As filed
with the Securities and Exchange Commission on July 8, 2008
Registration
No.
333-
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-3
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
TERRESTAR
CORPORATION
(Exact
Name of Registrant as Specified in Its Charter)
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Delaware
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4812
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93-0976127
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(State
of Incorporation)
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(Primary
S.I.C. Code Number)
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(I.R.S.
Employer
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Identification
No.)
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12010
Sunset Hills Road
9th
Floor
Reston,
Virginia 20190
(703)
483-7800
(Address,
Including Zip Code, and Telephone Number, Including Area Code,
of
Registrant’s Principal Executive Offices)
Jeffrey
Epstein
President,
General Counsel and Secretary
12010
Sunset Hills Road
9th
Floor
Reston,
Virginia 20190
(703)
483-7800
(Name, Address, Including
Zip Code, and Telephone Number,
Including
Area Code, of Agent for Service)
Copy
to:
Barbara
Becker
Gibson,
Dunn & Crutcher LLP
200
Park Avenue, 47th Floor
New
York, New York 10166
(212)
351-4000
Facsimile:
(212) 351-6202
Approximate
date of commencement of proposed sale to the public:
From time
to time after the effective date of this Registration
Statement
.
If the only securities being
registered on this form are to be offered pursuant to dividend or interest
reinvestment plans, please check the following box.
o
If any of the securities
being registered on this form are to be offered on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment plans, check
the following box.
ý
If this Form is filed to
register additional securities for an offering pursuant to Rule 462(b) under
the Securities Act, please check the
following
box and list the Securities Act registration statement number
of the earlier effective registration statement for the same
offering.
o
If this Form is a
post-effective amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same
offering.
o
If this Form is a
registration statement pursuant to General Instruction I.D. or a post−effective
amendment thereto that shall become effective upon filing with the Commission
pursuant to Rule 462(e) under the Securities Act, check the following
box.
o
If this Form is a
post−effective amendment to a registration statement filed pursuant to General
Instruction I.D. filed to register additional securities or additional classes
of securities pursuant to Rule 413(b) under the Securities Act, check the
following box.
o
continued
on following page
continued
from previous page
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
x
Non-accelerated filer
o
(Do not check if a smaller reporting
company)
Smaller reporting company
o
CALCULATION
OF REGISTRATION FEE
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Title
of Each Class of Securities to be Registered
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Amount
to be
Registered
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Proposed
Maximum
Offering
Price
Per
Unit (1)
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Proposed
Maximum
Aggregate
Offering
Price (1)
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Amount
of
Registration
Fee
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Common Stock, par value $0.01 per share
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132,591,433
shares
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$2.48
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$328,826,754
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$12,922.89
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(1)
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Calculated
in accordance with Rule 457(c) under the Securities Act of 1933 based on
the average of the high and low prices per share of our common stock on
July 7, 2008, as reported on the NASDAQ Stock
Market.
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The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act or until the Registration Statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
The
information in this prospectus is not complete and may be
changed. The selling stockholders may not sell
these
securities until the registration statement filed with the Securities and
Exchange Commission is
effective.
This prospectus is not an offer to sell these securities and is not soliciting
an offer to buy these
securities
in any jurisdiction where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED JULY 8, 2008
PROSPECTUS
TERRESTAR
CORPORATION
132,591,433
Shares of Common
Stock
This prospectus relates solely to the
offer and sale by the selling stockholders identified in this prospectus or a
subsequently filed prospectus supplement of up to 132,591,433
shares of our common stock. The
selling stockholders are offering all of the shares to be sold in the offering,
but they are not required to sell any of these shares. The selling stockholders
may sell the offered shares in public or private transactions, at prevailing
market prices or at privately negotiated prices in transactions that may or may
not involve the Pink Sheets or any exchange on which our shares are listed from
time to time. In connection with these sales, the selling stockholders may use
underwriters, broker-dealers, or agents, who may receive compensation or
commissions for the sales. We will incur expenses in connection with the
registration of the common stock, but we will not receive any of the proceeds
from the sale of our common stock by the selling
stockholders.
This
prospectus describes the general manner in which the shares of our common stock
may be offered and sold by the selling stockholders. If necessary,
the specific manner in which shares of common stock may be offered and sold will
be described in a supplement to this prospectus.
Our
common stock is quoted on the NASDAQ Global Market under the symbol “TSTR.” On
July 7, 2008 the closing sales price of our common stock was $2.31.
The
purchase of our common stock involves a high degree of risk. See “Risk Factors”
beginning on Page 4 for a discussion of factors that you should carefully
consider before purchasing the shares offered by this prospectus.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
The
information in this prospectus is not complete and may be changed. These
securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. The prospectus is
not an offer to sell these securities and it is not soliciting an offer to buy
these securities in any state where the offer or sale is not
permitted.
The
date of this Prospectus is ,
2008.
TABLE
OF CONTENTS
If
it is against the law in any state to make an offer to sell these shares, or to
solicit an offer from someone to buy these shares, then this prospectus does not
apply to any person in that state, and no offer or solicitation is made by this
prospectus to any such person.
You
should rely only on the information provided or incorporated by reference in
this prospectus or any supplement. Neither we nor any of the selling
stockholders have authorized anyone to provide you with different information.
You should not assume that the information in this prospectus or any supplement
is accurate as of any date other than the date on the front of this prospectus
or any supplement.
EX
PLANATORY NOTE
This
prospectus registers the resale of up to 132,591,433 shares of our common
stock, comprised of (i) up to 8,970,000 shares of our common stock to be issued
to EchoStar Corporation, or EchoStar, upon its exchange of up to $50 million in
principal amount of TerreStar Networks Inc., or TerreStar, 6.5% Senior
Exchangeable PIK Notes due 2014 (the “exchangeable notes”) originally issued on
February 7, 2008, (ii) up to 8,970,000 shares of our common stock to be issued
to certain affiliates of Harbinger Capital Partners, or Harbinger, upon its
exchange of up to $50 million in principal amount of exchangeable notes into
358,800 shares of our Series E Junior Participating Preferred Stock, par value
$0.01 per share (the “Junior Preferred”), and the subsequent conversion of
Junior Preferred stock into our common stock, (iii) up to 8,970,000 shares of
our common stock to be issued to certain of our existing shareholders upon their
exchange of up to $50 million in principal amount of exchangeable notes, (iv) up
to 3,884,951 shares of our common stock to be issued upon conversion of
exchangeable notes payable as PIK interest on the exchangeable notes through
March 15, 2010, in each case at a conversion price of $5.57 per share of common
stock (and a conversion price of $139.35 per share of Junior Preferred stock),
(v) up to 30,000,000 shares of our common stock to be issued to Harbinger
pursuant to our purchase of Harbinger's 1.4GHz spectrum rights for 1,200,000
shares of our Junior Preferred stock, and the subsequent conversion of Junior
Preferred stock into our common stock, (vi) 30,000,000 shares of our common
stock issued to EchoStar in connection with our acquisition of EchoStar's 1.4GHz
spectrum rights,
(vii)
37,389,426 shares of our common stock held by Harbinger who acquired these
shares (A) from former stockholders of TerreStar who exchanged each
share of TerreStar common stock held by them for 1.78 shares of our common
stock and subsequently sold those shares to Harbinger in a private
transaction, (B) in open market transactions and are freely-tradable shares,
subject to limitations on resale due to the affiliate status of Harbinger, as
such restrictions are applicable or (C) from us in private placement
transactions and such shares of our common stock are currently registered for
resale pursuant to an effective registration statement on Form S-3, (viii)
1,886 shares of our common stock that are issuable to Harbinger upon exercise of
warrants and such shares are currently registered for resale pursuant to an
effective registration statement on Form S-3 and (ix) 4,405,170 shares issuable
to Harbinger upon the conversion of shares of Series B Cumulative Convertible
Preferred Stock held by Harbinger and such shares are currently registered for
resale pursuant to an effective registration statement on Form
S-3.
CA
UTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This
prospectus, including the documents incorporated by reference into this
prospectus, contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements regarding our expected
financial position and operating results, our business strategy, and our
financing plans are forward-looking statements. These statements can sometimes
be identified by our use of forward-looking words such as “may,” “will,”
“anticipate,” “estimate,” “expect,” “project,” or “intend.” These
forward-looking statements reflect our plans, expectations and beliefs and,
accordingly, are subject to certain risks and uncertainties. We cannot guarantee
that any of such forward-looking statements will be realized.
Statements
regarding factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements, or cautionary statements,
include, among others, those under the caption “Risk Factors” and elsewhere in
this prospectus, including in conjunction with the forward-looking statements
included in this prospectus and in the documents we incorporate by reference.
All of our subsequent written and oral forward-looking statements (or statements
that may be attributed to us) are expressly qualified by the cautionary
statements. You should carefully review the risk factors described in our other
filings with the Securities and Exchange Commission from time to time, including
our reports on Forms 10-Q and 10-K which will be filed in the future, as well as
our other reports and filings with the Securities and Exchange Commission, or
SEC.
Our
forward-looking statements are based on information available to us today, and
we will not update these statements. Our actual results may differ significantly
from the results discussed.
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PR
OSPECTUS SUMMARY
This
summary only highlights the more detailed information appearing elsewhere
in this prospectus or documents incorporated by reference in this
prospectus. It may not contain all of the information that is
important to you. You should carefully read the entire
prospectus and the documents incorporated by reference in this prospectus
before deciding whether to invest in our common stock. In this prospectus,
the words “TerreStar Corporation,” the “Company,” “we,” “our” and “us”
refer to TerreStar Corporation and its subsidiaries, unless the context
otherwise requires. “TerreStar” refers to “TerreStar Networks, Inc.” and
its subsidiaries.
Company
Overview
We
were incorporated in 1988 under the laws of the State of Delaware. We are
in the integrated satellite wireless communications business through our
ownership of TerreStar, our principal operating entity, and TerreStar
Global. We changed our name from Motient Corporation to TerreStar
Corporation in 2007.
Our
primary business is TerreStar, a Reston, Virginia based future provider of
advanced mobile satellite services, or MSS, for the North American market.
Previously, we operated a two-way terrestrial wireless data communications
service. On September 14, 2006, we sold most of the assets and
liabilities relating to that business. Our historical financial statements
present this terrestrial wireless business as a discontinued operation.
Pursuant to such presentation, our current period continuing operations
are reflected as a single operating unit.
As
of March 31, 2008, we had two wholly-owned subsidiaries, Motient
Venture Holdings Inc., and Motient Holdings Inc., an 88% interest in
TerreStar and an 86% interest in TerreStar Global. Additionally, we held
approximately 28% non-voting interest in SkyTerra, a mobile satellite
communications company. As of March 31, 2008, SkyTerra owned
approximately 11% of TerreStar
’
s common
stock.
Recent
Developments
On
June 10, 2008, the Company issued 30 million shares of Common Stock to
EchoStar in connection with the indirect acquisition by the Company of
certain 1.4 GHz spectrum licenses from EchoStar and issued 1.2 million
shares of the Junior Preferred to Harbinger in connection with the
acquisition by the Company of Harbinger’s option to acquire certain 1.4
GHz spectrum licenses and related intellectual property. In
connection therewith, the Company also exercised the Harbinger option to
acquire the spectrum licenses and related intellectual
property.
The
TerreStar-1 satellite main body has successfully completed its Thermal
Vacuum testing and High Power and Passive Intermodulation testing of the
flight model S Band feed array for its 2 GHz mobile satellite service
satellite. TerreStar-1 is now in the final demonstration phase,
followed by final assembly and performance testing.
The
TerreStar-1 S-Band reflector, which was in an advanced stage of
completion, recently sustained damage during manufacturing at Harris
Corporation, the reflector sub-contractor used by Loral. The
Harris Corporation has provided a commitment to complete and ship the
reflector to Loral for integration on the TerreStar-1 satellite by March
15, 2009. Based on this commitment, Loral informed the Company
that TerreStar-1 will be ready to ship to the launch provider,
Arianespace, in April 2009. As a result, the Company expects
launch of TerreStar-1 may be postponed from fourth quarter 2008 to second
quarter 2009. Arianespace has been made aware of the current
situation and is working with the Company to accommodate the new launch
schedule. The Company will seek approval from the Federal
Communications Commission (
“
FCC
”
) and
Industry Canada once the launch schedule is confirmed.
On
June 25, 2008, Sprint Nextel Corporation (“Sprint”) filed a lawsuit in the
United States District Court for the Eastern District of Virginia naming
TerreStar Networks Inc. as a defendant. New ICO Satellite
Services, G.P. was also named as a defendant (together, with TerreStar
Networks Inc., the “Defendants”). In this lawsuit, Sprint
contends that Defendants owe them reimbursement for certain spectrum
relocation costs Sprint has or will incur in connection with relocating
incumbent licensees from certain frequencies in the 2 GHz spectrum
band. Sprint seeks, among other things, enforcement of certain
Federal Communications Commission orders and reimbursement of not less
than $100 million from each Defendant. While we believe the
suit is without merit, an adverse ruling could adversely affect our
liquidity and financial condition.
Corporate
Information
We
are a Delaware corporation with our principal executive offices located at
12010 Sunset Hills Road, 9th Floor, Reston, Virginia 20190. Our
telephone number is (703) 483-7800. TerreStar’s principal executive
offices are also at this location. You may find all of our
public filings with the SEC in the “Investor Relations” section of our
website, www.terrestarcorp.com. Our website and the information
contained therein or connected thereto are not intended to be incorporated
into this Registration Statement on Form S-3.
