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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 333-11149
TELEGLOBE MOBILE PARTNERS
(Exact name of Registrant as specified in its charter)
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DELAWARE 98-0135820
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization of Registrant) Identification No.)
1000, RUE DE LA GAUCHETIERE OUEST
MONTREAL (QUEBEC)
CANADA H3B 4X5
(Address of Registrant's principal executive offices)
(Zip Code)
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(514) 868-8124
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the last 90 days. Yes __ No X
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
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TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 14
Item 3. Legal Proceedings........................................... 14
Item 4. Submission of Matters to a Vote of Security Holders......... 14
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters......................................... 14
Item 6. Selected Financial Data..................................... 15
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 16
Item 8. Financial Statements and Supplementary Data................. 21
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 51
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 51
Item 11. Executive Compensation...................................... 52
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 52
Item 13. Certain Relationships and Related Transactions.............. 52
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 55
Signatures.................................................. 57
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PART I
ITEM 1. BUSINESS
The information contained in this report on Form 10-K speaks as of and for
the year ended December 31, 1996 and not as of or for any other date or period
except as otherwise provided herein.
BACKGROUND
Teleglobe Mobile Partners ("Teleglobe Mobile" or the "Company") is a
Delaware general partnership formed in 1993 whose interests are wholly owned on
an indirect basis by Teleglobe Inc. ("Teleglobe") and Technology Resources
Industries Bhd. ("TRI"). Teleglobe Mobile was formed for the purpose of being a
general and a limited partner in ORBCOMM Global, L.P. ("ORBCOMM"), a Delaware
limited partnership providing a satellite-based global two-way data and
messaging communications system. Teleglobe Mobile holds a 50% interest in
ORBCOMM. The remaining 50% interest is held by Orbital Communications
Corporation ("OCC"), a Delaware corporation and a majority owned subsidiary of
Orbital Sciences Corporation ("Orbital"). Pursuant to the terms of the
Partnership Agreement of ORBCOMM between Teleglobe Mobile and OCC, action by
ORBCOMM generally requires the approval of General Partners (as defined) holding
a majority of the Participation Percentages (as defined) held by the General
Partners. Because Teleglobe Mobile and OCC each holds 50% of the Participation
Percentages in ORBCOMM, the approval of both OCC and Teleglobe Mobile is
generally required for ORBCOMM to act.
Teleglobe Mobile is also a 2% general and limited partner in ORBCOMM
International Partners, L.P. ("ORBCOMM International"), a Delaware limited
partnership, and OCC is a 2% general and limited partner in ORBCOMM USA, L.P.
("ORBCOMM USA"), a Delaware limited partnership. ORBCOMM USA and ORBCOMM
International were formed to market ORBCOMM products and services in the United
States and internationally, respectively. Teleglobe Mobile controls the
operational and financial affairs of ORBCOMM International, and OCC controls the
operational and financial affairs of ORBCOMM USA. Directly and indirectly,
Teleglobe Mobile holds 51% and 49% of ORBCOMM International and ORBCOMM USA,
respectively, and ORBCOMM holds a 98% non-controlling interest in each of these
two marketing partnerships.
Teleglobe Mobile's largest asset is its 50% interest in ORBCOMM. Teleglobe
Mobile and OCC have invested approximately $160 million in ORBCOMM.
ORBCOMM is establishing a commercial low-Earth orbit ("LEO")
satellite-based mobile data and messaging communications system that will be
available on a global basis (the "ORBCOMM System"). The ORBCOMM System is
designed to provide two-way global data and messaging communications through a
constellation of 28 LEO satellites and a complement of associated ground
infrastructure situated around the world. Major target markets include worldwide
mobile asset tracking; remote industrial monitoring and control applications;
environmental data collection; and real time person-to-person and
machine-to-machine communications, including two-way Internet electronic mail
("email") communications and recreational and business messaging.
Teleglobe, a Canadian corporation, provides international
telecommunications services to approximately 240 countries worldwide through a
network of submarine cables and satellite Earth stations. Teleglobe is owned
approximately 22% by BCE Inc., which is the largest public corporate entity in
Canada, and indirectly approximately 20% by Telesystem Ltd., a Canadian company.
TRI operates the largest and one of the fastest-growing cellular networks in
Malaysia, with over 800,000 subscribers and also has cellular and paging joint
ventures in five countries.
ORBCOMM Global Capital Corporation ("Capital"), a Delaware corporation, was
formed in July 1996 to act as a co-issuer in connection with the private
placement (the "Old Notes Offering") of $170 million 14% Senior Notes due 2004
with Revenue Participation Interest (the "Old Notes"). The Old Notes were
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exchanged in January 1997 for notes that are substantially similar to the Old
Notes except that the new notes (the "Notes") are registered under the
Securities Act of 1933, as amended. The Notes are fully and unconditionally
guaranteed on a joint and several basis by OCC, Teleglobe Mobile, ORBCOMM USA
and ORBCOMM International, except that the guarantees are non-recourse to the
shareholders and/or partners of the guarantors, limited only to the extent
necessary for each such guarantee not to constitute a fraudulent conveyance
under applicable law. Capital has nominal assets and will not conduct any
operations.
THE ORBCOMM SYSTEM
General
ORBCOMM offers commercial intermittent data communications services in the
United States through its existing network, which consists of two LEO satellites
launched in April 1995 and related U.S. ground infrastructure. When fully
deployed, the ORBCOMM System is designed to provide data and short, alphanumeric
paging-like messaging communications coverage virtually anywhere on the Earth's
surface in a reliable and cost-effective manner. In contrast to "Big LEO"
systems, which are designed primarily for voice applications, the ORBCOMM
System, which is a "Little LEO" system, is focused on data communications and
messaging applications. The ORBCOMM System is designed to address the
substantial existing and growing demand for communications services worldwide,
without the high cost and geographic and technical limitations imposed by other
communications systems. ORBCOMM intends to distribute its services globally in a
cost-effective manner primarily through value-added resellers ("Resellers") and
other distribution channels, as appropriate, in the United States and
international service licensees ("International Licensees") around the world.
To use the ORBCOMM System for text messaging, a user creates a message
using a computer connected to an ORBCOMM subscriber communicator ("Subscriber
Communicator") or a stand-alone Subscriber Communicator, which message is sent
to the nearest ORBCOMM System satellite and delivered to an ORBCOMM Earth
station, which supports communication with the satellites, and then to the
Gateway Switching System, which processes the messages. Within the Gateway, the
message is processed using a combination of ORBCOMM-developed and commercial
email software, and sent on to its ultimate destination. If desired, an
acknowledgment message is returned to the sender. The final delivery may be to
another Subscriber Communicator or may make use of public/private X.25 data
networks or the Internet.
In October 1994, OCC was awarded Federal Communications Commission ("FCC")
authority to construct, launch and operate a LEO satellite-based data and
messaging communications system in the United States (the "FCC License"). In
1992, certain portions of the radio spectrum were allocated by the International
Telecommunications Union ("ITU") for use by Little LEO satellite systems, such
as the ORBCOMM System, on an international basis.
Recent Developments
In 1995, in addition to the successful launch of the first two ORBCOMM
System satellites, ORBCOMM completed initial development and construction of the
ground infrastructure located in the United States and associated network
control systems, and tested prototype Subscriber Communicators. In 1996,
additional progress was made on the ORBCOMM System. In February 1996, ORBCOMM
initiated intermittent data communications services in the United States. The
two ORBCOMM System satellites and four U.S. Earth stations are providing data
communications services, focused on environmental and industrial monitoring
applications for the U.S. environmental and oil and gas industries, and asset
and cargo tracking applications for the U.S. government and commercial entities,
with additional tracking and positioning applications targeted for the near
future. ORBCOMM has two satellites on orbit, with 26 additional satellites
scheduled for launch in 1997 and 1998.
ORBCOMM USA plans to provide initial services in the United States
primarily through Resellers, many of whom have an existing, well-established
market presence through their existing customer bases, market-specific brand
name recognition and distribution networks. Outside the United States, ORBCOMM
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International will enter into service license agreements ("Service License
Agreements") with International Licensees who will be responsible in their
territory for, among other things, procuring from ORBCOMM International and
installing the necessary Gateways (facilities that transport and control the
flow of data and necessary communications and other information for the ORBCOMM
System), obtaining all regulatory approvals to provide services using the
ORBCOMM System and operating and marketing services using the ORBCOMM System.
During 1996, ORBCOMM USA added 14 Resellers and ORBCOMM International expanded
its worldwide network of International Licensees. ORBCOMM USA has 33 reseller
agreements with companies including Arinc, Inc., Corexco Consulting Services,
Inc., Globitrac, Inc., Sky-Eye Railway Services, Inc. and the Stevens Water
Monitoring Division of Leupold & Stevens, Inc. In addition, ORBCOMM
International has signed seven Service License Agreements with International
Licensees, five of which were executed during 1996. In 1996, ORBCOMM
International signed a Service License Agreement with European Company for
Mobile Communication Services, B.V., ORBCOMM Europe ("ORBCOMM Europe"), a
consortium of European companies, which has been given the exclusive right to
market services using the ORBCOMM System to approximately 40 European countries.
ORBCOMM International has also executed Service License Agreements with ORBCOMM
Canada Inc., which is controlled by Teleglobe, Cellular Communications Network
(Malaysia) Sdn. Bhd. ("Celcom"), a wholly owned subsidiary of TRI, ORBCOMM
Maghreb, S.A. ("ORBCOMM Maghreb"), CEC Bosphorus Communications, Ltd. ("CEC
Bosphorus"), SEC ORBCOMM (Middle East) Ltd. ("SEC ORBCOMM") and Communications
Technology Inc. ("CTI"). ORBCOMM Canada, Celcom, ORBCOMM Maghreb, CEC Bosphorus,
SEC ORBCOMM and CTI were granted the exclusive right to market ORBCOMM System
services in Canada; Malaysia, Singapore and Brunei; Morocco, Tunisia, Algeria
and Mauritania; Turkey and eight Central Asian countries; 11 Middle East
countries; and the Republic of Korea, respectively. As of December 31, 1996, 69
countries with a combined population of almost one billion were covered by
Service License Agreements.
During 1996, two Subscriber Communicator manufacturers were added to the
three existing manufacturers and four different types of Subscriber
Communicators were approved for manufacture. ORBCOMM has development and
manufacturing agreements with Kyushu Matsushita Electric Company, Ltd. (also
known as "Panasonic"). ORBCOMM has also executed Subscriber Communicator
Manufacturing Agreements, which include terms regarding the development,
manufacture and sales support for Subscriber Communicators, with
Scientific-Atlanta, Inc. ("Scientific-Atlanta"), Magellan Corporation
("Magellan"), a subsidiary of Orbital, Torrey Science Corporation ("Torrey
Science") and Stellar Electronics Ltd. ("Stellar"). Panasonic has received
authorization from ORBCOMM to manufacture two basic Subscriber Communicators,
one with and one without the ability to receive positioning signals from the
Global Positioning Satellite ("GPS") system, both of which are now commercially
available. Torrey Science received authorization from ORBCOMM in August 1996 and
Stellar received authorization from ORBCOMM in September 1996 to manufacture a
basic Subscriber Communicator.
Services
ORBCOMM System service offerings for mobile data and messaging
communications will fall into two broad categories with variations based on
market requirements: tracking and monitoring; and message and priority
communications.
Tracking and Monitoring. ORBCOMM believes that tracking and monitoring
users will include a broad group of industries that require a means of regularly
collecting data from, or in some cases controlling equipment in, multiple remote
locations. Major target markets include: (i) worldwide mobile asset tracking;
(ii) industrial monitoring and control applications; and (iii) environmental
data collection. Many of these users manage numerous, widely dispersed sites in
remote areas out of reach of the public switched telephone network ("PSTN") or
terrestrial-based wireless systems, and often accomplish data collection and
equipment control functions manually with on-site personnel.
Messaging and Priority Communications. ORBCOMM believes that messaging
communications users will include a broad range of commercial and consumer users
who require a means of communicating with locations such as their office,
dispatch center or home or who require the ability to send priority messages or
positioning information. Examples include professionals who work away from their
office, fleet operators who
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require messaging between a central office and mobile assets, and individuals
who desire a means of communicating short messages or positioning information
from an automobile, boat or other remote locations. These users rely on pagers,
cellular phones, fleet dispatch systems and public pay phones, all of which can
be unavailable, inconvenient or expensive in certain geographic locations. In
remote geographic regions outside the United States, these PSTN and
terrestrial-based wireless systems are not always available or cost-effective.
As a satellite-based system with coverage available virtually anywhere on the
Earth's surface, ORBCOMM can offer messaging services through the ORBCOMM
System.
Addressable Markets
ORBCOMM has identified a number of industries and industry segments in the
United States where there exists a demand for mobile data and messaging
communications services for tracking and monitoring, which ORBCOMM views as the
initial primary target applications for its services. ORBCOMM believes that
certain portions of the transportation, energy, environmental and marine
industries or industry segments and the U.S. government possess characteristics
or requirements that are particularly well-suited to the services offered by
Little LEO systems. ORBCOMM refers to these portions as "addressable markets."
ORBCOMM's description of potential markets for its data and messaging
communications service offerings and ORBCOMM's addressable markets represent
only ORBCOMM's estimates with respect to such markets.
Transportation. Transportation companies require a cost-effective means of
regularly and reliably monitoring the location and the status of cargo globally
to reduce cargo losses, improve service and better use transportation assets.
The transportation market can be separated into four categories: trailers
including full truckload, less-than-full truckload and private trucking;
long-haul trucking; containers; and rail cars.
ORBCOMM believes that the U.S. addressable market for full truckloads
comprises non-refrigerated trailers belonging to large trucking fleets that need
to improve trailer utilization, and for less-than-full truckload comprises
non-refrigerated trailers that carry high-value goods and travel longer,
less-than-full truckload routes (greater than 400 miles) between regional
centers. The addressable market for private fleet trucks is expected to be those
used in "just-in-time" manufacturing and distribution systems and which,
therefore, typically require high levels of efficiency due to competition from
for-hire companies. ORBCOMM expects the addressable market for refrigerated
trailers to comprise those trailers for which cargo monitoring and trailer
utilization are required. Trailers (both refrigerated and non-refrigerated) are
being tracked by geostationary satellite-based systems (such as those offered by
QUALCOMM) that offer seamless coverage, but depend on larger power sources that
require the trailer to be attached to the main engine of the tractor. As a
result, when the trailer is detached from the tractor, it can no longer be
tracked. A low-power cellular system can be used to track untethered trailers;
however, geographic coverage is limited and ORBCOMM believes that the cost of
cellular roaming may make this service cost-prohibitive. Private trucking fleets
typically use systems internal to their companies where each trailer's number is
manually recorded as trailers enter and leave a point of distribution.
ORBCOMM believes that its addressable portion of the U.S. long-haul
trucking market is characterized by smaller fleets (typically less than 50
trucks) that need mobile communications to compete with larger fleets but have
been unable to afford the service offerings where equipment costs are
approximately $4,000 per unit. A low-cost alternative for these smaller fleets
has been paging, although paging offers only a one-way short data link to the
vehicle. ORBCOMM believes that the addressable market for the owner-operated
transportation vehicle sub-segment comprises those vehicles contracted to
larger, long-haul carriers. While these larger carriers resist installing $4,000
mobile communications units on vehicles they do not own, many are requiring
owner-operators to equip their vehicles with mobile communications.
ORBCOMM expects that its addressable market in the container (intermodal)
industry segment in the United States will comprise those containers carrying
the most valuable items subject to theft. Intermodal container transportation
systems use manual systems to record containers as they enter and leave yards.
Unlike the ORBCOMM System, these passive systems record where a trailer has
been, but not where it is, its status or the condition of its contents.
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ORBCOMM believes that the addressable market for rail transportation will
comprise those rail cars used to transport high-value cargo or hazardous cargo
comprising bulk materials. The American Association of Railroads has mandated
the use of automatic equipment identifiers ("AEI") on rail cars. AEI systems
consist of a radio tag mounted on the rail car and a reader that records the
identity of the car as it passes by. AEIs therefore share the same limitations
as bar code systems because they only record where the trailer has been, not its
current location, status or the condition of its contents.
Energy. ORBCOMM believes that the ORBCOMM System can provide an effective
means of monitoring and controlling various assets used in the energy industry.
Pipeline operators take active measures to monitor lines and limit pipeline
corrosion to comply with laws by installing cathodic protection systems that
include a device called a rectifier. Protection systems also are required by
federal regulations on storage tanks, utility systems and injection wells. The
majority of protection system records are compiled from data collected by
personnel who travel to the site and record the readings. Conventional industry
practice is to install one rectifier per mile of pipeline with generally one
transceiver (subscriber communication device) per rectifier. However, several
pipelines can be laid along one right-of-way, with a common rectifier system,
meaning that multiple rectifiers can feed into one transceiver unit. ORBCOMM
believes that its addressable market comprises the aggregate number of
rectifiers deployed on U.S. pipelines. In addition, ORBCOMM believes that its
addressable market for wells producing natural gas and crude oil and gas and
electric utility meters in the United States will be those production wells and
utility meters located in remote geographic locations.
Environmental. Many industrial companies and government agencies have a
need to monitor meteorological, hydrological and environmental data such as
rainfall, water levels and water quality at remote sites. For example, the
Environmental Protection Agency has established standards for air and water
quality that require pollution abatement procedures, which procedures rely
heavily on the automated logging and collection of data from remote sites. In
addition to pollutants, water monitoring devices are used to measure flow rate,
temperature and water level. ORBCOMM believes that the addressable market
comprises those sites that are located in highly remote areas not served by
terrestrial systems, which can use Subscriber Communicators to transmit small
amounts of data relatively infrequently and on an exception basis.
Marine. ORBCOMM has identified two U.S. marine industry segments,
Fisheries, and Barges and Workboats. ORBCOMM's addressable market is expected to
be those fishing vessels that operate primarily in the Gulf of Alaska, the
Northwest United States and the Northwestern Atlantic. These vessels usually
remain at sea for extended periods and operate on extremely tight margins with
operating costs that are carefully controlled. As a result, they need low-cost
communications systems to meet safety and regulatory requirements and to
exchange commercial and operational information with their offices, fuel
providers, provisioners and packing houses. ORBCOMM expects that the addressable
market for barges and workboats will comprise barges that operate without
independent sources of power and carry grain, coal and other commodities. They
traverse U.S. waterways in groups of barges that are "fleeted" together and
pushed by towboats and require energy-efficient monitoring and communications
devices to transmit position reports, cargo status reports and security
information. Tugs, towboats and supply/service boats also need low-cost two-way
communications to send operational and service-related data to their land-based
headquarters and receive dispatch instructions in return.
U.S. Government. ORBCOMM believes U.S. Government applications represent a
major target market for its services. Pressures to contain Federal spending and
specific acts of Congress have resulted in a major change in the procurement
practices in the Department of Defense ("DoD") and civil agencies, causing them,
where possible, to purchase satellite-based services from commercial providers.
ORBCOMM believes that use of LEO systems like the ORBCOMM System will provide
Government users with low-cost solutions, low probability of intercept and
detection and worldwide availability. ORBCOMM believes that DoD programs have
requirements that are unfulfilled by existing systems. Each program promotes the
vision of extending communications down to individual soldiers and system
operators. There is no dedicated DoD system available using inexpensive, small,
lightweight communication units. ORBCOMM expects to compete to provide LEO
service to the U.S. Government, including in connection with certain programs
already announced by the U.S. Government.
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Foreign Governments. Use of Little LEO systems such as the ORBCOMM System
is expected to provide foreign governments with low-cost applications, low
probability of intercept and detection and worldwide availability. Potential
defense applications include transmission of GPS-determined position data for
maneuvering units and downed pilots and transmission of air defense, fire
support data, asset tracking and tactical messaging. Potential civil government
applications include wide-area clandestine communications, monitoring and
control of natural resources and search and rescue functions. For foreign
governments, ORBCOMM anticipates that the ORBCOMM System could improve coverage
and reliability and reduce the cost of such applications.
With respect to the provision by ORBCOMM of services using the ORBCOMM
System on an international basis, ORBCOMM believes that certain of its
international business activities, including its provision of services through
International Licensees to foreign end-users, public or private, will be
governed primarily by the internal laws of the relevant foreign countries or
regions. The provision of such services may also be subject to U.S. laws,
regulations and treaties regarding the export or sale of technology, products or
services by U.S. companies to foreign governments or private foreign entities,
including those U.S. laws, regulations and treaties that restrict or regulate
the export by U.S. companies of certain sensitive technologies, products or
services having military or other applications.
Future Markets. In addition to the markets and applications (such as those
described above) that have already displayed a demand for mobile data and
messaging communications services, ORBCOMM believes that with the full
deployment of the constellation, the ORBCOMM System's combination of
capabilities will stimulate new demand, especially among potential messaging
users. Internationally, ORBCOMM believes that the ORBCOMM System can offer
services in developing countries or remote regions where basic telephone service
or data and messaging services are not available. As a satellite-based system
with coverage of virtually all of the Earth's surface, ORBCOMM can efficiently
and cost-effectively offer communications services in these geographic areas
through the ORBCOMM System.
Marketing
Domestic. The exclusive right to market the ORBCOMM System in the United
States is held by ORBCOMM USA, a marketing partnership in which Teleglobe Mobile
owns indirectly a 49% interest. ORBCOMM USA has developed a comprehensive
marketing plan that includes distribution, applications development, customer
service and pricing strategies. While offering commercial intermittent service,
ORBCOMM USA is seeking to build an initial base of subscribers in the United
States and expand on its agreements with key channels of distribution. During
the fully operational stage, ORBCOMM expects that ORBCOMM USA's sales and
marketing staff will primarily support indirect channels of distribution.
ORBCOMM USA is in the process of negotiating and signing agreements with
Resellers who purchase ORBCOMM System services directly from it and resell these
services to end-users in a specific industry and/or market as part of a package
that may include other products or services. In soliciting customers, the
Reseller "adds value" to the basic service offering by bundling related
applications software, hardware or product packaging for its respective industry
or market segment. Mobile data carriers are expected to offer ORBCOMM System
services by taking advantage of the ORBCOMM System's "gap-filler" properties as
well as its geolocation and acknowledgment features. Such additional ORBCOMM
partners are likely to come from such areas as paging, personal communications
services ("PCS"), mobile data, cellular and intelligent transportation systems.
International. The exclusive right to market the ORBCOMM System outside
the United States is held by ORBCOMM International, another marketing
partnership in which Teleglobe Mobile owns indirectly a 51% controlling
interest. Provision of communication services using the ORBCOMM System outside
the United States is expected to be achieved through International Licensees
authorized by ORBCOMM International. ORBCOMM International has signed seven
Service License Agreements with International Licensees and is in the process of
negotiating and signing additional Service License Agreements covering various
countries or regions of planned service outside of the United States.
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International Licensees will be responsible for obtaining all necessary
licenses and approvals for the use of the ORBCOMM System and the construction
and operation of the Gateways in the designated territories. Accordingly, in
selecting authorized International Licensees for a particular country, ORBCOMM
International considers such factors as an International Licensee's: (i)
reputation in the marketplace; (ii) existing distribution capabilities and
infrastructure; (iii) financial condition and other resources; and (iv) ability
to obtain the requisite local regulatory approvals. International Licensees will
pay fees for access to the ORBCOMM System in their territory, including a
monthly Satellite Usage Fee. The Satellite Usage Fee is calculated as the
greater of a percentage of gross operating revenues and a data throughput fee,
which percentage and dollar amount may be increased by ORBCOMM International in
accordance with the terms of the agreement.
In conjunction with the execution of a Service License Agreement, an
International Licensee will be required to purchase from ORBCOMM International a
Gateway, which will include a specific number of Earth stations. In certain
defined circumstances, an International Licensee may be permitted by ORBCOMM
International to share a Gateway with another International Licensee in an
adjacent territory, thereby reducing the initial out-of-pocket start-up costs
for an ORBCOMM System franchise. For example, ORBCOMM International has executed
a Ground Segment Facilities Use Agreement with ORBCOMM Canada, pursuant to which
ORBCOMM Canada is authorized for a fee to access and use the U.S. Gateway on a
shared basis with ORBCOMM USA.
System Architecture
Overview. The ORBCOMM System has been designed to provide for the delivery
and receipt of data communications and short, alphanumeric paging-like messages
anywhere in the world on a highly efficient and cost-effective basis. ORBCOMM
System satellites are designed specifically for the transmission of short
messages. This design focus eliminates a number of complex and expensive
components such as customized spot beams, on-board switching and high-powered
amplifiers that are required on larger, more complex satellites designed to
carry voice, video and data traffic. The less complex and more compact design of
the ORBCOMM System satellites (approximately 95 pounds) reduces the cost and
time of production and enables ORBCOMM to launch multiple satellites using a
single, relatively low-cost launch vehicle. The ORBCOMM System uses a digital
packet-switched communication protocol. ORBCOMM believes this design will
provide it with a substantial cost advantage versus the communication protocols
to be used by the proposed Big LEO systems such as Iridium and Globalstar.
Unlike the ORBCOMM System, Big LEO systems, which are designed primarily for
two-way voice traffic, are required to establish a circuit-oriented connection
over their network to transmit even short messages, which significantly
increases the per-message transmission cost for short messages.
The two operational ORBCOMM System satellites have provided ORBCOMM with
significant information regarding actual satellite performance in a space
environment. As a result of analyzing this information, as well as information
obtained prior to launch, ORBCOMM, in conjunction with Orbital, has undertaken a
redesign of certain system elements of the satellites. ORBCOMM also continues to
experience, from time to time, certain technical difficulties with the ORBCOMM
network, including unplanned outages of certain electronic systems and
subsystems on its initial two satellites resulting in the temporary inability to
process subscriber communications. While ORBCOMM believes these technical
difficulties have been addressed as experienced, and that none of these
difficulties has resulted in a significant degradation of satellite performance,
there can be no assurance that performance degradation in these two satellites
will not occur in the future.
The ORBCOMM System consists of four operational segments: (i) a base space
segment consisting of a constellation of 28 LEO satellites; (ii) a ground
segment consisting of Gateways, the major elements of which include Earth
stations sending and receiving signals and a message switching system that
processes the message traffic; (iii) a control segment to monitor and manage the
flow of information through the system; and (iv) a subscriber segment consisting
of communicators used by subscribers to transmit and receive messages to and
from nearby satellites.
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Space Segment. The base Space Segment will consist of a constellation of
28 satellites comprising three planes of eight satellites and two planes of two
satellites in highly inclined orbits (of which one plane of two satellites has
been launched), all at approximately 775 kilometers above the Earth. The two
in-orbit satellites are in a 70 degrees inclined plane at an altitude of
approximately 740 kilometers. The MicroStar(TM) satellites are produced by
Orbital and generally will be deployed in groups of eight using Orbital's
Pegasus(R) XL launch vehicle. Two satellites are to be placed in a
high-inclination orbit using an Orbital Taurus(R) launch vehicle. The design of
the remaining 26 satellites (as well as the eight ground spare satellites) is
expected to be substantially identical.
Under the terms of the ORBCOMM System Procurement Agreement (the
"Procurement Agreement") between Orbital and ORBCOMM, ORBCOMM is purchasing,
among other things, 34 LEO satellites and launch services for 26 satellites.
Eight of the 34 satellites may be used as ground spares and launched in the
event of the loss of satellites as a result of a launch failure or in-orbit
satellite failure. In the event such satellites are not needed for such purpose,
ORBCOMM intends to launch these satellites as an additional plane of eight, as
authorized by the FCC License. This would increase global coverage and provide
additional system redundancy. Except for the communications software, which is
the responsibility of ORBCOMM, Orbital is responsible for the performance of the
satellites, the U.S. Earth stations and the satellite management functionality
of the Network Control Center ("NCC").
