-----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, SgIQGtv5upOK2vDByOQjBd/uWTNbMZZrNODgs4POU94hdRJC32hRaYQIbal27AYr G/TttMJY9kcU0IPs+Sb5Ag== /in/edgar/work/20000919/0000950123-00-008662/0000950123-00-008662.txt : 20000923 0000950123-00-008662.hdr.sgml : 20000923 ACCESSION NUMBER: 0000950123-00-008662 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000918 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000919 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLOBALSTAR TELECOMMUNICATIONS LTD CENTRAL INDEX KEY: 0000933401 STANDARD INDUSTRIAL CLASSIFICATION: [4812 ] IRS NUMBER: 133795510 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-25456 FILM NUMBER: 724863 BUSINESS ADDRESS: STREET 1: CEDAR HOUSE 41 CEDAR AVENUE STREET 2: HAMILTON CITY: BERMUDA HM12 STATE: D0 BUSINESS PHONE: 4412952244 MAIL ADDRESS: STREET 1: 600 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10016 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLOBALSTAR LP CENTRAL INDEX KEY: 0001037927 STANDARD INDUSTRIAL CLASSIFICATION: [4812 ] IRS NUMBER: 133759824 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 333-25461 FILM NUMBER: 724864 BUSINESS ADDRESS: STREET 1: 3200 ZARKEN R STREET 2: PO BOX 640670 CITY: SAN JOSE STATE: CA ZIP: 95164 BUSINESS PHONE: 4089334000 8-K 1 y40566e8-k.txt CURRENT REPORT 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): September 18, 2000 --------------------- GLOBALSTAR TELECOMMUNICATIONS LIMITED ------------------------------------------------- (Exact name of registrant as specified in its charter) Islands of Bermuda 0-25456 13-3795510 ---------------------------------------------------------------- (State or other (Commission (IRS Employer jurisdiction of File Number) Identification incorporation) Number
Cedar House, 41 Cedar Avenue, Hamilton, Bermuda HM 12 -------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (441) 295-2244 -------------------------------------- GLOBALSTAR, L.P. ----------------- (Exact name of registrant as specified in its charter) Delaware 333-25461 13-3759824 ----------------------------------------------------------------------- (State or other (Commission (IRS Employer jurisdiction of File Number) Identification incorporation) Number
3200 Zanker Road, San Jose, California 95134 ---------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (408)933-4000 ------------- 2 Item 5. Other Events. Globalstar Telecommunications Limited ("GTL") has entered into a purchase agreement with Bear, Stearns International Limited ("Bear Stearns"), under which Bear Stearns has agreed to purchase, subject to certain conditions and over several tranches, up to $105 million of shares of GTL common stock as set forth in the Prospectus Supplement and Purchase Agreement filed as exhibits hereto and incorporated by reference herein. GTL will use the proceeds from the sales to purchase partnership interests in Globalstar, L.P., which, in turn, will use the proceeds for general corporate purposes including capital expenditures, operations (including marketing and distribution of phones and services) and interest expense. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (c) Exhibits. Exhibit 1 Prospectus Supplement dated September 18, 2000 Exhibit 2 Purchase Agreement dated as of September 18, 2000 among Globalstar Telecommunications Limited, Globalstar, L.P. and Bear, Stearns International Limited. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. GLOBALSTAR TELECOMMUNICATIONS LIMITED By: /s/ Richard J. Townsend --------------------------- Name: Richard J. Townsend Title: Vice President and Chief Financial Officer GLOBALSTAR, L.P. By: Loral/Qualcomm Satellite Services, L.P., its managing general partner By: Loral/Qualcomm Partnership, L.P., its general partner By: Loral General Partner, Inc., its general partner By: /s/ Avi Katz ---------------------------- Name: Avi Katz Title: Vice President and Secretary Date: September 18, 2000 EX-99.1 2 y40566ex99-1.txt PROSPECTUS SUPPLEMENT 1 PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED AUGUST 18, 1999 $105,000,000 [GLOBALSTAR LOGO] GLOBALSTAR TELECOMMUNICATIONS LIMITED COMMON STOCK ------------------------- This is a public offering of up to $105,000,000 of shares of our common stock. We may offer and sell these shares from time to time in separate tranches pursuant to a common stock purchase agreement with Bear Stearns. The price Bear Stearns will pay us for these shares will be based on one of three formulas, which we will choose upon each decision to take down a tranche. We may choose to receive: - 97 1/2% of the arithmetic average of the closing bid prices, - 93% of the arithmetic average of the volume weighted average price, or - 100% of the lowest sale price (excluding sales not meeting certain criteria) of our common stock, as reported by the Nasdaq National Market over the two trading days following our notice, subject to certain exceptions described herein. See "Prospectus Supplement--Plan of Distribution" beginning on page S-16 for more information. Bear Stearns will sell the shares on the Nasdaq National Market at prices available in the market or directly to purchasers at negotiated prices. Each time we propose to sell a tranche of shares to Bear Stearns hereunder, we will supplement this prospectus to show: - the date of notice of take down of such tranche; - the number of shares proposed to be sold; - the amount of gross proceeds received by us from any prior sales hereunder as of the date of such supplement (excluding any proceeds from the proposed sale and before deducting the offering expenses, including the fee to be paid to Bear Stearns); - the remaining dollar amount of shares under this prospectus supplement after consummation of the proposed sale (assuming that these shares were sold to Bear Stearns based upon the last reported sale price of the common stock listed below); and - the last reported price of the common stock as of a recent date. Our common stock is traded on the Nasdaq National Market under the symbol "GSTRF," and the last reported sale price of the common stock on September 15, 2000, was $11.50 per share. ------------------------- SEE "RISK FACTORS" BEGINNING ON PAGE S-5 TO READ ABOUT CERTAIN RISKS THAT YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------- BEAR, STEARNS & CO. INC. The date of this prospectus supplement is September 18, 2000 2 PROSPECTUS SUPPLEMENT SUMMARY You should read the entire prospectus supplement, our base prospectus dated August 18, 1999, our and Globalstar's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 included herewith and the other documents incorporated by reference before making an investment decision. The information in this prospectus supplement replaces any inconsistent information in the base prospectus and in our and Globalstar's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 included herewith. Globalstar Telecommunications Limited is referred to in this prospectus supplement as "we", "our", "us" or "GTL" and Globalstar, L.P. is referred to as "Globalstar." GLOBALSTAR TELECOMMUNICATIONS LIMITED OUR COMPANY We are a general partner of Globalstar, which has recently commenced operations of its global telecommunications network. As of June 30, 2000, we owned approximately 39% of Globalstar's ordinary partnership interests and, after giving effect to the purchase of Globalstar's ordinary partnership interests with the proceeds from this offering, we will own approximately 41% of Globalstar's ordinary partnership interests (based upon an assumed average sale price to Bear Stearns of $11.00 per share of our common stock). We operate as a holding company to permit public equity ownership interest in Globalstar. Our sole asset consists of our partnership interests in Globalstar. Loral Space & Communications Ltd., one of the world's leading satellite companies, is one of the founders of, and, through a subsidiary, serves as the managing general partner of, Globalstar. GLOBALSTAR Globalstar owns and operates a satellite constellation that forms the backbone of a global telecommunications network designed to serve virtually every populated area of the world. Globalstar's network, which we refer to as the Globalstar system, uses Qualcomm's patented CDMA technology to provide high-quality mobile and fixed telephone service to customers who live, work or travel beyond the reach of terrestrial-based communications networks. Qualcomm has agreed that Globalstar will be the only provider of mobile satellite services to which it will license its patented CDMA technology. Globalstar's service provider partners, who are experienced telecommunications companies, have launched, are launching or are preparing to launch, service in key markets worldwide. Globalstar and its service provider partners have also begun intensive marketing campaigns and are adopting multifaceted, locally oriented marketing strategies to serve their markets. Under Globalstar's agreements with its service providers, these partners are the exclusive providers of Globalstar service within their assigned territory and will retain their exclusivity as long as they meet minimum performance goals. Under these agreements, Globalstar acts as a wholesaler of capacity on its space segment to its service providers. Globalstar has assigned the largest service territories to its founding strategic partners, including a France Telecom Alcatel joint venture, Vodafone AirTouch, ChinaSat, Elsacom and Dacom. The Globalstar system commenced commercial service in the first quarter of 2000 when Globalstar began its transition from a development stage entity to an operating limited partnership. As of August 31, 2000, there were 20 gateways in revenue service, and three additional gateways have completed their system testing process, two of which are expected to be in revenue service during the third quarter of 2000. In addition, several existing gateways have been or are being upgraded to expand their coverage areas, bringing service to new S-1 3 territories and markets. These include large parts of Alaska, the northern Atlantic sea lanes between North America and northern Europe, most of the Caribbean and the Sea of Japan. Globalstar service providers are now providing commercial service in 40 countries, including Argentina, Australia, Brazil, Canada, China, Mexico, South Korea, the United States and virtually all of western Europe. By the end of the fourth quarter 2000, Globalstar service providers plan to have commercial service available in approximately 60 additional countries, including Russia, Saudi Arabia, Scandinavia and Turkey. The Globalstar system is designed to offer a cost-effective communications solution for areas underserved or unserved by existing telecommunications infrastructures. Globalstar mobile phones are simple to use -- just like ordinary cellular telephones -- and are among the smallest, lightest and least expensive satellite phones currently available. These phones are multimode, functioning as cellular phones where terrestrial cellular service is available and as satellite phones where cellular service is not available. Globalstar phones provide this multimode capability without separate modules or plug-ins. Globalstar pay phones and fixed wireless phones for business and residential use provide basic telephone service in rural villages and at remote industrial and residential sites. Globalstar phones have familiar features such as phone book, voicemail, short messaging service, and, in some service areas, call forwarding. Commercial data service is expected to be available in North America later this year, and in Europe, Australia and other GSM territories in 2001. As of August 31, 2000, Globalstar's vendors Qualcomm, Ericsson and Telit had manufactured, collectively, approximately 120,000 Globalstar phones. Globalstar's utilization of Qualcomm's CDMA technology should enable it to swiftly adopt future improvements as this industry-leading wireless technology evolves. In addition, because the intelligence of the Globalstar system is located on the ground, future enhancements are easily implemented. As an example of this design flexibility, Globalstar recently concluded preliminary agreements with In-Flight Network, a joint venture between News Corporation and Rockwell Collins, to provide Internet and e-mail services to passengers in commercial and other aircraft. Under those agreements, Globalstar, In-Flight Network and Qualcomm will participate jointly in the development of a system that will provide broadband Internet access as well as e-mail and voice-over-IP applications directly to aircraft. In 2001, Globalstar expects to provide an independent two-way channel for Internet access, e-mail, downloading of data and other applications, supplemented by a very high bandwidth forward link over a geostationary satellite, capable of providing high volume content such as streaming video. Globalstar's full constellation of 52 satellites, including four in-orbit spares, is in orbit and functioning. Based on our experience to date, we expect Globalstar satellites to have a useful life of 10 years, rather than our original expectation of 7 1/2 years. The Globalstar satellites use a simple, traditional "bent pipe" design, amplifying and reflecting received signals directly back to earth, with no intersatellite links. Gateways owned and operated by Globalstar service providers then connect customer calls through the existing public telephone network. As a result, the Globalstar system will complement and extend, rather than bypass, the existing telephone network infrastructure. Globalstar believes its call quality is equal to, or better than, digital cellular connections. According to industry sources, more than 80% of the world's land mass is not covered by cellular service. Globastar believes, based on market research, that its addressable market -- those who live, work or regularly travel to areas underserved or unserved by existing telecommunications infrastructure and who desire and have the ability to pay for telephone service such as that offered by Globalstar -- is approximately 40 million potential customers. We expect that Globalstar's first generation system will have a system capacity of approximately 7 million subscribers, less than one fifth of Globalstar's potential addressable market. In fact, because of the limited spectrum available for use by mobile satellite services S-2 4 like Globalstar, the combined capacity of Globalstar and the other existing and announced mobile satellite service systems are capable of serving only a portion of this market. Globalstar's original consortium of 12 leading international telecommunications service providers and manufacturers has grown into an international organization with marketing channels in 125 countries and agreements with over 220 local service providers. Globalstar-supported cooperative advertising is creating brand awareness globally and within selected market segments, while sales channels are focused both on the mass market as well as targeted market segments, including: - government, including police, emergency and military users; - commercial freight and fishing vessels, cruise ships and recreational boats; - truck drivers and business travelers; - the forestry, mining, oil and gas and other natural resource industries; - wilderness guides and outdoor enthusiasts; - agribusiness; - commercial and private aircraft; and - utilities. Globalstar's service providers have an existing customer base of more than 100 million cellular customers from which they intend to identify for direct marketing efforts those who work in, or frequently travel to, or through, areas without cellular service. From July 1, 2000 through December 31, 2000, Globalstar expects to spend approximately $161 million for the enhancement of its system software, for the eight spare satellites being constructed by Space Systems/Loral, for development work completed but not paid at June 30, 2000, for repayment of vendor financing and for the net financing provided to Globalstar's service providers to assist in the purchase of gateways, fixed access terminals and handsets (net of expected receipts of $129 million from the service providers as repayment of such financing). In addition, cash interest, preferred dividends and operating costs are estimated to be between $100 million and $125 million per quarter for the remainder of 2000. Globalstar expects that its cash on hand ($463 million at June 30, 2000), the drawdown of all its remaining available credit (approximately $29 million at June 30, 2000), and, assuming this offering is completed this year, the expected proceeds from this offering, will enable it to end 2000 with a cash balance of approximately $150 million. Globalstar will require significant additional funds to cover its cash outflows for 2001, which it expects will include operating expenses, interest on indebtedness and dividends on preferred stock of as much as $500 million, as well as capital expenditures and other cash requirements. The amount of such additional funds will depend, among other things, upon the amount and timing of revenues generated. We cannot assure you of the amount of revenues that will be generated or of the accuracy of the amounts estimated above. Globalstar is contemplating raising additional funds through, among other alternatives, equity infusions from its strategic partners; there is no assurance that it will be able to do so on satisfactory terms or at all. If Globalstar is not able to raise sufficient funds, the lack of funds may result in a default on its debt facilities. If Globalstar cannot obtain waivers or otherwise cure such default, there could be a severe adverse effect on the value of our shareholders' equity. See "Risk Factors" beginning on page S-5 herein and "Liquidity and Capital Resources" in our and Globalstar's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 attached hereto. S-3 5 Globalstar's $500 million credit agreement contains a financial condition covenant which comes into effect on March 31, 2001, and requires, among other things, that Globalstar have revenues of $100 million for the four quarters ending March 31, 2001. Globalstar's revenues for the first of these four quarters, the quarter ended June 30, 2000, were $708,000. Given the level of revenues in the quarter ended June 30, 2000, Globalstar anticipates that the growth in revenues during the subsequent three quarters will not be sufficient to meet the $100 million revenue covenant. If Globalstar cannot satisfy this covenant or obtain waivers or amendments from a majority of the bank lenders or fulfill the $500 million obligation in a form satisfactory to all the bank lenders, Globalstar would be in default under its debt facilities (including vendor financing) and Globalstar's lenders and bondholders would have the right to accelerate payment of their loans to Globalstar. If Globalstar is not able to obtain waivers or refinance such debt, there could be a severe adverse effect on the value of our shareholders' equity. Loral