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T
H
E OFFERING
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Common
stock offered by the selling stockholders
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132,591,433
shares
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Common
stock outstanding as of June 13, 2008
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121,095,783
shares
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Use
of proceeds
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All
of the net proceeds from the sale of the common stock covered by this
prospectus will go to the selling stockholders who offer and sell shares
of the common stock. We will not receive any proceeds from the
sale of the common stock offered by the selling
stockholders.
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NASDAQ
Global Market trading symbol
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TSTR
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R
ISK FACTORS
An
investment in our common stock involves risks. Any of the following risks, as
well as other risks and uncertainties, could harm our business and financial
results and cause the value of our securities to decline, which in turn could
cause investors to lose all or part of their investment in us. The risks below
are not the only ones we face. Additional risks not currently known to us, or
that we currently deem immaterial, also may impair our business.
Risks
Related to Our Significant Indebtedness
We
Have A Significant Amount Of Debt And May Incur Significant Additional Debt,
Including Secured Debt, In The Future, Which Could Adversely Affect Our
Financial Health And Our Ability To React To Changes In Our
Business.
We and
our subsidiaries have a significant amount of debt and may (subject to
applicable restrictions in our debt instruments) incur additional debt in the
future. Because of our significant indebtedness and adverse changes
in the capital markets, our ability to raise additional capital at reasonable
rates, or at all, is uncertain. If we need to raise additional
capital through the issuance of equity or find it necessary to engage in a
recapitalization or other similar transaction, our shareholders could suffer
significant dilution, including potential loss of the entire value of their
investment, and in the case of a recapitalization or other similar transaction,
our noteholders might not receive principal and interest payments to which they
are contractually entitled.
Our
significant amount of debt could have other important consequences. For
example, the debt will or could:
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require
us to dedicate a significant portion of our cash flow from operating
activities to make payments on our debt, reducing our funds available for
working capital, capital expenditures, and other general corporate
expenses;
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limit
our flexibility in planning for, or reacting to, changes in our business,
the integrated satellite wireless communications industries, and the
economy at large;
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place
us at a disadvantage compared to our competitors that have proportionately
less debt;
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expose
us to increased interest expense to the extent we refinance existing debt
with higher cost debt;
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adversely
affect our relationship with customers and
suppliers;
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limit
our ability to borrow additional funds in the future, due to applicable
financial and restrictive covenants in our
debt;
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make
it more difficult for us to satisfy our obligations to the holders of our
notes and to satisfy our obligations to the lenders under our credit
facilities; and
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limit
future increases in the value, or cause a decline in the value of our
equity, which could limit our ability to raise additional capital by
issuing equity.
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A default
by us under one of our debt obligations could result in the acceleration of
those obligations, which in turn could trigger cross defaults under other
agreements governing our long-term indebtedness. Any default under
the $100 million Purchase Money Credit Agreement, or credit agreement, or the
indentures governing $150 million of exchangeable notes, or exchangeable notes,
and $50 million of TerreStar notes, or TerreStar notes, could adversely affect
our growth, our financial condition, our results of operations, the value of our
equity and our ability to make payments on our debt, and could force us to seek
the protection of the bankruptcy laws. We may incur significant
additional debt in the future. If current debt amounts increase, the
related risks that we now face will intensify.
The
Agreements And Instruments Governing Our Debt Contain Restrictions And
Limitations That Could Significantly Affect Our Ability To Operate Our Business,
As Well As Significantly Affect Our Liquidity, And Adversely Affect You, As A
Shareholder.
Our
credit facility and the indentures governing our and our subsidiaries' debt
contain a number of significant covenants that could adversely affect our
ability to operate our business, as well as significantly affect our liquidity,
and therefore could adversely affect our results of operations. These
covenants restrict, among other things, our ability to:
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repurchase
or redeem equity interests and
debt;
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make
certain investments or
acquisitions;
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pay
dividends or make other
distributions;
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dispose
of assets or merge;
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enter
into related party transactions;
and
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grant
liens and pledge assets.
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The
breach of any covenants or obligations in our notes or credit facility, not
otherwise waived or amended, could result in a default under the applicable debt
obligations and could trigger acceleration of those obligations, which in turn
could trigger cross defaults under other agreements governing our long-term
indebtedness. Any default under the credit facility or the
indentures governing our exchangeable notes and TerreStar notes could adversely
affect our growth, our financial condition, our results of operations and our
ability to make payments on our exchangeable notes, TerreStar notes or
credit facility, and could force us to seek the protection of the bankruptcy
laws.
Our
And TerreStar’s Outstanding Debt Is Subject To Change Of Control Provisions. We
May Not Have The Ability To Raise The Funds Necessary To Fulfill Our Obligations
Under Our Indebtedness Following A Change Of Control, Which Would Place Us In
Default Under The Exchangeable Notes and TerreStar Notes.
We may
not have the ability to raise the funds necessary to fulfill our obligations
under our exchangeable notes and TerreStar notes following a change of control.
Under the indentures governing our exchangeable notes and TerreStar notes, upon
the occurrence of specified change of control events, TerreStar is required to
offer to repurchase all of the outstanding exchangeable notes or TerreStar
notes. However, we and TerreStar may not have sufficient funds at the time of
the change of control event to make the required repurchase of notes. Our
failure to make or complete a change of control offer would place TerreStar in
default under its exchangeable notes and TerreStar notes and would have a
material adverse impact on our financial condition.
Risks
Related to our Business
TerreStar
Is A Development Stage Company With No Operating Revenues.
TerreStar
is a development stage company and has never generated any revenues from
operations. We sold our two-way terrestrial wireless and data communications
service in September 2006. We do not expect to generate significant
revenues prior to 2009, if at all. If we obtain sufficient financing and
successfully develop and construct TerreStar’s network, our ability to
transition to an operating company will depend on, among other things:
successful execution of our business plan; market acceptance of the services we
intend to offer; and attracting, training and motivating highly skilled
satellite and network operations personnel, a sales force and customer service
personnel. We may not be able to successfully complete the transition to an
operating company or generate sufficient cash from operations to cover our
expenses. If we do not become profitable, we will have difficulty obtaining
funds to continue our operations.
We
Are Not Cash Flow Positive, And We Will Need Additional Liquidity To Fund Our
Operations And Fully Fund All Of Our Necessary Capital
Expenditures.
We do not
generate sufficient cash from operations to cover our operating expenses, and it
is unclear when, or if, we will be able to do so. Even if we begin to generate
cash in excess of our operating expenses, we expect to require additional funds
to meet capital expenditures and other non-operating cash expenses, including
but not limited to capital expenditures required to complete and launch our
satellite currently under construction. We currently anticipate that our funding
requirements for the 2008 should be met through a combination of various
sources, including cash on hand.
There can
be no assurance that the foregoing sources of liquidity will provide sufficient
funds in the amounts or at the time that funding is required. In
addition, if our ability to realize such liquidity from any such source is
delayed or the proceeds from any such source are insufficient to meet our
expenditure requirements as they arise, we will seek additional equity or debt
financing, although such additional financing may not be available on reasonable
terms, if at all.
We
Will Continue To Incur Significant Losses.
We will
incur losses in 2008 and do not expect to generate any revenues until at least
2009, if at all. If we do not become profitable, we could have
difficulty obtaining funds to continue our operations. We have incurred net
losses every year since we began operations. These losses are due to the costs
of developing and building our network and the costs of developing, selling and
providing products and services.
TerreStar
will Require Significant Funding to Finance the Execution of its Business
Strategy, Including Funds for the Construction and Launch of our Satellites and
for our Terrestrial Network Buildout.
As of
March 31, 2008, we had aggregate contractual payment obligations of
approximately $2.4 billion, consisting of $285 million for satellite
expenditures, $19 million for lease related expenditures and $436 million for
terrestrial network related expenditures, as well as $1.7 billion for debt
obligations including interest.
We expect
to make substantial capital expenditures for the development of our universal
chipset and handsets in 2008, and for building out our terrestrial network in
2009 and beyond. We will also require funds for selling, general and
administrative expenses, working capital, interest on borrowings, financing
costs and operating expenses until some time after the commencement of
commercial operations. In addition, the final payments for our satellite launch
and insurance, totaling approximately $40 to $50 million are expected to be
due in 2008. These payments are required in order for us to launch our
TerreStar-1 satellite.
The cost
of building and deploying our integrated satellite and terrestrial network and
developing the universal chipset could exceed our estimates. For example, the
costs for the build out of the terrestrial component of our network could be
greater, perhaps significantly, than our current estimates due to changing costs
of supplies, market conditions and other factors over which we have no control.
The rate at which we build out the terrestrial component of our network will
also depend on customer requirements.
If we
require more funding than we currently anticipate, or we cannot meet our
financing needs, our ability to operate our business, our financial condition
and our results of operation could be adversely affected.
We
May Not Obtain The Financing Needed To Develop And Construct Our Network And
Meet Our Funding Obligations.
We expect
to require substantial funds to finance the execution of our business strategy.
In addition, subject to certain conditions and so long as the provision of such
funding does not conflict with applicable Canadian regulatory requirements,
TerreStar will be obligated to fund any operating cash shortfalls of TerreStar
Canada upon the request of TerreStar Canada. If we are required to provide such
funds to TerreStar Canada, we will need to reallocate existing, or raise
additional, funds. We plan to seek to raise funds in the future through various
means, including by selling debt and equity securities, by obtaining loans or
other credit lines, through vendor financing or through strategic relationships.
The type, timing and terms of financing we may select will depend upon our cash
needs, the availability of alternatives, our success in securing significant
customers for our network, the prevailing conditions in the financial markets
and the restrictions contained in any of our outstanding debt and any future
indebtedness. In addition, our ability to attract funding is based in part on
the value ascribed to our spectrum. Valuations of spectrum in other frequency
bands have historically been volatile, and we cannot predict at what amount a
future source of funding may be willing to value our spectrum and other assets.
The FCC and/or Industry Canada could allocate additional spectrum, through
auction, lease or other means, that could be used to compete with us, or that
could decrease the perceived market value of our wireless capacity. The FCC and
Industry Canada may take other action to promote the availability or more
flexible use of existing satellite or terrestrial spectrum allocations. The
acquisition by our competitors of rights to use additional spectrum could have a
material adverse effect on the value of our spectrum authorizations, which, in
turn, could adversely affect our ability to obtain necessary financing. We may
not be able to obtain financing when needed, on favorable terms or at all. If we
fail to obtain any necessary financing on a timely basis, then any of the
following could occur:
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construction
and launch of our satellites, or other events necessary to conduct our
business could be materially delayed, or the associated costs could
materially increase;
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we
could default on our commitments under our satellite construction
agreements or our launch agreement, or to creditors or third parties,
leading to the termination of such agreements;
and
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we
may not be able to deploy our network as planned, and may have to
discontinue operations or seek a purchaser for our business or
assets.
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Any of
these factors could cause us to miss required performance milestones under our
FCC authorization or Industry Canada approval in principle and could result in
our loss of those authorizations. See “—Regulatory Risks.”
If we are
successful in raising additional financing, we anticipate that a significant
portion of future financing will consist of debt securities. As a result, we
will likely become even more highly leveraged. If additional funds are raised
through the incurrence of indebtedness, we may incur significant interest
charges, and we will become subject to additional restrictions and covenants
that could further limit our ability to respond to market conditions, provide
for unanticipated capital investments or take advantage of business
opportunities.
Funding
Requirements For TerreStar May Jeopardize Our Investment In, And Control Over,
TerreStar.
The
implementation of TerreStar’s business plan, including the construction and
launch of a satellite system and the necessary terrestrial components of an
ancillary terrestrial component, or ATC, based communications system, will
require significant additional funding. If we do not provide such funding to
TerreStar, then TerreStar may be forced to seek funding from third parties that
may dilute our equity investment in TerreStar. Such dilution, if sufficiently
severe, may limit our control over TerreStar.
Our
Business Is Subject To A High Degree Of Government Regulation.
The
communications industry is highly regulated by governmental entities and
regulatory authorities, including the FCC and Industry Canada. Our business is
completely dependent upon obtaining and maintaining regulatory authorizations to
operate our planned integrated satellite and terrestrial network. For example,
we could fail to obtain approval from the FCC of our September 2007 application
for ATC authority in the United States. Failure to obtain or maintain necessary
governmental approvals would impair our ability to implement our planned network
and would have a material adverse effect on our financial condition. Additional
important risks relating to our regulatory framework are listed below under
“—Regulatory Risks.”
Our
Network Will Depend On The Development And Integration Of Complex And Untested
Technologies.
We must
integrate a number of sophisticated satellite, terrestrial and wireless
technologies that typically have not been integrated in the past, and some of
which are not yet fully developed, before we can offer our planned
network. The technologies we must integrate include, but are not
limited to:
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satellites
that have significantly larger antennas and are substantially more
powerful than any satellites currently in
use;
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use
of dynamic spot-beam technology to allocate signal strength among
different geographic areas, including the ability to concentrate signal
strength in specific geographic
locations;
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development
of universal chipset™ architecture that is capable of being deployed into
a wide range of mobile devices;
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development
of chipsets for mobile handsets and other devices that are capable of
receiving satellite and ground-based
signals;
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development
of integrated satellite and terrestrial-capable mobile handsets with
attractive performance, functionality and price;
and
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development
of ground infrastructure hardware and software capable of supporting our
communication system and the demands of our
customers.