The ORBCOMM network is unique in that both the Ground Segment and the
Subscriber Segment (described below) communicate with the satellites in the same
band, thus eliminating the design complexity, as well as the associated mass,
power and cost, of supporting multiple radio payloads on a single satellite. The
satellites also contain an intelligent packet-routing capability, including a
limited store-and-forward capability.
Ground Segment. The Ground Segment consists of Gateways strategically
located throughout the world. The role of the Gateway is to provide access to
the Space Segment and interface to public and private data networks. The major
elements of a Gateway include:
- Earth stations, each of which is composed of two radomes, with enclosed
VHF tracking antennae, one of which is redundant, associated pedestal,
controller, and radio equipment;
- Gateway Message Switching System, which processes the message traffic and
provides the interconnection to the terrestrial networks; and
- Gateway Management System, which manages the Gateway elements.
To provide real time services using the ORBCOMM System in a particular
geographic region, an appropriately located Gateway is required. Substantially
all elements of the U.S. Gateway have been constructed, including four Earth
stations located in New York, Arizona, Georgia and Washington. ORBCOMM
International has entered into agreements with six International Licensees for
the construction of Gateways outside the United States and expects to enter into
similar additional agreements in connection with the execution of new Service
License Agreements. The cost and implementation of these Gateways is expected to
be borne by the International Licensees.
The Gateway satellite links have been designed to make use of single uplink
and downlink channels for all ORBCOMM System satellites by using a Time Division
Multiple Access ("TDMA") protocol. This protocol will permit multiple Gateways
to communicate simultaneously with a single satellite. The TDMA protocol has
several advantages, including the ability to provide a virtually seamless
handover of a satellite from Earth station to Earth station under the
centralized control of the NCC.
Control Segment. The Control Segment monitors and manages all network
elements to ensure continuous, consistent operations in the provision of quality
service. The Control Segment is housed at the NCC. ORBCOMM is constructing a new
NCC, which is scheduled to be completed during the third quarter of 1997, that
will allow ORBCOMM to control, monitor and administer the 28 satellite
constellation and ground control assets.
The Control Segment systems include a network management system that
presents the status of all network elements and a space vehicle management
system. Through the U.S. Gateway, managed from the
8
<PAGE> 11
NCC, ORBCOMM has access to the Space Segment for command and control purposes,
although, consistent with the rules and regulations of the FCC, OCC maintains
ultimate control over the ORBCOMM System.
Subscriber Segment. The Subscriber Segment consists of various models of
Subscriber Communicators that are generally designed to support specific
application needs of users. The Subscriber Communicator models will include: (i)
vehicular/battery-powered Subscriber Communicators that could be used in asset
tracking, cargo monitoring, or vehicular operation monitoring; (ii) externally
powered Subscriber Communicators for fixed applications such as pipeline
monitoring, remote device control, or environmental monitoring; and (iii)
self-contained, battery- and/or solar-powered Subscriber Communicators that
would support applications where commercial or other external power is not
available, including personal messaging applications.
SUMMARY SATELLITE DATA
The most significant characteristics of the satellites that comprise the
ORBCOMM System, such as their design specifications, coverage and design life,
as well as licensing and launch information for the satellites, are summarized
in the following table.
<TABLE>
<CAPTION>
NUMBER OF LAUNCH DESIGN
SATELLITES(1) PLANE VEHICLE LICENSED LIFE
------------- ---------- ---------- ------------------- -------
<S> <C> <C> <C> <C> <C>
A. OPERATIONAL(2)
1. FM 1-2 2 70 degrees Pegasus October 20, 1994(3) 4 Years
B. LICENSED
1. FM 3-4 2 70 degrees Taurus(4) October 20, 1994 5 Years
2. FM 5-12 8 45 degrees Pegasus XL October 20, 1994 5 Years
3. FM 13-20 8 45 degrees Pegasus XL October 20, 1994 5 Years
4. FM 21-28 8 45 degrees Pegasus XL October 20, 1994 5 Years
5. FM 29-36(5) 8 45 degrees Pegasus XL October 20, 1994 5 Years
</TABLE>
- ---------------
(1) Each of the satellites that comprise the ORBCOMM System is an Orbital
MicroStar satellite, measuring approximately 41 inches in diameter, 6.5
inches in height, 170 inches in deployed length and 88 inches in "deployed
width at solar arrays."
(2) The two ORBCOMM System satellites that are in orbit provide communications
availability in the United States for approximately 10% of each 24-hour
period (eight to ten passes over a fixed point on the Earth's surface each
day), with maximum outages of approximately nine hours.
(3) The license for the ORBCOMM System issued to OCC by the FCC on October 20,
1994 supersedes the earlier experimental licenses granted to OCC and
includes the two satellites launched by OCC in April 1995. The October 20,
1994 license grants OCC the authority to construct, launch and operate 36
LEO satellites in the United States.
(4) These two satellites are intended to be launched as a secondary payload on a
Taurus launch vehicle, also manufactured by Orbital.
(5) These eight satellites represent ground spares that may be deployed as a
fourth plane by ORBCOMM, provided that, subject to FCC approval, ORBCOMM may
determine not to so deploy such satellites.
COMPETITION
Competition in the communications industry is intense, fueled by rapid and
continuous technological advances and alliances between industry participants
seeking to use such advances on an international scale to capture significant
market share. ORBCOMM inaugurated commercial service on February 1, 1996,
becoming the first commercial Little LEO mobile satellite service provider.
ORBCOMM believes that commencement of commercial service provides it with a head
start in developing markets, distribution systems, applications and customers
globally. ORBCOMM expects that potential competitors will include other Little
LEO systems, such as Starsys Global Positioning, Inc. ("Starsys"), Big LEO
systems, such as the Iridium and Globalstar systems and several existing and
planned geosynchronous Earth orbit ("GEO") systems such as the American Mobile
Satellite Corporation system.
Starsys is licensed to construct and operate a multiple-satellite
constellation that, if deployed, could compete directly with the ORBCOMM System.
Starsys employs code division multiple access ("CDMA") modulation (spread
spectrum) that must operate in spectrum that is allocated on both a "primary"
and
9
<PAGE> 12
"secondary" basis to Little LEO services. As a result, Starsys will operate at
low power levels to avoid interference to other services. The low power levels
result in a maximum transmission rate of 600 bps from Subscriber Communicators
compared with 2,400 bps for the ORBCOMM System. In addition, the U.S. Government
has imposed a channel occupancy limit on Starsys of 25% of that permitted for
the ORBCOMM System to prevent interference to existing U.S. Government systems.
ORBCOMM believes that no operational Starsys satellites will be launched until
1998 at the earliest, and that completion of the network will not be
accomplished before 2000.
One other entity has been licensed by the FCC to provide Little LEO
satellite services in the United States. Volunteers in Technical Assistance
("VITA"), a not-for-profit organization, has been licensed for one of the two
satellites for which it applied. VITA will use a small amount of uplink and
downlink spectrum to transmit health, research and scientific data on a delayed
basis between developing countries and the United States. VITA's first satellite
was destroyed in 1995 as a result of a launch vehicle failure. VITA has
requested that the FCC authorize it to launch a replacement satellite. It is
expected that the FCC will authorize VITA to launch a replacement satellite.
ORBCOMM does not expect that any of the other proposed Little LEO systems
participating in a second licensing round before the FCC will be in a position
to offer competing real time data and messaging communications services before
the year 2000. Even if the FCC were to license one or more of these other
applicants, ORBCOMM holds an advantage over these potential competitors by
virtue of its having already obtained FCC licensing for all elements of its
system in the United States, by achieving, in large part, international
coordination of its designated frequencies through the ITU, and having already
designed, constructed and deployed a fully functional, end-to-end system. Over
the course of the next several years, ORBCOMM expects that it will obtain
further advantages over these potential competitors by (i) launching the
remaining satellites in the ORBCOMM System, (ii) signing agreements with
additional Subscriber Communicator manufacturers, (iii) signing reseller
agreements through ORBCOMM USA, (iv) signing Service License Agreements through
ORBCOMM International and (v) expanding its marketing activities generally as
the ORBCOMM System matures.
Plans for other Little LEO systems have been announced in Russia, France,
Tonga, Brazil, Mexico, Uganda, Australia and Korea. However, with the sole
exception of the French candidate system, the ORBCOMM System and those of the
other U.S. licensees are expected to occupy all but a small portion of the
allocated spectrum and are protected from harmful interference from all other
systems.
The Big LEO systems, which will operate LEO mobile satellite systems using
radio frequencies above 1 GHz, are not expected to be ready for real time,
uninterrupted service before 1998. In addition, all the Big LEO systems are
designed primarily to provide two-way voice services which require larger, more
complex satellites than the ORBCOMM System satellites, and larger constellations
to provide coverage. As a result, the cost of the Big LEO systems is
significantly greater than those of the ORBCOMM System. Based on filings with
the FCC, Iridium anticipates an initial service date in 1998 for a proposed
66-satellite constellation to provide voice and other communications services at
usage charges of approximately $3.00 per minute plus tail charges (land-line
extension charges). The total system cost is expected to be approximately $4.7
billion. The Globalstar system is expected to cost approximately $2.5 billion
and consists of a constellation of 48 satellites with usage charges of
approximately $0.55 per minute. The announced objective service date for the
Globalstar system is in 1998.
Satellite-based communications systems are characterized by high up-front
costs and relatively low marginal costs of providing service. A number of Big
LEO and Little LEO systems are being constructed or proposed, and while the
proponents of these systems foresee substantial demand for the services they
will provide, the actual level of demand will not become known until such
systems are constructed, launched and begin operations. Big LEO and GEO systems
are designed primarily to provide two-way voice services, which require larger,
more complex satellites and require a circuit-oriented connection over their
network to transmit even short messages, which significantly increases their
per-message cost for such short messages. However, these systems could seek to
offer services similar to those offered by the ORBCOMM System. In such case,
price competition could be intense.
10
<PAGE> 13
The ORBCOMM System is not intended to compete directly with existing and
planned terrestrial messaging and data systems including cellular paging
systems. ORBCOMM believes that the ORBCOMM System will complement these
services, which provide low-cost services primarily in metropolitan areas where
subscriber densities justify construction of radio towers. Such systems
generally do not have sufficient coverage outside metropolitan areas, making
them less attractive to some vertical markets such as field service operations
and trucking, where assets spend large portions of their operating time outside
terrestrial system coverage areas. The ORBCOMM System presents an attractive
complement to tower-based services because it can provide geographic gap-filler
service at affordable costs without the need for additional infrastructure
investment.
It is expected that as terrestrial communications services expand to
regions that are underserved or not served by wireline or cellular services,
demand for ORBCOMM System service in these regions may be reduced. ORBCOMM may
also face competition in the future from companies using new technologies and
new satellite systems. A number of these new technologies, even if they are not
ultimately successful, could have an adverse effect on ORBCOMM. ORBCOMM's
business would be adversely affected if competitors begin operations or existing
or new communications service providers penetrate its target markets before
completion of the ORBCOMM System. Additionally, as with any satellite-based
system, the ORBCOMM System will function when there is an unobstructed
line-of-sight between the user and one or more of the ORBCOMM System satellites
overhead, and services will not be available inside buildings or other similar
structures. There can be no assurance that these characteristics will not
adversely affect subscriber demand for the ORBCOMM System.
REGULATION
United States FCC Regulation
Regulatory History of ORBCOMM System. All commercial non-voice,
non-geosynchronous ("NVNG") satellite systems, including Little LEO systems such
as the ORBCOMM System, in the United States are subject to the regulatory
authority of the FCC, which is the U.S. agency with jurisdiction over commercial
uses of the radio spectrum. Little LEOs must obtain an authorization from the
FCC to construct and launch their satellites and to operate their satellites to
provide services in assigned spectrum segments.
On February 28, 1990, OCC filed an application with the FCC for a Little
LEO system and on March 13, 1992 and May 28, 1993, the FCC awarded OCC
experimental licenses to develop and test a limited Little LEO service. These
licenses, plus other licenses previously granted to OCC, permitted the launch of
two satellites, the construction of two ground stations, the development and
production of 1,000 subscriber terminals and the marketing of revenue-producing
services.
On October 20, 1994, the FCC License was issued to OCC. Pursuant to the FCC
License, OCC was granted authority by the FCC to construct, launch and operate
an additional 34 satellites located 775 kilometers above Earth, in four inclined
orbital and two near-polar planes, for the purpose of providing two-way data and
message communications and position determination services in certain specified
segments of the radio frequency spectrum. The FCC License grants OCC the
authority to operate in certain segments of the radio frequency spectrum for its
uplink and downlink functions.
<TABLE>
<S> <C>
Uplink: 148.0-149.9 MHz
Downlink: 137.0-138.0 MHz and 400.075-400.125 MHz
</TABLE>
The FCC License is for private carriage and extends ten years from the
operational date of the first ORBCOMM satellite, FM1, which was April 3, 1995.
The milestone requirements of the FCC License mandate that OCC launch its first
two satellites by December 1998 and its remaining 34 authorized satellites by
December 2000. OCC has already met the first milestone with the launch of its
first two satellites, FM1 and FM2, in April 1995. OCC has set an aggressive
launch schedule for 26 satellites that, if successful, will result in OCC
reaching the second milestone by the end of the first quarter of 1998, subject
to receipt of FCC approval by such date in the event ORBCOMM determines not to
deploy the eight ground spares as a fourth plane. In addition, OCC is required,
three years prior to the expiration of the FCC License, to apply for a
11
<PAGE> 14
license renewal. Although the FCC has indicated that it is inclined to grant
license renewals, it is not certain that OCC's license would be renewed should
it apply.
Under the terms of a coordination agreement between Starsys and OCC, which
was incorporated into the terms of the FCC License, OCC is required to shut down
its left-hand circular polarization ("LHCP") satellite-to-subscriber downlink
channels under certain circumstances when operation of such channels would
interfere with the Starsys system. To further lessen the possibility of
co-polarization interference, OCC also agreed to modify its frequency plan to
locate its LHCP channels in the lower portion of the 137.0-138.0 MHz band.
Although this agreement only applies to OCC's domestic operations, the FCC
reserved the right to consider extending these coordination provisions to OCC's
international operations if notified of actual sharing difficulties between the
ORBCOMM System and Starsys.
In 1995, the FCC granted OCC licenses to operate four Earth stations in the
continental United States and granted OCC a blanket license to deploy up to
200,000 Subscriber Communicators. Thus, the ORBCOMM System is the only
commercial Little LEO system to be licensed fully for all segments of its system
within the United States.
Second Processing Round. On November 16, 1994, the FCC closed the
application filing period for applications for other proposed NVNG satellite
systems. There are seven NVNG applicants in the second processing round
(including OCC), each of which proposes to operate in all or part of the same
frequencies as the ORBCOMM System in the United States.
In its second round application before the FCC, OCC seeks authorization to
construct 12 more satellites to improve its high-latitude coverage over Alaska,
Canada and Europe, as well as to provide additional capacity and greater
in-orbit redundancy. This proposal would require the FCC to allocate an
additional 90 kHz of spectrum in the 137-138 MHz downlink to OCC. OCC also has
requested use of an additional 50 kHz in the 149.9-150.05 MHz band for a
worldwide gateway uplink. This spectrum, while registered to OCC, is occupied by
Russian military satellite downlinks.
Although the FCC has closed the second processing round for NVNG systems,
it has not yet licensed any of the second round applicants. On October 29, 1996,
the FCC issued a Notice of Proposed Rulemaking (the "Notice") that sets forth
proposed rules for the second licensing round for Little LEO systems. In the
Notice, the FCC indicated that there was sufficient spectrum available for only
one to three additional licensees. Due to the scarcity of spectrum, the FCC
proposed to limit the second processing round to applicants who were not
licensed in the first processing round and are not affiliated with companies
licensed in the first processing round. In addition, to the extent there are
mutually exclusive applicants in the second round, the FCC has sought comments
on whether it should conduct an auction for the available licenses. The FCC
anticipates that it will issue a final order on licensing rules by April 1997
and that it will proceed to licensing promptly thereafter. If the FCC's proposal
to limit the second licensing round to "new" applicants is adopted and upheld,
it would exclude OCC from participation in the second round. If OCC is in fact
excluded from the second licensing round, OCC would likely only obtain
additional spectrum to provide expansion capacity for the ORBCOMM System if
additional spectrum is subsequently allocated for use by Little LEO systems.
Request for Modification of FCC License. On October 20, 1995, OCC
submitted to the FCC a request for modification of the FCC License (the
"Modification Request"), proposing to reduce each of the ORBCOMM System
satellites' subscriber downlinks operating in the 137-138 MHz band from two to
one, while changing the downlink data rate to a selectable rate of either 4.8 or
9.6 kbps, which would reduce the ORBCOMM System's overall bandwidth requirements
by 40 kHz. OCC also proposed to continue to operate at 4.8 kbps in
high-inclination planes, and at 56 kbps in the gateway downlink on all
satellites. The Modification Request would eliminate the need for OCC to shut
down its LHCP when in view of a Starsys Earth station and thus obviate many of
the restrictions imposed on the ORBCOMM System under the terms of the FCC
License. In addition, the Modification Request would facilitate coordination of
the ORBCOMM System with Russian meteorological satellites operating in this
bandwidth and could facilitate OCC's coordination efforts with the proposed
French S/80-1 satellite system. Several of the other second round applicants
have filed comments with the FCC opposing the Modification Request. The
Modification Request has now completed the public comment cycle and OCC believes
that the Modification Request will be granted
12
<PAGE> 15
within the next several months. Should the FCC fail to grant the Modification
Request, it could have a material adverse effect on the ORBCOMM System.
International Regulation
ITU Spectrum Allocations. The ORBCOMM System operates both in the United
States and internationally using frequencies allocated for Little LEO systems in
the International Table of Frequency Allocations (the "International Table").
The International Table identifies radio frequency segments that have been
designated for specific radio services by the member nations of the
International Telecommunications Union (the "ITU"). Major portions of the 137 to
150 MHz band and a narrow portion of the spectrum band at 400 MHz have been
allocated on a global basis to Little LEO systems. The specific frequency
allocations for uplink and downlink operations include the following:
<TABLE>
<S> <C>
Uplink: 148.0-149.9 MHz (1.9 MHz on a primary basis)
Downlink: 137.0-138.0 MHz (675 kHz on a primary basis; 325 kHz on a
secondary basis)
400.15-401.00 MHz (850 kHz on a primary basis)
</TABLE>
In addition, 3 MHz of uplink and 3 MHz of downlink frequencies have been
allocated on a secondary basis in the 300 MHz band. The band 400.075-400.125 MHz
licensed for use by the ORBCOMM System already was allocated previously on a
global basis to Time and Frequency Standard service and, OCC's planned use of
this bandwidth complies with the regulations governing its use.
A designation of "primary" places the Little LEO systems on an equal
footing with existing users of these frequencies, subject to the provision that
they not interfere with those services or constrain their growth and, with
respect to certain countries and certain frequency bands, that the Little LEO
systems not claim protection from those other services. A "secondary"
designation means that the other users of the same frequencies have priority
over the Little LEO systems and are not required to accommodate or avoid
interference with them.
ITU Coordination. The United States, on behalf of OCC, is required to
coordinate the frequencies used by the ORBCOMM System through the ITU. ITU
frequency coordination is a necessary prerequisite to obtaining interference
protection from other satellite systems. The United States through the FCC, on
behalf of OCC, notified the ITU that the ORBCOMM System was placed in service on
April 3, 1995 and that it has operated without complaints of interference since
that time. The FCC also informed the ITU that OCC has successfully completed its
coordination with all other administrations except Russia and France and the FCC
has notified (registered) the ORBCOMM System with the ITU except for Russia and
France. ORBCOMM believes that the Modification Request would facilitate its
coordination efforts with Russia and could facilitate its coordination efforts
with France. OCC expects that it will successfully complete the ITU coordination
process with Russia and with France in 1997, at which time the ORBCOMM System
will be fully registered with the ITU and accorded protection from interference
from any other subsequently developed system.
ITU coordination is also required for the uplink ground segment of the
ORBCOMM System, but is the responsibility of individual administrations.
Depending on the location of particular ground stations, the applicable
coordination distance specified in the ITU procedures may extend across
international boundaries and require coordination by more than one government
authority.
Coordination with Intelsat and Inmarsat. Pursuant to the Intelsat treaty,
international satellite operators are required to demonstrate that they will not
cause economic or technical harm to Intelsat. OCC was notified in March 1995
that this coordination with Intelsat has been completed successfully. The
Inmarsat treaty similarly requires both technical and economic harm
coordination. OCC was notified in October 1995 that it had successfully
completed both technical and economic coordination with Inmarsat.
Regulation of Service Providers. Primary responsibility for obtaining
local regulatory approval to offer ORBCOMM System services in countries outside
the United States will reside with the various International Licensees. The
process for obtaining operating approval in foreign countries generally conforms
to the following model. The International Licensee requests operating authority
from the appropriate national
13
<PAGE> 16
regulatory body, which has the sole authority to grant an operating license.
Obtaining such local regulatory approvals normally requires, among other things,
that the International Licensee demonstrate the absence of interference to other
authorized uses of the spectrum in each country. In some countries, this process
may take longer due to heavier shared use of the applicable frequencies and, in
certain other countries, may require reassignment of some existing users. The
national regulatory authority may choose to associate with the ORBCOMM ITU
submission. The national regulatory authority also will be required to submit
so-called Appendix 3 information as required by the ITU Radio Regulations in
order to coordinate and protect ORBCOMM Earth stations in the territory or
region from interference by other ground systems.
ORBCOMM Canada has received authority to operate in Canada and provide
services using the ORBCOMM System. In addition, experimental or provisional
operating authority for the ORBCOMM System has been granted in Japan, Italy,
Germany, France, Russia, Mexico, Venezuela, Colombia, Chile and Korea to several
International Licenses or proposed International Licensees.
ORBCOMM and ORBCOMM International provide technical and regulatory
assistance to International Licensees in pursuing operating authority. The
assistance provided by ORBCOMM and ORBCOMM International includes actual
in-country demonstrations that the ORBCOMM System can share use of the allocated
spectrum with existing users while causing no harmful interference or
constraining operations and growth of those systems. While International
Licensees have been selected, in part, based on their perceived qualifications
to obtain the requisite foreign regulatory authorizations, there can be no
assurance that they will be successful in doing so, and if they are not
successful, service on the ORBCOMM System will not be available in such
countries. In addition, the continued operations of the International Licensees
may be subject to other regulatory requirements and changes in each foreign
jurisdiction.
EMPLOYEES
As of December 31, 1996, the Company had no full-time employees.
ITEM 2. PROPERTIES
None.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings material to its
financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company is a Delaware general partnership whose interests are wholly
owned on an indirect basis by Teleglobe and TRI. There is no public trading
market for any securities of the Company. To date, no cash distributions have
been paid by the Company to either TRI or Teleglobe and the Company does not
intend to do so in the near future.
There are no distributions required to be made by the Company to its
partners under the Company's Partnership Agreement. However, ORBCOMM is required
to distribute to its partners, OCC and Teleglobe Mobile, a minimum annual
distribution required by its Partnership Agreement in the amount of (i) 40%,
multiplied by the lesser of (a) such partners' distributive share of ORBCOMM's
taxable income for the preceding year, and (b) the excess, if any, of cumulative
Net Income (as defined) over cumulative Net Loss (as defined) allocated to such
partner since the inception of ORBCOMM. All other distributions are to be
14
<PAGE> 17
made at the discretion of the partners. Pursuant to the covenants contained in
the Indenture dated August 7, 1996 among ORBCOMM, Capital, ORBCOMM USA, ORBCOMM
International and Marine Midland Bank (the "Indenture") governing the Notes, no
additional cash distributions are permitted to be made to the partners of
ORBCOMM other than those distributions that satisfy the requirements of the
various limitations on "Restricted Payments" contained in the Indenture.
ITEM 6. SELECTED FINANCIAL DATA
The following selected income and expense data of Teleglobe Mobile and
ORBCOMM for the years ended December 31, 1994, 1995 and 1996 and the selected
balance sheet data of Teleglobe Mobile and ORBCOMM at December 31, 1993, 1994,
1995 and 1996 have been derived from the audited financial statements of
Teleglobe Mobile and ORBCOMM. The selected financial data set forth below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the audited financial statements of
Teleglobe Mobile and ORBCOMM and notes thereto included elsewhere in this
report.
SELECTED FINANCIAL DATA -- TELEGLOBE MOBILE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1994 1995 1996
--------- ---------- -----------
<S> <C> <C> <C>
Income and Expense Data:(1)
Total income(2)(3).............................. $ 0 $1,034,000 $(8,062,000)
Non-controlling interest........................ 0 0 828,000
Net income (loss)............................... (453,000) (291,000) (9,495,000)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1993 1994 1995 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance Sheet Data:(4)
Joint venture investment............ $10,003,000 $10,003,000 $33,512,000 $74,361,000
Total assets........................ 10,003,000 10,003,000 67,680,000 81,176,000
Total liabilities................... 485,000 938,000 276,000 6,223,000
Total partners' capital............. 9,518,000 9,065,000 67,404,000 74,953,000
</TABLE>
- ---------------
(1) For the period July 21, 1993 (date of inception) through December 31, 1993,
there were no income and expense transactions.
(2) Teleglobe Mobile is a development stage enterprise and had no significant
system revenue.
(3) Comprises share in net loss of a joint venture of $0, $219,000 and
$8,975,000 for the years ended December 31, 1994, 1995 and 1996,
respectively.
(4) Prior to 1995, Teleglobe Mobile had accounted for its investments in ORBCOMM
and ORBCOMM International using the cost method of accounting.
15
<PAGE> 18
SELECTED FINANCIAL DATA -- ORBCOMM
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1994 1995 1996
-------- --------- ------------
<S> <C> <C> <C>
Income and Expense Data:(1)
Total income(2)................................... $ 0 $ 958,415(3) $ 3,974,948(3)
Equity in earnings (losses) of affiliates(4)...... 0 (853,270) (4,602,096)
Excess (deficiency) of income over expenses....... (9,062) 55,202 (19,480,178)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1993 1994 1995 1996
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents......... $ 0 $ 5,000,000 $ 1,784,950 $ 56,870,424
Investments(5).................... 0 0 0 96,612,441
Mobile Communications Satellite
System, net(6)................. 43,924,717 68,646,861 106,989,940 170,033,722
Total assets...................... 47,665,519 73,646,861 109,029,658 329,509,214
Long-term debt.................... 0 5,000,000 4,174,430 173,269,619
Partners' capital................. 47,665,519 58,509,418 94,601,239 137,941,554
</TABLE>
- ---------------
(1) For the period June 30, 1993 (date of inception) through December 31, 1993,
there were no income and expense transactions.
(2) ORBCOMM is a development stage enterprise and had no significant system
revenue.
(3) Comprises interest income (expense), net and a non-refundable fee received
from a potential International Licensee.
(4) ORBCOMM accounts for its investments in ORBCOMM USA and ORBCOMM
International using the equity method of accounting.
(5) Includes $13 million of the net proceeds of the Old Notes Offering deposited
by ORBCOMM and Capital into a segregated account to be used solely for
purposes of funding the development and deployment of the ORBCOMM System and
related operating expenses. Also includes approximately $44.8 million in a
segregated account to provide for payment in full of interest on the Old
Notes and Notes through August 15, 1998 (the "Pledge Account") and
approximately $3.8 million in a segregated account related to the loan (the
"MetLife Note") provided under the Loan and Security Agreement dated
December 22, 1994 between the Company and MetLife Capital Corporation
("MetLife").
