accrued interest to the applicable Redemption Date. 71 62 (b) Pursuant to the Globalstar Amended Partnership Agreement, Globalstar L.P. shall deliver a Globalstar Redemption Notice to the Company not later than 20 Business Days prior to each such Redemption Date. The Company shall deliver the GTL Redemption Notice no later than one Business Day following receipt of the Globalstar Redemption Notice, and in the event the Globalstar Redemption Notice states the Globalstar Corresponding Redemption due on such Redemption Date will include the delivery of Ordinary Partnership Interests, the Company shall deliver to the Holders and Globalstar L.P. a GTL Response Redemption Notice not later than 12 Business Days prior to such Redemption Date; provided, however, the Company will only deliver the GTL Response Redemption Notice to the Holders if the form of consideration to be used includes Common Stock. (c) In the event Globalstar elects to, pursuant to the Globalstar Amended Partnership Agreement, make the Globalstar Corresponding Redemption on the Redemption Date in cash, the Company shall, to the extent such Corresponding Globalstar Redemption was paid in cash, make the applicable redemption payment due on such Redemption Date in cash. (d) In the event Globalstar elects to, pursuant to the Globalstar Amended Partnership Agreement, make the Globalstar Corresponding Redemption due on the Redemption Date by delivering to the Company Ordinary Partnership Interests, the Company may either (A) issue Common Stock in the manner set forth in paragraph (e) of this Section and pay the applicable redemption payment in cash from the proceeds of such issuance or (B) deliver shares of Common Stock in the manner set forth in Section 10.01(c). (e) In the event the Company elects to issue Common Stock, the proceeds of which will be used to pay the applicable redemption payment due on such Redemption Date, the Company shall issue such Common Stock not later than five Business Days prior to such Redemption Date. (f) The Company may not initiate either a Provisional Redemption or an Optional Redemption unless and until it receives the Globalstar Redemption Notice. SECTION 11.02. Applicability of Article. Redemption of Securities at the election of the Company or otherwise as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article. 72 63 SECTION 11.03. Election To Redeem. The election of the Company to redeem any Securities pursuant to Section 11.01 shall be evidenced by a Board Resolution. SECTION 11.04. Selection by Trustee of Securities To Be Redeemed. If less than all the Securities are to be redeemed the particular Securities to be redeemed shall be selected not more than 20 days prior to the Redemption Date by the Trustee, from the Outstanding Securities not previously called for redemption, pro rata or by lot or by such other method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to $50.00 or any integral multiple thereof) of the principal amount of Securities of a denomination larger than $50.00. If any Security selected for partial redemption is converted in part before termination of the conversion right with respect to the portion of the Security so selected, the converted portion of such Security shall be deemed (so far as may be) to be the portion selected for redemption. Securities which have been converted during a selection of Securities to be redeemed shall be treated by the Trustee as Outstanding for the purpose of such selection but not for the purpose of the payment of the Redemption Price. The Trustee shall promptly notify the Company and the Registrar in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Security which has been or is to be redeemed. SECTION 11.05. Notice of Redemption. Whenever a GTL Redemption Notice or GTL Response Redemption Notice is required to be delivered to the Holders, such Notice shall provide the information set forth in the definition thereof and be given by first class mail, postage prepaid to each Holder of Securities to be redeemed, at his address appearing in the Security Register. 73 64 In addition, all GTL Redemption Notices shall identify the Securities to be redeemed (including CUSIP number) and shall state: (1) the Redemption Date; (2) the Redemption Price; (3) if less than all the Outstanding Securities are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed; (4) that on the Redemption Date the Redemption Price, together with (unless the Redemption Date shall be an Interest Payment Date) interest accrued and unpaid to the Redemption Date, will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after said date; (5) the conversion price, the date on which the right to convert the principal of the Securities to be redeemed will terminate and the place or places where such Securities may be surrendered for conversion; and (6) the place or places where such Securities are to be surrendered for payment of the Redemption Price. The GTL Redemption Notice and the GTL Response Redemption Notice shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company; provided, however, that if the Company so requests, it shall provide the Trustee adequate time, as reasonably determined by the Trustee, to deliver such notices in a timely fashion. SECTION 11.06. Deposit of Redemption Price. Prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust) an amount of consideration sufficient to pay, in the case of a cash payment, or deliver, in the case of delivery of Common Stock, the Redemption Price of and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on all the Securities which are to be redeemed on that date other than any Securities called for redemption on that date which have been converted prior to the date of such deposit. 74 65 If any Security called for redemption is converted, any cash or Common Stock deposited with the Trustee or with any Paying Agent or so segregated and held in trust for the redemption of such Security shall (subject to any right of the Holder of such Security or any Predecessor Security to receive interest as provided in Section 3.07(h)) be paid or delivered to the Company upon Company Request or, if then held by the Company, shall be discharged from such trust. Any Interest Make-Whole Payment will be paid to the Holder of Record on the date of conversion or Redemption Date, as the case may be. SECTION 11.07. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest, including any Interest Make-Whole Payment) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid, subject to Section 3.07(h), by the Company at the Redemption Price, together with accrued interest to the Redemption Date. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the Redemption Price thereof, exclusive of accrued interest and including any Interest Make-Whole Payment, shall, until paid, bear interest from the Redemption Date at the rate borne by the Security. SECTION 11.08. Securities Redeemed in Part. Any Security which is to be redeemed only in part shall be surrendered at any office or agency of the Company designated for that purpose (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company, the Trustee and the Registrar duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered. 75 66 ARTICLE XII Conversion of Securities SECTION 12.01. Conversion Privilege and Conversion Price. Subject to and upon compliance with the provisions of this Article, at the option of the Holder thereof, any Security or any portion of the principal amount thereof which is $50.00 or an integral multiple thereof may be converted at the principal amount thereof, or of such portion thereof, into fully paid and nonassessable shares (calculated as to each conversion to the nearest 1/100 of a share) of Common Stock of the Company, at the conversion price, determined as hereinafter provided, in effect at the time of conversion. Such conversion right shall expire at the close of business on the Business Day preceding the Mandatory Redemption Date. In case a Security or portion thereof is called for redemption, such conversion right in respect of the Security or portion so called shall expire at the close of business on the Business Day preceding the Redemption Date, unless the Company defaults in making the payment due upon redemption. The price at which shares of Common Stock shall be delivered upon conversion (herein called the "Conversion Price") shall be initially $65.00 per share of Common Stock. The Conversion Price shall be adjusted in certain instances as provided in Section 12.04 and Section 12.06. SECTION 12.02. Exercise of Conversion Privilege. In order to exercise the conversion privilege, the Holder of any Security to be converted shall surrender such Security, duly endorsed or assigned to the Company or in blank, at any office or agency of the Company maintained for that purpose, accompanied by written notice to the Company at such office or agency that the Holder elects to convert such Security or, if less than the entire principal amount thereof is to be converted, the portion thereof to be converted. In connection with the exercise of the conversion privilege by a Holder prior to a Redemption Date, a Holder's right to exercise his conversion privilege shall terminate at the close of business on the Business Day prior to the Redemption Date. Securities surrendered for conversion during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date shall (except in the case of Securities or portions thereof which have been called for redemption on a Redemption Date within such period) be accompanied by payment in New York Clearing House funds or 76 67 other funds acceptable to the Company of an amount in cash equal to the interest payable on such Interest Payment Date on the principal amount of Securities being surrendered for conversion. Except as provided in the preceding sentence and subject to Section 3.07(h), no payment or adjustment shall be made upon any conversion on account of any interest accrued on the Securities surrendered for conversion or on account of any dividends on the Common Stock issued upon conversion. In no event shall the Company be obligated to pay any converting Holder any unpaid Interest Arrearages upon conversion. Securities shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such Securities for conversion in accordance with the foregoing provisions, and at such time the rights of the Holders of such Securities as Holders shall cease, and the person or persons entitled to receive the Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time. As promptly as practicable on or after the conversion date, the Company shall issue and shall deliver at such office or agency a certificate or certificates for the number of full shares of Common Stock issuable upon conversion, together with payment in lieu of any fraction of a share, as provided in Section 12.03. In the case of any Security which is converted in part only, upon such conversion the Company shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Company, a new Security or Securities of authorized denominations in aggregate principal amount equal to the unconverted portion of the principal amount of such Security. SECTION 12.03. Fractions of Shares. No fractional shares of Common Stock shall be issued upon the conversion of Securities. If more than one Security shall be surrendered for conversion at one time by the same Holder, the number of full shares which shall be issuable upon conversion thereof shall be computed on the basis of the aggregate principal amount of Securities (or specified portions thereof) so surrendered. Instead of any fractional share of Common Stock which would otherwise be issuable upon conversion of any Security or Securities (or specified portions thereof), the Company shall pay a cash adjustment in respect of such fraction in an amount equal to the same fraction of the closing price (as defined in Section 12.04(g)(i)) per share 77 68 of Common Stock at the close of business on the Business Day prior to the day of conversion. SECTION 12.04. Adjustment of Conversion Price. The Conversion Price shall be adjusted from time to time by the Company as follows: (a) If the Company shall hereafter pay a dividend or make a distribution to all holders of the outstanding Common Stock in shares of Common Stock, the Conversion Price in effect at the opening of business on the date following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the Record Date (as defined in Section 12.04(g)) fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such reduction to become effective immediately after the opening of business on the day following the Record Date. If any dividend or distribution of the type described in this Section 12.04(a) is declared but not so paid or made, the Conversion Price shall again be adjusted to the Conversion Price which would then be in effect if such dividend or distribution had not been declared. (b) If the Company shall issue rights or warrants to all holders of its outstanding shares of Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the Current Market Price (as defined in Section 12.04 (g)) (other than the GTL Guarantee Warrants) on the Record Date fixed for the determination of stockholders entitled to receive such rights or warrants, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect at the opening of business on the date after such Record Date by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the Record Date plus the number of shares of Common Stock which the aggregate offering price of the total number of shares so offered would purchase at such Current Market Price and of which the denominator shall be the number of shares of Common 78 69 Stock outstanding at the close of business on the Record Date plus the total number of additional shares of Common Stock so offered for subscription or purchase. Such adjustment shall become effective immediately after the opening of business on the day following the Record Date fixed for determination of stockholders entitled to receive such rights or warrants. To the extent that shares of Common Stock are not delivered pursuant to such rights or warrants, upon the expiration or termination of such rights or warrants the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made on the basis of delivery of only the number of shares of Common Stock actually delivered. If such rights or warrants are not so issued, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such date fixed for the determination of stockholders entitled to receive such rights or warrants had not been fixed. In determining whether any rights or warrants entitle the holders to subscribe for or purchase shares of Common Stock at less than such Current Market Price, and in determining the aggregate offering price of such shares of Common Stock, there shall be taken into account any consideration received for such rights or warrants, with the value of such consideration, if other than cash, to be determined by the Board of Directors. (c) If the outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and, conversely, if the outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective. (d) If the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock shares of any class of capital stock of the Company 79 70 (other than any dividends or distributions to which Section 12.04(a) applies) or evidences of its indebtedness, cash or other assets (including securities, but excluding any rights or warrants of a type referred to in Section 12.04(b) and dividends and distributions paid exclusively in cash and excluding any capital stock, evidences of indebtedness, cash or assets distributed upon a merger or consolidation to which Section 12.10 applies) (the foregoing hereinafter in this Section 12.04(d) called the "Distributed Securities"), then, in each such case, the Conversion Price shall be reduced so that the same shall be equal to the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the Record Date (as defined in Section 12.04(g)) with respect to such distribution by a fraction of which the numerator shall be the Current Market Price (determined as provided in Section 12.04(g)) on such date less the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors) on such date of the portion of the Distributed Securities so distributed applicable to one share of Common Stock and the denominator shall be such Current Market Price, such reduction to become effective immediately prior to the opening of business on the day following the Record Date; provided, however, that, in the event the then fair market value (as so determined) of the portion of the Distributed Securities so distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price on the Record Date, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder of Securities shall have the right to receive upon conversion of a Security (or any portion thereof) the amount of Distributed Securities such Holder would have received had such Holder