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As a
result, unanticipated technological problems or delays relating to the
development and use of our technology may prove difficult, time consuming,
expensive or impossible to solve. Any of these may result in delays in
implementing, or make inoperable, our infrastructure and would adversely affect
our financial condition.
Our
Success Will Depend On Market Acceptance Of New And Unproven Technology, Which
May Never Occur.
Other
than satellite radio, we are not aware of any integrated satellite and
terrestrial wireless network in commercial operation. As a result, our proposed
market is new and untested and we cannot predict with certainty the potential
demand for the services we plan to offer or the extent to which we will meet
that demand. There may not be sufficient demand in general for the services we
plan to offer, or in particular geographic markets, for particular types of
services or during particular time periods, to enable us to generate positive
cash flow, and our cost structure may not permit us to meet our obligations.
Among other things, end user acceptance of our network and services will depend
upon:
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our
ability to provide integrated wireless services that meet market
demand;
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our
ability to provide attractive service offerings to our anticipated
customers;
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the
cost and availability of handsets and other user equipment that are
similar in size, weight and cost to existing standard wireless devices,
but incorporate the new technology required to operate on our planned
network;
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federal,
state, provincial, local and international regulations affecting the
operation of satellite networks and wireless
systems;
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the
effectiveness of our competitors in developing and offering new or
alternative technologies;
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the
price of our planned service offerings;
and
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general
and local economic conditions.
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We cannot
successfully implement our business plan if we cannot gain market acceptance for
our planned products and services. A lack of demand could adversely affect our
ability to sell our services, enter into strategic relationships or develop and
successfully market new services. In addition, demand patterns shift over time,
and user preferences may not favor the services we plan to offer. Any material
miscalculation with respect to our service offerings or operating strategy will
adversely affect our ability to operate our business, our financial condition
and our results of operations.
We
May Be Unable To Achieve Our Business And Financial Objectives Because The
Communications Industry Is Highly Competitive.
The
global communications industry is highly competitive and characterized by rapid
change. In seeking market acceptance for our network, we will encounter
competition in many forms, including:
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satellite
services from other operators;
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conventional
and emerging terrestrial wireless
services;
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traditional
wireline voice and high-speed data
offerings;
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terrestrial
land-mobile and fixed services; and
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next-generation
integrated services that may be offered in the future by other networks
operating in the S-band or the
L-band.
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Participants
in the communications industry include major domestic and international
companies, many of which have financial, technical, marketing, sales,
distribution and other resources substantially greater than we have and which
provide a wider range of services than we will provide. There currently are
several other satellite companies that provide or are planning to provide
services similar to ours. In addition to facing competition from our
satellite-based competitors, we are subject to competition from terrestrial
voice and data service providers in several markets and with respect to certain
services, particularly from those that are expanding into rural and remote areas
and providing the same general types of services and products that we intend to
provide. Land-based telecommunications service capabilities have been expanded
into underserved areas more quickly than we anticipated, which could result in
less demand for our services than we anticipated in formulating our business
plan. These ground-based communications companies may have certain advantages
over us because of the general perception among consumers that wireless voice
communication products and services are cheaper and more convenient than
satellite-based ones. Furthermore, we may also face competition from new
competitors or emerging technologies with which we may be unable to compete
effectively.
With many
companies targeting many of the same clients, if any of our competitors succeeds
in offering services that compete with ours before we do, or develops a network
that is, or that is perceived to be, superior to ours, then we may not be able
to execute our business plan, which would materially adversely affect our
business, financial condition and results of operations.
Our
system may not function as intended, and we will not know whether it will
function as intended until we have deployed a substantial portion of our
network. Hardware or software errors in space or on the ground may limit or
delay our service, and therefore reduce anticipated revenues and the viability
of our services. There could also be delays in the planned development,
integration and operation of the components of our network. The strength of the
signal from our satellite could cause ground-based interference or other
unintended effects. If the technological integration of our network is not
completed in a timely and effective manner, our business will be
harmed.
Our
Satellites Are Subject To Construction, Delivery And Launch Delays.
We depend
on third parties, such as Loral and Arianespace, to build and launch our
satellites. The assembly of such satellites is technically complex and subject
to construction and delivery delays that could result from a variety of causes,
including the failure of third-party vendors to perform as anticipated and
changes in the technical specifications of the satellites. Delivery of our
satellites may not be timely, which could adversely affect our ability to meet
our FCC and Industry Canada-required construction and launch milestones and the
planned introduction of our network.
In 2005,
Loral commenced construction of TerreStar-1, which was originally scheduled to
be launched in November 2007. In May 2007, we were notified that Loral revised
its expected delivery date of TerreStar-1 from November 2007 to August 2008,
causing us to delay our expected launch of TerreStar-1 to September 2008. In
February 2008, we were notified that Loral had further revised its expected
delivery date of TerreStar-1, pending final testing in April 2008, from August
2008 to November 2008. In June
2008
,
we were notified that Loral
had further revised its expected delivery date of TerreStar-1 from November 2008
to April 2009. Arianespace has been made aware of these delays and is
working with us to accommodate a new launch schedule. Our remaining
FCC milestones require that we launch TerreStar-1 in September 2008 and certify
our network operational in November 2008 and our remaining Industry Canada
milestone requires that we successfully place the satellite into its assigned
orbital position by November 2008. We will seek new milestone dates
from the FCC and Industry Canada when the launch
schedule of TerreStar-1
is confirmed. There can be no assurance that any such requests would
be granted.
During
any period of delay in construction, delivery or launch of our satellite, we
would continue to have significant cash requirements that could materially
increase the aggregate amount of funding we need. We may not be able to obtain
additional financing on favorable terms, or at all, during periods of delay.
Delays could also make it more difficult for us to secure customers and could
force us to reschedule our anticipated satellite launch dates.
In
November 2006, we signed a contract with Arianespace which entitles us to a
launch for TerreStar-1 that will meet our FCC and Industry Canada milestones and
also mitigates possible impacts from delays. Due to delays
we will not be ready to launch TerreStar-1 within our extended launch
window of December 2008 to February 2009. We are seeking a new launch
window and launch slot, however, these may not be available within the time
period required to meet the relevant milestones as extended.
Our
Satellites Could Be Damaged Or Destroyed During Launch Or Deployment Or Could
Fail To Achieve Their Designated Orbital Location.
Our
satellite launches and deployments may not be successful. A percentage of
satellites never become operational because of launch failures, satellite
destruction or damage during launch or improper orbital placement, among other
factors. Launch failure rates vary depending on the chosen launch vehicle and
contractor. Even launch vehicles with good track records experience some launch
failures, and these vehicles may experience launch failures when launching our
satellites despite their track records. Even if successfully launched into
orbit, a satellite may use more fuel than planned to enter into its orbital
location, which could reduce the overall useful life of the satellite, or
may never enter or remain in its designated orbital location, which could render
it inoperable. Deployment and use of the antennas on our satellites are subject
to additional risks because our antennas will be larger than those currently on
most commercial satellites. If one or more of the launches or deployments fail,
we will suffer significant delays that will damage our business, cause us to
incur significant additional costs and adversely affect our ability to generate
revenues.
Satellites
Have A Limited Useful Life And Premature Failure Of Our Satellites Could Damage
Our Business.
During
and after their launch, all satellites are subject to equipment failures,
malfunctions (which are commonly referred to as anomalies) and other problems. A
number of factors could decrease the expected useful lives or the utility of our
satellites, including:
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defects
in construction;
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radiation
induced failure of satellite parts;
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faster
than expected degradation of solar
panels;
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malfunction
of component parts;
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higher
than anticipated use of fuel to maintain the satellite’s orbital
location;
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higher
than anticipated use of fuel during orbit raising following
launch;
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random
failure of satellite components not protected by back-up
units;
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inability
to control the positioning of the
satellite;
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electromagnetic
storms, solar and other astronomical events, including solar radiation and
flares; and
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collisions
with other objects in space, including meteors and decommissioned
spacecraft in uncontrolled orbits that pass through the geostationary belt
at various points.
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We may
experience failures, anomalies and other problems, whether of the types
described above or arising from the failure of other systems or components,
despite extensive precautionary measures taken to determine and eliminate the
cause of anomalies in our satellites and provide redundancy for many critical
components in our satellites. The interruption of our business caused by the
loss or premature degradation of a satellite would continue until we either
extended service to end users on another satellite or built and launched
additional satellites. If any of our satellites were to malfunction or to fail
prematurely, it could affect the quality of our service, substantially delay the
commencement or interrupt the continuation of our service, harm our reputation,
cause our insurance costs to increase and adversely affect our business and our
financial condition.
Damage
To, Or Caused By, Our Satellites May Not Be Fully Covered By
Insurance.
We expect
to purchase launch and in-orbit insurance policies for our satellite. The price,
terms and availability of insurance can fluctuate significantly due to various
factors, including satellite failures and general market conditions. If certain
material adverse changes in market conditions for in-orbit insurance were to
make it commercially unreasonable for us to maintain in-orbit insurance, we may
forego such insurance. Other adverse changes in insurance market conditions may
substantially increase the premiums we will have to pay for insurance or may
preclude us from fully insuring our loss. If the launch of our satellite is a
total or partial failure, or our satellite is damaged in orbit, our insurance
may not fully cover our losses and these failures may also cause insurers to
include additional exclusions in our insurance policies when they come up for
renewal. We may not be able to obtain additional financing to construct, launch
and insure a replacement satellite or such financing may not be available on
terms favorable to us. Also, any insurance we obtain will likely contain certain
customary exclusions and material change conditions that would limit our
coverage. These exclusions typically relate to losses resulting from acts of
war, insurrection or military action and government confiscation, as well as
lasers, directed energy beams, nuclear and anti-satellite devices and
radioactive contamination. Any uninsured losses could have a material adverse
effect on us.
We do not
expect to buy insurance to cover, and would not have protection against,
business interruption, loss of business or similar losses. Furthermore, we
expect to maintain third-party liability insurance. Such insurance may not be
adequate or available to cover all third-party damages that may be caused by our
satellites, and we may not be able to obtain or renew our third-party liability
insurance on reasonable terms and conditions, or at all.
We
Will Depend On A Limited Number Of Suppliers And Service Providers To Design,
Construct And Maintain Our Network.
We will
rely on contracts with third parties to design and build our satellites, as well
as the terrestrial components of our network. These include the integrated MSS
and ATC systems, technology for communications between the satellite and
terrestrial equipment, and the development of small, integrated MSS/ATC handsets
and other devices utilizing our universal chipset
™
architecture that will meet FCC and Industry Canada requirements, none of which
exists today. We also intend to enter into relationships with third-party
contractors in the future for equipment and maintenance and other services
relating to our network. There are only a few companies capable of supplying the
products and services necessary to implement and maintain our network. As a
result, if any third-party contractor relationship with us is terminated, we may
not be able to find a replacement in a timely manner or on terms satisfactory to
us. This could lead to delays in implementing our network and interruptions in
providing service to our customers, which would adversely affect our financial
condition. In addition, the development and rollout of the terrestrial component
of our network by these third parties may also be subject to unforeseen delays,
cost overruns, regulatory changes, engineering and technological changes and
other factors, some of which may be outside of our control.
Delays
In Initial And Ongoing Deployment Of The Terrestrial Component Of Our Network
Due To Limited Tower Availability, Local Zoning Approvals Or Adequate
Telecommunications Transport Capacity Would Delay And Reduce Our
Revenues.
Our
business strategy includes the initial deployment of the terrestrial component
of our network in several targeted markets, with subsequent expansion based upon
customer requirements. Tower sites or leases of space on tower sites and
authorizations in some desirable areas may be costly and time-consuming to
obtain. If we are unable to obtain tower space, local zoning approvals or
adequate telecommunications transport capacity to develop our network in a
timely fashion, the launch of our network will be delayed, our revenues will be
delayed and less than expected. As a result, our business will be adversely
affected.
The
Planned Terrestrial Component Of Our Network Or Other Ground Facilities Could Be
Damaged By Natural Catastrophes Or Man-Made Disasters.
Since the
terrestrial component of our planned network will be attached to buildings,
towers and other structures, an earthquake, tornado, flood or other catastrophic
event, a man-made disaster or vandalism could damage our network, interrupt our
service and harm our business in the affected area. Temporary disruptions could
damage our reputation and the demand for our services and adversely affect our
financial condition.
Failure
To Develop, Manufacture And Supply Handsets And Other Devices That Incorporate
Our Universal Chipset Architecture In A Timely Manner, Or At All, Will Delay Or
Materially Reduce Our Revenues.
We will
rely on third-party manufacturers and their distributors to manufacture and
distribute devices incorporating our universal chipset architecture. Such
devices will have the same form, function and aesthetics as a standard wireless
device, and will be able to communicate with both the terrestrial and satellite
components of our planned network without requiring external hardware. These
devices are not yet available, and we and third-party vendors may be unable to
develop and produce them in a timely manner, or at all, to permit the
introduction of our service. If we, our vendors or our manufacturers fail to
develop, manufacture and supply devices incorporating our universal chipset
architecture for timely commercial sale at affordable prices, the launch of
our service will be delayed, our revenues will be adversely affected and our
business will suffer.