SatCom Ltd. and Loral Satellite, Inc., directly and indirectly wholly owned subsidiaries of Loral Space & Communications, Ltd., have jointly and severally guaranteed Globalstar's obligations under this credit agreement. See "Risk Factors" beginning on page S-5 herein and "Liquidity and Capital Resources" in our and Globalstar's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 attached hereto. THE OFFERING We may offer up to $105,000,000 of shares of our common stock under this prospectus supplement pursuant to our common stock purchase agreement with Bear Stearns. Under this purchase agreement, upon satisfaction of certain conditions, we may exercise our right to sell a tranche of common stock to Bear Stearns by giving notice to Bear Stearns by 5:30 p.m. on any trading day. However, we may not issue notices on consecutive trading days or after September 17, 2001. Each sale of our common stock to Bear Stearns will typically take place on the third trading day after we give notice. See "Plan of Distribution" herein for a more detailed description of certain terms of this offering. Assuming that we sell to Bear Stearns all of the shares of our common stock that are permitted to be sold under the purchase agreement and that the average sale price to Bear Stearns is $11.00 per share, the number of shares of our common stock that would be outstanding after this offering would be 106,457,195. The number of shares outstanding after this offering is based on the common stock outstanding on June 30, 2000 and does not include shares of our common stock issuable upon exercise of options and warrants and upon conversion of our convertible preferred stock. We will use the net proceeds from this offering to purchase ordinary partnership interests in Globalstar. We may offer shares under this prospectus supplement on a continuous basis under Rule 415 of the Securities Act. S-4 6 RISK FACTORS You should carefully consider the following risks before you decide to buy our common stock. An investment in our common stock also entails additional risks which are described in our and Globalstar's Annual Report on Form 10-K for the year ended December 31, 1999 and are incorporated by reference in this prospectus, in the base prospectus and in our and Globalstar's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 included herewith, to the extent they have not been updated by the information provided to you in this section. THE GLOBALSTAR SYSTEM ONLY RECENTLY COMMENCED OPERATIONS, AND CUSTOMER DEMAND FOR THE SERVICE HAS EMERGED MORE SLOWLY THAN WE ORIGINALLY ANTICIPATED, RESULTING IN LOWER THAN ANTICIPATED REVENUES. FAILURE TO OBTAIN SUFFICIENT REVENUES COULD RESULT IN DEFAULT UNDER GLOBALSTAR'S DEBT FACILITIES. Telephone systems using low-earth orbit satellites are a new business that has not yet succeeded in the marketplace. Globalstar commenced commercial operations in the first quarter of 2000 and has yet to generate significant subscriber revenues, despite being in service in parts of the world for more than six months. For the six month period ended June 30, 2000, Globalstar had approximately $1.3 million of revenues. Globalstar's market penetration rates, minutes of use and resulting revenues have been significantly less than its management's original expectations. Roll-out of commercial service in countries has also been slower than expected. Globalstar believes that it is too early in the service roll-out to discern any trend or pattern in minutes of use and resulting revenues that would be indicative of future results. There can be no assurance that Globalstar will be able to rapidly and significantly improve its market penetration rates and revenues from current levels to a level sufficient to fund Globalstar's future cash requirements, including cash requirements to service its debt. If Globalstar is unable to obtain sufficient funds to pay for its debt service, Globalstar would be in default under its debt facilities and there could be a severe adverse effect on the value of our shareholders' equity. See "Liquidity and Capital Resources" in our and Globalstar's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 attached hereto. The first company to launch service in this industry, Iridium L.L.C., filed for bankruptcy in August 1999. Iridium terminated commercial service in March 2000, although it is currently providing service to its customers at no charge. GLOBALSTAR MUST ACHIEVE SIGNIFICANT REVENUES QUICKLY IN ORDER TO MEET A FINANCIAL COVENANT THAT WILL COME INTO EFFECT IN MARCH 2001. Globalstar's $500 million credit agreement contains various financial condition covenants, one of which comes into effect on March 31, 2001. This covenant would require, among other things, that Globalstar have revenues of $100 million for the four quarters ending March 31, 2001. Globalstar's revenues for the first of these four quarters, the quarter ended June 30, 2000, were $708,000. Given the level of revenues in the quarter ended June 30, 2000, Globalstar anticipates that the growth in revenues during the subsequent three quarters will not be sufficient to meet the $100 million revenue covenant. If Globalstar cannot satisfy this covenant, obtain waivers or amendments from a majority of the bank lenders, or fulfill the $500 million obligation in a form satisfactory to all the bank lenders, Globalstar would be in default under its debt facilities (including vendor financing) and Globalstar's lenders and bondholders would have the right to accelerate payment of their loans to Globalstar. If Globalstar is not able to obtain waivers or refinance such debt, there could be a severe adverse effect on the value of our shareholders' equity. Loral SatCom Ltd. and Loral Satellite, Inc., directly and indirectly wholly owned subsidiaries of Loral Space & S-5 7 Communications Ltd., have jointly and severally guaranteed Globalstar's obligations under this credit agreement. GLOBALSTAR WILL INCUR ADDITIONAL SYSTEM COSTS AND WILL REQUIRE SIGNIFICANT ADDITIONAL FUNDS. From July 1, 2000, through December 31, 2000, Globalstar expects to spend approximately $161 million for the enhancement of its system software, for the eight spare satellites being constructed by Space Systems/Loral, for development work completed but not paid at June 30, 2000, for repayment of vendor financing and for the financing provided to Globalstar's service providers to assist in the purchase of gateways, fixed access terminals and handsets (net of expected receipts of $129 million from the service providers as repayment of such financing). In addition, cash interest, preferred dividends and operating costs are estimated to be between $100 million and $125 million per quarter for the remainder of 2000. Globalstar expects that its cash on hand ($463 million at June 30, 2000), the drawdown of all its remaining available credit (approximately $29 million at June 29, 2000), and, assuming this offering is completed this year, the expected proceeds from this offering, will enable it to end 2000 with a cash balance of approximately $150 million. Globalstar will require significant additional funds to cover its cash outflows for 2001, which it expects will include operating expenses, interest on indebtedness and dividends on preferred stock of as much as $500 million, as well as capital expenditures and other cash requirements. The amount of such additional funds will depend, among other things, upon the amount and timing of revenues generated. We cannot assure you of the amount of revenues that will be generated or of the accuracy of the amounts estimated above. Globalstar is contemplating raising additional funds through, among other alternatives, equity infusions from its strategic partners; there is no assurance that it will be able to do so on satisfactory terms or at all. If Globalstar is not able to raise sufficient funds, the lack of funds may result in a default on its debt facilities. If Globalstar cannot obtain waivers or otherwise cure such default, there could be a severe adverse effect on the value of our shareholders' equity. Globalstar also has secured from SS/L twelve and eighteen month options to purchase two additional Delta launch vehicles. The total future commitment for these launch vehicles is approximately $82 million plus escalation of 3% per year. If these launch vehicles are not used by the end of 2003, Globalstar will incur a termination charge of approximately $19 million. LOCKHEED MARTIN IS DISPUTING GLOBALSTAR'S RIGHT TO ISSUE IT A $150 MILLION SUBORDINATED NOTE IN SATISFACTION OF PAYMENTS MADE UNDER A GUARANTY. On June 30, 2000, Globalstar's $250 million credit facility with The Chase Manhattan Bank, which was fully drawn, matured, and was thereupon repaid in full by its guarantors, including Lockheed Martin Corporation. Pursuant to the relevant agreements entered into in 1996, Globalstar issued to all the guarantors three-year notes in proportion to the principal amount of the credit facility guarantees. Lockheed Martin, however, has rejected the notes it received and is instead asking Globalstar to issue new securities with additional rights and enhanced value, without waiving its claim that it is entitled to receive an immediate cash reimbursement by Globalstar of its $150 million payment to the bank lenders. Globalstar disputes Lockheed Martin's interpretation of the relevant agreements, but is, nonetheless, in discussions with Lockheed Martin to resolve the dispute. If the dispute is not resolved, we cannot be sure that if the matter were litigated the court would agree with Globalstar's interpretation of the agreements. Moreover, if as a result of this dispute, a holder of Globalstar public bonds claimed a cross default under the applicable S-6 8 indentures, and a court ruled against Globalstar, the maturity date of the bonds would be accelerated. Management believes, however, that a court would agree with Globalstar's interpretation of the relevant agreements. GLOBALSTAR FACES INTENSE COMPETITION FROM BOTH DIRECT AND INDIRECT COMPETITORS, AND ADDITIONAL DIRECT COMPETITORS PLAN TO ENTER THE MARKET SOON. ICO Global Communications has proposed a similar worldwide system and has filed a request with the Federal Communications Commission to operate in the United States in a different frequency band than that used by Globalstar. ICO Global has emerged from its bankruptcy proceedings with reduced debt obligations, pursuant to a financing package from a group led by Craig McCaw, which makes it more likely that ICO Global will complete its system and compete with Globalstar in the future. If Constellation Communications, Inc. and Mobile Communications Holdings, Inc., which have held licenses from the Federal Communications Commission since July 1997, attract financing, build their systems and begin operations, they will become direct competitors as well. If Iridium receives additional financing and resumes commercial service, it will also become a direct competitor. In addition to competing for investment capital, subscribers and service providers in markets all over the world, the mobile satellite services systems, including Globalstar, also compete with each other for the limited spectrum available for mobile satellite services operations. CDMA systems such as Globalstar, Constellation and Mobile Communications Holdings permit multiple systems to operate within the same frequency band. To the extent that Globalstar is required to share this frequency band with these other systems or with foreign systems, Globalstar's available capacity will be reduced. Existing fixed satellite systems, including those of American Mobile Satellite Corporation, Comsat Corporation's Planet-1, PT Asia Cellular Satellites and Inmarsat, and proposed systems, such as Thuraya Satellite Telecommunications Company, also provide, or intend to provide, competing service on a regional basis at potentially lower costs. Technological advances and a continuing trend toward strategic alliances in the telecommunications industry could give rise to significant new competitors. Satellite-based telecommunications systems are characterized by high up-front costs and relatively low operating costs. Several systems are being proposed, and, while the proponents of these systems believe that there will be significant demand for their services, actual demand will not become known until such systems are operational. If the capacity of Globalstar and competing systems exceeds demand, price competition could be intense. NEW TECHNOLOGIES AND THE EXPANSION OF LAND-BASED SYSTEMS MAY REDUCE DEMAND FOR GLOBALSTAR'S SERVICE. The extension of land-based telecommunications services to regions currently underserved or not served by wireline or cellular services may reduce demand for Globalstar service in those regions. These land-based telecommunications services are being built more quickly than Globalstar originally anticipated, which has contributed to lessened demand for Globalstar's service. Globalstar may also face competition in the future from companies using new technologies and new satellite systems. The space and communications industries are subject to rapid advances and innovations in technology. New technology could render Globalstar obsolete or less competitive by satisfying consumer demand in more attractive ways or through the introduction of incompatible standards. In addition, Globalstar depends on technologies S-7 9 developed by third parties, and we cannot be certain that these technologies will continue to be available to Globalstar on a timely basis or on reasonable terms. THE RIGHT OF SHAREHOLDERS UNDER BERMUDA LAW ARE DIFFERENT FROM THE RIGHTS OF SHAREHOLDERS UNDER U.S. LAW. Since we are a Bermuda company, the principles of law that govern shareholder rights, the validity of corporate procedures and other matters are different from those that would apply if we were a U.S. company. For example, it is not certain whether a Bermuda court would enforce liabilities against us or our officers and directors based upon United States securities law either in an original action in Bermuda or under a United States judgment. Bermuda law giving shareholders rights to sue directors is less developed than in the United States and may provide fewer rights. PRICES OF OUR COMMON STOCK MAY BE VOLATILE. Many things that we cannot predict or control may affect the price of our common stock. Risks associated with the operation of satellite systems, in particular, may cause sudden changes in the price. In addition, the stock markets in general, and the Nasdaq National Market and technology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors may seriously impact the market price of our common stock, regardless of our actual operating performance. HOLDERS OR OUR COMMON STOCK MAY BE DILUTED BY FUTURE STOCK ISSUANCES. As of June 30, 2000, 96,911,740 shares of our common stock were outstanding. In addition: - Globalstar partners have the right, exercisable over a period of years following the beginning of Globalstar service and two consecutive quarters of positive net income, to exchange their outstanding ordinary partnership interests for approximately 154 million shares of our common stock. - holders of outstanding warrants issued in connection with Globalstar's 11 3/8% senior notes have the right to exercise them for 3,810,469 shares of our common stock at an exercise price of $17.394 per share; - in connection with their guarantee of Globalstar's $500 million credit facility, Loral has warrants to purchase an aggregate of 3,450,000 Globalstar partnership interests (equivalent to approximately 13,800,000 shares of our common stock) at an exercise price of $91.00 per partnership interest (equivalent to $22.75 per share of our common stock); - in connection with its provision of approximately $531 million of vendor financing to Globalstar, Qualcomm has warrants to purchase an aggregate of 3,450,000 Globalstar partnership interests (equivalent to approximately 13,800,000 shares of our common stock) at an exercise price of $42.25 per partnership interest (equivalent to $10.56 per share of common stock); - Globalstar employees and directors have options to buy 8,415,800 shares of our common stock, at exercise prices ranging from $4.16 to $31.41 per share; - under our stock option plan, we may in the future grant employees' options to purchase as many as 1,487,300 shares of our common stock; S-8 10 - in connection with service provider arrangements in China under which China Telecommunications Broadcast Satellite Corporation has agreed to act as the sole distributor of Globalstar service in China, China Telecom has an option to acquire 937,500 Globalstar partnership interests (equivalent to 3,750,000 shares of our common stock) for $18,750,000; and - 4,396,295 shares of our Series A preferred stock are outstanding and are convertible into 9,451,837 shares of our common stock and 2,999,990 shares of our Series B preferred stock are outstanding and are convertible into 5,778,791 shares of our common stock. Moreover, we are currently in discussion to sell additional shares of our common stock to certain of Globalstar's partners. Sales of significant amounts of our common stock to the public, or the perception that those sales could happen, could adversely affect the price of our common stock. FORWARD-LOOKING STATEMENTS Some statements and information contained or incorporated by reference in this prospectus supplement and the base prospectus are not historical facts, but are "forward-looking statements", as this term is defined in the Private Securities Litigation Reform Act of 1995. We wish to caution you that these forward looking statements are only predictions, and actual events or results may differ materially as a result of risks that we face, including those set forth in this prospectus supplement and the base prospectus under "Risk Factors" or incorporated therein by reference. When we or Globalstar use the words "believe", "intend", "expect", "may", "will", "should", "anticipate" or their negatives, or similar expressions, the statements which include those words are usually forward-looking statement. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements. USE OF PROCEEDS We will use the net proceeds from this offering to purchase ordinary partnership interests in Globalstar. Globalstar, in turn, will use these proceeds for general corporate purposes, including capital expenditures, operations (including marketing and distribution of phones and services) and interest expense. S-9 11 PRICE RANGE OF COMMON STOCK Our common stock is quoted on the Nasdaq National Market under the symbol "GSTRF." The following table lists, for the periods indicated, the range of high and low sales prices for our common stock as reported on the Nasdaq National Market. The sale prices for the common stock have been adjusted to reflect the two-for-one stock split we issued on June 8, 1998, to shareholders of record as of May 29, 1998 and the two-for-one stock split we issued on May 28, 1997 to shareholders of record as of May 12, 1997.