(6) Represents the ORBCOMM System.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
In 1993, Teleglobe, acting through Teleglobe Mobile, and Orbital, acting
through OCC, formed ORBCOMM. Each of Teleglobe Mobile and OCC owns a 50%
interest in ORBCOMM, with TRI through TR (U.S.A.) Ltd. holding a 30% interest in
Teleglobe Mobile. Concurrently with the formation of ORBCOMM, Teleglobe Mobile
and OCC formed two marketing partnerships, ORBCOMM USA and ORBCOMM International
(collectively, the "Marketing Partnerships"), with the exclusive right to market
the ORBCOMM System in the United States and internationally, respectively.
ORBCOMM is a 98% general and limited partner in each of the Marketing
Partnerships, while Teleglobe Mobile and OCC control the remaining 2% of ORBCOMM
International and ORBCOMM USA, respectively. OCC retains control over the
applicable FCC licenses and the ORBCOMM System, consistent with FCC regulations.
Teleglobe Mobile and OCC invested an aggregate of approximately $160
million in the ORBCOMM project. In addition, on August 7, 1996, ORBCOMM and
Capital completed the Old Notes Offering. In January 1997, all of the Old Notes
were exchanged for the Notes, which are substantially similar to the Old Notes,
except that the Notes are registered under the Securities Act of 1933, as
amended. The Notes are fully and unconditionally guaranteed on a joint and
several basis by Teleglobe Mobile, OCC, ORBCOMM USA and ORBCOMM International,
except that the guarantees are nonrecourse to the shareholders and/or partners
of the guarantors, limited only to the extent necessary for each such guarantee
not to constitute a fraudulent conveyance under applicable law.
16
<PAGE> 19
ORGANIZATIONAL STRUCTURE; FINANCIAL REPORTING
Pursuant to the terms of the partnership agreements for ORBCOMM and the
Marketing Partnerships: (i) Teleglobe Mobile and OCC share equal responsibility
for the operational and financial affairs of ORBCOMM; (ii) Teleglobe Mobile
generally controls the operational and financial affairs of ORBCOMM
International; and (iii) OCC generally controls the operational and financial
affairs of ORBCOMM USA. Investors are encouraged to refer to the financial
statements of Teleglobe Mobile, ORBCOMM and ORBCOMM International included
elsewhere in this report.
ORBCOMM International pays to Teleglobe Mobile an International Output
Capacity Charge that is a quarterly fee equal to 23% of its total service
revenues for such calendar quarter in exchange for the exclusive right to
market, sell, lease and franchise all ORBCOMM System output capacity outside the
United States. In consideration of the grant to Teleglobe Mobile of the
exclusive right to market, sell, lease and franchise all ORBCOMM System output
capacity outside the United States, Teleglobe Mobile, in turn, pays to ORBCOMM
an International System Charge that is a quarterly fee equal to the
International Output Capacity Charge minus 1.15% of Total Aggregate Revenues
defined as the total of ORBCOMM USA and ORBCOMM International total system
service revenues.
SERVICE ROLL-OUT
The roll-out of ORBCOMM System services will occur in two stages.
Commercial intermittent service commenced in the United States in February 1996.
ORBCOMM, through ORBCOMM USA, serves several U.S. market segments that can
benefit from intermittent data communications services, such as oil and gas
pipeline monitoring, certain environmental monitoring, and tracking and
positioning applications. As additional satellites are added to the
constellation, it will become possible to serve additional market segments such
as certain messaging applications that require real time services. Two
additional satellites are planned to be launched on a Taurus launch vehicle and
an additional eight satellites are planned to be launched on a Pegasus XL launch
vehicle during the third quarter of 1997. Service outside the United States will
be provided as International Licensees receive regulatory approval and build
network ground systems.
To facilitate the introduction and development of commercial service,
ORBCOMM procured several thousand Subscriber Communicators from certain of its
Subscriber Communicator manufacturers. ORBCOMM believes that this inventory will
be sufficient to support certain market sales activities into the second half of
1997.
REVENUE
ORBCOMM International pays to the Company an International Output Capacity
Charge that is a quarterly fee equal to 23% of its total service revenues for
such calendar quarter in exchange for the exclusive right to market, sell, lease
and franchise all ORBCOMM System output capacity outside the United States. In
addition, ORBCOMM International derives revenue under the gateway procurement
contracts executed by it in connection with the Service License Agreements or
the sale of Subscriber Communicator hardware.
ORBCOMM International has a standard Service License Agreement for
execution by International Licensees outside the United States. International
Licensees are responsible for obtaining all necessary licenses and approvals for
use of the ORBCOMM System in their territory. Certain International Licensees
will pay to ORBCOMM International a fixed fee in exchange for the exclusive
right to use the ORBCOMM System in a specified service territory. In addition,
International Licensees will pay a monthly Satellite Usage Fee based on the
greater of a percentage of gross operating revenues and a data throughput fee.
On the execution of a Service License Agreement, International Licensees are
required to purchase a Gateway from ORBCOMM International or share the U.S.
Gateway or a closely located Gateway operated by an International Licensee.
Retail pricing in their respective territories will be at the discretion of
the International Licensees and is expected to vary from country to country to
reflect variations in economic conditions, the availability of substitute
services, local customs and government policy as required to be competitive with
other services.
17
<PAGE> 20
OPERATING EXPENSES
In 1996, Teleglobe Mobile entered into an Administrative Services Agreement
with Teleglobe. Under this agreement, Teleglobe provides management services to
the Company. Teleglobe invoices the Company for those services on a monthly
basis. In addition, the Company is obligated to pay quarterly to ORBCOMM a
System Charge in consideration of ORBCOMM's grant to the Company of the
exclusive right to market, sell, lease and franchise all ORBCOMM System output
capacity outside the United States. Such System Charge is calculated as 23% of
ORBCOMM International's total service revenues for such quarter minus 1.15% of
Total Aggregate Revenues, as defined above.
RESULTS OF OPERATIONS
Teleglobe Mobile is a holding company that does not conduct stand-alone
operations. Its assets consist almost exclusively of its interests in ORBCOMM
and ORBCOMM International. Thus, the following disclosure regarding the results
of operations of ORBCOMM and ORBCOMM International directly reflect Teleglobe
Mobile's results of operations.
ORBCOMM
ORBCOMM commenced commercial intermittent service in the United States on
February 1, 1996 and has generated nominal revenues and negative cash flow.
ORBCOMM's activities have focused primarily on the acquisition of regulatory
approvals for operation of the ORBCOMM System, design, construction and
deployment of its initial satellites and associated network systems, negotiation
of agreements with domestic Resellers, execution of Service License Agreements
with International Licensees, identification of potential International
Licensees in countries outside the United States, identification and
authorization of Subscriber Communicator manufacturers and hiring of management
and other key personnel. ORBCOMM expects to continue to generate negative cash
flow through most of 1998.
Income. In 1995, ORBCOMM received a nonrefundable fee from a potential
International Licensee. ORBCOMM recognized this nonrefundable fee over the term
of the relevant agreement. No such fees were received in earlier periods or
during the year ended December 31, 1996.
In late 1994, ORBCOMM received the MetLife Note to help finance a portion
of the ORBCOMM System. In addition, in August 1996, ORBCOMM closed the Old Notes
Offering. The proceeds from the sale of the Old Notes are invested primarily in
short term government securities, with certain restrictions attached to all of
the investment portfolio. In January 1997, all of the Old Notes were exchanged
for the Notes. ORBCOMM recognized interest income on the invested portion of the
MetLife Note and the proceeds of the Old Notes Offering of approximately $58,000
and $3,861,000 for the years ended December 31, 1995 and 1996, respectively.
Teleglobe Mobile continues to serve as a guarantor of the Notes.
Expenses. As discussed above, ORBCOMM is in its development stage and does
not anticipate emerging from the development stage until mid-1998. During the
construction phase of the ORBCOMM System, ORBCOMM has capitalized all
construction costs, consisting primarily of satellites, launch vehicles and the
U.S. ground segment acquired from Orbital. Research and development expenses and
selling, general and administrative costs have been expensed in the period
incurred. Interest expense, where appropriate, related to the MetLife Note, the
Old Notes and the Notes has been capitalized as part of the historical cost of
the ORBCOMM System.
ORBCOMM incurred approximately $9,000, $50,000 and $6,933,000 of marketing,
administrative and other expenses for the years ended December 31, 1994, 1995
and 1996, respectively. ORBCOMM incurred approximately $5,453,000 of ORBCOMM
System engineering expenses for the year ended December 31, 1996 (none for the
years ended December 31, 1994 and 1995). ORBCOMM is capitalizing a portion of
engineering direct labor costs that relates to hardware and system design
development and coding of the software products that enhance the operation of
the ORBCOMM System. ORBCOMM also incurred approximately $6,199,000 in ORBCOMM
System depreciation expense for the year ended December 31,
18
<PAGE> 21
1996, as the ORBCOMM System became available for service in early 1996 (none for
the years ended December 31, 1994 and 1995).
Equity in Earnings (Losses) of Affiliates. ORBCOMM recognized its share of
ORBCOMM USA's and ORBCOMM International's losses, consisting primarily of
marketing expenses, of approximately $853,000 for the year ended December 31,
1995 and approximately $4,602,000 for the year ended December 31, 1996 (none for
the year ended December 31, 1994). Each of ORBCOMM USA and ORBCOMM International
formally began their marketing efforts in 1995 in anticipation of commercial
service in 1996.
ORBCOMM International
Expenses. ORBCOMM International incurred approximately $1,692,000 of
marketing and administrative expenses for the year ended December 31, 1996 (none
for the years ended December 31, 1994 and 1995). In addition, ORBCOMM
International pays to the Company an International Output Capacity Charge that
is a quarterly fee equal to 23% of its service revenues for such calendar
quarter in exchange for the exclusive right to market, sell, lease and franchise
all ORBCOMM System output capacity outside the United States.
Service License Agreements. During 1996, ORBCOMM International signed five
Service License Agreements and associated Gateway procurement contracts and
software license agreements with International Licensees covering Europe, the
Malaysian Region, a portion of North Africa, Turkey and the Middle East. The
Service License Agreements authorize the International Licensees to use the
ORBCOMM System to provide two-way messaging and data communication services.
Under these agreements, approximately $6,147,000 has been received and recorded
as deferred revenue at December 31, 1996. ORBCOMM International generally
recognizes fees from Service License Agreements ratably over the term of the
agreement, or when ORBCOMM International's obligations thereunder are
substantially complete. Revenue under the gateway procurement contracts is
recognized when products are shipped or when customers have accepted the
products or services, depending on contractual terms.
19
<PAGE> 22
LIQUIDITY AND CAPITAL RESOURCES
Teleglobe Mobile obtains its funding from its indirect partners, Teleglobe
and TRI. Teleglobe Mobile's and OCC's total capital commitments to ORBCOMM are
approximately $85,000,000 and $75,000,000, respectively, all of which have been
contributed through December 31, 1996. Capital contributions by Teleglobe Mobile
and OCC through December 31, 1995 were approximately $35,000,000 and
$62,000,000, respectively.
The development of ORBCOMM's business, launch of the initial two satellites
and construction of the network control center and U.S. Gateway have resulted in
substantial capital expenditures during the past several years. Capital
expenditures by ORBCOMM were approximately $25,000,000, $38,000,000, and
$69,000,000 for the years ended December 31, 1994, 1995 and 1996, respectively.
A combination of operating losses and substantial capital expenditures
related to the development of the ORBCOMM System has resulted in negative cash
flow since 1994. Funding of this cash flow deficiency has been accomplished
through capital contributions from OCC and Teleglobe Mobile and through the
proceeds from the Old Notes Offering and the MetLife Note. ORBCOMM expects to
have to continue to fund operating losses as it develops and expands its
business. ORBCOMM has set aside a sufficient amount in a segregated account to
provide for payment in full of interest on the Old Notes and Notes through
August 15, 1998. Following August 15, 1998, interest expense on the Notes will
represent a significant cash requirement for ORBCOMM.
The total cost of the construction and deployment of the ORBCOMM System is
estimated to be approximately $258,000,000. Of this amount, approximately
$202,000,000 will be used for the satellite constellation, ground spares and
launch services, approximately $30,000,000 will be used for the U.S. ground
segment, approximately $8,000,000 will be used for insurance and approximately
$18,000,000 will be used for other costs. As of December 31, 1996, approximately
$176,000,000 of this amount had been expended. Teleglobe Mobile and OCC have
invested approximately $160,000,000 in the ORBCOMM project. Such equity
investment, together with the proceeds of the Old Notes Offering and cash
expected to be generated from operations, is expected to allow ORBCOMM to meet
its financial obligations through at least the end of 1997. ORBCOMM believes
that a significant portion of cash from ORBCOMM's operations through the end of
1997 will be generated through international license fees obtained by entering
into Service License Agreements. ORBCOMM expects that its capital requirements
in 1998 will be provided by cash flows from operations and, consistent with the
covenants contained in the Indenture governing the Notes, credit facilities and
operating lease arrangements.
The Notes contain a revenue participation feature providing for payment by
ORBCOMM, on each interest payment date, of interest ("Revenue Participation
Interest") in an aggregate amount equal to 5.0% of System Revenue (as defined in
the Indenture) for the six-month period ending on December 31 or June 30 most
recently completed prior to such interest payment date. ORBCOMM is not required
to pay any Revenue Participation Interest, however, until the Credit Parties
Fixed Charge Coverage Ratio (as defined in the Indenture) for the four
consecutive fiscal quarters last completed prior to such interest payment date
equals or exceeds 2.0:1. The Notes are fully and unconditionally guaranteed on a
joint and several basis by Teleglobe Mobile, OCC, ORBCOMM International and
ORBCOMM USA. The guarantees are nonrecourse to the shareholders and/or partners
of the guarantors.
There are no distributions required to be made by Teleglobe Mobile to its
partners under its Partnership Agreement. However, ORBCOMM is required to
distribute to its partners, Teleglobe Mobile and OCC, a minimum annual
distribution required by its Partnership Agreement in the amount of (i) 40%,
multiplied by the lesser of (a) such partners' distributive share of ORBCOMM's
taxable income for the preceding year, and (b) the excess, if any, of cumulative
Net Income (as defined) over cumulative Net Loss (as defined) allocated to such
partner since the inception of ORBCOMM. All other distributions are to be made
at the discretion of the partners. Pursuant to the covenants contained in the
Indenture, no additional cash distributions are permitted to be made to the
partners of ORBCOMM other than those distributions that satisfy the requirements
of the various limitations on "Restricted Payments" contained in the Indenture.
20
<PAGE> 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
TELEGLOBE MOBILE PARTNERS
Auditors' Report.......................................... 23
Report of Independent Certified Public Accountants........ 24
Consolidated Balance Sheets as of December 31, 1995 and
1996................................................... 25
Consolidated Statements of Operations for the Years Ended
December 31, 1994, 1995 and 1996 and Total Accumulated
During Development Stage through December 31, 1996..... 26
Consolidated Statements of Partners' Capital for the Years
Ended December 31, 1993, 1994, 1995 and 1996........... 27
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1994, 1995 and 1996 and Total Cash
Flows During Development Stage through December 31,
1996................................................... 28
Notes to Consolidated Financial Statements................ 29
ORBCOMM GLOBAL, L.P.
Independent Auditors' Report.............................. 33
Balance Sheets as of December 31, 1995 and 1996........... 34
Statements of Income and Expenses for the Years Ended
December 31, 1994, 1995 and 1996 and Total Accumulated
During Development Stage through December 31, 1996..... 35
Statements of Partners' Capital for the Years Ended
December 31, 1993, 1994, 1995 and 1996................. 36
Statements of Cash Flows for the Years Ended December 31,
1994, 1995 and 1996 and Total Cash Flows During
Development Stage through December 31, 1996............ 37
Notes to Financial Statements............................. 38
ORBCOMM INTERNATIONAL PARTNERS, L.P.
Independent Auditors' Report.............................. 44
Balance Sheets as of December 31, 1995 and 1996........... 45
Statements of Income and Expenses for the Years Ended
December 31, 1994, 1995 and 1996 and Total Accumulated
During Development Stage through December 31, 1996..... 46
Statements of Partners' Capital for the Years Ended
December 31, 1993, 1994, 1995 and 1996................. 47
Statements of Cash Flows for the Years Ended December 31,
1994, 1995 and 1996 and Total Cash Flows During
Development Stage through December 31, 1996............ 48
Notes to Financial Statements............................. 49
</TABLE>
21
<PAGE> 24
AUDITORS' REPORT
To the Partners of
Teleglobe Mobile Partners
We have audited the consolidated balance sheet of Teleglobe Mobile Partners (a
development stage enterprise) as at December 31, 1995 and the consolidated
statements of operations, partners' capital and cash flows for each of the years
in the two year period ended December 31, 1995. These consolidated financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on the financial statements based on our
audits.
We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Partnership as at December 31,
1995 and the results of its operations, partners' capital and cash flows for
each of the years in the two year period ended December 31, 1995 in accordance
with generally accepted accounting principles in the United States of America.
Grant Thornton
General Partnership
Chartered Accountants
Montreal, Canada
June 25, 1996
22
<PAGE> 25
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Partners
Teleglobe Mobile Partners
(a development stage enterprise)
We have audited the consolidated balance sheet of Teleglobe Mobile Partners (a
development stage enterprise) as of December 31, 1996, and the consolidated
statements of operations, partners' capital and cash flows for the year then
ended and for the period from July 21, 1993 (date of inception) through December
31, 1996. These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on the
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, these consolidated financial statements referred to above,
present fairly, in all material respects, the financial position of Teleglobe
Mobile Partners (a development stage enterprise) as of December 31, 1996, and
the results of its operations, partners' capital and cash flows for the year
then ended and for the period from July 21, 1993 (date of inception) through
December 31, 1996 in conformity with generally accepted accounting principles.
Grant Thornton LLP
Vienna, Virginia
February 19, 1997
23
<PAGE> 26
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents................................. $34,168 $ 1,618
Accounts receivable....................................... 0 17
Prepaid contract costs.................................... 0 3,871
Due from an affiliate, without interest and repayment
terms.................................................. 0 1,309
------- -------
Total current assets................................... 34,168 6,815
Joint venture investment.................................. 33,512 74,361
------- -------
TOTAL ASSETS...................................... $67,680 $81,176
======= =======
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Accounts payable and accrued liabilities.................. $ 271 $ 899
Deferred revenue.......................................... 0 6,147
------- -------
Total current liabilities.............................. 271 7,046
Non-controlling interest.................................. 5 (823)
------- -------
Total Liabilities...................................... 276 6,223
PARTNERS' CAPITAL
Teleglobe Mobile, L.P. ................................... 46,711 51,942
TR (U.S.A.) Ltd. ......................................... 20,221 22,486
Teleglobe Mobile Investment Inc. ......................... 472 525
------- -------
Total Partners' Capital................................ 67,404 74,953
------- -------
TOTAL LIABILITIES AND PARTNERS' CAPITAL........... $67,680 $81,176
======= =======
</TABLE>
(See accompanying notes to the consolidated financial statements)
24
<PAGE> 27
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
TOTAL
ACCUMULATED
DURING
YEAR ENDED DEVELOPMENT
DECEMBER 31, STAGE THROUGH
--------------------------- DECEMBER 31,
1994 1995 1996 1996
----- ------ -------- -------------
<S> <C> <C> <C> <C>
INCOME
Product sales.................................. $ 0 $ 0 $ 8 $ 8
Interest income................................ 0 1,253 905 2,158
Share in net loss of a joint venture........... 0 (219) (8,975) (9,194)
----- ------ -------- --------
Total Income................................ 0 1,034 (8,062) (7,028)
EXPENSES
Cost of product sales.......................... 0 0 6 6
Operating expenses............................. 453 743 1,967 3,648
Financial charges.............................. 0 0 288 288
----- ------ -------- --------
Total Expenses.............................. 453 743 2,261 3,942
Income (loss) before non-controlling interest.... (453) 291 (10,323) (10,970)
Non-controlling interest......................... 0 0 828 828
----- ------ -------- --------
NET INCOME (LOSS)................................ $(453) $ 291 $ (9,495) $(10,142)
===== ====== ======== ========
</TABLE>
(See accompanying notes to the consolidated financial statements)
25
<PAGE> 28
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
GENERAL PARTNERS
---------------------------------------------
TELEGLOBE
TELEGLOBE MOBILE TR (U.S.A.)
MOBILE, L.P. INVESTMENT INC. LTD. TOTAL
------------ --------------- ------------ -------
<S> <C> <C> <C> <C>
Capital contributions........................ $ 9,903 $100 $ 0 $10,003
Net loss..................................... (480) (5) 0 (485)
------- ---- -------- -------
PARTNERS' CAPITAL, DECEMBER 31, 1993........... 9,423 95 0 9,518
Net loss..................................... (449) (4) 0 (453)
------- ---- -------- -------
PARTNERS' CAPITAL, DECEMBER 31, 1994........... 8,974 91 0 9,065
Capital contributions........................ 27,719 281 31,062 59,062
Excess of contributions from a new partner to
the existing partners..................... 10,587 106 (10,693) 0
Net income................................... 134 1 156 291
Share of financing fees of a joint venture... (703) (7) (304) (1,014)
------- ---- -------- -------
PARTNERS' CAPITAL, DECEMBER 31, 1995........... 46,711 472 20,221 67,404
Capital contributions........................ 9,256 94 7,650 17,000
Excess of contributions from a new partner to
the existing partners..................... 2,525 25 (2,550) 0
Net loss..................................... (6,580) (67) (2,848) (9,495)
Share of unrealized gains on
available-for-sale investments of a joint
venture................................... 30 1 13 44
------- ---- -------- -------
PARTNERS' CAPITAL, DECEMBER 31, 1996........... $51,942 $525 $ 22,486 $74,953
======= ==== ======== =======
</TABLE>
(See accompanying notes to the consolidated financial statements)
26
<PAGE> 29
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
TOTAL
CASH FLOWS
DURING
DEVELOPMENT
YEAR ENDED DECEMBER 31, STAGE THROUGH
----------------------------- DECEMBER 31,
1994 1995 1996 1996
----- -------- -------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).......................... $(453) $ 291 $ (9,495) $(10,142)
Non-cash items:
Share in net loss of a joint venture.... 0 219 8,975 9,194
Non-controlling interest................ 0 0 (828) (828)
Changes in non-cash operating balances:
Accounts receivable..................... 0 0 (17) (17)
Prepaid contract costs.................. 0 0 (3,871) (3,871)
Accounts payable and accrued
liabilities........................... 453 (667) 628 899
Deferred revenue........................ 0 0 6,147 6,147
----- -------- -------- --------
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES......................... 0 (157) 1,539 1,382
----- -------- -------- --------
INVESTING ACTIVITIES
Net increase in a joint venture
investment.............................. 0 (23,728) (49,780) (83,511)
Due from an affiliate...................... 0 0 (1,309) (1,309)
----- -------- -------- --------
CASH USED IN INVESTING ACTIVITIES..... 0 (23,728) (51,089) (84,820)
----- -------- -------- --------
FINANCING ACTIVITIES
Share of financing fees of a joint
venture................................. 0 (1,014) 0 (1,014)
Partners' contributions.................... 0 59,062 17,000 86,065
Non-controlling interest................... 0 5 0 5
----- -------- -------- --------
CASH PROVIDED BY FINANCING
ACTIVITIES......................... 0 58,053 17,000 85,056
----- -------- -------- --------
INCREASE (DECREASE) IN CASH.................. 0 34,168 (32,550) 1,618
Cash, beginning of period.................... 0 0 34,168 0
----- -------- -------- --------
CASH, END OF PERIOD.......................... $ 0 $ 34,168 $ 1,618 $ 1,618
===== ======== ======== ========
CASH REPRESENTS CASH AND CASH EQUIVALENTS
</TABLE>
(See accompanying notes to the consolidated financial statements)
27
<PAGE> 30
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
(1) GOVERNING STATUTES AND NATURE OF OPERATIONS
Teleglobe Mobile Partners, a Delaware general partnership (the
"Partnership") was originally formed July 21, 1993, in accordance with the
provisions of the Delaware Uniform Partnership Law for purposes of being a
general and a limited partner in ORBCOMM Global, L.P. ("ORBCOMM Global"), a
Delaware limited partnership providing international wireless data
communications services. The Partnership also carries on marketing activities
through its subsidiary, ORBCOMM International Partners, L.P. ("ORBCOMM
International"). As of June 29, 1994, the original Partnership was amended and
restated by admitting a new partner to the Partnership. The Partnership's term
commenced on June 29, 1994 and shall terminate on December 31, 2015.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Partnership holds a 50% Participation Percentage in ORBCOMM Global,
which in turn holds a 98% non-controlling interest in ORBCOMM USA, L.P.
("ORBCOMM USA") and ORBCOMM International, two other partnerships formed to
market the ORBCOMM system.
The Partnership also directly holds a 2% Participation Percentage in
ORBCOMM International bringing its direct and indirect Participation Percentage
to 51%. Teleglobe Mobile Partners controls the operational and financial affairs
of ORBCOMM International.
The Partnership is in its development stage, devoting substantially all of
its efforts to establishing a new communications business through ORBCOMM
Global. Operations are expected to commence in 1998. The consolidated financial
statements of the Partnership are prepared on the accrual basis of accounting,
in conformity with generally accepted accounting principles in the United States
of America and, where applicable, are in general conformity with practices
prevailing in the telecommunications industry. They include the accounts of the
Partnership and its subsidiary, ORBCOMM International. All significant
intercompany transactions and balances have been eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Joint venture investment
The investment in ORBCOMM Global is accounted for using the equity method.
Goodwill, consisting of the excess of the cost of the Partnership's
investment over its equity in the underlying net assets of ORBCOMM Global at the
acquisition date, is included in the joint venture investment. Goodwill is
amortized on a straight-line basis, starting October 1, 1996, over the estimated
economic useful life of the ORBCOMM system.
Revenue recognition
ORBCOMM International generally recognizes fees from Service License
Agreements ("SLAs") with its International Licensees ratably over the term of
the agreement, or when ORBCOMM International's obligations thereunder are
substantially complete. Revenue under the gateway procurement contracts
28
<PAGE> 31
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
executed in connection with SLAs or sale of subscriber communicator hardware is
recognized when products are shipped or when customers have accepted the
products or services, depending on contractual terms.
Income taxes
As a partnership, Federal and state income taxes are the direct
responsibility of each partner. Accordingly, no income taxes have been recorded
in the consolidated financial statements.
Cash and cash equivalents
The Partnership considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
Fair value of financial instruments
The carrying value of the Partnership's cash and cash equivalents,
receivables, and accounts payable approximates fair value since all such
instruments are short-term in nature.
(3) JOINT VENTURE INVESTMENT
As at December 31, 1996, goodwill, net of accumulated amortization in the
amount of $63, included in the joint venture investment amounts to $4,562 (none
in 1995).
The following tables summarize the information concerning the income,
assets and liabilities of ORBCOMM Global.
<TABLE>
<CAPTION>
TOTAL
ACCUMULATED
DURING
DEVELOPMENT
YEAR ENDED DECEMBER 31, STAGE THROUGH
------------------------ DECEMBER 31,
1994 1995 1996 1996
---- ---- -------- -------------
<S> <C> <C> <C> <C>
Income statement data
Income............................................. $ 0 $958 $ 3,975 $ 4,933
Net income (loss).................................. (9) 55 (19,480) (19,434)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
-------- --------
<S> <C> <C>
Balance sheet data
Total assets.............................................. $109,029 $329,509
Total liabilities......................................... 14,428 191,567
Partners' capital
Teleglobe Mobile Partners.............................. 33,517 73,596
Orbital Communications Corporation..................... 61,084 64,346
</TABLE>
Based on its current assessment of the overall business prospects of
ORBCOMM Global's marketing partnerships and the ORBCOMM System, the Partnership
believes its investment of approximately $74,000 in ORBCOMM Global is fully
recoverable. If in the future, the ORBCOMM Global business is not successful,
the Partnership may be required to expense part or all of its investment.