converted such Security (or portion thereof) immediately prior to such Record Date. If such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared. If the Board of Directors determines the fair market value of any distribution for purposes of this Section 12.04(d) by reference to the actual or when issued trading market for any securities comprising all or part of such distribution, it must in doing so consider the prices in 80 71 such market over the same period used in computing the Current Market Price pursuant to Section 12.04(g) to the extent possible. Rights or warrants distributed by the Company to all holders of Common Stock entitling the holders thereof to subscribe for or purchase shares of the Company's capital stock (either initially or under certain circumstances), which rights or warrants, until the occurrence of a specified event or events ("Dilution Trigger Event"): (i) are deemed to be transferred with such shares of Common Stock; (ii) are not exercisable; and (iii) are also issued in respect of future issuances of Common Stock, shall be deemed not to have been distributed for purposes of this Section 12.04(d) (and no adjustment to the Conversion Price under this Section 12.04(d) shall be required) until the occurrence of the earliest Dilution Trigger Event, whereupon such rights and warrants shall be deemed to have been distributed and an appropriate adjustment to the Conversion Price under this Section 12.04(d) shall be made. If any such rights or warrants, including any such existing rights or warrants distributed prior to the date of this Indenture, are subject to subsequent events, upon the occurrence of each of which such rights or warrants shall become exercisable to purchase different securities, evidences of indebtedness or other assets, then the occurrence of each such event shall be deemed to be such date of issuance and record date with respect to new rights or warrants (and a termination or expiration of the existing rights or warrants without exercise by the holder thereof). In addition, in the event of any distribution (or deemed distribution) of rights or warrants, or any Dilution Trigger Event with respect thereto, that was counted for purposes of calculating a distribution amount for which an adjustment to the Conversion Price under this Section 12.04 was made, (1) in the case of any such rights or warrants which shall all have been redeemed or repurchased without exercise by any holders thereof, the Conversion Price shall be readjusted upon such final redemption or repurchase to give effect to such distribution or Dilution Trigger Event, as the case may be, as though it were a cash distribution, equal to the per share redemption or repurchase price received by a holder or holders of Common Stock with respect to such rights or warrants (assuming such holder had retained such rights or warrants), made to all holders of Common 81 72 Stock as of the date of such redemption or repurchase, and (2) in the case of such rights or warrants which shall have expired or been terminated without exercise by any holders thereof, the Conversion Price shall be readjusted as if such rights and warrants had not been issued. Notwithstanding any other provision of this Section 12.04(d) to the contrary, rights, warrants, evidences of indebtedness, other securities, cash or other assets (including, without limitation, any rights distributed pursuant to any stockholder rights plan) shall be deemed not to have been distributed for purposes of this Section 12.04(d) if the Company makes proper provision so that each Holder of Securities who converts a Security (or any portion thereof) after the date fixed for determination of stockholders entitled to receive such distribution shall be entitled to receive upon such conversion, in addition to the shares of Common Stock issuable upon such conversion, the amount and kind of such distributions that such Holder would have been entitled to receive if such Holder had, immediately prior to such determination date, converted such Security into Common Stock. For purposes of this Section 12.04(d) and Sections 12.04(a) and (b), any dividend or distribution to which this Section 12.04(d) is applicable that also includes shares of Common Stock, or rights or warrants to subscribe for or purchase shares of Common Stock to which Section 12.04(b) applies (or both), shall be deemed instead to be (1) a dividend or distribution of the evidences of indebtedness, assets, shares of capital stock, rights or warrants other than such shares of Common Stock or rights or warrants to which Section 12.04(b) applies (and any Conversion Price reduction required by this Section 12.04(d) with respect to such dividend or distribution shall then be made) immediately followed by (2) a dividend or distribution of such shares of Common Stock or such rights or warrants (and any further Conversion Price reduction required by Sections 12.04(a) and (b) with respect to such dividend or distribution shall then be made), except that (a) the Record Date of such dividend or distribution shall be substituted as "the date fixed for the determination of stockholders entitled to receive such dividend or other distribution", "Record Date fixed for such determination" and "Record Date" within the 82 73 meaning of Section 12.04(a) and as "the date fixed for the determination of stockholders entitled to receive such rights or warrants", "the Record Date fixed for the determination of the stockholders entitled to receive such rights or warrants" and "such Record Date" within the meaning of Section 12.04(b), and (b) any shares of Common Stock included in such dividend or distribution shall not be deemed "outstanding at the close of business on the date fixed for such determination" within the meaning of Section 12.04(a). (e) If the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock cash (excluding any cash that is distributed upon a merger or consolidation to which Section 12.10 applies or as part of a distribution referred to in Section 12.04(d)) in an aggregate amount that, combined together with (1) the aggregate amount of any other such distributions to all holders of its Common Stock made exclusively in cash within the 12 months preceding the date of payment of such distribution, and in respect of which no adjustment pursuant to this Section 12.04(e) has been made, and (2) the aggregate of any cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors) of consideration payable in respect of any tender offer by the Company for all or any portion of the Common Stock concluded within the 12 months preceding the date of payment of such distribution, and in respect of which no adjustment pursuant to Section 12.04(f) has been made, exceeds 10% of the product of the Current Market Price (determined as provided in Section 12.04(g)) on the Record Date with respect to such distribution times the number of shares of Common Stock outstanding on such date, then, and in each such case, immediately after the close of business on such date, the Conversion Price shall be reduced so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on such Record Date by a fraction (i) the numerator of which shall be equal to the Current Market Price on the Record Date less an amount equal to the quotient of (x) the excess of such combined amount over such 10% and (y) the number of shares of Common Stock outstanding on the Record Date and (ii) the denominator of which shall be equal to the Current Market Price on such Record Date; provided, however, that, if the portion of the cash so 83 74 distributed applicable to one share of Common Stock is equal to or greater than the Current Market Price of the Common Stock on the Record Date, in lieu of the foregoing adjustment, adequate provision shall be made so that each Holder of Securities shall have the right to receive upon conversion of a Security (or any portion thereof) the amount of cash such Holder would have received had such Holder converted such Security (or portion thereof) immediately prior to such Record Date. If such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such dividend or distribution had not been declared. Any cash distribution to all holders of Common Stock as to which the Company makes the election permitted by Section 12.04(m) and as to which the Company has complied with the requirements of such Section shall be treated as not having been made for all purposes of this Section 12.04(e). (f) If a tender offer made by the Company or any of its subsidiaries for all or any portion of the Common Stock expires and such tender offer (as amended upon the expiration thereof) requires the payment to stockholders (based on the acceptance (up to any maximum specified in the terms of the tender offer) of Purchased Shares (as defined below)) of an aggregate consideration having a fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors) that, combined together with (1) the aggregate of the cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors), as of the expiration of such tender offer, of consideration payable in respect of any other tender offers, by the Company or any of its subsidiaries for all or any portion of the Common Stock expiring within the 12 months preceding the expiration of such tender offer and in respect of which no adjustment pursuant to this Section 12.04(f) has been made and (2) the aggregate amount of any distributions to all holders of the Common Stock made exclusively in cash within 12 months preceding the expiration of such tender offer and in respect of which no adjustment pursuant to Section 12.04(e) has been made, exceeds 10% of the product of the Current Market Price (determined as provided in Section 12.04(g)) as of the last time (the 84 75 "Expiration Time") tenders could have been made pursuant to such tender offer (as it may be amended) times the number of shares of Common Stock outstanding (including any tendered shares) at the Expiration Time, then, and in each such case, immediately prior to the opening of business on the day after the date of the Expiration Time, the Conversion Price shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately prior to the close of business on the date of the Expiration Time by a fraction of which the numerator shall be the number of shares of Common Stock outstanding (including any tendered shares) at the Expiration Time multiplied by the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time and the denominator shall be the sum of (x) the fair market value (determined as aforesaid) of the aggregate consideration payable to stockholders based on the acceptance (up to any maximum specified in the terms of the tender offer) of all shares validly tendered and not withdrawn as of the Expiration Time (the shares deemed so accepted, up to any such maximum, being referred to as the "Purchased Shares") and (y) the product of the number of shares of Common Stock outstanding (less any Purchased Shares) at the Expiration Time and the Current Market Price of the Common Stock on the Trading Day next succeeding the Expiration Time, such reduction (if any) to become effective immediately prior to the opening of business on the day following the Expiration Time. If the Company is obligated to purchase shares pursuant to any such tender offer, but the Company is permanently prevented by applicable law from effecting any such purchases or all such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion Price which would then be in effect if such tender offer had not been made. If the application of this Section 12.04(f) to any tender offer would result in an increase in the Conversion Price, no adjustment shall be made for such tender offer under this Section 12.04(f). (g) For purposes of this Section 12.04, the following terms shall have the meaning indicated: (i) "closing price" with respect to any securities on any day means the closing price on such day or, if no such sale takes place on such day, the average of the reported high and low 85 76 prices on such day, in each case on The Nasdaq National Market or the New York Stock Exchange, as applicable, or, if such security is not listed or admitted to trading on such national market or exchange, on the principal national securities exchange or quotation system on which such security is quoted or listed or admitted to trading, or, if not quoted or listed or admitted to trading on any national securities exchange or quotation system, the average of the high and low prices of such security on the over-the-counter market on the day in question as reported by the National Quotation Bureau Incorporated or a similar generally accepted reporting service, or, if not so available, in such manner as furnished by any New York Stock Exchange member firm selected from time to time by the Board of Directors for that purpose, or a price determined in good faith by the Board of Directors, whose determination shall be conclusive and described in a resolution of the Board of Directors. (ii) "Current Market Price" means the average of the daily closing prices per share of Common Stock for the 10 consecutive trading days immediately prior to the date in question; provided, however, that (A) if the "ex" date (as hereinafter defined) for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Conversion Price pursuant to Section 12.04(a), (b), (c), (d), (e) or (f) occurs during such 10 consecutive trading days, the closing price for each trading day prior to the "ex" date for such other event shall be adjusted by multiplying such closing price by the same fraction by which the Conversion Price is so required to be adjusted as a result of such other event, (B) if the "ex" date for any event (other than the issuance or distribution requiring such computation) that requires an adjustment to the Conversion Price pursuant to Section 12.04(a), (b), (c), (d), (e) or (f) occurs on or after the "ex" date for the issuance or distribution requiring such computation and prior to the day in question, the closing price for each trading day on and after the "ex" date for such other event shall be adjusted by multiplying such closing price by the reciprocal of the 86 77 fraction by which the Conversion Price is so required to be adjusted as a result of such other event and (C) if the "ex" date for the issuance or distribution requiring such computation is prior to the day in question, after taking into account any adjustment required pursuant to clause (A) or (B) of this proviso, the closing price for each trading day on or after such "ex" date shall be adjusted by adding thereto the amount of any cash and the fair market value (as determined by the Board of Directors in a manner consistent with any determination of such value for purposes of Section 12.04(d) or (f), whose determination shall be conclusive and described in a resolution of the Board of Directors) of the evidences of indebtedness, shares of capital stock or assets being distributed applicable to one share of Common Stock as of the close of business on the day before such "ex" date. For purposes of any computation under Section 12.04(f), the Current Market Price on any date shall be deemed to be the average of the daily closing prices per share of Common Stock for such day and the next two succeeding trading days; provided, however, that, if the "ex" date for any event (other than the tender offer requiring such computation) that requires an adjustment to the Conversion Price pursuant to Section 12.04(a), (b), (c), (d), (e) or (f) occurs on or after the Expiration Time for the tender or exchange offer requiring such computation and prior to the day in question, the closing price for each trading day on and after the "ex" date for such other event shall be adjusted by multiplying such closing price by the reciprocal of the fraction by which the Conversion Price is so required to be adjusted as a result of such other event. For purposes of this paragraph, the term "ex" date (I) when used with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way on the relevant exchange or in the relevant market from which the closing price was obtained without the right to receive such issuance or distribution, (II) when used with respect to any subdivision or combination of shares of Common Stock, means the first date on which the Common Stock trades regular way on such exchange or in such market after the time at which such subdivision or combination becomes effective and 87 78 (III) when used with respect to any tender or exchange offer means the first date on which the Common Stock trades regular way on such exchange or in such market after the Expiration Time of such offer. Notwithstanding the foregoing, whenever successive adjustments to the Conversion Price are called for pursuant to this Section 12.04, such adjustments shall be made to the Current Market Price as may be necessary or appropriate to effectuate the intent of this Section 12.04 and to avoid unjust or inequitable