HIGH LOW ---- --- 1997 First Quarter............................................. $ 17 13/16 $12 1/2 Second Quarter............................................ $ 16 3/4 $11 7/8 Third Quarter............................................. $ 26 3/4 $13 1/2 Fourth Quarter............................................ $ 29 3/4 $19 1/2 1998 First Quarter............................................. $ 37 1/8 $19 Second Quarter............................................ $ 36 1/8 $25 3/4 Third Quarter............................................. $ 28 1/8 $ 9 5/8 Fourth Quarter............................................ $ 22 1/8 $ 8 5/16 1999 First Quarter............................................. $ 24 1/2 $12 5/8 Second Quarter............................................ $ 24 1/2 $13 1/2 Third Quarter............................................. $ 33 $20 1/2 Fourth Quarter............................................ $ 49 1/2 $19 2000 First Quarter............................................. $ 53 3/4 $12 13/16 Second Quarter............................................ $ 15 3/4 $ 5 13/16 Third Quarter (through September 15, 2000)................ $ 12 1/4 $ 7 1/8
S-10 12 CAPITALIZATION The following table sets forth the cash and cash equivalents and capitalization of GTL and Globalstar as of June 30, 2000 on an unaudited historical basis. GLOBALSTAR TELECOMMUNICATIONS LIMITED (IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, 2000 ------------- Shareholders' equity: Preference shares, $.01 par value, 20,000,000 shares authorized: 8% Series A convertible redeemable preferred stock (4,396,295 shares outstanding, $220 million redemption value)................................................. $ 213,393 9% Series B convertible redeemable preferred stock (2,999,990 shares outstanding, $150 million redemption value)................................................. 145,574 Common stock, $1.00 par value, 600,000,000 shares authorized (96,911,740 shares outstanding).............. 96,912 Paid-in-capital........................................... 1,001,132 Warrants.................................................. 11,268 Accumulated deficit....................................... (370,684) ---------- Total shareholders' equity and capitalization...... $1,097,595 ==========
GLOBALSTAR, L.P. (IN THOUSANDS, EXCEPT PARTNERSHIP INTEREST DATA)
JUNE 30, 2000 ------------- Cash and cash equivalents(1)................................ $ 463,486 ========== Vendor financing liability, including current portion(2).... $ 758,824 Revolving credit facility................................... 100,000 Term loans payable, including current portion............... 400,000 Notes payable(3)............................................ 206,300 Notes payable to affiliates(3).............................. 43,700 Senior notes ($1,450,000 aggregate principal amount)........ 1,403,388 Partners' capital: 8% Series A convertible redeemable preferred partnership interests (4,396,295 interests outstanding, $220 million redemption value).............................. 213,393 9% Series B convertible redeemable preferred partnership interests (2,999,990 interests outstanding, $150 million redemption value).............................. 145,574 Ordinary partnership interests (61,861,714 interests outstanding)........................................... 336,410 Unearned compensation(4)................................ (1,773) Warrants(5)............................................. 215,388 ---------- Total partners' capital............................ 908,992 ---------- Total capitalization............................... $3,821,204 ==========
- ------------------------- (1) Includes restricted cash of $49 million, consisting of payments received from service providers for the purchase of gateways. (2) See Note 6 of Globalstar's consolidated financial statements for the year ended December 31, 1999 incorporated by reference and Note 5 of Globalstar's condensed consolidated financial statements for the period ended June 30, 2000, included herewith. (3) See Note 6 of Globalstar's condensed consolidated financial statements for the period ended June 30, 2000, included herewith. (4) See Note 11 of Globalstar's consolidated financial statements for the year ended December 31, 1999, incorporated by reference. (5) See Notes 6, 7 and 9 of Globalstar's consolidated financial statements for the year ended December 31, 1999 incorporated by reference and Note 5 of Globalstar's condensed consolidated financial statements for the period ended June 30, 2000, included herewith. S-11 13 TAXATION This summary of certain tax considerations is based upon current (as of the date of this prospectus) laws, treaties, cases, regulations and rulings, all of which are subject to change, possibly with retroactive effect. It does not consider all the tax issues that might be relevant to an investor or that depend upon an investor's particular circumstances. Prospective investors should consult their own professional advisors about the tax consequences of acquiring, holding and disposing of the common stock under the laws of the jurisdictions in which they are subject to taxation. The legal conclusions set forth below in the discussion of U.S. tax law are the opinions of Willkie Farr & Gallagher, our U.S. counsel. The summary of certain Bermuda tax consequences is the opinion of Appleby, Spurling & Kempe, our Bermuda counsel. UNITED STATES TAX CONSIDERATIONS Taxation of United States Holders. This section discusses certain rules applicable to a holder of stock that is a United States Holder. For purposes of this discussion, a "United States Holder" means a holder of stock who or which is - an individual who is a citizen or resident of the United States for U.S. federal income tax purposes, - a corporation or other entity taxable as a corporation created or organized under the laws of the United States or any political subdivision thereof (including the States and the District of Columbia), - an estate or trust described in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended (the "Code"), or - a person whose worldwide income or gain is otherwise subject to U.S. federal income taxation on a net income basis. Certain U.S. federal income tax consequences relevant to a holder of stock other than a United States Holder (a "non-U.S. Holder") are discussed separately below. A dividend payment on the stock will be taxable as ordinary dividend income to the extent it is paid out of our current or accumulated earnings and profits. Payments in excess of earnings and profits will be treated as a tax-free return of capital to the extent of the United States Holder's tax basis in the stock. These payments will reduce the tax basis at which the stock is held; payments in excess of tax basis will be treated in the same manner as gains arising from a sale or other disposition of the stock, as discussed below. Because we are a foreign corporation, the dividend payments will not be eligible for the inter-corporate dividends-received deduction. Holders should consult their U.S. tax advisors regarding the U.S. foreign tax credit treatment of dividends received from us. Subject to the discussion below on passive foreign investment companies ("PFICs") and assuming the United States Holder holds the stock as a capital asset, any gain or loss recognized by a United States Holder on the sale or other disposition (other than a redemption by us) of stock will be capital gain or loss. Such capital gain or loss will be long-term or short-term depending on the holding period for the stock. A United States Holder will also generally recognize capital gain or loss upon a redemption of stock for cash, provided that certain requirements are met. Special rules apply to the taxation of a U.S. shareholder in a PFIC. A PFIC is a foreign corporation (1) 75% or more of whose income is passive or (2) 50% or more of whose assets produce or are held to produce passive income. We believe that we have not been a PFIC and S-12 14 will not become one. We continue to earn, through Globalstar, sufficient active income to avoid PFIC status. However, Globalstar may earn passive income such as interest on working capital and royalties on certain intangibles. Furthermore, the extent and timing of Globalstar's active business income cannot be predicted with certainty. If we were a PFIC, unless a United States Holder of our stock made the QEF election described below, he would be subject to a tax-deferral charge on gain on a disposition of such stock and on certain "excess distributions" received from us. In addition, any such gains or excess distributions would be taxable at ordinary income rates. If a United States Holder makes the qualified electing fund ("QEF") election, he will be required to include in his taxable income his pro rata share of our ordinary earnings and net capital gain for each taxable year (regardless of when or whether cash attributable to such income is actually distributed to such shareholder by us). If the United States Holder makes a QEF election, the tax-deferral charge and ordinary income rules described in the preceding paragraph will not apply. Actual distributions out of amounts so included in income will not be taxable to the shareholder. A United States Holder's tax basis in its shares of stock will be increased by the amount so included and decreased by the amount of nontaxable distributions. A United States Holder making a QEF election may also elect to defer the payment of tax on certain undistributed income of the PFIC (subject to an interest charge) until such time as the income is distributed or the holder sells the stock. The QEF election is effective only if we make certain required information available to the United States Holders. In the event we are characterized as a PFIC for federal income tax purposes, we will undertake to provide each United States Holder with the information needed to make a QEF election and to determine the pro rata share of our ordinary earnings and net capital gain applicable to our stock. A U.S. shareholder that holds "marketable" stock in a PFIC may, in lieu of making a QEF election, avoid certain unfavorable consequences of the PFIC rules by electing to mark the PFIC stock to market as of the close of each taxable year. If a United States Holder has stock which is marketable, then such United States Holder may be eligible to be taxed on a mark-to-market basis with regard to such stock. If such United States Holder so elected, he would be taxed on changes in market value of the stock from year to year, whether or not he actually sold such stock. A United States Holder that makes the mark-to-market election will be required to include in income each year as ordinary income an amount equal to the excess, if any, of the fair market value of the stock at the close of the year over the United States Holder's adjusted tax basis in such stock. If, at the close of the year, the United States Holder's adjusted tax basis exceeds the fair market value of the stock, then the United States Holder may deduct any such excess from ordinary income, but only to the extent of net mark-to-market gains previously included in income. Any gain from the actual sale of the PFIC stock will be treated as ordinary income, and any loss will be treated as ordinary loss to the extent of net mark-to-market gains previously included in income. We expect our stock to constitute "marketable" stock for these purposes. However, we cannot assure you that our stock will continue to constitute "marketable" stock in the future. Taxation of Non-U.S. Holders. We expect that most of our income will be from sources outside the United States and will not be effectively connected with a U.S. trade or business. Thus, non-U.S. Holders will not be subject to U.S. federal taxation on distributions received from us unless those distributions are effectively connected with the conduct by the non-U.S. Holder of a trade or business in the United States. In addition, a non-U.S. Holder will not be subject to U.S. federal income taxation on gains realized on a sale or exchange of stock unless (1) the gain from the sale is effectively connected with a trade or business of the non-U.S. Holder in the United States (unless an applicable treaty provides otherwise) or (2) the non-U.S. Holder is an individual and is present in the United States for 183 or more days in S-13 15 the taxable year of the disposition and certain other conditions are met. The determination of whether a non-U.S. Holder is engaged in the conduct of a trade or business in the United States or whether the sale of a non-U.S. Holder's stock is effectively connected with a trade or business of the non-U.S. Holder in the United States depends on the facts and circumstances of each investor's case. Non-U.S. Holders that are foreign corporations may be subject to an additional branch profits tax on their income which is effectively connected with a U.S. trade or business. Each prospective non-U.S. Holder should consult with his own tax advisor to determine whether his distributions or gains will be subject to U.S. federal income taxation. Information Reporting and Backup Withholding. Under certain circumstances relating to the manner in which certain non-U.S. Holders hold their stock, dividend payments with respect to our stock and proceeds from the sale, exchange or redemption of our stock may be subject to information reporting to the IRS and possible U.S. backup withholding at a 31% rate. Backup withholding will not apply, however, to a holder who furnishes a correct taxpayer identification number or provides under penalties of perjury a certificate of foreign status and makes any other required certification or who is otherwise exempt from backup withholding. Both U.S. Holders and non-U.S. Holders should consult their tax advisors regarding the application of the information reporting and backup withholding rules to holders in their circumstances. Amounts withheld as backup withholding may be credited against a holder's U.S. federal income tax liability, and a holder may obtain a refund of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS and furnishing any required information. Taxation of GTL. Our tax consequences result from our status as a partner in Globalstar. As a partnership, Globalstar itself will not have any U.S. federal income tax liability. Generally, its partners will be taxed as if they directly expended their share of Globalstar expenditures and directly realized their share of Globalstar income. We expect, based on Globalstar's description of its proposed activities, that most of our income will be from sources outside the United States and that such income will not be effectively connected with the conduct of a trade or business within the United States. Thus, we believe that there generally will be no U.S. federal income taxes on our share of such income. The United States Treasury Department is engaged in a project to draft and propose regulations that will determine how the partners will be taxed in the United States on their respective shares of Globalstar's income. The outcome of the regulation project cannot be predicted. The Treasury Department may adopt final regulations that characterize substantial portions of our income as derived from U.S. sources and as effectively connected with a U.S. trade or business. We will be subject to U.S. tax at regular U.S. federal, state and local corporate rates on our share of Globalstar's income that is effectively connected with the conduct of a trade or business in the United States ("U.S. Income") and will be required to file federal, state and local income tax returns with respect to such U.S. Income. Globalstar is obligated to provide the information required for us to prepare our federal, state and local income tax returns. Globalstar intends to make cash distributions, to the extent of available funds, to all partners, including us, until the non-U.S. partners, again including us, have been distributed an amount sufficient to enable them to pay the federal, state and local income taxes on their share of Globalstar's U.S. Income. The distribution to non-U.S. partners for federal income taxes may take the form of a withholding tax payment made by Globalstar to the U.S. Treasury. The amount withheld may exceed the amount of our federal income tax liability, in which case we would be entitled to seek a refund from the U.S. Treasury for the excess amount. In addition to the regular U.S. taxes, we will be subject to a United States branch profits tax (currently at a 30% rate) on actual or deemed withdrawals of our share of Globalstar's U.S. Income. S-14 16 BERMUDA TAX CONSIDERATIONS At the date of this prospectus, there is no Bermuda income tax, corporation or profits tax, withholding tax, capital gains tax, capital transfer tax, estate or stamp duty or inheritance tax payable by us or the Holders of our stock (other than Holders ordinarily resident in Bermuda) in respect of their investment in the stock. We have obtained from the Minister of Finance under the Exempted Undertakings Tax Protection Act 1966, as amended, a certificate confirming that, in the event of there being enacted in Bermuda, any legislation imposing tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not until March 28, 2016 be applicable to us or to any of our operations, or our other obligations except insofar as such tax applies to persons ordinarily resident in Bermuda and holding such stock or other obligations, or to any land we lease or let in Bermuda. We are liable to pay the Bermuda government an annual registration fee calculated on a sliding scale based upon our assessable capital which fee will not exceed BD$26,500. We have been classified as non-resident of the Bermuda exchange control area by the Bermuda Monetary Authority, whose permission for the issue of the stock has been obtained. The transfer of stock between persons regarded as non-resident of Bermuda for exchange control purposes and the issue and redemption of stock to and by such persons may be effective without specific consents under the Exchange Control Act 1972 of Bermuda and Regulations made thereunder. Transfers involving any person regarded as resident in Bermuda for exchange control purposes may require specific authorization under that Act. We, by virtue of being a non-resident of Bermuda for exchange control purposes, are free to acquire, hold and sell any foreign currency, securities and other investments without restrictions. Purchasers of stock may be required to pay stamp taxes and other charges in accordance with the laws and practices of the country of purchase. Prospective purchasers should consult their tax advisers as to the tax laws of applicable jurisdictions and the specific tax consequences of acquiring, holding and disposing of the stock. The stock does not provide for additional payments by us following a change in the tax laws or rules of Bermuda that is adverse to the Holders of our stock. TAX CONSIDERATIONS IN OTHER JURISDICTIONS Any portion of our income from sources outside the United States, realized through Globalstar or otherwise, may be subject to taxation by foreign countries and the extent to which these countries may require us or Globalstar to pay tax or to make payments in lieu of tax cannot be determined in advance. However, based upon our review of current tax laws, including applicable international tax treaties of certain countries that Globalstar believes to be among its significant potential markets, we expect that a significant portion of our worldwide income will