29
<PAGE> 32
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
(4) RELATED PARTY TRANSACTIONS
As of December 31, 1996, ORBCOMM International had a receivable of
approximately $1,300 from ORBCOMM Global that represents net cash outflow to
ORBCOMM Global (none for the year ended December 31, 1995). ORBCOMM
International is currently in development stage and obtains funds to support
operations through non-interest bearing advances from ORBCOMM Global.
As of December 31, 1996, ORBCOMM International had a payable of
approximately $225 to Teleglobe Canada Inc., an affiliate of the Partnership,
for a contracted employee to provide international marketing services (none for
the year ended December 31, 1995).
In 1996, the Partnership entered into an Administrative Services Agreement
with Teleglobe Inc. ("Teleglobe"), the ultimate parent company of the
Partnership. Under this agreement, Teleglobe provides management services to the
Partnership. Teleglobe invoices the Partnership for those services on a monthly
basis. As of December 31, 1996, the Partnership owed Teleglobe approximately
$155 ($271 for the year ended December 31, 1995).
As of December 31, 1996, ORBCOMM International had a receivable of
approximately $7 for bonus payments to ORBCOMM International employees paid on
behalf of Orbital Communications Corporation ("OCC"), a majority owned
subsidiary of Orbital Sciences Corporation, for employees previously employed by
OCC (none for the year ended December 31, 1995).
(5) COMMITMENTS AND CONTINGENCIES
In August 1996, ORBCOMM Global and ORBCOMM Global Capital Corp. (the
"Issuers") issued $170,000 of Senior Notes due in full in 2004 with Revenue
Participation Interest (the "Old Notes"). Revenue Participation Interest
represents an aggregate amount equal to 5% of the ORBCOMM System revenue and is
payable on the Old Notes on each interest payment date subject to certain
covenant restrictions. Interest on the Old Notes accrues at a rate of 14% per
annum and will be payable semi-annually in arrears on February 15 and August 15
of each year, commencing on February 15, 1997.
All of the Old Notes have been exchanged for an equal principal amount of
registered 14% Series B Senior Notes due in full in 2004 with Revenue
Participation Interest (the "Notes"). The Notes are substantially similar to the
Old Notes except that the Notes are registered under the Securities Act of 1933,
as amended, and do not bear legends restricting the transfer thereof. The Notes
are fully and unconditionally guaranteed on a joint and several basis by the
Partnership, OCC, ORBCOMM USA and ORBCOMM International (each a "Guarantor" and
collectively, the "Guarantors"), except that the guarantees are nonrecourse to
the shareholders and/or partners of the Guarantors, limited only to the extent
necessary for each such guarantee not to constitute a fraudulent conveyance
under applicable law. The guarantee of each Guarantor ranks pari passu in right
of payment with all senior indebtedness of such Guarantor and senior in right of
payment to all indebtedness expressly subordinated to the guarantee of such
Guarantor. The guarantees are non-recourse to the shareholders and/or partners
of each Guarantor and no shareholders or partners of any Guarantors will have
any liability for any claim under the Notes.
On closing, ORBCOMM Global used a portion of the net proceeds from the sale
of the Old Notes, approximately $44,800, to purchase a portfolio of U.S.
Government securities to provide for payment in full of interest on the Old
Notes and Notes through August 15, 1998.
The Partnership is obligated to pay quarterly to ORBCOMM Global a System
Charge in consideration of ORBCOMM Global's grant to the Partnership of the
right to market, sell, lease and franchise all ORBCOMM System output capacity
outside the United States. Such System Charge is calculated as 23% of
30
<PAGE> 33
TELEGLOBE MOBILE PARTNERS
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS OF DOLLARS)
(5) COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
ORBCOMM International's total service revenues for such quarter ("International
Output Capacity Charge") minus 1.15% of aggregate system service revenues,
defined as the total of ORBCOMM International and ORBCOMM USA total system
service revenues. If the International Output Capacity Charge is less than 1.15%
of aggregate system service revenues as described above, then the Partnership is
not required to pay and does not owe any portion of the System Charge to ORBCOMM
Global. The Partnership in turn has granted to ORBCOMM International, these same
privileges and the exclusive use of the ORBCOMM System Assets located outside
the United States for a period of 20 years. In consideration for this grant,
ORBCOMM International has agreed to pay to the Partnership an International
Output Capacity Charge. As of December 31, 1996, no such charge has been
incurred.
The Partnership is committed to invest approximately $85,000 in the ORBCOMM
project. As of December 31, 1996, this amount has already been invested entirely
($34,753 as of December 31, 1995).
In October 1996, ORBCOMM International entered into agreements with certain
manufacturers for construction of gateway Earth stations scheduled for delivery
over the next two years. As of December 31, 1996, ORBCOMM International has
approximately $3,800 of prepaid contract costs which represent advanced payments
to these manufacturers. Total commitments remaining under these agreements
approximate $14,000.
(6) SERVICE LICENSE AGREEMENTS
During 1996, ORBCOMM International signed five SLAs and the associated
Gateway procurement contracts and software license agreements with International
Licensees covering Europe, the Malaysian Region, a portion of North Africa,
Turkey and the Middle East. The SLAs authorize the International Licensees to
use the ORBCOMM System to provide two-way messaging and data communications
services. Under these agreements, approximately $6,000 has been received and
recorded as deferred revenues at December 31, 1996. ORBCOMM International is
obligated to ship six Gateways to certain international licensees under these
agreements.
(7) RECLASSIFICATION OF PRIOR YEARS BALANCES
Certain amounts in prior year's financial statements have been reclassified
to conform with the current year presentation.
31
<PAGE> 34
INDEPENDENT AUDITORS' REPORT
The Partners
ORBCOMM Global, L.P.:
We have audited the accompanying balance sheets of ORBCOMM Global, L.P.
("ORBCOMM") (a development stage enterprise) as of December 31, 1996 and 1995,
and the related statements of income and expenses, partners' capital, and cash
flows for each of the years in the three year period ended December 31, 1996 and
for the period from June 30, 1993 (date of inception) through December 31, 1996.
These financial statements are the responsibility of ORBCOMM's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ORBCOMM (a development stage
enterprise) as of December 31, 1996 and 1995, and the results of its income and
expenses and its cash flows for each of the years in the three year period ended
December 31, 1996 and for the period from June 30, 1993 (date of inception)
through December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Washington, DC
January 31, 1997
32
<PAGE> 35
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 1,784,950 $ 56,870,424
Short-term available-for-sale investments................. 0 31,433,390
Short-term held-to-maturity investments................... 0 23,335,992
Receivable -- Orbital Communications Corporation.......... 0 114,784
Receivables -- other...................................... 0 637,727
Inventory................................................. 446,684 1,751,270
------------ ------------
Total Current Assets................................... 2,231,634 114,143,587
LONG TERM ASSETS:
Long-term available-for-sale investments.................. 0 20,364,987
Long-term held-to-maturity investments.................... 0 21,478,072
Receivables -- other...................................... 0 517,370
Mobile Communications Satellite System, net of accumulated
depreciation........................................... 106,989,940 170,033,722
Other assets, net......................................... 0 6,137,567
Investments in and advances to affiliates................. (191,916) (3,166,091)
------------ ------------
TOTAL ASSETS...................................... $109,029,658 $329,509,214
============ ============
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Current portion of long-term debt......................... $ 904,811 $ 991,652
Accounts payable.......................................... 4,037,675 4,610,786
Accrued expenses.......................................... 6,116,314 13,687,255
Deferred revenue.......................................... 100,000 0
------------ ------------
Total Current Liabilities.............................. 11,158,800 19,289,693
Long-term debt............................................ 3,269,619 172,277,967
------------ ------------
Total Liabilities...................................... 14,428,419 191,567,660
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Teleglobe Mobile Partners................................. 33,517,008 73,595,777
Orbital Communications Corporation........................ 61,084,231 64,345,777
------------ ------------
Total Partners' Capital................................ 94,601,239 137,941,554
------------ ------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL........... $109,029,658 $329,509,214
============ ============
</TABLE>
(See accompanying notes to the financial statements)
33
<PAGE> 36
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF INCOME AND EXPENSES
<TABLE>
<CAPTION>
TOTAL
ACCUMULATED
DURING
DEVELOPMENT
YEAR ENDED DECEMBER 31, STAGE THROUGH
------------------------------------ DECEMBER 31,
1994 1995 1996 1996
------- --------- ------------ -------------
<S> <C> <C> <C> <C>
INCOME:
Product sales.......................... $ 0 $ 0 $ 268,350 $ 268,350
Distribution fees...................... 0 900,000 100,000 1,000,000
Other.................................. 0 0 52,410 52,410
------- --------- ------------ ------------
Total Income........................ 0 900,000 420,760 1,320,760
EXPENSES:
Cost of product sales.................. 0 0 268,350 268,350
Depreciation........................... 0 0 6,198,519 6,198,519
Engineering expenses................... 0 0 5,453,299 5,453,299
Marketing, administrative and other
expenses............................ 9,062 49,943 6,932,862 6,991,867
------- --------- ------------ ------------
Total Expenses...................... 9,062 49,943 18,853,030 18,912,035
------- --------- ------------ ------------
Income (loss) from operations....... (9,062) 850,057 (18,432,270) (17,591,275)
OTHER INCOME AND EXPENSES:
Interest income (expenses), net........ 0 58,415 3,554,188 3,612,603
Equity in earnings (losses) of
affiliates.......................... 0 (853,270) (4,602,096) (5,455,366)
------- --------- ------------ ------------
EXCESS (DEFICIENCY) OF INCOME
OVER EXPENSES.......................... $(9,062) $ 55,202 $(19,480,178) $(19,434,038)
======= ========= ============ ============
</TABLE>
(See accompanying notes to the financial statements)
34
<PAGE> 37
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
ORBITAL
TELEGLOBE MOBILE COMMUNICATIONS
PARTNERS CORPORATION TOTAL
---------------- -------------- ------------
<S> <C> <C> <C>
Capital contributions........................ $10,000,000 $38,148,997 $ 48,148,997
Excess (deficiency) of income over
expenses.................................. 0 0 0
Financing fees............................... (241,739) (241,739) (483,478)
----------- ----------- ------------
PARTNERS' CAPITAL, DECEMBER 31, 1993........... 9,758,261 37,907,258 47,665,519
Capital contributions........................ 0 10,852,961 10,852,961
Excess (deficiency) of income over
expenses.................................. (4,531) (4,531) (9,062)
----------- ----------- ------------
PARTNERS' CAPITAL, DECEMBER 31, 1994........... 9,753,730 48,755,688 58,509,418
Capital contributions........................ 24,750,000 13,315,265 38,065,265
Excess (deficiency) of income over
expenses.................................. 27,601 27,601 55,202
Financing fees............................... (1,014,323) (1,014,323) (2,028,646)
----------- ----------- ------------
PARTNERS' CAPITAL, DECEMBER 31, 1995........... 33,517,008 61,084,231 94,601,239
Capital contributions........................ 49,775,000 12,957,777 62,732,777
Excess (deficiency) of income over
expenses.................................. (9,740,089) (9,740,089) (19,480,178)
Unrealized gains on available-for-sale
investments............................... 43,858 43,858 87,716
----------- ----------- ------------
PARTNERS' CAPITAL, DECEMBER 31, 1996........... $73,595,777 $64,345,777 $137,941,554
=========== =========== ============
</TABLE>
(See accompanying notes to the financial statements)
35
<PAGE> 38
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TOTAL CASH
FLOWS DURING
DEVELOPMENT
YEAR ENDED DECEMBER 31, STAGE THROUGH
------------------------------------------- DECEMBER 31,
1994 1995 1996 1996
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Excess (deficiency) of income over expenses... $ (9,062) $ 55,202 $ (19,480,178) $ (19,434,038)
ADJUSTMENTS TO RECONCILE EXCESS (DEFICIENCY)
OF INCOME OVER EXPENSES TO NET CASH PROVIDED
BY (USED IN) OPERATING ACTIVITIES:
Depreciation................................ 0 0 6,198,519 6,198,519
Amortization of financing fees.............. 0 0 306,594 306,594
Equity in losses of affiliates.............. 0 833,670 4,602,096 5,435,766
Increase in receivable -- Orbital
Communications Corporation................ 0 0 (114,784) (114,784)
Increase in receivables -- other............ 0 0 (1,155,097) (1,155,097)
Increase in inventory....................... 0 (446,684) (1,304,586) (1,751,270)
Increase in accounts payable................ 2,270,775 1,786,500 573,111 4,630,386
Increase (decrease) in deferred revenue..... 0 100,000 (100,000) 0
Increase (decrease) in accrued expenses..... 7,866,668 (1,750,354) 7,570,941 13,687,255
Decrease in prepaid contract costs.......... 3,740,802 0 0 0
------------ ------------ ------------- -------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES............................. 13,869,183 578,334 (2,903,384) 7,803,331
------------ ------------ ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................... (24,722,144) (38,343,079) (69,242,301) (176,232,241)
Increase in amount due from affiliates........ 0 (661,354) (1,608,321) (2,269,675)
Purchase of available-for-sale investments.... 0 0 (91,717,823) (91,717,823)
Proceeds from sale of available-for-sale
investments................................. 0 0 40,007,162 40,007,162
Purchase of held-to-maturity investments...... 0 0 (44,814,064) (44,814,064)
------------ ------------ ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES..... (24,722,144) (39,004,433) (167,375,347) (275,026,641)
------------ ------------ ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of long-term
debt........................................ 5,000,000 0 164,475,000 169,475,000
Repayment of long-term debt................... 0 (825,570) (904,811) (1,730,381)
Partners' contributions....................... 10,852,961 38,065,265 62,732,777 159,800,000
Financing fees paid........................... 0 (2,028,646) (938,761) (3,450,885)
------------ ------------ ------------- -------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES............................. 15,852,961 35,211,049 225,364,205 324,093,734
------------ ------------ ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................... 5,000,000 (3,215,050) 55,085,474 56,870,424
CASH AND CASH EQUIVALENTS:
Beginning of period........................... 0 5,000,000 1,784,950 0
------------ ------------ ------------- -------------
CASH AND CASH EQUIVALENTS:
End of period................................. $ 5,000,000 $ 1,784,950 $ 56,870,424 $ 56,870,424
============ ============ ============= =============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid................................. $ 0 $ 425,765 $ 346,526 $ 772,291
============ ============ ============= =============
</TABLE>
(See accompanying notes to the financial statements)
36
<PAGE> 39
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(1) THE ORBCOMM SYSTEM
Organization
In 1993, Orbital Communications Corporation ("OCC"), a majority owned
subsidiary of Orbital Sciences Corporation ("Orbital"), and Teleglobe Mobile
Partners ("Teleglobe Mobile"), a partnership established by affiliates of
Teleglobe Inc. ("Teleglobe"), formed ORBCOMM Global, L.P. ("ORBCOMM" or the
"Company"), a Delaware limited partnership.
Pursuant to the terms of the Agreement of Limited Partnership of the
Company between OCC and Teleglobe Mobile (the "Partnership Agreement"), action
by the Company generally requires the approval of General Partners holding a
majority of the Participation Percentages held by the General Partners. OCC and
Teleglobe Mobile each holds 50% of the Participation Percentages in the Company,
with the result that the approval of both OCC and Teleglobe Mobile is generally
necessary for the Company to act.
The Company is a 98% noncontrolling General Partner in ORBCOMM USA, L.P.
("ORBCOMM USA") and ORBCOMM International Partners, L.P. ("ORBCOMM
International"), two partnerships formed to market services using the ORBCOMM
low-Earth orbit satellite communications system (the "ORBCOMM System") in the
United States and internationally, respectively.
The ORBCOMM System Description
The Company was created for the design, development, construction,
integration, testing and operation of the ORBCOMM System. The Company intends to
construct and implement the initial 28 satellite ORBCOMM System in two phases:
the ORBCOMM Phase 1A System, consisting of the worldwide network control center
(including the satellite management system), the U.S. Gateway control center,
four U.S. Earth stations and two satellites; and the ORBCOMM Phase 1B System
consisting of the ORBCOMM Phase 1A System, three additional planes each
consisting of eight satellites and one plane consisting of two high-inclination
satellites.
Orbital is the primary supplier of the communications satellites, launch
vehicles and U.S. ground systems and successfully launched the ORBCOMM Phase 1A
System satellites in April 1995. The ORBCOMM Phase 1A System began commercial
intermittent service in early 1996.
The System Charge
OCC is obligated to pay quarterly to the Company a System Charge in
consideration of the construction and financing of the ORBCOMM System assets by
the Company. Teleglobe Mobile is obligated to pay quarterly to the Company a
System Charge in consideration of the Company's grant to Teleglobe Mobile of the
right to market, sell, lease and franchise all ORBCOMM System output capacity
outside the United States.
Regulatory Status
Construction and operation of communications satellites in the United
States requires licenses from the Federal Communications Commission (the "FCC").
OCC has been granted full operational authority for the ORBCOMM System by the
FCC. Similar licenses are required from foreign regulatory authorities to permit
ORBCOMM System services to be offered outside the United States. Primary
responsibility for obtaining licenses outside the United States will reside with
entities who become International Licensees.
37
<PAGE> 40
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company is in its development stage, devoting substantially all of its
efforts to establishing a new communications business. The Company's planned
principal operations are expected to commence in 1998. The accompanying
financial statements have been prepared on the accrual basis of accounting in
conformity with generally accepted accounting principles in the United States.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Depreciation and Recoverability of Long-Lived Assets
Depreciation is provided over an asset's estimated economic useful life
using the straight-line method as follows:
<TABLE>
<S> <C>
Space Segment Assets: lesser of five years or estimated life of the satellite
Ground Segment Assets: 10 years
Furniture and Equipment: three to 10 years
</TABLE>
The Company anticipates depreciating the ORBCOMM System over the estimated
economic useful lives of the various ORBCOMM System components once the ORBCOMM
System is placed in service. The Phase 1A System, which includes the worldwide
network control center (including the satellite management system), the U.S.
Gateway control center, four U.S. Earth stations and two satellites, was placed
in service at the beginning of 1996, at which time the Company began
depreciating those assets. The Company anticipates that the ORBCOMM Phase 1B
System will become fully operational in 1998.
The Company's policy is to review its long-lived assets, including its
satellite systems, for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Company recognizes impairment losses when the sum of the expected future cash
flows is less than the carrying amount of the asset. Given the inherent
technical and commercial risks within the space communications industry, it is
possible that the Company's current estimate for recovery of the carrying amount
of its assets may change.
Investments in Affiliates
Pursuant to the terms of ORBCOMM USA's and ORBCOMM International's
partnership agreements, OCC controls the operational and financial affairs of
ORBCOMM USA and Teleglobe Mobile controls the operational and financial affairs
of ORBCOMM International. The Company, however, significantly influences both
marketing partnerships. Accordingly, the Company is accounting for its
investments in ORBCOMM USA and ORBCOMM International using the equity method.
Pursuant to the equity method of accounting, the Company's carrying amount
of an investment is initially recorded at cost and is increased to reflect its
share of the affiliate's income, and is reduced to reflect its share of the
affiliate's losses. The Company's investment is also increased to reflect
contributions to, and reduced to reflect distributions from, such affiliates.
38
<PAGE> 41
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Income Taxes
As a partnership, Federal and state income taxes are the direct
responsibility of each partner. Accordingly, no income taxes have been recorded
in the accompanying financial statements.
Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities of
three months or less to be cash equivalents.
Investments
The Company maintains two investment portfolios characterized by
management's intentions as to future investment activity. Investments classified
as "held-to-maturity" are not intended to be sold prior to maturity and are
carried at cost. Investments not intended to be held until maturity are
classified as "available-for-sale" and carried at fair value with temporary
unrealized gains (losses) charged directly to partners' capital. Investments
with maturities of less than one year are classified as short-term investments.
Investments maturing after one year are classified as long-term investments. The
Company uses the average cost method in determining the basis of investments
sold when computing realized gains (losses).
Inventory
Inventory is stated at the lower of cost, determined on the specific
identification basis, or market and represents subscriber communicators
available for sale to customers.
Fair Value of Financial Instruments
The carrying value of the Company's cash and cash equivalents, receivables,
and accounts payables approximates fair value since all such instruments are
short-term in nature. Fair value for the Company's long-term debt is determined
based on current rates offered for debt of similar remaining maturities. At
December 31, 1995 and 1996, the fair value for the long-term debt approximated
carrying value.
Mobile Communications Satellite System Under Construction
During the construction of the ORBCOMM System, the Company is capitalizing
substantially all such construction costs. The Company is capitalizing a portion
of the engineering direct labor costs that relate to hardware and system design
development and coding of the software products that enhance the operation of
the ORBCOMM System. As of December 31, 1996, approximately $1,244,000 of such
costs have been capitalized (none for the year ended December 31, 1995).
Additionally, interest costs of approximately $426,000 and approximately
$10,030,000 have been capitalized as part of the historical cost of the ORBCOMM
System for the years ended December 31, 1995 and December 31, 1996,
respectively. Additionally, approximately $9,500 of Revenue Participation
Interest (see Note 6, "Long-Term Debt") at the rate of 5% of ORBCOMM System
revenue has been capitalized as of December 31, 1996.
Partners' Capital
In accordance with the Partnership Agreement, Teleglobe Mobile and OCC are
both general and limited partners in the Company. Therefore, limited and general
partner accounts are combined into one single capital account and presented as
such in the balance sheet and statements of Partners' Capital.
39
<PAGE> 42
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
Revenue Recognition
The Company provided subscriber communicator hardware to ORBCOMM USA and
ORBCOMM International at cost. Revenue is recognized when products are shipped
or when customers have accepted the products or services, depending on
contractual terms. Contract revenues and receivables are recognized and accrued
as contract costs are incurred. Related contract expenses incurred in providing
marketing services in the United States are recognized on the accrual basis of
accounting. The Company generally recognizes distribution fees ratably over the
term of the agreement, or when the Company's obligations under the agreement are
substantially complete.
Reclassification of Prior Years Balances
Certain amounts in the prior year's financial statements have been
reclassified to conform with the current year presentation.
(3) INVESTMENTS
Included in cash and cash equivalents is approximately $54,527,000 of
commercial paper as of December 31, 1996. The fair value of commercial paper
approximates carrying value.
The following table sets forth the aggregate cost and fair values and gross
unrealized gains (losses) of available-for-sale securities as of December 31,
1996 (none for the year ended December 31, 1995):
<TABLE>
<CAPTION>
UNREALIZED
SECURITIES COST GAINS (LOSSES) FAIR VALUE
---------- ----------- -------------- -----------
<S> <C> <C> <C>
Short-Term
U.S. Treasury Notes...................... $21,152,137 $53,788 $21,205,925
Commercial Paper......................... 10,229,101 (1,636) 10,227,465
----------- ------- -----------
Total short-term investments.......... 31,381,238 52,152 31,433,390
----------- ------- -----------
Long-Term
U.S. Treasury Notes, maturing 2-5
years................................. 20,329,423 35,564 20,364,987
----------- ------- -----------
Total available-for-sale
investments......................... $51,710,661 $87,716 $51,798,377
=========== ======= ===========
</TABLE>
The following table sets forth the aggregate cost and fair values of
held-to-maturity as of December 31, 1996 (none for the year ended December 31,
1995):
<TABLE>
<CAPTION>
UNREALIZED
SECURITIES COST GAINS FAIR VALUE
---------- ----------- ---------- -----------
<S> <C> <C> <C>
Short-Term
U.S. Treasury Notes........................ $23,335,992 $ 524,909 $23,860,901
Long-Term
U.S. Treasury Notes, maturing 2-5 years.... 21,478,072 541,807 22,019,879
----------- ---------- -----------
Total held-to-maturity investments...... $44,814,064 $1,066,716 $45,880,780
=========== ========== ===========
</TABLE>
Unrealized gains on held-to-maturity investments represent accrued interest
income and unrealized holding gains.
40
<PAGE> 43
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(4) RELATED PARTY TRANSACTIONS
The Company paid Orbital approximately $11,000,000, $38,000,000, and
$56,000,000 for the years ended December 31, 1994, 1995 and 1996, respectively,
and approximately $48,000,000 for the period June 30, 1993 (date of inception)
through December 31, 1993. Payments were made for work performed pursuant to the
ORBCOMM System Design, Development, and Operations Agreement (for the Phase 1A
System), the ORBCOMM System Procurement Agreement (for the Phase 1B System) and
the Administrative Services Agreement (for provision of ongoing support to the
Company).
In 1995, pursuant to the terms of the ORBCOMM System Design, Development
and Operations Agreement, the Company reimbursed OCC $1,375,000 for previous
costs incurred in obtaining the FCC License and other related costs. The Company
capitalized such costs as part of its Mobile Communications Satellite System.
At December 31, 1996, the Company had a receivable of approximately
$112,000 for a bonus payment to the Company's employees paid on behalf of OCC
for employees previously employed by OCC (none for the year ended December 31,
1995).
Certain provisions of the Partnership Agreement require the Company to
reimburse OCC for OCC's repurchase of shares of OCC common stock acquired
pursuant to the OCC 1992 Stock Option Plan ("Stock Option Plan"). During 1996,
the Company reimbursed OCC approximately $1,100,000 under the Stock Option Plan.
Orbital contributed approximately $100,000 to OCC to repurchase such shares.
Therefore, the net cash paid to third parties on repurchase of OCC common stock
was no greater than $1,000,000 per annum as required by the terms of the
Indenture.
(5) MOBILE COMMUNICATIONS SATELLITE SYSTEM
The Company's Mobile Communications Satellite System comprises the
following assets:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1996
------------ ------------
<S> <C> <C>
Space segment................................... $ 76,643,128 $140,999,409
Ground segment.................................. 29,799,853 33,554,094
Software........................................ 546,959 1,678,738
------------ ------------
Total fixed assets.............................. 106,989,940 176,232,241
Less accumulated depreciation................... 0 (6,198,519)
------------ ------------
Total fixed assets, net of depreciation......... $106,989,940 $170,033,722
============ ============
</TABLE>
(6) LONG-TERM DEBT
In August 1996, ORBCOMM and ORBCOMM Global Capital Corp. (the "Issuers")
issued $170,000,000 of Senior Notes due in full in 2004 with Revenue
Participation Interest (the "Old Notes"). Revenue Participation Interest
represents an aggregate amount equal to 5% of the ORBCOMM System revenue and is
payable on the Old Notes on each interest payment date subject to certain
covenant restrictions. Interest on the Old Notes accrues at the rate of 14% per
annum and will be payable semi-annually in arrears on February 15 and August 15
each year, commencing on February 15, 1997.
All of the Old Notes have been exchanged for an equal principal amount of
registered 14% Series B Senior Notes due in full in 2004 with Revenue
Participation Interest (the "Notes"). The Notes are substantially similar to the
Old Notes except that the Notes are registered under the Securities Act of 1933,
as amended, and do not bear legends restricting the transfer thereof. The Notes
are fully and unconditionally
41
<PAGE> 44
ORBCOMM GLOBAL, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(6) LONG-TERM DEBT -- (CONTINUED)
guaranteed on a joint and several basis by OCC, Teleglobe Mobile, ORBCOMM USA
and ORBCOMM International (each a "Guarantor" and collectively the
"Guarantors"), except that the guarantees are non-recourse to the shareholders
and/or partners of the Guarantors, limited only to the extent necessary for each
such guarantee not to constitute a fraudulent conveyance under applicable law.