results, as determined in good faith by the Board of Directors. (iii) "fair market value" shall mean the amount which a willing buyer would pay a willing seller in an arm's-length transaction. (iv) "Record Date" shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of stockholders entitled to receive such cash, securities or other property (whether such date is fixed by the Board of Directors or by statute, contract or otherwise). (h) No adjustment in the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in such price; provided, however, that any adjustments which by reason of this Section 12.04(i) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article 12 shall be made by the Company and shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. No adjustment need be made for a change in the par value or no par value of the Common Stock. (i) Whenever the Conversion Price is adjusted as herein provided, the Company shall promptly file with the Trustee an Officers' Certificate setting forth the Conversion Price after such adjustment and setting forth 88 79 a brief statement of the facts requiring such adjustment. Promptly after delivery of such certificate, the Company shall prepare a notice of such adjustment of the Conversion Price setting forth the adjusted Conversion Price and the date on which each adjustment becomes effective and shall mail such notice of such adjustment of the Conversion Price to each Holder of Securities at such Holder's last address appearing on the register of Holders maintained for that purpose within 20 days of the effective date of such adjustment. Failure to deliver such notice shall not affect the legality or validity of any such adjustment. (j) In any case in which this Section 12.04 provides that an adjustment shall become effective immediately after a Record Date for an event, the Company may defer until the occurrence of such event issuing to the Holder of any Security converted after such Record Date and before the occurrence of such event the additional shares of common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment. (k) For purposes of this Section 12.04, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company shall not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company. (l) In lieu of making any adjustment to the Conversion Price pursuant to Section 12.04(e), the Company may elect to reserve an amount of cash for distribution to the Holders of Securities upon the conversion of the Securities so that any such Holder converting Securities will receive upon such conversion, in addition to the shares of Common Stock and other items to which such Holder is entitled, the full amount of cash which such Holder would have received if such Holder had, immediately prior to the Record Date for such distribution of cash, converted its Securities into Common Stock, together with any interest accrued with respect to such amount, in accordance with this Section 12.04(m). The Company may make such election by providing an Officers' Certificate to the Trustee to 89 80 such effect on or prior to the payment date for any such distribution and depositing with the Trustee on or prior to such date an amount of cash equal to the aggregate amount that the Holders of Securities would have received if such Holders had, immediately prior to the Record Date for such distribution, converted all the Securities into Common Stock. Any such funds so deposited by the Company with the Trustee shall be invested by the Trustee in U.S. Government Obligations with a maturity not more than three months from the date of issuance. Upon conversion of Securities by a Holder thereof, such Holder shall be entitled to receive, in addition to the Common Stock issuable upon conversion, an amount of cash equal to the amount such Holder would have received if such Holder had, immediately prior to the Record Date for such distribution, converted its Securities into Common Stock, along with such Holder's pro rata share of any accrued interest earned as a consequence of the investment of such funds. Promptly after making an election pursuant to this Section 12.04(m), the Company shall give or shall cause to be given notice to all Holders of Securities of such election, which notice shall state the amount of cash per $100 principal amount of Securities such Holders shall be entitled to receive (excluding interest) upon conversion of the Securities as a consequence of the Company having made such election. SECTION 12.05. Notice of Adjustment of Conversion Price. Whenever the conversion price is adjusted as provided in Section 12.04: (a) the Company shall compute the adjusted conversion price in accordance with Section 12.04 and shall prepare a certificate signed by any Vice President or the Treasurer of the Company setting forth the adjusted conversion price and showing in reasonable detail the facts upon which such adjustment is based and the effective date of such adjustment, and such certificate shall forthwith be filed at each office or agency maintained for the purpose of conversion of Securities; and (b) a notice stating that the conversion price has been adjusted and setting forth the adjusted conversion price shall, as soon as practicable, be mailed by the Company to all Holders at their last addresses as they shall appear in the Security Register. 90 81 SECTION 12.06. Provisions in Case of Consolidation, Merger or Conveyance or Transfer of Properties and Assets. In case of any consolidation of the Company with, or merger of the Company into, any other corporation, or in case of any merger of another corporation into the Company (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company), or in case of any conveyance or transfer of the properties and assets of the Company substantially as an entirety, the corporation formed by such consolidation or resulting from such merger or which acquires by conveyance or transfer such properties and assets, as the case may be, shall execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Security then outstanding shall have the right thereafter, during the period such Security shall be convertible as specified in Section 12.01, to convert such Security only into the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer by a holder of the number of shares of Common Stock of the Company into which such Security might have been converted immediately prior to such consolidation, merger, conveyance or transfer, assuming such holder of Common Stock of the Company failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer (provided that, if the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer is not the same for each share of Common Stock of the Company in respect of which such rights of election shall not have been exercised ("nonelecting share"), then for the purpose of this Section the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer by each nonelecting share shall be deemed to be the kind and amount so receivable per share by a plurality of the nonelecting shares). Such supplemental indenture shall provide for adjustments which, for events subsequent to the effective date of such supplemental indenture, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article. The above provisions of this Section shall similarly apply to successive consolidations, mergers, conveyances or transfers. The Company will not become a party to any consolidation or merger unless the terms of such consolidation or merger are consistent with this Section. 91 82 SECTION 12.07. Notice of Certain Corporate Action. In case: (a) the Company shall declare a dividend (or any other distribution) on its Common Stock payable otherwise than in cash out of its earned surplus; or (b) the Company shall authorize the granting to the holders of its Common Stock of rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any other rights; or (c) of any reclassification of the Common Stock of the Company (other than a subdivision or combination of its outstanding shares of Common Stock), or of any consolidation or merger to which the Company is a party and for which approval of any stockholders of the Company is required, or the sale or transfer of all or substantially all the assets of the Company; or (d) of the voluntary or involuntary dissolution, liquidation or winding up of the Company; then the Company shall cause to be filed with the Trustee and at each office or agency maintained for the purpose of conversion of Securities, and shall cause to be mailed to all Holders at their last addresses as they shall appear in the Security Register, at least 20 days (or 10 days in any case specified in clause (a) or (b) above) prior to the applicable date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, rights or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up. Failure to give the notice requested by this Section or any defect therein shall not affect the legality or validity of any dividend, distribution, right, warrant, reclassification, consolidation, merger, sale, transfer, dissolution, liquidation or winding up, or the vote upon any such action. 92 83 SECTION 12.08. Company To Reserve Common Stock. The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of Securities, the full number of shares of Common Stock then issuable upon the conversion of all outstanding Securities. SECTION 12.09. Taxes on Conversions. The Company will pay any and all taxes that may be payable in respect of the issue or delivery of shares of Common Stock on conversion of Securities pursuant hereto. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock in a name other than that of the Holder of the Security or Securities to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Company the amount of any such tax, or has established to the satisfaction of the Company that such tax has been paid. SECTION 12.10. Covenant as to Common Stock. The Company covenants that all shares of Common Stock which may be issued upon conversion of Securities will upon issue be duly and validly issued and fully paid and nonassessable and, except as provided in Section 12.08, the Company will pay all taxes, liens and charges with respect to the issue thereof. SECTION 12.11. Responsibility of Trustee. The Trustee, subject to the provisions of Section 6.01, and any conversion agent shall not at any time be under any duty or responsibility to any Holder to determine whether any facts exist which may require any adjustment of the Conversion Price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture, provided to be employed, in making the same. The Trustee has no duty to determine whether a supplemental indenture under this Article need be entered into or whether any provisions of any supplemental indenture are correct. Neither the Trustee nor any conversion agent shall be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock, or of any other securities or property, which may at any time be issued or delivered upon the conversion of any Security; and it or they do not make any representation with respect thereto. Neither the Trustee nor any conversion agent shall be responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver any 93 84 shares of Common Stock or stock certificates or other securities or property upon the surrender of any Security for the purpose of conversion; and the Trustee, subject to the provisions of Section 6.01, and any conversion agent shall not be responsible for any failure of the Company to comply with any of the covenants of the Company contained in this Article. ARTICLE XIII Subordination of Securities SECTION 13.01. Securities Subordinate to Debt Obligations. The Company, for itself, its successors and assigns, covenants and agrees, and each Holder of Securities, by his acceptance thereof likewise covenants and agrees, that all Securities issued hereunder shall be subordinated and subject, to the extent and in the manner herein set forth, in right of payment to the prior payment in full of all Debt Obligations. SECTION 13.02. No Payments When Debt Obligations in Default; Payment Over of Proceeds upon Dissolution, etc. In the event the Company shall default in the payment of any Debt Obligation when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise, then, unless and until such default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash or property, by setoff or otherwise) shall be made or agreed to be made on account of the principal of or Redemption Price of or interest on the Securities (excepting cash payment for fractional shares). Upon the happening of an event of default with respect to any Debt Obligation, as defined therein or in the instrument under which the same is outstanding, permitting the holders thereof to accelerate the maturity thereof (under circumstances when the terms of the preceding paragraph are not applicable), unless and until such event of default shall have been cured or waived or shall have ceased to exist, no direct or indirect payment (in cash or property by setoff or otherwise) shall be made or agreed to be made on account of the principal of or Redemption of or interest on the Securities (excepting cash payment for fractional shares). 94 85 In the event of: (a) any insolvency, bankruptcy, receivership, liquidation, reorganization, readjustment, composition or other similar proceeding relating to the Company or its property; (b) any proceeding for the liquidation, dissolution or other winding up of the Company or its property; (c) any assignment by the Company for the benefit of creditors; or (d) any other marshalling of the assets of the Company; all Debt Obligations (including any interest thereon accruing after the commencement of any such proceedings) shall first be paid in full before any payment or distribution (direct or indirect), whether in cash, property or securities, by setoff or otherwise, shall be made to any Holder on account of any Securities, and to that end any payment or distribution, whether in cash, property or securities (other than securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article with respect to the Securities, to the payment of all Debt Obligations at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment) which would otherwise (but for the subordination provisions contained in this Article) be payable or deliverable in respect of the Securities shall be paid or delivered directly to the holders of Debt Obligations, as their respective interests may appear, until all Debt Obligations (including any interest thereon accruing after the commencement of any such proceedings) shall have been paid in full. If any payment or distribution (other than securities of the Company or any other corporation provided for by a plan of reorganization or readjustment the payment of which is subordinate, at least to the extent provided in this Article with respect to the Securities, to the payment of all Debt Obligations at the time outstanding and to any securities issued in respect thereof under any such plan of reorganization or readjustment) shall be received by the Trustee or the Holders in contravention of any of the terms of this Article and before all the Debt Obligations have been 95 86 paid in full, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered and transferred to, the holders of such Debt Obligations at the time outstanding as their respective interests may appear for application to the payment of Debt Obligations until all Debt Obligations (including any interest thereon accruing after the commencement of any such proceeding referred to in paragraph (a), (b), (c) or (d) above) shall have been paid in full. If the Trustee or any such Holder fails to endorse or assign any such payment or distribution as required by this Article, the Trustee and the Holder of each Security by his acceptance thereof authorizes each holder of Debt Obligations, any representative or representatives of holders of Debt Obligations and the trustee or trustees under any indenture pursuant to which any instrument evidencing such Debt Obligations may have been issued so to endorse or assign the same. No holder of Debt Obligations shall be prejudiced in the right to enforce subordination of the Securities by any act or failure to act on the part of the Company. Subject to the payment in full of all Debt Obligations, the Holders shall be subrogated (equally and ratably with the holders of all obligations of the Company which rank on a parity with the Securities and are entitled to like rights of subrogation) to the rights of the holders of Debt Obligations to receive payments or distributions applicable to the Debt Obligations until the Securities shall be paid in full, and no such payments or distributions shall, as between the Company, its creditors other than the holders of Debt Obligations and the Holders of the Securities, be deemed to be a payment by the Company to or on account of the Securities. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities, on the one hand, and the holders of Debt Obligations, on the other hand, and nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall impair, as between the Company, its creditors other than the holders of Debt Obligations and the Holders of the Securities, the obligation of the Company to pay the Holders the principal of or Redemption Price of and interest on the Securities as and when the same shall become due and payable in accordance with the terms thereof, or prevent the Trustee or the Holders from exercising all rights, powers and remedies otherwise permitted by applicable law or under this Indenture, upon a default hereunder, all subject to the 96 87 rights of the holders of Debt Obligations to receive cash, property or securities otherwise payable or deliverable to the Trustee or the Holders. Upon any payment or distribution pursuant to this Section, the Trustee shall be entitled to rely upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in this Section are pending, and the Trustee, subject as between the Trustee and the Holders to the provisions of Section 6.01, shall be entitled to rely upon a certificate of the liquidating trustee or agent or other person making such payment or distribution to the Trustee or to the Holders for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Debt Obligations and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Section. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Debt Obligations to participate in any payment or distribution pursuant to this Section, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Debt Obligations held by such Person, as to the extent to which such Person is entitled to participate in such payment or distribution, and as to other facts pertinent to the rights of such Person under this Section, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 13.03. Trustee To Effectuate Subordination. The Holder of each Security by his acceptance thereof authorizes and directs the Trustee in his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination as provided in this Article and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 13.04. Trustee Not Charged with Knowledge of Prohibition. The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, but subject as between the Trustee and the Holders to the provisions of Section 6.01, the Trustee shall not be charged 97 88 with knowledge of the existence of any Debt Obligations, or of any default in the payment of any Debt Obligations, or of any facts which would prohibit the making of any payment of moneys to or by the Trustee, unless and until three Business Days after the Trustee shall have received written notice thereof from the Company or any holder of Debt Obligations or the representative or representatives of such holder, and the Trustee may conclusively rely on any writing purporting to be from a holder of Debt Obligations, or a representative of such holder, as being genuine; nor shall the Trustee be charged with knowledge of the curing of any such default or of the elimination of the act or condition preventing any such payment unless and until the Trustee shall have received an Officers' Certificate to such effect. The provisions of this Section shall not limit any rights of holders of Debt Obligations under this Article to recover from the Holders of Securities any payment made to any such Holder. SECTION 13.05. Rights of Trustee as Holder of Debt Obligations. The Trustee shall be entitled to all the rights set forth in this Article with respect to any Debt Obligations which may at any time be held by it, to the same extent as any other holder of Debt Obligations; and nothing in Section 6.12, or elsewhere in this Indenture, shall deprive the Trustee of any of its rights as such holder. Nothing in this Article XIII shall apply to the claims of, or payments to, the Trustee under or pursuant to Section 6.06. SECTION 13.06. Article Applicable to Paying Agent. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context shall otherwise require) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; provided, however, that Sections 13.04 and 13.05 shall not apply to the Company or any Affiliate of the Company if the Company or such Affiliate acts as Paying Agent. SECTION 13.07. Trustee Not Fiduciary for Holders of Debt Obligations. The Trustee shall not be deemed to owe any fiduciary duty to the holders of Debt Obligations and shall not be liable to any such holders if the Trustee shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Company or to any other person cash or property to which any holders of Debt Obligations shall be entitled by virtue of this Article XIII or otherwise. The Trustee shall not be charged with knowledge of the existence 98 89 of Debt Obligations or of any facts that would prohibit any payment hereunder unless a Trust Officer of the Trustee shall have received notice to that effect at the address of the Trustee set forth in Section 1.05. With respect to the holders of Debt Obligations, the Trustee undertakes to perform or to observe only such of its covenants or obligations as are specifically set forth in this Article XIII and no implied covenants or obligations with respect to holders of Debt Obligations shall be read into this Indenture against the Trustee. * * * This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the day and year first above written. GLOBALSTAR TELECOMMUNICATIONS LIMITED, by -------------------------- Name: Title: THE BANK OF NEW YORK, as Trustee, by -------------------------- Name: Title: 99 EXHIBIT A [FORM OF FACE OF SECURITY] [Global Securities Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Securities Legend] "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), AND, IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE EXPIRATION 100 OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(C)(3) OF REGULATION S UNDER THE SECURITIES ACT), A CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (4) TO AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS MAY NOT TRANSFER THIS SECURITY PURSUANT TO THIS CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(C)(3) OF REGULATION S UNDER THE SECURITIES ACT), (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (0)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT." 101 No. R- --------------------- CUSIP No. GLOBALSTAR TELECOMMUNICATIONS LIMITED 6 1/2% CONVERTIBLE PREFERRED EQUIVALENT OBLIGATIONS DUE 2006 GLOBALSTAR TELECOMMUNICATIONS LIMITED Globalstar Telecommunications Limited, a Bermuda corporation (the "Company") promises to pay to __________________________________________________ ________________ or registered assigns, the principal sum [indicated on Schedule A hereof]*[of _________________________________ United States Dollars]** on March 1, 2006 (the "Mandatory Redemption Date"). Interest Payment Dates: March 1, June 1, September 1 and December 1, commencing June 1, 1996. Record Dates: February 15, May 15, August 15 and November 15 Reference is hereby made to the further provisions of this Security set forth on the reverse hereof which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be - --------------------- * Applicable to Global Securities only. ** Applicable to certificated Securities only. 102 entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, Globalstar Telecommunications Limited has caused this Security to be signed manually or by facsimile by its duly authorized officers and a facsimile of its corporate seal to be affixed hereto or imprinted hereon. GLOBALSTAR TELECOMMUNICATIONS LIMITED, by -------------------------- by -------------------------- [Seal] Dated: March 6, 1996 TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the 6 1/2% Convertible Preferred Equivalent Obligation due 2006 described in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee, by -------------------------- Authorized Signatory 103 GLOBALSTAR TELECOMMUNICATIONS LIMITED 6 1/2% Convertible Preferred Equivalent Obligations due 2006 1. Interest. GLOBALSTAR TELECOMMUNICATIONS LIMITED, a Bermuda corporation (hereinafter called the "Company", which term includes any successor corporation under the Indenture hereinafter referred to) is the issuer of this 6 1/2% Convertible Preferred Equivalent Obligation due 2006 (the "Security"). The Company promises to pay interest thereon from March 6, 1996, or from the most recent Interest Payment Date to which interest has been paid or duly provided for, quarterly on March 1, June 1, September 1 and December 1 in each year, commencing June 1, 1996, at the rate of 6 1/2% per annum, until the principal hereof is paid or made available for payment. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the February 15, May 15, August 15, or November 15 (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. The Company may elect to defer interest payments on any Interest Payment Date if Globalstar L.P. shall have deferred payment of the Scheduled Distribution in respect of the Preferred Partnership Interests corresponding to such interest payment. Arrearages of deferred but unpaid interest accruals ("Interest Arrearages") will not themselves bear interest, but so long as any Interest Arrearage remains outstanding, the Company will be prohibited from paying (i) dividends on its Common Stock, (ii) dividends on any Preferred Stock or (iii) interest on debt ranking pari passu with or junior to the Securities from time to time outstanding, except on a pro rata basis with respect to any such pari passu debt based on the aggregate principal amount of such debt. Preferred distributions equal to the aggregate amount of interest payable by the Company on the Securities will be payable to the Company by Globalstar L.P. in respect of the Preferred Partnership Interests on each Interest Payment Date, if, as and when declared by the Globalstar General Partners' Committee. The Company may not elect to defer any interest payment if Globalstar L.P. has paid the Scheduled Distribution in respect of Preferred Partnership Interest 104 corresponding to such interest payment. In the event that the Company fails to pay the interest due for an aggregate of six quarterly interest payments, the Holders will have the rights and remedies described in Section 15 of this Security. The Indenture does not provide the Holders with any rights to accelerate the payment of the Securities. Payment of the principal or Redemption Price of and interest on this Security shall be payable at the office or agency of the Company maintained for that purpose in The City of New York or at any other office or agency maintained by the Company for such purpose. If any such payment is in cash, it shall be payable by United States dollar check drawn on, or wire transfer (provided that appropriate wire instructions have been received by the Trustee at least 15 days prior to the applicable date of payment) to a United States dollar account maintained by the Holder with, a bank located in New York City; provided, however, that at the option of the Company payment of interest in cash may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. 2. Method of Payments. The Company may make any payments due on the Securities, including redemption payments, interest payments and the Interest Make-Whole Payment, (i) in cash, (ii) by delivery of Common Stock (based upon 90% of the Average Market Value of the Common Stock in the case of interest payments and any Interest Make-Whole Payment, and 100% of the Average Market Value of the Common Stock in the case of all other payments) or (iii) through any combination of the foregoing; provided, however, if Globalstar L.P. shall have paid the Scheduled Distribution or Globalstar Corresponding Redemption on the Preferred Partnership Interests in cash, the Company shall make the corresponding payment in cash. The Company may make a cash payment from the proceeds of an issuance of Common Stock following a payment by Globalstar L.P. through a delivery of Ordinary Partnership Interests. The Company also may make interest payments notwithstanding the fact that it shall not have received a Scheduled Distribution on the Preferred Partnership Interests for the corresponding Interest Payment Date. 3. Paying Agent and Registrar. The Trustee will act as Paying Agent, Registrar and Conversion Agent. The Company may change any Paying Agent, Registrar, co-registrar or Conversion Agent without prior notice. The Company or any of its Affiliates may act in any such capacity. 105 4. Indenture. The Company issued the Securities under an indenture, dated as of March 6, 1996 (the "Indenture"), between the Company and The Bank of New York, as Trustee. The terms of the Securities include those stated in the Indenture and those made part of the Indenture by the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the Indenture. The Securities are subject to, and qualified by, all such terms, certain of which are summarized herein, and Holders are referred to the Indenture and such Act for a statement of such terms. The Securities are unsecured obligations of the Company limited to (except as otherwise provided in the Indenture) up to an aggregate principal amount of $275,000,000 (plus up to $55,000,000 aggregate principal amount of Securities that may be sold by the Company pursuant to the over-allotment option granted pursuant to the Purchase Agreement), and are subordinated in right of payment to all existing and future Debt Obligations of the Company as provided in the Indenture. Any Holder of this Security shall be deemed to have agreed to and be bound by all the terms and conditions contained in the Indenture applicable to a holder of a Security. 5. Provisional Redemption. The Company may redeem, in whole or in part (a "Provisional Redemption"), at any time prior to March 2, 1999, at the redemption price of 103% of the aggregate principal amount of the Securities to be redeemed plus accrued and unpaid interest, if any, to the date of Redemption (the "Provisional Redemption Date"), in the event that the Current Market Value of the Common Stock equals or exceeds the following Trigger Percentages of the Conversion Price for at least 20 Trading Days in any consecutive 30 Trading Day period ending on the Trading Day prior to the date of mailing of the Globalstar Redemption Notice if called for Provision Redemption in the 12-month period ending March 1 of the following years:
Year Trigger Percentage ---- ------------------ 1997 170% 1998 160% 1999 150%
Upon any Provisional Redemption, the Company shall make the Interest Make-Whole Payment with respect to the Securities called for Provisional Redemption. THE COMPANY SHALL MAKE THE INTEREST MAKE-WHOLE PAYMENT ON ALL SECURITIES CALLED FOR PROVISIONAL REDEMPTION, REGARDLESS OF WHETHER SUCH SECURITIES ARE CONVERTED PRIOR TO THE PROVISIONAL REDEMPTION DATE. 106 6. Optional Redemption. Commencing March 2, 1999, the Securities will be redeemable at any time, in whole or in part, at the election of the Company (the "Optional Redemption"), at a Redemption Price equal to the percentage of the principal amount set forth below plus accrued and unpaid interest, if any, to the date of Redemption (the "Optional Redemption Date") if redeemed in the 12-month period ending March 1 of the following years:
Year Redemption Price ---- ---------------- 2000 103% 2001 102% 2002 101%