We
May Rely On Third Parties To Identify, Develop And Market Products Using Our
Network.
We intend
to enter into agreements with third parties to identify, develop and market
products using our network. We may be unable to identify, or to enter into
agreements with, suitable third parties to perform these activities. If we do
not form satisfactory relationships with third parties, or if any such third
parties do not successfully carry out their contractual duties or meet expected
deadlines, we may not be able to successfully identify, develop and sell
products using our network, which would adversely affect our financial condition
and results of operations.
We
May Not Be Able To Identify, Develop And Market Innovative Products And
Therefore We May Not Be Able To Compete Effectively.
Our
ability to implement our business plan depends in part on our ability to gauge
the direction of commercial and technological progress in key markets and to
fund and successfully develop and market products in our targeted markets. Our
competitors may have access to technologies not available to us, which may
enable them to provide communications services of greater interest to end users,
or at a more competitive price. We may not be able to develop new products or
technology, either alone or with third parties, or license any additional
necessary intellectual property rights from third parties on a commercially
competitive basis. The satellite and wireless industries are both characterized
by rapid technological change, frequent new product innovations, changes in
customer requirements and expectations and evolving industry standards. If we
are unable to keep pace with these changes, our business may be unsuccessful.
Products using new technologies, or emerging industry standards, could make our
technologies obsolete. If we fail to keep pace with the evolving technological
innovations in our markets on a competitive basis, our financial condition and
results of operation could be adversely affected. In particular, if existing
wireless providers improve their coverage of terrestrial-based systems to make
them more ubiquitous, demand for products and services utilizing our network
could be adversely affected or fail to materialize.
We
Plan To Execute Our Initial Development Through A Relationship With An Anchor
Tenant, And The Failure To Establish, Or Impairment Of, This Relationship Could
Have Severe Consequences On Our Business.
Our
objective is to form an anchor tenant relationship with a customer, such as a
U.S. federal government organization, a state or local public safety/first
responder organization or a significant commercial enterprise. Any significant
disruption or deterioration of our relationship with our anchor tenant could
adversely affect our business. Because we expect to derive a significant portion
of our revenue from a limited number of customers, the failure to attract an
anchor tenant or the loss of such an anchor tenant could significantly reduce
our ability to generate revenue or profit and negatively impact our financial
condition and operations.
We
May Depend On The U.S. Government For A Significant Portion Of Our Revenues, And
The Impairment Of This Relationship Or Changes In Government Spending Could Have
Severe Consequences On Our Business.
Our
objective is to form an anchor tenant relationship with a customer, potentially
a U.S. federal government organization such as the Department of Defense, the
Federal Emergency Management Agency or the Department of Homeland Security.
Future sales under U.S. government contracts are conditioned upon the
availability of Congressional appropriations. The strength of our relationship
with any federal government organization is subject to the overall U.S.
government budget and appropriation decisions and processes. U.S. government
budget decisions, including defense and emergency response spending, are based
on changing government priorities and objectives, which are driven by numerous
factors, including geopolitical events and macroeconomic conditions, and are
beyond our control. Significant changes to U.S. defense and emergency response
spending could have long-term consequences for our size and structure,
and could negatively impact our results of operations and financial
condition.
An
Economic Downturn In The United States Or Canada Or Changes In Consumer Spending
Could Adversely Affect Our Financial Condition.
In the
event that the United States or Canada experiences an economic downturn and
spending by consumers drops, our business may be adversely affected. Demand for
the services we plan to offer may not grow or be accepted generally, or in
particular geographic markets, for particular types of services, or during
particular time periods. A lack of demand could adversely affect our ability to
sell our services, enter into strategic relationships or develop and
successfully market new services.
We
Depend On Licenses Of Critical Intellectual Property From ATC Technologies, A
Wholly-Owned Subsidiary Of MSV.
We
license the majority of the technology we plan to use to operate our network
from ATC Technologies, a wholly-owned subsidiary of Mobile Satellite Ventures
LP, or MSV. MSV has rights to approximately 30 MHz of spectrum in the L-band, is
positioned to achieve device transparency and plans to offer services that
compete with the services that we plan to offer.
MSV has
assigned to ATC Technologies a significant intellectual property portfolio,
including a significant number of patents. Pursuant to the agreement by and
between ATC Technologies and us, ATC Technologies granted us a perpetual,
world-wide, non-exclusive, royalty-free, fully paid up, nontransferable (except
for certain rights to sublicense), non-assignable, limited purpose right and
license to certain existing patents owned by ATC Technologies for the sole
purpose of developing, operating, implementing, providing and maintaining S-band
or MSS services with an ATC component. ATC Technologies granted back to
MSV similar rights to the same intellectual property for L-band services in any
geographic territory in the entire world where MSV, one of its affiliates or a
joint venture or strategic alliance into which MSV has entered, is authorized to
provide L-band services. In addition, ATC Technologies granted rights to MSV
International, LLC, or MSVI, a subsidiary of MSV, in and to the same
intellectual property for the purpose of providing communications services
anywhere in the entire world, excluding services relating to the S-band. We
granted to ATC Technologies a perpetual, world-wide, non-exclusive,
royalty-free, fully paid up, nontransferable (except for certain rights to
sublicense), non-assignable, limited purpose right and license to certain
existing patents owned or licensed by us and certain technologies licensed by us
for the sole purpose of developing, operating, implementing, providing and
maintaining L-band services or L-band services with an ATC component. ATC
Technologies has also contractually committed to license to us, pursuant to the
same terms as set forth above, certain additional patents that may be developed,
acquired or otherwise owned by ATC Technologies or its affiliates (including MSV
and MSVI), and we have contractually committed to license to ATC Technologies,
pursuant to the same terms as set forth above, certain additional patents and
technologies that may be developed, licensed, acquired or otherwise owned by us
until October 1, 2016.
The
license agreement between us and ATC Technologies may be terminated: (1) by
mutual written consent of both parties; (2) by either party in the event
that the other party fails to perform or otherwise breaches any material
obligations under the license agreement and fails to cure such breach within 90
days of receiving notice thereof; or (3) in the event that the other party
files a petition for bankruptcy or insolvency or upon certain other insolvency
events. In the event that our license agreement with ATC Technologies is
terminated, we may not be able to obtain future licenses for alternative
technologies on terms as favorable to us as those obtained through the license
agreement with ATC Technologies, if at all. However, even in the event that our
license agreement with ATC Technologies is terminated, we will retain our
perpetual license to all ATC Technologies intellectual property licensed to us
on a license-by-license basis, until the date of the expiration of the
applicable patent under which the license was granted. If ATC Technologies
terminates or breaches its agreements with us or if we and ATC Technologies have
a significant dispute regarding the licensed intellectual property, such
termination, breach or significant dispute could have a material adverse effect
on our business.
The
intellectual property we license from ATC Technologies includes issued patents
and technology included in patent applications. The patents for which we or ATC
Technologies have applied may not be issued or, if they are issued, such patents
may be insufficient to protect fully the technology we own or license. Moreover,
if such patents prove to be inadequate to protect fully the technology we own or
license, our ability to implement our business plan and, consequently, our
financial condition, may be adversely affected. In addition, any patents that
may be issued to us and any patents licensed to us from ATC Technologies may be
challenged, invalidated or circumvented.
We also
rely upon unpatented proprietary technology and other trade secrets. Our failure
to protect such proprietary technology and trade secrets or the lack of
enforceability or breach by third parties of agreements into which we have
entered could also adversely affect our ability to implement our business plan
and our financial condition.
We
May Incur Costs, And May Not Be Successful, Defending Our Rights To Intellectual
Property Upon Which We Depend.
In
developing and implementing our network, we will need to develop or obtain
rights to additional technology that is not currently owned by us or licensed to
us. We may be unsuccessful in developing additional technologies required to
develop and implement our network, and we may not be able to protect
intellectual property associated with technologies we develop from infringement
by third parties. In addition, if we are able to develop or license such
technologies, there can be no assurance that any patents issued or licensed to
us will not be challenged, invalidated or circumvented. Litigation to defend and
enforce these intellectual property rights could result in substantial costs and
diversion of resources and could have a material adverse effect on our financial
condition and results of operations, regardless of the final outcome of such
litigation. Despite our efforts to safeguard and maintain our proprietary
rights, we may not be successful in doing so, and our competitors may
independently develop or patent technologies equivalent or superior to our
technologies. It is possible that third parties may infringe upon our
intellectual property now and in the future.
We may be
unable to determine when third parties are using our intellectual property
rights without our authorization. The undetected or unremedied use of our
intellectual property rights or the legitimate development or acquisition of
intellectual property similar to ours by third parties could reduce or eliminate
any competitive advantage we have as a result of our intellectual property,
adversely affecting our financial condition and results of operations. If we
must take legal action to protect, defend or enforce our intellectual
property rights, any suits or proceedings could result in significant costs and
diversion of our resources and our management’s attention, and we may not
prevail in any such suits or proceedings. A failure to protect, defend or
enforce our intellectual property rights could have an adverse effect on our
business, financial condition and results of operations.
Third
Parties May Claim That Our Products Or Services Infringe Their Intellectual
Property Rights.
Other
parties may have patents or pending patent applications relating to integrated
wireless technology that may later mature into patents. Such parties may bring
suit against us for patent infringement or other violations of intellectual
property rights. The development and operation of our system may also infringe
or otherwise violate as-yet unidentified intellectual property rights of others.
If our products or services are found to infringe or otherwise violate the
intellectual property rights of others, we may need to obtain licenses from
those parties or substantially re-engineer our products or processes in order to
avoid infringement. We may not be able to obtain the necessary licenses on
commercially reasonable terms, if at all, or be able to re-engineer our products
successfully. Moreover, if we are found by a court of law to infringe or
otherwise violate the intellectual property rights of others, we could be
required to pay substantial damages or be enjoined from making, using or selling
the infringing products or technology. We also could be enjoined from making,
using or selling the allegedly infringing products or technology, pending the
final outcome of the suit. Our financial condition could be adversely affected
if we are required to pay damages or are enjoined from using critical
technology.
Wireless
Devices May, Or May Be Perceived To, Pose Health And Safety Risks And, As A
Result, We May Be Subject To New Regulations, Demand For Our Services May
Decrease And We Could Face Liability Or Reputational Harm Based On Alleged
Health Risks.
There has
been adverse publicity concerning alleged health risks associated with radio
frequency transmissions from portable hand-held telephones that have
transmitting antennae, similar to devices that may incorporate our universal
chipset
™
architecture. Lawsuits have been filed against participants in the wireless
industry alleging various adverse health consequences, including cancer, as a
result of wireless phone usage. If courts or governmental agencies find that
there is valid scientific evidence that the use of portable hand-held devices
poses a health risk, or if consumers’ health concerns over radio frequency
emissions increase for any reason, use of wireless handsets may decline.
Further, government authorities might increase regulation of wireless handsets
as a result of these health concerns. The actual or perceived risk of radio
frequency emissions could have an adverse effect on our business, financial
condition and results of operations.
We
May Be Negatively Affected By Industry Consolidation.
Consolidation
in the communications industry could adversely affect us by increasing the scale
or scope of our competitors, or creating a competitor that is capable of
providing services similar to those we intend to offer, thereby making it more
difficult for us to compete. Industry consolidation also may impede our ability
to identify acquisition, joint venture or other strategic
opportunities.
Future
Acquisitions May Be Costly And Difficult To Integrate And May Divert And Dilute
Management Resources.
As part
of our business strategy, we may make acquisitions of, or investments in,
companies, products or technologies that we believe complement our services,
augment our market coverage or enhance our technical capabilities or that we
believe may otherwise offer growth opportunities. Acquisitions and mergers
involve a number of risks, including, but not limited to:
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the
time and costs associated with identifying and evaluating potential
acquisition or merger partners;
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difficulties
in assimilating operations of the acquired business and implementing
uniform standards, controls, procedures and
policies;
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unanticipated
expenses and working capital
requirements;
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the
inability to finance an acquisition on acceptable terms, or at all, and to
maintain adequate capital;
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diversion
of management’s attention from daily
operations;
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difficulty
achieving sufficient revenues and cost synergies to offset increased
expenses associated with acquisitions;
and
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risks
and expenses of entering new geographic
markets.
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Any of
these acquisition risks could result in unexpected losses or expenses and
thereby reduce the expected benefits of the acquisition. Our failure to
successfully integrate future acquisitions and manage our growth could adversely
affect our business, results of operations, financial condition and future
prospects.
We may
also pursue acquisitions, joint ventures or other strategic transactions. If we
do so, we may face costs and risks arising from any such transaction, including
integrating a new business into our business or managing a joint venture. These
may include legal, organizational, financial and other costs and
risks.
If
We Are Unable To Manage Our Growth, We May Not Be Able To Execute Our Business
Plan And Achieve Profitability.
In 2006,
TerreStar began to experience rapid growth, growing from four employees at
December 31, 2005 to 175 employees at December 31, 2007. In April 2008 we
announced the implementation of cost cutting measures including a headcount
reduction of 79 management and non-management positions across TerreStar.
We believe that these cost-cutting measures will allow us to continue our
operations under our current business plan and meet our capital requirements
into the second quarter of 2009. While we believe that the workforce
reductions will not impact our ability to execute our updated business plan, the
loss of employee and management resources from our cost-cutting measures may
impact our operations.
