General
The merger agreement provides that, subject to certain conditions, Acquisition Corp. will merge with SkyTerra, with SkyTerra continuing as the surviving corporation in the merger.
We have attached a copy of the merger agreement as Appendix A to this proxy statement, a copy of the First Amendment as Appendix B to this proxy statement and a copy of the Second Amendment as Appendix C to this proxy statement.
We urge you to, and you should, read the merger agreement in its entirety because it is the legal document governing the merger.
Background of the Merger Historical Relationship Between Harbinger and SkyTerra
As of March 28, 2006, the Master Fund was a minority stockholder in SkyTerra, owning approximately 2,117,800 shares of Capital Stock.
At such time, SkyTerra’s two primary assets, following its distribution in February 2006 of its interest in Hughes Network Systems, were minority stakes in Mobile Satellite Ventures LP (“MSV,” and subsequently renamed SkyTerra LP and now a wholly owned subsidiary of SkyTerra, “SkyTerra LP”) and TerreStar Networks Inc. (“TerreStar Networks”). In March 2006, the Master Fund also acquired from the underwriters $60 million aggregate principal amount of bonds in a $750 million offering of SkyTerra LP Senior Secured Notes (“Senior Secured Notes”).
Subsequently, on July 28, 2006, Harbinger increased its equity ownership in SkyTerra to 3,230,048 shares of Capital Stock through the purchase of 891,363 shares of Capital Stock at $18 per share as part of a stockholder rights offering made to all SkyTerra stockholders.
As of October 13, 2006, the Master Fund, together with the Special Fund had acquired another 2,703,214 shares of Capital Stock at prices ranging from $12.95–13.15 per share.
Following these purchases Harbinger “beneficially” owned (within the meaning of the SEC’s rules) approximately 22.3% of SkyTerra’s Capital Stock, as reported by Harbinger, in a report filed with the SEC on Schedule 13D on October 13, 2006.
Except with respect to the agreements entered into by SkyTerra LP with each holder of Senior Secured Notes, Harbinger and SkyTerra had not entered into any agreements or transactions in connection with the purchases described above.
Subsequent to its initial investments in SkyTerra and SkyTerra LP, Harbinger further increased its investments in SkyTerra and SkyTerra LP through a series of transactions occurring between December 2007 through July 2009. During such time period, the following significant transactions involving SkyTerra and Harbinger (or investments of Harbinger) occurred:
• Purchase of $150 Million of SkyTerra LP Senior Unsecured Notes.
On December 15, 2007, Harbinger entered into a Securities Purchase Agreement (the “2007 SPA”) with SkyTerra LP and Mobile Satellite Ventures Finance Co., which was subsequently renamed SkyTerra Finance Co. and is now a wholly owned subsidiary of SkyTerra, pursuant to which Harbinger agreed to purchase $150 million of SkyTerra LP’s 16.5% Senior Unsecured Notes due 2013 and ten year warrants to purchase 9,144,038 shares of SkyTerra’s Capital Stock, with an exercise price of $10.00 per share.
The terms of the warrants permit Harbinger to elect to receive shares of Common Stock, Non–Voting Common Stock or any combination thereof.
Harbinger was also granted the right of first negotiation to discuss the purchase of additional equity securities from SkyTerra prior to SkyTerra’s negotiation with a third party.
If SkyTerra and Harbinger did not agree on the terms for such a transaction, Harbinger had the right to maintain its percentage ownership interest through pro rata purchases of shares in issuances to third parties.
Such right expires once Harbinger and their affiliates beneficially own less than five percent (5%) of the outstanding Capital Stock of SkyTerra or, if earlier, on December 31, 2011. The transactions contemplated by the 2007 SPA closed on January 7, 2008.
• SkyTerra Enters into Cooperation Agreement with Inmarsat. On December 20, 2007, SkyTerra entered into a Cooperation Agreement, which we refer to as the “Cooperation Agreement,” with Inmarsat Global Limited, a subsidiary of Inmarsat plc, which we refer to as “Inmarsat.” Inmarsat is a UK satellite company in which Harbinger owns approximately 28% of the outstanding capital stock.
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