not be subject to tax by the United States, Bermuda or by the countries from which we derive our income. To the extent that Globalstar bears a higher foreign tax because any holder of ordinary partnership interests (including us) is not subject to United States tax on its share of Globalstar's foreign income, the additional foreign tax will be specifically allocated to such partner and will reduce amounts distributed by Globalstar to such partner with respect to its ordinary partnership interests. S-15 17 PLAN OF DISTRIBUTION Subject to the terms and conditions set forth in a purchase agreement dated September 18, 2000, between us and Bear Stearns, Bear Stearns has agreed, upon notice from us, to purchase up to $105,000,000 of common stock, valued based on the applicable valuation formula described below, in a series of tranches. However, we may not issue notices on consecutive trading days or after September 17, 2001. Upon satisfaction of certain stock price, timing and other conditions, we can exercise our right under the purchase agreement to take down a tranche of common stock by giving notice to Bear Stearns by 5:30 p.m. on any trading day. In each tranche, we can sell Bear Stearns a number of shares of common stock not to exceed the lesser of (x) 10% of the total trading volume reported by the Nasdaq National Market on the two trading days prior to our giving notice, (y) 10% of the total number of shares of common stock outstanding as of the date of this prospectus supplement and (z) 10% of the total number of shares of common stock outstanding on a trading day we give notice, but not less than 50,000 shares of common stock (except during the last tranche in which we can only take down an amount of shares that would not cause Bear Stearns to purchase more than $105,000,000 of common stock, but which can be less than 50,000 shares). The price Bear Stearns will pay to us will be based on one of three formulas, which we will choose upon each decision to take down a tranche. We may choose to receive: - 97 1/2% of the arithmetic average of the closing bid prices, - 93% of the arithmetic average of the volume weighted average price, or - 100% of the lowest sale price (excluding sales not meeting certain criteria) of our common stock, as reported by the Nasdaq National Market over the two trading days following our giving notice. We will deliver the shares of common stock to Bear Stearns, and Bear Stearns will pay for the shares on the third trading day after we give notice. However, if we do not meet certain trading volume and float requirements, the two-day pricing period and the date of payment and delivery of the shares may be extended by one or five trading days. Bear Stearns will sell the shares on the Nasdaq National Market at prices available in the market or directly to purchasers at negotiated prices. As noted above, Bear Stearns' obligation is limited to $105,000,000 of common stock, as determined by the sale price to Bear Stearns. Bear Stearns Compensation. We have agreed to pay Bear Stearns a fee of $5,000,000 for entering into the purchase agreement. Indemnification of Bear Stearns. In the purchase agreement, we have agreed to indemnify Bear Stearns against certain liabilities, including liabilities under the Securities Act, or to contribute to payments Bear Stearns may be required to make in connection with these liabilities. Discretionary Accounts. Bear Stearns has informed us that it does not intend to confirm sales to any account over which they exercise discretionary authority. Taxes. Purchasers of the shares of common stock offered by this prospectus may be required to pay stamps taxes and other charges in accordance with the laws and practices of the country of purchase in addition to the offering price. Lock-up Agreement. Except for the common stock to be sold in this offering and any shares offered in connection with employee benefit plans, shares sold to Globalstar's partners and other limited exceptions, we have agreed not to offer, sell, contract to sell or otherwise, or announce any intention to, issue any shares of our common stock or other capital stock or S-16 18 securities convertible into or exchangeable for, or any rights to acquire, our common stock or our other capital stock, during each period commencing on the date we deliver a notice of sale and ending on the last pricing date of such sale, without the prior written consent of Bear Stearns. Bear Stearns has from time to time provided certain investment banking services to us and our affiliates, including Globalstar, for which they have received customary fees. LEGAL MATTERS Certain United States tax matters described under "Taxation" will be passed upon for us by Willkie Farr & Gallagher, New York, New York. The validity of the common stock will be passed upon for us by Appleby, Spurling & Kempe, Hamilton, Bermuda. Cravath, Swaine & Moore, New York, New York, represented Bear Stearns in connection with this offering. As of August 31, 1999, partners and counsel in Willkie Farr & Gallagher beneficially owned approximately 144,452 shares of common stock. Mr. Robert B. Hodes is counsel to the law firm of Willkie Farr & Gallagher and serves as a director on our board of directors and the board of directors of Loral and as a member of the executive and audit committees of our board of directors and the board of directors of Loral. WHERE YOU CAN FIND MORE INFORMATION We file reports, proxy statements and other information with the SEC which you can read at the SEC's Web site at http://www.sec.gov. You can also read these documents at the SEC's public reference rooms in Washington, D.C., Chicago, Illinois and New York, N.Y. Please call the SEC toll free at 1-800-SEC-0330 for information about its public reference rooms. We have filed a registration statement with the SEC on Form S-3 under the Securities Act of 1933. This prospectus does not contain all of the information in the registration statement. We have omitted certain parts of the registration statement, as permitted by the rules and regulations of the SEC. You may inspect and copy the registration statement, including exhibits, at the SEC's web site and public reference facilities. Our statements in this prospectus about the contents of any contract or other document are not necessarily complete. You should refer to the copy of the contract or other document we have filed as an exhibit to the registration statement for complete information. The SEC allows us to "incorporate by reference" the information we file with it, which means we can satisfy our legal obligations to disclose important information contained in those documents by referring you to them. The information included in the following documents is incorporated by reference and is considered to be a part of this prospectus. More recent information that we file with the SEC automatically updates and supersedes any inconsistent information contained in prior filings. The documents listed below have been filed under the Securities and Exchange Act of 1934 with the SEC and are incorporated herein by reference: - GTL's and Globalstar's Annual Report on Form 10-K for the year ended December 31, 1999; - GTL's and Globalstar's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2000; - GTL's and Globalstar's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2000; - GTL's Proxy Statement relating to the 2000 Annual Meeting of Shareholders; S-17 19 - GTL's and Globalstar's Current Report on Form 8-K, filed July 7, 2000; - the description of GTL's common stock contained in GTL's registration statement on Form 8-A filed under the Exchange Act and any amendments or reports filed for the purpose of updating such description We also incorporate by reference all documents subsequently filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act, until the offering of the securities under this prospectus is completed. We will provide without charge to each person, including any person having a control relationship with that person, to whom a prospectus is delivered, a copy of any or all of the information that has been incorporated by reference in this prospectus but not delivered with this prospectus. If you would like to obtain this information from us, please direct your request, either in writing or by telephone to Globalstar Telecommunications Limited, Cedar House, 41 Cedar Avenue, Hamilton HM12, Bermuda, Attn: Secretary, (441) 295-2244. For information about Globalstar, please direct your request in writing or by telephone to Globalstar, L.P. at 3200 Zanker Road, P.O. Box 640670, San Jose California 95134-0670, Attention Dan McEntee, (408) 933-4000. You should rely on the information incorporated by reference or provided in this prospectus or any prospectus supplement. We have not authorized anyone else to provide you with different information. We are not making an offer of these securities in any state where the offer is not permitted. You should not assume that the information in this prospectus or any prospectus supplement is accurate as of any date other than the date on the front of those documents. S-18 20 ------------------------------------------------------ ------------------------------------------------------ YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT OR ADDITIONAL INFORMATION. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY SHARES OF OUR COMMON STOCK IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IS CORRECT ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY OF THIS PROSPECTUS OR ANY SALE OF OUR COMMON STOCK. --------------------------- TABLE OF CONTENTS ---------------------------
PAGE ---- Prospectus Supplement Summary............. S-1 The Offering.............................. S-4 Risk Factors.............................. S-5 Forward-Looking Statements................ S-9 Use of Proceeds........................... S-9 Price Range of Common Stock............... S-10 Capitalization............................ S-11 Taxation.................................. S-12 Plan of Distribution...................... S-16 Legal Matters............................. S-17 Where you can find more information....... S-17 Base Prospectus Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2000
------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ $105,000,000 [GLOBALSTAR LOGO] GLOBALSTAR TELECOMMUNICATIONS LIMITED COMMON STOCK ------------------------------------------ PROSPECTUS SUPPLEMENT ------------------------------------------ BEAR, STEARNS & CO. INC. SEPTEMBER 18, 2000 ------------------------------------------------------ ------------------------------------------------------ EX-99.2 3 y40566ex99-2.txt PURCHASE AGREEMENT 1 GLOBALSTAR TELECOMMUNICATIONS LIMITED PURCHASE AGREEMENT of up to $105,000,000 of COMMON STOCK September 18, 2000 BEAR, STEARNS INTERNATIONAL LIMITED 245 Park Avenue New York, N.Y. 10167 Dear Sirs: Globalstar Telecommunications Limited, a company organized and existing under the laws of Bermuda (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to Bear, Stearns International Limited ("Bear Stearns") shares of Common Stock of the Company (the "Common Stock") having an Aggregate Base Price (as herein defined) of $105,000,000 in a series of tranches (each a "Tranche"). The determination to take down a Tranche, the number of shares of Common Stock to be included in the Tranche and the purchase price per share to be paid by Bear Stearns are subject to the terms and conditions set forth herein. The Company and Bear Stearns hereby agree as follows: The following terms as used in this Agreement shall have the following meanings: "Additional Service Provider Agreements" means all material service provider agreements entered into between Globalstar and the additional service providers after the date of the Founding Service Provider Agreements. "Aggregate Base Price" is the total number of shares of Common Stock sold pursuant to this agreement, plus the number of shares of Common Stock for which a Notice of Sale has been received but which have yet to be sold ("Shares-in-Process") multiplied by their respective Base Price. In the event that the Base Price is not yet known 2 2 for such Shares-in-Process, it shall be determined based on the Prior VWA Price. "Applicable Tranche Shares" means, with respect to a Tranche, the number of shares of Common Stock which Bear Stearns is required to purchase from the Company, as specified in Section 2(a)(i). "Base Price" means the price per share paid by Bear Stearns to the Company, determined, with respect to each Tranche, in accordance with the provisions of Section 2(a)(ii). "Base Prospectus" shall mean the base prospectus contained in the Registration Statement on a Notice Date. "Business Day" means any day on which trading in the Common Stock is conducted through NASDAQ. "Bye-laws" means the bye-laws of the Company. "Closing Bid Price" means (x) the last bid price as reported by Bloomberg L.P. or (y) if for any reason Bloomberg L.P. shall not report such last bid price, the last bid price as reported by the NASDAQ, as of the close of the afternoon trading session, at approximately 4:00 p.m., as determined by Bear Stearns in a commercially reasonable manner. "Commission" means the U.S. Securities and Exchange Commission. "Common Stock" shall have the meaning assigned thereto in the first paragraph of this Agreement. "Communications Act" means the Communications Act of 1934. "Exchange Act" means the Securities Exchange Act of 1934. "FCC" means the Federal Communications Commission. "Final Tranche" shall have the meaning assigned thereto in Section 2(a)(i). 3 3 "Founding Service Provider Agreements" means the Service Provider Agreements dated as of January 1, 1995 entered into between Globalstar and certain founding service providers. "Globalstar" means Globalstar, L.P., a Delaware limited partnership. "Globalstar Credit Agreement" means the Credit Agreement, dated as of August 5, 1999, among Globalstar, the several financial institutions named therein and Bank of America, N.A., as administrative agent (referred to herein as the "Administrative Agent"), as amended or supplemented from time to time during the term of this agreement. "Initial Letter" shall have the meaning assigned thereto in Section 7(i). "Investment Company Act" means the Investment Company Act of 1940 and the rules and regulations thereunder. "Lock-up Period" means, with respect to a Tranche, all times from the applicable Notice Date through the last day on which the applicable Base Price is determined, inclusive. "Loral" means Loral Space & Communications Ltd., a company organized and existing under the laws of Bermuda. "LQP" means Loral/QUALCOMM Partnership, L.P., a Delaware limited partnership and the general partner of LQSS. "LQSS" means Loral/QUALCOMM Satellite Services, L.P., a Delaware limited partnership and the managing general partner of Globalstar. "Market Disruption Event" shall have the meaning assigned thereto in Section 7(m). "Material Adverse Change" means, with respect to any entity, any material adverse change in or affecting the business, results of operations, financial condition, owners' equity (stockholders' equity in the case of a 4 4 corporation and partners' equity in the case of a partnership) or prospects of such entity, taken as a whole. "Memorandum of Association" means the memorandum of association of the Company. "NASDAQ" means the NASDAQ National Market or the American Stock Exchange or the New York Stock Exchange if the Common Stock is then traded thereon. "Notice Date" means, with respect to each Tranche, the date a Notice of Sale is executed by the Company and delivered to Bear Stearns. "Notice of Sale" means the document, the form of which is attached as Exhibit 1, to be delivered by the Company to Bear Stearns, which instructs Bear Stearns to offer the Applicable Tranche Shares to the public. "Officer's Certificate" shall have the meaning assigned thereto in Section 7(j). "Partnership Agreement" means the Amended and Restated Agreement of Limited Partnership of Globalstar, L.P. dated as of March 6, 1996, as amended as of April 8, 1998, January 26, 1999, and February 1, 2000, among LQSS, the Company and certain limited partners named therein. "Pricing Supplement" means the supplement to the Prospectus which sets forth, with respect to a Tranche, the number of Applicable Tranche Shares, the anticipated Tranche Closing Date, and any other information mutually agreed to be included by the Company and Bear Stearns. "Preferred Partnership Interests" shall have the meaning assigned thereto in Section 1(r). "Prior VWA Price" means the arithmetic average of the volume weighted average price of the Common Stock reported by NASDAQ on the two Business Days preceding the Notice Date. "Prospectus" shall mean, on any date, the Base Prospectus and each prospectus supplement (including any 5 5 Pricing Supplement) relating to the Common Stock offered pursuant to this agreement filed pursuant to Rule 424(b). "Purchase Price Option A" means the price which Bear Stearns pays to the Company on a Tranche Closing Date for the Applicable Tranche Shares as specified in Section 2(a)(ii)(A). "Purchase Price Option B" means the price which Bear Stearns pays to the Company on a Tranche Closing Date for the Applicable Tranche Shares as specified in Section 2(a)(ii)(B). "Purchase Price Option C" means the price which Bear Stearns pays to the Company on a Tranche Closing Date for the Applicable Tranche Shares as specified in Section 2(a)(ii)(C). "QUALCOMM" shall have the meaning assigned thereto in Section 1(d). "QUALCOMM Agreement" shall have the meaning assigned thereto in Section 1(l). "QUALCOMM Facility" shall have the meaning assigned thereto in Section 1(d). "Registration Statement" shall mean the registra tion statement (No. 33-83239) that was originally declared effective on August 18, 1999, as amended by the post- effective amendment that was declared effective on September 15, 2000, registering for sale pursuant to Rule 415 certain securities of the Company and Globalstar, including the filings with the Commission pursuant to the Exchange Act incorporated therein, as amended on each Notice Date. "Revolving Credit Agreement" means the revolving credit agreement dated as of December 15, 1995, as amended, among Globalstar, Chemical Bank (now The Chase Manhattan Bank), as administrative agent, and the lenders signatory thereto. "Rule 415", "Rule 424" and "Rule 430A" refer to such rules under the Securities Act. 6 6 "Rule 430A Information" shall mean information with respect to the Common Stock and the offering thereof permitted to be omitted from the Registration Statement when it becomes effective pursuant to Rule 430A. "Rules and Regulations" means the rules and regulations in effect at any relevant time adopted by the Commission under the Securities Act or the Exchange Act, as applicable. "Securities Act" means the Securities Act of 1933. "Series A Preferred Stock" shall have the meaning assigned thereto in Section 1(r). "Series B Preferred Stock" shall have the meaning assigned thereto in Section 1(r). "Service Provider Agreements" means the Founding Service Provider Agreements and the Additional Service Provider Agreements. "Shares-in-Process" shall have the meaning assigned in the definition of "Aggregate Base Price". "SS/L" means Space Systems/Loral Inc., a Delaware corporation. "SS/L Agreement" shall have the meaning assigned thereto in Section 1(l). "Tranche Closing Date" means the third Business Day after delivery by the Company to Bear Stearns of a Notice of Sale, on which payment and delivery of the Applicable Tranche Shares occurs, unless extended pursuant to Section (2)(a)(iv). "Tranche Period" means, with respect to a Tranche, all times from the Notice Date through the Tranche Closing Date, inclusive. 