In
addition, in 2006, TerreStar completed the spin-off of its wholly-owned
subsidiary, TerreStar Global Ltd., or TerreStar Global. TerreStar Global intends
to offer an integrated satellite and terrestrial network outside of North
America. Some of our employees, including some of our executive officers,
perform services for TerreStar Global, which may reduce the time they can devote
to our business. Our failure to manage growth effectively could significantly
impede our ability to execute our business strategy and achieve
profitability.
We
Must Attract, Integrate And Retain Key Personnel.
Our
success depends, in large part, upon the continuing contributions of our key
technical and management personnel and integrating new personnel into our
business. Employment agreements with our employees are terminable at-will by the
employees, and we do not maintain “key-man” insurance on any of our employees.
In April 2008, we announced certain cost-cutting measures including a
significant headcount reduction. Although we believe we will be able to execute
our business plan with our current workforce, the loss of the services of a
significant number of our remaining key employees could harm our business and
our future prospects. Our future success will also depend on our ability to
attract and retain additional management and technical personnel required in
connection with the implementation of our business plan. In addition,
our recent cost-cutting measures may make it more difficult to attract and
retain personnel. Competition for such personnel is intense, and if
we fail to retain or attract such personnel and integrate those personnel who we
hire, our business could suffer. We have entered into arrangements with certain
of our officers that provide for payments upon a change of control, as defined
in those agreements.
We
Are Involved In Ongoing Litigation, Which Could Have A Negative Impact on
Us.
Certain
stockholders affiliated with one of our former directors have initiated multiple
lawsuits against us. In 2006, certain stockholders sought to install a slate of
directors to our board of directors, which was not successful. If these
efforts or similar efforts that might be made in the future are successful, they
may result in a change of control of TerreStar Corporation, or interfere with
our efforts to raise debt or equity capital which could adversely affect our
liquidity and financial condition.
On June
25, 2008, Sprint Nextel Corporation (“Sprint”) filed a lawsuit in the United
States District Court for the Eastern District of Virginia naming TerreStar
Networks Inc. as a defendant. New ICO Satellite Services, G.P. was
also named as a defendant (together, with TerreStar Networks Inc., the
“Defendants”). In this lawsuit, Sprint contends that Defendants owe
them reimbursement for certain spectrum relocation costs Sprint has or will
incur in connection with relocating incumbent licensees from certain frequencies
in the 2 GHz spectrum band. Sprint seeks, among other things,
enforcement of certain Federal Communications Commission orders and
reimbursement of not less than $100 million from each
Defendant. While we believe the suit is without merit, an adverse
ruling could adversely affect our liquidity and financial
condition.
We
May Have To Take Actions Which Are Disruptive To Our Business To Avoid
Registration Under The Investment Company Act Of 1940.
Under
certain circumstances we may have to take actions which are disruptive to our
business if we are deemed to be an investment company under the Investment
Company Act of 1940, as amended (the “Investment Company Act”). Our
equity investments, in particular our ownership interests in SkyTerra and MSV,
may constitute investment securities under the Investment Company Act. Under the
Investment Company Act, a company may be deemed to be an investment company if
it owns investment securities with a value exceeding 40% of its total assets
excluding cash items and government securities, subject to certain other
exclusions. Investment companies are required to register under and comply with
the Investment Company Act unless an exclusion or SEC safe harbor applies. If we
were to be deemed an investment company, we would become subject to the
requirements of the Investment Company Act. As a consequence, we would be
prohibited from engaging in business as we have in the past and might be subject
to civil and criminal penalties for noncompliance. In addition, certain of our
contracts might be voidable, and a court-appointed receiver could take control
of us and liquidate our business. In June 2006, one of our
stockholders filed a lawsuit against TerreStar Corporation, alleging, among
other things, that we are an investment company. In October 2006, the U.S.
Magistrate Judge heard arguments on TerreStar Corporation’s motions to dismiss
the case, and thereafter recommended that the U.S. District Court dismiss the
suit. The U.S. District Court adopted the Magistrate Judge’s recommendation and
has dismissed these claims with prejudice.
We
Do Not Expect To Pay Any Cash Dividends On Our Common Stock For The Foreseeable
Future.
We have
never paid cash dividends on our common stock and do not anticipate that any
cash dividends will be paid on the common stock for the foreseeable future. The
payment of any dividend by us will be at the discretion of our board of
directors and will depend on, among other things, our earnings, capital
requirements and financial condition. In addition, pursuant to the terms of the
Series A and Series B Preferred, no dividends may be declared or paid, and no
funds shall be set apart for payment, on shares of TerreStar Corporation common
stock, unless (i) written notice of such dividend is given to each holder of
shares of Series A and Series B Preferred not less than 15 days prior to the
record date for such dividend and (ii) a registration statement registering the
resale of shares of common stock issuable to the holders of the Series A and
Series B Preferred has been filed with the SEC and is effective on the date
TerreStar Corporation declares such dividend. Also, under Delaware law, a
corporation cannot declare or pay dividends on its capital stock unless it has
an available surplus. Furthermore, the terms of some of our financing
arrangements directly limit our ability to pay cash dividends on our common
stock. The terms of any future indebtedness of our subsidiaries also may
generally restrict the ability of some of our subsidiaries to distribute
earnings or make other payments to us.
Future
Sales Of Our Common Stock Could Adversely Affect Its Price And/Or Our Ability To
Raise Capital.
Sales of
substantial amounts of our common stock, or the perception that such sales could
occur, could adversely affect the prevailing market price of our common stock
and our ability to raise capital.
We may
issue additional common stock in future financing transactions or as incentive
compensation for our executives and other personnel, consultants and advisors.
Issuing any equity securities would be dilutive to the equity interests
represented by our then-outstanding shares of common stock. The market price for
our common stock could decrease as the market takes into account the dilutive
effect of any of these issuances. Finally, if we decide to file a registration
statement to raise additional capital, some of our existing stockholders hold
piggyback registration rights that, if exercised, will require us to include
their shares in certain registration statements. Any of these conditions could
adversely affect our ability to raise needed capital.
Funds
Affiliated With Harbinger Capital Partners Own A Significant Percentage Of Our
Voting Shares And Have A Significant Economic Interest In Several Of Our
Competitors.
As of
June 13, 2008, funds affiliated with Harbinger Capital Partners owned an
aggregate of 81 Million shares or 49.2% of our common stock, as reported on
their Schedule 13 D/A filed with the SEC. Accordingly, these funds
are able to significantly influence us through their ability to heavily
influence the outcome of election of our directors, amendments to our
certificate of incorporation and by-laws and other actions requiring the vote or
consent of stockholders. There is no assurance that the interest of Harbinger
will be aligned with those of our other investors, and Harbinger may make
decisions that adversely impact our stockholders. In addition to Harbinger’s
ownership interest in us, Harbinger also reports significant ownership interest
in SkyTerra and Inmarsat.
Failure
to Achieve and Maintain Effective Internal Control Over Financial Reporting in
Accordance With Rules of the Securities and Exchange Commission Promulgated
Under Section 404 of the Sarbanes-Oxley Act.
We
identified a material weakness in our internal control over financial reporting,
as described in Item 9A, Controls and Procedures of our annual report on Form
10-K for the fiscal year ended December 31, 2007. This weakness could harm our
business and operating results, and could result in adverse publicity and a loss
in investor confidence in the accuracy and completeness of our financial
reports, which in turn could have a material adverse effect on our stock price,
and, if such weakness is not properly remediated, could adversely affect our
ability to report our financial results on a timely and accurate
basis.
Although
we believe that we have taken steps to remediate this material weakness we
cannot assure you that this remediation will be successful or that additional
deficiencies or weaknesses in our controls and procedures will not be
identified.
Regulatory
Risks
We
Could Lose Our FCC Authorization And Industry Canada Approval In Principle And
Be Subject To Fines Or Other Penalties.
We must
meet significant construction and implementation milestones and comply with
complex and changing FCC and Industry Canada rules and regulations to maintain
our authorizations to use our assigned spectrum and orbital slot. The remaining
milestones in the United States are a successful satellite launch by us by
September 2008, and certification that the system is operational by
November 2008. The remaining milestone in Canada is successfully placing the
satellite into its assigned orbital position by November 2008. We
will seek new milestone dates from the FCC and Industry Canada once the launch
schedule for TerreStar-1 is confirmed. There can be no assurance that
any such requests would be granted. Once the system is operational, we will
be required to maintain satellite coverage of all 50 states, the District of
Columbia, Puerto Rico, the U.S. Virgin Islands and all regions of Canada that
are within the coverage contour described in our Industry Canada approval in
principle and, to the extent that we have been granted ATC authority, to provide
an integrated MSS service offering in all locations where our ATC is made
available. We may not meet these milestones, satisfy these service requirements
or comply with other applicable rules and regulations. Non-compliance with these
or other conditions, including other FCC or Industry Canada gating or ongoing
service criteria, could result in fines, additional conditions, revocation
of the authorizations, or other adverse FCC or Industry Canada actions. The loss
of our spectrum authorizations would prevent us from implementing our business
plan and have a material adverse effect on our financial condition and the
amount and value of the collateral pledged to support the TerreStar notes or
exchangeable notes.
If
We Fail To Secure Or Maintain Certain Approvals, We Will Default Under Our
Credit Agreement.
Our
credit agreement of February 5, 2008 with EchoStar and Harbinger contains
certain events of default that can be triggered upon our failure to secure or
maintain certain regulatory approvals, including the following (in each
case subject to certain exceptions):
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a
denial, revocation, cancellation or relinquishment of any material
license held by TerreStar, TerreStar Canada or a guarantor to operate
satellite component or ATC
facilities;
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TerreStar’s
failure to secure the FCC ATC authorization within six months following
TerreStar’s certification to the FCC that the TerreStar-1 satellite system
is operational and that it has satisfied the final FCC milestone
conditioning the FCC MSS S-Band Spectrum reservation held by
TerreStar;
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failure
to satisfy the FCC’s implementation milestone to launch the TerreStar−1
Satellite on or prior to September 30, 2008, the FCC’s implementation
milestone to certify that the satellite system is operational on or prior
to November 30, 2008, or Industry Canada’s implementation milestone to
place the TerreStar−1 Satellite into its assigned orbital position on or
prior to November 30, 2008, or failure to satisfy any extended deadline
issued by the applicable governmental authority of these implementation
milestones; and
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failure
to obtain shareholder approval of each of the EchoStar and Harbinger
spectrum contribution transactions on or prior to July 23,
2008.
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If any of
these events of default under our credit agreement occurs and is continuing, our
lenders can terminate their commitments and declare the amounts outstanding
under the credit agreement immediately due and payable. In addition,
the acceleration of our repayment obligation under the credit agreement would
constitute an event of default under cross-default provisions in the indenture
governing our exchangeable notes and the TerreStar notes, in each case
permitting the trustee or holders thereunder to accelerate the notes and declare
them immediately due and payable.
We
Have Not Yet Applied For, And May Not Receive, Certain Regulatory Approvals That
Are Necessary To Our Business Plan.
We may be
required to obtain additional approvals from national and local authorities in
connection with the services that we wish to provide in the
future. For example, we have applied for and have not yet been
granted authorization to provide ATC in the United States and have not been
granted waivers we requested from the FCC of certain ATC technical rules, which
would allow us to use commercially standard equipment in our ATC base
stations. TerreStar Canada has not yet made such an application with
Industry Canada. We cannot be granted ATC authorization until we can
show that we will comply in the near future with the FCC’s and Industry Canada’s
ATC gating criteria, which we may not be able to satisfy. Further,
the manufacturers of our ATC user terminals and base stations will need to
obtain FCC equipment certifications and similar certifications in
Canada. In addition, our future customers, or our business strategy,
may require us to launch additional satellites, including TerreStar-2, in
order to increase redundancy and decrease the risk of having only one satellite
in orbit. In order to do so, we must obtain regulatory approval for
one or more additional orbital slots, or permission from Industry Canada to
launch additional satellites into our orbital slot for TerreStar-1, and may need
a waiver of the FCC requirement for a ground spare satellite.
Either
Industry Canada or the FCC may refuse to grant these and other necessary
regulatory approvals in the future, or they may impose conditions on these
approvals that we are unable to satisfy. Failure to obtain or retain
any necessary regulatory approvals would impair our ability to execute our
business plan, and would materially adversely affect our financial
condition.
The
Industry Canada Approval In Principle To Construct And Operate A Satellite In A
Canadian Orbital Slot Is Held, And Upon The Launch Thereof Will Be Held, By A
Canadian Entity Over Which Neither We Nor TerreStar Exercises
Control.
The
Industry Canada approval in principle to construct and operate a 2 GHz MSS
S-band satellite in a Canadian orbital position is currently held by TerreStar
Canada, an entity that neither we, nor TerreStar control. Upon the launch
of TerreStar-1, we expect that TerreStar-1 will be transferred to TerreStar
Canada. Under the
Radiocommunication Act
(Canada) and the
Telecommunications Act
(Canada), and the regulations promulgated thereunder, TerreStar may only own a
20% voting equity interest in TerreStar Canada, along with a 33
1
/3%
voting equity interest in TerreStar Canada Holdings, which is TerreStar Canada’s
parent and 80% voting equity owner. 4371585 Canada Inc , a Canadian-owned
and controlled third party, owns a 66
2
/
3
% voting interest in TerreStar
Canada Holdings. The rules and regulations further provide that the business and
operations of TerreStar Canada cannot otherwise be controlled in fact by
non-Canadians.