and thereafter at a Redemption Price equal to 100% of the principal amount plus accrued and unpaid interest, if any, to the Optional Redemption Date. The Company may not initiate either a Provisional Redemption or an Optional Redemption unless and until it receives the Globalstar Redemption Notice. Following the receipt thereof, the Company shall initiate the Provisional Redemption or Optional Redemption, as the case may be, by delivering the GTL Redemption Notice. In the event of redemption or conversion of this Security in part only, a new Security or Securities for the unredeemed or unconverted portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof. 7. Notice of Redemption. Notice of redemption will be mailed at least 19 days before the Redemption Date to each Holder of the Security to be redeemed at his address of record. The Securities in denominations larger than $50.00 may be redeemed in part but only in integral multiples of $50.00. In the event of a redemption of less than all of the Securities, the Securities will be chosen for redemption by the Trustee in accordance with the Indenture. Unless the Company defaults in making such redemption payment, or the Paying Agent is prohibited from making such payment pursuant to the Indenture, interest ceases to accrue on the Securities or portions of them called for redemption on and after the redemption date. If this Security is redeemed subsequent to a record date with respect to any interest payment date specified above and on or prior to such interest payment date, then any accrued interest will be paid to the person in whose name this Security is registered at the close of 107 business on such record date. Any Interest Make-Whole Payment will be paid to the Holder of record on the date of conversion or Redemption Date, as the case may be. 8. Mandatory Redemption. Each Security (if not earlier redeemed or converted) will be mandatorily redeemed by the Company on the Mandatory Redemption Date at a Redemption Price of 100% of the principal amount per Security plus accrued and unpaid interest, if any (including all Interest Arrearages), to the Mandatory Redemption Date. 9. Subordination. The indebtedness evidenced by the Securities is, to the extent and in the manner set forth in the Indenture, expressly subordinated and subject in right of payment to the prior payment in full of all Debt Obligations, as defined in the Indenture, and this Security is issued subject to such provisions of the Indenture, and each Holder of this Security, by accepting the same, agrees to and shall be bound by such provisions and authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination as provided in the Indenture and appoints the Trustee his attorney-in-fact for any and all such purposes. 10. Conversion. Subject to and upon compliance with the provisions of the Indenture, the Holder of this Security is entitled, at such Holder's option, at any time on or before the close of business on the Business Day prior to the Mandatory Redemption Date, or, in case this Security or a portion hereof is called for redemption, then in respect of this Security or such portion hereof until and including, but (unless the Company defaults in making the payment due upon redemption) not after, the close of business on the Business Day prior to the Redemption Date, to convert this Security (or any portion of the principal amount hereof which is $50.00 or any integral multiple thereof), at the principal amount hereof, or of such portion, into fully paid and nonassessable shares (calculated as to each conversion to the nearest 1/100 of a share) of Common Stock of the Company at a conversion price equal to $65.00 aggregate principal amount of Securities for each share of Common Stock (or at the current adjusted conversion price if an adjustment has been made as provided in the Indenture) (the "Conversion Price") by surrender of this Security, duly endorsed or assigned to the Company or in blank, at the office or agency of the Company maintained for that purpose in The City of New York or at any other office or agency maintained by the Company for such purpose, accompanied by written notice to the Company that the Holder hereof elects to convert this Security or, if less than the 108 entire principal amount hereof is to be converted, the portion hereof to be converted, and, in case such surrender shall be made during the period from the close of business on any Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date (unless this Security or the portion hereof being converted has been called for redemption on a Redemption Date within such period), also accompanied by payment in New York Clearing House or other funds acceptable to the Company of an amount equal in cash to the interest payable on such Interest Payment Date on the principal amount of this Security then being converted; provided, that no payment shall be owed or payable to any converting Holder if the Board of Directors of the Company shall have elected to defer the interest payment to be made on such Interest Payment Date. Subject to the aforesaid requirement for payment and, in the case of a conversion after the Regular Record Date next preceding any Interest Payment Date and on or before such Interest Payment Date, to the right of the Holder of this Security (or any Predecessor Security) of record at such Regular Record Date to receive an installment of interest (with certain exceptions provided in the Indenture), no payment or adjustment is to be made on conversion for interest accrued hereon, including any Interest Arrearages, or for dividends on the Common Stock issued on conversion. In no event shall the Company be obligated to pay any unpaid Interest Arrearages upon conversion. No fractions of shares will be issued on conversion, but instead of any fractional interest, the Company shall pay a cash adjustment as provided in the Indenture. The Conversion Price is subject to adjustment as provided in the Indenture. In addition, the Indenture provides that, in case of certain consolidations or mergers to which the Company is a party or the conveyance or transfer of the properties and assets of the Company substantially as an entirety, the Indenture shall be amended, without the consent of any Holders of Securities, so that this Security, if then outstanding, will be convertible thereafter, during the period this Security shall be convertible as specified above, only into the kind and amount of securities, cash and other property receivable upon the consolidation, merger, conveyance or transfer by a holder of the number of shares of Common Stock of the Company into which this Security might have been converted immediately prior to such consolidation, merger, conveyance or transfer, assuming such holder of Common Stock of the Company failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance or transfer (provided that, if the kind or amount 109 of securities, cash and other property so receivable is not the same for each nonelecting share of Common Stock of the Company, then the kind and amount of securities, cash and other property so receivable by each nonelecting share shall be deemed to be the kind and amount so receivable per share by a plurality of the nonelecting shares). 11. Registration Rights. The Holder of this Security is entitled to the benefits of a Registration Rights Agreement, dated March 6, 1996, between the Company and the Initial Purchasers (the "Registration Rights Agreement"). Pursuant to the Registration Rights Agreement the Company has agreed for the benefit of the Holders, that (i) it will within 120 days after the closing of the sale of the Securities (the "Closing"), file a shelf registration statement (the "Shelf Registration Statement") with the Securities and Exchange Commission (the "Commission") with respect to resales of the Securities and the Common Stock issuable upon conversion thereof; (ii) will use its best efforts to cause, within 180 days after the Closing, such Shelf Registration Statement shall be declared effective by the Commission; and (iii) the Company will maintain such Shelf Registration Statement continuously effective under the Securities Act until the third anniversary of the date of the Closing or such earlier date as of which the Securities shall no longer be restricted securities pursuant to Rule 144(k) under the Securities Act of 1933 or all the Securities or the Common Stock issuable upon conversion thereof have been sold pursuant to such Shelf Registration Statement. 12. Denominations, Transfer, Exchange. The Securities are in registered form, without coupons, in denominations of $50.00 and integral multiples of $50.00. The transfer of Securities may be registered, and Securities may be exchanged, as provided in the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. The Registrar need not exchange or register the transfer of any Security or portion of a Security selected for redemption (except the unredeemed portion of any Security being redeemed in part). Also, it need not exchange or register the transfer of any Security for a period of 15 days before a selection of Securities to be redeemed. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration 110 of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Indenture and the Securities contain certain limitations with respect to the transfer of the Securities, which shall be in effect until the effectiveness of the Shelf Registration Statement. 13. Persons Deemed Owners. Except as provided in the Indenture, the registered Holder of a Security may be treated as its owner for all purposes. 14. Unclaimed Money. If money or Common Stock for the payment of amounts due on the Securities remains unclaimed for two years, the Trustee and the Paying Agent shall pay the money or deliver the Securities, as the case may be, back to the Company at its written request. After that, Holders of Securities entitled to the money or the Common Stock must look to the Company for payment unless an abandoned property law designates another person and all liability of the Trustee and such Paying Agent with respect to such money or Common Stock shall cease. 15. Voting Rights. Except as required by law, the Holders will not be entitled to any voting rights unless the Company has deferred interest payments for an aggregate of six quarterly interest payments (a "Deferral Trigger Event"). As provided in the Globalstar Amended Partnership Agreement, upon a Deferral Trigger Event, (i) the number of members of the General Partners' Committee of Globalstar will be increased by one and the Holders of the Securities, voting separately as a class with the holders of any other securities upon which similar voting rights have been conferred and are exercisable, will be entitled to elect one representative to such General Partners' Committee (the "CPE Representative") and (ii) Loral SpaceCom shall use its best efforts to cause the shareholders of the Company to approve and elect a nominee to the Board of Directors of the Company designated by the Holders of the Securities (the "CPE Nominee"). If the shareholders shall fail to approve such CPE Nominee, Loral SpaceCom will seek, pursuant to Section of the Amended Partnership Agreement, the resignation of a Loral SpaceCom Designee director from the Board of Directors of the Company and will use its best efforts to cause the Board of Directors of the Company to appoint the CPE Nominee to the Board of Directors of the Company until the next annual meeting of shareholders, at which time such appointment will be submitted to the shareholders of the 111 Company for their approval; provided, however, that if such shareholder approval is not obtained, the procedures described in clause (ii) above shall continue to be in effect. The CPE Representative and the CPE Nominee, if appointed to the Board, will promptly resign upon receipt of notice from the Company that all Interest Arrearages with respect to the Securities have been paid. 16. Amendments, Supplements and Waivers. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than two-thirds in aggregate principal amount of the Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. 17. Trustee Dealings with the Company. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with the Company or an Affiliate with the same rights it would have if it were not Trustee, subject to certain limitations provided for in the Indenture and in the TIA. Any Paying, Transfer or Conversion Agent may do the same with similar rights. 18. No Recourse Against Others. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder, by accepting a Security, waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 19. Governing Law. THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE 112 WITH THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 20. Authentication. The Securities shall not be valid until authenticated by the manual signature of an authorized signatory of the Trustee or an authenticating agent. 21. Abbreviations. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (for tenants in common), TEN ENT (for tenants by the entireties), JT TEN (for joint tenants with right of survivorship and not as tenants in common), CUST (for Custodian), and U/G/M/A (for Uniform Gifts to Minors Act). 22. Definitions. Capitalized terms not defined in this Security have the meaning given to them in the Indenture. Except with respect to the rights of the holders of Debt Obligations set forth in the Indenture and in this Security, no reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal or Redemption Price of and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed or to convert this Security as provided in the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company maintained for that purpose in The City of New York or at any other office or agency maintained by the Company for such purpose, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company, the Trustee and the Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the 113 same aggregate principal amount, will be issued to the designated transferee or transferees. The Company will furnish to any Holder of the Securities upon written request and without charge a copy of the Indenture. Request may be made to: Globalstar Telecommunications Limited 600 Third Avenue New York, New York 10016 Attention of: General Counsel 114 ASSIGNMENT FORM To assign this Security, fill in the form below: (I) or (we) assign and transfer this Security to - -------------------------------------------------------------------------------- (Insert assignee's social security or tax I.D. no.) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Print or type assignee's name, address and zip code) and irrevocably appoint _______________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Your Signature: --------------------------------------- (Sign exactly as your name appears on the other side of this Security) Date: ------------------ Signature Guarantee:* ------------------------------ In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the date that is three years after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any - ------------------------ *Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 115 Affiliate of the Company, the undersigned confirms that such Securities are being transferred: CHECK ONE BOX BELOW (1) / / to the Company; or (2) / / pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (3) / / pursuant to and in compliance with Regulation S under the Securities Act of 1933; or (4) / / to an "accredited investor" (as defined in Rule 501(a) under the Securities Act of 1933 that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee); or (5) / / pursuant to another available exemption from the registration requirements of the Securities Act of 1933. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (2), (3), (4) or (5) is checked, the Trustee may require, prior to registering any such transfer of the Securities such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 116 Securities Act of 1933, such as the exemption provided by Rule 144 under such Act. ------------------------ Signature Signature Guarantee:* - --------------------- -------------------------- Signature must be guaranteed Signature - -------------------------------------------------------------------------------- TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ---------------- ------------------------------ NOTICE: To be executed by an executive officer - -------------------- *Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 117 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE A The initial principal amount at the Mandatory Redemption Date of this Global Security shall be $275,000,000. The following increases or decreases in the principal amount of this Global Security have been made:
======================================================================= Amount of increase in Principal Principal Amount of this Amount of Amount of Signature of Global Security decrease in this Global authorized including upon Principal Security signatory of exercise of the Amount of following Trustee or over-allotment this Global such decrease Securities Date Made option Security or increase Custodian - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- - ----------------------------------------------------------------------- =======================================================================