7 7 1. Representations, Warranties and Agreements of the Company and Globalstar. Each of the Company and Globalstar represents, warrants and agrees that: (a) The Company meets the requirements for use of Form S-3 under the Securities Act in connection with the offering pursuant to the Prospectus. The Registration Statement has remained in effect since it was originally declared effective by the Commission on August 18, 1999, and the post-effective amendment has remained in effect since it was originally declared effective by the Commission on September 15, 2000. The Registration Statement covers, among other securities, the registration under the Securities Act of the offering and sale of the Common Stock. Upon the offering of each Tranche, the Company will file with the Commission a Prospectus, or Pricing Supplement in circumstances where only a Pricing Supplement is required, in accordance with Rules 415, 424(b) and 430A. As filed, such Prospectus shall contain all applicable Rule 430A Information, together with all other such required information, and, except to the extent Bear Stearns shall agree in writing to a modification, shall be in all substantive respects in the form furnished to Bear Stearns on or prior to the Notice Date. The Registration Statement, on the Notice Date, meets the requirements set forth in Rules 415(a)(1)(x) and (a)(4). (b) As of the date hereof, the Registration Statement did not, and on each Notice Date and Tranche Closing Date the Prospectus will not, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and on the date of any filing pursuant to Rule 424(b), any Notice Date and any Tranche Closing Date, the Prospectus will not include any 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; provided, however, that the Company and Globalstar make no representations or warranties as to the information contained in or omitted from the Registration Statement or the Prospectus in reliance upon and in conformity with information furnished in writing to the Company by Bear Stearns specifically for inclusion in the Registration Statement or the Prospectus. 8 8 (c) The Company has been duly incorporated as an exempted company and is validly existing as an exempted company in good standing under the laws of Bermuda, with all requisite power and authority and, except as disclosed in the Prospectus, has all necessary material government authorizations, licenses, certificates, franchises, permits and approvals required to own its properties and to conduct its business as described in the Prospectus; and, since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been, and prior to any Tranche Closing Date there will not be, any change in the capital stock or long-term debt of the Company, or any Material Adverse Change, or any development involving a prospective Material Adverse Change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company, taken as a whole, otherwise than as set forth or contemplated, or under arrangements referred to, in the Prospectus. (d) Globalstar has been duly formed and is validly existing as a limited partnership in good standing under the laws of the State of Delaware and has been duly qualified for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases property, or conducts any business, so as to require such qualification (except where the failure to so qualify would not result in a Material Adverse Change with respect to Globalstar); and Globalstar has all requisite power and authority and, except as disclosed in the Prospectus, all necessary material governmental authorizations, licenses, certificates, franchises, permits and approvals required to own its properties and to conduct its business as described in the Prospectus; and, since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been, and prior to any Tranche Closing Date there will not be, any change in the partnership interests or long-term debt of Globalstar (except for borrowings under the Globalstar Credit Agreement, under the vendor financing agreement between QUALCOMM Inc., a Delaware corporation ("QUALCOMM") or pursuant to other vendor financing arrangements) and Globalstar dated as of May 5, 2000 (the 9 9 "QUALCOMM Facility"), or any development involving a prospective Material Adverse Change, with respect to Globalstar, other than as set forth or contemplated, or under arrangements referred to, in the Prospectus. (e) Neither the Company nor Globalstar owns any real property and each of the Company and Globalstar has good and marketable title to all material personal property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such other liens, encumbrances and defects as will not in the aggregate result in a Material Adverse Change of the Company or Globalstar, as the case may be, and do not interfere with the use made and proposed to be made of such property by the Company or Globalstar, as the case may be, and any material real property and buildings held under lease by the Company or Globalstar, as the case may be, are held by them under valid, subsisting and enforceable leases with such exceptions as are described in the Prospectus or are not material and do not interfere with the use made and proposed to be made of such real property and buildings by the Company or Globalstar, as the case may be. (f) The Company has authorized capital stock as set forth in the Prospectus, and all the issued shares of Common Stock of the Company have been duly and validly authorized and issued, are fully paid and not subject to further calls and conform in all material respects to the description in the Prospectus; the Common Stock is approved for trading on NASDAQ and is not subject to any preemptive or similar rights. (g) The shares of Common Stock to be issued and sold by the Company to Bear Stearns hereunder have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued, fully paid and not subject to further calls and will conform in all material respects to the description of the Common Stock in the Prospectus. (h) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture or other agreement 10 10 or instrument to which the Company or Globalstar is a party or by which the Company or Globalstar is bound or to which any of the property or assets of the Company or Globalstar is subject, nor will such actions result in any violation of the provisions of the Memorandum of Association or the Bye-laws, in each case as amended, of the Company or the Partnership Agreement, or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or Globalstar or any of their properties or assets; and no consent, approval, authorization, order, registration, filing or qualification (other than the required filing with the Bermuda Registrar of Companies) of or with any court or governmental agency or body is required for the issue and sale of the Common Stock or the consummation of the other transactions contemplated by this Agreement, except the registration and filings under the Securities Act and the Exchange Act of the Common Stock, and such consents, approvals, authorizations, registrations, filings or qualifications as may be required under state securities or Blue Sky laws or as may be required by the laws of any country other than the United States in connection with the purchase and distribution of the Common Stock by Bear Stearns. The total number of shares of Common Stock to be issued and sold by the Company to Bear Stearns hereunder will at no time be equal to or exceed 20% of the number of shares of common stock of the Company outstanding before this Offering, unless such issuance is approved by the Company's shareholders in accordance with the Company's Memorandum of Association and Bye-laws. (i) There are no legal or governmental proceed ings pending to which the Company or Globalstar, or to the knowledge of the Company or Globalstar, any partner of Globalstar, LQSS or LQP is a party or of which any property of the Company or Globalstar is the subject, except such as are described or contemplated by the Prospectus which will individually or in the aggregate be reasonably likely to result in a Material Adverse Change with respect to the Company or Globalstar, as the case may be; and, to the best of the Company's and Globalstar's knowledge and except such as are described or contemplated by the Prospectus, no such proceedings are threatened or contemplated by others. (j) There are no contracts or other documents that are required to be described in the Prospectus or filed 11 11 as exhibits to the Registration Statement which are not described therein or filed as exhibits thereto. (k) Globalstar and its partners and equipment suppliers own or possess adequate patent rights or licenses or other rights to use patent rights, inventions, trademarks, service marks, trade names and copyrights (except as otherwise described in the Registration Statement or the Prospectus) necessary to conduct the general business proposed to be operated by Globalstar as described in the Prospectus, and, except as described in the Prospectus, none of Globalstar or its partners or its equipment suppliers has received any notice of infringement of or conflict with asserted rights of others with respect to any patent, patent rights, inventions, trademarks, service marks, trade names or copyrights which, in the aggregate, would result in a Material Adverse Change with respect to Globalstar. (l) Except as described in the Prospectus or for defaults under the Founding Service Provider Agreement between Globalstar and Hyundai/DACOM, no default exists, and no event has occurred which with notice or lapse of time, or both, would constitute a default in the due performance and observance of any term, covenant or condition of the Partnership Agreement, any Service Provider Agreement for the provision of Globalstar services as described in the Prospectus, the agreement between Globalstar and QUALCOMM dated March 18, 1994, as amended (the "QUALCOMM Agreement"), the agreement between Globalstar and SS/L dated February 16, 1994 (the "SS/L Agreement"), the QUALCOMM Facility or any indenture, mortgage, deed of trust, loan or credit agreement, lease or other agreement or instrument to which the Company or Globalstar is a party or by which either of them is bound, except any such default with respect to any such lease, other agreement or instrument as would not, individually or in the aggregate, result in a Material Adverse Change with respect to the Company or Globalstar, as the case may be. (m) The Company and Globalstar have timely filed all material tax returns and notices. Except as described in the Prospectus, the Company and Globalstar have no knowledge, or any reasonable grounds to know, of any federal, state, county, local or foreign tax deficiencies of any nature whatsoever which would, in the aggregate, result 12 12 in a Material Adverse Change with respect to the Company or Globalstar, as the case may be. (n) Other than as disclosed in the Prospectus, there are no contracts, agreements or understandings between the Company and any person granting such person the right (other than rights which have been waived or satisfied) to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registra tion statement filed by the Company under the Securities Act. (o) Except as disclosed in the Prospectus, Globalstar carries or will have the benefit of insurance in such amounts and covering such risks as is adequate for the conduct of its business and the value of its properties and as is customary for companies engaging in similar businesses in similar industries. (p) Except as described in the Prospectus, no labor disturbance by the employees of Globalstar exists, or to the knowledge of Globalstar, is imminent which might be expected to result in a Material Adverse Change with respect to Globalstar. (q) Each of the Company and Globalstar is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company or Globalstar would have any liability; neither the Company nor Globalstar has incurred or expects to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 (other than routine minimum funding obligations), 4971 or 4975 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and nothing has occurred, whether by action or failure to act, with respect 13 13 to the operation of any "pension plan" for which the Company or any of its subsidiaries would have any liability that is intended to be qualified under Section 401(a) of the Code that could reasonably be expected to result in the loss of such qualification. (r) Except as may otherwise be disclosed in or contemplated by the Prospectus, since the date as of which information is given in the Prospectus, neither the Company nor Globalstar has (i) issued or granted any securities or partnership interests (except pursuant to the exercise of existing options or warrants), (ii) incurred any material liability or obligation, direct or contingent, other than liabilities and obligations which were incurred in the ordinary course of business (except for borrowings under the Globalstar Credit Agreement, the QUALCOMM Facility or pursuant to other vendor financing arrangements), (iii) entered into any material transaction not in the ordinary course of business or (iv) in the case of the Company, declared or paid any dividend on its capital stock other than with respect to (A) the 8% Series A Convertible Redeemable Preferred Stock of the Company due 2011 (the "Series A Preferred Stock") or (B) the 9% Series B Convertible Redeemable Preferred Stock of the Company due 2011 (the "Series B Preferred Stock") or, in the case of Globalstar, made any distribution to its partners other than with respect to the convertible redeemable preferred general partnership interests of Globalstar issued in connection with the Series A Preferred Stock or Series B Preferred Stock (the "Preferred Partnership Interests"). (s) Deloitte & Touche LLP, whose report is incorporated by reference in the Prospectus, are independent public accountants as required by the Securities Act and the Rules and Regulations. The financial statements and schedules (including the related notes and supporting schedules) included (by incorporation by reference or otherwise) in the Registration Statement and the Prospectus present fairly the financial condition, results of operations and changes in financial condition of the entities purported to be shown thereby at the dates and for the periods indicated and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as may be noted therein) throughout the periods indicated. 14 14 (t) Each of the Company and Globalstar (i) makes and keeps accurate books and records and (ii) maintains internal accounting controls which provide reasonable assurance that (A) transactions are executed in accordance with management's authorization, (B) transactions are recorded as necessary to permit preparation of its financial statements and to maintain accountability for its assets and (C) access to its assets is permitted only in accordance with management's authorization. (u) Except as disclosed in the Prospectus, there has been no storage, disposal, generation, manufacture, refinement, transportation, handling or treatment of toxic wastes, medical wastes, hazardous wastes or hazardous substances by Globalstar (or, to the knowledge of Globalstar, any of Globalstar's predecessors in interest) at, upon or from any of the property now or previously owned or leased by Globalstar in violation of any applicable law, ordinance, rule, regulation, order, judgment, decree or permit or which would require remedial action under any applicable law, ordinance, rule, regulation, order, judgment, decree or permit, except for any violation or remedial action which would not be reasonably likely to result in, singularly or in the aggregate with all such violations and remedial actions, a Material Adverse Change with respect to Globalstar; there has been no spill, discharge, leak, emission, injection, escape, dumping or release of any kind onto such property or into the environment surrounding such property of any toxic wastes, medical wastes, solid wastes, hazardous wastes or hazardous substances due to or caused by Globalstar or any of its predecessors or with respect to which Globalstar has knowledge, except for any such spill, discharge, leak, emission, injection, escape, dumping or release which would be reasonably likely to result in, singularly or in the aggregate with all such spills, discharges, leaks, emissions, injections, escapes, dumpings and releases, a Material Adverse Change with respect to Globalstar; and the terms "hazardous wastes", toxic wastes", "hazardous substances" and "medical wastes" shall have the meanings specified in any applicable local, state, federal and foreign laws or regulations with respect to environmental protection. 15 15 (v) The Partnership Agreement, the Service Provider Agreements, the SS/L Agreement, the QUALCOMM Agreement and the QUALCOMM Facility have been duly executed by the Company and Globalstar (to the extent that they are parties thereto) and are valid, binding and enforceable agreements, except as enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally or by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (ii) Federal or state securities laws or principles of public policy with regard to rights to indemnity under the Partnership Agreement to the extent an indemnified party thereunder may be deemed or alleged to be an underwriter pursuant to such laws; provided, however, that no representation is made hereunder with respect to the enforceability of any provisions contained in the Partnership Agreement or the Service Provider Agreements which state that the parties thereto have agreed to further negotiate with respect to certain matters as specified therein or which provide for the grant of exclusive service territories. (w) Globalstar has entered into service provider agreements covering at least 125 countries. (x)(i) The FCC has authorized LQP to construct a mobile satellite system capable of operating in the 1610-1626.5/2483.5-2500 MHZ frequency bands, consistent with the technical specifications set forth in its application, the FCC's rules and the conditions set forth in the FCC's Order and Authorization (DA 95-128), released January 31, 1995, as modified by the Erratum, DA 95-373 (released February 29, 1996), as affirmed and modified by the Memorandum Opinion and Order, FCC 96-279 (released June 27, 1996), as modified by the FCC's Order and Authorization, DA 96-1924 (released November 19, 1996); however, such authorization is presently subject to modification, stay or revocation through judicial appeals. (ii) Participation by Globalstar in the development and operation of the Globalstar System as described in the Prospectus does not violate the Communications Act or the Rules and Regulations. 