The guarantee of each Guarantor ranks pari passu in right of payment with all
senior indebtedness of such Guarantor and senior in right of payment to all
indebtedness expressly subordinated to the guarantee of such Guarantor. The
guarantees are non-recourse to the shareholders and/or partners of each
Guarantor and no shareholders or partners of any Guarantors will have any
liability for any claim under the Notes.
On closing, the Company used a portion of the net proceeds from the sale of
the Old Notes, approximately $44,800,000, to purchase a portfolio of U.S.
Government securities to provide for payment in full of interest on the Old
Notes and Notes through August 15, 1998 (see Note 3, "Investments").
The Company also has a $5,000,000 secured note outstanding with a financial
institution, which bears interest at 9.2% per annum and is due in monthly
principal and interest installments of $104,278 through December 1999. The note
is secured by equipment located at certain of the U.S. Earth stations, network
control center and satellite control center, and is guaranteed by Orbital.
Included in other assets is unamortized financing fees incurred for the
issuance of the Old Notes of approximately $6,138,000 net of approximately
$307,000 amortization cost for the year ended December 31, 1996 (none for the
year ended December 31, 1995). Such costs are being amortized over an eight-year
period.
42
<PAGE> 45
INDEPENDENT AUDITORS' REPORT
The Partners
ORBCOMM International Partners, L.P.:
We have audited the accompanying balance sheets of ORBCOMM International
Partners, L.P. ("ORBCOMM International") (a development stage enterprise) as of
December 31, 1996 and 1995, and the related statements of income and expenses,
partners' capital, and cash flows for each of the years in the three year period
ended December 31, 1996 and for the period from June 30, 1993 (date of
inception) to December 31, 1996. These financial statements are the
responsibility of ORBCOMM International's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ORBCOMM International (a
development stage enterprise) as of December 31, 1996 and 1995, and the results
of its income and expenses and its cash flows for each of the years in the three
year period ended December 31, 1996 and for the period from June 30, 1993 (date
of inception) to December 31, 1996, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Washington, DC
January 31, 1997
43
<PAGE> 46
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1995 1996
------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $10,000 $ 0
Receivable -- Orbital Communications Corporation.......... 0 6,613
Accounts receivable....................................... 0 8,000
Prepaid contract costs.................................... 0 3,871,118
Amount due from ORBCOMM Global, L.P. ..................... 0 1,308,549
------- -----------
TOTAL ASSETS...................................... $10,000 $ 5,194,280
======= ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accounts payable and accrued expenses..................... $ 0 $ 727,993
Deferred revenue.......................................... 0 6,146,545
------- -----------
Total Liabilities...................................... 0 6,874,538
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL:
Teleglobe Mobile Partners................................. 200 (33,605)
ORBCOMM Global, L.P. ..................................... 9,800 (1,646,653)
------- -----------
Total Partners' Capital................................ 10,000 (1,680,258)
------- -----------
TOTAL LIABILITIES AND PARTNERS' CAPITAL........... $10,000 $ 5,194,280
======= ===========
</TABLE>
(See accompanying notes to the financial statements)
44
<PAGE> 47
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF INCOME AND EXPENSES
<TABLE>
<CAPTION>
TOTAL
ACCUMULATED
DURING
DEVELOPMENT
YEAR ENDED DECEMBER 31, STAGE THROUGH
--------------------------- DECEMBER 31,
1994 1995 1996 1996
---- ---- ----------- -------------
<S> <C> <C> <C> <C>
INCOME:
Product sales.................................... $0 $0 $ 8,000 $ 8,000
EXPENSES:
Cost of product sales............................ 0 0 6,230 6,230
Marketing and administrative expenses............ 0 0 1,692,028 1,692,028
-- -- ----------- -------------
Total Expenses................................ 0 0 1,698,258 1,698,258
-- -- ----------- -------------
EXCESS (DEFICIENCY) OF INCOME...................... $0 $0 $(1,690,258) $ (1,690,258)
== == =========== =============
</TABLE>
(See accompanying notes to the financial statements)
45
<PAGE> 48
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<CAPTION>
ORBITAL TELEGLOBE
COMMUNICATIONS MOBILE ORBCOMM
CORPORATION PARTNERS GLOBAL, L.P. TOTAL
-------------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Capital contributions...................... $ 8,500 $ 1,500 $ 0 $ 10,000
Excess (deficiency) of income over
expenses................................ 0 0 0 0
------- -------- ----------- -----------
PARTNERS' CAPITAL, DECEMBER 31, 1993......... 8,500 1,500 0 10,000
Excess (deficiency) of income over
expenses................................ 0 0 0 0
------- -------- ----------- -----------
PARTNERS' CAPITAL, DECEMBER 31, 1994......... 8,500 1,500 0 10,000
Capital transfer........................... (8,500) (1,300) 9,800 0
Excess (deficiency) of income over
expenses................................ 0 0 0 0
------- -------- ----------- -----------
PARTNERS' CAPITAL, DECEMBER 31, 1995......... 0 200 9,800 10,000
Excess (deficiency) of income over
expenses................................ 0 (33,805) (1,656,453) (1,690,258)
------- -------- ----------- -----------
PARTNERS' CAPITAL, DECEMBER 31, 1996......... $ 0 $(33,605) $(1,646,653) $(1,680,258)
======= ======== =========== ===========
</TABLE>
(See accompanying notes to the financial statements)
46
<PAGE> 49
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TOTAL CASH
FLOWS DURING
DEVELOPMENT
YEAR ENDED DECEMBER 31, STAGE THROUGH
--------------------------------- DECEMBER 31,
1994 1995 1996 1996
------- ------- ----------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Excess (deficiency) of income over
expenses............................... $ 0 $ 0 $(1,690,258) $ (1,690,258)
ADJUSTMENTS TO RECONCILE EXCESS
(DEFICIENCY) OF INCOME OVER EXPENSES TO
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
Increase in receivable -- Orbital
Communications Corporation........... 0 0 (6,613) (6,613)
Increase in accounts receivable........ 0 0 (8,000) (8,000)
Increase in prepaid contract costs..... 0 0 (3,871,118) (3,871,118)
Increase in other current
liabilities.......................... 0 0 727,993 727,993
Increase in deferred revenue........... 0 0 6,146,545 6,146,545
------- ------- ----------- ------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES........................ 0 0 1,298,549 1,298,549
------- ------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in amount due from ORBCOMM
Global, L.P............................ 0 0 (1,308,549) (1,308,549)
------- ------- ----------- ------------
NET CASH USED IN INVESTING
ACTIVITIES........................ 0 0 (1,308,549) (1,308,549)
------- ------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Partners' Contribution.................... 0 0 0 10,000
------- ------- ----------- ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES........................ 0 0 0 10,000
------- ------- ----------- ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS... 0 0 (10,000) 0
CASH AND CASH EQUIVALENTS:
Beginning of period....................... 10,000 10,000 10,000 0
------- ------- ----------- ------------
CASH AND CASH EQUIVALENTS:
End of period............................. $10,000 $10,000 $ 0 $ 0
======= ======= =========== ============
</TABLE>
(See accompanying notes to the financial statements)
47
<PAGE> 50
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(1) THE ORBCOMM SYSTEM
Organization
In 1993, Orbital Communications Corporation ("OCC"), a majority owned
subsidiary of Orbital Sciences Corporation ("Orbital"), and Teleglobe Mobile
Partners ("Teleglobe Mobile"), a partnership established by affiliates of
Teleglobe Inc. ("Teleglobe"), formed ORBCOMM Global, L.P. ("ORBCOMM" or the
"Company"), a Delaware limited partnership. OCC and Teleglobe Mobile also formed
two marketing partnerships, ORBCOMM USA, L.P. ("ORBCOMM USA") and ORBCOMM
International Partners, L.P. ("ORBCOMM International"), to market services using
the ORBCOMM low-Earth orbit satellite communications system (the "ORBCOMM
System") in the United States and internationally, respectively. In 1995,
ORBCOMM became a 98% General Partner in ORBCOMM International, reducing
Teleglobe Mobile's General Partner interest to 2% and eliminating OCC's interest
entirely.
Pursuant to the terms of the Agreement of Limited Partnership of ORBCOMM
International between Teleglobe Mobile and ORBCOMM, action by ORBCOMM
International generally requires the approval of General Partners holding a
majority of the participating percentages held by the General Partners, with OCC
and Teleglobe Mobile each voting their direct and indirect participation
percentages as a whole. OCC and Teleglobe Mobile each currently holds 49% and
51%, respectively, of the direct and indirect participation percentages in
ORBCOMM International. Accordingly, ORBCOMM International's financial statements
are included in Teleglobe Mobile's consolidated financial statements.
The ORBCOMM System Description
ORBCOMM was created for the design, development, construction, integration,
testing and operation of the ORBCOMM System. ORBCOMM intends to construct and
implement the initial 28 satellite ORBCOMM System in two phases: the ORBCOMM
Phase 1A System, consisting of the worldwide network control center (including
the satellite management system), the U.S. Gateway control center, four U.S.
Earth stations and two satellites; and the ORBCOMM Phase 1B System, consisting
of the ORBCOMM Phase 1A System, three additional planes each consisting of eight
satellites and one plane consisting of two high-inclination satellites.
Orbital is the primary supplier of the communications satellites, launch
vehicles and U.S. ground systems and successfully launched the ORBCOMM Phase 1A
System satellites in April 1995. The ORBCOMM Phase 1A System began commercial
intermittent service in early 1996.
The Output Capacity Charge
Pursuant to the terms of the International System Charge Agreement (the
"International System Charge Agreement") among ORBCOMM, Teleglobe Mobile and
ORBCOMM International, ORBCOMM International has agreed to pay to Teleglobe
Mobile an International Output Capacity Charge that is equal to 23% of its total
aggregate service revenues for a calendar quarter in exchange for the exclusive
right to market, sell, lease and franchise all ORBCOMM System output capacity
outside the United States.
Regulatory Status
Construction and operation of communications satellites in the United
States requires licenses from the Federal Communications Commission (the "FCC").
OCC has been granted full operational authority for the ORBCOMM System by the
FCC. Similar licenses are required from foreign regulatory authorities to permit
ORBCOMM System services to be offered outside the United States. Primary
responsibility for obtaining licenses outside the United States will reside with
the various International Licensees.
48
<PAGE> 51
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
ORBCOMM International is in its development stage, devoting substantially
all of its efforts to establishing commercial and governmental markets, through
International Licensees, for the ORBCOMM System internationally. ORBCOMM
International's planned principal operations are expected to commence in 1998.
The accompanying financial statements of ORBCOMM International have been
prepared on the accrual basis of accounting in conformity with generally
accepted accounting principles in the United States.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Revenue Recognition
ORBCOMM International generally recognizes fees from Service License
Agreements ("SLAs") with its International Licensees ratably over the term of
the agreement, or when ORBCOMM International's obligations thereunder are
substantially complete. Revenue under the gateway procurement contracts executed
in connection with the SLAs or sale of subscriber communicator hardware is
recognized when products are shipped or when customers have accepted the
products or services, depending on contractual terms.
Income Taxes
As a partnership, Federal and state income taxes are the direct
responsibility of each partner. Accordingly, no income taxes have been recorded
in the accompanying financial statements.
Cash and Cash Equivalents
ORBCOMM International considers all highly liquid investments with
maturities of three months or less to be cash equivalents.
(3) RELATED PARTY TRANSACTIONS
As of December 31, 1996, ORBCOMM International had a receivable of
approximately $1,308,000 from ORBCOMM that represents net cash outflow to
ORBCOMM (none for the year ended December 31, 1995). ORBCOMM International is
currently in development stage and obtains funds to support operations through
non-interest bearing advances from ORBCOMM.
As of December 31, 1996, ORBCOMM International had a payable of
approximately $225,000 to Teleglobe Canada Inc., an affiliate of Teleglobe
Mobile, for a contracted employee to provide international marketing services
(none for the year ended December 31, 1995).
At December 31, 1996, ORBCOMM International had a receivable of
approximately $6,600 for bonus payments to ORBCOMM International employees paid
on behalf of OCC for employees previously employed by OCC (none for the year
ended December 31, 1995).
(4) COMMITMENTS AND CONTINGENCIES
In August 1996, ORBCOMM and ORBCOMM Global Capital Corp. (the "Issuers")
issued $170,000,000 of Senior Notes due in full in 2004 with Revenue
Participation Interest (the "Old Notes").
49
<PAGE> 52
ORBCOMM INTERNATIONAL PARTNERS, L.P.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(4) COMMITMENTS AND CONTINGENCIES -- (CONTINUED)
Revenue Participation Interest represents an aggregate amount equal to 5% of the
ORBCOMM System revenue and is payable on the Old Notes on each interest payment
date subject to certain covenant restrictions. Interest on the Old Notes accrues
at a rate of 14% per annum and will be payable semi-annually in arrears on
February 15 and August 15 of each year, commencing on February 15, 1997.
All of the Old Notes have been exchanged for an equal principal amount of
registered 14% Series B Senior Notes due in full in 2004 with Revenue
Participation Interest (the "Notes"). The Notes are substantially similar to the
Old Notes except that the Notes are registered under the Securities Act of 1933,
as amended, and do not bear legends restricting the transfer thereof. The Notes
are fully and unconditionally guaranteed on a joint and several basis by OCC,
Teleglobe Mobile, ORBCOMM USA and ORBCOMM International (each a "Guarantor and
collectively the "Guarantors"), except that the guarantees are non-recourse to
the shareholders and/or partners of the Guarantors, limited only to the extent
necessary for each such guarantee not to constitute a fraudulent conveyance
under applicable law. The guarantee of each Guarantor ranks pari passu in right
of payment with all senior indebtedness of such Guarantor and senior in right of
payment to all indebtedness expressly subordinated to the guarantee of such
Guarantor. The guarantees are non-recourse to the shareholders and/or partners
of each Guarantor and no shareholders or partners of any Guarantors will have
any liability for any claim under the Notes.
On closing, ORBCOMM used a portion of the net proceeds from the sale of the
Old Notes, approximately $44,800,000, to purchase a portfolio of United States
Government securities to provide for payment in full of interest on the Old
Notes and Notes through August 15, 1998.
In October 1996, ORBCOMM International entered into agreements with certain
manufacturers for construction of gateway Earth stations scheduled for delivery
over the next two years. As of December 31, 1996, ORBCOMM International has
approximately $3,800,000 of prepaid contract costs which represent advanced
payments to these manufacturers. Total commitments remaining under these
agreements approximate $14,000,000.
(5) SERVICE LICENSE AGREEMENTS
During 1996, ORBCOMM International signed five SLAs and the associated
Gateway procurement contracts and software license agreements with International
Licensees covering Europe, the Malaysian Region, a portion of North Africa,
Turkey and the Middle East. The SLAs authorize the International Licensees to
use the ORBCOMM System to provide two-way messaging and data communication
services. Under these agreements, approximately $6,000,000 has been received and
recorded as deferred revenue at December 31, 1996. ORBCOMM International is
obligated to ship six Gateways to certain international licensees under these
agreements.
50
<PAGE> 53
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS
The Partnership Agreement of Teleglobe Mobile provides that, subject to
certain exceptions, the management of the Company is the exclusive
responsibility of Teleglobe Mobile Investment Inc. ("TMI"), the managing partner
("Managing Partner") of the Company. Officers of the Managing Partner are
nominated by the Board of Directors of TMI and exercise such authority as they
are granted by the Board of Directors of TMI.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of December 31, 1996
regarding the executive officers of the Managing Partner.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Claude Seguin................................ Chairman of the Board, Chief Executive Officer,
Treasurer and Director of Teleglobe Mobile
Investment Inc.
Marc Leroux.................................. President, Teleglobe Mobile Investment Inc.
Guthrie J. Stewart........................... Director, Teleglobe Mobile Investment Inc.
Wan Aishah Wan Hamid......................... Director, Teleglobe Mobile Investment Inc.
</TABLE>
Claude Seguin has been the Chairman of the Board, Chief Executive Officer
and Treasurer of Teleglobe Mobile Investment Inc., the managing partner of
Teleglobe Mobile, since December 1996 and a director of Teleglobe Mobile
Investment Inc. since July 1993. He has also been the Executive Vice-President,
Finance and Corporate Development and Chief Financial Officer of Teleglobe since
August 1996. From 1992 to August 1996, Mr. Seguin was Executive Vice-President,
Finance and Chief Financial Officer of Teleglobe. Mr. Seguin served the Quebec
Finance Ministry as deputy minister from 1987 to 1992.
Marc Leroux has been the President of Teleglobe Mobile Investment Inc.
since September 1994. Mr. Leroux has also been the Vice President, Technology of
Teleglobe since 1992 and the President and Chief Operating Officer of
Teleglobe's World Mobility Division since 1994. Prior to joining Teleglobe in
1992, Mr. Leroux directed a wide range of research and development projects at
Bell-Northern Research Ltd., a subsidiary of Northern Telecom Ltd.
Guthrie J. Stewart has been a director of Teleglobe Mobile Investment Inc.
since July 1993. He has also been the Executive Vice President, Canadian Market
and Network Operations of Teleglobe since August 1996. From February 1994 to
August 1996, Mr. Stewart was Executive Vice President, Corporate Development and
Corporate Secretary of Teleglobe. From August 1993 to February 1994, Mr. Stewart
was Executive Vice President, Government and International Affairs and Corporate
Secretary of Teleglobe. Prior to August 1993, he was Vice President, Legal
Matters and Corporate Secretary of Teleglobe.
Wan Aishah Wan Hamid has been a director of Teleglobe Mobile Investment
Inc. since October 1995. Ms. Wan Hamid joined CELCOM in 1992 as Senior Manager
of Corporate Planning. In 1993, as a Senior Vice President, she was responsible
for Strategic Planning and Corporate Affairs before being promoted to Executive
Vice President in 1996. She is also a Director of TRI and Malaysian Helicopter
Services Berhad. Prior to joining CELCOM, Ms. Wan Hamid was with Digital
Equipment Corporation in the telecommunications industries segment, and
Hutchison Paging Ltd as a Senior Manager in Corporate Planning.
51
<PAGE> 54
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
No compensation was received by the executive officers of the Company by
virtue of serving as an executive officer of TMI.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the partnership interests of the Company as of December 31, 1996.
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS INTEREST
---------------- ----------
<S> <C>
Teleglobe Inc............................................. 70%
1000, rue de La Gauchetiere ouest
Montreal, Quebec H3B 4X5
Technology Resources Industries Bhd....................... 30%
Menara TR 16EB
Kuala Lumpur, Jalan Ampong
50450 Malaysia
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
MASTER AGREEMENT
As of June 30, 1993, Orbital, OCC, Teleglobe and Teleglobe Mobile entered
into the Master Agreement, restated as of September 12, 1995, that sets forth
the principles upon which the parties have agreed to develop, construct and
operate the ORBCOMM System. The Master Agreement subsequently has been amended
and restated and provides for the following:
Covenants Relating to OCC. Orbital and OCC have agreed: (i) to preserve
OCC's corporate existence; (ii) to use all commercially reasonable efforts to
obtain and maintain all material U.S. operating licenses and permits necessary
for the construction, operation and marketing of the ORBCOMM System; (iii) so
long as OCC holds any FCC authorizations, that OCC will (a) remain a subsidiary
of Orbital, other than as a result of options granted under the Orbital
Communications Corporation 1992 Stock Option Plan; (b) carry on no business
other than the construction, operation and marketing of the ORBCOMM System or
business that is in furtherance, or in connection with the expansion of the
ORBCOMM System; (c) remain the sole holder of all FCC authorizations required
for the construction, launch and operation of the ORBCOMM System (other than FCC
authorization for individual user transceivers and FCC authorizations held by
ORBCOMM and ORBCOMM USA); (d) subject to certain exceptions, not grant, create,
assume, incur or suffer to exist any lien affecting OCC or any of its property,
rights, revenues or assets; (e) subject to certain exceptions, not sell,
transfer, convey, lease or otherwise dispose of any assets; (f) not consolidate,
merge or amalgamate with any other person; (g) subject to certain exceptions in
accordance with the Definitive Agreements (as defined in the Master Agreement),
not create, amend or repeal any by-laws or modify the OCC certificate of
incorporation; (h) subject to certain exceptions in accordance with the
Definitive Agreements, not make any loans or give any financial guarantees for
the obligations of any other party; and (i) not make any assignment for the
benefit of creditors or subject OCC to any bankruptcy or insolvency law or take
steps to wind up or terminate OCC's corporate existence or engage in any
financial restructuring. Additionally, Orbital has agreed, as long as OCC holds
the FCC License, not to dispose of any debt interest in OCC.
Guarantees. Orbital has unconditionally and absolutely guaranteed the full
and punctual payment of all of OCC's payment obligations under the Definitive
Agreements to which OCC is a party. Teleglobe has unconditionally and absolutely
guaranteed the full and punctual payment of all of Teleglobe Mobile's payment
obligations under the Definitive Agreements to which Teleglobe Mobile is a
party.
52
<PAGE> 55
Change of Control. In the event of a Change in Control of Orbital or
Teleglobe (a "Change of Control Party"), Teleglobe Mobile or OCC, as the case
may be (the "Non-Change of Control Party"), has the option: (i) for a period of
180 days from the Change of Control to require the Change of Control Party to
purchase the Non-Change of Control Party's interest in each of ORBCOMM, ORBCOMM
USA and ORBCOMM International at an aggregate price equal to the greater of (a)
the Non-Change of Control Party's aggregate Unrecouped Capital Preferences in
such partnerships and (b) the Non-Change of Control Party's direct Participation
Percentage in each such partnership multiplied by the fair market value (as
defined) of each such partnership; or (ii) to cause the general partners of
ORBCOMM to adopt a resolution providing that, in the event there is a deadlock
on a matter requiring the approval of a Majority in Interest of the partners,
the President of ORBCOMM shall be entitled to decide on such matter by way of
casting a vote or otherwise, as deemed appropriate by the Non-Change of Control
Party, notwithstanding any contrary provision set forth in the ORBCOMM
Partnership Agreement. Subject to the receipt of all necessary government
approvals, upon a Change of Control of Orbital, Orbital agrees to cause OCC to
transfer to ORBCOMM USA all FCC licenses then held by OCC relating to the
construction, launch or operation of the ORBCOMM System.
In the event that OCC should become a common carrier or a CMRS
provider -- either by virtue of a change in the ORBCOMM System's regulatory
classification by the FCC from private-carrier to common-carrier or CMRS status,
or by virtue of a change in its service offerings that would convert OCC from a
private carrier to a common carrier or a CMRS provider -- ORBCOMM USA might be
precluded from acquiring the FCC licenses from OCC, due to the extent of alien
ownership in ORBCOMM USA as a result of Teleglobe Mobile's indirect interest in
ORBCOMM USA.
INTERNATIONAL SYSTEM CHARGE AGREEMENT
ORBCOMM, ORBCOMM International and Teleglobe Mobile have entered into the
International System Charge Agreement, restated as of September 12, 1995, for
the purpose of: (i) providing for the use by Teleglobe Mobile of all of the
ORBCOMM System output capacity and exclusive use of the System Assets located in
all areas of the world outside of the United States (the "Non-U.S. Area"); and
(ii) providing the means by which Teleglobe Mobile will grant to ORBCOMM
International an exclusive right in the Non-U.S. Area to market, sell, lease and
franchise all ORBCOMM System output capacity. The term of the International
System Charge Agreement commenced on June 30, 1993 and continues until the
earlier of June 30, 2013 and the date on which Teleglobe Mobile ceases to be a
general and limited partner of ORBCOMM.
Exclusive Use of System Capacity Outside the United States. ORBCOMM has
granted to Teleglobe Mobile the exclusive right in the Non-U.S. Area to market,
sell, lease and franchise all ORBCOMM System output capacity and exclusive use
of the System Assets located in the Non-U.S. Area. Teleglobe Mobile, in turn,
has granted to ORBCOMM International the exclusive right in the Non-U.S. Area to
market, sell, lease and franchise all ORBCOMM System output capacity and
exclusive use of the System Assets located in the Non-U.S. Area. OCC ultimately
has retained all rights in and to, and neither Teleglobe Mobile nor ORBCOMM
International has been granted rights to, the ORBCOMM System.
System Charge. In consideration of the grant to Teleglobe Mobile of the
exclusive right to market, sell, lease and franchise all ORBCOMM System output
capacity in the Non-U.S. Area, Teleglobe Mobile agrees to remit to ORBCOMM
Teleglobe Mobile's allocated portion of the System Charge for that calendar
quarter calculated in accordance with the Partnership Agreement of ORBCOMM. If
the International Output Capacity Charge for such calendar quarter is less than
1.15% of Total Aggregate Revenues (as defined), then Teleglobe Mobile is not
required to pay any portion of the System Charge for such calendar quarter.
International Output Capacity Charge. In consideration of the grant by
Teleglobe Mobile to ORBCOMM International of the exclusive right to market,
sell, lease and franchise all ORBCOMM System output capacity in the Non-U.S.
Area, ORBCOMM International agrees: (i) within 30 days of the end of each
calendar quarter, to notify ORBCOMM of the total aggregate revenues invoiced by
it during such calendar quarter; and (ii) to remit to Teleglobe Mobile 23% of
the total aggregate revenues invoiced by it
53
<PAGE> 56
during each calendar quarter. ORBCOMM International retains sole discretion to
set the fees to be paid by its subscribers, Resellers and International
Licensees for use of the ORBCOMM System.
Indemnification. With regard to patent infringement claims, ORBCOMM agrees
to defend, indemnify and hold harmless Teleglobe Mobile and ORBCOMM
International and their respective successors and assigns from and against any
claim with respect to an infringement or other violation of any copyright,
trademark or patent or other validly registered enforceable intellectual
property right of any third party for any items ORBCOMM has authorized Teleglobe
Mobile and ORBCOMM International to use under the International System Charge
Agreement but only to the same extent as the indemnification received by ORBCOMM
from Orbital, if any, under the Procurement Agreement (as defined).
PROPRIETARY INFORMATION AND NON-COMPETITION AGREEMENT
ORBCOMM, Orbital, OCC, Teleglobe, Teleglobe Mobile, ORBCOMM USA and ORBCOMM
International have entered into the Proprietary Information and Non-Competition
Agreement, restated as of September 12, 1995, to protect any confidential and
proprietary information that may be disclosed to one another in connection with
the development, construction, operation and marketing of the ORBCOMM System.
Orbital and Teleglobe entered into the agreement for the additional purpose of
prohibiting direct competition between the two entities in the provision of
certain LEO satellite services during the term of the agreement and for a period
of one year thereafter.
Orbital and Teleglobe agree that for the duration of the agreement and for
one year thereafter, they will not, directly or indirectly or in any capacity,
except in connection with the fulfillment of their respective obligations under
any of the Definitive Agreements: (i) carry on, engage, participate, invest or
have an equity or any financial interest in the marketing, construction,
development or management of any business or enterprise that competes with
Orbital or Teleglobe or their respective affiliates in offering commercial, LEO
non-voice satellite communications services operating in the 137-150 MHz band or
such other frequency allocated to the Little LEO mobile satellite service below
1 GHz, provided, however, OCC and Orbital are permitted to: (a) sell satellites,
launch vehicles, launch services and communications services to non-commercial
entities without limitation; and (b) provide all other entities up to two
satellites every two years and launch vehicles or launch services for up to two
satellites every two years; (ii) assist in or influence the hiring by any person
who competes with Orbital or Teleglobe or their respective affiliates of any
salesman, distributor, or employee of Orbital or Teleglobe or their respective
affiliates, or otherwise cause any person having a business relationship with
Orbital or Teleglobe or their respective affiliates to sever such relationship;
or (iii) employ any person to work on or represent the ORBCOMM System who will
also work on or represent another mobile communications system, without first
notifying the President of ORBCOMM.