Under the
relevant transfer agreements, 4371585 Canada Inc owns 66
2
/
3
% of the
shares of, and has the power to elect three out of the five members of the board
of directors of, TerreStar Canada Holdings, and TerreStar Canada Holdings owns
80% of the shares of, and has the power to elect four out of the five members of
the board of directors of, TerreStar Canada. TerreStar will have certain
contractual rights with respect to the business and operations of, and certain
negative protections as a minority shareholder of, both TerreStar Canada and
TerreStar Canada Holdings. With certain exceptions, TerreStar has no ability
to control the business or operations of TerreStar Canada, which holds the
Industry Canada approval in principle and will own TerreStar-1. TerreStar does
not have negative approval rights with respect to appointment or termination of
senior officers or creation of budgets for TerreStar Canada or TerreStar Canada
Holdings.
FCC
And Industry Canada Decisions Affecting The Amount Of 2 GHz MSS S-band Spectrum
Assigned To Us Are Subject To Reconsideration And Review.
In
December 2005, the FCC provided TMI Communications with a reservation of 10 MHz
of uplink MSS spectrum and 10 MHz of downlink MSS spectrum in the 2 GHz MSS
S-band. TMI Communications has assigned that authorization to us and on May 10,
2007 the FCC has modified the reservation to reflect that change. Two parties
have challenged the December 2005 ruling, and one party has also challenged a
separate decision by the FCC to cancel its former 2 GHz MSS S-band
authorization. If these challenges succeed, the amount of 2 GHz MSS S-band
spectrum that is available to us may be reduced to a level that is insufficient
for us to implement our business plan. Furthermore, in Canada, our spectrum
could be reduced from 20 MHz to 14 MHz if Industry Canada determines that it is
necessary to reapportion spectrum in order to license other MSS operators in
Canada. Any reduction in the spectrum we are authorized to use could impair our
business plan and materially adversely affect our financial
condition.
Our
Use Of The 2 GHz MSS S-band Is Subject To Successful Relocation Of Existing
Users.
In the
United States, our operations at the 2 GHz MSS S-band are subject to successful
relocation of existing broadcast auxiliary service, or BAS, licensees and other
terrestrial licensees in the band. Costs associated with spectrum clearing could
be substantial. In the United States, Sprint Nextel Corporation, or Sprint
Nextel, is obligated to relocate existing BAS and other terrestrial users in our
uplink spectrum and 2 GHz MSS S-band licensees must relocate microwave users in
the 2 GHz MSS S-band downlink band. To the extent that Sprint Nextel complies
with its BAS band clearing obligations, 2 GHz MSS S-band licensees commencing
operations thereafter would not have to clear the band themselves, but might be
required to reimburse Sprint Nextel for a portion of its band clearing
costs. Due to the complex nature of the overall 2 GHz MSS S-band relocation and
the need to work closely with Sprint Nextel on band clearing, we may not make
sufficient progress in the relocation effort or meet FCC requirements for
relocating existing users and the start of our MSS operations in uncleared
markets may be delayed. On September 4, 2007, Sprint Nextel and certain
broadcaster trade associations asked the FCC for an additional 29 months past
the September 7, 2007 deadline to complete the relocation process. On
March 5, 2008, the FCC granted Sprint Nextel’s request but only extended
the deadline to complete the relocation process until March 5, 2009. The
FCC also permitted certain testing and trials by MSS licensees in 2008 and
sought comment on ways in which BAS licensees and MSS licensees could co-exist
in the band after January 2009 and before the relocation process is concluded.
If Sprint Nextel does not complete clearance of the 2 GHz MSS S-band within a
reasonable period of time and/or appropriate sharing procedures cannot be
established, our ability to implement our business plan, and our financial
condition could be adversely impacted. In Canada, our operations at the 2 GHz
MSS S-band are subject to successful relocation of terrestrial microwave users.
Although there are a small number of users in the 2GHz band, these users must be
given a minimum of two years notice by Industry Canada to relocate unless a
commercial agreement is reached under which they would move
earlier. Although Industry Canada has given notice to these users
that they must relocate within a two year period, if these users are not
relocated in sufficient time before the launch of our services, we may not be
able to offer our services in certain locations in Canada, which could impair
our business plan and materially adversely affect our operations.
Our
Service May Cause Or Be Subject To Interference.
We will
be required to provide our ATC service without causing harmful interference. In
addition, we must accept some interference from certain other spectrum users.
For example, the FCC may adopt rules for an adjacent band that do not adequately
protect us against interference. In September 2004, the FCC issued an order
allowing PCS operation in the 1995-2000 MHz, and in September 2007, the FCC
sought comment on proposed rules for the 2155-2175 MHz band, both of which may
be adjacent to the 2 GHz MSS S-band frequencies ultimately assigned to us. If
the rules that the FCC adopts for the 1995-2000 MHz and 2155-2175 MHz bands do
not adequately protect us against adjacent band interference, our reputation and
our ability to compete effectively could be adversely affected. Requirements
that we limit the interference we cause, or that we accept certain levels of
interference, may hinder satellite operations within our system and may, in
certain cases, subject our users to a degradation in service quality, which may
adversely affect our reputation and financial condition.
ATC
Spectrum Access Is Limited By Technological Factors.
We will
operate with the authority to use a finite quantity of radio spectrum. Spectrum
used for communication between the satellite and the ground will not be
available for use in the ATC component of our network. In addition,
communications with the satellite may interfere with portions of the spectrum
that would otherwise be available for ATC use, further diminishing the
availability of spectrum for the ATC component to an extent that cannot be
quantified at this time.
Technical
Challenges Or Regulatory Requirements May Limit The Attractiveness Of Our
Spectrum For Providing Mobile Services.
We
believe our 2 GHz MSS S-band spectrum with ATC capability must be at least
functionally equivalent to the PCS/cellular spectrum in order to be attractive
to parties with which we may enter into strategic relationships. The FCC and
Industry Canada require us to make satellite service available throughout the
United States and Canada. This requirement may limit the availability of some of
our spectrum for terrestrial service in some markets at some times. If we are
not able to develop technology that allows the entities with which we enter into
strategic relationships to use our spectrum in a manner comparable to
PCS/cellular operators, we may not be successful in entering into strategic
arrangements with these parties.
We
May Face Unforeseen Regulations With Which We Find It Difficult, Costly Or
Impossible To Comply.
The
provision of communications services is highly regulated. As a provider of
communications services in the United States and Canada, we will be subject to
the laws and regulations of both the United States and Canada. Violations of
laws or regulations of these countries may result in various sanctions including
fines, loss of authorizations and the denial of applications for new
authorizations or for the renewal of existing authorizations.
From time
to time, governmental entities may impose new or modified conditions on our
authorizations, which could adversely affect our ability to generate revenues
and implement our business plan. For example, from time to time, the U.S.
federal government has considered imposing substantial new fees on the use of
frequencies, such as the ones we plan to use to provide our service. In the U.S.
and Canada, the FCC and Industry Canada, respectively, already collect fees from
space and terrestrial spectrum licensees. We are currently required to pay
certain fees, and it is possible that we may be subject to increased fees in the
future.
Export
Control And Embargo Laws May Preclude Us From Obtaining Necessary Satellites,
Parts Or Data Or Providing Certain Services In The Future.
We must
comply with U.S. export control laws in connection with any information,
products, or materials that we provide to non-U.S. persons relating to
satellites, associated equipment and data and with the provision of related
services. These requirements may make it necessary for us to obtain export or
re-export authorizations from the U.S. government in connection with any
dealings we have with 4371585 Canada Inc, TerreStar Canada, TerreStar
Canada Holdings, non-U.S. satellite manufacturing firms, launch services
providers, insurers, customers and employees. We may not be able to obtain and
maintain the necessary authorizations, which could adversely affect our ability
to:
• effect
the transfer agreements;
• procure
new U.S.-manufactured satellites;
• control
any existing satellites;
• acquire
launch services;
• obtain
insurance and pursue our rights under insurance policies; or
• conduct
our satellite-related operations.
In
addition, if we do not properly manage our internal compliance processes and, as
a result, violate U.S. export laws, the terms of an export authorization or
embargo laws, the violation could make it more difficult, or even impossible, to
maintain or obtain licenses and could result in civil or criminal
penalties.
Our
Strategic Relationships Will Be Subject To Government Regulations.
We must
ensure that parties with which we enter into strategic relationships comply with
the FCC’s and Industry Canada’s ATC rules. This may require us to seek
agreements in connection with potential strategic relationships that provide for
a degree of control by us in the operation of their business that they may be
unwilling or unable to grant us.
In
addition, the U.S. Communications Act of 1934, as amended, or the Communications
Act, and the FCC’s rules require us to maintain legal as well as actual control
over the spectrum for which we are licensed. Our ability to enter into strategic
arrangements may be limited by the requirement that we maintain
de facto
control of the
spectrum for which we are licensed. If we are found to have relinquished control
without approval from the FCC, we may be subject to fines, forfeitures, or
revocation of our licenses.
Similarly,
the
Radiocommunication
Act
(Canada), the
Telecommunications Act
(Canada) and Industry Canada’s rules require that Canadians maintain legal as
well as actual control over TerreStar Canada and certain of its licensed
facilities. Our ability to enter into strategic arrangements may be limited by
the requirement that Canadians maintain control over TerreStar Canada and these
licensed facilities in Canada. If TerreStar Canada is found to have relinquished
control to non-Canadians, TerreStar Canada may be subject to fines, forfeitures
or revocation of its licenses and may not lawfully continue to carry on its
business in Canada.
FCC
And Industry Canada Regulations And Approval Processes Could Delay Or Impede A
Transfer Of Control Of TerreStar.
Any
investment that could result in a transfer of control of TerreStar could be
subject to prior FCC approval and in some cases could involve a lengthy FCC
review period prior to its consummation. The prior approval of Industry Canada
is also required before any material change in the ownership or control of
TerreStar Canada can take effect. We may not be able to obtain any such FCC or
Industry Canada approvals on a timely basis, if at all, and the FCC or Industry
Canada may impose new or additional license conditions as part of any review of
such a request. If we are unable to implement our business plan and generate
revenue to meet our financial commitments, including under the credit agreement,
the TerreStar notes issued by TerreStar in February 2007 and February 2008
and the exchangeable notes issued by TerreStar in February 2008, these
regulations could impede or prevent a transfer of control or sale of our company
to a third party with greater financial resources.
Rules
Relating To Canadian Ownership And Control Of TerreStar Canada Are Subject To
Interpretation And Change.
TerreStar
Canada is subject to foreign ownership restrictions imposed by the
Telecommunications Act
(Canada) and the
Radiocommunication
Act
(Canada) and regulations
made pursuant to the these acts. Future determinations by Industry Canada or the
Canadian Radio-Television and Telecommunications Commission, or CRTC, or events
beyond our control, may result in TerreStar Canada ceasing to comply with the
relevant legislation. If such a development were to occur, the ability of
TerreStar Canada to operate as a Canadian carrier under the
Telecommunications Act
(Canada) or to maintain, renew or secure its Industry Canada approval in
principle could be jeopardized and our business could be materially adversely
affected.
U
SE OF PROCEEDS
The
selling stockholders will receive all of the net proceeds from the sale of the
common stock offered by this prospectus. Accordingly, we will not receive any
proceeds from the sale of the common stock.
DE
TERMINATION OF OFFERING PRICE
The
selling stockholders will determine at what price they may sell the offered
shares, and such sales may be made at prevailing market prices, or at privately
negotiated prices.
SE
LLING STOCKHOLDERS
The
following table and accompanying notes set forth certain information regarding
the selling stockholders as of July 7, 2008 unless otherwise indicated. Under
this prospectus, the selling stockholders and any of their respective
transferees, assignees, donees, distributees, pledgees or other successors in
interest may offer and sell from time to time an aggregate of 132,591,433 shares
of common stock. In this prospectus, we refer to these holders collectively as
the selling stockholders. The shares are being registered to permit public sales
of the shares, and the selling stockholders may offer the shares for resale from
time to time. See “Plan of Distribution.”
This
registration statement of which this prospectus forms a part of has been filed
pursuant to registration rights granted to the selling
stockholders. Under the terms of the registration rights agreement
between us and the selling stockholders, we will pay all expenses of
registration of the shares of common stock, excluding any underwriting discounts
and fees, brokerage and sales commissions, and stock transfer taxes relating to
the sale or disposition of the shares. Our expenses for the registration of
shares of common stock are estimated to be $48,422.89.
The table
below sets forth the names of the selling stockholders and the number of shares
owned, directly and beneficially, by such stockholders as of July 7, 2008 unless
otherwise indicated. The number of shares of common stock outstanding on June
13, 2008 unless otherwise indicated was 121,095,783. Ownership is
based on information provided to us by each respective selling stockholder,
Forms 4, Schedules 13D and other public documents filed with the Securities and
Exchange Commission.