118 ELECTION TO CONVERT To Globalstar Telecommunications Limited: The undersigned owner of this Security hereby irrevocably exercises the option to convert this Security, or the portion below designated, into Common Stock of GLOBALSTAR TELECOMMUNICATIONS LIMITED in accordance with the terms of the Indenture referred to in this Security, and directs that the shares issuable and deliverable upon conversion, together with any check in payment for fractional shares, be issued in the name of and delivered to the undersigned, unless a different name has been indicated in the assignment below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto. Any Holder, upon the exercise of its conversion rights in accordance with the terms of the Indenture and the Security, agrees to be bound by the terms of the Registration Rights 119 Agreement relating to the Common Stock issuable upon conversion of the Security. Date: in whole -- Portions of Security to be converted ($50.00 or integral multiples thereof): $ ---------------- ------------------------------------------- Signature (for conversion only) Please Print or Typewrite Name and Address, Including Zip Code, and Social Security or Other Identifying Number Signature Guarantee:* --------------------- - --------------------- *Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 120 EXHIBIT B FORM OF TRANSFER CERTIFICATE FOR TRANSFER FROM GLOBAL SECURITY OR RESTRICTED SECURITY TO RESTRICTED SECURITY (Transfers pursuant to Section 3.05(b)(ii) or Section 3.05(b)(iii) of the Indenture) The Bank of New York, as Trustee 101 Barclay Street, Floor 21 West New York, New York 10286 Attn: Corporate Trust Trustee Administration Re: Globalstar Telecommunications Limited 6 1/2% Convertible Preferred Equivalent Obligations due 2006 (the "Securities") Reference is hereby made to the Indenture dated as of March 6, 1996 (the "Indenture") between Globalstar Telecommunications Limited, as Issuer, and The Bank of New York, as Trustee. Capitalized terms used but not defined herein shall have the meanings given them in the Indenture. This letter relates to U.S. $__________ aggregate principal amount of Securities which are held [in the form of the [Restricted] [Global] Security (CUSIP No. ) with the Depositary]*in the name of [name of transferor] (the "Transferor") to effect the transfer of the Securities. In connection with such request, and in respect of such Securities, the Transferor does hereby certify that such Securities are being transferred in accordance with (i) the transfer restrictions set forth in the Securities and (ii) to a transferee that the Transferor reasonably believes is an "accredited investor" (as defined in Rule 501(a) of Regulation D under the Securities Act of 1933) and is acquiring at least $250,000 principal amount of Securities for its own account or for one or more accounts as to which the transferee exercises sole investment discretion and (iii) in accordance with applicable - -------------------- *Insert, if appropriate. 121 securities laws of any state of the United States or any other jurisdiction. [Name of Transferor], by -------------------------------- Name: Title: Dated: cc: Globalstar Telecommunications Limited 600 Third Avenue New York, New York 10016 Attn: General Counsel 122 EXHIBIT C FORM OF ACCREDITED INVESTOR TRANSFEREE CERTIFICATE (Transfers pursuant to Section 3.05(b)(ii) and Section 3.05(b)(iii) of the Indenture) The Bank of New York, as Trustee 101 Barclay Street, Floor 21 West New York, New York 10286 Attn: Corporate Trust Trustee Trust Administration Re: Globalstar Telecommunications Limited 6 1/2% Convertible Preferred Obligations due 2006 (the "Securities") Reference is hereby made to the Indenture dated as of March 6, 1996 (the "Indenture") between Globalstar Telecommunications Limited, as Issuer, and The Bank of New York, as Trustee. Capitalized terms used but not defined herein shall have the meanings given them in the Indenture. This letter relates to U.S. $__________ aggregate principal amount of Securities which are held [in the form of the [Restricted] [Global] Security (CUSIP No. ___) with the Depositary] in the name of [name of transferor] (the "Transferor") to effect the transfer of the Securities to the undersigned. In connection with such request, and in respect of such Securities we confirm that: 1. We understand that the Securities have not been registered under the U.S. Securities Act of 1933 (the "Securities Act"), and are being sold to us in a transaction that is exempt from the registration requirements of the Securities Act. 2. We are a corporation, partnership or other entity having such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Securities, and we are (or any account for which we are purchasing under paragraph 4 below is) an accredited investor as defined in Rule 501(a) under the Securities Act, able to bear the economic risk of our proposed investment in the Securities. 123 3. We are acquiring the Securities for our own account (or for accounts as to which we exercise sole investment discretion and have authority to make, and do make, the statements contained in this letter) and not with a view to any distribution of the Securities, subject, nevertheless, to the understanding that the disposition of our property shall at all times be and remain within our control. 4. We are, and each account (if any) for which we are purchasing Securities is, purchasing Securities having an aggregate principal amount of not less than $250,000. 5. We understand that (a) the Securities will be delivered to us in registered form only and that the certificate delivered to with respect to the Securities will bear a legend substantially to the following effect: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF THE COMPANY THAT THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED (X) PRIOR TO THE THIRD ANNIVERSARY OF THE ISSUANCE HEREOF (OR ANY PREDECESSOR SECURITY HERETO) OR (Y) BY ANY HOLDER THAT WAS AN AFFILIATE OF THE COMPANY AT ANY TIME DURING THE THREE MONTHS PRECEDING THE DATE OF SUCH TRANSFER, IN EITHER CASE OTHER THAN (1) TO THE COMPANY, (2) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), AND, IF SUCH TRANSFER IS BEING EFFECTED BY CERTAIN TRANSFERORS SPECIFIED IN THE INDENTURE (AS DEFINED BELOW) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(C)(3) OF REGULATION S UNDER THE SECURITIES ACT), A CERTIFICATE WHICH MAY BE OBTAINED FROM THE COMPANY OR THE TRUSTEE IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE, (4) TO AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(A) UNDER THE 124 SECURITIES ACT (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE IN THE FORM ATTACHED TO THIS SECURITY IS DELIVERED BY THE TRANSFEREE TO THE COMPANY AND THE TRUSTEE (PROVIDED THAT CERTAIN HOLDERS SPECIFIED IN THE INDENTURE MAY NOT TRANSFER THIS SECURITY PURSUANT TO THIS CLAUSE (4) PRIOR TO THE EXPIRATION OF THE "40 DAY RESTRICTED PERIOD" (WITHIN THE MEANING OF RULE 903(C)(3) OF REGULATION S UNDER THE SECURITIES ACT), (5) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 (IF APPLICABLE) UNDER THE SECURITIES ACT, OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. AN ACCREDITED INVESTOR HOLDING THIS SECURITY AGREES IT WILL FURNISH TO THE COMPANY AND THE TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM THAT ANY TRANSFER BY IT OF THIS SECURITY COMPLIES WITH THE FOREGOING RESTRICTIONS. THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, REPRESENTS AND AGREES FOR THE BENEFIT OF THE COMPANY THAT IT IS (1) A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A OR (2) AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT AND THAT IT IS HOLDING THIS SECURITY FOR INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION OR (3) A NON-U.S. PERSON OUTSIDE THE UNITED STATES WITHIN THE MEANING OF (OR AN ACCOUNT SATISFYING THE REQUIREMENTS OF PARAGRAPH (0)(2) OF RULE 902 UNDER) REGULATION S UNDER THE SECURITIES ACT." and (b) such certificates will be reissued without the foregoing legend only in accordance with the terms of the Indenture. 6. We agree that in the event that at some future time we wish to dispose of any of the Securities, we will not do so unless: (a) the Securities are sold to the Company or any Subsidiary thereof; (b) the Securities are sold to a qualified institutional buyer in compliance with Rule 144A under the Securities Act; (c) the Securities are sold to an accredited investor, as defined in Rule 501(a) under the Securities Act, acquiring at least $250,000 125 principal amount of the Securities that, prior to such transfer, furnishes to the Trustee a signed letter containing certain representations and agreements relating to the restrictions on transfer of the Securities (the form of which letter can be obtained from such Trustee); (d) the Securities are sold outside the United States in compliance with Rule 903 or Rule 904 under the Securities Act; (e) the Securities are sold by us pursuant to Rule 144 under the Securities Act; or (f) the Securities are sold pursuant to an effective registration statement under the Securities Act. Very truly yours, [PURCHASER] by ------------------------ Name: Title: Dated: cc: Globalstar Telecommunications Limited 600 Third Avenue New York, New York 10016 EX-4.2 3 REGISTRATION RIGHTS AGREEMENT 1 Exhibit 4.2 EXECUTION COPY GLOBALSTAR TELECOMMUNICATIONS LIMITED $275,000,000 6.5% Convertible Preferred Equivalent Obligations due 2006 REGISTRATION RIGHTS AGREEMENT New York, New York March 6, 1996 Lehman Brothers Inc. Bear, Stearns & Co. Inc. Donaldson, Lufkin & Jenrette Securities Corporation Unterberg Harris Dear Sirs: Globalstar Telecommunications Limited, a Bermuda company (the "Company"), proposes to issue and sell to you (the "Purchasers"), upon the terms set forth in the Purchase Agreement dated February 29, 1996 (as amended prior to the date hereof, the "Purchase Agreement"), among the Company, Globalstar, L.P., a Delaware limited partnership ("Globalstar"), and the Purchasers, $275,000,000 aggregate principal amount (plus an additional $55,000,000 principal amount to cover over-allotments, if any) of its 6.5% Convertible Preferred Equivalent Obligations due 2006 (the "Securities") (the "Initial Placement"). The Securities will be convertible into shares of Common Stock, $1.00 par value per share, of the Company (the "Common Stock") at the conversion price set forth in the Final Memorandum (as defined below). In satisfaction of a condition to your obligations under the Purchase Agreement, the Company agrees with you (i) for your benefit and (ii) for the benefit of the holders of the Securities or the Common Stock issuable upon conversion of the Securities (including you) from time to time until such-time as such Securities shall no longer constitute restricted securities pursuant to Rule 144(k) of the Securities Act (as defined herein) or all such Securities or Common Stock issued upon conversion of such Securities have been sold pursuant to the Shelf Registration 2 2 Statement (as defined below) (each of the foregoing a "Holder" and together the "Holders"), as follows: 1. Definitions. Capitalized terms used herein without definition shall have their respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. "Affiliate" of any specified person means any other person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such specified person. For purposes of this definition, control of a person means the power, direct or indirect, to direct or cause the direction of the management and policies of such person whether by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Closing Date" has the meaning set forth in the Purchase Agreement. "Commission" means the Securities and Exchange Commission. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. "Final Memorandum" has the meaning set forth in the Purchase Agreement. "First Closing Date" has the meaning set forth in the Purchase Agreement. "Holder" has the meaning set forth in the preamble hereto. "Indenture" means the indenture relating to the Securities, to be entered into by the Company and The Bank of New York, as trustee, as the same may be amended from time to time in accordance with the terms thereof. 3 3 "Initial Placement" has the meaning set forth in the preamble hereto. "Majority Holders" means the Holders of a majority of the aggregate principal amount of Securities registered under a Shelf Registration Statement; provided, however, that Holders of Common Stock issued upon conversion of Securities shall be deemed to be Holders of the aggregate principal amount of Securities from which such Common Stock was converted. "Managing Underwriters" means the investment banker or investment bankers and manager or managers that shall administer an underwritten offering of the securities covered by the Shelf Registration Statement. "Prospectus" means the prospectus included in any Shelf Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Securities or Common Stock issuable upon conversion thereof covered by such Shelf Registration Statement, and all amendments and supplements to the Prospectus, including post-effective amendments. "Securities" has the meaning set forth in the preamble hereto. "Shelf Registration" means a registration effected pursuant to Section 2 hereof. "Shelf Registration Period" has the meaning set forth in Section 2(b) hereof. "Shelf Registration Statement" means a "shelf" registration statement of the Company pursuant to the provisions of Section 2 hereof which covers some or all of the Securities and the Common Stock issuable upon conversion thereof, as applicable, on an appropriate form under Rule 415 under the Act or any similar rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. 4 4 "Trustee" means the trustee with respect to the Securities under the Indenture. "underwriter" means any underwriter of Securities or Common Stock issuable upon conversion thereof in connection with an offering thereof under a Shelf Registration Statement. 2. Shelf Registration; Suspension of Use of Prospectus. (a) The Company shall prepare and, not later than 120 days following the First Closing Date, shall file with the Commission and thereafter, but no later than 180 days following the First Closing Date, shall use its best efforts to cause to be declared effective under the Act a Shelf Registration Statement relating to the offer and sale of the Securities and the Common Stock issuable upon conversion thereof by the Holders from time to time in accordance with the methods of distribution elected by such Holders and set forth in such Shelf Registration Statement. (b) The Company shall use its best efforts to keep the Shelf Registration Statement continuously effective in order to permit the Prospectus forming part thereof to be usable by Holders until the third anniversary of the First Closing Date or such earlier date as of which the Securities shall no longer constitute restricted securities under Rule 144(k) of the Securities Act or all the Securities or Common Stock issuable upon conversion thereof covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (in any such case, such period being called the "Shelf Registration Period"). The Company shall be deemed not to have used its best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of securities covered thereby not being able to offer and sell such securities during that period, unless such action is (i) required by applicable law or (ii) pursuant to Section 2(c) hereof, and, in either case, so long as the Company promptly thereafter complies with the requirements of Section 3(i) hereof, if applicable. (c) The Company may suspend the use of the Prospectus for a period not to exceed 15 days in any three month period for valid business reasons (not including avoidance of the Company's obligations hereunder), including the acquisition or divestiture of assets, public filings 5 5 with the Commission, pending corporate developments and similar events. 3. Registration Procedures. In connection with any Shelf Registration Statement, the following provisions shall apply: (a) The Company shall furnish to you, prior to the filing thereof with the Commission, a copy of any Shelf Registration Statement, and each amendment thereof and each amendment or supplement, if any, to the Prospectus included therein and shall use its best efforts to reflect in each such document, when so filed with the Commission, such comments as you reasonably may propose. (b) The Company shall ensure that (i) any Shelf Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto complies in all material respects with the Act and the rules and regulations thereunder, (ii) any Shelf Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any Prospectus forming part of any Shelf Registration Statement, and any amendment or supplement to such Prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (c) (1) The Company shall advise you and the Holders and, if requested by you or any such Holder, confirm such advice in writing: (i) when a Shelf Registration Statement and any amendment thereto has been filed with the Commission and when the Shelf Registration Statement or any post-effective amendment thereto has become effective; and (ii) of any request by the Commission for amendments or supplements to the Shelf Registration Statement or the Prospectus included therein or for additional information. 