16 16 (iii) The construction, launch and operation by Globalstar of the Globalstar satellite constellation authorized by the Order and Authorization (DA 95-128), released January 31, 1995, as modified by the Erratum, DA 95-373 (released February 29, 1996), as affirmed and modified by the Memorandum Opinion and Order, FCC 96-279 (released June 27, 1996), as modified by the FCC's Order and Authorization, DA 96-1924 (released November 19, 1996), does not violate provisions of the Communications Act or the FCC's rules and policies thereunder relating to control of FCC authorizations, provided that L/Q Licensee, Inc. remains in ultimate control of the authorized facilities as defined by the rules and policies of the FCC and that there is no transfer of control of L/Q Licensee, Inc. without prior approval of the FCC. (y) After giving effect to the sale of Common Stock by Bear Stearns as contemplated by this Agreement, the Company will not be an "investment company" under the Investment Company Act. (z) The ordinary partnership interests to be issued and sold by Globalstar to the Company pursuant to the Partnership Agreement, will be, as of each Tranche Closing Date, duly and validly authorized, executed, issued and delivered, in accordance with the terms of the Partnership Agreement, fully paid and nonassessable and not subject to preemptive rights and will constitute the valid and binding obligations of Globalstar. (aa) Neither the Company nor Globalstar or any of their Affiliates has taken, nor will any of them take, di rectly or indirectly, any action designed to cause or that would result in, or which constitutes or that might reasonably be expected to constitute, the stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Common Stock. 2. Purchase and Sale of the Securities. (a) At any time prior to September 18, 2001, the Company may effect a sale of a Tranche pursuant to, and subject to the terms of, this Agreement by delivery of a Notice of Sale to Bear Stearns at 245 Park Avenue, New York, 17 17 NY 10167 by 5:30 p.m. New York time on a Business Day. The Company may consider delivery made via fax complete upon the verbal confirmation of receipt by Bear Stearns. Each Notice of Sale shall be executed by an authorized officer of the Company and shall set forth the following with regard to each Tranche takedown: (i) the number of shares of Common Stock (the "Applicable Tranche Shares") to be sold pursuant to such Tranche, which number of shares shall not be less than 50,000 or greater than the lesser of: (A) 10% of the total trading volume reported by the NASDAQ during the two Business Days preceding the Notice Date, (B) the lesser of (x) 10% of the total number of shares of Common Stock outstanding as of the date hereof or (y) 10% of the total number of shares of Common Stock outstanding as of the Notice Date or (C) a number of shares calculated in accordance with the following formula: $105,000,000-- Aggregate Base Price; ------------------------------------ Prior VWA Price provided, however, in the event that the number of Applicable Tranche Shares equals the amount calculated in clause (C) of this Section 2(a)(i), then (x) the 50,000 share minimum described above shall not apply, and (y) the Notice of Sale shall specify such number of Applicable Tranche Shares, rounded to the next higher integral number of 100 shares, and such Tranche shall be the Final Tranche taken down under this agreement (the "Final Tranche"); 18 18 (ii) whether the Company has chosen: (A) Purchase Price Option A, which shall equal 97 1/2% of the arithmetic average of the Closing Bid Price for the Common Stock on the two Business Days following the Notice Date, provided, that if any time the Closing Bid Price is not the high bid price for such day, then such calculation shall exclude any such bids made by Bear Stearns, (B) Purchase Price Option B, which shall equal 93% of the arithmetic average of the volume weighted average price of the Common Stock as reported by NASDAQ on the two Business Days following the Notice Date, or (C) Purchase Price Option C which shall equal 100% of the lowest trading price for the Common Stock as reported by NASDAQ on either of the two Business Days following the Notice Date, excluding trades of less than 10,000 shares and transactions involving Bear Stearns, in its proprietary capacity, for determination of the Base Price of the Applicable Tranche Shares; (iii) the Tranche Closing Date; (iv) confirmation that the Common Stock meets the ADTV and public float value (as therein defined) of Rule 101(c)(1) of Regulation M under the Exchange Act; provided, however, that if such ADTV and public float requirements are not met, such Notice of Sale shall state whether the provisions of paragraph (1) or (2) of the definition of "restricted period" under Rule 101 of Regulation M is applicable; if paragraph (1) is applicable, the reference to "on the two Business Days following the Notice Date" in subparagraphs (A), (B) and (C) of paragraph (a)(ii) above shall be changed to "on the two Business Days following one 'business day' (as such term is defined in Rule 100 of Regulation M under the Exchange Act) subsequent to the Notice Date" and, if paragraph (2) is applicable, shall be changed to "on the two Business Days following the five 19 19 'business days' (as such term is defined in Rule 100 of Regulation M under the Exchange Act) subsequent to the Notice Date"; and (v) confirmation that the representations and warranties contained in Section 1 of this agreement, qualified as to materiality are true and correct and those not so qualified are true and correct in all material respects as of such Notice Date, provided, however, that in all cases any qualifications as to materiality shall be considered in the aggregate, and the covenants contained in Sections 5 and 6 of this agreement have been satisfied in all material respects as of such Notice Date and shall be accompanied by the Pricing Supplement setting forth information relating to the Tranche and if any amendments or supplements to the Prospectus are required, the Prospectus. (b) The Company shall not issue a Notice of Sale, and any such Notice of Sale so issued shall be deemed ineffective, unless each of the following conditions is met: (i) a Notice of Sale was not issued on the immediately preceding Business Day; (ii) Bear Stearns is not subject to a restricted period (as therein defined) of Rule 101 of Regulation M under the Exchange Act with regard to the Common Stock; and (iii) at no time on the Notice Date had the Common Stock traded at a price of $4.50 or less. (c) Pursuant to this agreement, Bear Stearns shall not be obligated to purchase more than $105,000,000 Aggregate Base Price of Common Stock other than as may result from the Base Price for the Applicable Tranche Shares being in excess of the Prior VWA Price used in the calculations set forth in Section 2(a)(i). (d) The Company shall not be obligated to deliver any Common Stock on any Tranche Closing Date, except upon payment for all the Applicable Tranche Shares to be 20 20 purchased on such Tranche Closing Date as provided herein. The previous sentence notwithstanding, with respect to a Tranche that has yet to close, upon the occurrence of a Market Disruption Event, or any other event or occurrence which, in Bear Stearns' reasonable opinion, after consultation with the Company and its counsel, makes it unlikely that the conditions to the closing on the Tranche Closing Date will be met, or in the event that a Tranche does not close on the Tranche Closing Date, the Company shall be obligated to, at Bear Stearns' option (except that in the case of a Market Disruption Event, only option (A) will be utilized), either: (A) deliver to Bear Stearns such number of shares of Common Stock which Bear Stearns sold in the market pursuant to such outstanding Notice of Sale at the price at which such shares were sold in the market or (B) make a payment to Bear Stearns in cash in an amount sufficient to make Bear Stearns whole with regard to the sale of such shares. 3. Commitment Fee. The Company shall pay to Bear Stearns $5,000,000, in consideration for entering into this agreement. Such payment shall be made in cash according to the following schedule:
Amount Date ------ ---- $1,500,000 September 18, 2000; 1,000,000 September 21, 2000; 1,500,000 September 26, 2000; 1,000,000 September 29, 2000.
If the Company shall fail to make any payment when due, (x) the remainder of such payments shall become immediately due and payable and (y) Bear Stearns shall be released from all existing obligations hereunder. 4. Delivery of and Payment for Applicable Tranche Shares. Delivery of and payment for the Applicable Tranche Shares shall be made at the offices of Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York, NY 10019 (or such other mutually agreed upon place) at 10:00 a.m., New York City time, on the third Business Day 21 21 following the Notice Date or at such other date or place as shall be determined by agreement between Bear Stearns and the Company. On each Tranche Closing Date, the Company shall deliver or cause to be delivered certificates representing the Applicable Tranche Shares to Bear Stearns for its account against payment to or upon the order of the Company of the purchase price by wire transfer in certified or official bank check or checks payable in same-day funds. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of Bear Stearns hereunder. Upon delivery, the Applicable Tranche Shares shall be registered in such names and in such denominations as Bear Stearns shall request in writing not less than two Business Days prior to the Tranche Closing Date. For the purpose of expediting the checking and packaging of the certificates for the Applicable Tranche Shares, the Company shall make the certificates representing the Applicable Tranche Shares available for inspection by Bear Stearns in New York, New York, not later than 2:00 p.m., New York City time, on the Business Day prior to the Tranche Closing Date. If the Company is unable or unwilling to comply with the terms of this Section 4, or any other conditions to settlement (including but not limited to, having the Common Stock delivered pursuant to a Tranche Closing covered by the Prospectus and Registration Statement), the Company agrees to indemnify and hold harmless Bear Stearns from and against any loses incurred, directly or indirectly, as a result (including the costs of cover). 5. Covenants of the Company. The Company covenants and agrees: (a) Prior to the termination of this agreement, the Company will not file any amendment to the Registration Statement or Prospectus unless the Company has furnished Bear Stearns a copy for its review prior to filing and will not file any such proposed amendment or supplement to which Bear Stearns reasonably objects. The Company will cause the Prospectus, properly completed, and any supplement thereto to be filed with the Commission pursuant to the applicable paragraph of Rule 424(b) (if required) within the time period prescribed and on each Notice Date and will provide evidence satisfactory to Bear Stearns of such timely filing. The Company will promptly advise Bear Stearns (1) when the 22 22 Prospectus shall have been filed (if required) with the Commission pursuant to Rule 424(b), (2) when, prior to termination of this offering, any amendment to the Regis tration Statement (including any filing with the Commission of any document that is incorporated by reference) shall have been filed or become effective, (3) of any request by the Commission or its staff for any amendment to the Registration Statement, or for any supplement to the Prospectus or for any additional information, (4) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institu tion or threatening of any proceeding for that purpose and (5) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Common Stock for sale in any jurisdiction or the institution or threatening of any proceeding for such purpose. The Company will use its best efforts to prevent the issuance of any such stop order or the suspension of any such qualification and, if issued, to obtain as soon as possible the withdrawal thereof. (b) If, at any time when a prospectus relating to the Common Stock is required to be delivered under the Securities Act, any event occurs as a result of which the Prospectus would include any 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, or if it shall be necessary to amend the Registration Statement or supplement the Prospectus to comply with the Securities Act or the Exchange Act or the Rules and Regulations, the Company promptly will (1) notify Bear Stearns of such event, (2) prepare and file with the Commission, subject to the first sentence of paragraph (a) of this Section 5, an amendment or supplement which will correct such statement or omission or effect such compliance and (3) supply copies of the Prospectus to Bear Stearns in such quantities as it may reasonably request. (c) The Company will arrange, if necessary, for the qualification of the Common Stock for sale under the laws of such jurisdictions as Bear Stearns may designate, will maintain such qualifications in effect so long as required for the distribution of the Common Stock and will pay any fee of the National Association of Securities 23 23 Dealers, Inc., in connection with its review of the offering; provided, that, in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to (a) service of process in suits, other than those arising out of the offering or sale of the Common Stock, in any jurisdiction where it is not now so subject or (b) subject it to taxation in any such jurisdiction. (d) During any applicable Lock-up Period, not to, directly or indirectly, or announce any intent to, (1) offer for sale, sell, pledge or otherwise dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition by any person during such period of) any shares of Common Stock or securities convertible into or exchangeable for Common Stock, or sell or grant options, rights or warrants with respect to any shares of Common Stock or securities convertible into or exchangeable for Common Stock other than, in each case, as applicable, (i) Common Stock, the issuance of which is permitted to satisfy the Company's dividend, conversion and redemption obligations (including in respect of any dividend make-whole payments or optional or provisional redemption payments) pursuant to the terms of the Series A Preferred Stock or Series B Preferred Stock, (ii) Common Stock, or options to purchase Common Stock, issued in connection with any employee stock option plan, stock ownership plan or dividend reinvestment plan, (iii) any transfers of warrants issued in connection with the Globalstar Credit Agreement or the Revolving Credit Agreement, or shares of Common Stock issuable upon exercise of such warrants, (iv) warrants issued in connection with the QUALCOMM Facility, (v) Common Stock issued pursuant to warrants outstanding on the date hereof, (vi) strategically driven private placements of the Company's Common Stock with strategic investors and (vii) Common Stock issued to Globalstar's partners, or (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of such shares of Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise, in each case without the prior written consent of Bear Stearns; 24 24 (e) The Company will not take, directly or indirectly, any action designed to or which has constituted or which might reasonably be expected to cause or result, under the Exchange Act or otherwise, in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Common Stock. (f) For a period of five years following the last Tranche Closing, the Company shall furnish to Bear Stearns copies of all materials furnished by the Company to its shareholders and all public reports and all reports and financial statements furnished by the Company to the NASDAQ or any other principal national securities exchange upon which the Common Stock may be listed pursuant to requirements of or agreements with such exchange or to the Commission pursuant to the Exchange Act or any Rule or Regulation; (g) The Company shall apply the net proceeds from the sale of the Common Stock being sold by the Company as set forth in the Prospectus; and (h) The Company shall take such steps as shall be necessary to ensure that it shall not become an "investment company" within the meaning of such term under the Investment Company Act. (i) The Company agrees to pay (i) the costs incident to the authorization, issuance, sale and delivery of the Common Stock and any taxes payable in that connection; (ii) the costs incident to the preparation, printing and filing under the Securities Act of the Registration Statement and any amendments and exhibits thereto; (iii) the costs of distributing the Registration Statement and any post-effective amendments thereof (including, in each case, exhibits and filings incorporated by reference), the Prospectus or any document incorporated by reference therein, all as provided in this Agreement; (iv) the costs of producing and distributing this Agreement and any other related documents in connection with the offering, purchase, sale and delivery of the Common Stock; (v) any filing fees incident to securing any required review by the National Association of Securities Dealers, Inc. of the terms of sale of the Common Stock; (vi) any applicable listing or other fees; (vii) the fees and expenses of 25 25 qualifying the Common Stock under the securities laws of the several jurisdictions and of preparing, printing and distributing a Blue Sky Memorandum; and (viii) all other costs and expenses incident to the performance of the obligations of the Company under this Agreement; provided, that, except as provided in this Section 5 and in Section 10 Bear Stearns shall pay their own costs and expenses, including the costs and expenses of their counsel, any transfer taxes on the Common Stock which they may sell and the expenses of advertising any offering of the Common Stock made by Bear Stearns. (j) The Company will not, prior to the earlier of (i) one year from the date of this agreement, (ii) the close of the Final Tranche or (iii) any termination of this agreement pursuant to Section 9 hereunder, enter into any at-the-market (as defined in Rule 415) offering through any issuer other than Bear Stearns. 6. Covenants of Globalstar. Globalstar covenants and agrees with Bear Stearns that: (a) During any applicable Lock-up Period, Globalstar shall not, except with the prior written consent of Bear Stearns, offer, sell or contract to sell or otherwise dispose of, directly or indirectly, or announce the offering of, any partnership interests, any options, rights or warrants with respect to such interests or any securities convertible into, or exchangeable for, such interests other than, in each case, as applicable, (i) partnership interests, the issuance of which is permitted to satisfy Globalstar's dividend, conversion and redemption obligations (including in respect of any dividend make-whole payments or optional dividend cash payments) pursuant to the terms of the Series A Preferred Stock or Series B Preferred Stock, (ii) partnership interests issued in connection with any of the Company's employee option plan, stock ownership plan or dividend reinvestment plan, (iii) any transfers of warrants issued in connection with the Globalstar Credit Agreement, or the Revolving Credit Agreement or partnership interests issuable upon exercise of such warrants, (iv) warrants issued in connection with the QUALCOMM Facility, (v) partnership interests issued pursuant to options or warrants outstanding on the date hereof, (vi) strategically driven private placements of the 26 26 partnership interests with strategic investors, (vii) the issuance of partnership interests to Globalstar's partners and, (viii) any other issuance of a number of partnership interests to GTL that corresponds to the number of shares of Common Stock issued by GTL pursuant to an offering permitted under Section 5(d) hereof. (b) Globalstar shall apply the proceeds of the sale of its partnership interests to the Company substantially as set forth in the Prospectus. 