The
selling stockholders will act independently of us in making decisions with
respect to the timing, manner and size of the sale or sales of common stock
covered by this prospectus. We cannot estimate the number of shares
the selling stockholders will hold after the completion of the offering by the
selling stockholders because they may sell all or a portion of the shares
offered by this prospectus. We have assumed for the purposes of this table that
none of the shares offered by this prospectus will be held by the selling
stockholders after the completion of this offering. Our registration of shares
of common stock held by the selling stockholders does not necessarily mean that
the selling stockholders will sell all or any of the shares. Except as otherwise
indicated, each person listed in the table has informed TerreStar
Corporation that such person has (1) voting and investment power with
respect to such person’s shares of common stock and (2) record and beneficial
ownership with respect to such person’s shares of common stock.
If all of
the shares are sold pursuant to this prospectus, then the selling stockholders
will sell 132,591,433 shares of our common stock.
|
|
Shares
Beneficially Owned
Prior
To Offering (1)(2)
|
Number
of Shares Being Offered
|
Shares
Beneficially Owned
After
The Offering (4)
|
|
Name Of
Beneficial Owner
|
Number
|
Percentage(3)
|
Exchangeable
note
shares
|
Spectrum
contribution
shares
|
Other
Shares
|
Number
|
Percentage (3)
|
|
Harbinger
Capital
Partners
|
41,796,482
(5)
|
32.13%
|
10,264,487
(7)
|
30,000,000
|
41,796,482
(6)
|
----
|
----
|
|
EchoStar
Corporation
|
39,180,172
|
30.1%
|
10,264,487
(8)
|
30,000,000
|
----
|
|
|
|
Singer
Children's
Management
Trust
|
1,576,416
|
1.30%
|
513,249 (9)
|
----
|
----
|
1,117,250
|
0.92%
|
|
Gary
and Karen
Singer
Children's
Trust
|
459,166
|
0.38%
|
513,249
(10)
|
----
|
----
|
----
|
----
|
|
LC
Capital Master
Fund,
Ltd.
|
1,574,431
|
1.30%
|
1,283,124
(11)
|
----
|
----
|
445,488
|
0.37%
|
|
OZ
Global Special
Investments
Master
Fund,
LP
|
115,013.83
|
0.09%
|
111,888 (12)
|
----
|
----
|
16,570
|
0.01%
|
|
OZ
Master Fund,
Ltd.
|
4,508,291
|
3.72%
|
1,941,108 (13)
|
----
|
----
|
2,800,426
|
2.31%
|
|
Millennium
Partners,
L.P.
|
1,769,872
(16)
|
1.46%
|
1,283,124
(14)
|
----
|
----
|
648,622
|
0.54%
|
|
Sola,
Ltd.
|
11,989,105
|
9.90%
|
4,619,243 (15)
|
----
|
----
|
7,856,609
|
6.49%
|
______________
|
(1)
|
Pursuant
to Rule 13d-3 of the Exchange Act, a person is deemed to be a beneficial
owner of a security if that person has the right to acquire beneficial
ownership of such security within 60 days, including the right to acquire
through the sale of all shares offered by this prospectus and the exercise
of an option or warrant or through the conversion of a
security.
|
|
(2)
|
Shares
issuable upon repayment of interest on the exchangeable notes are included
in the number of Shares to be offered, but are not shown as beneficially
owned by the Selling Stockholders. As a result the number of
Shares that the Selling Stockholders may sell pursuant to this Prospectus
may exceed the number of Shares the Selling Stockholders would otherwise
beneficially own as determined pursuant to Rule 13d-3 of the Exchange
Act.
|
|
(3)
|
Based
on the number of shares of common stock outstanding as of June 13,
2008.
|
|
(4)
|
Assumes
that the shares of common stock issuable upon the exercise of the warrants
and shares of common stock underlying our Series A and Series B preferred
stock are not outstanding.
|
|
(5)
|
Does
not include shares convertible from the Junior
Preferred.
|
|
(6)
|
Harbinger
Capital Partners Master Fund I, Ltd. owns 30,641,731 shares and Harbinger
Capital Partners Special Situations Fund, L.P. owns 11,154,751
shares.
|
|
(7)
|
Consists
of (a) 8,970,000 shares of common stock issuable upon the exchange of up
to $50 million in principal amount of exchangeable notes and (b) 1,294,984
shares of common stock issuable upon conversion of the exchange of
exchangeable notes issuable in the form of PIK interest through March 15,
2010.
|
|
(8)
|
Consists
of (a) 8,970,000 shares of common stock issuable upon the exchange of up
to $50 million in principal amount of exchangeable notes and (b) 1,294,984
shares of common stock issuable upon conversion of the exchange of
exchangeable notes issuable in the form of PIK interest through March 15,
2010.
|
|
(9)
|
Consists
of (a) 448,500 shares of common stock issuable upon the exchange of up to
$2,500,000 in principal amount of exchangeable notes and (b) 64,749 shares
of common stock issuable upon conversion of the exchange of exchangeable
notes issuable in the form of PIK interest through March 15,
2010.
|
|
(10)
|
Consists
of (a) 448,500 shares of common stock issuable upon the exchange of up to
$2,500,000 in principal amount of exchangeable notes and (b) 64,749
shares of common stock issuable upon conversion of the exchange of
exchangeable notes issuable in the form of PIK interest through March 15,
2010.
|
|
(11)
|
Consists
of (a) 1,121,250 shares of common stock issuable upon the exchange of up
to $6,250,000 in principal amount of exchangeable notes and
(b) 161,873 shares of common stock issuable upon conversion of the
exchange of exchangeable notes issuable in the form of PIK interest
through March 15, 2010.
|
|
(12)
|
Consists
of (a) 97,773 shares of common stock issuable upon the exchange of up to
$545,000 in principal amount of exchangeable notes and (b) 14,115 shares
of common stock issuable upon conversion of the exchange of exchangeable
notes issuable in the form of PIK interest through March 15,
2010.
|
|
(13)
|
Consists
of (a) 1,696,227 shares of common stock issuable upon the exchange of up
to $9,455,000 in principal amount of exchangeable notes and (b) 244,881
shares of common stock issuable upon conversion of the exchange of
exchangeable notes issuable in the form of PIK interest through March 15,
2010.
|
|
(14)
|
Consists
of (a) 1,121,250 shares of common stock issuable upon the exchange of up
to $6,250,000 in principal amount of exchangeable notes and
(b) 161,873 shares of common stock issuable upon conversion of the
exchange of exchangeable notes issuable in the form of PIK interest
through March 15, 2010.
|
|
(15)
|
Consists
of (a) 4,036,500 shares of common stock issuable upon the exchange of up
to $22,500,000 in principal amount of exchangeable notes and
(b) 582,743 shares of common stock issuable upon conversion of the
exchange of exchangeable notes issuable in the form of PIK interest
through March 15, 2010.
|
|
(16)
|
Includes 204,200
shares of common stock issued or to be issued upon the exchange of Series
B Preferred stock held by Millenco, LLC an affiliate of Millennium
Partners, L.P.
|
PLA
N OF DISTRIBUTION
TerreStar
Corporation has registered the shares offered by this prospectus on behalf of
the selling stockholders, and will not receive any proceeds from the sale of the
shares by the selling stockholders.
Registration of the
shares covered by this prospectus does not mean, however, that those shares
necessarily will be offered or sold.
These shares may be sold
or distributed from time to time by the selling stockholders and any of their
respective transferees, assignees, donees, distributees, pledgees or other
successors in interest, all of whom we collectively refer to in this prospectus
as “selling stockholders.” The selling stockholders may sell their shares at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices, or at fixed prices or in
competitively bid transactions, which may be changed. Each selling stockholder
reserves the right to accept or reject, in whole or in part, any proposed
purchase of shares, whether the purchase is to be made directly or through
agents.
The
selling stockholders may offer their shares at various times in one or more of
the following transactions:
|
|
·
|
in
ordinary brokers’ transactions and transactions in which the broker
solicits purchasers;
|
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account pursuant to this
prospectus;
|
|
|
·
|
in
transactions involving cross or block
trades;
|
|
|
·
|
in
transactions “at the market” to or through market makers in the common
stock or into an existing market for the common
stock;
|
|
|
·
|
in
other ways not involving market makers or established trading markets,
including direct sales of the shares to purchasers or sales of the shares
effected through agents;
|
|
|
·
|
through
transactions in options, swaps or other derivatives which may or may not
be listed on an exchange;
|
|
|
·
|
in
privately negotiated transactions;
|
|
|
·
|
in
transactions to cover short sales;
|
|
|
·
|
in
underwritten transactions; or
|
|
|
·
|
in
a combination of any of the foregoing
transactions.
|
The
selling stockholders also may sell all or a portion of their shares in open
market transactions in accordance with Rule 144 under the Securities Act,
provided that they meet the criteria and conform to the requirements of that
rule.
From time
to time, one or more of the selling stockholders may pledge or grant a security
interest in some or all of the shares owned by them. If the selling stockholders
default in performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares from time to time by this prospectus. The
selling stockholders also may transfer and donate shares in other circumstances.
The number of shares beneficially owned by selling stockholders will decrease as
and when the selling stockholders transfer or donate their shares or default in
performing obligations secured by their shares. The plan of distribution for the
shares offered and sold under this prospectus will otherwise remain unchanged,
except that the transferees, donees, pledgees, other secured parties or other
successors in interest will be selling stockholders for purposes of this
prospectus.
A selling
stockholder may sell short the common stock. The selling stockholder may deliver
this prospectus in connection with such short sales and use the shares offered
by this prospectus to cover such short sales.
A selling
stockholder may enter into hedging transactions with broker-dealers. The
broker-dealers may engage in short sales of the common stock in the course of
hedging the positions they assume with the selling stockholder, including
positions assumed in connection with distributions of the shares by such
broker-dealers. A selling stockholder also may enter into option or other
transactions with broker-dealers that involve the delivery of shares to the
broker-dealers, who may then resell or otherwise transfer such shares. In
addition, a selling stockholder may loan or pledge shares to a broker-dealer,
who may sell the loaned shares or, upon a default by the selling stockholder of
the secured obligation, may sell or otherwise transfer the pledged
shares.
The
selling stockholders may use brokers, dealers, underwriters or agents to sell
their shares. The persons acting as agents may receive compensation in the form
of commissions, discounts or concessions. This compensation may be paid by the
selling stockholders or the purchasers of the shares of whom such persons may
act as agent, or to whom they may sell as principal, or both. The compensation
as to a particular person may be less than or in excess of customary
commissions. The selling stockholders and any agents or broker-dealers that
participate with the selling stockholders in the offer and sale of the shares
may be deemed to be “underwriters” within the meaning of the Securities Act. Any
commissions they receive and any profit they realize on the resale of the shares
by them may be deemed to be underwriting discounts and commissions under the
Securities Act. Neither we nor any selling stockholders can presently estimate
the amount of such compensation.
If
underwriters are used in a firm commitment underwriting, the selling
stockholders will enter into an underwriting agreement with those underwriters
relating to the shares of common stock that the selling stockholders will
offer. Unless otherwise set forth in a prospectus supplement, the
obligations of the underwriters to purchase those shares will be subject to
conditions. The underwriters, if any, will purchase such shares on a
firm commitment basis and will be obligated to purchase all of such
shares.
The
selling stockholders may sell shares directly to purchasers. In this
case, the selling stockholders may not engage brokers, dealers, underwriters or
agents in the offer and sale of such shares.
TerreStar
Corporation has advised the selling stockholders that during such time as they
may be engaged in a distribution of the shares, they are required to comply with
Regulation M under the Exchange Act. With some exceptions, Regulation M
prohibits any selling stockholder, any affiliated purchasers and other persons
who participate in such a distribution from bidding for or purchasing, or
attempting to induce any person to bid for or purchase, any security which is
the subject of the distribution until the entire distribution is
complete.
Under
TerreStar Corporation’s registration rights agreement with certain of the
selling stockholders, TerreStar Corporation is required to bear the expenses
relating to this offering, excluding any underwriting discounts and fees,
brokerage and sales commissions, and stock transfer taxes relating to the sale
or disposition of the shares. TerreStar Corporation estimates that
such expenses will be approximately $48,422.89.
TerreStar
Corporation has agreed to indemnify certain of the selling stockholders and
their respective controlling persons against some liabilities, including some
liabilities under the Securities Act.
It is
possible that a significant number of shares could be sold at the same time.
Such sales, or the perception that such sales could occur, may adversely affect
prevailing market prices for the common stock.
This
offering by any selling stockholder will terminate on the date on which the
selling stockholder has sold all of such selling stockholder’s
shares.
LE
GAL MATTERS
The
validity of the common stock will be passed upon for us by Gibson, Dunn &
Crutcher LLP and Andrews Kurth LLP.
EX
PERTS
The
consolidated financial statements appearing in our Annual Report (Form 10-K) for
the year ended December 31, 2007 have been audited by Friedman LLP, independent
auditors, as set forth in their report thereon, included therein, and
incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given on the authority of such firm as experts in accounting and
auditing.