Neither of Orbital or Teleglobe will be in default of its obligations under
this portion of the Proprietary Information and Non-Competition Agreement by
virtue of holding for portfolio purposes as a passive investor no more than 5%
of the issued and outstanding public equity securities of a corporation.
Indemnification. Orbital and Teleglobe agree to indemnify and save
harmless one another and their respective affiliates (an "Indemnified Party")
from and against any claims, demands, actions, causes of action, judgments,
damages, losses, liabilities, costs or expenses that may be made against any of
them as a result of, arising out of or relating to any violation, contravention
or breach of the Proprietary Information and Non-Competition Agreement by a
party who is not an Indemnified Party.
Termination. The Proprietary Information and Non-Competition Agreement
shall terminate upon the earlier of OCC or Teleglobe Mobile ceasing to be both a
general and a limited partner of ORBCOMM.
54
<PAGE> 57
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements.
2. Financial Statement Schedules.
The financial statements listed in the index to the Financial
Statements that appears on page 24 of this Report on Form 10-K are
filed as part of this Report.
Financial statement schedules have been omitted because they are
inapplicable or are not required.
3. Exhibits
The exhibits to this Report on Form 10-K are listed under Item
14(c) below.
(b) Reports on Form 8-K
The Company has not previously been required to file a Report on Form
8-K under the Act.
(c) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- ----------------------
<S> <C>
(a) 2 Purchase Agreement, dated as of August 2, 1996, by and among
ORBCOMM Global, L.P., ORBCOMM Global Capital Corp., ORBCOMM
USA, L.P., ORBCOMM International Partners, L.P., Orbital
Communications Corporation, Teleglobe Mobile Partners, Bear
Stearns & Co. Inc., J.P. Morgan Securities Inc. and RBC
Dominion Securities Company.
3 Organizational Documents.
* 3.1 Amended and Restated Agreement of General Partnership of
Teleglobe Mobile Partners.
* 3.1.1 Amendment No. 1 to the Amended and Restated Agreement of
General Partnership of Teleglobe Mobile Partners
(a) 4 Indenture, dated as of August 7, 1996, by and among ORBCOMM
Global, L.P., ORBCOMM Global Capital Corp., ORBCOMM USA,
L.P., ORBCOMM International Partners, L.P., Orbital
Communications Corporation, Teleglobe Mobile Partners and
Marine Midland Bank.
10 Material Contracts.
(a)10.1 Registration Rights Agreement, dated as of August 7, 1996,
by and among ORBCOMM Global, L.P., ORBCOMM Global Capital
Corp., ORBCOMM USA, L.P., ORBCOMM International Partners,
L.P., Orbital Communications Corporation, Teleglobe Mobile
Partners, Bear, Stearns & Co. Inc., J.P. Morgan Securities
Inc. and RBC Dominion Securities Corporation.
(a)10.3 International System Charge Agreement, restated as of
September 12, 1995, by and among ORBCOMM Global, L.P.,
Teleglobe Mobile Partners and ORBCOMM International
Partners, L.P.
(a)10.4 Master Agreement, restated as of September 12, 1995, by and
among Orbital Sciences Corporation, Orbital Communications
Corporation, Teleglobe Inc. and Teleglobe Mobile Partners.
(a)10.6 Proprietary Information and Non-Competition Agreement,
restated as of September 12, 1995, by and among ORBCOMM
Global, L.P., Orbital Sciences Corporation, Orbital
Communications Corporation, Teleglobe Inc., Teleglobe
Mobile Partners, ORBCOMM USA, L.P. and ORBCOMM
International Partners, L.P.
* 10.7 Administrative Services Agreement dated as of August 7, 1996
by and between Teleglobe Mobile Partners and Teleglobe Inc.
</TABLE>
55
<PAGE> 58
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- --------- ----------------------
<S> <C>
* 21 Subsidiaries of the Registrant.
* 27 Financial Data Schedule.
</TABLE>
- ---------------
* Filed Herewith.
(a) Incorporated by reference to the identically numbered exhibit to the ORBCOMM
Global, L.P.'s Registration Statement on Form S-4, as amended (Reg. No.
333-11149).
56
<PAGE> 59
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THE REGISTRANT HAS DULY CAUSED THIS REPORT ON
FORM 10-K TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF MONTREAL, PROVINCE OF QUEBEC ON JUNE 25, 1998.
TELEGLOBE MOBILE PARTNERS
By: TELEGLOBE MOBILE INVESTMENT INC.,
its managing partner
By: /s/ CLAUDE SEGUIN
--------------------------------------
CLAUDE SEGUIN
CHAIRMAN OF THE BOARD, CHIEF
EXECUTIVE OFFICER AND TREASURER
57
<PAGE> 60
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report on Form 10-K has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ CLAUDE SEGUIN Chief Executive Officer and June 25, 1998
- --------------------------------------------------- Treasurer, Teleglobe Mobile
CLAUDE SEGUIN Investment Inc.
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
/s/ CLAUDE SEGUIN Director, Teleglobe June 25, 1998
- --------------------------------------------------- Mobile Investment Inc.
CLAUDE SEGUIN
/s/ GUTHRIE J. STEWART Director, Teleglobe June 25, 1998
- --------------------------------------------------- Mobile Investment Inc.
GUTHRIE J. STEWART
Director, Teleglobe June 25, 1998
- --------------------------------------------------- Mobile Investment Inc.
WAN AISHAH WAN HAMID
</TABLE>
58
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
AGREEMENT OF GENERAL PARTNERSHIP
OF
TELEGLOBE MOBILE PARTNERS
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE 1
ORGANIZATION AND PURPOSE................................................... 2
1.1 Formation................................................. 2
1.2 Name...................................................... 2
1.3 Purpose................................................... 2
1.4 Principal Place of Business............................... 2
1.5 Residence of Partners..................................... 2
1.6 Fiscal Year............................................... 2
1.7 Term...................................................... 2
1.8 Documents................................................. 3
1.9 Title to Partnership Property............................. 3
ARTICLE 2
DEFINITIONS................................................................ 3
2.1 Definitions............................................... 3
ARTICLE 3
CAPITAL.................................................................... 7
3.2 Initial Capital Contributions............................. 8
3.3 Non-Mandatory Additional Capital Contributions............ 9
3.4 No Interest on Capital.................................... 11
3.5 Withdrawal of Capital Contributions....................... 11
3.6 Mandatory Additional Capital Contributions and Defaults... 11
3.7 No Property Contribution.................................. 12
ARTICLE 4
DISTRIBUTIONS.............................................................. 13
4.1 Distributions............................................. 13
4.2 Nature of Distributions................................... 13
4.3 Tax Payments.............................................. 13
ARTICLE 5
PARTNERS' ACCOUNTS; ALLOCATION OF
PARTNERSHIP INCOME AND EXPENSES............................................ 13
5.1 Maintenance of Capital Accounts........................... 13
(a) General Rule..................................... 13
(b) Computation of Items of Income, Gain, Loss or
Deduction........................................ 14
(c) Transferees...................................... 15
(d) Adjustments to Carrying Values................... 15
(e) Effect of Distributions in Kind on Capital
Accounts......................................... 16
5.2 Allocations of Net Income and Net Loss.................... 17
(a) In General....................................... 17
(b) Special Provisions Governing Capital Account
Allocations...................................... 17
(c) Allocations for Tax Purposes..................... 18
(d) Other Rules Pertaining to Allocations............ 19
ARTICLE 6
POWERS AND OBLIGATIONS OF PARTNERS......................................... 20
6.1 Managing Partner to Manage Business....................... 20
6.2 Authorization of Partners................................. 20
6.3 Board of Directors of the Managing Partner................ 21
6.4 Approval of Certain Matters............................... 21
6.5 Meetings.................................................. 22
ARTICLE 7
ACCOUNTS................................................................... 22
7.1 Books..................................................... 22
7.2 Certificates, Reports, Returns and Audits................. 22
7.3 Auditors.................................................. 23
ARTICLE 8
ADMISSION AND WITHDRAWAL OF PARTNERS
</TABLE>
- (2) -
<PAGE> 3
<TABLE>
<S> <C>
AND TRANSFERS OF PARTNERSHIP INTERESTS..................................... 24
8.1 Admission or Transfer of or by a Partner.................. 24
8.2 Transfer of .............................................. 24
(a) General Requirements............................. 24
(b) Additional Agreement of Partners................. 25
(c) Teleglobe Mobile L.P............................. 25
8.3 Right of First Refusal.................................... 25
(a)....................................................... 25
(b) Closing of Offered Securities.................... 26
8.4 Transferor's and Transferee's Rights and Duties........... 27
8.5 Satisfactory Written Assignment Required.................. 27
8.6 Admission and Withdrawal of Partners...................... 27
ARTICLE 9
DISSOLUTION AND LIQUIDATION................................................ 27
9.1 Dissolution............................................... 27
9.2 Distribution on Dissolution............................... 28
9.4 Assets Other Than Cash.................................... 28
ARTICLE 10
INDEMNIFICATION OF MANAGING PARTNER........................................ 28
10.1 Exculpation of Managing Partner........................... 28
10.2 Indemnification of Managing Partner....................... 29
11.1 Notices................................................... 29
11.2 Integration............................................... 31
11.3 Resolution of Disputes.................................... 31
11.5 Counterparts.............................................. 32
11.6 Severability.............................................. 32
11.7 Captions.................................................. 32
11.8 Binding Effect............................................ 32
11.9 Gender and Number......................................... 33
11.10 Amendment................................................. 33
SCHEDULE A
Business Address of the Partners
and
Initial Capital Contributions.............................................. 34
SCHEDULE B
July 21, 1993 and November 18, 1993
Capital Contributions...................................................... 35
SCHEDULE C
June 29, 1994 Capital Contributions........................................ 36
</TABLE>
- (3) -
<PAGE> 4
AMENDED AND RESTATED
GENERAL PARTNERSHIP AGREEMENT
OF
TELEGLOBE MOBILE PARTNERS
A DELAWARE GENERAL PARTNERSHIP
THIS AMENDED AND RESTATED GENERAL PARTNERSHIP AGREEMENT OF
TELEGLOBE MOBILE PARTNERS (the "AMENDED AND RESTATED AGREEMENT"), a Delaware
general partnership (the "PARTNERSHIP"), dated as of June 29, 1994, is
entered into:
BY AND AMONG: TELEGLOBE MOBILE INVESTMENT INC., a
Delaware corporation ("MANAGING PARTNER");
AND: TELEGLOBE MOBILE L.P., a Delaware limited
partnership;
AND: TR (U.S.A.) LTD., a corporation
incorporated under the laws of Delaware
("NEW PARTNER")
(collectively, the "PARTNERS").
WITNESSETH:
WHEREAS the Partnership was organized, in accordance with the provisions of
the Delaware Uniform Partnership Law, 6 Del. C. 1953, Section 1501 et. seq,
as it may be amended from time to time, and any successor thereto (the
"PARTNERSHIP LAW"), by the filing by the Partners of a Certificate of General
Partnership with the Secretary of State of the State of Delaware (the
"CERTIFICATE");
WHEREAS upon the filing of the Certificate, the Managing Partner and
Teleglobe Mobile L.P. entered into a General Partnership Agreement dated
July 21, 1993 ("ORIGINAL AGREEMENT"); and
WHEREAS the Partners wish to amend and restate the Original Agreement in its
entirety by entering into this Amended and Restated Agreement thereby
admitting a new partner to the Partnership and setting forth their agreements
with respect to the conduct of the business of the Partnership and each of
their rights and obligations as partners;
NOW, THEREFORE, in consideration of the mutual covenants contained in the
Amended and Restated Agreement, the parties to this Amended and Restated
Agreement agree as follows:
<PAGE> 5
ARTICLE 1
ORGANIZATION AND PURPOSE
1.1 FORMATION. The Partnership was formed and is being continued as a
general partnership pursuant to the Partnership Law, and upon the terms and
conditions contained in this Amended and Restated Agreement.
1.2 NAME. The name of the Partnership shall be "TELEGLOBE MOBILE PART-
NERS", and all business of the Partnership shall be conducted under the name
of the Partnership.
1.3 PURPOSE. The purpose of the Partnership is to be a general partner
and a limited partner in ORBCOMM DEVELOPMENT PARTNERS, L.P., a Delaware
limited partnership (the "LIMITED PARTNERSHIP") as well as in other limited
partnerships, including, without limitation, ORBCOMM U.S. PARTNERS L.P. and
ORBCOMM INTERNATIONAL PARTNERS L.P. (collectively, the "ORBCOMM
PARTNERSHIPS") a group of limited partnerships involved in the development,
construction and operation of a global digital communication system of
low-Earth orbit satellites and terrestrial facilities intended to provide
two-way data and message communications and position determination services
throughout the world, and to do such other things in furtherance thereof or
in connection therewith as the Managing Partner deems necessary or
appropriate.
1.4 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the
Partnership shall be c/o Corporation Service Company, 1013 Centre Road,
Wilmington, Delaware or any other location as may be subsequently chosen by
the Managing Partner upon ten (10) days notice to the Partners.
1.5 RESIDENCE OF PARTNERS. The business addresses of the Partners are
listed on Schedule A attached hereto.
1.6 FISCAL YEAR. The fiscal year of the Partnership, and the taxable
year of the Partnership for United States Federal income tax purposes, shall
be as permitted under Section 706 of the Code (the "PARTNERSHIP YEAR").
1.7 TERM. The Partnership's term commenced on the date of formation of
the Partnership and shall terminate on December 31, 2015 or as otherwise
provided by this Amended and Restated Agreement or by law.
1.8 DOCUMENTS. The Partnership shall execute and file the documents
necessary to comply with the requirements of the laws of Delaware for the
formation, continuation and operation of general partnerships.
<PAGE> 6
1.9 TITLE TO PARTNERSHIP PROPERTY. All property owned by the
Partnership, tangible or intangible, shall be owned by the Partnership as an
entity, and no Partner, individually, shall have any ownership interest in
any such property.
ARTICLE 2
DEFINITIONS
2.1 DEFINITIONS. The following defined terms used in this Amended and
Restated Agreement shall have the respective meanings specified below:
(a) "AAA" shall have the meaning ascribed to such term in Subsection
11.3(b);
(b) "ADDITIONAL CAPITAL CONTRIBUTION" and "ADDITIONAL CAPITAL
CONTRIBUTIONS" shall have the meaning ascribed to such term in
Section 3.3.
(c) "ADJUSTED PROPERTY" means property the Carrying Value of which has
been adjusted pursuant to Section 5.1.
(d) "AFFILIATE" means, with respect to any Person:
(i) any Person directly or indirectly controlling, controlled
by, or under common control with, such Person;
(ii) a Person owning or controlling ten percent (10%) or more of
the outstanding voting securities of such Person;
(iii) any officer, director, partner or employee of such Person; or
(iv) if such Person is an officer, director, partner or employee,
any other entity for which such Person acts in any capacity.
(e) "AMENDED AND RESTATED AGREEMENT" shall have the meaning ascribed to
such term in the recitals hereto.
(f) "CAPITAL ACCOUNT" of a Partner means the account maintained for
such Partner in accordance with the provisions of Subsection 5.1(a).
(g) "CAPITAL CONTRIBUTIONS" of a Partner shall have the meaning ascribed
to such term in Section 3.3.
(h) "CARRYING VALUE" means, with respect to any property, the adjusted
basis of such
<PAGE> 7
property for United States Federal income tax purposes, as of the time
of determination, subject to those adjustments specified in the
following sentence. The Carrying Value of any property shall be
adjusted from time to time in accordance with Subsections 5.1(c),
5.1(d) and 5.1(e) and to reflect changes, additions or other
adjustments to the Carrying Value for dispositions, acquisitions or
improvements of Partnership property, as deemed appropriate by the
Managing Partner and in a manner consistent with United States Federal
income tax principles.
(i) "CERTIFICATE" shall have the meaning ascribed to such term in the
recitals hereto.
(j) "CODE" means the United States Internal Revenue Code of 1986, as
amended.
(k) "CONTRIBUTED PROPERTY" means any property contributed to the
Partnership other than cash.
(l) "DEFAULTING PARTNER" shall have the meaning ascribed to such term in
Section 3.6.
(m) "DISTRIBUTABLE CASH" shall mean all cash received by the Partnership
less (i) any amount necessary for the payment of all costs,
expenses, obligations and liabilities of the Partnership then due
and (ii) a reasonable reserve as determined by the Managing Partner.
(n) "DOLLAR". Any reference to "DOLLAR", "DOLLARS" or "$" shall mean
the lawful currency of the United States.
(o) "ESCROW AGREEMENT" shall have the meaning ascribed to such term in
Section 3.2.
(p) "INDEMNITEE" shall have the meaning ascribed to such term in Section
10.2.
(q) "INITIAL CAPITAL CONTRIBUTIONS" shall mean, collectively, all
capital contributions referred to in Section 3.2.
(r) "LIMITED PARTNERSHIP" shall have the meaning ascribed to such term
in Section 1.3.
(s) "MANAGING PARTNER" shall have the meaning ascribed to such term in
the recitals hereto.
(t) "NET INCOME AND NET LOSS". "NET INCOME" or "NET LOSS" means an
amount equal to the Partnership's taxable income or taxable loss for
a relevant period, adjusted as provided herein. Net Income and Net
Loss shall be determined in accordance with Section 703(a) of the
Code (for this purpose, all items of income, gain, loss or deduction
required to be stated separately pursuant to Section 703(a)(1) of
the Code
<PAGE> 8
shall be included in taxable income or loss), and adjusted as provided
in Subsections 5.1(b) through 5.1(e), and further adjusted to reflect
any adjustments resulting from amended returns, claims for refund and
tax audits.
(u) "NET VALUE" means, in the case of a contribution of assets, the fair
market value of assets contributed to the Partnership reduced by the
outstanding balance of any indebtedness either assumed by the
Partnership upon such contribution or to which such assets are
subject when contributed and, in the case of a distribution of
assets, the fair market value of assets distributed by the
Partnership reduced by the outstanding balance of any Partnership
indebtedness assumed by the Partner receiving such distribution or
any indebtedness to which such distributed property is subject, as
such fair market value is determined by the Managing Partner using
such reasonable methods of valuation as it in its sole discretion
deems appropriate.
(v) "NEW PARTNER" shall have the meaning ascribed to such term in the
recital hereto.
(w) "NON-DEFAULTING PARTNER" shall have the meaning ascribed to such
term in Section 3.6.
(x) "NOTICES" shall have the meaning ascribed to such term in
Section 11.1.
(y) "OFFER" shall have the meaning ascribed to such term in
Subsection 8.3(a)(iv).
(z) "OFFERED SECURITIES" shall have the meaning ascribed to such term in
Subsection 8.3(a)(iv).
(aa) "OFFEREE" shall have the meaning ascribed to such term in Subsection
8.3(a)(iv).
(ab) "ORBCOMM PARTNERSHIPS" shall have the meaning ascribed to such term
in Section 1.3;
(ac) "ORIGINAL AGREEMENT" shall have the meaning ascribed to such term in
the recitals hereto.
(ad) "PARTNERS" shall have the meaning ascribed to such term in the
recitals hereto.
(ae) "PARTNERSHIP" shall have the meaning ascribed to such term in the
recitals hereto.
(af) "PARTNERSHIP INTEREST" of a Partner shall be the total interest of
such Partner in the Partnership.
(ag) "PARTNERSHIP LAW" shall have the meaning ascribed to such term in
the recital hereto.
<PAGE> 9
(ah) "PARTNERSHIP YEAR" shall have the meaning ascribed to such term in
Section 1.6.
(ai) "PERSON" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
(aj) "PRICE" shall have the meaning ascribed to such term in Subsection
8.3(a)(iv).
(ak) "PROPOSED PURCHASER" shall have the meaning ascribed to such term in
Subsection 8.3(a)(iv).
(al) "RECAPTURE INCOME" means any gain recognized by the Partnership (but
computed without regard to any adjustment required by Section 734 or
743 of the Code) upon the disposition of any property or asset of
the Partnership that does not constitute capital gain for United
States Federal income tax purposes because such gain represents the
recapture of deductions or reductions in basis for tax credits
previously taken with respect to such property or assets.
(am) "SELLER" shall have the meaning ascribed to such term in Subsection
8.3(a).
(an) "SHARING PERCENTAGE" of a Partner shall be the portion of such
Partner's Partnership Interest described as such in Section 3.1.
(ao) "SUPER-MAJORITY" of the Partners means a Partner or Partners having
Sharing Percentages aggregating more than seventy-five per cent
(75%) of the Sharing Percentages held by all Partners.
(ap) "TAX MATTERS PARTNER" shall have the meaning ascribed to such term
in Section 6231(a)(7) of the Code.
(aq) "TRANSFER" means an assignment, sale, exchange, gift, pledge,
contribution, distribution, disposal, or other transfer.
(ar) "UNREALIZED GAIN" as of any date of determination means the excess,
if any, of the fair market value of property (as determined under
Subsections 5.1(d) or 5.1(e) as of such date of determination) over
the Carrying Value of such property as of such date of determination
(prior to any adjustment to be made pursuant to Subsections 5.1(d)
or 5.1(e) as of such date of determination).
(as) "UNREALIZED LOSS" as of any date of determination means the excess,
if any, of the Carrying Value of property as of such date of
determination (prior to any adjustment to be made pursuant to
Subsections 5.1(d) or 5.1(e) as of such date) over the fair market
value of such property (as determined under Subsections 5.1(d) or
<PAGE> 10
5.1(e) as of such date of determination).
ARTICLE 3
CAPITAL
3.1 PARTNERSHIP INTERESTS. The equity interest of each Partner in the
Partnership (the "PARTNERSHIP INTEREST") shall be expressed in terms of the
Partners' Sharing Percentages. As at the date of this Amended and Restated
Agreement, the Sharing Percentage of each Partner shall be as follows:
<TABLE>
<CAPTION>
NAME OF THE PARTNER SHARING PERCENTAGE
<S> <C>
Managing Partner 0.7%
Teleglobe Mobile L.P. 69.3%
New Partner 30%
</TABLE>
Subject to any adjustments pursuant to Sections 3.3 and 3.6, the Partners
shall be required to make the capital contributions set forth in Sections
3.2, 3.3 and 3.6 and shall be entitled to receive the distributions set forth
in Articles 4 and 9.
3.2 INITIAL CAPITAL CONTRIBUTIONS. On July 21, 1993, the Managing
Partner and Teleglobe Mobile L.P. have initially contributed amounts to the
capital of the Partnership as provided on Schedule A attached hereto
concurrently with the execution of the Original Agreement. On July 21, 1993
and on November 18, 1993, the Managing Partner and Teleglobe Mobile L.P. have
contributed additional amounts to the capital of the Partnership as provided
on Schedule B attached hereto.
Contemporaneously with the execution of this Amended and Restated Agreement,
New Partner agrees to contribute the sum of Forty Three Million, Nine Hundred
and Six Thousand Eight Hundred and Twenty Two Dollars ($43,906,822.00) in
consideration for the thirty percent Sharing Percentage, which capital
contribution shall be (i) payable as follows;
<TABLE>
<CAPTION>
PAYMENT DATE AMOUNT
<S> <C>
June 29, 1994 $17,562,729
March 31, 1995 $13,172,046
June 30, 1995 $13,172,047
</TABLE>
and, (ii) subject to the provisions of that certain escrow agreement attached
hereto as Schedule D and to be executed contemporaneously with this Amended
and Restated Agreement by and between the Partnership, the Managing Partner,
New Partner and The Bank of Nova Scotia Trust Company of New York (the
"ESCROW AGREEMENT").
<PAGE> 11
In order to secure the capital contribution payments of March 31,
1995 and June 30, 1995, referred to above, New Partner shall within
forty-five (45) days from the date of this Amended and Restated Agreement
procure the Managing Partner with bank letters of credit in the respective
amounts of $13,172,046 and $13,172,047 issued by a reputable financial
institution acceptable to the Managing Partner which letters of credit shall
be guaranteed by the Malaysian agency of The Bank of Nova Scotia.
In the event that New Partner does not provide the above-referred
letters of credit within the period of time prescribed by this Section 3.2,
this Amended and Restated Agreement shall, without any further action on the
part of any Partner, be amended to provide that New Partner total Initial
Capital Contribution shall be limited to $17,562,729 and that the Sharing
Percentage of New Partner shall be 12%. In such event, the Partners also
give the power to the Managing Partner to amend any provision of this Amended
and Restated Agreement which require a modification as a result of the change
in the New Partner Initial Capital Contribution and Sharing Percentage.
All capital contributions referred to in this Section 3.2 shall be
collectively referred to as the "INITIAL CAPITAL CONTRIBUTIONS").
3.3 NON-MANDATORY ADDITIONAL CAPITAL CONTRIBUTIONS. As and when
requested by the Managing Partner and, provided that such request is
supported by new market opportunities, each Partner shall have the
opportunity, within thirty (30) days after receiving notice from the Managing
Partner requesting an additional capital contribution, to contribute in cash
or immediately available funds, such additional amount to the capital of the
Partnership in accordance with its Sharing Percentage at the time such
additional contribution is requested. If any of the Partners declines to
make a contribution pursuant to this Section 3.3 then:
<PAGE> 12
(a) the other Partners shall be entitled to contribute the
amounts so declined on a prorata basis according to their
Sharing Percentages (in addition to any amount such Partners
are entitled to contribute pursuant to the preceding
paragraph); and
(b) the Partners' Sharing Percentages shall be adjusted as
follows:
Additional contributions....................................A
Contributions before additional contributions...............B
Sharing Percentages before additional contributions:
- of the non-contributing Partner(s)......................C
- of each of the contributing Partner(s)..................D
Sharing Percentages after additional contributions:
- of each of the non-contributing Partner.................F
- of each of the contributing Partner(s)..................G
Total Sharing Percentage adjustment.........................E
Sharing Percentage adjustment for:
- each non-contributing Partner...........................H
where C, D, E, F and G are expressed as decimal numbers
(i.e. as fraction of 1) and not as percentages.
E = (A/(A + B)) * SIGMA C
F = C - H
G = D + (D/(1 - SIGMA C)) * E
H = (A/(A + B)) * C
Notwithstanding the provisions of this Section 3.3, the Managing Partner
shall at no time request non-mandatory additional Capital Contribution in
excess of Ten Million Dollars ($10,000,000).
All additional capital contributions referred to in Sections 3.3 and
3.6 shall be collectively referred to as the "ADDITIONAL CAPITAL
Contributions" and the Initial Capital Contributions and the Additional
Capital Contribution shall be collectively referred to as the "CAPITAL
CONTRIBUTIONS".
<PAGE> 13
3.4 NO INTEREST ON CAPITAL. Except as otherwise provided for in the
Escrow Agreement, no interest shall be paid to the Partners on their
respective Capital Contributions or on Capital Account balances.
3.5 WITHDRAWAL OF CAPITAL CONTRIBUTIONS. No Partner shall have the
right to withdraw or reduce any part of its Capital Contributions except as
provided in this Amended and Restated Agreement.