7. Conditions of Bear Stearns' Obligations. The obligations of Bear Stearns hereunder are subject to the accuracy, when made and on each Notice Date and Tranche Closing Date, of the representations and warranties of the Company and Globalstar contained herein, to the performance by the Company and Globalstar of their obligations hereunder and to the following additional terms and conditions: (a) Each Prospectus will be filed in the manner and within the time period required by Rule 424(b); and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or threatened. (b) Bear Stearns shall not have discovered and disclosed to the Company on or prior to each such date that the Registration Statement or the Prospectus or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of Bear Stearns, is material or omits to state a fact which, in Bear Stearns' opinion, is material and is required to be stated therein or is necessary to make the statements therein not misleading. (c) All corporate proceedings and other legal matters incident to the authorization, form and validity of this Agreement, the Common Stock, the Registration Statement and the Prospectus, and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for Bear Stearns, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters. 27 27 (d) On the date hereof and on each Tranche Closing Date there shall have been furnished to Bear Stearns an opinion of Willkie Farr & Gallagher, counsel to the Company and Globalstar, dated the date hereof or such Tranche Closing Date, as applicable, and in form and sub stance satisfactory to counsel for Bear Stearns, to the effect that: (i) Globalstar has been duly formed and is validly existing as a limited partnership in good standing under the laws of the State of Delaware, and has been duly qualified for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases property, or conducts any business, so as to require such qualification (except where the failure to so qualify would not have a material adverse effect on Globalstar); and Globalstar has all requisite power and authority and, except as disclosed in the Prospectus, all material governmental authorizations, licenses, certificates, franchises, permits and approvals required to own its properties and to conduct its business as described in the Prospectus; (ii) To such counsel's knowledge, except as described in the Prospectus, the Company has not granted any outstanding options, warrants or commitments with respect to any shares of the capital stock of the Company, whether issued or unissued, and Globalstar, LQSS and LQP have not granted any rights or options to other persons with respect to partnership interests of Globalstar; (iii) The Common Stock conforms in all material respects to the description thereof contained in the Prospectus; (iv) To such counsel's knowledge, no litigation or governmental proceedings are pending or threatened against the Company or Globalstar which would adversely affect the Company's or Globalstar's ability to perform its obligations under this Agreement or is required to be disclosed in the Prospectus and which is not disclosed and correctly summarized therein; 28 28 (v) This Agreement has been duly authorized, executed and delivered by the Company and Globalstar; (vi) The execution, delivery and performance by the Company and Globalstar of this Agreement, and the consummation by the Company of the sales of the Common Stock thereby will not (A) conflict with or constitute a breach of any of the terms or provisions of, or a default under, the Partnership Agreement or the amended and restated agreement of partnership of LQP dated as of March 23, 1994, as amended on March 24, 1998, the Service Provider Agreements, the Memorandum of Association or Bye-laws, the SS/L Agreement, the Qualcomm Agreement or any indenture, mortgage, deed of trust, loan agreement or other material agreement or instrument known to such counsel to which the Company or Globalstar is a party or by which they or their property is bound or (B) (assuming compliance with all applicable state securities and Blue Sky laws in those jurisdictions in the United States in which the Common Stock is being sold and compliance with all non-U.S. applicable securities laws and regulations of any country in which Common Stock may be offered or sold outside the U.S.) violate or conflict with any provision of law or regulation applicable to the Company (1) of the State of New York, (2) of the United States of America or (3) set forth in the Revised Uniform Limited Partnership Act of the State of Delaware; (vii) No consent, approval, authorization or order of any court, regulatory body, administrative agency or other governmental body is required to be obtained for the sale of the Common Stock as contemplated by the Prospectus under any provision of law or regulation applicable to the Company of the State of New York or the United States of America, except as may be required under the various state securities or Blue Sky laws or the consent of the Bermuda Monetary Authority; (viii) There is no restriction upon the voting or transfer of any Common Stock acquired hereunder pursuant to the Company's Memorandum of Association or Bye-laws, in each case as amended, or in any agreement or other instrument of which such counsel has knowledge 29 29 except as described in the Prospectus; and no holders of securities of the Company have rights to the registration thereof under the Registration Statement except as described in the Prospectus; (ix) Such counsel has read all contracts referred to in the Registration Statement and the Prospectus and all other loan agreements to which the Company or Globalstar is a party of which such counsel has knowledge and to the extent material such contracts are fairly summarized as disclosed therein, conform in all material respects to the descriptions thereof contained therein, and are filed as exhibits thereto; (x) The statements set forth in the Prospectus under the heading "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 therein under the heading "Description of Common Stock", insofar as such statements purport to summarize provisions of the Common Stock, provide a fair summary of such provisions; (xi) The Registration Statement was declared effective under the Securities Act as of the date and time specified in such opinion, the Prospectus was filed with the Commission pursuant to the subparagraph of Rule 424(b) of the Rules and Regulations specified in such opinion on the date specified therein and no stop order suspending the effectiveness of the Registration Statement has been issued and, to the knowledge of such counsel, no proceeding for that purpose is pending or threatened by the Commission; (xii) The Registration Statement and the Prospectus, as amended or supplemented (other than the financial statements and related schedules therein, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Securities Act and the Rules and Regulations; and the documents incorporated by 30 30 reference in the Prospectus and any further amendment or supplement to any such incorporated document made by the Company prior to such Tranche Closing Date (other than the financial statements and related schedules therein, as to which such counsel need express no opinion), when they were filed with the Commission, complied as to form in all material respects with the requirements of the Securities Act or the Exchange Act, as applicable, and the Rules and Regulations; (xiii) To such counsel's knowledge, there are no contracts or other documents which are required to be described in the Prospectus or filed as exhibits to the Registration Statement by the Securities Act or by the Rules and Regulations which have not been described or filed as exhibits to the Registration Statement or incorporated therein by reference as permitted by the Rules and Regulations; (xiv) The Partnership Agreement has been duly and validly authorized, executed and delivered by the Company, LQSS, Loral, and Loral/DASA Globalstar, L.P. and each of the Service Provider Agreements, the SS/L Agreement and the Qualcomm Agreement have been duly and validly authorized, executed and delivered by Globalstar and, to such counsel's knowledge, the other parties to each of the aforementioned agreements have authorized, executed and delivered such agreements and assuming such authorization, execution and delivery by such other parties, such agreements constitute valid and legally binding obligations enforceable against the parties thereto, except as enforceability may be limited by (I) bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally or by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (II) Federal or state securities laws or principles of public policy with regard to rights to indemnity; provided, however, that no opinion need be given with respect to the enforceability of any provisions contained in the Partnership Agreement or the Service Provider Agreements which state that the parties thereto have agreed to further negotiate with respect to certain matters as specified therein; 31 31 (xv) LQP has agreed to use the license to operate mobile satellite services in the 1610-1626.5 MHZ L-band and the 2483.5-2500 MHZ S-band granted by the FCC for the exclusive benefit of Globalstar; (xvi) After giving effect to the sale of the Common Stock by Bear Stearns as contemplated in the Prospectus, the Company will not be an "investment company" under the Investment Company Act. (xvii) The Partnership Agreement has been duly amended in accordance with the requirements thereof in a manner which permits the creation, issuance and sale by Globalstar of the ordinary partnership interests to be issued in connection with the offering of the Common Stock, and the making of distributions by Globalstar in respect thereof; no further consents, votes or approvals of Globalstar, or the partners in Globalstar, or any stockholders in such partners, are required pursuant to the Partnership Agreement and applicable Delaware law to give effect to such amendment other than those consents, votes or approvals (including the consent of the Committee, Consent of the Partners, the Consent of the Disinterested Partners and the consent of a GTL Independent Director (as such terms are defined in the Partnership Agreement)), which have been duly obtained; and (xviii) the ordinary partnership interests to be issued and sold to the Company pursuant to the Partner ship Agreement have been duly and validly authorized, and when issued and delivered, in accordance with the terms of the Partnership Agreement, will be validly issued, fully paid and nonassessable and will constitute the valid and binding obligations of Globalstar. In rendering such opinions, such counsel may limit its opinion to the laws of the State of New York, the laws of the United States and the Delaware Revised Uniform Limited Partnership Act and as to matters of fact, such counsel may rely to the extent deemed proper, on certifi cates of responsible officers of the Company or Globalstar and public officials. 32 32 Such counsel shall also make a statement to the following effect: In the course of preparation by the Company of the Prospectus, such counsel participated in conferences with certain officers of the Company and Globalstar, with the independent auditors of the Company's and of Globalstar's financial statements and representatives of Bear Stearns. While such counsel has not independently verified the accuracy, completeness or fairness of the statements made in the Prospectus and does not assume any responsibility therefor (except insofar as set forth in Section 7(d)(iii), (viii) and (ix) above and except for statements made therein related to such counsel), nothing has come to its attention that would lead it to believe that the Prospectus, as of the date hereof, or, for any opinion delivered on a Tranche Closing Date, throughout such Tranche Period (other than the financial statements and notes thereto and the supporting schedules and other financial data derived therefrom included or incorporated by reference therein or the matters addressed by the opinion of Crowell & Moring (set forth in Section 7(f) hereof) and matters addressed in the opinion of Appleby, Spurling & Kempe (set forth in Section 7(e) hereof) as to Bermuda law matters) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Such counsel may also state, in any opinion other than the opinion delivered on the date hereof, the extent to which such conferences, if any, have been limited. (e) On the date hereof there shall have been furnished to Bear Stearns an opinion of Appleby, Spurling & Kempe, counsel to the Company, dated the date hereof, and in form and substance satisfactory to counsel for the Bear Stearns to the effect that: (i) The Company has been duly incorporated as an exempted company and is validly existing as an exempted company in good standing under the laws of Bermuda, and has full power and authority and has obtained all Bermuda governmental authorizations, licenses, certificates, franchises, permits and approvals required to own its properties and to conduct its business as described in the Prospectus; 33 33 (ii) Assuming that no more than 23,400,000 shares are sold pursuant to this agreement, the Company has authorized capital stock as set forth in the Registration Statement, and all the issued shares of Common Stock of the Company have been duly and validly authorized and issued and are fully paid and not subject to further calls; the Common Stock has been duly authorized and, when delivered to Bear Stearns against payment therefor as provided by this Agreement, will have been validly issued and will be fully paid and not subject to further calls; the issuance of the Common Stock is not subject to any preemptive or similar rights under the Company's Memorandum of Association or Bye-laws, in each case as amended; the Common Stock conforms to the descriptions thereof in the Prospectus; (iii) To such counsel's knowledge, no litigation or governmental proceeding is pending or threatened against the Company in Bermuda which would adversely affect the Company's ability to perform its obligations under this Agreement; (iv) The execution, delivery and performance by the Company of this Agreement has been duly authorized and the consummation by the Company of the sale of the Common Stock in accordance therewith will not (A) conflict with the Company's Memorandum of Association or Bye-Laws, in each case as amended, or (B) violate or conflict with any provision of law or regulation of Bermuda applicable to the Company; (v) No consent, approval, authorization or order of any court, regulatory body, administrative agency or other governmental body is required to be obtained for the sale of Common Stock under any provision of law or regulation of Bermuda applicable to the Company or for the consummation of the transactions contemplated by this Agreement; (vi) There is no restriction upon the voting or transfer of any Common Stock pursuant to (A) the law of Bermuda, (B) the Company's Memorandum of Association or 34 34 Bye-laws, in each case as amended, or (C) any agreement or other instrument of which such counsel has knowledge except as described in the Prospectus; (vii) The statements set forth in the Base Prospectus under the headings "Description of Common Stock--Bermuda Law", insofar as such statements describe the Common Stock and constitute a summary of the legal matters referred to therein fairly present the information referred to therein with respect to such legal matters; (viii) A final and conclusive judgment of a New York court under which a sum of money is payable (not being a sum payable in respect of taxes or other charges of a like nature, in respect of a fine or other penalty or in respect of multiple damages as defined in The Protection of Trading Interest Act, 1981) may be the subject of enforcement proceedings in the Supreme Court of Bermuda under the common law doctrine of obligation by action for the debt evidenced by the New York court's judgment; assuming that (1) the court that gave such judgment was competent to hear the action in accordance with private international law principles as applied by the courts in Bermuda and (2) such judgment is not contrary to public policy in Bermuda, has not been obtained by fraud or in proceedings contrary to natural justice and is not based on an error in Bermuda law, such counsel believes that, on general principle such a judgment would be enforceable in the Supreme Court of Bermuda; and enforcement of such a judgment against assets in Bermuda may involve the conversion of the judgment into Bermuda dollars, but the Bermuda Monetary Authority's policy is to give the consents necessary to enable recovery in the currency of the obligation; (ix) The submission by the Company to the jurisdiction of the State and federal courts sitting in the City of New York contained in this Agreement constitutes a legal, valid and binding obligation of the Company, provided that such submission is valid under New York law; 35 35 (x) The choice of the laws of the State of New York to govern this Agreement is a valid choice of law under Bermuda law. (f) On each Tranche Closing Date, there shall have been furnished to Bear Stearns a letter of Appleby, Spurling & Kempe, dated such Tranche Closing Date, stating that Bear Stearns is, as of such Tranche Closing Date, entitled to rely on its opinion described in Section (7)(e), above, as if it were dated such Tranche Closing Date. (g) On the date hereof and on each Tranche Closing Date there shall have been furnished to Bear Stearns an opinion of Crowell & Moring, special communications counsel to the Company, dated the date hereof or such Tranche Closing Date, as applicable, in form and substance satisfactory to counsel for Bear Stearns to the effect that: (i) To such counsel's knowledge, except for the statements set forth in the Company's offering memorandum dated January 21, 1999, regarding the offering of the Series A Preferred Stock, under the heading "Regulation -- United States FCC Regulation" and the Annual Report of the Company for the fiscal year ended December 31, 1999, under the heading "Business--Licensing" or except as described in the Prospectus, there are no pending or threatened proceedings which could have a material adverse effect on the validity of the authorization for construction, launch and operation of the Globalstar satellite constellation; (ii) The FCC has authorized LQP to construct a mobile satellite system capable of operating in the 1610-1626.5/2483.5-2500 MHZ frequency bands, consistent with the technical specifications set forth in its application, the FCC's rules and the conditions set forth in the FCC's Order and Authorization (DA 95-128), released January 31, 1995, as modified by the Erratum, DA 95-373 (released February 29, 1996), as affirmed and modified by the Memorandum Opinion and Order, FCC 96-279 (released June 27, 1996), as modified by the FCC's Order and Authorization, DA 96-1924 (released November 19, 1996); and pursuant to FCC approval, LQP 36 36 has assigned such authorization to L/Q Licensee, Inc.; however, such authorization is presently subject to modification, stay or revocation as a result of pending judicial appeals; (iii) The construction, launch and operation by Globalstar, of the Globalstar satellite constellation authorized by the Order and Authorization, DA 95-128 (released Jan. 31, 1995), as modified by the Erratum, DA 95-373 (released February 28, 1995), as affirmed and modified by the Memorandum