INC
ORPORATION OF INFORMATION FILED WITH THE SEC
The SEC
allows us to “incorporate by reference” information filed with the
SEC. This means that we can disclose important information to you,
without actually including the specific information in this prospectus, by
referring you to those documents. The following documents which we
have previously filed with the SEC pursuant to the Exchange Act are incorporated
into this prospectus by reference; provided, however, that we are not
incorporating any information furnished under Item 2.02 or Item 7.01 of any
Current Report on Form 8-K:
|
|
·
|
our
Annual Report on Form 10-K for the year ended December 31, 2007 (filed
March 31, 2008 and as amended on April 29, May 7, and May 12,
2008);
|
|
|
·
|
our
Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 (filed
April 12, 2008);
|
|
|
·
|
our
Current Reports on Form 8-K and Form 8-K/A filed with the SEC on January
4, 2008, January 22, 2008, February 5, 2008, February 7, 2008, February 8,
2008, February 12, 2008, February 21, 2008, April 1, 2008, April 18, 2008,
April 24, 2008, May 21, 2008, June 11, 2008, June 30, 2008, and July 1,
2008; and
|
|
|
·
|
the
description of our common stock contained in our registration statement on
Form 8-A filed with the SEC on April 14, 2000 under the Securities
Exchange Act of 1934, as amended, including any amendment or report filed
for the purpose of updating such
description.
|
All
documents we file pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act after the date of this prospectus and before all of the common stock offered
by this prospectus is sold are incorporated by reference in this prospectus from
the date of filing of the documents. Information that we file with
the SEC will automatically update and may replace information in this prospectus
and information previously filed with the SEC.
W
HERE YOU CAN FIND MORE INFORMATION
We have
filed a registration statement on Form S-3 with the SEC to register the shares
as required by the federal securities laws. This prospectus, which constitutes a
part of that registration statement on Form S-3, omits certain information
concerning us and our common stock contained in the registration statement.
Furthermore, statements contained in this prospectus concerning any document
filed as an exhibit are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
registration statement. Accordingly, you should reference the registration
statement and its exhibits for further information with respect to us and the
shares offered under this prospectus.
We also
file annual, quarterly and special reports, proxy statements and other
information with the SEC under the Securities Exchange Act of 1934, as amended.
Our Exchange Act file number for our SEC filings is 0-23044. You may read and
copy any document we file with the SEC at the following SEC public reference
room:
Public
Reference Room
100 F St.
N.E.
Washington,
D.C. 20549
You may
obtain information on the operation of the SEC’s Public Reference Room by
calling the SEC at 1-800-SEC-0330.
The SEC
also maintains an Internet web site that contains reports, proxy statements and
other information regarding issuers, including TerreStar Corporation, who file
electronically with the SEC. The address of that site is
http://www.sec.gov.
To
receive a free copy of any of the documents incorporated by reference in this
prospectus, other than exhibits, unless they are specifically incorporated by
reference in those documents, call or write to TerreStar Corporation,
Attention: Corporate Secretary, 12010 Sunset Hills Road, 9th Floor,
Reston, Virginia 20190 (telephone (703) 483-7800).
You
should rely only on the information or representations provided in this
prospectus and the registration statement. We have not authorized anyone to
provide you with different information. The information contained in this
document speaks only as of the date of this document unless the information
specifically indicates that another date applies.
132,591,433
Shares of Common Stock
,
2008
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
14. Other Expenses of Issuance and Distribution
The
expenses to be paid in connection with the issuance and distribution of the
securities being registered, other than underwriting discounts and commissions,
will be paid entirely by the registrant and are as follows:
|
SEC registration
fee
|
|
$
|
12,923
|
|
|
Printing and engraving
expenses
|
|
|
1,000
|
|
|
Accounting fees and
expenses
|
|
|
2,500
|
|
|
Legal fees and
expenses
|
|
|
30,000
|
|
|
Miscellaneous
|
|
|
2,000
|
|
|
Total
|
|
$
|
48,422.89
|
|
_____________________
Item
15. Indemnification of Directors and Officers
TerreStar
Corporation is incorporated under the laws of the State of
Delaware. Section 145 (“Section 145”) of Title 8 of the Delaware Code
gives a corporation power to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys’
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person’s conduct was unlawful.
Section
145 also gives a corporation power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that the person is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys’ fees) actually and reasonably incurred by the person in
connection with the defense or settlement of such action or suit if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper. Section 145 further provides that, to the extent that a
present or former director or officer of a corporation has been successful on
the merits or otherwise in defense of any such action, suit or proceeding, or in
defense of any claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys’ fees) actually and reasonably incurred by
such person in connection therewith.
Section
145 also authorizes a corporation to purchase and maintain insurance on behalf
of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against him
and incurred by him in any such capacity, arising out of his status as such,
whether or not the corporation would otherwise have the power to indemnify him
under Section 145.
Our
restated certificate of incorporation and restated bylaws provide for the
indemnification of officers and directors to the fullest extent permitted by the
Delaware Code.
All of
our directors and officers are covered by insurance policies against certain
liabilities for actions taken in their capacities as such, including liabilities
under the Securities Act of 1933.
Item
16. Exhibits
|
Exhibit
No.
|
Exhibit
|
|
3.1
|
-
|
Restated
Certificate of Incorporation of the Company (as restated effective May 1,
2002) (incorporated by reference to Exhibit 3.1 of the Company’s Amendment
No. 2 to Registration Statement on Form 8-A, filed May 1,
2002).
|
|
3.2
|
-
|
Amended
and Restated Bylaws of the Company (as amended and restated effective May
1, 2002) (incorporated by reference to Exhibit 3.1 of the Company’s
Amendment No. 2 to Registration Statement on Form 8-A, filed May 1,
2002).
|
|
3.5
|
-
|
Amendment
to Restated Certificate of Incorporation (incorporated by reference to
TerreStar Corporation’s Registration Statement on Form S-1 filed on June
24, 2005).
|
|
3.6
|
-
|
Amendment
to Restated Certificate of Incorporation (incorporated by reference to
Exhibit 3.6 of the registration statement on Form S-3 filed on August 7,
2006 (File No. 333-136366)).
|
|
4.2
|
-
|
Registration Rights Agreement, dated February 5,
2008, among the Company, TerreStar, EchoStar Corporation, Harbinger
Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special
Situations Fun
d, L.P. and other
institutional investors party thereto (incorporated by reference to
Exhibit 4.5 to the Company
’
s Current
Report on Form 8-K dated February 5, 2008).
|
|
5.1*
|
-
|
Form
of Opinion of Gibson, Dunn & Crutcher LLP.
|
|
5.2*
|
-
|
Form
of Opinion of Andrews Kurth LLP
|
|
23.1*
|
-
|
Consent
of Friedman LLP, Independent Registered Public Accounting
Firm.
|
|
23.2*
|
-
|
Form
of Consent of Gibson, Dunn & Crutcher LLP (included in
Exhibit 5.1).
|
|
23.3*
|
-
|
Form
of Consent of Andrews Kurth LLP (included in Exhibit
5.2).
|
|
24.1*
|
-
|
Power
of Attorney (included in signature
page).
|
* Filed
herewith.
Item
17. Undertakings
A. The
undersigned registrant hereby undertakes:
|
|
(1)
|
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
|
|
|
(i)
|
To
include any prospectus required by section 10(a)(3) of the Securities Act
of 1933;
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(ii)
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To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20% change in the maximum aggregate offering
price set forth in the “Calculation of Registration Fee” table in the
effective registration statement;
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(iii)
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To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration statement;
provided
,
however
, that
paragraphs A(1)(i), A(1)(ii) and A(1)(iii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs
is contained in reports filed with or furnished to the SEC by the
registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement, or is contained in a form of prospectus filed
pursuant to Rule 424(b) that is a part of this registration
statement.
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(2)
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That,
for the purpose of determining any liability under the Securities Act of
1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
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(3)
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To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
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(4)
|
That,
for the purpose of determining liability under the Securities Act to any
purchaser:
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(A)
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Each
prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be
deemed to be part of this registration statement as of the date the filed
prospectus was deemed part of and included in this registration statement;
and
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(B)
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Each
prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or
(b)(7) as part of this registration statement in reliance on Rule 430B
relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x)
for the purpose of providing the information required by section 10(a) of
the Securities Act shall be deemed to be part of and included in this
registration statement as of the earlier of the date such form of
prospectus is first used after effectiveness or the date of the first
contract of sale of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability purposes of
the issuer and any person that is at that date an underwriter, such date
shall be deemed to be a new effective date of this registration statement
relating to the securities in this registration statement to which that
prospectus relates, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering
thereof. Provided, however, that no statement made in a
registration statement or prospectus that is part of this registration
statement or made in a document incorporated or deemed incorporated by
reference into this registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time of contract
of sale prior to such effective date, supersede or modify any statement
that was made in this registration statement or prospectus that was part
of this registration statement or made in any such document immediately
prior to such effective date; or
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(C)
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If
the registrant is subject to Rule 430C, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to an offering,
other than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of
and included in the registration statement as of the date it is first used
after effectiveness. Provided, however, that no statement made
in a registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to
such date of first use.
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(5)
|
That,
for the purpose of determining liability of the registrant under the
Securities Act of 1933 to any purchaser in the initial distribution of the
securities, the undersigned registrant undertakes that in a primary
offering of securities of the undersigned registrant pursuant to this
registration statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered or sold to
such purchaser by means of any of the following communications, the
undersigned registrant will be a seller to the purchaser and will be
considered to offer or sell such securities to such
purchaser:
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(i)
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Any
preliminary prospectus or prospectus of the undersigned registrant
relating to the offering required to be filed pursuant to Rule
424;
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(ii)
|
Any
free writing prospectus relating to the offering prepared by or on behalf
of the undersigned registrant or used or referred to by the undersigned
registrant;
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(iii)
|
The
portion of any other free writing prospectus relating to the offering
containing material information about the undersigned registrant or its
securities provided by or on behalf of the undersigned registrant;
and
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(iv)
|
Any
other communication that is an offer in the offering made by the
undersigned registrant to the
purchaser.
|
B. The
undersigned registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant’s
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
C. Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant,
we have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
D. The
undersigned registrant hereby undertakes that:
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(1)
|
For
purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared
effective.
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(2)
|
For
the purpose of determining any liability under the Securities Act, each
post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering
thereof.
|
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Reston, VA, on the 8
th
day of July,
2008.
|
|
TERRESTAR
CORPORATION
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By:
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/s/ Jeffrey
Epstein
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Jeffrey
Epstein,
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|
President,
General Counsel and Secretary
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|
KNOW ALL
PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby
severally constitutes and appoints, Jeffrey W. Epstein and Neil Hazard, and each
or any of them, his or her true and lawful attorney-in-fact and agent, each with
the power of substitution and resubstitution, for him or her in any and all
capacities, to sign any and all amendments to this registration statement and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed below by the following persons on behalf of the registrant in
the capacities set forth below on the 8
th
day of July,
2008.
|
Name
|
|
Title
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/s/ Jeffrey
Epstein
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President, General
Counsel and Secretary
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Jeffrey
Epstein
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(Principal Executive
Officer)
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/s/ Neil
Hazard
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Executive Vice
President, Chief Financial Officer and Treasurer
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Neil
Hazard
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(Principal Financial Officer)
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/s/ David
Andonian
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Director
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David
Andonian
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/s/ Eugene
Davis
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Director
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Eugene
Davis
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/s/ William
Freeman
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Director
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William
Freeman
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/s/ Jacques
Leduc
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Director
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Jacques
Leduc
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/s/ David
Meltzer
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Director
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David
Meltzer
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/s/ Dean
Olmstead
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Director
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Dean
Olmstead
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/s/ David
Rayner
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Director
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David
Rayner
|
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LIST
OF EXHIBITS
|
3.1
|
-
|
Restated
Certificate of Incorporation of the Company (as restated effective May 1,
2002) (incorporated by reference to Exhibit 3.1 of the Company’s Amendment
No. 2 to Registration Statement on Form 8-A, filed May 1,
2002).
|
|
3.2
|
-
|
Amended
and Restated Bylaws of the Company (as amended and restated effective May
1, 2002) (incorporated by reference to Exhibit 3.1 of the Company’s
Amendment No. 2 to Registration Statement on Form 8-A, filed May 1,
2002).
|
|
3.5
|
-
|
Amendment
to Restated Certificate of Incorporation (incorporated by reference to
TerreStar Corporation’s Registration Statement on Form S-1 filed on June
24, 2005).
|
|
3.6
|
-
|
Amendment
to Restated Certificate of Incorporation (incorporated by reference to
Exhibit 3.6 of the registration statement on Form S-3 filed on August 7,
2006 (File No. 333-136366)).
|
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4.2
|
-
|
Registration Rights Agreement, dated February 5,
2008, among the Company, TerreStar, EchoStar Corporation, Harbinger
Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special
Situations Fun
d, L.P. and other
institutional investors party thereto (incorporated by reference to
Exhibit 4.5 to the Company
’
s Current
Report on Form 8-K dated February 5, 2008).
|
|
5.1*
|
-
|
Form
of Opinion of Gibson, Dunn & Crutcher LLP.
|
|
5.2*
|
-
|
Form
of Opinion of Andrews Kurth LLP
|
|
23.1*
|
-
|
Consent
of Friedman LLP, Independent Registered Public Accounting
Firm.
|
|
23.2*
|
-
|
Form
of Consent of Gibson, Dunn & Crutcher LLP (included in
Exhibit 5.1).
|
|
23.3*
|
-
|
Form
of Consent of Andrews Kurth LLP (included in Exhibit
5.2).
|
|
24.1*
|
-
|
Power
of Attorney (included in signature
page).
|
* Filed
herewith.
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