3.6 MANDATORY ADDITIONAL CAPITAL CONTRIBUTIONS AND DEFAULTS.
Notwithstanding Section 3.3, if the aggregate capital contributions of the
Partnership to the Limited Partnership are greater than $97,570,000 or if the
aggregate capital contribution of the Partnership to ORBCOMM U.S. Partners
L.P. and ORBCOMM International Partners L.P. is, in the aggregate, greater
than $10,000, the Managing Partner may, at its sole discretion, request from
the Partners additional mandatory capital contribution and each Partner
shall, within thirty (30) days after receiving notice from the Managing
Partner requesting such additional capital contribution, contribute in cash
or immediately available funds, an amount equal to such excess multiplied by
such Partner's Sharing Percentage at the time the additional capital
contribution is requested by the Managing Partner. If any Partner (a
"DEFAULTING PARTNER") fails to contribute to the Partnership any of its
additional capital contributions as are required pursuant to this Section 3.6
or any other provision of this Amended and Restated Agreement requiring
mandatory additional capital contribution, and fails to cure such failure
within fifteen (15) days after receiving notice from the Managing Partner of
such failure, then the other Partners (the "NON-DEFAULTING PARTNERS") shall
have any and all remedies they may have at law or in equity including without
limitation to the extent permitted by applicable law:
(a) seeking enforcement of the Defaulting Partner's obligation
to make such Capital Contributions by appropriate legal
proceedings;
(b) notwithstanding Subsection 6.4(e), making a loan to the
Partnership in an amount equal to the portion of the
Defaulting Partner's contribution obligation that is in
default, which loan shall (i) bear interest at the rate of
the lesser of (x) the prime rate of Morgan Guaranty Trust
Company of New York as announced in the Wall Street Journal
plus five percent (5%) or (y) the maximum rate permitted by
law, (ii) be payable on the demand of the Partner making the
loan, prior to any distributions pursuant to Articles 4
or 9; or
(c) notwithstanding Article 8, selling or assigning such
Defaulting Partner's Partnership Interest in the
Partnership, in which event the proceeds of the sales or
assignment shall first be applied to the payment of the
expenses of the sale or assignment, next to the payment of
the obligation to make the Capital Contribution and the
balance, if any, shall be remitted to the Defaulting Partner.
<PAGE> 14
In addition to any and all remedies that the Non-Defaulting Partners
may have at law or in equity, the Non-Defaulting Partners, as long as the
Defaulting Partner remains in default, shall be entitled to revoke any of
the rights of the Defaulting Partner under this Amended and Restated
Agreement including, without limitation, its right to appoint nominees as
directors of the Managing Partner. In addition, during the period for which
the Defaulting Partner is in default, the Defaulting Partner shall cause its
nominee as directors of the Managing Partner to vote in accordance with the
instructions of the nominees of the Non-Defaulting Partners. Should the
nominees of the Non-Defaulting Partners not agree among each other as to the
instructions to be given to the nominees of the Defaulting Partners, the
nominees of the Defaulting Partners of the Managing Partner should abstain to
vote on any matter presented to the Managing Partner.
Finally, to the extent that none of the above remedies allow the
Managing Partner to cure the default of the Defaulting Partner, the Managing
Partner, on behalf of the Partnership and the Non-Defaulting Partners, shall,
each time a Defaulting Partner is in default, be entitled to cancel (i) 25%
of the Defaulting Partner's entire Capital Contribution and Partnership
Interest for the first default to make a mandatory Capital Contribution, (ii)
50% of the Defaulting Partner's entire Capital Contribution and Partnership
Interest for the second default to make a mandatory Capital Contribution and
(iv) the remaining entire Defaulting Partner's Capital Contribution and
Partnership Interest.
3.7 NO PROPERTY CONTRIBUTION. Except with the unanimous consent of all
the Partners, all Capital Contributions to the Partnership shall be made in
cash and no Partner shall be entitled to contribute any property to the
Partnership.
ARTICLE 4
DISTRIBUTIONS
4.1 DISTRIBUTIONS. For each Partnership Year, Distributable Cash shall
be distributed to the Partners, at such times as the Managing Partner may
determine, in accordance with their respective Sharing Percentages.
4.2 NATURE OF DISTRIBUTIONS. Distributions may be made in cash or
property, or both, in the discretion of the Managing Partner.
4.3 TAX PAYMENTS. If the Partnership withholds or pays any tax
(including any addition to tax, penalty, or interest (other than an addition
to tax, penalty, or interest attributable solely to an act or omission of the
Tax Matters Partner)) in respect of any Partner's distributive share of
Partnership income or distributions to any Partner, such payment or
withholding shall be treated as a distribution pursuant to Section 4.1 to
such Partner. To the extent that the Partnership does not have sufficient
funds to make the tax payments referred to in this Section 4.3, the Managing
Partner shall be entitled to request a
<PAGE> 15
mandatory capital contribution from such Partner, which contribution shall be
subject to the provisions of Section 3.6.
ARTICLE 5
PARTNERS' ACCOUNTS; ALLOCATION OF
PARTNERSHIP INCOME AND EXPENSES
5.1 MAINTENANCE OF CAPITAL ACCOUNTS.
(a) GENERAL RULE. The Partnership shall maintain for each
Partner a separate capital account in accordance with
Section 704 of the Code and the regulations thereunder
("CAPITAL ACCOUNT"). Each Partner's Capital Account shall
be increased by:
(i) the cash amount or Net Value of all capital
contributions made by such Partner to the
Partnership; and
(ii) all items of Net Income allocated to such Partner;
and decreased by:
(iii) the cash amount or Net Value of all actual and
deemed distributions of cash or property made to
such Partner; and
(iv) all items of Net Loss allocated to such Partner.
The Partners agree that as of the date hereof the Capital
Account of each Partner is:
<TABLE>
<S> <C>
Managing Partner $ 1,024,492
Teleglobe Mobile L.P. $ 101,424,759
New Partner $ 43,906,822
TOTAL $ 156,356,073
===========
</TABLE>
(b) COMPUTATION OF ITEMS OF INCOME, GAIN, LOSS OR DEDUCTION.
For purposes of computing the amount of any item of income,
gain, deduction or loss to be reflected in the Partners'
Capital Accounts, the determination, recognition and
classification of any such item shall be the same as its
determination, recognition and classification for United
States Federal income tax purposes (including any method of
depreciation, cost recovery or amortization used for this
purpose), provided that:
<PAGE> 16
(i) In accordance with the requirements of Section
704(c) of the Code and Treasury Regulations Section
1.704-1(b)(2)(iv)(d), any deductions for
depreciation, cost recovery or amortization
attributable to Contributed Property shall be
determined as if the adjusted basis of such
property on the date it was acquired by the
Partnership was equal to the fair market value of
such property. Upon an adjustment pursuant to
Subsection 5.1(d) to the Carrying Value of any
Partnership property subject to depreciation, cost
recovery or amortization, any further deductions
for such depreciation, cost recovery or
amortization attributable to such property shall be
determined as if the adjusted basis of such
property was equal to the Carrying Value of such
property immediately following such adjustment.
(ii) Any income, gain or loss attributable to the
taxable disposition of any property shall be
determined by the Partnership as if the adjusted
basis of such property as of such date of
disposition was equal in amount to the
Partnership's Carrying Value with respect to such
property as of such date.
(iii) The computation of all items of income, gain, loss
and deduction shall be made, as to those items
described in Section 705(a)(1)(B) or Section
705(a)(2)(B) of the Code, without regard to the
fact that such items are not includible in gross
income or are neither currently deductible nor
capitalizable for United States Federal income tax
purposes. For this purpose, amounts paid or
incurred to organize the Partnership or to promote
the sale of interests in the Partnership that are
neither deductible nor amortizable under Section
709 of the Code, and deductions for any losses
incurred in connection with the sale or exchange of
Partnership assets disallowed pursuant to Section
267(a)(1) or Section 707(b) of the Code, shall be
treated as expenditures described in Section
705(a)(2)(B) of the Code.
(c) TRANSFEREES. Generally, a transferee of a Partner's
Partnership Interest will succeed to the Capital Account
relating to the interest transferred. However, if the
transfer causes a termination of the Partnership under
Section 708(b)(1)(B) of the Code, the Partnership's
properties shall be deemed to have been distributed in
liquidation of the Partnership to the Partners (including
the transferee of a Partnership Interest) and deemed
recontributed by such Partners in reconstitution of the
Partnership. In
<PAGE> 17
such event, the Carrying Values of the Partnership properties
shall be adjusted immediately prior to such deemed distribution
pursuant to Subsection 5.1(e) (and such adjusted Carrying
Values shall constitute the Net Values of such properties upon
this deemed contribution to the reconstituted Partnership). The
Capital Accounts of such reconstituted Partnership shall be
maintained in accordance with the principles of this Section
5.1.
(d) ADJUSTMENTS TO CARRYING VALUES. In accordance with Treasury
Regulations Section 1.704-1(b)(2)(iv)(f), in connection with
either:
(i) the contribution of money or other property (other
than a de minimis amount) to the Partnership by a
new or existing Partner in consideration for an
interest in the Partnership; or
(ii) a distribution of money or other property (other
than a de minimis amount) by the Partnership to a
retiring or continuing Partner as consideration for
an interest in the Partnership,
the Capital Accounts of all Partners and the Carrying Values
of all Partnership properties may at the sole discretion of
the Managing Partner be adjusted (consistent with the
provisions hereof) upwards or downwards to reflect any
Unrealized Gain or Unrealized Loss attributable to each
Partnership property, as if such Unrealized Gain or
Unrealized Loss had been recognized upon an actual sale of
each such property at such time and had been allocated to
the Partners pursuant to Section 5.2. For purposes of
determining such Unrealized Gain or Unrealized Loss, the
fair market value of Partnership assets shall be determined
by the Managing Partner using such reasonable methods of
valuation as it, in its sole discretion, deems appropriate.
(e) EFFECT OF DISTRIBUTIONS IN KIND ON CAPITAL ACCOUNTS. In
accordance with Treasury Regulations Section
1.704-1(b)(2)(iv)(e), immediately prior to the actual or
deemed distribution of any Partnership property in kind, the
Capital Accounts of all Partners and the Carrying Value of
each such Partnership property shall be adjusted (consistent
with the provisions hereof) upward or downward to reflect
any Unrealized Gain or Unrealized Loss attributable to such
Partnership property as if such Unrealized Gain or
Unrealized Loss had been recognized upon an actual sale of
each such property immediately prior to such distribution
and had been allocated to the Partners, at such time,
pursuant to Section 5.2. For purposes of determining such
Unrealized Gain or Unrealized Loss, the
<PAGE> 18
fair market values of relevant Partnership properties shall be
determined by the Managing Partner pursuant to Section 6.4
using such reasonable methods of valuation as it, in its sole
discretion, deems appropriate.
5.2 ALLOCATIONS OF NET INCOME AND NET LOSS.
(a) IN GENERAL. Subject to Subsection 5.2(b), Net Income and
Net Loss shall be allocated to the Capital Accounts of the
Partners in proportion to their respective Sharing
Percentages.
(b) SPECIAL PROVISIONS GOVERNING CAPITAL ACCOUNT ALLOCATIONS.
To the extent inconsistent with the provisions of Subsection
5.2(a) the following special provisions shall govern
allocations to Capital Accounts:
(i) If there is a net decrease in "partnership minimum
gain" (within the meaning of Treasury Regulations
Section 1.704-2(b)(2)) during a taxable year, each
Partner shall (subject to the exceptions set
forth in Treasury Regulations Section 1.704-2(f))
be allocated items of income and gain for such year
(and, if necessary, for subsequent years) equal to
the portion of such Partner's share of the net
decrease in partnership minimum gain. This
Subsection 5.2(b)(i) is intended to be a "minimum
gain chargeback" within meaning of Treasury
Regulations Section 1.704-2(f), and is to be
interpreted to comply with the requirements of
such regulation.
(ii) If any Partner unexpectedly receives any
adjustments, allocations or distributions described
in Treasury Regulations Section 1.704-
1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704- 1(b)(2)(ii)(d)(6), items of income and gain
shall be specially allocated to such Partner in an
amount and manner sufficient to eliminate a deficit
in its Capital Account (after taking into account
adjustments, distributions and allocations
described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) and (6)) in excess of
its obligations to restore such deficit (within the
meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(d)) created by such adjustments,
allocations or distributions as quickly as
possible. This Subsection 5.2(b)(ii) is intended
to constitute a "qualified income offset" within
the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(3) and is to be interpreted to
comply with the requirements of such regulation.
<PAGE> 19
(iii) In accordance with Treasury Regulations Section
1.704-2:
(1) any items of partnership loss, deduction or
expenditure (including expenditures
described in Section 705(a)(2)(B) of the
Code) that are attributable to liabilities
of the Partnership for which no Partner
bears the economic risk of loss shall be
allocated in the same manner as Net Losses
hereunder; and
(2) any items of partnership loss, deduction or
expenditure (including expenditures
described in Section 705(a)(2)(B) of the
Code) that are attributable to nonrecourse
debt of the partnership for which one or
more Partners bears the economic risk of
loss shall be allocated to each Partner in
proportion to the extent to which such
Partner bears such economic risk of loss.
(iv) Any special allocations of items of income or gain
pursuant to Subsections 5.2(b)(i), (ii), (iii) and
(iv) shall be taken into account in computing
subsequent allocations of items of income, gain,
deduction or loss so that the net amounts of any
items so allocated shall, to the extent possible
and consistent with such Sections, be equal to the
net amounts that would have been allocated to each
Partner had the allocations made pursuant to such
Sections not been made.
(c) ALLOCATIONS FOR TAX PURPOSES.
(i) For United States Federal income tax purposes,
except as otherwise provided in this Subsection
5.2(c), each item of income, gain, loss, and
deduction of the Partnership shall be allocated
among the Partners in the same proportions as items
comprising Net Income or Net Loss, as the case may
be, are allocated among the Partners. Credits
shall be allocated as provided in Treasury
Regulations Section 1.704-1(b)(4)(ii).
(ii) In the case of Contributed Property, items of
income, gain, loss, depreciation, amortization and
cost recovery shall be allocated among the Partners
in a manner consistent with the principles of
Section 704(c) of the Code. In the case of
Adjusted Property, items of income, gain, loss,
depreciation
<PAGE> 20
and cost recovery deductions attributable thereto
shall:
(1) first, be allocated among the Partners in a
manner consistent with the principles of
Section 704(c) of the Code to take into
account the Unrealized Gain or Unrealized
Loss attributable to such property and the
allocation thereof pursuant to Subsection
5.1(c) or 5.1(d); and
(2) second, in the event such property was
originally Contributed Property, be
allocated among the Partners in a manner
consistent with Subsection (ii) above.
(iii) To the extent permissible under applicable Treasury
Regulations, the amount of any gain from a
disposition allocated to (or recognized by) a
Partner (or its successor in interest) for United
States Federal income tax purposes pursuant to the
above provisions shall be deemed to be Recapture
Income to the extent such Partner has been
allocated any deduction or credit directly or
indirectly giving rise to the treatment of such
gain as Recapture Income.
(iv) All items of income, gain, loss, deduction and
credit recognized by the Partnership for United
States Federal income tax purposes and allocated to
the Partners in accordance with the provisions
hereof shall be determined without regard to any
adjustment made pursuant to Section 743 of the
Code; provided, however, that such allocations,
once made, shall be adjusted as necessary or
appropriate to take into account those adjustments
permitted by Section 743 of the Code, and any
adjustments made pursuant to Section 734 of the
Code shall be allocated to the extent permitted
under and in accordance with the rules of Treasury
Regulations Section 1.704-1(b)(2)(iv)(m).
(d) OTHER RULES PERTAINING TO ALLOCATIONS. Subject to
Article 6, the Tax Matters Partner may adopt and employ such
methods and procedures for:
(i) the determination and allocation of adjustments
under Sections 704(c), 734 and 743 of the Code;
(ii) the provision of tax information and reports to
Partners;
<PAGE> 21
(iii) the adoption of reasonable conventions and methods
for the valuation of assets and the determination
of tax basis;
(iv) the allocation of asset values and tax basis; and
(v) conventions for the determination of cost recovery,
depreciation and amortization deductions and the
maintenance of inventories, as it determines in its
sole discretion are necessary and appropriate to
execute the provisions of this Amended and Restated
Agreement, and to comply with United States Federal
and state tax laws. To the fullest extent
permitted by law, the Tax Matters Partner shall be
indemnified and held harmless by the Partnership
for any expenses, penalties or other liabilities
arising as a result of decisions made in good faith
on any of the matters referred to in the preceding
sentence.
ARTICLE 6
POWERS AND OBLIGATIONS OF PARTNERS
6.1 MANAGING PARTNER TO MANAGE BUSINESS. Except to the extent required
by law or specific provisions of this Amended and Restated Agreement, the
Managing Partner shall manage and control the business of the Partnership and
shall devote such portion of its time and attention to the conduct of the
business of the Partnership as is necessary to carry out the purposes and
business of the Partnership. Except as otherwise specifically provided
herein, the other Partners shall not have any right or authority to act for
or bind the Partnership. The other Partners hereby consent to the exercise
by the Managing Partner of the powers conferred on it hereunder. It is
acknowledged by the Partners that the officers of the Managing Partner will
act in accordance with the guidelines established to that effect by the Board
of Directors.
6.2 AUTHORIZATION OF PARTNERS. The Partners hereby authorize the
Managing Partner, on behalf of the Partnership, to become a general partner
and a limited partner in the ORBCOMM Partnerships.
6.3 BOARD OF DIRECTORS OF THE MANAGING PARTNER. The Board of Directors
of the Managing Partner will consist of a minimum of three and of a maximum
of ten directors. Each Partner shall be entitled to representation on the
Board of Directors of the Managing Partner in proportion to its Sharing
Percentage in the Partnership (without rounding up, and to be a minimum of
one). The Chairman of the Board of the Managing Partner shall be appointed
by Teleglobe Mobile L.P. and in the event of a deadlock on any decision of
the Board of Directors of the Managing Partner, the Chairman shall have a
casting vote.
<PAGE> 22
6.4 APPROVAL OF CERTAIN MATTERS. Notwithstanding the provisions of
Section 6.1, the approval of a Super-Majority of the Sharing Percentages
shall be required to:
(a) transfer all or substantially all the assets of the
Partnership or contract to do so;
(b) merge or consolidate the Partnership with any other Person;
(c) permit the entry by the Partnership into any additional line
of business other than those described in Section 1.3 or
directly related thereto;
(d) admit any Persons to the Partnership as a Partner provided
that, so long as the aggregate Sharing Percentages of the
Managing Partner and Teleglobe Mobile L.P. equal at least
30% of the total Sharing Percentages, the Managing Partner
shall be entitled to accept new Partners without the consent
of the other Partners provided that the Managing Partner
shall not accept any new Partners from the South-East Asia
Region unless the New Partner gives its prior written
consent to the admission of such new Partner to the
Partnership;
(e) cause the Partnership to borrow any amounts in excess of
U.S.$5,000,000;
(f) modify in any material respect, any significant accounting
policy or tax policy;
(g) make on behalf of the Partnership an assignment for the
benefit of the creditors, decide on behalf of the
Partnership to submit the Partnership to any proceedings
under any bankruptcy or insolvency law, decide to avail the
Partnership of the benefit of any other legislation for the
benefit of debtors, or take steps to wind up or terminate
the Partnership's existence; and
(h) amend any provisions of this Amended and Restated Agreement
except to give effect to Subsections 6.4(d) and 8.1(b) and
any transfer accepted under Section 8.2.
6.5 MEETINGS. Meetings of the Partners may be called by any Partner and
shall be held at such location as shall be reasonably determined by the
Managing Partner. Notwithstanding any provisions of applicable law, not less
than ten (10) business days prior written notice of the time, place and
purpose of each meeting of Partners shall be provided by each Partner calling
such meeting provided that any Partner may waive compliance with such notice
<PAGE> 23
requirement. Any meeting may be adjourned from time to time by the Managing
Partner and, except as provided below, the meeting may be held as adjourned
without further notice. Any Partner may participate in any meeting by means
of conference telephone, video or similar communications equipment allowing
all persons to participate in the meeting to hear each other at the same
time. Any action required or permitted to be taken with the approval of the
Partners may be taken without a meeting upon written consent of all Partners
which written consent shall be filed with the records of the meeting of the
Partners. The quorum for any meetings of the Partnership shall be at least
two Partners representing at least 75% of the total Sharing Percentages. If
at any such meeting, the Partners of at least 75% of the total Sharing
Percentages are not present or represented by proxy within one-half hour
after the time appointed for such meeting, then the meeting shall be
adjourned to such date not less than ten (10) business days thereafter and to
such time and place as may be designated by the chairman of such meeting, and
not less than five (5) business days' written notice shall be given of such
adjourned meeting. At such adjourned meeting the Partners present or
represented by proxy may transact the business for which the meeting was
originally called.
ARTICLE 7
ACCOUNTS
7.1 BOOKS. Each Partner shall have the right to inspect the
Partnership's books and records (including a list of the names and addresses
of Partners) at any reasonable time upon advance written request to the
Managing Partner, which books and records shall be maintained by the
Partnership.
7.2 CERTIFICATES, REPORTS, RETURNS AND AUDITS.
(a) The books of account shall be closed promptly after the end
of each Partnership Year. Within thirty (30) days of the
end of the Partnership Year, the Managing Partner shall
provide each Person who was a Partner at any time during
such Partnership Year an unaudited statement of profit and
loss for such year. Within ninety (90) days of the end of
the Partnership Year, the Managing Partner shall provide to
each Person who was a Partner at any time during such
Partnership Year audited financial statements that shall
include a statement of profit and loss and a statement of
cash flows for the year then ended, a balance sheet as of
the close of the Partnership Year and a statement of such
Partner's Capital Account, all of which shall be prepared in
accordance with generally accepted accounting principles in
the United States, and shall be audited by the Partnership's
independent public accountants.
(b) Within ten (10) days of the receipt thereof by the
Partnership or by the Managing Partner in its capacity as
managing partner of the Partnership,
<PAGE> 24
the Managing Partner shall forward to the Partners any audited
or unaudited financial statements in final form received from
ORBCOMM Partnerships.
(c) The Managing Partner shall be the Tax Matters Partner of the
Partnership. The Tax Matters Partner shall prepare or cause
to be prepared all United States, state, local and foreign
tax returns of the Partnership for each year for which such
returns are required to be filed. The Partnership shall
reimburse the Tax Matters Partner for all expenses incurred
by the Tax Matters Partner in carrying out its
responsibilities as such under the terms of this Amended and
Restated Agreement, other than expenses that are
attributable to the gross negligence, wilful or wanton
conduct or bad faith of the Tax Matters Partner.
7.3 AUDITORS. For purposes of financial reporting and Federal income
tax return preparation, the independent certified public accounting firm for
the Partnership initially shall be Grant Thornton.
ARTICLE 8
ADMISSION AND WITHDRAWAL OF PARTNERS
AND TRANSFERS OF PARTNERSHIP INTERESTS
8.1 ADMISSION OR TRANSFER OF OR BY A PARTNER.
(a) Any admission of a Partner shall be deemed to occur
effective on the day of the calendar month on which the
admission or transfer occurs.
(b) In the event of the admission of a Partner, this Amended and
Restated Agreement shall be promptly amended as necessary to
reflect any changes in the Sharing Percentages and to
reflect the Capital Contributions of the newly admitted
Partner or the withdrawal of capital by any withdrawing
Partner, and to set forth any new provisions or to amend any
existing provisions of this Amended and Restated Agreement
that may be necessary or desirable in light of the admission
or withdrawal of a Partner.
(c) The Managing Partner shall cause the Partnership to elect
the interim closing of the books method of accounting with
respect to (i) the admission of a new Partner to the
Partnership and (ii) a Transfer by a Partner of all or a
portion of its Partnership Interest.
8.2 TRANSFER OF SHARING PERCENTAGES.
<PAGE> 25
(a) GENERAL REQUIREMENTS. Subject to the right of first refusal
contained in Section 8.3, and subject to any restrictions on
transferability by operation of law, a Partner may make a
Transfer in writing of all or any portion of its Partnership
Interest; provided, however, that:
(i) no such Transfer shall be permitted if such
Transfer would, in the judgment of counsel to the
Partnership, jeopardize the status or cause the
termination of the Partnership as a partnership for
United States Federal income tax purposes;
(ii) no such Transfer shall be permitted if such
Transfer would, in the judgment of counsel to the
Partnership, violate or cause the Partnership to
violate, any applicable law or governmental rule or
regulation, including without limitation, any
applicable federal or state securities law; and
(iii) subject to the provisions of Subsection 8.2(c),
without the unanimous consent of the Partners at
their sole discretion, no Partner may make a
Transfer of more than ten percent (10%) of Sharing
Percentage to any Person.
(b) ADDITIONAL AGREEMENT OF PARTNERS. By executing this Amended
and Restated Agreement, each Partner shall be deemed to have
consented to any Transfer in conformity with Subsection
8.2(a). Each Partner agrees, upon request of the Managing
Partner, to execute such certificates or other documents and
perform such acts as the Managing Partner deems appropriate
to preserve the status of the Partnership as a partnership
after the completion of any Transfer of any Partnership
Interest under the laws of the jurisdiction in which the
Partnership is doing business. Each Partner making such a
Transfer agrees to pay, prior to the time the Managing
Partner consents to such Transfer, all reasonable expenses,
including attorneys' fees, incurred by the Partnership in
connection with such Transfer.
(c) TELEGLOBE MOBILE L.P. Subject to Subsection 6.4(d) with
respect to the admission of new Partners from the South-East
Asia Region, as long as the aggregate Sharing Percentages of
the Managing Partner and Teleglobe Mobile L.P. equal at
least 30% of the total Sharing Percentages, Teleglobe Mobile
L.P. shall be entitled to dispose of any portion of its
Partnership Interest without the prior written consent of
the other Partners or without complying with the provisions
of Section 8.3 with respect to the right of first refusal.
<PAGE> 26
8.3 RIGHT OF FIRST REFUSAL.
(a) GENERAL. Subject to the provisions of Subsection 8.2(c), if
at any time any Partner desires to make a Transfer (each a
"SELLER") of:
(i) any portion of its Partnership Interest;
(ii) any other equity security of the Partnership;
(iii) any debt security of the Partnership; or
(iv) any option, warrant or other right to subscribe
for, purchase or otherwise acquire any interest,
equity or debt security of the Partnership
(collectively, the "OFFERED SECURITIES"), to a bona
fide third-party purchaser other than a
wholly-owned subsidiary (the "PROPOSED PURCHASER"),
the Seller shall first make an offer in writing
(the "OFFER") which Offer shall be for cash only,
or cash equivalent to the other Partners in a form
acceptable to such Partner offeree (the "OFFEREE"),
to sell all such Offered Securities to the Offeree
at a price ("PRICE") equal to the amount offered by
the Proposed Purchaser, which Price shall be final,
binding and conclusive on the Seller and Offeree.
The Offer shall specify the terms of the offer by
the Proposed Purchaser and the name of the Proposed
Purchaser and shall be accompanied by copies of any
agreement or documents executed or delivered, or to
be executed or delivered, by the Seller and the
Proposed Purchaser. The Offeree may accept such
Offer, at the Price and upon the same terms and
conditions as the Proposed Purchaser's offer,
within sixty (60) days after Offeree's receipt of
the Offer. In the event that no acceptance is
received from the Offeree within such sixty (60)
day period, the Offer shall be deemed to have been
refused. Upon any refusal of an Offer, the Seller
shall be at liberty for the further period of sixty
(60) days to sell all but not less than all of the
Offered Securities to the Proposed Purchaser on
terms which are not more favourable to the Proposed
Purchaser than the terms set forth in the Offer,
provided that the Proposed Purchaser agrees in
writing to be bound by this Amended and Restated
Agreement to the same extent as the Seller was
bound. If no such sale is completed within such
sixty (60) day period, the Seller shall be
required, before selling, transferring, assigning
or otherwise disposing of
<PAGE> 27
the Offered Securities, to re-offer the Offered
Securities to the Offeree in the manner set forth in
this Section 8.3.
(b) CLOSING OF OFFERED SECURITIES. The closing of the purchase
and sale of the Offered Securities resulting from the
acceptance of an offer by the Offeree shall occur no later
than thirty (30) business days following the Offeree's
acceptance of the Offer at such place and time as the Seller
and the Offeree shall mutually agree. At such closing, the
Offeree shall pay the Price in cash or cash equivalent in
accordance with the terms of the Offer to the Seller of the
Offered Securities to be transferred, and the Seller shall
deliver resignations of all members of the board of the
Managing Partner nominated by the Seller, if any. Payment
for the Offered Securities shall be made in United States
dollars in immediately available funds.