6 6 (2) The Company shall advise you and the Holders and, if requested by you or any such Holder, confirm such advice in writing: (i) of the issuance by the Commission of any stop order suspending the effectiveness of the Shelf Registration Statement or the initiation of any proceedings for that purpose; (ii) of the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included in any Shelf Registration Statement for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (iii) of the suspension of the use of the Prospectus pursuant to Section 2(c) hereof or of the happening of any event that requires the making of any changes in the Shelf Registration Statement or the Prospectus so that, as of such date, the statements therein are not misleading and do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in light of the circumstances under which they were made) not misleading (which advice shall be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made); provided that such notice shall not be required to specify the nature of the event giving rise to the notice requirement hereunder. (d) The Company shall use its best efforts to obtain the withdrawal of any order suspending the effectiveness of any Shelf Registration Statement at the earliest possible time. (e) The Company shall furnish to each Holder of securities included within the coverage of any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits (including those incorporated by reference). 7 7 (f) The Company shall, during the Shelf Registration Period, deliver to each Holder of securities included within the coverage of any Shelf Registration Statement, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request; and the Company consents to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of securities in connection with the offering and sale of the securities covered by the Prospectus or any amendment or supplement thereto. (g) Prior to any offering of securities pursuant to any Shelf Registration Statement, the Company shall register or qualify or cooperate with the Holders of securities included therein and their respective counsel in connection with the registration or qualification of such securities for offer and sale under the securities or blue sky laws of such jurisdictions as any such Holders reasonably request in writing and do any and all other acts or things reasonably necessary or advisable to enable the offer and sale in such jurisdictions of the securities covered by such Shelf Registration Statement; provided, however, that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to general service of process or to taxation in any such jurisdiction where it is not then so subject. (h) The Company shall cooperate with the Holders of Securities or the Common Stock issued upon conversion thereof to facilitate the timely preparation and delivery of certificates representing Securities or the Common Stock issued upon conversion thereof to be sold pursuant to any Shelf Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request prior to sales of securities pursuant to such Shelf Registration Statement. (i) Upon the occurrence of any event contemplated by paragraph (c)(2)(iii) above, the Company shall, if required pursuant to the Act or paragraph (c)(2)(iii) above, promptly prepare a post-effective amendment to 8 8 any Shelf Registration Statement or an amendment or supplement to the related Prospectus or file any other required document so that, as thereafter delivered to purchasers of the securities included therein, the Prospectus will not include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (j) Not later than the effective date of any Shelf Registration Statement hereunder, the Company shall provide a CUSIP number for the Securities registered under such Shelf Registration Statement, and provide the Trustee with printed certificates for such Securities, in a form eligible for deposit with The Depository Trust Company. (k) The Company shall use its best efforts to comply with all applicable rules and regulations of the Commission and shall make generally available to its security holders as soon as practicable after the effective date of the applicable Shelf Registration Statement an earnings statement satisfying the provisions of Section 11(a) of the Act. (1) The Company shall cause the Indenture to be qualified under the Trust Indenture Act in a timely manner. (m) The Company may require each Holder of securities to be sold pursuant to any Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of such securities as the Company may from time to time reasonably require for inclusion in such Shelf Registration Statement. Any Holder who fails to provide such information shall not be entitled to use the Prospectus. (n) The Company shall, if requested, promptly incorporate in a Prospectus supplement or posteffective amendment to a Shelf Registration Statement, such information as the Managing Underwriters and Majority Holders reasonably agree should be included therein and shall make all required filings of such Prospectus supplement or post-effective amendment as soon as 9 9 notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment. (o) The Company shall enter into such agreements (including underwriting agreements) and take all other appropriate actions in order to expedite or facilitate the registration or the disposition of the Securities or the Common Stock issuable upon conversion thereof, and in connection therewith, if an underwriting agreement is entered into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 5 (or such other provisions and procedures acceptable to the Majority Holders and the Managing Underwriters, if any), with respect to all parties to be indemnified pursuant to Section 5 by Holders of Securities or the Common Stock issuable upon conversion thereof to the Company, it being understood that all underwriting discounts and commissions, and all other underwriting fees, associated with such agreement in connection with such offering of the Securities and Common Stock issuable upon conversion thereof shall, except as otherwise expressly agreed herein (including, without limitation, those expenses covered by Section 4), be for the account of the Holders or the underwriters. (p) The Company shall (i) make reasonably available for inspection by the Holders of securities to be registered thereunder, any underwriter participating in any disposition pursuant to such Shelf Registration Statement, and any attorney, accountant or other agent retained by the Holders or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries; (ii) cause the Company's officers, directors and employees to supply all relevant information reasonably requested by the Holders or any such underwriter, attorney, accountant or agent in connection with such Shelf Registration Statement as is customary for similar due diligence examinations; provided, however, that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by the Holders or any such underwriter, attorney, accountant or agent, unless disclosure thereof is made in connection with a court proceeding or required by law, or such information has become available (not in violation of 10 10 this agreement) to the public generally or through a third party without an accompanying obligation of confidentiality; (iii) make such representations and warranties to the Holders of securities registered thereunder and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement; (iv) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the Managing Underwriters, if any) addressed to each selling Holder and the underwriters, if any, covering such matters as are customarily covered in opinions requested in underwritten offerings and such other matters as may be reasonably requested by such Holders and underwriters; (v) obtain "cold comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Shelf Registration Statement), addressed to each selling Holder of securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with primary underwritten offerings; and (vi) deliver such documents and certificates as may be reasonably requested by the Majority Holders and the Managing Underwriters, if any, including those to evidence compliance with Section 3(i) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. The foregoing actions set forth in clauses (iii), (iv), (v) and (vi) of this Section 3(p) shall be performed at (A) the effectiveness of such Shelf Registration Statement and each post-effective amendment thereto and (B) each closing under any underwriting or similar agreement as and to the extent required thereunder. 4. Registration Expenses. Globalstar shall bear all expenses incurred in connection with the performance of the Company's obligations under Sections 2 and 3 hereof and shall reimburse the Holders for the reasonable and duly documented fees and disbursements of (i) counsel designated 11 11 by the Majority Holders to act as counsel for the Holders in connection therewith or (ii) in the absence of such selection of counsel by the Majority Holders, one firm designated by the underwriters to act as counsel for the Holders in connection therewith. 5. Indemnification and Contribution. (a) In connection with any Shelf Registration Statement, the Company agrees to indemnify and hold harmless each Holder of securities covered thereby (including the Purchasers), the directors, officers, employees and agents of each such Holder and each person who controls any such Holder within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Shelf Registration Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that (i) the Company will not be liable in any case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any such Holder or underwriter or Managing Underwriter specifically for inclusion therein, (ii) the Company shall not be liable to any indemnified party under this indemnity agreement with respect to any Shelf Registration Statement or Prospectus to the extent that any such loss, claim, damage or liability of such indemnified party results solely from an untrue statement of a material fact contained in, or the omission of a material fact from, the Shelf Registration Statement or Prospectus which untrue statement or omission was corrected in an amended or supplemented Shelf Registration Statement or Prospectus, if the person alleging such loss, claim, 12 12 damage or liability was not sent or given, at or prior to the written confirmation of such sale, a copy of the amended or supplemented Shelf Registration Statement or Prospectus if the Company had previously furnished copies thereof to such indemnified party and if such delivery of a prospectus is finally judicially determined to be required by the Act and was not so made and (iii) the Company will not be liable to any indemnified party under this indemnity agreement with respect to any Shelf Registration Statement or Prospectus to the extent that any such loss, claim, damage or liability of such indemnified party results (a) from the use of a Shelf Registration Statement during a period when a stop order has been issued in respect thereof or any proceedings for that purpose have been initiated or (b) from the use of the Prospectus during a period when the use of the Prospectus has been suspended in accordance with Section 2(c) hereof, provided, in each case, that Holders received prior notice of such stop order, initiation of proceedings or suspension. This indemnity agreement will be in addition to any liability which the Company may otherwise have. The Company also agrees to indemnify or contribute to Losses, as provided in Section 5(d), of any underwriters of Securities or the Common Stock issued upon conversion thereof registered under a Shelf Registration Statement, their officers and directors and each person who controls such underwriters on substantially the same basis as that of the indemnification of the Purchasers and the selling Holders provided in this Section 5(a) and shall, if requested by any Holder, enter into an underwriting agreement reflecting such agreement, as provided in Section 3(o) hereof. (b) Each Holder of securities covered by a Shelf Registration Statement (including the Purchasers) severally agrees to indemnify and hold harmless (i) the Company, (ii) each of its directors, (iii) each of its officers who signs such Shelf Registration Statement and (iv) each person who controls the Company within the meaning of either the Act or the Exchange Act to the same extent as the foregoing indemnity from the Company to each such Holder, but only with reference to written information relating to such Holder furnished to the Company by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which any such Holder may otherwise have. 13 13 (c) Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party's choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be reasonably satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel (and local counsel) if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or 14 14 contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. (d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 5 is unavailable to or insufficient to hold harmless an indemnified party for any reason, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively "Losses") to which such indemnified party may be subject in such proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the Initial Placement and the Shelf Registration Statement which resulted in such Losses; provided, however, that in no case shall the Purchasers of any Security or the Common Stock issued upon conversion thereof be responsible, in the aggregate, for any amount in excess of the purchase discount or commission applicable to such Security, as set forth on the cover page of the Final Memorandum, nor shall any underwriter be responsible for any amount in excess of the underwriting discount or commission applicable to the securities purchased by such underwriter under the Shelf Registration Statement which resulted in such Losses. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the Initial Placement (before deducting expenses) as set forth on the cover page of the Final Memorandum. Benefits received by the Purchasers shall be deemed to be equal to the total purchase discounts and commissions as set forth on the cover page of the Final Memorandum, and benefits received by any other Holders shall be deemed to be equal to the value of receiving Securities 15 15 or the Common Stock issuable upon conversion thereof registered under the Act. Benefits received by any underwriter shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Shelf Registration Statement which resulted in such Losses. Relative fault shall be determined by reference to whether any alleged untrue statement or omission relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand. The parties agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 5, each person who controls a Holder within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each person who controls the Company within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Shelf Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d). (e) The provisions of this Section 5 will remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Company or any of the officers, directors or controlling persons referred to in Section 5 hereof, and will survive the sale by a Holder of securities covered by a Shelf Registration Statement. 6. Miscellaneous. (a) No Inconsistent Agreements. The Company has not, as of the date hereof, entered into, nor shall it, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the Holders herein or otherwise conflicts with the provisions hereof. 16 16 (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, qualified, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Holders of at least a majority of the then outstanding aggregate principal amount of Securities or the Common Stock issued upon conversion thereof; provided that, with respect to any matter that directly or indirectly affects the rights of the Purchasers hereunder, the Company shall obtain the written consent of the Purchasers against which such amendment, qualification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders whose securities are being sold pursuant to a Shelf Registration Statement and that does not directly or indirectly affect the rights of other Holders may be given by the Majority Holders, determined on the basis of securities being sold rather than registered under such Shelf Registration Statement. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail, telex, telecopier, or air courier guaranteeing overnight delivery: (1) if to a Holder, at the most current address given by such holder to the Company in accordance with the provisions of this Section 6(c), which address initially is, with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture, with a copy in like manner to Lehman Brothers Inc.; (2) if to you, initially at the address set forth in the Purchase Agreement; and (3) if to the Company, initially at its address set forth in the Purchase Agreement. All such notices and communications shall be deemed to have been duly given when received. 