Opinion and Order, FCC 96-279 (released June 27, 1996), as modified by the FCC's Order and Authorization, DA 96-1924 (released November 19, 1996), would not violate provisions of the Communications Act or the FCC's rules and policies thereunder relating to control of FCC authorizations, provided that L/Q Licensee, Inc. remains in ultimate control of the authorized facilities as defined by the rules and policies of the FCC and that there is no transfer of control of L/Q Licensee, Inc. without prior approval of the FCC, and (iv) That such opinion shall be considered true, valid and current throughout the duration of this agreement, unless counsel shall have delivered to Bear Stearns, and Bear Stearns shall have confirmed receipt of, notification to the contrary. (h) Bear Stearns shall have received from Cravath, Swaine & Moore, counsel for Bear Stearns, such opinion and letters, dated the date hereof, with respect to the issuance and sale of the Common Stock, the Registration Statement, the Prospectus and other related matters as Bear Stearns may reasonably require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters. (i) At the time of execution of this Agreement, Bear Stearns shall have received from Deloitte & Touche LLP ("Deloitte") a letter (the "Initial Letter"), in form and substance satisfactory to the Bear Stearns, addressed to Bear Stearns and the Board of Directors of the Company and dated the date hereof (i) confirming that they are independent public accountants within the meaning of the 37 37 Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date hereof (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Prospectus, as of a date not more than five days prior to the date hereof), the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants' "comfort letters" to underwriters in connection with registered public offerings. (j) On each Tranche Closing Date, Bear Stearns shall have received from Deloitte a letter, addressed to Bear Stearns and the Board of Directors of the Company and dated such Tranche Closing Date (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the Tranche Closing Date, or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Prospectus, as of a date not more than five days prior to the date of the Tranche Closing Date, the conclusions and findings of such firm with respect to the financial information and other matters covered by the Initial Letter, (iii) confirming in all material respects the conclusions and findings set forth in the Initial Letter and (iv) updating the Initial Letter with any information which would have been included in such Initial Letter had it been given on such Tranche Closing Date. (k) The Company and Globalstar shall each furnish to Bear Stearns as of the date hereof and shall have furnished to Bear Stearns on each Tranche Closing Date a certificate, dated such date, of its (x) Chairman of the Board, its President or a Vice President and its chief financial officer or Treasurer or (y) the Chairman of the Board, the President or a Vice-President and the Chief Financial Officer or Treasurer of the Managing General 38 38 Partner of Globalstar (the "Officer's Certificate") stating that: (i) The representations and warranties of the Company in Section 1 of this Agreement qualified as to materiality are true and correct and those not so qualified are true and correct in all material respects as if made at and of the date hereof, or, if the Officer's Certificate is being delivered on a Tranche Closing Date, have been throughout the Tranche Period, true and correct provided, however, that in all cases any qualifications as to materiality shall be considered in the aggregate; the Company has in all material respects complied with all its agreements contained herein; and the Company has in all respects satisfied the conditions on its part to be complied with or satisfied at such date; and (ii) They have carefully examined the Registration Statement and the Prospectus and, in their opinion (A) as of such date, the Registration Statement and Prospectus did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (B) since such date no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement or the Prospectus. (l) (i) Neither the Company nor Globalstar shall have sustained since the date of the latest audited financial statements included or incorporated by reference in the Prospectus at the date of the Agreement any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus or (ii) since such date there shall not have been any change in the capital stock, partnership interests or long-term debt of the Company or Globalstar or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and Globalstar, otherwise than as set forth or contemplated in the Prospectus, the effect of 39 39 which, in any such case described in clause (i) or (ii), is, in the judgment of Bear Stearns, so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Common Stock being delivered on such Tranche Closing Date on the terms and in the manner contemplated in the Prospectus. (m) Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange or the American Stock Exchange or in the over-the-counter market, or trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended (which shall not include any limitation on program trading pursuant to the rules of the New York Stock Exchange) or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a banking moratorium shall have been declared by Federal or state authorities, (iii) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States or there shall have been a declaration of a national emergency or war by the United States or (iv) there shall have occurred such a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) (each a "Market Disruption Event") as to make it, in the judgment of Bear Stearns, impracticable or inadvisable to proceed with the public offering or delivery of the Common Stock being delivered on such Tranche Closing Date on the terms and in the manner contemplated in the Prospectus. All such opinions, certificates, letters and documents shall be in compliance with the provisions hereof only if they are reasonably satisfactory in form and sub stance to Bear Stearns and its counsel. The Company shall furnish to Bear Stearns conformed copies of such opinions, certificates, letters and other documents in such number as Bear Stearns shall reasonably request. If any of the conditions specified in this Section 7 shall not have been fulfilled when and as required by this Agreement, this Agreement and all obligations of Bear Stearns hereunder may 40 40 be canceled at, or at any time prior to, each Tranche Closing Date, by Bear Stearns. Any such cancellation shall be without liability of Bear Stearns to the Company. Notice of such cancellation shall be given to the Company in writing, or by telecopy or telephone and confirmed in writing. 8. Indemnification and Contribution. (a) The Company and Globalstar, jointly and severally, shall indemnify and hold harmless Bear Stearns, its officers and employees and each person, if any, who controls Bear Stearns within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of Common Stock), to which Bear Stearns and each such officer, employee or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus or (ii) the omission or alleged omission to state in the Registration Statement or the Prospectus any material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse Bear Stearns and each such officer, employee or controlling person promptly upon demand for any legal or other expenses reasonably incurred by Bear Stearns and each such officer, employee or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company and Globalstar shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement or the Prospectus, in reliance upon and in conformity with written information concerning Bear Stearns furnished to the Company by or on behalf of Bear Stearns specifically for inclusion therein which information consists solely of the information specified in Section 8(e); and provided further that as to any Base Prospectus or any preliminary prospectus this indemnity agreement shall not inure to the benefit of Bear Stearns on 41 41 account of any loss, claim, damage, liability or action arising from the sale of Common Stock to any person by Bear Stearns if Bear Stearns failed to send or give a copy of the Prospectus, as the same may be amended or supplemented, to that person within the time required by the Securities Act, and the untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact in such Base Prospectus was corrected in the Prospectus, unless such failure resulted from non-compliance by the Company with Section 5(c) herein. The foregoing indemnity agreement is in addition to any liability which the Company or Globalstar may otherwise have to Bear Stearns or to any officer, employee or controlling person of Bear Stearns. (b) Bear Stearns shall indemnify and hold harmless the Company, its officers and employees, each of its directors, and each person, if any, who controls the Company within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company or any such director, officer or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus or (ii) the omission or alleged omission to state in the Registration Statement or the Prospectus, any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning Bear Stearns furnished to the Company by or on behalf of Bear Stearns specifically for inclusion therein, and shall reimburse the Company and any such director, officer or controlling person for any legal or other expenses reasonably incurred by the Company or any such director, officer or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is 42 42 in addition to any liability which Bear Stearns may otherwise have to the Company or any such director, officer, employee or controlling person. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent it has been materially prejudiced by such failure, and provided further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 8. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that any indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the employment thereof has been specifically authorized by the indemnifying party in writing, (ii) such indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party and in the reasonable judgment of such counsel it is advisable for such indemnified party to employ separate counsel or (iii) the indemnifying party has failed to assume the defense of such action and employ counsel reasonably satisfactory to the 43 43 indemnified party, in which case, if such indemnified party promptly notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (in addition to local counsel) at any time for all such indemnified parties, which firm shall be designated in writing by Bear Stearns, or by the Company, if the indemnified parties under this Section consist of the Company or Globalstar. No indemnifying party shall be liable for any settlement of any such action effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and Globalstar on the one hand and Bear Stearns on the other from the offering of the Common Stock or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and Globalstar on the one hand and Bear Stearns on the other with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the 44 44 Company and Globalstar on the one hand and Bear Stearns on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from a Tranche purchased under this Agreement (before deducting expenses) received by the Company and Globalstar, on the one hand, and the pro rata share of the commitment fee (which shall equal the Base Price multiplied by the number of Applicable Tranche Shares for such Tranche) and the total trading profits earned by Bear Stearns with respect to the shares of the Common Stock of such Tranche purchased under this Agreement, on the other hand, bear to the total gross proceeds from the offering of the shares of the Common Stock of such Tranche under this Agreement. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company and Globalstar or Bear Stearns, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. For purposes of the preceding two sentences, the net proceeds deemed to be received by the Company shall be deemed to be also for the benefit of the Globalstar and information supplied by the Company shall also be deemed to have been supplied by the Globalstar. The Company and Globalstar and Bear Stearns agree that it would not be just and equitable if contributions pursuant to this Section 8 were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section shall be deemed to include, for purposes of this Section 8(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 8(d) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) Bear Stearns confirms and the Company acknowledges that the statements with respect to the public offering of the Common Stock by Bear Stearns set forth on 45 45 the cover page and in the "Plan of Distribution" section of the Prospectus are correct and constitute the only information concerning Bear Stearns furnished in writing to the Company by or on behalf of Bear Stearns specifically for inclusion in the Registration Statement and the Prospectus. 9. Termination. The obligations of Bear Stearns hereunder may be terminated by notice given to and received by the Company after the closing of a Tranche but before the issuance of an additional Notice of Sale if, prior to that time, any of the events described in Sections 7(l) or 7(m), shall have occurred or if Bear Stearns shall decline to purchase the Common Stock for any reason permitted under this Agreement. 10. Reimbursement of Bear Stearns' Expenses. If, on any Tranche Closing Date, the Company shall fail to tender the Common Stock for delivery to Bear Stearns by reason of any failure, refusal or inability on the part of the Company to perform any agreement on its part to be performed, or because any other condition of Bear Stearns' obligations hereunder required to be fulfilled by the Company is not fulfilled, the Company will reimburse Bear Stearns for all reasonable out-of-pocket expenses (including the costs of cover and fees and disbursements of counsel) incurred by Bear Stearns in connection with this Agreement and the proposed purchase of the Common Stock, and upon demand the Company shall pay the full amount thereof to Bear Stearns. 11. Assignment. Bear Stearns may assign all or any portion of its rights under this agreement to Bear Stearns & Co. Inc. 12. Notices, etc. All statements, requests, notices and agreements hereunder shall be in writing, and: (a) to the Company: Cedar House 41 Cedar Avenue Hamilton HM12 Bermuda Attention: Avi Katz 46 46 (b) to Globalstar: 3200 Zanker Road San Jose, California 95164-0670 Attention: Avi Katz (c) to the Bear Stearns: c/o Bear, Stearns & Co. Inc. 245 Park Avenue New York, New York 10167 Attention: Stephen D. Meyer, Senior Managing Director, Equity Derivatives Department 13. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon Bear Stearns and the Company and Globalstar. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that (A) the representations, warranties, indemnities and agreements of the Company contained in this Agreement shall also be deemed to be for the benefit of the person or persons, if any, who control Bear Stearns within the meaning of Section 15 of the Securities Act and (B) the indemnity agreement of Bear Stearns contained in Section 8(b) of this Agreement shall be deemed to be for the benefit of directors of the Company, officers of the Company who have signed the Registration Statement and any person controlling the Company within the meaning of Section 15 of the Securities Act. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 13, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. 14. Survival. The respective indemnities, representations, warranties and agreements of the Company, Globalstar and Bear Stearns contained in this Agreement or made by or on behalf on them, respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Common Stock and shall remain in full force and effect 47 47 regardless of any investigation made by or on behalf of any of them or any person controlling any of them. 15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF NEW YORK. 16. CONSENT TO JURISDICTION. EACH PARTY IRREVOCABLY AGREES THAT ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY ("RELATED PROCEEDINGS") MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA LOCATED IN THE CITY OF NEW YORK OR THE COURTS OF THE STATE OF NEW YORK IN EACH CASE LOCATED IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK (COLLECTIVELY, THE "SPECIFIED COURTS"), AND IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION (EXCEPT FOR PROCEEDINGS INSTITUTED IN REGARD TO THE ENFORCEMENT OF A JUDGMENT OF ANY SUCH COURT (A "RELATED JUDGMENT"), AS TO WHICH SUCH JURISDICTION IS NON-EXCLUSIVE) OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. THE PARTIES FURTHER AGREE THAT SERVICE OF ANY PROCESS, SUMMONS, NOTICE OR DOCUMENT BY MAIL TO SUCH PARTY'S ADDRESS SET FORTH ABOVE SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY LAWSUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY LAWSUIT, ACTION OR OTHER PROCEEDING IN THE SPECIFIED COURTS, AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH LAWSUIT, ACTION OR OTHER PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE COMPANY HEREBY IRREVOCABLY APPOINTS CT CORPORATION SYSTEM, BROADWAY, NEW YORK, NY 10019, AS ITS AGENT TO RECEIVE SERVICE OF PROCESS OR OTHER LEGAL SUMMONS FOR PURPOSES OF ANY SUCH ACTION OR PROCEEDING THAT MAY BE INSTITUTED IN ANY STATE OR FEDERAL COURT IN THE CITY AND STATE OF NEW YORK. 17. Waiver of Immunity. With respect to any Related Proceeding, each party irrevocably waives, to the fullest extent permitted by applicable law, all immunity (whether on the basis of sovereignty or otherwise) from jurisdiction, service of process, attachment (both before and after judgment) and execution to which it might otherwise be entitled in the Specified Courts, and with respect to any Related Judgment, each party waives any such 48 48 immunity in the Specified Courts or any other court of competent jurisdiction, and will not raise or claim or cause to be pleaded any such immunity at or in respect of any such Related Proceeding or Related Judgment, including, without limitation, any immunity pursuant to the United States Foreign Sovereign Immunities Act of 1976, as amended. 18. Counterparts. This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument. 19. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement. 49 49 Please confirm, by signing and returning to the Company two counterparts of this Agreement, that the foregoing correctly sets forth the agreement among the Company, Globalstar and Bear Stearns. Very truly yours, GLOBALSTAR TELECOMMUNICATIONS LIMITED By: /s/ Richard J. Townsend -------------------------------- Name: Richard J. Townsend Title: Vice President and Chief Financial Officer GLOBALSTAR, L.P. by LORAL/QUALCOMM SATELLITE SERVICES, L.P., its general partner by LORAL/QUALCOMM PARTNERSHIP, L.P. its managing general partner by LORAL GENERAL PARTNER, INC. its general partner, By: /s/ Richard J. Townsend -------------------------------- Name: Richard J. Townsend Title: Senior Vice President and Chief Financial Officer Confirmed and accepted as of the date first above mentioned: BEAR, STEARNS INTERNATIONAL LIMITED By: /s/ Steve Meyer ---------------------------------- Authorized Signatory -----END PRIVACY-ENHANCED MESSAGE-----