8.4 TRANSFEROR'S AND TRANSFEREE'S RIGHTS AND DUTIES. Any purported
Transfer of all or any portion of a Partnership Interest which is not in
compliance with Sections 8.2 and 8.3 is hereby declared to be null and void
and of no force or effect whatsoever. If a Transfer is in compliance with
Sections 8.2 and 8.3, the transferee shall be admitted as a Partner and shall
succeed to the rights and obligations of the assignor in respect of the
transferred interest (including, without limitation, any pending obligation
to make any mandatory capital contribution on the part of the assignor), as
of the first day of the month next following receipt by the Managing Partner
of written notice of assignment and fulfilment of all conditions precedent to
such assignment provided for in this Amended and Restated Agreement. If a
Partner makes a Transfer of all or a portion of its Partnership Interest to a
wholly-owned subsidiary, such transferring Partner shall remain liable as
guarantor for the obligations so assigned.
8.5 SATISFACTORY WRITTEN ASSIGNMENT REQUIRED. Anything herein to the
contrary notwithstanding, the Partnership, the Partners, and the Managing
Partner shall be entitled to treat the transferor of Partnership Interest as
the absolute owner thereof in all respects, and shall incur no liability for
distributions made in good faith to such transferor, until such time as a
written Transfer that conforms to the requirements of this Article 8 has been
received by and recorded on the books of the Partnership.
8.6 ADMISSION AND WITHDRAWAL OF PARTNERS. Except with the consent of
the Managing Partner, no Partner shall be admitted to the Partnership or
permitted to withdraw or resign from the Partnership other than as a result
of a Transfer permitted under Sections 8.2 and 8.3. If any Partner withdraws
or resigns from the Partnership in violation of this Amended and Restated
Agreement, any unpaid balance of such Partner's Capital Contribution shall
become immediately due and payable and such Partner shall not be entitled to
any further distributions from the Partnership.
<PAGE> 28
ARTICLE 9
DISSOLUTION AND LIQUIDATION
9.1 DISSOLUTION. The Partnership shall dissolve on the first to occur
of the following:
(a) The expiration of the term of the Partnership as provided in
paragraph 1.7; or
(b) The election by all of the Partners to dissolve the
Partnership.
9.2 DISTRIBUTION ON DISSOLUTION. The proceeds of liquidation and other
assets of the Partnership shall be applied and distributed in the following
order of priority:
(a) To the payment of debts and liabilities of the Partnership
and the expenses of liquidation, and to the setting up of
any reserves that the Managing Partner may deem reasonably
necessary for any contingent or unforeseen liabilities or
obligations of the Partnership; and
(b) Any balance then remaining shall be distributed to the
Partners in accordance with their respective positive
Capital Accounts, provided that income, gains, losses, and
deductions for that year shall first be allocated in
accordance with the provisions of Article 5.
9.3 CONTRIBUTION BY THE PARTNERS. On liquidation of all or
substantially all of the Partnership's assets, if a Partner has a negative
Capital Account, it shall contribute capital to the Partnership in an amount
equal to the deficit balance in such Partner's Capital Account.
9.4 ASSETS OTHER THAN CASH. Assets of the Partnership may be
distributed in kind on the basis of the then appraised value of such assets.
If agreed to by all the Partners, distributions in-kind shall be made to the
Partners as tenants-in-common. For purposes of making such distribution
only, the unrealized profit or loss on any such asset (based on its fair
market value) shall be first allocated among the Partners and the
distribution of the asset shall be treated as a distribution of cash equal to
the fair market value of such asset.
ARTICLE 10
INDEMNIFICATION OF MANAGING PARTNER
10.1 EXCULPATION OF MANAGING PARTNER. Neither the Managing Partner nor
any officer, employee, agent or shareholder of the Managing Partner, shall be
liable, responsible or accountable in damages or otherwise to the Partnership
or any Partner for any action taken or failure to act on behalf of the
Partnership within the scope of the authority conferred on the
<PAGE> 29
Managing Partner by this Amended and Restated Agreement or by law, unless such
act or omission constitutes gross negligence, wilful misconduct or fraud. To the
extent that the acts or omissions of the Managing Partner, or any officer,
employee, agent or shareholder of the Managing Partner constitute gross
negligence, wilful misconduct or fraud by the Managing Partner, the Managing
Partner shall indemnify and save harmless the Partnership and the Partners from
any loss or damage occasioned thereby (including, without limitation, reasonable
attorneys' fees).
10.2 INDEMNIFICATION OF MANAGING PARTNER. The Partnership shall
reimburse the Managing Partner for all ordinary and necessary operating
expenses incurred by the Managing Partner in carrying on the Partnership's
business. The Partnership shall indemnify and hold harmless the Managing
Partner, and each officer, director, employee, agent and shareholder of the
Managing Partner (each, an "INDEMNITEE"), from and against any loss, expense,
damage or injury suffered or sustained by any of them by reason of any acts,
omissions or alleged acts or omissions arising out of its activities on
behalf of the Partnership or in furtherance of the interests of the
Partnership, including but not limited to any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in connection
with the defense of any actual or threatened actions, proceedings or claims
if the acts, omissions or alleged acts or omissions upon which such actual or
threatened actions, proceedings or claim is based were for a purpose
reasonably believed by such Indemnitee to be in the best interests of the
Partnership and did not constitute gross negligence, wilful misconduct or
fraud by such Indemnitee. Reasonable expenses incurred by an Indemnitee may,
in connection with the defense of any actual action or proceeding in which
Partners are adverse parties or in which the person who incurred the expenses
is accused of grossly negligent acts or omissions or wilful misconduct, be
paid or reimbursed by the Partnership in advance of the final disposition of
the action, proceeding or claim upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of his good faith belief that he has
met the standard of conduct necessary for indemnification by the Partnership
and (ii) a written undertaking by or on behalf of the Indemnitee to repay
such amount if it shall ultimately be determined that he has not met such
standard of conduct, which undertaking shall be an unlimited general
obligation of the Indemnitee but need not be secured (unless so required by
the Managing Partner) and may be accepted without reference to financial
ability to make the repayment.
ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 NOTICES. Any notice, consent, authorization, direction or other
instrument required or permitted to be given hereunder ("NOTICES") shall be
in writing and shall be delivered either by personal delivery, by certified
mail or by telecopier, return receipt requested, and addressed as follows:
<PAGE> 30
TELEGLOBE MOBILE INVESTMENT INC.
c/o Corporation Service Company
1013 Centre Road
Wilmington, Delaware
With a copy by telecopier to:
TELEGLOBE INC.
Attention: The Corporate Secretary
Telecopier: (514) 868-8153
TELEGLOBE MOBILE L.P.
c/o Corporation Service Company
1013 Centre Road
Wilmington, Delaware
With a copy by telecopier to:
TELEGLOBE INC.
Attention: The Corporate Secretary
Telecopier: (514) 868-8153
TR (U.S.A.) LTD.
c/o Corporation Trust Centre
1209 Orange Street
City of Wilmington, Country of New Castle
Delaware 19801
With a copy by telecopier to:
TECHNOLOGY RESOURCES INDUSTRIES BHD.
Attention: The Secretary
Telecopier: 03 263-2018
Any Notice shall be deemed to have been effectively given and received, if
sent by telecopier, on the next business day following receipt of such
transmission confirmation of receipt by confirmed facsimile transmission
being deemed receipt of communication sent by telecopy or,
<PAGE> 31
if delivered, to have been given and received on the date of such delivery. Any
Partner may change its address for service by written Notice given as aforesaid.
11.2 INTEGRATION. This Amended and Restated Agreement sets forth the
entire agreement between the parties with regard to the subject matter hereof.
11.3 RESOLUTION OF DISPUTES.
(a) Any controversy or claim that may arise under, out of, in
connection with or relating to this Amended and Restated
Agreement or any breach hereof or thereof, shall be
submitted to a representative management panel of the
Partners. Each of the Partners involved in any such
controversy or claim may appoint up to three individuals to
such panel. The members of such panel shall be appointed by
each such Partner within ten (10) days of the receipt by any
Partner of notice of the existence of such controversy or
claim. The unanimous decision and agreement of such panel
shall resolve the controversy or claim. If the panel is
unable to resolve such matter within thirty (30) days of the
submission of such controversy or claim to such panel, it
shall be brought before the Presidents or Chairman of each
of the Partners involved in any such controversy or claim,
for final resolution. If such individuals are unable to
resolve the matter within thirty (30) days of the submission
of such controversy or claim to such individuals, any
Partner may remove the controversy or claim for arbitration
in accordance with Subsection 11.3(b).
(b) Any controversy or claim that is not resolved under
Subsection 11.3(a) shall be settled by final and binding
arbitration in New York, New York in accordance with the
then existing United States domestic rules of the American
Arbitration Association ("AAA"). In the event that more
than one claim or controversy arise under this Amended and
Restated Agreement such claims or controversies may be
consolidated in a single arbitral proceeding. Each of the
Partners involved in such controversy or claim shall appoint
one arbitrator. If any party shall fail to appoint an
arbitrator within thirty (30) days from the date on which
another party's request for arbitration has been
communicated to the first party, such appointment shall be
made by the AAA. The arbitrators so appointed shall agree
upon another arbitrator who shall act as chairman of the
arbitral tribunal. If the appointed arbitrators fail to
nominate a chairman within ten (10) days from the date as of
which both arbitrators shall have been appointed, such
chairman shall be selected by the AAA. In all cases, the
arbitrators shall be fluent in English. In the event that
the arbitral tribunal consists of an even number of
arbitrators, the Chairman
<PAGE> 32
shall have a casting vote. Judgment upon any award rendered by
the arbitrators may be entered in any court having jurisdiction
or application may be made for judicial acceptance of the award
and an order of enforcement, as the case may be. The Partners
agree that if it becomes necessary for any party to enforce an
arbitral award by a legal action or additional arbitration or
judicial methods, the Party or Parties against whom enforcement
is sought shall pay all reasonable costs and attorneys' fees
incurred by the party seeking to enforce the award.
For the purposes of this Section 11.3, the Managing Partner and any Partner
who controls the Managing Partner shall be considered as only one Partner.
11.4 APPLICABLE LAW. This Amended and Restated Agreement shall be
governed by, construed and enforced in accordance with the laws of Delaware
without giving effect to the provisions, policies or principles thereof
relating to choice or conflict of laws.
11.5 COUNTERPARTS. This Amended and Restated Agreement may be executed
in counterparts and all counterparts so executed shall constitute one Amended
and Restated Agreement binding on all the parties. It shall not be necessary
for each party to execute the same counterparts.
11.6 SEVERABILITY. In case any one or more of the provisions contained
in this Amended and Restated Agreement or any application of the provisions
shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions or the remaining
applications shall no time any way be affected or impaired.
11.7 CAPTIONS. The captions and headings in this Amended and Restated
Agreement are for convenience only and shall not be considered in
interpreting any provision of this Amended and Restated Agreement.
11.8 BINDING EFFECT. Except as otherwise provided to the contrary, this
Amended and Restated Agreement shall be binding upon, and inure to the
benefit of, the Partners and their respective heirs, executors,
administrators, successors and assigns.
11.9 GENDER AND NUMBER. Whenever required by the context, the singular
shall be deemed to include the plural, and the plural shall be deemed to
include the singular, and the masculine, feminine and neuter genders shall
each be deemed to include the other.
11.10 AMENDMENT. Except as otherwise provided, this Amended and Restated
Agreement may be amended in whole or in part only by an agreement in writing
signed by all the Partners.
IN WITNESS WHEREOF, the parties have executed this agreement as of the date
first
<PAGE> 33
above written.
TELEGLOBE MOBILE TELEGLOBE MOBILE L.P.
INVESTMENT INC. BY ITS GENERAL PARTNER
TELEGLOBE MOBILE INC.
By: By:
TR (U.S.A.) LTD.
By:
<PAGE> 34
AMENDED AND RESTATED
GENERAL PARTNERSHIP AGREEMENT
TELEGLOBE MOBILE PARTNERS
SCHEDULE A
BUSINESS ADDRESS OF THE PARTNERS
AND
INITIAL CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
INITIAL CAPITAL
NAME OF PARTNER CONTRIBUTION
<S> <C>
TELEGLOBE MOBILE INVESTMENT INC. $10
c/o Corporation Service Company
1013 Centre Road
Wilmington, Delaware
TELEGLOBE MOBILE L.P. $990
c/o Corporation Service Company
1013 Centre Road
Wilmington, Delaware
</TABLE>
<PAGE> 35
AMENDED AND RESTATED
GENERAL PARTNERSHIP AGREEMENT
TELEGLOBE MOBILE PARTNERS
SCHEDULE B
JULY 21, 1993 AND NOVEMBER 18, 1993
CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
NAME OF PARTNERS 21/07/93 18/11/93 TOTAL CAPITAL
CONTRIBUTION CONTRIBUTION CONTRIBUTIONS
<S> <C> <C> <C>
Teleglobe Mobile Investment Inc. $20,030.00 $80,000.00 $100,040.00
Teleglobe Mobile L.P. $1,982,970.00 $7,920,000.00 $9,903,960.00
</TABLE>
<PAGE> 36
AMENDED AND RESTATED
GENERAL PARTNERSHIP AGREEMENT
TELEGLOBE MOBILE PARTNERS
SCHEDULE C
JUNE 29, 1994 CAPITAL CONTRIBUTIONS
<TABLE>
<CAPTION>
NAME OF PARTNERS JUNE 29, TOTAL
1994 CAPITAL
CONTRIBUTIONS CONTRIBUTION
<S> <C> <C>
Teleglobe Mobile Investment Inc. Nil $100,040
Teleglobe Mobile L.P. Nil $9,903,960
New Partner $17,562,729(1) $17,562,729
</TABLE>
(1) As part of a commitment for $43,906,822.
<PAGE> 37
AMENDED AND RESTATED
GENERAL PARTNERSHIP AGREEMENT
TELEGLOBE MOBILE PARTNERS
SCHEDULE D
ESCROW AGREEMENT
<PAGE> 1
EXHIBIT 3.1.1
AMENDMENT N degrees 1
TO THE
AMENDED AND RESTATED
AGREEMENT OF GENERAL PARTNERSHIP
OF
TELEGLOBE MOBILE PARTNERS
THIS AMENDMENT N degrees 1 to the Amended and Restated Agreement of General
Partnership of Teleglobe Mobile Partners (the "AMENDMENT N* 1") is made and
entered into as of this 9th day of September, 1995 by and among, Teleglobe
Mobile Investment Inc. (the "MANAGING PARTNER"), Teleglobe Mobile L.P.
("TELEGLOBE MOBILE") and TR (U.S.A.) Ltd. ("TR").
WHEREAS the Managing Partner, Teleglobe Mobile and TR desire to amend and modify
the Amended and Restated Agreement of General Partnership of Teleglobe Mobile
Partners dated as of June 29, 1994 (the "AGREEMENT").
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Terms used but not otherwise defined herein shall have the meaning
ascribed thereto in the Agreement.
SECTION 2. The definition at Subsection 2.1(e) "Amended and Restated Agreement"
is deleted in its entirety and replaced by the following :
"(e) "AMENDED AND RESTATED AGREEMENT" shall have the meaning ascribed to such
term in the recitals hereto, as such agreement may be amended from time to
time."
The definition at Section 2.1 (o) "Escrow Agreement" is deleted in its entirety.
SECTION 3. Section 3.2 entitled "Initial Capital Contribution" is deleted in its
entirety and replaced by the following :
"3.2 INITIAL CAPITAL CONTRIBUTIONS.
(a) On July 21, 1993, the Managing Partner and Teleglobe Mobile L.P. have
initially contributed amounts to the capital of the Partnership as
provided on Schedule A attached hereto concurrently with the execution of
the Original Agreement. On July 21, 1993 and on November 18, 1993, the
Managing Partner and Teleglobe Mobile L.P. have contributed additional
amounts to the capital of the Partnership as provided on Schedule B
attached hereto.
Contemporaneously with the execution of this Amended and Restated
Agreement, New
<PAGE> 2
Partner agrees to contribute the sum of Forty Three Million, Nine Hundred
and Six Thousand Eight Hundred and Twenty Two Dollars ($43,906,822) in
consideration for the thirty percent Sharing Percentage, of which
Seventeen Million Five Hundred Sixty Two Thousand Seven Hundred and Twenty
Nine Dollars ($17,562,729) has been paid.
(b) With respect to the payment of the remaining Twenty Six Million Three
Hundred and Forty Four Thousand and Ninety Three Dollars ($26,344,093) of
Initial Capital Contribution of New Partner, New Partner agrees to
disburse the amount requested by the Managing Partner as follows:
<TABLE>
<CAPTION>
DATE AMOUNT
---- ------
<S> <C>
January 1, 1996 $13,500,000
April 1, 1996 $9,000,000
July 1, 1996 $3,844,093
TOTAL $26,344,093
</TABLE>
In addition to the Capital Contribution referred to above in paragraph
(a), the Managing Partner and Teleglobe Mobile L.P. agree to make an
additional Capital Contribution in the amount of Forty Three Million Six
Hundred and Sixty Six Thousand Eight Hundred and Ninety Four Dollars
($43,663,894) as follows:
<TABLE>
<CAPTION>
DATE AMOUNT
- -------------------- --------------------------------------------
Managing Partner Teleglobe Mobile, L.P.
---------------- ----------------------
<S> <C> <C>
Option Exercise Date 45,500 6,454,500
October 1, 1995 35,000 4,965,000
January 1, 1996 115,500 16,384,500
April 1, 1996 77,000 10,923,000
July 1, 1996 32,647 4,631,247
---------------- ----------------------
305,647 43,358,247
</TABLE>
<PAGE> 3
(c) In order to secure the payment obligation of such remaining portion of the
Initial Capital Contribution of New Partner, New Partner hereby delivers a
guarantee by Technology Resources Industries Berhad, the parent company of
New Partner, in the maximum amount of Twenty Six Million Three Hundred and
Forty Four Thousand and Ninety Three Dollars ($26,344,093).
(d) In the event that New Partner or Technology Resources Industries Berhad is
in default to make any payment as provided in this section 3.2, then New
Partner's Sharing Percentage shall be adjusted in the manner provided in
Section 3.3 and this Amended and Restated Agreement shall, without any
further action on the part of any Partner, be amended to provide that New
Partner's total Initial Capital Contribution shall be limited to the
amount actually contributed by New Partner. In such event, the Partners
also give the power to the Managing Partner to amend any provision of this
Amended and Restated Agreement which require a modification as a result of
the change in the New Partner Initial Capital Contribution and Sharing
Percentage.
All capital contributions referred to in this Section 3.2 shall be
collectively referred to as the "Initial Capital Contribution"."
SECTION 4. All other provisions of this Agreement shall remain unchanged.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed as of
the day and year first above.
TELEGLOBE MOBILE TELEGLOBE MOBILE L.P.
INVESTMENT INC. BY ITS GENERAL PARTNER
TELEGLOBE MOBILE INC.
<PAGE> 4
Per: /s/ GUTHRIE J. STEWART Per: /s/ MARC LEROUX
Name: Guthrie J. Stewart Name: Marc Leroux
Title: Chairman of the Board and Title: President
Chief Executive Officer
TR (U.S.A.) LTD.
Per: /s/ TAJUDIN RAMLI
Name: Tajudin Ramli
Title: Director
<PAGE> 1
EXHIBIT 10.7
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement ("Agreement") is entered into this 7th
day of August, 1996 between Teleglobe Inc., a Canada Business Corporation
("TELEGLOBE"), and Teleglobe Mobile Partners, a Delaware general partnership
("TMP").
WITNESSETH
WHEREAS Orbital Sciences Corporation, Orbital Communications Corporation
("ORBCOMM"), TELEGLOBE and TMP have entered into agreements for the development,
construction, operation and marketing of a global digital satellite
communications system of low-Earth orbit satellites and terrestrial facilities
intended to provide two-way data and message communications and position
determination services throughout the world (the "ORBCOMM System") and related
activities in connection therewith; and
WHEREAS TMP desires to enter into this Agreement with TELEGLOBE for the purpose
of having TELEGLOBE perform on behalf of TMP the services set forth herein in
accordance with the terms and conditions hereof
NOW THEREFORE, in consideration of the covenants and agreements contained
herein, and for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree as follows:
a) SERVICES TO BE PROVIDED
(i) TELEGLOBE Services
Teleglobe shall provide to TMP the services specified in Schedule 1
hereto (the "Services") and will charge back TMP for said Services,
as set forth in Schedule 1, attached hereto.
(ii) Manner of Furnishing Services
TELEGLOBE shall render and perform the Services as an independent
contractor in accordance with its own standards for furnishing such
services to itself or its subsidiaries at the time the Services are
provided, subject to the provisions of this Agreement and with all
applicable governmental laws, rules and regulations. Notwithstanding
the foregoing, in providing the Services, TELEGLOBE and its
directors, officers and employees shall not be responsible, or have
any liability, for the accuracy, completeness or timeliness of any
advice or service or any report, filing or other document that it or
any of them provides, prepares or assists in preparing, except to the
extent that any inaccuracy, incompleteness or untimeliness arises
from the gross negligence or willful misconduct of TELEGLOBE and its
directors, officers and employees from and against any and all
damage, cost, loss, liability and expense (including reasonable
attorney's fees) in connection with any
<PAGE> 2
and all actions or threatened actions arising out of the performance
of the Services, except in circumstances where the party who would
otherwise be indemnified hereunder has not met the standard of care
described in the preceding sentence. In no event shall TELEGLOBE
or its directors, officers or employees be liable for any indirect,
special or consequential damages in connection with or arising out
of the performance of the Services.
b) TERM OF AGREEMENT
Term of this Agreement shall be deemed to have commenced on June 30, 1994,
and shall continue so long as any of the categories of Services is provided
by TELEGLOBE to TMP (the "Term"); provided that TMP shall have the right to
terminate the provision by TELEGLOBE of any or all of the categories of
Services upon furnishing TELEGLOBE ninety (90) days prior written notice and
provided, further, that the parties hereto acknowledge and agree that no
monies shall be due and owing hereunder or shall be paid after August 7,
1996 for any Services rendered prior to such date other than for Services
that have already been invoiced as of such date in an amount not to exceed
CND$ 50,000.
c) PAYMENT TERMS
(i) Payment Date
Within fifteen (15) days after the end of each calendar month,
TELEGLOBE shall invoice TMP for those Services provided by TELEGLOBE
to TMP during the preceding month, together with any unbilled or
unpaid charges for any prior month. Such invoice shall set forth in
detail information supporting the amount of such invoice and shall be
due and payable by TMP within thirty (30) days of receipt thereof by
TMP.
(ii) Maintenance of Records
TELEGLOBE shall maintain those records necessary to support the amount
set forth on its invoices.
d) MISCELLANEOUS
(i) Notices
All notices given under this Agreement must be in writing and sent by
hand delivery, by overnight courier or by facsimile transmission
(answerback received), to:
- 2 -
<PAGE> 3
TMP
Teleglobe Mobile Partners
C/O the Managing Partner
Teleglobe Mobile Investment Inc.
1000 de La Gauchetiere Street West
Montreal (Quebec)
H3B 4X5
Facsimile: (514) 868-7719
Attention: Treasurer
TELEGLOBE
Teleglobe Inc.
1000 de La Gauchetiere Street West
Montreal (Quebec)
H3B 4X5
Facsimile: (514) 868-7438
Attention: Corporate Secretary
or to such other persons or addresses as either party may designate by
written notice to the other. All such notices sent to either party
shall be effective on the date of actual receipt.
(ii) Binding Effect; Assignment
This Agreement shall be binding upon the parties and their permitted
successors and assigns. Neither this Agreement nor any interests or
obligations hereunder shall be assigned or transferred (by operation
of law or otherwise) to any person without the prior consent of the
other party.
(iii) Entire Agreement
This Agreement and all attachments (which are hereby made part of this
Agreement) contain the entire understanding between the parties and
supersede all prior written and oral understandings relating to the
subject hereof. No representations, agreements, modifications or
understandings not contained herein shall be valid or effective unless
agree to in writing and signed by both parties. Any modification or
amendment of this Agreement must be in writing and signed by both
parties.
- 3 -
<PAGE> 4
(iv) Governing Law
The construction, interpretation and performance of this Agreement, as
well as the legal relations of the parties arising hereunder, shall be
governed by the and construed in accordance with the laws of the
Province of Quebec and applicable laws of Canada, without giving
effect to the conflict or choice of law provisions thereof. Neither
party may bring any action for a claim under this Agreement later than
one (1) year after the termination or expiration of this Agreement.
(v) Waiver
It is understood and agreed that no failure or delay by either party
in exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise thereof
preclude any other or further exercise conditions of this Agreement
shall be deemed to be a waiver of any subsequent breach of any
conditions of any term or condition. All waivers must be in writing
and signed by the party sought to be bound.
(vi) Severability
If any part of this Agreement shall be held invalid or unenforceable,
such determination shall not affect the validity or enforceability of
any remaining portion, which shall remain in force and effect as if
this Agreement had been executed with the invalid or unenforceable
portion thereof eliminated.
(vii) Headings
Headings in this Agreement are included for convenience of reference
only and shall not constitute a part of this Agreement for any other
purpose.
IN WITNESS WHEREOF, the parties have caused this Administrative Services
Agreement to be executed as of the day and year first above written.
TELEGLOBE INC.
By: /s/ FRANCOIS LAURIN
-------------------------------
Name: Francois Laurin
Title: Vice-President, Finance and
Controller
TELEGLOBE MOBILE PARTNERS
(by its Managing Partner Teleglobe Mobile
Investment Inc.)
By: /s/ ANDRE BOURBONNAIS
-------------------------------
Name: Andre Bourbonnais
Title: Secretary
- 4 -
<PAGE> 5
SCHEDULE 1 - SERVICES
Upon the request of TMP from time to time, TELEGLOBE shall provide management
services such as accounting services, legal advice and technical support to
TMP for the ORBCOMM System.
In consideration of the provision of the Services by TELEGLOBE to TMP, TMP
shall reimburse TELEGLOBE the following expenses incurred by TELEGLOBE:
a) any direct out-of-pocket expenses incurred in connection with the
provision of the Services such as:
(i) travel and accommodation expenses of TELEGLOBE's employees or
representatives for necessary business trips made for the provision
of the Services;
(ii) professional fees and disbursements of external experts such as
outside legal counsels, accountants and other professionals from
whom TELEGLOBE has retained the services for the provision of the
Services; and
(iii) cost of any office supply or material used by TELEGLOBE for the
provision of the Services; and
b) total remuneration (salary and fringe benefits) of TELEGLOBE's employees
directly affected to the provision of the Services.
Except for such reimbursement of the expenses incurred by TELEGLOBE, no other
compensation or remuneration shall be payable to TELEGLOBE by TMP pursuant to
this Administrative Services Agreement.
- 5 -
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF TELEGLOBE MOBILE PARTNERS
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY STATE OF INCORPORATION OR ORGANIZATION
------------------ --------------------------------------
<S> <C>
ORBCOMM International Partners, L.P. Delaware
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,618
<SECURITIES> 0
<RECEIVABLES> 17
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,815
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 81,176
<CURRENT-LIABILITIES> 7,046
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 74,953<F1>
<TOTAL-LIABILITY-AND-EQUITY> 81,176
<SALES> 8
<TOTAL-REVENUES> (8,062)
<CGS> 6
<TOTAL-COSTS> 2,261
<OTHER-EXPENSES> 828
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (9,495)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,945)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,945)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Represent Total Partners' Capital
</FN>
</TABLE>