17 17 The Purchasers or the Company by notice to the other may designate additional or different addresses for subsequent notices or communications. (d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including, without the need for an express assignment or any consent by the Company thereto, subsequent Holders of Securities or the Common Stock issuable upon conversion thereof. The Company hereby agrees to extend the benefits of this Agreement to any Holder of Securities and any such Holder may specifically enforce the provisions of this Agreement as if an original party hereto. (e) Counterparts. This agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (f) Headings. The headings in this agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (g) Governing Law. This agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to agreements made and to be performed in said State. (h) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (i) Securities Held by the Company, etc. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities or the Common Stock issued upon conversion thereof is required hereunder, Securities or the Common Stock 18 18 issued upon conversion thereof held by the Company or its Affiliates (other than subsequent Holders of Securities or the Common Stock issuable upon conversion thereof if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 19 19 Please confirm that the foregoing correctly sets forth the agreement between the Company and you. Very truly yours, GLOBALSTAR TELECOMMUNICATIONS LIMITED, by -------------------------- Name: Title: GLOBALSTAR, L.P. by LORAL/QUALCOMM SATELLITE SERVICES, L.P., its general partner, by LORAL/QUALCOMM PARTNERSHIP, L.P., its general partner, by LORAL GENERAL PARTNER, INC., its general partner, by ----------------------- Name: Title: Accepted in New York, New York March, 1996 20 20 LEHMAN BROTHERS INC. BEAR, STEARNS & CO. INC. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION UNTERBERG HARRIS by LEHMAN BROTHERS INC. by ----------------------- Name: Title: EX-5 4 OPINION OF APPLEBY, SPURLING & KEMPE 1 Exhibit 5/8.2 [Letterhead of Appleby, Spurling & Kemp] 20 June, 1996 Globalstar Telecommunications Limited Cedar House 41 Cedar Avenue Hamilton, HM 12 Bermuda Dear Sirs, We have acted as counsel to Globalstar Telecommunications Limited, a Bermuda company (the "Company"), in connection with its registration for resale of $310,000,000 Convertible Preferred Equivalent Obligations (the "Convertible Obligations") and the 4,769,230 shares of Common Stock issuable upon conversion thereof, subject to adjustment in certain circumstances (the "Conversion Shares"), as described in the Company's Prospectus (the "Prospectus") contained in the Form S-3 Registration Statement (the "Registration Statement"), filed with the United States Securities and Exchange Commission under the Securities Act of 1933, as amended. For the purposes of this opinion, we have been supplied with and reviewed a copy of the Registration Statement, and have relied upon the Memorandum of Association and Bye-Laws of the Company and such other documents, certificates and records and have made such investigations as we deem necessary or appropriate in order to give the opinion expressed herein. We have assumed: (i) The genuineness of all signatures on the documents which we have examined. (ii) The conformity to original documents of all documents produced to us as copies and the authenticity of all original documents which, or copies of which, have been submitted to us. Based upon and subject to the foregoing and subject to the reservations mentioned below and to any matters not disclosed to us, we are of the opinion that: (i) the Convertible Obligations have been duly authorised and validly issued by the Company and that the Conversion Shares, when issued in accordance with the terms of the Convertible Obligations, will be duly authorised, validly issued, fully paid and subject to no further calls; and 2 (ii) the statements set forth in the Prospectus under the headings "Description of Capital Stock", "Certain Foreign Issuer Considerations" and "Taxation - Bermuda Tax Considerations", to the extent that they constitute matters of Bermuda law, or legal conclusions with respect thereto, have been reviewed by us and are accurate in all material respects and fairly present the information disclosed therein in all material respects. Our reservations are as follows: (A) We express no opinion as to any law other than Bermuda law and none of the opinions expressed herein relates to compliance with or matters governed by the laws of any jurisdiction other than Bermuda. Where an obligation is to be performed in a jurisdiction other than Bermuda, a Bermuda court may decline to enforce it to the extent that such performance would be illegal or contrary to public policy under the laws of such other jurisdiction. (B) We express no opinion as to the availability of equitable remedies, such as specific performance or injunctive relief, or as to any matters which are within the discretion of the Bermuda courts, such as the award of costs, or questions related to jurisdiction. Further, we express no opinion as to the validity or binding effect in Bermuda of any waiver of or obligation to waive any provision of law (whether substantive or procedural) or any right or remedy arising through circumstances not known at the time of the filing of the Registration Statement. (C) Section 9 of the Interest and Credit Charges (Regulation) Act 1975 provides that the Bermuda courts have discretion as to the amount of interest if any payable on the amount of a judgment after date of judgment. If the court does not exercise that discretion, then interest will accrue at the statutory rate which is currently seven per cent per annum. Where a party is vested with a discretion or may determine a matter in its opinion, such discretion may have to be exercised reasonably or such an opinion may have to be based on reasonable grounds. We consent to the filing of this opinion as Exhibit 5 to the Registration Statement and to the reference to our firm under the caption "Legal Opinions", "Description of Capital Stock", "Certain Foreign Issuer Considerations" and "Taxation" in the Prospectus which is a part of the Registration Statement. This opinion is issued on the basis that it will be construed in accordance with the provisions of Bermuda law. It is issued -2- 3 solely for the benefit of the addressee in relation to the transaction described above and is not to be made available to or relied upon by any other person, firm or entity. Yours faithfully, Appleby, Spurling & Kempe -3- EX-8.1 5 TAX OPINION OF WILLKIE FARR & GALLAGHER 1 Exhibit 8.1 [Letterhead of WILLKIE FARR & GALLAGHER] June 20, 1996 Globalstar Telecommunications Limited Cedar House 41 Cedar Avenue Hamilton HM 12 Bermuda Re: Globalstar Telecommunications Limited $310,000,000 Convertible Preferred Equivalent Obligations due 2006 Ladies and Gentlemen: We have acted as counsel for Globalstar Telecommunications Limited, a Bermuda corporation (the "Company"), in connection with its registration for resale of $310,000,000 Convertible Preferred Equivalent Obligations due 2006 (the "Securities") and the 4,769,230 shares of Common Stock issuable upon conversion thereof, subject to adjustment in certain circumstances (the "Conversion Shares"), as described in the Company's Prospectus (the "Prospectus"), contained in the Form S-3 Registration Statement (the "Registration Statement") filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. The Securities have been issued pursuant to an Indenture, dated as of March 6, 1996 (the "Indenture"), between the Company and The Bank of New York, as Trustee. As counsel for the Company, we have examined copies of the Registration Statement and the Amended and Restated Agreement of Limited Partnership, dated as of December 31, 1994 (the "Partnership Agreement"), of Globalstar, L.P. ("Globalstar"). We have examined originals, certified copies or photocopies of such records of Globalstar, the Company and its subsidiaries and such other certificates and documents as we have deemed relevant and necessary for the opinions hereinafter set forth. In such examination, we have assumed the genuineness of all 2 June 20, 1996 Page 2 signatures, the authenticity of all documents submitted to us as originals and the conformity to originals of all documents submitted to us as certified copies or photocopies. As to various questions of fact material to such opinions, we have relied upon certificates of officers of the Company and of Globalstar and public officials. Based upon the foregoing and having regard for such legal questions as we have deemed relevant, it is our opinion that: The statements set forth in the Prospectus under "Taxation--United States Tax Considerations", insofar as such statements constitute a summary of the legal matters, documents or proceedings referred to therein relating to the laws of the United States fairly present the information referred to therein with respect to such legal matters, documents and proceedings; the statements set forth under the heading "Governance of Globalstar," insofar as such statements purport to summarize provisions of the Partnership Agreement, provide a fair summary of such provisions; and the statements set forth under the heading "Description of Securities" in the Prospectus, insofar as such statements purport to summarize provisions of the Securities and Indenture, provide a fair summary of such provisions. We call to your attention that we are members of the Bar of the State of New York and do not purport to be experts in, or to render any opinions with respect to, the laws of jurisdictions other than the State of New York, except for the federal laws of the United States of America and the Revised Uniform Limited Partnership Act of the State of Delaware. Very truly yours, Willkie Farr & Gallagher EX-12 6 COMPUTATION OF RATIO OF EARNINGS-CFC AND PSD 1 EXHIBIT 12 STATEMENT REGARDING COMPUTATION OF RATIOS (In thousands, except ratios) GLOBALSTAR TELECOMMUNICATIONS LIMITED RATIO OF EARNINGS TO FIXED CHARGES
THREE MONTHS YEAR ENDED ENDED DECEMBER 31, MARCH 31, 1995 1996 -------------- -------------- Earnings: Net loss...................................................... $(12,632) $ (3,282) Add: Equity in loss of Globalstar, L.P........................ 12,632 3,282 Interest expense......................................... -- 1,424 -------------- -------------- Earnings available to cover fixed charges(1).................... $ -- $ 1,424 ============== ============== Fixed charges --interest expense................................ $ -- $ 1,424 ============== ============== Ratio of earnings to fixed charges.............................. N/A 1x ============== ==============
- --------------- (1) The earnings of GTL available to cover fixed charges, consist solely of dividends from Globalstar, L.P. on the Redeemable Preferred Partnership Interests held by GTL. GLOBALSTAR, L.P. DEFICIENCY OF EARNINGS TO COVER FIXED CHARGES
CUMULATIVE MARCH 23 MARCH 23, 1994 (COMMENCEMENT OF THREE MONTHS (COMMENCEMENT OF OPERATIONS) TO YEAR ENDED ENDED OPERATIONS) TO DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31, 1994 1995 1996 1996 ---------------- ------------ ------------ ---------------- Net loss............................ $(26,244) $(68,237) $(13,952) $ (108,433) Dividends on Redeemable Preferred Partnership Interests............. -- -- (1,424) (1,424) ------- ------- ------- -------- Deficiency of earnings to cover fixed charges..................... $(26,244) $(68,237) $(15,376) $ (109,857) ======= ======= ======= ========
EX-23.1 7 CONSENT OF DELOITTE & TOUCHE 1 EXHIBIT 23.1 CONSENT OF DELOITTE & TOUCHE LLP We consent to the incorporation by reference in this Registration Statement of Globalstar Telecommunications Limited on Form S-3 of our reports dated January 26, 1996 (March 6, 1996 as to Notes 4 and 11 of Globalstar Telecommunications Limited and Globalstar, L.P., respectively), appearing in the Annual Report on Form 10-K of Globalstar Telecommunications Limited for the year ended December 31, 1995 and to the reference to us under the heading "Experts" in the Prospectus, which is part of this Registration Statement. DELOITTE & TOUCHE LLP San Jose, California June 19, 1996 EX-25 8 FORM T-1:STATE PF ELIGIBILITY 1 THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T =============================================================================== FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) |__| THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) -------------------- GLOBALSTAR TELECOMMUNICATIONS LIMITED (Exact name of obligor as specified in its charter) Bermuda 13-3795510 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) Cedar House 41 Cedar Avenue Hamilton HM12, Bermuda (Address of principal executive offices) (Zip code) -------------------- 6 % Convertible Preferred Equivalent Obligations Due 2006 (Title of the indenture securities) =============================================================================== 2 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject.
- ------------------------------------------------------------------------------- Name Address - ------------------------------------------------------------------------------- Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. (See Note on page 3.) 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the Commission's Rules of Practice. 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.)
-2- 3 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. NOTE Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of all facts on which to base a responsive answer to Item 2, the answer to said Item is based on incomplete information. Item 2 may, however, be considered as correct unless amended by an amendment to this Form T-1. - 3 - 4 SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 5th day of June, 1996. THE BANK OF NEW YORK By: /S/MARY JANE MORRISSEY -------------------------- Name: MARY JANE MORRISSEY Title: VICE PRESIDENT -4- 5 EXHIBIT 7 Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business December 31, 1995, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts ASSETS in Thousands Cash and balances due from depos- itory institutions: Noninterest-bearing balances and currency and coin .................. $ 4,500,312 Interest-bearing balances .......... 643,938 Securities: Held-to-maturity securities ........ 806,221 Available-for-sale securities ...... 2,036,768 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank: Federal funds sold ................... 4,166,720 Securities purchased under agreements to resell........................... 50,413 Loans and lease financing receivables: Loans and leases, net of unearned income ........................... 27,068,535 LESS: Allowance for loan and lease losses ..................... 520,024 LESS: Allocated transfer risk reserve........................... 1,000 Loans and leases, net of unearned income and allowance, and reserve 26,547,511 Assets held in trading accounts ...... 758,462 Premises and fixed assets (including capitalized leases) ................ 615,330 Other real estate owned .............. 63,769 Investments in unconsolidated subsidiaries and associated companies .......................... 223,174 Customers' liability to this bank on acceptances outstanding ............ 900,795 Intangible assets .................... 212,220 Other assets ......................... 1,186,274 ----------- Total assets ......................... $42,711,907 =========== LIABILITIES Deposits: In domestic offices ................ $21,248,127 Noninterest-bearing ................ 9,172,079 Interest-bearing ................... 12,076,048 In foreign offices, Edge and Agreement subsidiaries, and IBFs ... 9,535,088 Noninterest-bearing ................ 64,417 Interest-bearing ................... 9,470,671 Federal funds purchased and secu- rities sold under agreements to re- purchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: Federal funds purchased ............ 2,095,668 Securities sold under agreements to repurchase .................... 69,212 Demand notes issued to the U.S. Treasury ........................... 107,340 Trading liabilities .................. 615,718 Other borrowed money: With original maturity of one year or less .......................... 1,638,744 With original maturity of more than one year ......................... 120,863 Bank's liability on acceptances exe- cuted and outstanding .............. 909,527 Subordinated notes and debentures .... 1,047,860 Other liabilities .................... 1,836,573 ----------- Total liabilities .................... 39,224,720 ----------- EQUITY CAPITAL Common stock ........................ 942,284 Surplus ............................. 525,666 Undivided profits and capital reserves .......................... 1,995,316 Net unrealized holding gains (losses) on available-for-sale securities ........................ 29,668 Cumulative foreign currency transla- tion adjustments .................. ( 5,747) ----------- Total equity capital ................ 3,487,187 ----------- Total liabilities and equity capital ........................... $42,711,907 ===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. J. Carter Bacot ) Thomas A. Renyi ) Directors Alan R. Griffith ) -----END PRIVACY-ENHANCED MESSAGE-----